73431100 Domondon Taxation Notes 2010

7/27/2019 73431100 Domondon Taxation Notes 2010

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BAR STAR NOTES

X IONVER. 2010.06.12copyrighted 2010

Prepared by Pro. Abe!ardo T. "o#o$do$%AB %Eco$&' BS( %Acctg&' ))B' *A %Eco$&' ))*' "() %(a$d.&.

)a+yer,(PA,(-to# Bro/er' *a$age#e$t (o$-!ta$t' Proeor o )a+a$d Pre,Bar Reie+er&

How to use the BAR STAR NOTES. The BAR STARNOTES i$ the or# o -etio$ a$d a$+er a +e!! a tet-a!dic-io$ +ere specially prepared by Prof. o!o"do" for thee#clusi$e use of Bar Re$iewees who atte"ded his %&'& (ectures o"

TA)AT*ON he!d at the 3$ierity o the Phi!ippi$e. 4$c!-ded i$ thepree$tatio$ are doctri$e co$tai$ed i$ S-pre#e (o-rt deciio$ -p to

Apri! 2010.

The p-rpoe o the 5BAR STAR NOTES i to proide the BarReie+ee +ith a ha$dy reie+ #ateria! +hich ere a #e#ory,

ogger or the Septe#ber 12' 2010 Bar Ea#i$atio$ i$ Taatio$. Thea-thor trie to eco$d g-e +hat +o-!d be i$c!-ded i$ the Bar Ea#-i$g tatitica! a$a!yi. The act-a! Bar -etio$ #ay $ot beor#-!ated i$ the a#e #a$$er a the BAR STAR NOTES. 7o+eer'the doctri$e teted i$ the Bar +o-!d i$ a!! probabi!ity be i$c!-ded i$ theeNote.

4 preed or ti#e' the a-thor -gget that the reader ho-!doc- hi atte$tio$ o$ the o!!o+i$g8

Nice to /$o+ Sho-!d /$o+ *-t /$o+ a$d #ater4t i -rther -ggeted that the reader ho-!d #ere!y bro+e thoe

+itho-t tar.

+ARN*N,-

Thee #ateria! are copyrighted a$d9or baed o$ the +riter:

boo/ o$ Taatio$ a$d -t-re reiio$. 4t i prohibited to reprod-ce a$y

part o thee Note i$ a$y or# or a$y #ea$' e!ectro$ic or #echa$ica!'i$c!-di$g photocopyi$g +itho-t the +ritte$ per#iio$ o the a-thor.3$a-thori;ed -er ha!! $ot be proec-ted b-t SHA(( BE SB/E0TTO THE (A+ O1 KARMAS0H THAT THE2 +*(( NE3ER PASSTHE BAR OR +O( BE NHAPP2 *N (*1E or tea!i$g thei$te!!ect-a! property o the a-thor.

THE BEST O1 (04 ANA3AN0E 0ON,RAT(AT*ONS

X ION,ENERA( PR*N0*P(ES O1 TA)AT*ON

TA)AT*ON5 *N ,ENERA(

'. State briefly a"d co"cisely the "ature of ta#atio".Alter"ati$ely5 defi"e ta#atio".

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+o-!d be para!y;ed or !ac/ o #otie po+er to actiate a$d operate it.%Commissioner of Internal Revenue v. Algue, Inc. et al.,1>? S(RA ?' 16,1@&

:. ;arshall said that5 the power to ta# i"$ol$es thepower to destroy. O" the other ha"d5 Hol!es stated thatthe power to ta# is "ot the power to destroy while thecourt sits.

Reco"cile the state!e"ts.*" the alter"ati$e5 what are the i!plicatio"s that flow

fro! the abo$e state!e"ts 7S3. iscuss briefly but co!prehe"si$ely theob?ecti$es or purposes of ta#atio".

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aroe ro# pec-!iar co$ideratio$ -ch a thoe epecia!!y p-$itie eect%Southern Cross Cement Corporation v. Cement Manufacturers

Association of the Philippines, et al., ?>0' A-g-t ' 200>& athe po+er to ta i$o!e the po+er to detroy a$d the be!ie that tae are!ieb!ood o the tate. %I"id.# tae bei$g the !ieb!ood o the goer$#e$t'their pro#pt a$d certai$ aai!abi!ity i o the ee$ce.

Thee co$ideratio$ $eceitated the eo!-tio$ o taatio$ a aditi$ct !ega! co$cept ro# po!ice po+er. %I"id.&

''. How the power of ta#atio" !ay be used toi!ple!e"t power of e!i"e"t do!ai". Ta #ea-re are b-te$orced co$trib-tio$ eacted o$ pai$ o pe$a! a$ctio$ a$d c!ear!yi#poed or p-b!ic p-rpoe. 4$ #ot rece$t year' the po+er to ta hai$deed beco#e a #ot eectie too! to rea!i;e ocia! -tice' p-b!ic +e!are'a$d the e-itab!e ditrib-tio$ o +ea!th. %Commissioner of Internal Revenue v.Central $uzon %rug Corporation, F6@' Apri! 16' 200>&

Etab!ih#e$t gra$ti$g the 20H e$ior citi;e$ dico-$t #ayc!ai# the dico-$t gra$ted to e$ior citi;e$ as ta# deductio"baed o$the $et cot o the good o!d or erice re$dered8 Provided' That thecot o the dico-$t ha!! be a!!o+ed a ded-ctio$ ro# gro i$co#e or

the a#e taab!e year that the dico-$t i gra$ted. Provided, further,That the tota! a#o-$t o the c!ai#ed ta ded-ctio$ $et o a!-e added tai app!icab!e' ha!! be i$c!-ded i$ their gro a!e receipt or tap-rpoe a$d ha!! be -bect to proper doc-#e$tatio$ a$d to theproiio$ o the Natio$a! 4$ter$a! Ree$-e (ode' a a#e$ded. GM.&.'olding Corporation v. Court of Appeals, et al.,


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b. 4$direct tae are thoe that are de#a$ded i$ the irti$ta$ce' ro#' or are paid by' o$e pero$ i$ the epectatio$ a$d i$te$tio$that he ca$ hit the b-rde$ to %Commissioner of Internal Revenue v.Philippine $ong %istance (elephone Company, supra&to o#eo$e e!e $ot aa ta b-t a part o the p-rchae price. %Commissioner, of InternalRevenue v. American &)press International, Inc. *Philippine Branch#, 260F' -$e 2F' 200> citi$g ario- cae a$d a-thoritie&Ea#p!e J a!-e added ta %VAT&' doc-#e$tary ta#p ta' ecie ta'perce$tage ta' etc.

'@.Silair FSi"9aporeG PTE5 (td.5 a" i"ter"atio"alcarrier5 purchased a$iatio" 9as fro! Petro" 0orporatio"5which it uses for its operatio"s. *t "ow clai!s for refu"d or ta#credit for the e#cise ta#es it paid clai!i"9 that it is e#e!ptfro! the pay!e"t of e#cise ta#es u"der the pro$isio"s of Sec.'8< of the N*R0 of 'CC@ which pro$ides that petroleu!products are e#e!pt fro! e#cise ta#es whe" sold to Ee#pte$titie or age$cie coered by ta treatie' co$e$tio$' a$d other i$ter$atio$a!agree#e$t or their -e a$d co$-#ptio$8 Proided' ho+eer' That the co-$tryo aid oreig$ i$ter$atio$a! carrier or ee#pt e$titie or age$cie ee#pt ro#i#i!ar tae petro!e-# prod-ct o!d to Phi!ippi$e carrier' e$titie or age$cie

Silair further a"chors its clai! o" Article :F%G of the AirTra"sport A9ree!e"t betwee" the ,o$er"!e"t of theRepublic of the Philippi"es a"d the ,o$er"!e"t of theRepublic of Si"9apore FAir Tra"sport A9ree!e"t betwee" RPa"d Si"9aporeG which reads- C-e!' !-brica$t' pare part' reg-!are-ip#e$t a$d aircrat tore i$trod-ced i$to' or ta/e$ o$ board aircrat i$ theterritory o o$e (o$tracti$g party by' or o$ beha! o' a deig$ated air!i$e o theother (o$tracti$g Party a$d i$te$ded o!e!y or -e i$ the operatio$ o the agreederice ha!!' +ith the eceptio$ o charge correpo$di$g to the ericeperor#ed' be ee#pt ro# the a#e c-to# d-tie' i$pectio$ ee a$d otherd-tie or tae i#poed i$ the territorie o the irt (o$tracti$g Party ' ee$ +he$

thee -pp!ie are to be -ed o$ the part o the o-r$ey peror#ed oer theterritory o the (o$tracti$g Party i$ +hich they are i$trod-ced i$to or ta/e$ o$board. The #ateria! reerred to aboe #ay be re-ired to be /ept -$derc-to# -periio$ a$d co$tro!.

Silair liewise ar9ues that it is e#e!pt fro! i"directta#es because the Air Tra"sport A9ree!e"t betwee" RP a"dSi"9apore 9ra"ts e#e!ptio" fro! the sa!e custo!s duties5i"spectio" fees a"d other duties or ta#es i!posed i" theterritory of the first 0o"tracti"9 Party. *t i"$oes ;aceda $.;acarai95 /r.5 ,.R. No. %C'5 ;ay 8'5 'CC'5 'C@ S0RA@@'.which upheld the clai! for ta# credit or refu"d by theNatio"al Power 0orporatio" FNP0G o" the 9rou"d that the NP0

is e#e!pt e$e" fro! the pay!e"t of i"direct ta#es.

*s Silair e"titled to the ta# refu"d or credit it sees 7Reaso" out your a"swer.

S3' 200>' @? S(RA61 the S-pre#e (o-rt c!ariied the r-!i$g i$ Maceda v. Macaraig, r., i;84t #ay be o that i$ Maceda vs. Macaraig, r.' the (o-rt he!d that a$ee#ptio$ ro# all ta#es gra$ted to the Natio$a! Po+er (orporatio$%NP(& -$der it charter i$c!-de both direct a$d i$direct tae.

A$ ee#ptio$ ro# a!! tae ec!-de i$direct tae' -$!e theee#pti$g tat-te' !i/e NP(: charter' i o co-ched a to i$c!-de i$directta ro# the ee#ptio$. The a#e$d#e$t -$der Rep-b!ic Act No. 6F>

e$-#erated the detai! coered by NP(: ee#ptio$. S-be-e$t!y' P.".?0' #ade ee$ #ore peciic the detai! o the ee#ptio$ o NP( tocoer' a#o$g other' both direct a$d i$direct tae o$ a!! petro!e-#prod-ct -ed i$ it operatio$. Preide$tia! "ecree No. F? GNP(:a#e$ded charterI a#e$ded the ta ee#ptio$ by i#p!iyi$g the a#e !a+i$ ge$era! ter#. 4t -cci$ct!y ee#pt NP( ro# a!! or# o tae'd-tie' eeK The -e o the phrae a!! or# o tae de#o$tratethe i$te$tio$ o the !a+ to gie NP( a!! the ta ee#ptio$ it ha bee$e$oyi$g beore.

The ee#ptio$ gra$ted -$der Sectio$ 1> %b& o the N4R( o 1FF@a$d Artic!e %2& o the Air Tra$port Agree#e$t bet+ee$ RP a$dSi$gapore ca$$ot' +itho-t a c!ear ho+i$g o !egi!atie i$te$t' beco$tr-ed a i$c!-di$g i$direct tae. Stat-te gra$ti$g ta ee#ptio$

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#-t be co$tr-ed i$ trictii#i -ri agai$t the tapayer a$d !ibera!!y i$aor o the tai$g a-thority' a$d i a$ ee#ptio$ i o-$d to eit' it #-t$ot be e$!arged by co$tr-ctio$. %Sil-air *Singapore# P(&, $td., v.Commissioner of Internal Revenue, F' Cebr-ary 6' 200?&

'. +hat are the differe"t i"ds of ta#esclassified as to purpose 7

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be used for a pri$ate purpose5 a"d therefore5 the law $iolatesthe rule that public re$e"ues shall "ot be appropriated fora"ythi"9 but a public purpose. ecide with reaso".

S3"ece#ber F' 1FF' *i$-te Reo!-tio$#

A tapayer: -it i proper!y bro-ght o$!y +he$ there ia$ eercie o the pe$di$g or tai$g po+er o (o$gre.%Automotive Industry 1or-ers Alliance *AI1A#,etc., et al., v. Romulo,etc. ,et al., @>0F' a$-ary 1?' 200> citi$g+onzales v. !arvasa, ' A-g-t 1' 2000' @ S(RA@' @1&

c. Cor oter' there #-t be a ho+i$g o obio- i$teret i$the a!idity o the e!ectio$ !a+ i$ -etio$.

d. Cor co$cer$ed citi;e$' there #-t be a ho+i$g that thei-e raied are o tra$ce$de$ta! i#porta$ce +hich #-t be ett!edear!y.

e. Cor !egi!ator' there #-t be a c!ai# that the oicia! actio$co#p!ai$ed o i$ri$ge -po$ their prerogatie a !egi!ator. %%avid, et

al., v. President +loria Macapagal0Arroyo, etc., et al., . Locus standibei"9 !erely a !atter of procedure5ha$e bee" wai$ed i" certai" i"sta"ces where a party who is"ot perso"ally i"?ured !ay be allowed to bri"9 suit. Theo!!o+i$g are ea#p!e o i$ta$ce +here -it hae bee$ bro-ght bypartie +ho hae $ot hae bee$ pero$a!!y i$-red by the operatio$ o a !a+or a$y other goer$#e$t act b-t by co$cer$ed citi;e$' tapayer or oter+ho act-a!!y -e i$ the p-b!ic i$teret8

a. Tapayer: -it to -etio$ co$tract e$tered i$to by the$atio$a! goer$#e$t or goer$#e$t,o+$ed or co$tro!!ed corporatio$a!!eged!y i$ co$trae$tio$ o the !a+.

b. A tapayer i a!!o+ed to -e +here there i a c!ai# that p-b!ic-$d are i!!ega!!y dib-red' or that p-b!ic #o$ey i bei$g de!ected to a$yi#proper p-rpoe' or that there i a +atage o p-b!ic -$d thro-gh thee$orce#e$t o a$ i$a!id or -$co$tit-tio$a! !a+. %A"aya v. &"dane,


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deficit as a perce"ta9e of ,P of the pre$ious year e#ceedso"e a"d o"ehalf perce"t F' JIG.

+as there a" i"$alid dele9atio" of le9islati$e power 7S3 a$d co#pa$io$ cae citi$g ario- caeII

. *"sta"ces of proper dele9atio"- +he" ta#i"9 powercould be dele9ated- E#ceptio"s to the rule o" "o"dele9atio"-

a. "e!egatio$ o tari po+er by (o$gre to the Preide$t -$derthe !eib!e tari c!a-e' Sectio$ 2? %2&' Artic!e V4 o the (o$tit-tio$.b. "e!egatio$ o e#erge$cy po+er to the Preide$t -$der

Sectio$ 2 %2& o Artic!e V4 o the (o$tit-tio$.c. The de!egatio$ to the Preide$t o the Phi!ippi$e to e$ter i$to

eec-tie agree#e$t' a$d to ratiy treatie +hich #ay co$tai$ taee#ptio$ proiio$ -bect to the co$c-rre$ce by the Se$ate i$ theratiicatio$ #ade by the Preide$t.

d. "e!egatio$ to the peop!e at !arge.e. "e!egatio$ to ad#i$itratie bodie GA"a-ada +uro Party $ist

*/ormerly AASS#, etc., v, &rmita, et al., 6' Septe#ber 1'200>I' +hich i reerred to a -bordi$ate !egi!atio$. 4$ thi i$ta$ce' there i a re-ire#e$t that the !a+ i co#p!ete i$a!! apect o +hat i de!egated i #ere!y the i#p!e#e$tatio$ o the !a+or there eit -icie$t!y deter#i$ate ta$dard to g-ide the de!egatea$d pree$t a tota! tra$ere$ce o the tai$g po+er.

C. Paradi9! shift fro! e#clusi$e 0o"9ressio"alpower to direct 9ra"t of ta#i"9 power to local le9islati$ebodies. The po+er to ta i $o !o$ger eted ec!-ie!y o$ (o$greD!oca! !egi!atie bodie are $o+ gie$ direct a-thority to !ey tae' eea$d other charge p-r-a$t to Artic!e L' ectio$ > o the 1F?@ (o$tit-tio$.%Batangas Poer Corporation v. Batangas City, et al. 26@>' a$dco#pa$io$ cae' Apri! 2?' 200 citi$g !ational Poer Corporation v. City ofCa"anatuan, doe $ot cha$ge thedoctri$e that #-$icipa! corporatio$ do $ot poe i$here$t po+er otaatio$. =hat it doe i to co$er #-$icipa! corporatio$ a ge$era!po+er to !ey tae a$d other+ie create o-rce o ree$-e. They $o!o$ger hae to +ait or a tat-tory gra$t o thee po+er. The po+er othe !egi!atie a-thority re!atie to the ica! po+er o !oca! goer$#e$tha bee$ red-ced to the a-thority to i#poe !i#itatio$ o$ #-$icipa!

po+er. *oreoer' thee !i#itatio$ #-t be co$ite$t +ith the baicpo!icy o !oca! a-to$o#y. The i#porta$t !ega! eect o Sectio$ > i th-to reere the pri$cip!e that do-bt are reo!ed agai$t #-$icipa!corporatio$. 7e$ceorth' i$ i$terpreti$g tat-tory proiio$ o$ #-$icipa!ica! po+er' do-bt +i!! be reo!ed i$ aor o #-$icipa! corporatio$.4t i -$dertood' ho+eer' that tae i#poed by !oca! goer$#e$t #-tbe or a p-b!ic p-rpoe' -$ior# +ithi$ a !oca!ity' #-t $ot beco$icatory' a$d #-t be +ithi$ the -ridictio$ o the !oca! -$it to pa.%8uezon City, et al., v. ABS0CB! Broadcasting Corporation'


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'%. Reco"ciliatio" of the local 9o$er"!e"t6s authorityto ta# a"d the 0o"9ressio"al 9e"eral ta#i"9 power. (o$greha the i$here$t po+er to ta' +hich i$c!-de the po+er to gra$t taee#ptio$. O$ the other ha$d' the po+er o !oca! goer$#e$t' -cha proi$ce a$d citie or ea#p!e -e;o$ (ity' to ta i precribed bySectio$ 1>1 i$ re!atio$ to Sectio$ 1@ o the )&I is ow"ed by 1red 0orporatio"5 a 1ilipi"oow"edPhilippi"e corporatio". E"site 0o. also ow"s '&&I of the

shares of Susa"to 0o.5 a" *"do"esia" co!pa"y which has aduly lice"sed Philippi"e bra"ch. ue to worldwiderestructuri"9 of the E"site (td.5. 9roup5 E"site (td.5. decidedto sell all its shares i" Philippi"e Sta!pi"9 Pla"t5 *"c. a"dSusa"to 0o. The "e9otiatio"s for the buyout a"d the si9"i"9of the A9ree!e"t of Sale were all do"e i" the Philippi"es.The A9ree!e"t pro$ides that the purchase price will be paidto E"site (td6s ba" accou"t i" the .S. a"d that title to thePhilippi"e Sta!pi"9 Pla"t5 *"c. a"d Susa"to 0o. shall betra"sferred to ,e"eral 0o.5 i" Toro"to 0a"ada where stoccertificates will be deli$ered. ,e"eral 0o. sees your ad$ice

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as to whether or "ot it will sub?ect the pay!e"ts of thepurchase price to withholdi"9 ta#. E#plai" your ad$ice.

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b. Supposi"9 that Oba!a5 *"c.5 sells ticets outside ofthe Philippi"es for passe"9ers it carry fro! ,old 0ity5 SouthAfrica to the Philippi"es but retur"s to South Africa withouta"y car9o or passe"9ers. +ould it the" be sub?ect to a"yPhilippi"e ta# o" such sales 7

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ae#e$t or to!! or the !ega!ity o a$y pe$a!ty i#poed i$ re!atio$ to theaboeD

!. A-thority o !oca! goer$#e$t -$it to create their o+$o-rce o ree$-e' to !ey tae' ee a$d other charge -bect tog-ide!i$e a$d !i#itatio$ i#poed by (o$gre co$ite$t +ith the baicpo!icy o !oca! a-to$o#yD

#. A-to#atic re!eae o !oca! goer$#e$t -t hare i$ $atio$a!taeD

$. Ta ee#ptio$ o a!! ree$-e a$d aet o $o$,toc/' $o$,proit ed-catio$a! i$tit-tio$ -ed act-a!!y' direct!y a$d ec!-ie!y ored-catio$a! p-rpoeD

o. Ta ee#ptio$ o a!! ree$-e a$d aet o proprietary orcooperatie ed-catio$a! i$tit-tio$ -bect to !i#itatio$ proided by !a+i$c!-di$g retrictio$ o$ diide$d a$d proiio$ or rei$et#e$t oproitD

p. Ta ee#ptio$ o gra$t' e$do+#e$t' do$atio$ orco$trib-tio$ -ed act-a!!y' direct!y a$d ec!-ie!y or ed-catio$a!p-rpoe -bect to co$ditio$ precribed by !a+.


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4$te$tio$a! dicri#i$atio$ agai$t #e#ber o a -ai,-pectc!a io!ate e-a! protectio$ -$!e they are -bta$tia!!y re!ated toi#porta$t goer$#e$t obectie. *Craig v. Boren, 2F 3.S. 1F0#

Th-' a tate !a+ gra$ti$g a property ta ee#ptio$ to +ido+' b-t$ot +ido+er' ha bee$ he!d a!id or it -rther the tate po!icy oc-hio$i$g the i$a$cia! i#pact o po-a! !o -po$ the e or +ho#that !o --a!!y i#poe a heaier b-rde$. *:ahn v. Shevin, 16 3.S.>1#

'%. EDuality a"d u"ifor!ity of ta#atio" !ay !ea" thesa!e as eDual protectio". 4$ -ch a cae' the ter# +o-!d #ea$ thata!! -bect a$d obect o taatio$ +hich are i#i!ar!y it-ated ha!! be-bect to the a#e b-rde$ a$d gra$ted the a#e prii!ege +itho-t a$ydicri#i$atio$ +hatoeer.

'8. *t is i"here"t i" the power to ta# that the State befree to select the sub?ects of ta#atio"5a$d it ha bee$ repeated!yhe!d that' Qi$e-a!itie +hich re-!t ro# a i$g!i$g o-t o o$e partic-!arc!a o taatio$' or ee#ptio$' i$ri$ge $o co$tit-tio$a! !i#itatio$.Q*Commissioner of Internal Revenue, et al., v. Santos, et al., 2@@ S(RA61@&

C. Be"?ie is a lawabidi"9 citie" who pays his realestate ta#es pro!ptly. ue to a series of typhoo"s a"dad$erse eco"o!ic co"ditio"s5 a" ordi"a"ce is passed bySoli!a" 0ity 9ra"ti"9 a


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attor$ey or $o$eaa$ce +o-!d beco#e a$ i-e i$ the tria! o #a$ypero$ charged +ith hei$o- cri#e a$d the e$orce#e$t o !a+ +o-!d-er a co#p!ete brea/do+$. %Santos v. People, et al, & or the a#e tai$g period J per ca!e$dar yearD a$d %6& o thea#e /i$d or character J a !oca! b-i$e ta i#poed o$ gro a!e orreceipt o the b-i$e. %(he City of Manila, et al., v. Coca0Cola BottlersPhilippines, Inc., ' A-g-t ' 200F&

':. A lawful ta# o" a "ew sub?ect5 or a" i"creased ta#o" a" old o"e5 does "ot i"terfere with a co"tract or i!pairs its

obli9atio"' withi" the !ea"i"9 of the co"stitutio". *(olentino v.Secretary of /inance, et al., and companion cases,2> S(RA 60&

'' 1FF' 2> S(RA 60' 6?>& The a-thor opi$ethat i$ce practica!!y a!! ra$chie gra$ted to te!eco##-$icatio$co#pa$ie are i#i!ar!y +orded that the aboe doctri$e i$d app!icatio$to the other&

'. The pri!ary reaso" for the withdrawal of ta#e#e!ptio" pri$ile9es 9ra"ted to 9o$er"!e"t ow"ed a"dco"trolled corporatio"s a$d a!! other -$it o goer$#e$t +a that-ch prii!ege re-!ted to erio- ta bae eroio$ a$d ditortio$ i$ the ta

treat#e$t o i#i!ar!y it-ated e$terprie' he$ce re-!ti$g i$ the $eed orthee e$titie to hare i$ the re-ire#e$t o dee!op#e$t' ica! orother+ie' by payi$g the tae a$d other charge d-e the#. %PhilippinePorts Authority v. City of Iloilo,


14/79

epre!y proide +hat /i$d o tae ABS,(BN i ee#pted ro#. 4t i$ot c!ear +hether the ee#ptio$ +o-!d i$c!-de both !oca!' +hether#-$icipa!' city or proi$cia!' a$d $atio$a! ta. =hether the i$ !ie- o a!!tae proiio$ +o-!d i$c!-de ee#ptio$ ro# !oca! ta i $ot-$e-ioca!.

The right to ee#ptio$ ro# !oca! ra$chie ta #-t be c!ear!yetab!ihed a$d ca$$ot be #ade o-t o i$ere$ce or i#p!icatio$ b-t #-tbe !aid beyo$d reao$ab!e do-bt. Veri!y' the -$certai$ty i$ the i$ !ie- o

a!! tae proiio$ ho-!d be co$tr-ed agai$t ABS,(BN. ABS,(BNha the b-rde$ to proe that it i i$ act coered by the ee#ptio$ oc!ai#ed b-t ha ai!ed to do o. %8uezon City, et al., v. ABS0CB!Broadcasting Corporation'


15/79

b. Tai$g a!! o the -bect or obect or the irt ti#e +itho-ttai$g a!! o the# or the eco$d ti#e.

4 a$y o the e!e#e$t are abe$t the$ there i i$direct d-p!icatetaatio$ +hich i $ot prohibited by the co$tit-tio$.

NOTES AN" (O**ENTS8a. Prese"ce of the %"d ele!e"t $iolates the eDual protectio"

clause. 4 o$!y the 1te!e#e$t i pree$t' tai$g the a#e -bect or obect t+ice'by the a#e tai$g a-thority' etc.' there i $o io!atio$ o the e-a! protectio$

c!a-e beca-e a!! -bect a$d obect that are i#i!ar!y it-ated are -bect tothe a#e b-rde$ a$d gra$ted the a#e prii!ege +itho-t a$y dicri#i$atio$+hatoeer'

The pree$ce o the 2$de!e#e$t' tai$g a!! o the -bect a$d obect orthe irt ti#e' +itho-t tai$g a!! or the eco$d ti#e' re-!t to dicri#i$atio$ a#o$g-bect a$d obect that are i#i!ar!y it-ated' he$ce io!atie o the e-a!protectio$ c!a-e.

%' 200>&

8&. The petitio"ers alle9e that the R3AT law is

co"stitutio"al because the Bica!eral 0o"fere"ce 0o!!ittedhas e#ceeded its authority i" i"cludi"9 pro$isio"s which were"e$er i"cluded i" the $ersio"s of both the House a"d Se"atesuch as i"serti"9 the sta"dby authority to the Preside"t toi"crease the 3AT fro! '&I to '%IK deleti"9 e"tirely the "opasso" pro$isio"s fou"d i" both the House a"d Se"ate BillsKi"serti"9 the pro$isio" i!posi"9 a @&I li!it o" the a!ou"t ofi"put ta# to be credited a9ai"st the output ta#K a"d i"cludi"9the a!e"d!e"ts i"troduced o"ly by Se"ate Bill No. 'C a$d co#pa$io$ caeI

8'. The 3AT while re9ressi$e is NOT $iolati$e of the!a"date to e$ol$e a pro9ressi$e syste! of ta#atio". o youa9ree 7 The #a$date to (o$gre i $ot to precribe b-t to eo!e aprogreie yte# o taatio$. Other+ie' a!e tae +hich perhap arethe o!det or# o i$direct tae' +o-!d hae bee$ prohibited +ith theproc!a#atio$ o the co$tit-tio$a! proiio$. Sa!e tae are a!oregreie. . GA"a-ada +uro Party $ist *etc.# v. &rmita, etc., et al.,6' Septe#ber 1' 200> a$d co#pa$io$ cae citi$g (olentino v. Secretary of/inance, et al., >>' A-g-t 2>' 1FF' 2> S(RA 60I

15


16/79

8%. All re$e"ues a"d assets of "o"stoc5 "o"profiteducatio"al i"stitutio"s that are actually5 directly a"de#clusi$ely used for educatio"al purposes shall be e#e!ptfro! ta#atio".

88. Re$e"ues a"d assets of proprietary educatio"al

i"stitutio"s5 i"cludi"9 those which are cooperati$ely ow"ed5!ay be e"titled to e#e!ptio"s sub?ect to li!itatio"s pro$ided

by law i"cludi"9 restrictio"s o" di$ide"ds a"d pro$isio"sforrei"$est!e"ts. There i $o !a+ at the pree$t +hich gra$t ee#ptio$'other the ee#ptio$ gra$ted to cooperatie.

OTHER 0ON0EPTS

'. isti"9uish ta# fro! debt.

TAL "EBT

Basis baed o$ !a+ baed o$ co$tract or-dg#e$t

1ailure to Pay #ay re-!t i$i#prio$#e$t

$o i#prio$#e$t

;ode ofPay!e"t

ge$era!!y payab!e i$#o$ey

payab!e i$ #o$ey'property or erice

Assi9"ability $ot aig$ab!e aig$ab!e

Pay!e"t -$!e it beco#e adebt i $ot -bect toco#pe$atio$ or et,o

#ay be a -bect

*"terest doe $ot dra+ i$teret-$!e de!i$-e$t

dra+ i$teret itip-!ated or de!ayed

Authority i#poed by p-b!ica-thority

ca$ be i#poed bypriate i$diid-a!

Prescriptio" Precriptie periodor ta -$der N4R(

debt -$der the (ii!(ode

+ARN*N,- o "ot use the abo$e arra"9e!e"t i" a"sweri"9 BarDuestio"s.

%. 0o!pe"satio" ta/e p!ace by operatio$ o !a+' +here the!oca! goer$#e$t a$d the tapayer are i$ their o+$ right reciproca!!ydebtor a$d creditor o each other' a$d that the debt are both d-e a$dde#a$dab!e' i$ co$e-e$ce o Artic!e 12@? a$d 12@F o the (ii! (ode.*%omingo v. +arlitos, ? S(RA &

8. ;ay there be co!pe"satio" or setoff betwee" a"atio"al ta# a"d a debt 7 Reaso" out your a"swer.

S3


17/79

inde"eti.%Commissioner of Internal Revenue v. &sso Standard &astern, Inc1@2S(RA 6&

e. =hi!e -dg#e$t ho-!d be re$dered i$ aor o Rep-b!icor -$paid tae' -dg#e$t o-ght at the a#e ti#e to i-e orSa#pag-ita Pict-re co##a$di$g pay#e$t to the !atter by the Rep-b!ico the a!-e o the bac/pay certiicate +hich the Rep-b!ic receied.%Repu"lic v. &ricta' 1@2 S(RA 62&

' > S(RA 66?&

. Strict i"terpretatio" of ta# e#e!ptio" laws. Taeare +hat cii!i;ed peop!e pay or cii!i;ed ociety. They are the !ieb!oodo the $atio$. Th-' tat-te gra$ti$g ta ee#ptio$ are co$tr-edstricissimi =urisagai$t the tapayer a$d !ibera!!y i$ aor o the tai$ga-thority. A c!ai# o ta ee#ptio$ #-t be c!ear!y ho+$ a$d baed o$

!a$g-age i$ !a+ too p!ai$ to be #ita/e$. Other+ie tated' taatio$ ithe r-!e' ee#ptio$ i the eceptio$. %8uezon City, et al., v. ABS0CB!Broadcasting Corporation'


18/79

'%. But "ote Nestle Phil. v. Court of Appeals, et al., ,.R.No. '8:'':5 /uly >5 %&&'+hich he!d that i$ order or the r-!e o$ solutioinde"eti to app!y it i a$ ee$tia! co$ditio$ that the petitio$er #-t irtho+ that it pay#e$t o the c-to# d-tie +a i$ ece o +hat +are-ired by the !a+ at the ti#e the -bect 16 i#portatio$ o #i!/ a$d #i!/prod-ct +ere #ade. 3$!e ho+$ other+ie' the dip-tab!e pre-#ptio$o reg-!arity o peror#a$ce o d-ty !ie i$ aor o the (o!!ector o(-to#.

'8. Strict i"terpretatio" of a ta# refu"d that partaes ofthe "ature of a ta# does "ot apply to ta# refu"d based o"erro"eous pay!e"t or where there is "o law that authoriescollectio" of the ta#. There i parity bet+ee$ ta re-$d a$d taee#ptio$ o$!y +he$ the or#er i baed either o$ a ta ee#ptio$tat-te or a ta re-$d tat-te. %Commissioner of Internal Revenue v./ortune (o"acco Corporation, ' -!y 21' 200?&

Ta re-$d %or ta credit&' o$ the other ha$d' are $ot o-$dedpri$cipa!!y o$ !egi!atie grace b-t o$ the !ega! pri$cip!e +hich -$der!iea!! -ai,co$tract abhorri$g a pero$: -$-t e$rich#e$t at the epe$eo a$other. GCommissioner, supra citi$g Ramie (e)tiles, Inc. v. 'on. Mathay'Sr.' 1@? Phi!. ?2 %1F@F&D Puyat Sons v. City of Manila' et a!.' 11@ Phi!. F?>

%1F6&IThe dy$a#ic o erro$eo- pay#e$t o ta it to a tee the

prototypic -ai,co$tract' solutio inde"iti, +hich coer $ot o$!y #ita/ei$ act b-t a!o #ita/e i$ !a+. %Commissioner, supra citi$g (4V4) (O"E'Art. 212' 21> a$d 21>>&

The 1' >@,>?D SurigaoConsolidated Mining Co. Inc. v. Commissioner of Internal Revenue' supraI

A c!ai# or ta re-$d #ay be baed o$ tat-te gra$ti$g taee#ptio$ or ta re-$d. 4$ -ch cae' the r-!e o trict i$terpretatio$agai$t the tapayer i app!icab!e a the c!ai# or re-$d parta/e o the$at-re o a$ ee#ptio$' a !egi!atie grace' +hich ca$$ot be a!!o+ed-$!e gra$ted i$ the #ot ep!icit a$d categorica! !a$g-age. Thetapayer #-t ho+ that the !egi!at-re i$te$ded to ee#pt hi# ro# the

ta by +ord too p!ai$ to be #ita/e$. GCommissioner, supra +ith a $ote toee Surigao Consolidated Mining Co. Inc. v. CIR' supra at @2,@D Phile)Mining Corp. v. Commissioner of Internal Revenue' 6> Phi!. >@2' >@F %1FFF&D%avao +ulf $um"er Corp. v. Commissioner of Internal Revenue' > Phi!. ?F1,?F2 %1FF?&D . Commissioner of Internal Revenue v. (o-yo Shipping Co., $td.'1 Phi!. 220' 22? %1FF>&I

'


19/79

'@. The purpose of ta# a!"estyi toa. gie ta eader +ho +ih to re!e$t a cha$ce to tart a c!ea$

!ate' a$d tob. gie the goer$#e$t a cha$ce to co!!ect -$co!!ected ta ro#ta eader +itho-t hai$g to go thro-gh the tedio- proce o a

ta cae. *Banas, r. v. Court of Appeals, et al.,> cited i$ Segarra' Ve$ice 7'Ta Treatie8 Tric/ or treat M' Phi!ippi$e "ai!y 4$-irer' "ece#ber 6' 2002' p. (>&

There #ay be i$ta$ce +here a partic-!ar i$co#e i ee#pt ro#taatio$ i$ order to e$co-rage oreig$ i$et#e$t +hich #ay !ead toeco$o#ic dee!op#e$t. 4 the ta credit #ethod i -ed' there +o-!d be

$o #ore ta to credit i$ce there i $o #ore ta to credit a a re-!t o theta ee#ptio$. (o$e-e$t!y' +he$ the ta #ethod credit #ethod iapp!ied to thee ite# o i$co#e' -ch i$ce$tie are ipho$ed o i$ce'i$ eect' the ta be$eit are ca$ce!!ed o-t. *I"id.# Th-' the $eed or theta pari$g proiio$.

NAT*ONA( *NTERNA( RE3ENE 0OE

OR,AN*LAT*ON AN 1N0T*ONS O1 THE BREA O1*NTERNA( RE3ENE

'. Rep. Act No. ':&


20/79

TA) ON *N0O;E

'. The Ta# 0ode has i"cluded u"der the ter!corporatio" part"erships5 "o !atter how createdor orga$i;ed'

oi$t,toc/ co#pa$ie' oi$t acco-$t %cuentas en participacion&'aociatio$' or i$-ra$ce co#pa$ie. GSec. 2 $o+ Sec. 2 %B& o theN4R( o 1FF@I

%. 4$ &vangelista v. Collector, 102 Phi!. 10,the S-pre#e (o-rthe!d citi$g *erte$ that the ter! part"ership i"cludes a y$dicate'gro-p' poo!' oi$t e$t-re or other -$i$corporated orga$i;atio$' thro-gh orby #ea$ o +hich a$y b-i$e' i$a$cia! operatio$' or e$t-re i carriedo$.

8. 0ertai" busi"ess or9a"iatio"s do "ot fall u"der thecate9ory of corporatio"s u"der the Ta# 0ode ' a$d thereore $ot-bect to ta a corporatio$' i$c!-de8

a.


21/79

'8. *f a creditor !erely desires to be"efit a debtor a"dwithout a"y co"sideratio" therefor ca"cels the a!ou"t of thedebt it is a 9ift fro! the creditor to the debtor a"d "eed "ot bei"cluded i" the latter6s i"co!e.

':. *f a corporatio" to which a stocholder is i"debted

for9i$es the debt5 the tra"sactio" has the effect of pay!e"t ofa di$ide"d. %Sec. >0' Re. Reg. No. 2&

''

Artic!e L44 o the (o$tit-tio$ co$ider cooperatie a i$tr-#e$t or ocia!-tice a$d eco$o#ic dee!op#e$t. At the a#e ti#e' Sectio$ 10 o Artic!e 44 othe (o$tit-tio$ dec!are that it i a po!icy o the State to pro#ote ocia! -tice i$a!! phae o $atio$a! dee!op#e$t. 4$ re!atio$ thereto' Sectio$ 2 o Artic!e L444 othe (o$tit-tio$ tate that the pro#otio$ o ocia! -tice ha!! i$c!-de theco##it#e$t to create eco$o#ic opport-$itie baed o$ reedo# o i$itiatie a$d

e!,re!ia$ce. Beari$g i$ #i$d the oregoi$g proiio$' +e i$d that a$i$terpretatio$ ee#pti$g the #e#ber o cooperatie ro# the i#poitio$ o thei$a! ta -$der Sectio$ 2%B&%1& o the N4R( %ta o$ i$teret ear$ed by depoit&i #ore i$ /eepi$g +ith the !etter a$d pirit o o-r (o$tit-tio$. %%umagueteCathedral Credit Coopertive 5%CCC#6 etc., v. Commissioner of Internal Revenue,00 Phi!. >?6 %200>&.

'>. The ,lobal syste! of i"co!e ta#atio" i a yte#e#p!oyed +here the ta yte# ie+ i$diere$t!y the ta bae a$dge$era!!y treat i$ co##o$ a!! categorie o taab!e i$co#e o thei$diid-a!. *(an v. del Rosario, r.,2@ S(RA 2' 1&

'@. The Schedular syste! of i"co!e ta#atio" i a yte#e#p!oyed +here the i$co#e ta treat#e$t arie a$d i #ade to depe$do$ the /i$d or category o taab!e i$co#e o the tapayer. *(an v. delRosario, r., @ SCRA @F, @@?#

'. "der the Natio"al *"ter"al Re$e"ue 0ode the 9lobalsyste! is applicable to ta#able corporatio"s a"d the schedularto i"di$iduals.

'C. 0o!pe"satio" i"co!e is co"sidered as ha$i"9bee" ear"ed i" the place where the ser$ice was re"dereda$d$ot co$idered a o-rced ro# the p!ace o origi$ o the #o$ey.

%&. Pay!e"t for ser$ices5 other tha" co!pe"satio"i"co!e5 is co"sidered as ha$i"9 bee" ear"ed at the placewhere the acti$ity or ser$ice was perfor!ed.

%'. A "o"reside"t alie"5 who has stayed i" thePhilippi"es for a" a99re9ate period of !ore tha" '& daysduri"9 a"y cale"dar year5 shall be co"sidered as a "o"reside"t alie" doi"9 busi"ess i" the Philippi"es. (o$e-e$t!y'he ha!! be -bect to i$co#e ta o$ hi i$co#e deried ro# o-rce ro#+ithi$ the Phi!ippi$e. GSec. 2> %A& %1&' N4R(I

7e i a!!o+ed to aai! o the ite#i;ed ded-ctio$ i$c!-di$g the

pero$a! a$d additio$a! ee#ptio$ -bect to the r-!e o$ reciprocity.

%%. +hat are co"sidered as de minimis be"efits"ot sub?ect to withholdi"9 ta# o" co!pe"satio" i"co!e ofboth !a"a9erial a"d ra" a"d file e!ployees 7

S3


22/79

i. C!o+er' r-it' boo/' or i#i!ar ite# gie$ to e#p!oyee-$der pecia! circ-#ta$ce' e.g. o$ acco-$t o i!!$e' #arriage' birth o ababy' etc.D a$d

. "ai!y #ea! a!!o+a$ce or oerti#e +or/ $ot eceedi$g t+e$tyie perce$t %2>H& o the baic #i$i#-# +age.

The a#o-$t o de minimis be$eit co$or#i$g to the cei!i$g herei$precribed ha!! $ot be co$idered i$ deter#i$i$g the P0'000 cei!i$g oother be$eit proided -$der Sectio$ 2 %B&%@&%e& o the (ode. 7o+eer'

i the e#p!oyer pay #ore tha$ the cei!i$g precribed by thee reg-!atio$'the ece ha!! be taab!e to the e#p!oyee receii$g the be$eit o$!y i-ch ece i beyo$d the P0'000.00 cei!i$g' proided' -rther' that a$ya#o-$t gie$ by the e#p!oyer a be$eit to it e#p!oyee' +hetherc!aiied a de minimis be$eit or ri$ge be$eit' ha!! co$tit-te aded-ctib!e epe$e -po$ -ch e#p!oyer. GSec. 2.@?.1 %A& %&' Re. Reg.2,F? a a#e$ded by Re. Reg. No. ?,2000I

%8. *"co!e sub?ect to fi"al ta# refers to a" i"co!ecollected throu9h the withholdi"9 ta# syste!. The payor o thei$co#e +ithho!d the ta a$d re#it it to the goer$#e$t a a i$a!ett!e#e$t o the i$co#e ta a a i$a! ett!e#e$t o the i$co#e ta d-e o$

aid i$co#e. The recipie$t i $o !o$ger re-ired to i$c!-de the i$co#e-bected to a i$a! ta a part o hi gro i$co#e i$ hi i$co#e ta ret-r$.

%:. isti"9uishe#clusio"s fro! deductio"s.S3


23/79

2& Cor a$y ca-e beyo$d the co$tro! o aid oicia! ore#p!oyee GSec. 2 %B& %6& %b&' N4R( o 1FF@I' -ch aretre$ch#e$t' red-$da$cy a$d ceatio$ o b-i$e. G1t par.'Sec. 2.@? %B&' %1& %b&' Re. Reg. No. 2,F?I

%. +hat are the *te!ied deductio"s fro! 9rossi"co!e a"d who !ay a$ail of the! 7

a. Ordi"ary a"d "ecessary trade' b-i$e or proeio$a!

e#pe"ses.b. The a#o-$t o i"terest paid or i$c-rred +ithi$ a taab!e year

o$ i$debted$e i$ co$$ectio$ +ith the tapayer: proeio$' trade orb-i$e.

Reide$t citi;e$' reide$t a!ie$ i$diid-a! a$d $o$reide$t a!ie$i$diid-a! +ho are e$gaged i$ trade a$d b-i$e' o$ their gro i$co#eother ro# co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee epe$e."o#etic corporatio$' etate a$d tr-t #ay a!o ded-ct thi epe$e.No$reide$t citi;e$ a$d oreig$ corporatio$ o$ their gro i$co#e ro#+ithi$ #ay a!o ded-ct thi epe$e.

No$reide$t a!ie$ i$diid-a! $ot e$gaged i$ trade or b-i$e i$the Phi!ippi$e are $ot a!!o+ed to ded-ct thi epe$e.

c. Ta#espaid or i$c-rred +ithi$ the taab!e year i$ co$$ectio$+ith the tapayer: proeio$.



d. Ordi$ary losses' !oe ro# ca-a!ty' thet ore#be;;!e#e$tD a$d $et operati$g !oe.



e. Bad debtsd-e to the tapayer' act-a!!y acertai$ed tobe +orth!e a$d charged o +ithi$ the taab!e year' co$$ected +ithproeio$' trade or b-i$e' $ot -tai$ed bet+ee$ re!ated partie.

Reide$t citi;e$' reide$t a!ie$ i$diid-a! a$d $o$reide$t a!ie$i$diid-a! +ho are e$gaged i$ trade a$d b-i$e' o$ their gro i$co#e

other ro# co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee epe$e."o#etic corporatio$' etate a$d tr-t #ay a!o ded-ct thi epe$e.No$reide$t citi;e$ a$d oreig$ corporatio$ o$ their gro i$co#e ro#+ithi$ #ay a!o ded-ct thi epe$e.


. epreciatio"or a reao$ab!e a!!o+a$ce or the eha-tio$'+ear a$d tear %i$c!-di$g reao$ab!e a!!o+a$ce or obo!ece$ce& o

property -ed i$ trade or b-i$e.Reide$t citi;e$' reide$t a!ie$ i$diid-a! a$d $o$reide$t a!ie$

i$diid-a! +ho are e$gaged i$ trade a$d b-i$e' o$ their gro i$co#eother ro# co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee epe$e."o#etic corporatio$' etate a$d tr-t #ay a!o ded-ct thi epe$e.No$reide$t citi;e$ a$d oreig$ corporatio$ o$ their gro i$co#e ro#+ithi$ #ay a!o ded-ct thi epe$e.


g. epletio"or ded-ctio$ arii$g ro# the eha-tio$ o a $o$,rep!aceab!e aet' --a!!y a $at-ra! reo-rce.

Reide$t citi;e$' reide$t a!ie$ i$diid-a! a$d $o$reide$t a!ie$

i$diid-a! +ho are e$gaged i$ trade a$d b-i$e' o$ their gro i$co#eother ro# co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee epe$e."o#etic corporatio$' etate a$d tr-t #ay a!o ded-ct thi epe$e.No$reide$t citi;e$ a$d oreig$ corporatio$ o$ their gro i$co#e ro#+ithi$ #ay a!o ded-ct thi epe$e.


h. 0haritable a$d other co"tributio"s. Reide$t citi;e$'reide$t a!ie$ i$diid-a! a$d $o$reide$t a!ie$ i$diid-a! +ho aree$gaged i$ trade a$d b-i$e' o$ their gro i$co#e other ro#co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee epe$e. "o#eticcorporatio$' etate a$d tr-t #ay a!o ded-ct thi epe$e.No$reide$t citi;e$ a$d oreig$ corporatio$ o$ their gro i$co#e ro#+ithi$ #ay a!o ded-ct thi epe$e.


i. Research a"d de$elop!e"tepe$dit-re treated a deerredepe$e paid or i$c-rred by the tapayer i$ co$$ectio$ +ith hi trade'b-i$e or proeio$' $ot ded-cted a epe$e a$d chargeab!e tocapita! acco-$t b-t $ot chargeab!e to property o a character +hich i-bect to depreciatio$ or dep!etio$.

Reide$t citi;e$' reide$t a!ie$ i$diid-a! a$d $o$reide$t a!ie$i$diid-a! +ho are e$gaged i$ trade a$d b-i$e' o$ their gro i$co#eother ro# co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee epe$e."o#etic corporatio$' etate a$d tr-t #ay a!o ded-ct thi epe$e.

23


24/79

No$reide$t citi;e$ a$d oreig$ corporatio$ o$ their gro i$co#e ro#+ithi$ #ay a!o ded-ct thi epe$e.


. 0o"tributio"s to pe"sio" trusts. Reide$t citi;e$' reide$ta!ie$ i$diid-a! a$d $o$reide$t a!ie$ i$diid-a! +ho are e$gaged i$ tradea$d b-i$e' o$ their gro i$co#e other ro# co#pe$atio$ i$co#e area!!o+ed to ded-ct thee epe$e. "o#etic corporatio$' etate a$d

tr-t #ay a!o ded-ct thi epe$e. No$reide$t citi;e$ a$d oreig$corporatio$ o$ their gro i$co#e ro# +ithi$ #ay a!o ded-ct thiepe$e.


/. *"sura"ce pre!iu!s or hea!th a$d hopita!i;atio$. Reide$tciti;e$' reide$t a!ie$ i$diid-a! a$d $o$reide$t a!ie$ i$diid-a! +ho aree$gaged i$ trade a$d b-i$e' o$ their gro i$co#e other ro#co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee epe$e. No$reide$tciti;e$ a$d $o$reide$t a!ie$ i$diid-a! e$gaged i$ trade or b-i$e i$ thePhi!ippi$e o$ their gro i$co#e ro# +ithi$ #ay a!o ded-ct theepre#i-#.

No$reide$t a!ie$ i$diid-a! $ot e$gaged i$ trade or b-i$e i$the Phi!ippi$e are $ot a!!o+ed to ded-ct thee pre#i-#.!. Perso"al a"d additio"al e#e!ptio"s. Reide$t citi;e$' a$d

reide$t a!ie$ o$ their gro i$co#e a$d ro# co#pe$atio$ i$co#e area!!o+ed to ded-ct thee pre#i-#. No$reide$t citi;e$ o$ their groi$co#e ro# +ithi$ #ay a!o ded-ct thi epe$e. No$reide$t a!ie$i$diid-a! e$gaged i$ trade or b-i$e i$ the Phi!ippi$e are a!!o+ed toded-ct thee ee#ptio$ -$der reciprocity.


%C. isti"9uish ordi"ary e#pe"ses fro! capital

e#pe"ditures.S3


25/79

b. Reco9"itio" of i"co!e a"d e#pe"ses u"der the accrual!ethod of accou"ti"9. A#o-$t o i$co#e accr-e +here the right toreceie the# beco#e ied' +here there i created a$ e$orceab!e !iabi!ity.)iabi!itie' are i$c-rred +he$ ied a$d deter#i$ab!e i$ $at-re +itho-tregard to i$deter#i$acy #ere!y o ti#e o pay#e$t.. %Commissioner ofInternal Revenue v, Isa"ela cultural Corporation, . De minimis be"efits are facilities a"d pri$ile9es%-ch a e$tertai$#e$t' #edica! erice' or o,ca!!ed co-rtey dico-$to$ p-rchae&' -r$ihed or oered by a$ e#p!oyer to hi e#p!oyee.They are $ot co$idered a co#pe$atio$ -bect to i$co#e ta a$dco$e-e$t!y to +ithho!di$g ta' i -ch aci!itie are oered or -r$ihed bythe e#p!oyer #ere!y a a #ea$ o pro#oti$g the hea!th' good+i!!'

25


26/79

co$te$t#e$t' or eicie$cy o hi e#p!oyee. GSec. 2.@?'1 %A& %&' Re. Reg.2,F? a a#e$ded by Re. Reg. No. ?,2000I

8@. Preferred shares are co"sidered capital re9ardlessof the co"ditio"s u"der which such shares are issued a"ddi$ide"ds or i"terests paid thereo" are "ot allowed asdeductio"s fro! the 9ross i"co!e of corporatio"s. %Ree$-e*e#ora$d-# (irc-!ar No. 1@,@1&

8. Bad debtsare thoe +hich re-!t ro# the +orth!e$eor -$co!!ectibi!ity' i$ +ho!e or i$ part' o a#o-$t d-e the tapayer byother' arii$g ro# #o$ey !e$t or ro# -$co!!ectib!e a#o-$t o i$co#ero# good o!d or erice re$dered. %Sec. 2.a' Re. Reg. >,FF&

8C. +ho are related parties 7S3,FF&

b. 4 the aid tapayer did $ot be$eit ro# the ded-ctio$ o the

aid bad debt +ritte$,o beca-e it did $ot re-!t to a$y red-ctio$ o hii$co#e ta i$ the year o -ch ded-ctio$ %i.e. +here the re-!t o hib-i$e operatio$ +a a $et !o ee$ +itho-t ded-ctio$ o the bad debt+ritte$,o&' the$ hi -be-e$t recoery thereo ha!! be treated a a#ere recoery or a ret-r$ o capita!' he$ce' $ot treated a receipt orea!i;ed taab!e i$co#e. %Sec. ' Re. Reg. >,FF&

:%. epreciatio"i the grad-a! di#i$-tio$ i$ the -e-! a!-e ota$gib!e property re-!ti$g ro# ordi$ary +ear a$d tear a$d ro# $or#a!obo!ece$ce. The ter# i a!o app!ied to a#orti;atio$ o the a!-e oi$ta$gib!e aet the -e o +hich i$ the trade or b-i$e i dei$ite!y!i#ited i$ d-ratio$.

:8. The !ethods of depreciatio" are the followi"9-a. Straight !i$e #ethodDb. "ec!i$i$g ba!a$ce #ethodDc. S-# o year digit #ethodD a$dd. A$y other #ethod precribed by the Secretary o Ci$a$ce

-po$ the reco##e$datio$ o the (o##iio$er o 4$ter$a! Ree$-e81& Apportio$#e$t to -$it o prod-ctio$D2& 7o-r o prod-ctie -eD& Rea!-atio$ #ethodD a$d& Si$/i$g -$d #ethod.

::. +hat are perso"al a"d additio"al e#e!ptio"s 7

26


27/79

S30 thateach o the po-e #ay c!ai# the P>0'000.00. Th-' the tota! a#i!ia!baic pero$a! ee#ptio$ or po-e i P100'000.00.

C-rther#ore' the diti$ctio$ bet+ee$ the co$cept o i$g!e'#arried a$d head o the a#i!y or p-rpoe o aai!i$g o the baicpero$a! ee#ptio$ ha a!ready bee$ e!i#i$ated by Rep. Act No. F>0.

:'000.00&c. or each -a!iied depe$de$t chi!d'd. proided that the tota! $-#ber o depe$de$t or +hich

additio$a! ee#ptio$ #ay be c!ai#ed1& ha!! $ot eceed o-r %& depe$de$t. G1tpar.' Sec.

2.@F %4& %1& %b&' Re. Reg. No. 2,F? a a#e$ded by Re. Reg. No. 10,200?' arra$ge#e$t a$d $-#beri$g -pp!iedD Sec. > %B&' N4R( o 1FF@a a#e$ded by Rep. Act No. F>0I

NOTES AN" (O**ENTS8

a. 4t i c!ear that -$der the a#e$d#e$t' i$g!e i$diid-a! #ay$o+ c!ai# or the additio$a! ee#ptio$. C-rther#ore' the co$cept ohead o a a#i!y doe $ot i$d app!icatio$ a$y#ore.

b. A depe$de$t #ea$a. a !egiti#ate' i!!egiti#ate or !ega!!y adopted chi!db. chie!y depe$de$t -po$ a$d !ii$g +ith the tapayerc. i -ch depe$de$t i

1& $ot #ore tha$ t+e$ty,o$e %21& year o age'

2& -$#arried a$d& $ot gai$-!!y e#p!oyed or

d. i -ch depe$de$t'1& regard!e o age2& i i$capab!e o e!,-pport& beca-e o #e$ta! or phyica! deect. G2$d par.' Sec.

2.@F %4& %1& %b&' Re. Reg. No. 2,F? a a#e$ded by Re. Reg. No. 10,200?' arra$ge#e$t a$d $-#beri$g -pp!iedD Sec. > %b&' N4R( o 1FF@'a a#e$ded by Rep. Act No. F>0I

c. 4t i to be $oted that -$der the N4R( o 1FF@' a a#e$dedby Rep. Act No. F>0' o$!y -a!iied depe$de$t chi!dre$ are co$ideredor additio$a! ee#ptio$. 0.

Se$ior citi;e$ ha!! be treated a depe$de$t proided or i$ theNatio$a! 4$ter$a! Ree$-e (ode' a a#e$ded' a$d a -ch' i$diid-a!tapayer cari$g or the#' be they re!atie or $ot ha!! be accorded theprii!ege gra$ted by the (ode i$oar a hai$g depe$de$t areco$cer$ed. G!at par. Sec. > %a&' Rep. Act No. @2' a a#e$ded by Rep. ActF2>@' The Epa$ded Se$ior (iti;e$ Act o 200I

:@. 0apital assetsha!! reer to a!! rea! propertie he!d by a

tapayer' +hether or $ot co$$ected +ith hi trade or b-i$e' a$d +hichare $ot i$c!-ded a#o$g the rea! propertie co$idered a ordi$ary aet.%Sec. 2.a' Re. Reg. No. @,200&

The ter# capita! aet #ea$ property he!d by the tapayer%+hether or $ot co$$ected +ith hi trade or b-i$e&' B3T "OES NOT4N()3"E8

a. Stoc/ i$ trade o the tapayer' or b. Other property o a /i$d +hich +o-!d proper!y be i$c!-ded i$the i$e$tory o the tapayer i o$ ha$d at the c!oe o the taab!e year' or c. Property he!d by the tapayer pri#ari!y or a!e to c-to#er i$the ordi$ary co-re o hi trade or b-i$e' ord. Property -ed i$ the trade or b-i$e' o a character +hich i -bect to

the a!!o+a$ce or depreciatio$D or rea! property -ed i$ the trade or

27


28/79

b-i$e o the tapayer. GSec. F %A& %1&' N4R( o 1FF@' capita!i;ed +ord'$-#beri$g a$d arra$ge#e$t -pp!iedD Sec. 2.a' Re. Reg. No. @,200I

:. E#a!ples of capital assets-a. Stoc/ a$d ec-ritie he!d by tapayer other tha$ dea!er i$

ec-ritieD b. e+e!ry $ot -ed or trade a$d b-i$eD c. Reide$tia! ho-e a$d !a$d o+$ed a$d -ed a -chD

d. A-to#obi!e $ot -ed i$ trade a$d b-i$eDe. Pai$ti$g' c-!pt-re' ta#p co!!ectio$' obect o art +hich

are $ot -ed i$ trade or b-i$eD. 4$herited !arge tract o agric-!t-ra! !a$d +hich +ere

-bdiided p-r-a$t to the goer$#e$t #a$date -$der !a$d reor#' the$o!d to te$a$t. *Ro)as v. Court of (a) Appeals, etc. $0EGF@, April D,?HD#

g. Rea! property -ed by a$ ee#pt corporatio$ i$ it ee#ptoperatio$' -ch a a corporatio$ i$c!-ded i$ the e$-#eratio$ o Sectio$ 0o the (ode' ha!! $ot be co$idered -ed or b-i$e p-rpoe' a$dthereore co$idered a capita! aet. %!at e$te$ce' rdpar.' Sec. .b'Re. Reg. No. @,200&

h. Rea! property' +hether i$g!e detached' to+$ho-e' orco$do#i$i-# -$it' $ot -ed i$ trade or b-i$e a eide$ced by acertiicatio$ ro# the Bara$gay (hair#a$ or ro# the head oad#i$itratio$' i$ cae o co$do#i$i-# -$it' to+$ho-e or apart#e$t' a$da a!idated ro# the eiti$g aai!ab!e record o the B-rea- o 4$ter$a!Ree$-e' o+$ed by a$ i$diid-a! e$gaged i$ b-i$e' ha!! be treated acapita! aet. %!at par.' Sec. .b.' Re. Reg. No. @,200&

:C. Ordi"ary assets shall refer to all real propertiesspecifically e#cluded fro! the defi"itio" of capital assets5$a#e!y8

a. Stoc/ i$ trade o a tapayer or other rea! property o a /i$d +hich

+o-!d proper!y be i$c!-ded i$ the i$e$tory o a tapayer i o$ ha$d at thec!oe o the taab!e yearD or b. Rea! property he!d by the tapayer pri#ari!y or a!e to c-to#eri$ the ordi$ary co-re o hi trade or b-i$eD or c. Rea! property -ed i$ trade or b-i$e %i.e. b-i!di$g a$d9ori#proe#e$t&' o a character +hich i -bect to the a!!o+a$ce ordepreciatio$D or

d. Rea! property -ed i$ trade or b-i$e o the tapayer. %Sec. 2.b' Re. Reg. No. @,200&


29/79

%Sec. 2.c' Re. Reg.No. @,200&

&' N4R( o 1FF@I

>&. E#cepted fro! the pay!e"t of the presu!edcapital 9ai"s ta# are those presu!ed to ha$e bee" realiedfro! the dispositio" by "atural perso"s of their pri"cipal placeof reside"ce

a. the proceed o +hich i -!!y -ti!i;ed i$ ac-iri$g orco$tr-cti$g a $e+ pri$cipa! reide$ceD

b. +ithi$ eightee$ %1?& ca!e$dar #o$th ro# the date o a!e ordipoitio$

29


30/79

c. the B4R (o##iio$er ha!! hae bee$ d-!y $otiied by thetapayer +ithi$ thirty %0& day ro# the date o a!e or dipoitio$ thro-gha precribed ret-r$ o hi i$te$tio$ to aai! o the ta ee#ptio$D a$d

d. the aid ta ee#ptio$ ca$ o$!y be aai!ed o o$ce eery te$%10& year. GSec. 2 %"& %2&' N4R( o 1FF@I

>'. ;B0 was i"corporated i" 'C>' a"d e"9a9ed i"co!!ercial ba"i"9 operatio"s si"ce 'C@. O" ;ay %%5 'C@5

it ceased operatio"s that year by reaso" of i"sol$e"cy a"d itsassets a"d liabilities were placed u"der the char9e of a9o$er"!e"tappoi"ted recei$er. O" /u"e %85 'CCC5 the BSPauthoried ;B0 to operate as a thrift ba".

*" %&&&5 *t filed its ta# retur" for the year 'CCC payi"9 thea!ou"t of P88 !illio" co!puted i" accorda"ce with the!i"i!u! corporate i"co!e ta# F;0*TG. *t sou9ht the B*R6sruli"9 o" whether it is e"titled to the four F:G year 9race periodfor payi"9 o" the basis of ;0*T reco"ed fro! 'CCC. B*R the"ruled that cessatio" of busi"ess acti$ities as a result of bei"9placed u"der i"$olu"tary recei$ership !ay be a" eco"o!ic

reaso" for suspe"di"9 the i!positio" of the ;0*T.As a result of the ruli"9 ;B0 filed a" applicatio" for

refu"d of the P88 !illio". ue to the B*R6s i"actio"5 ;B0 fileda petitio" for re$iew with the 0TA.

The 0TA de"ied the petitio" o" the 9rou"d that ;B0 is"ot a "ewly or9a"ied corporatio". *" a $olte facie the B*R "ow!ai"tai"s that ;B0 should pay the ;0*T be9i""i"9 /a"uary '5'CC as it did "ot close its busi"ess operatio"s i" 'C@ but!erely suspe"ded the sa!e. E$e" if placed u"derrecei$ership5 the corporate e#iste"ce was "e$er affected.Thus5 it falls u"der the cate9ory of a" e#isti"9 corporatio"

reco!!e"ci"9 its ba"i"9 operatio"s.Should the refu"d be 9ra"ted 7S3


31/79

i$ta$gib!e or #ied' +hereer it-ated' to the ete$t o hi i$tereteiti$g therei$ at the ti#e o hi death. The gro etate o a $o$,reide$t a!ie$ co#prie a!! hi rea!property' it-ated i$ the Phi!ippi$eD a!! hi pero$a! property' ta$gib!e'i$ta$gib!e or #ied' it-ated i$ the Phi!ippi$e' to the ete$t o hi i$tereteiti$g therei$ at the ti#e o hi death.

%. +illia! S!ith5 a" A!erica" citie"5 was a

per!a"e"t reside"t of the Philippi"es. He died i" Sa"1ra"cisco5 0alifor"ia. He left '&5&&& shares of Sa" ;i9uel0orporatio"5 a co"do!i"iu! u"it at the Twi" TowersBuildi"9 at Pasi95 ;etro ;a"ila a"d a house a"d lot i";ia!i5 1lorida.

+hat assets shall be i"cluded i" the Estate Ta# Retur" tobe filed with the B*R 7

S3 %E&' N4R( o 1FF@&

NOTES AN" (O**ENTS8 The be$eiciary #-t $ot be the decede$t:etate' eec-tor or ad#i$itrator' beca-e the proceed are i$c!-dib!e a part ogro etate +hether or $ot the decede$t retai$ed the po+er o reocatio$.%I"id.&

c. =here the i$-ra$ce +a NOT ta/e$ by the decede$t -po$hi o+$ !ie a$d the be$eiciary i $ot the decede$t: etate' hi eec-toror ad#i$itrator.

:. *te!s deductible fro! the 9ross estate of a reside"tor "o"reside"t 1ilipi"o decede"t or reside"t alie" decede"t-

a. Epe$e' !oe' c!ai#' i$debted$e a$d taeDb. Property preio-!y taedD

c. Tra$er or p-b!ic -eDd. The Ca#i!y 7o#e -p to a a!-e $ot eceedi$g P1 #i!!io$De. Sta$dard ded-ctio$ o P1 #i!!io$D. *edica! epe$e $ot eceedi$g P>00'000.00Dg. A#o-$t o ee#pt retire#e$t receied by the heir -$der

Rep. Act *o. F1@Dh. Net hare o the -rii$g po-e i$ the co$-ga! part$erhip.


32/79

@. 3a"ishi"9 deductio" Fproperty pre$iously ta#edGallowed as a deductio" fro! the 9ross estate of a 1ilipi"ocitie"5 whether reside"t or "ot5 of a reside"t alie" decede"t5or of a "o"reside"t alie" decede"t.

a. A$ a#o-$t e-a! to the a!-e peciied be!o+ o b. A$y property or#i$g a part o the gro etate it-ated i$the Phi!ippi$e

c O a$y pero$ +ho died +ithi$ ie year prior to thedeath o the decede$t' or tra$erred to the decede$t by git +ithi$ ieyear prior to hi death'

d. =here -ch property ca$ be ide$tiied a hai$g bee$receied by the decede$t ro# the do$or by git' or ro# -ch priordecede$t by git' be-et' deie' or i$herita$ce' or

e. =hich ca$ be ide$tiied a hai$g bee$ ac-ired i$echa$ge or property o receied8

100H o the a!-e i the prior decede$t died +ithi$ o$e year prior tothe death o the decede$t' or i the property +a tra$erred to hi# by git+ithi$ the a#e period prior to hi deathD

?0H o the a!-e i the prior decede$t died #ore tha$ o$e year b-t$ot #ore tha$ t+o year prior to the death o the decede$t' or i the

property +a tra$erred to hi# by git +ithi$ the a#e period prior to hideathD

60H o the a!-e i the prior decede$t died #ore tha$ t+o year b-t$ot #ore tha$ three year prior to the death o the decede$t' or i theproperty +a tra$erred to hi# by git +ithi$ the a#e period prior to hideathD

0H o the a!-e i the prior decede$t died #ore tha$ three yearb-t $ot #ore tha$ o-r year prior to the death o the decede$t' or i theproperty +a tra$erred to hi# by git +ithi$ the a#e period prior to hideathD a$d

20H o the a!-e i the prior decede$t died #ore tha$ o-r yearb-t $ot #ore tha$ ie year prior to the death o the decede$t' or i the

property +a tra$erred to hi# by git +ithi$ the a#e period prior to hideath. GSec. ?6 %A& %2& a$d %B& %2&' N4R( o 1FF@' $-#beri$g' arra$ge#e$t a$d-$der!i$i$g -pp!iedI

. The appro$al of the court sitti"9 i" probate5 or as asettle!e"t tribu"al o$er the estate of the deceased is "ot a!a"datory reDuire!e"t for the collectio" of the estate. Theprobate co-rt i deter#i$i$g i-e +hich are $ot agai$t the property othe decede$t' or a c!ai# agai$t the etate a -ch' b-t i agai$t thei$teret or property right +hich the heir' !egatee' deiee' etc. ha i$ theproperty or#er!y he!d by the decede$t.

The $otice o !ey +ere reg-!ar!y i-ed +ithi$ the precriptie

period.

The ta ae#e$t hai$g beco#e i$a!' eec-tory a$de$orceab!e' the a#e ca$ $o !o$ger be co$teted by #ea$ o a dig-iedprotet. *Marcos, II v. Court of Appeals, et al.' 2@ S(RA @&

ONOR6S TA)ES

'. +hat is the do"or6s ta# rate if the do"ee is astra"9er 7

S3


33/79

7o+eer' the appraied a!-e o the rea! property at the ti#e o thegit ha!! be +hicheer i the higher o8

a. the air #ar/et a!-e a deter#i$ed by the (o##iio$er o4$ter$a! Ree$-e %;o$a! a!-atio$& or

b. the air #ar/et a!-e a ho+$ i$ the ched-!e o a!-e iedby the Proi$cia! a$d (ity Aeor. GSec. 102' i$ re!atio$ to Sec. ?? %B& botho the N4R( o 1FF@I

@. A died lea$i"9 as his o"ly heirs5 his sur$i$i"9

spouse B5 a"d three !i"or childre"5 )5 2 a"d L. Si"ce B does"ot wa"t to participate i" the distributio" of the estate5 shere"ou"ced her hereditary share i" the estate.

a. *s the re"u"ciatio" sub?ect to do"or6s ta# 7E#plai".

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=here property' other tha$ rea! property that ha bee$ -bectedto the i$a! capita! gai$ ta' i tra$erred or !e tha$ a$ ade-ate a$d-!! co$ideratio$ i$ #o$ey or #o$ey: +orth' the$ the a#o-$t by +hichthe air #ar/et a!-e o the property at the ti#e o the eec-tio$ o the(o$tract to Se!! or eec-tio$ o the "eed o Sa!e +hich i $ot precededby a (o$tract to Se!! eceeded the a!-e o the agreed or act-a!co$ideratio$ or e!!i$g price ha!! be dee#ed a git' a$d ha!! be i$c!-dedi$ co#p-ti$g the a#o-$t o git #ade d-ri$g the ca!e$dar year. %>thpar.'

Sec. 11' Re. Reg. No. 2,200&

3A(EAE TA)ES F3ATG

+ARN*N, MMM Approi#ate!y 10H o the tota! -etio$ a/ed i$the Bar Ea#i$atio$ are o-rced ro# VAT a$d it co$cept. Thi area iprobab!y the #ot diic-!t area to orecat beca-e there are $o tatitica!!yperceied patter$. The a-thor ha retai$ed the Star Syte# or VAT.(o$ideri$g the !i#ited period o ti#e' the reader i adied to oc- o$area #ar/ed +ith tar a$d -t bro+e the -$#ar/ed area.

'. 3alueadded ta# F3ATG i a ta +hich i i#poed

o$!y o$ the i$creae i$ the +orth' #erit or i#porta$ce o good'propertie or erice' a$d $ot o$ the tota! a!-e o the good or ericebei$g o!d or re$dered.

%. Nature of 3AT. VAT i a$ i$direct ta that #ay behited or paed o$ to the b-yer' tra$eree or !eee o the good'propertie or erice. A -ch' it ho-!d be -$dertood $ot i$ theco$tet o the pero$ or e$tity that i pri#ari!y' direct!y !iab!e or itpay#e$t' b-t i$ ter# o it $at-re a a ta o$ co$-#ptio$.GCommissioner of Internal Revenue v. Seagate (echnology *Philippines#, ?66' Cebr-ary 11' 200> citi$g ario- a-thoritieU

VAT i a perce$tage ta i#poed o$ a$y pero$ +hether or $ot ara$chie gra$tee' +ho i$ the co-re o trade or b-i$e' e!!' barter'echa$ge' !eae' good or propertie' re$der erice. 4t i a!o!eied o$ eery i#portatio$ o good +hether or $ot i$ the co-re o tradeor b-i$e. The ta bae o the VAT i !i#ited o$!y to the a!-e addedto -ch good' propertie' or erice by the e!!er' tra$eror or !eor.C-rther' the VAT i a$ i$direct ta a$d ca$ be paed o$ to the b-yer.%8uezon City, et al., v. ABS0CB! Broadcasting Corporation'


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co-re o hi trade or b-i$e' ha!! be !iab!e to VAT . %Re. Reg.No. 16,200>'Sec. .10>,1' paraphrai$g -pp!ied&

. 3arious 3AT !ethods a"d syste!s.a. 0ost deductio" !ethod. Thi i a i$g!e,tage ta +hich

i payab!e o$!y by the origi$a! e!!er. %A"a-ada +uro Party $ist *etc.# v.&rmita, etc., et al.,6' Septe#ber 1' 200> a$d co#pa$io$ cae&

Thi +a -be-e$t!y #odiied a$d a #it-re o cot ded-ctio$ #ethod

a$d ta credit #ethod +a -ed to deter#i$e the a!-e,added tapayab!e. %I"id.&

b. Ta# credit !ethod. Thi #ethod re!ie o$ i$oice' a$e$tity ca$ credit agai$t or -btract ro# the VAT charged o$ it a!e oro-tp-t the VAT paid o$ it p-rchae' i$p-t a$d i#port.GCommissioner of Internal Revenue v. Seagate (echnology *Philippines#,?66' Cebr-ary 11' 200>I

4 at the e$d o a taab!e period' the o-tp-t tae charged by ae!!er are e-a! to the i$p-t tae paed o$ by the -pp!ier' $opay#e$t i re-ired. 4t i +he$ the o-tp-t tae eceed the i$p-t taethat the ece ha to be paid.

4 ho+eer' the i$p-t tae eceed the o-tp-t tae' the ece

ha!! be carried oer to the -cceedi$g -arter or -arter. Sho-!d thei$p-t tae re-!t ro# ;ero,rated or eectie!y ;ero,rated tra$actio$ orro# ac-iitio$ o capita! good' a$y ece oer the o-tp-t tae ha!!i$tead be re-$ded to the tapayer or credited agai$t other i$ter$a!ree$-e tae. %I"id.&

C. How the 3AT is i!posed o" the i"crease i" worth5!erit or i!pro$e!e"t of the 9oods or ser$ices. The VAT-ti!i;e the co$cept o the o-tp-t a$d i$p-t tae.

O-tp-t VAT !e 4$p-t VAT VAT d-e o$ the i$creae i$ +orth'#erit or i#proe#e$t the good or erice.

'&. The ri9ht to credit the i"put ta# be li!ited byle9islatio" because it is a !ere creatio" of law. Prior to thee$act#e$t o #-!ti,tage a!e taatio$' the a!e tae paid at eery!ee! o ditrib-tio$ are $ot recoerab!e ro# the tae payab!e. =ith theade$t o Eec-tie Order No. 2@ i#poi$g a 10H #-!ti,tage ta o$ a!!a!e' it +a o$!y the$ that the crediti$g o the i$p-t ta paid o$ p-rchaeor i#portatio$ o good a$d erice by VAT,regitered pero$ agai$tthe o-tp-t ta +a etab!ihed. Thi co$ti$-ed +ith the Epa$ded VAT)a+ %R.A. No. @@16&' a$d The Ta Reor# Act o 1FF@ %R.A. No. ?2&.The right to credit i$p-t ta a agai$t the o-tp-t ta i c!ear!y a prii!egecreated by !a+' a prii!ege that a!o the !a+ ca$ !i#it. 4t ho-!d betreed that a pero$ ha $o eted right i$ tat-tory prii!ege.

*ABA:A%A +uro Party $ist, etc. et al. vs. &rmita, ' a$d co#pa$io$ cae' o$ the #otio$ or reco$ideratio$&

''. Output ta# i the a!-e,added ta d-e o$ the a!e or!eae or taab!e good' propertie or erice by a$y VAT,regiteredpero$.

'%. *"put ta# i the a!-e,added ta d-e o$ or paid by a

VAT,regitered pero$ o$ i#portatio$ o good or !oca! p-rchae ogood or erice' i$c!-di$g !eae or -e o propertie' i$ the co-re ohi trade or b-i$e. %Re. Reg. No. .110,1' 1tpar.&

'8. *"cluded i" the i"put ta#.a. the tra$itio$a! i$p-t ta a$db. the pre-#ptie i$p-t ta .4t i$c!-dec. i$p-t tae +hich ca$ be direct!y attrib-ted to tra$actio$

-bect to the VAT p!- a ratab!e portio$ o a$y i$p-t ta +hich ca$$ot bedirect!y attrib-ted to either the taab!e or ee#pt actiity. %Re. Reg.No. .110,1' 1t par.' 2$d e$te$ce'. A$d 2$d par.' paraphrai$g'

arra$ge#e$t a$d $-#beri$g -pp!ied &':. 0o"cept of tra"sitio"al i"put ta# credits o"

be9i""i"9 i"$e"tories. Tapayer +ho beco#e VAT,regiteredpero$ -po$ eceedi$g the #i$i#-# t-r$oer o P1'>00'000.00 i$ a$y12,#o$th period' or +ho o!-$tari!y regiter ee$ i their t-r$oer doe$ot eceed P1'>00'000.00 %ecept ra$chie gra$tee o radio a$dte!eiio$ broadcati$g +hoe threho!d i P10'000'000.00& ha!! bee$tit!ed to a tra$itio$a! i$p-t ta o$ the i$e$tory o$ ha$d a o theeectiity o their VAT regitratio$' o$ the o!!o+i$g8

a. good p-rchaed or rea!e i$ their pree$t co$ditio$Db. #ateria! p-rchaed or -rther procei$g' b-t +hich hae

$ot yet -$dergo$e procei$gD

c. good +hich hae bee$ #a$-act-red by the tapayerDd. good i$ proce or a!eD ore. good a$d -pp!ie or -e i$ the co-re o the tapayer:

trade or b-i$e a a VAT,regitered pero$. GRe. Reg. No. 16,200>'Sec..111,1' %a&' 1tpar.' arra$ge#e$t a$d $-#beri$g -pp!iedI

'


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A -ed i$ thi paragraph' the ter# procei$g ha!! #ea$pate-ri;atio$' ca$$i$g a$d actiitie +hich thro-gh phyica! or che#ica!proce a!ter the eterior tet-re or or# or i$$er -bta$ce o a prod-cti$ -ch a #a$$er a to prepare it or pecia! -e to +hich it co-!d $othae bee$ p-t i$ it origi$a! or# or co$ditio$. GRe. Reg. No. 16,200>'Sec..111,1' %b&I

'>. The 3AT re9istratio" fee does NOT $iolate

reli9ious freedo!. The VAT regitratio$ ee i#poed o$ $o$,VATe$terprie +hich i$c!-de a#o$g other' re!igio- ect +hich e!! a$dditrib-te re!igio- !iterat-re i $ot io!atie o re!igio- reedo#'a!tho-gh a ied a#o-$t i $ot i#poed or the eercie o a prii!ege b-to$!y or the p-rpoe o derayi$g part o the cot o regitratio$.

The regitratio$ ee i th- #ore o a$ ad#i$itratie ee' o$e $oti#poed o$ the eercie o a prii!ege' #-ch !e a co$tit-tio$a! right.*(olentino v. Secretary of /inance, et al., and companion cases,2> S(RA 60&

'@. *"terpretatio" of the ter! *" the 0ourse of Tradeor Busi"ess as used i" the 3AT syste!. The ter# Qdoi$gb-i$eQ or co-re o b-i$e co$ey the idea o b-i$e bei$gdo$e' $ot ro# ti#e to ti#e' b-t a!! the ti#e.4t doe $ot i$c!-de io!atedtra$actio$. %Commissioner of Internal Revenue v. Magsaysay $ines, Inc., etal., 5&&&5&&&.&&. The bid was !ade by;a9saysay (i"es5 purportedly for a "ew co!pa"y still to be

for!ed co!posed of itself5 Baliwa9 Na$i9atio"5 *"c.5 a"d 1*;

(i!ited of the ;arde" ,roup based i" Ho"9o"9 . The bidwas appro$ed by the 0o!!ittee o" Pri$atiatio"5 a"d aNotice of Award was issued to ;a9saysay (i"es.

*s the sale sub?ect to 3AT 7S3' Sec. .106,@'paraphrai$g' arra$ge#e$t a$d $-#beri$g -pp!iedI

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%&. Tra"sactio"s co"sidered retire!e"t or cessatio"of busi"ess dee!ed sale sub?ect to 3AT.

a. (ha$ge o o+$erhip o the b-i$e. There i cha$ge i$the o+$erhip o the b-i$e +here a i$g!e proprietorhip i$corporateDor

1& the proprietor o a i$g!e proprietorhip e!! hi e$tireb-i$e.

b. "io!-tio$ o a part$erhip a$d creatio$ o a $e+part$erhip +hich ta/e oer the b-i$e. GRe. Reg. No. 16,200>'Sec. .106,@ %a&' %& paraphrai$g' arra$ge#e$t a$d $-#beri$g -pp!iedI

%'. Sale of or lease of real properties sub?ect to 3AT.Sa!e o rea! propertie pri#ari!y or a!e to c-to#er or he!d or !eae i$the ordi$ary co-re o trade or b-i$e o the e!!er ha!! be -bect toVAT. %Re. Reg. No. 16,200>' Sec. .106,' 1tpar.&

Th-' capita! tra$actio$ o i$diid-a! are $ot -bect to VAT.O$!y rea! etate dea!er are -bect to VAT.

%%. O" Septe!ber :5 %&&C5 )2L5 *"c.5 a do!estic

corporatio" e"9a9ed i" the real estate busi"ess5 sold abuildi"9 for P'&5&&&5&&&.&&. *s the sale sub?ect to the $alueadded ta# F3ATG7 *f so5 how !uch7 E#plai".

S3'000.00 or a #ay ro# ti#e to ti#e be deter#i$edby the 73"(( a$d the NE"A a$d other re!ated !a+.

d. Sa!e o reide$tia! !ot a!-ed at O$e *i!!io$ Cie 7-$dred

Tho-a$d Peo %P1'>00'000.00& a$d be!o+' or ho-e W !ot a$d otherreide$tia! d+e!!i$g a!-ed at T+o *i!!io$


38/79

/. tra$portatio$co$tractor o$ their tra$port o good or cargoe' i$c!-di$g pero$ +hotra$port good or cargoe or hire a$d other do#etic co##o$ carrierby !a$d re!atie to their tra$port o good or cargoeD

!. co##o$ carrier byair a$d ea re!atie to their tra$port o pae$ger' good or cargoero# o$e p!ace i$ the Phi!ippi$e to a$other p!ace i$ the Phi!ippi$eD

#. a!e o e!ectrici ty by

ge$eratio$ co#pa$ie' tra$#iio$' a$d9or ditrib-tio$ co#pa$ieD$. ra$chie gra$tee o

e!ectric -ti!itie' te!epho$e a$d te!egraph' radio a$d te!eiio$broadcati$g a$d a!! other ra$chie gra$tee ecept ra$chie gra$teeo radio a$d9or te!eiio$ broadcati$g +hoe a$$-a! gro receipt o theprecedi$g year do $ot eceed Te$ *i!!io$ Peo %P10'000'000.00&' a$dra$chie gra$tee o ga a$d +ater -ti!itieD

o. $o$,!ie i$-ra$ceco#pa$ie %ecept their crop i$-ra$ce&' i$c!-di$g -rety' ide!ity'i$de#$ity a$d bo$di$g co#pa$ieD a$d

p.i#i!ar erice regard!e o +hether or $ot the peror#a$ce thereo

ca!! or the eercie or -e o the phyica! or #e$ta! ac-!tie. GN4R( o1FF@' Sec. 10? %A&' a a#e$ded by R.A. No. F@D Re. Reg. No. 16,200>'Sec. '10?,2' 1tpar.' arra$ge#e$t a$d $-#beri$g -pp!iedI

%>. Also i"cluded i" the phrase sale or e#cha"9e ofser$ices.

a. The !eae or the -e o or the right or prii!ege to -e a$ycopyright' pate$t' deig$ or #ode!' p!a$' ecret or#-!a or proce'good+i!!' trade#ar/' trade bra$d or other !i/e property or rightD

b. The !eae or the -e o' or the right to -e a$y i$d-tria!'co##ercia! or cie$tiic e-ip#e$tD

c. The -pp!y o cie$tiic' tech$ica!' i$d-tria! or co##ercia!/$o+!edge or i$or#atio$D

d. The -pp!y o a$y aita$ce that i a$ci !!ary a$d-bidiary to a$d i -r$ihed a a #ea$ o e$ab!i$g the app!icatio$ ore$oy#e$t o a$y -ch property' or right a i #e$tio$ed i$ -bparagraph%2& hereo or a$y -ch /$o+!edge or i$or#atio$ a i #e$tio$ed i$-bparagraph %& hereoD or

e. The -pp!y o erice by a $o$,reide$t pero$ or hie#p!oyee i$ co$$ectio$ +ith the -e o property or right be!o$gi$g to' orthe i$ta!!atio$ or operatio$ o a$y bra$d' #achi$ery or other apparat-p-rchaed ro# -ch $o$,reide$t pero$D

. The -pp!y o tech$ica! adice' aita$ce or ericere$dered i$ co$$ectio$ +ith tech$ica! #a$age#e$t or ad#i$itratio$ o

a$y cie$tiic' i$d-tria! or co##ercia! -$derta/i$g' e$t-re' proect oche#eD

g. The !eae o #otio$ pict-re i!#' i!# tape a$d dicDh. The !eae or the -e o or the right to -e radio'

te!eiio$' ate!!ite tra$#iio$ a$d cab!e te!eiio$ ti#e. %Re. Reg. No.16,200>' Sec. .10?,2' 2$dpar.&

%@. Lerorated Sales of ,oods or Properties. A

;ero,rated a!e o good or propertie by a a!e by a VAT,regiteredpero$ i a taab!e tra$actio$ or VAT p-rpoe b-t the a!e doe $otre-!t i$ a$y o-tp-t ta.

7o+eer' the i$p-t ta o$ the p-rchae o good' propertie orerice re!ated to -ch ;ero,rated a!e ha!! be aai!ab!e a ta credit orre-$d i$ accorda$ce +ith Re. Reg-!atio$ No. 16,200>. %Re. Reg. No.16,200>' 1tpar.&

%. 0o"cept of 3AT erorati"9. The ta rate i etat ;ero. =he$ app!ied to the ta bae' -ch rate obio-!y re-!t i$ $ota chargeab!e agai$t the p-rchaer. The e!!er o -ch tra$actio$charge $o o-tp-t ta' b-t ca$ c!ai# a re-$d or a ta credit certiicate or

the VAT preio-!y charged by -pp!ier. GCommissioner of InternalRevenue v. Seagate (echnology *Philippines#, ?66'Cebr-ary 11' 200>I

3$der a ;ero,rati$g che#e' the a!e or echa$ge o a partic-!arerice i co#p!ete!y reed ro# the VAT' beca-e the e!!er i e$tit!ed torecoer' by +ay o a re-$d or a a$ i$p-t ta credit' the ta that ii$c!-ded i$ the cot o p-rchae attrib-tab!e to the a!e or echa$ge.The ta paid or +ithhe!d i $ot ded-cted ro# the ta bae.%Commissioner, of Internal Revenue v. American &)press International, Inc.*Philippine Branch#, 260F' -$e 2F' 200> citi$g ario- cae&

%C. Situs of ta#atio" of erorated 3AT ser$ices suchas facilitati"9 the collectio" of recei$ables fro! credit card!e!bers situated i" the Philippi"es a"d pay!e"t to ser$iceestablish!e"ts i" the Philippi"es. The p!ace +here the erice ire$dered deter#i$e the -ridictio$ to i#poe the VAT

Peror#ed i$ the Phi!ippi$e' the erice i $eceari!y -bect toit -ridictio$ or the State $eceari!y ha to hae a -bta$tia!co$$ectio$ to it i$ order to e$orce a ;ero rate. The p!ace o pay#e$t ii##ateria! #-ch !e i the p!ace +here the o-tp-t o the erice +i!! be-rther or -!ti#ate!y -ed.

Thi i o beca-e the !a+ $either #a/e a -a!iicatio$ $or add aco$ditio$ i$ deter#i$i$g the ta it- o a ;ero,rated erice.%Commissioner of Internal Revenue v. American &)press International, Inc.*Philipppine Branch#, 260F' -$e 2F' 200>&

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8&. esti"atio" pri"ciple u"der the 3AT Syste!.A a ge$era! r-!e' the VAT yte# -e the deti$atio$ pri$cip!e a abai or the -ridictio$a! reach o the ta.

' Sec..106,>' 2$dpar.' paraphrai$g -pp!ied&

8' A-g-t F' 200>I

8. Lerorated sale of ser$ice5 defi"ed. A ;ero,rated a!e o erice %by a VAT,regitered pero$& i a taab!e tra$actio$or VAT p-rpoe' b-t ha!! $ot re-!t i$ a$y o-tp-t ta. 7o+eer' thei$p-t ta o$ p-rchae o good' propertie or erice re!ated to -ch;ero,rated a!e ha!! be aai!ab!e a ta credit or re-$d i$ accorda$ce+ith Rev. Regs. !o. ?D0GGE. GRe. Reg. No. 16,200>' Sec. Sec. .10?,>%a&' +ord i$ ita!ic -pp!ied&

8C. Ser$ice perfor!ed by A!erica" E#press i"

facilitati"9 the collectio" of recei$ables fro! credit card

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!e!bers situated i" the Philippi"es a"d pay!e"t to ser$iceestablish!e"ts i" the Philippi"es i" behalf of its Ho"94o"9based clie"t is sub?ect to 3AT but erorated. Thi i o beca-eit #eet a!! the re-ire#e$t or VAT i#poitio$' a o!!o+8

a. 4t reg-!ar!y re$der i$ the Phi!ippi$e the erice oaci!itati$g the co!!ectio$ a$d pay#e$t o receiab!e be!o$gi$g to aoreig$ co#pa$y that i a c!ear!y eparate a$d diti$ct e$tity.

b. S-ch erice i co##ercia! i$ $at-reD carried o$ oer a

-tai$ed period o ti#eD o$ a ig$iica$t ca!e +ith a reao$ab!e degreeo re-e$cyD a$d $ot at ra$do#' ort-ito-' or atte$-ated.

c. Cor thi erice' it dei$ite!y receie co$ideratio$ i$ oreig$c-rre$cy that i acco-$ted or i$ co$or#ity +ith !a+.

d. 4t i $ot a$ e$tity ee#pt -$der a$y o o-r !a+ ori$ter$atio$a! agree#e$t. %Commissioner, of Internal Revenue v. American&)press International, Inc. *Philippine Branch#, 260F' -$e 2F'200>&

:&. +hile the ser$ice perfor!ed by A!erica" E#pressis sub?ect to 3AT it is erorated5 a"d B*R Re$e"ueRe9ulatio"s that alter the le9al reDuire!e"ts for erorati"9

are ultra vires a"d i"$alid. The VAT yte# -e the deti$atio$pri$cip!e +hich poit that the good a$d erice are taed o$!y i$ theco-$try +here they are co$-#ed'

7o+eer' the !a+ ite! proide or c!ear eceptio$ -$der +hichthe -pp!y o erice ha!! be ;ero,rated' a#o$g +hich are the o!!o+i$g8

a. The erice i peror#ed i$ the Phi!ippi$eDb. The erice are +ithi$ the categorie proided or -$der the

Ta (odeD a$dc. 4t i paid or i$ acceptab!e oreig$ c-rre$cy o the Ba$g/o

Se$tra! $g Pi!ipi$a.A#erica$ Epre re$der aita$ce to it oreig$ c!ie$t by

receii$g the bi!! o erice etab!ih#e$t !ocated i$ the co-$try a$d

or+ardi$g the# to their c!ie$t abroad. The erice are peror#ed or-cce-!!y co#p!eted -po$ e$d to it oreig$ c!ie$t the drat a$d bi!!it ha gathered ro# erice etab!ih#e$t here' 4t erice' hai$gbee$ peror#ed i$ the Phi!ippi$e are thereore a!o co$-#ed i$ thePhi!ippi$e. Th-' it erice are ee#pt ro# the deti$atio$ pri$cip!ea$d are ;ero,rated.

The B4R co-!d $ot cha$ge the !a+. GCommissioner, of InternalRevenue v. American &)press International, Inc. *Philippine Branch#, 260F' -$e 2F' 200>I

:'. A forei9" 0o"sortiu! co!posed of B+S0

e"!ar5 ;itsui E"9i"eeri"9 a"d Shipbuildi"9 (td.5 a"d

;itsui a"d 0o.5 (td.5 which e"tered i"to a co"tract with

NAPO0OR for the operatio" a"d !ai"te"a"ce of two powerbar9es appoi"ted B+S0e"!ar as its coordi"atio"!a"a9er. B+S0;* was established as the subco"tractor toperfor! the actual wor i" the Philippi"es. The 0o"sortiu!paid B+S0;* i" acceptable forei9" e#cha"9e a"d accou"tedfor i" accorda"ce with the rules a"d re9ulatio"s of the BSP.

Throu9h a 1ebruary ':5 'CC< ruli"9 the B*R declared

that B+S0;* !ay choose to re9ister as a 3AT perso"ssub?ect to 3AT at ero rate. 1or 'CC>5 it filed the proper 3ATretur"s showi"9 ero rati"9. O" ece!ber %C5 'CC@5belie$i"9 that it is co$ered by Re$. Re9s. 5 dated1ebruary %&5 'CC>5 B+S0;* paid '&I output 3AT for theperiod Aprilece!ber 'CC>5 throu9h the 3olu"taryAssess!e"t Pro9ra! F3APG.

O" /a"uary @5 'CCC5 B+S0;* was able to obtai" aRuli"9 fro! the B*R reco"fir!i"9 that it is sub?ect to 3AT aterorati"9. O" this basis5 B+S0;* applied for a refu"d ofthe output 3AT it paid.

a. *s B+S0;* sub?ect to the '&I 3AT or is it erorated 7

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or +hich it get paid i$ acceptab!e oreig$ c-rre$cy i$+ard!y re#itted a$dacco-$ted or i$ accorda$ce +ith BSP r-!e a$d reg-!atio$.%Commissioner of Internal Revenue v. Burmeister and 1ain ScandinavianContractor Mindanao, Inc., 20>' a$-ary 22' 200@&

:%. +hat are 3ATE#e!pt tra"sactio"s 7 S3


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a$d $ot or a!e' barter or echa$ge' acco#pa$yi$g -ch pero$' orarrii$g +ithi$ $i$ety %F0& day beore or ater their arria!' -po$ theprod-ctio$ o eide$ce atiactory to the (o##iio$er o 4$ter$a!Ree$-e' that -ch pero$ are act-a!!y co#i$g to ett!e i$ thePhi!ippi$e a$d that the cha$ge o reide$ce i bo$a ideD

%E& Serice -bect to perce$tage ta -$der Tit!e V o the Ta(ode' a e$-#erated be!o+8

%1& Sa!e or !eae o good or propertie or the

peror#a$ce o erice o $o$,VAT,regitered pero$' othertha$ the tra$actio$ #e$tio$ed i$ paragraph %A& to %3& o Sec.10F %1& o the Ta (ode' the a$$-a! a!e a$d9or receipt o+hich doe $ot eceed the a#o-$t o O$e *i!!io$ Cie 7-$dredtho-a$d Peo %P1'>00'000.00&' Proided' That $ot !ater tha$a$-ary 1' 200F a$d eery three %& year thereater' thea#o-$t herei$ tated ha!! be ad-ted to it pree$t a!-e -i$gthe (o$-#er Price 4$de' a p-b!ihed by the Natio$a! StatiticOice %NSO&. %Sec. 116' Ta (ode&

%2& Serice re$dered by do#etic co##o$ carrier by!a$d or the tra$port o pae$ger a$d /eeper o garage.%Sec. 11@&

%& Serice re$dered by i$ter$atio$a! air9hippi$gcarrier. %Sec. 11?&

%& Serice re$dered by ra$chie gra$tee o radioa$d9or te!eiio$ broadcati$g +hoe a$$-a! gro receipt o theprecedi$g year do $ot eceed Te$ *i! !io$ Peo%P10'000'000.00& a$d by ra$chie o ga a$d +ater -ti!itie.%Sec. 11F&

%>& Serice re$dered or oerea dipatch #eage orco$eratio$ origi$ati$g ro# the Phi!ippi$e. %Sc. 120&

%6& Serice re$dered by a$y pero$' co#pa$y orcorporatio$ %ecept p-re!y cooperatie co#pa$ie or aociatio$& doi$g !ie i$-ra$ce b-i$e o a$y ort i$ the Phi!ippi$e.%Sec. 12&

%@& Serice re$dered by ire' #ari$e or #ice!!a$eo-i$-ra$ce age$t o oreig$ i$-ra$ce co#pa$ie. %Sec. 12&

%?& Serice o proprietor' !eee or operator ococ/pit' cabaret' $ight or day c!-b' boi$g ehibitio$proeio$a! ba/etba!! ga#e' ai,A!ai a$d race trac/. %Sec.12>&. a$d

%F& Receipt o$ a!e' barter or echa$ge o hare otoc/ !ited a$d traded thro-gh the !oca! toc/ echa$ge orthro-gh i$itia! p-b!ic oeri$g. %Sec. 12@&

%C& Serice by agric-!t-ra! co$tract gro+er a$d #i!!i$g orother o pa!ay i$to rice' cor$ i$to grit a$d -gar ca$e i$to ra+ -garD

Agric-!t-ra! co$tract gro+er reer to thoe pero$ prod-ci$gor other po-!try' !ietoc/ or other agric-!t-ra! a$d #ari$e ood prod-cti$ their origi$a! tate.

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4#portatio$ by $o$,agric-!t-ra!' $o$,e!ectric a$d $o$,creditcooperatie o #achi$erie a$d e-ip#e$t' i$c!-di$g pare partthereo' to be -ed by the# are -bect to VAT.

%O& Eport a!e by pero$ +ho are $ot VAT,regiteredD%P& Sa!e o rea! propertie $ot pri#ari!y he!d or a!e to

c-to#er or he!d or !eae i$ the ordi$ary co-re o trade or b-i$e' orrea! property -ti!i;ed or !o+,cot a$d ocia!i;ed ho-i$g a dei$ed byRep-b!ic Act No. @2@F' other+ie /$o+$ a the 3rba$ "ee!op#e$t a$d

7o-i$g Act o 1FF2' a$d other re!ated !a+' -ch a RA No. @?> a$dRA No. ?@6>' reide$tia! !ot a!-ed at O$e #i!!io$ ie h-$dred tho-a$dpeo %P 1'>00'000& a$d be!o+' ho-e a$d !ot' a$d other reide$tia!d+e!!i$g a!-ed at T+o #i!!io$ ie h-$dred tho-a$d peo %P2'>00'000& a$d be!o+8 Proided' That $ot !ater tha$ a$-ary 1' 200Fa$d eery three %& year thereater' the a#o-$t herei$ tated ha!! bead-ted to their pree$t a!-e -i$g the (o$-#er Price 4$de' ap-b!ihed by theNatio$a! Statitic Oice %NSO&D

%& )eae o a reide$tia! -$it +ith a #o$th!y re$ta! $oteceedi$g Te$ tho-a$d peo %P 10'000& Proided' That $ot !ater tha$a$-ary 1'200F a$d eery three %& year thereater' the a#o-$t herei$tated ha!! be ad-ted to it pree$t a!-e -i$g the (o$-#er Price4$de a p-b!ihed by the Natio$a! Statitic Oice %NSO&D

%R& Sa!e' i#portatio$' pri$ti$g or p-b!icatio$ o boo/ a$d a$y$e+paper' #aga;i$e' reie+ or b-!!eti$ +hich appear at reg-!ari$tera! +ith ied price or -bcriptio$ a$d a!e a$d +hich i $otdeoted pri$cipa!!y to the p-b!icatio$ o paid adertie#e$tD

%S& Sa!e' i#portatio$ or !eae o pae$ger or cargo ee! a$daircrat' i$c!-di$g e$gi$e' e-ip#e$t a$d pare part thereo or do#eticor i$ter$atio$a! tra$port operatio$D Proided' that the ee#ptio$ ro#VAT o$ the i#portatio$ a$d !oca! p-rchae o pae$ger a$d9or cargoee! ha!! be !i#ited to thoe o o$e h-$dred ity %1>0& to$ a$daboe' i$c!-di$g e$gi$e a$d pare part o aid ee!D Proided'-rther' that the ee! be i#ported ha!! co#p!y +ith the age !i#itre-ire#e$t' at the ti#e o ac-iitio$ co-$ted ro# the date o the

ee!: origi$a! co##iio$i$g' a o!!o+8 %i& or pae$ger a$d9orcargo ee!' the age !i#it i itee$ year %1>& year o!d' %ii& orta$/er' the age !i#it i te$ %10& year o!d' a$d %iii& Cor high,peedpae$ger car' the age !i#it i ie %>& year o!d' Proided' i$a!!y' thatee#ptio$ ha!! be -bect to the proiio$ o ectio$ o Rep-b!ic ActNo. F2F>' other+ie /$o+$ a The "o#etic Shippi$g "ee!op#e$t Acto 200.

%T& 4#portatio$ o -e!' good a$d -pp!ie by pero$ e$gagedi$ i$ter$atio$a! hippi$g or air tra$port operatio$D Proided' that theaid -e!' good a$d -pp!ie ha!! be -ed ec!-ie!y or ha!! pertai$ tothe tra$port o good a$d9or pae$ger ro# a port i$ the Phi!ippi$edirect!y to a oreig$ port +itho-t toppi$g at a$y other port i$ the

Phi!ippi$eD proided' -rther' that i a$y portio$ o -ch -e!' good or-pp!ie i -ed or p-rpoe other tha$ that #e$tio$ed i$ thi paragraph'-ch portio$ o -e!' good a$d -pp!ie ha!! be -bect to 10H VAT%$o+ 12H&D

%3& Serice o ba$/' $o$,ba$/ i$a$cia! i$ter#ediarieperor#i$g -ai,ba$/i$g -$ctio$' a$d other $o$,ba$/ i$a$cia!i$ter#ediarieD a$d

%V& Sa!e or !eae o good or propertie or theperor#a$ce o erice other tha$ the tra$actio$ #e$tio$ed i$ theprecedi$g paragraph' the gro a$$-a! a!e a$d9or receipt do $oteceed the a#o-$t o O$e #i!!io$ ie h-$dred tho-a$d peo%P1'>00'000&8 Proided' That $ot !ater tha$ a$-ary 1'200F a$d eerythree %& year thereater' the a#o-$t herei$ tatedha!! be ad-ted toit pree$t a!-e -i$g the (o$-#er Price 4$de a p-b!ihed by theNatio$a! Statitic Oice %NSO&.

Cor p-rpoe o the threho!d o P1'>00'000.00' the h-ba$d a$d+ie ha!! be c$idered eparate tapayer. 7o+eer' the aggregatio$r-!e or each tapayer ha!! app!y. Cor i$ta$ce' i a proeio$a!' aidero# the practice ohi proeio$' a!o derie ree$-e ro# other !i$eo b-i$e +hich are other+ie -bect to VAT' the a#e ha!! be

co#bi$ed or p-rpoe o deter#i$i$g +hether the threho!d ha bee$eceeded. Th-' the VAT,ee#pt a!e ha!! to be ic!-ded i$ deter#i$i$gthe threho!d. GN4R( o 1FF@' Sec. 10F %1&' a a#e$ded by R. A. No. F@D+ord i$ ita!ic ro# Re. Reg. No. 16,200>' Sec. .10F,1 %B&' +ord i$pare$thee -pp!iedI

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RETRNS AN +*THHO(*N,

'. *"co!e ta# retur"s bei"9 public docu!e"ts' -$ti!co$troerted by co#pete$t eide$ce' are co#pete$t eide$ce' are primafaciecorrect +ith repect to the e$trie therei$. *Ropali (rading v. !$RC, etal., 2F6 S(RA 0F' 1@&

%. *"di$iduals reDuired to file a" i"co!e ta# retur".

a. Eery Ci!ipi$o citi;e$ reidi$g i$ the Phi!ippi$eDb. Eery Ci!ipi$o citi;e$ reidi$g o-tide the Phi!ippi$e o$ hi

i$co#e ro# o-rce +ithi$ the Phi!ippi$eDc. Eery a!ie$ reidi$g i$ the Phi!ippi$e o$ i$co#e deried ro#

o-rce +ithi$ the Phi!ippi$eD a$dd. Eery $o$reide$t a!ie$ e$gaged i$ trade or b-i$e or i$ the

eercie o proeio$ i$ the Phi!ippi$e. GSec. >1 %A& %1&' N4R( o 1FF@I

8. ;arried i"di$iduals who are ear"i"9 purelyco!pe"satio" i"co!e allowed to file separate retur"s.

:. ;arried i"di$iduals5 whether citie"s5 reside"t or

"o"reside"t alie"s5 who do "ot deri$e i"co!e purely fro!co!pe"satio" shall file a co"solidated retur" for the ta#ableyear to i"clude the i"co!e of both spouses5 b-t +here it ii#practicab!e or the po-e to i!e o$e ret-r$' each po-e #ay i!e aeparate ret-r$ o i$co#e b-t the ret-r$ o i!ed ha!! be co$o!idated bythe B-rea- or p-rpoe o eriicatio$. GSectio$ >1 %"& o the N4R( o1FF@I

0I

>. *"di$iduals who are "ot reDuired to file a" i"co!eta# retur".

a. A$ i$diid-a! +hoe gro i$co#e doe $ot eceed hi tota!pero$a! a$d additio$a! ee#ptio$ or depe$de$t' Provided, That aciti;e$ o the Phi!ippi$e a$d a$y a!ie$ i$diid-a! e$gaged i$ b-i$e orpractice o proeio$ +ithi$ the Phi!ippi$e ha!! i!e a$ i$co#e ta ret-r$regard!e o the a#o-$t o gro i$co#e GSec. >1 %A& %2&' N4R( o 1FF@I

b. A$ i$diid-a! +ith repect to p-re co#pe$atio$ i$co#e'deried ro# -ch o-rce +ithi$ the Phi!ippi$e' the i$co#e ta o$ +hichha bee$ correct!y +ithhe!d8 Provided' That a$ i$diid-a! derii$g

co#pe$atio$ co$c-rre$t!y ro# t+o or #ore e#p!oyer at a$y ti#ed-ri$g the taab!e year ha!! i!e a$ i$co#e ta ret-r$GSec. >1 %A& %2&' N4R(o 1FF@' a a#e$ded by Rep. Act No. F>0' paraphrai$g -pp!iedI

c. A$ i$diid-a! +hoe o!e i$co#e ha bee$ -bect to i$a!+ithho!di$g taD

d. A #i$i#-# +age ear$er %i a +or/er i$ the priate ectorpaid the tat-tory #i$i#-# +age' or i a$ e#p!oyee i$ the p-b!ic ector+ith co#pe$atio$ i$co#e o $ot #ore tha$ the tat-tory #i$i#-# +agei$ the $o$,agric-!t-ra! ector +here he9he i aig$ed&' a$ i$diid-a! +hoi ee#pt ro# i$co#e ta p-r-a$t to the proiio$ o the Ta (odea$d other !a+' ge$era! or pecia!. GSec. >1 %A& %2&' N4R( o 1FF@ i$ re!atio$to Sec. 22 %77&' both a a#e$ded by Rep. Act. F>0I

@. ;i"i!u! wa9e ear"ers are e#e!pt fro! i"co!eta#atio". That #i$i#-# +age ear$er %i a +or/er i$ the priate ectorpaid the tat-tory #i$i#-# +age' or i a$ e#p!oyee i$ the p-b!ic ector+ith co#pe$atio$ i$co#e o $ot #ore tha$ the tat-tory #i$i#-# +agei$ the $o$,agric-!t-ra! ector +here he9he i aig$ed& ha!! be ee#ptro# the pay#e$t o i$co#e ta o$ their taab!e i$co#e8 Provided'further' That the ho!iday pay' oerti#e pay' $ight hit diere$tia! pay a$dha;ard pay receied by -ch #i$i#-# +age ear$er ha!! !i/e+ie beee#pt ro# i$co#e ta. GSec. >1 %A& %2&' N4R( o 1FF@ i$ re!atio$ to Sec. 22%77&' both a a#e$ded by Rep. Act. F>0I

. A" i"di$idual who is "ot reDuired to file a" i"co!e

ta# retur" !ay "e$ertheless be reDuired to file a" i"for!atio"retur". GSec. >1 %A& %&' N4R( o 1FF@I

C. A corporatio" files its i"co!e ta# retur" a"d paysits i"co!e ta# four F:G ti!es duri"9 a si"9le ta#able year.-arter!y ret-r$ are re-ired to be i!ed or the irt three -arter' the$ ai$a! ad-t#e$t ret-r$ i i!ed coeri$g the tota! taab!e i$co#e or the+ho!e taab!e year' be it ca!e$dar or ica!.

'&. A" i"di$idual ear"i"9 fro! the practice of hisprofessio" or who e"9a9es i" trade or busi"ess files his

i"co!e ta# retur" a"d pays his i"co!e ta# four F:G ti!es

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duri"9 a si"9le ta#able year. -arter!y ret-r$ are re-ired to be i!edor the irt three -arter' the$ a$ a$$-a! i$co#e ta ret-r$ i i!edcoeri$g the tota! taab!e i$co#e or the +ho!e o the preio- ca!e$daryear.

''. The purpose of the abo$e four F:G ti!es a yearreDuire!e"t is to !ae a$ailable sufficie"t fu"ds to !eet thebud9etary reDuire!e"ts5 o$ a -arter!y bai thereby i$creai$g

goer$#e$t !i-idity. 4t a!o eae hardhip o$ the part o i$diid-a! +hoare re-ired to #a/e thi o-r ti#e ret-r$. Th-' the tapayer doe $othae to raie !arge -# o #o$ey i$ order to pay the ta.

'%. A" i"di$idual ear"i"9 purely co!pe"satio" i"co!efiles o"ly o"e a""ual i"co!e ta# retur" coeri$g the tota! taab!eco#pe$atio$ i$co#e or the +ho!e o the preio- ca!e$dar year.

'8. "der the withholdi"9 ta# syste!5 ta#es i!posedor prescribed by the N*R0 of 'CC@ are to be deducted a"dwithheld by the payors fro! pay!e"ts !ade to payees for thefor!er to pay directly to the Bureau of *"ter"al Re$e"ue . 4t ia!o /$o+$ a co!!ectio$ o the ta at o-rce.

':. A withholdi"9 a9e"t is e#plicitly !ade perso"allyliable u"der the Ta# 0ode for the pay!e"t of the ta# reDuiredto be withheld5i$ order to co#pe! the +ithho!di$g age$t to +ithho!d theta -$der a$y a$d a!! circ-#ta$ce. 4$ eect' the repo$ibi!ity or theco!!ectio$ o the ta a +e!! a the pay#e$t thereo i co$ce$trated -po$the pero$ oer +ho# the . "der the fi"al withholdi"9 ta# syste! the a!ou"t ofi"co!e ta# withheld by the withholdi"9 a9e"t is co"stituted asa full a"d fi"al pay!e"t of the i"co!e due fro! the payee o"the said i"co!e. G1te$te$ce' 1tpar.' Sec. 2.>@ %A&' Re. Reg. No. 2,F?I

The !iabi!ity or pay#e$t o the ta ret pri#ari!y o$ the payor or the+ithho!di$g age$t.. Th-' i$ cae o hi ai!-re to +ithho!d the ta or i$cae o -$der +ithho!di$g' the deicie$cy ta ha!! be co!!ected ro# thepayor +ithho!di$g age$t. The payee i $ot re-ired to i!e a$ i$co#e taret-r$ or the partic-!ar i$co#e.

'@. "der the creditable withholdi"9 ta# syste!5 ta#eswithheld o" certai" i"co!e pay!e"ts are i"te"ded to eDual orat least appro#i!ate the ta# due fro! the payee o" the saidi"co!e. The i$co#e recipie$t i ti!! re-ired to i!e a$ i$co#e ta ret-r$a$d9or pay the diere$ce bet+ee$ the ta +ithhe!d a$d the ta d-e o$ thei$co#e. G1ta$d 2$de$te$ce' Sec. 2>@%B&' Re. Reg. No. 2,F?I

'. The two i"ds of creditable withholdi"9 ta#esare %a&tae +ithhe!d o$ i$co#e pay#e$t coered by the epa$ded +ithho!di$gtaD a$d %b& tae +ithhe!d o$ co#pe$atio$ i$co#e.

'C. Pay!e"ts to the followi"9 are e#e!pt fro! thereDuire!e"t of withholdi"9 or whe" "o withholdi"9 ta#esreDuired-

a. Natio$a!


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'. S-rtae or -rcharge' a!o /$o+$ a the cii! pe$a!tie' arethe a#o-$t i#poed i$ additio$ to the ta re-ired.

They are i$ the $at-re o pe$a!tie a$d ha!! be co!!ected at thea#e ti#e' i$ the a#e #a$$er' a$d a part o the ta. GSec.2? %A&'N4R( o 1FF@I

%. +hat are the two F%G i"ds of ci$il pe"alties 7S3


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cri#i$a!' a$d cadatra! cae acc-#-!ati$g i$ the doc/et o -ch co-rtDa$d

b. To hae a body +ith pecia! /$o+!edge +hich ordi$ary-dge o the the$ (o-rt o Cirt 4$ta$ce %$o+ RT(&' are $ot !i/e!y topoe' th- proidi$g or a$ ade-ate re#edy or a peedydeter#i$atio$ o ta cae. %


48/79

b& Oer petitio$ or reie+ o the -dg#e$t' reo!-tio$or order o the Regio$a! Tria! (o-rt i$ the eercie o their

appe!!ate -ridictio$ oer ta co!!ectio$ cae origi$a!!y decided by the*etropo!ita$ Tria! (o-rt' *-$icipa! Tria! (o-rt a$d *-$icipa!

(irc-it Tria! (o-rt' i$ their repectie -ridictio$. %Sec. @' R. A. No.112>' a a#e$ded by R. A. No. F2?2' e#phai a$d +ord i$ pare$thee

-pp!ied&

The petitio" for re$iew to be filed with the 0TA en banc

as the !ode for appeali"9 a decisio"5 resolutio"5 or order ofthe 0TA i$isio"5 u"der Sectio" ' of Republic Act No. ''%. *"sta"ces where t

73431100 Domondon Taxation Notes 2010

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