Taxation Notes 2010

7/25/2019 Taxation Notes 2010

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BAR STAR NOTES

X ION

VER. 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$y part othee Note i$ 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/E0T

TO THE (A+ O1 KARMAS0H THAT THE2 +*(( NE3ER PASS THEBAR OR +O( BE NHAPP2 *N (*1E or tea!i$g the i$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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8. +hat is the u"derlyi"9 theory of ta#atio" 7 E#plai"briefly.

S30' A-g-t ' 200>&

4$ rece$t year' the i$creai$g ocia! cha!!e$ge o the ti#eepa$ded the cope o the tate actiity' a$d taatio$ ha beco#e a too!to rea!i;e ocia! -tice a$d the e-itab!e ditrib-tio$ o +ea!th' eco$o#icprogre a$d the protectio$ o !oca! i$d-trie a +e!! a p-b!ic +e!are

a$d i#i!arobectie. %Batangas Poer Corporation v. Batangas City, etal., 26@>' a$d co#pa$io$ cae' Apri! 2?' 200 citi$g !ational PoerCorporation v. City of Ca"anatuan,


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i the deciio$ o$ the #otio$ or reco$ideratio$ o the -!y ?' 200Southern Cross deciio$.

The o,ca!!ed i$ tae o$ a!coho! a$d tobacco #a$-act-rer he!pdi-ade the co$-#er ro# eceie i$ta/e o thee pote$tia!!y har#-!prod-ct. %Southern Cross Cement Corporation v. Cement ManufacturersAssociation of the Philippines, et al.,?>0' A-g-t ' 200>&

'&. Ta#atio" disti"9uished fro! police power. Taatio$ iditi$g-ihab!e ro# po!ice po+er a to the #ea$ e#p!oyed to i#p!e#e$tthee p-b!ic goa!. Thoe doctri$e that are -$i-e to taatio$ aroe ro#pec-!iar co$ideratio$ -ch a thoe epecia!!y p-$itie eect %SouthernCross Cement Corporation v. Cement Manufacturers Association of thePhilippines, et al., ?>0' A-g-t ' 200>& a the po+er to tai$o!e the po+er to detroy a$d the be!ie that tae are !ieb!ood o thetate. %I"id.# tae bei$g the !ieb!ood o the goer$#e$t' their pro#pt a$dcertai$ 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 InternalRevenue 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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e$oy#e$t o a prii!ege or the e$gagi$g i$ a$ occ-patio$. Ea#p!e Ji$co#e ta' etate ta.

'>. +hat are the i"ds of ta#es classified as to who

bears the burde" 7 E#plai" each briefly.S3&D they are i#poitio$ or +hich a tapayer i direct!y!iab!e o$ the tra$actio$ or b-i$e he i e$gaged i$' %Commissioner ofInternal Revenue v. Philippine $ong %istance (elephone Company, supra&

+hich !iabi!ity ca$$ot be hited or tra$erred to a$other. Ea#p!e Ji$co#e ta' etate ta' do$or: ta' etc. 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 Revenuev. Philippine $ong %istance (elephone Company, supra& to o#eo$e e!e $otaa ta b-t a part o the p-rchae price. %Commissioner, of InternalRevenue v. American &)press International, Inc. *Philippine Branch#, 260F' -$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!pt fro!

the pay!e"t of e#cise ta#es u"der the pro$isio"s of Sec. '8< ofthe N*R0 of 'CC@ which pro$ides that petroleu! products aree#e!pt fro! e#cise ta#es whe" sold to Ee#pt e$titie or age$ciecoered by ta treatie' co$e$tio$' a$d other i$ter$atio$a! agree#e$t or their-e a$d co$-#ptio$8 Proided' ho+eer' That the co-$try o aid oreig$i$ter$atio$a! carrier or ee#pt e$titie or age$cie ee#pt ro# i#i!ar taepetro!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$er"!e"t of the Republicof the Philippi"es a"d the ,o$er"!e"t of the Republic ofSi"9apore FAir Tra"sport A9ree!e"t betwee" RP a"dSi"9aporeG which reads- C-e!' !-brica$t' pare part' reg-!ar e-ip#e$t

a$d aircrat tore i$trod-ced i$to' or ta/e$ o$ board aircrat i$ the territory o o$e

(o$tracti$g party by' or o$ beha! o' a deig$ated air!i$e o the other (o$tracti$gParty a$d i$te$ded o!e!y or -e i$ the operatio$ o the agreed erice ha!!'+ith the eceptio$ o charge correpo$di$g to the erice peror#ed' be ee#ptro# the a#e c-to# d-tie' i$pectio$ ee a$d other d-tie or tae i#poedi$ 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$ey peror#ed oer the territory o the (o$tracti$g

Party i$ +hich they are i$trod-ced i$to or ta/e$ o$ board. The #ateria! reerredto aboe #ay be re-ired to be /ept -$der c-to# -periio$ 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 $.;acarai95 /r.5 ,.R. No. %C'5 ;ay 8'5 'CC'5 'C@ S0RA@@'.which upheld the clai! for ta# credit or refu"d by theNatio"al Power 0orporatio" FNP0G o" the 9rou"d that the NP0is e#e!pt e$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(RA

61 the S-pre#e (o-rt c!ariied the r-!i$g i$ Maceda v. Macaraig, r., i;8

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4t #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$direct

ta 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' be

co$tr-ed a i$c!-di$g i$direct tae. Stat-te gra$ti$g ta ee#ptio$#-t be co$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#es classifiedas to purpose 7

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. Ta ree$-e #-t $ot be -ed or p-re!y priatep-rpoe or or the ec!-ie be$eit o priate pero$. g. Priate pero$ #ay be be$eited b-t -ch be$eit ho-!dbe #ere!y i$cide$ta! a it #ai$ obect i the be$eit o the co##-$ity i$ge$era!.

h. "eter#i$ed at the ti#e o e$act#e$t o ta !a+ a$d $ot atthe ti#e o i#p!e#e$tatio$. i. There i a pre-#ptio$ o p-b!ic p-rpoe ee$ i the ta !a+doe $ot peciica!!y proide or it p-rpoe. %Santos Co., v. Municipalityof Meycauayan, et al.' F Phi!. 10@&

. P-b!ic -e i $o !o$ger co$i$ed to the traditio$a! $otio$ o -eby the p-b!ic b-t he!d y$o$y#o- +ith p-b!ic i$teret' p-b!ic be$eit'p-b!ic +e!are' a$d p-b!ic co$e$ie$ce. %Commissioner of Internal Revenuev. Central $uzon %rug Corporation, F6@' Apri! 16' 200>&

8. A law was e"acted i!posi"9 a ta# o" !a"ufacturersof coco"ut oil5 the proceeds of which are to be usede#clusi$ely for the protectio" a"d pro!otio" of the coco"uti"dustry5 "a!ely5 to i!pro$e the wori"9 co"ditio"s i"coco"ut !ills a"d to co"duct research o" the use of coco"utoil for !otor fuel. So!e of the !a"ufacturers of coco"ut oilchalle"9e the $alidity of the law5 co"te"di"9 that the ta# is tobe used for a pri$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".

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b. *oreoer' a$d i at a!!' o$!y (o$gre' ca$ c!ai# a$y i$-ryro# the a!!eged eec-tie e$croach#e$t o the !egi!atie -$ctio$ toa#e$d' #odiy a$d9or repea! !a+. %Automotive Industry 1or-ers Alliance*AI1A#,etc., et al., supra,citi$g +onzales v. !arvasa, '

A-g-t 1'2000' @ S(RA @' @1&

>. Locus standibei"9 !erely a !atter of procedure5ha$e bee" wai$ed i" certai" i"sta"ces where a party who is "otperso"ally i"?ured !ay be allowed to bri"9 suit. The o!!o+i$g areea#p!e o i$ta$ce +here -it hae bee$ bro-ght by partie +ho hae$ot hae bee$ pero$a!!y i$-red by the operatio$ o a !a+ or a$y othergoer$#e$t act b-t by co$cer$ed citi;e$' tapayer or oter +hoact-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, 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$e 0o"9ressio"alpower to direct 9ra"t of ta#i"9 power to local le9islati$e bodies.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' ee a$dother charge p-r-a$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,


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=hi!e the po+er to ta by !oca! goer$#e$t #ay be eercied by!oca! !egi!atie bodie' $o !o$ger #ere!y by irt-e o a a!id de!egatio$a beore' b-t p-r-a$t to direct a-thority co$erred by Sectio$ >' Artic!eL o the (o$tit-tio$' the baic doctri$e o$ !oca! taatio$ re#ai$ee$tia!!y the a#e' 4the poer to ta) is 5still6 primarily vested in theCongress.7 %8uezon City, et al., v. ABS0CB! Broadcasting Corporation' 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$t #-t be or a p-b!ic p-rpoe' -$ior# +ithi$ a !oca!ity' #-t$ot be co$icatory' a$d #-t be +ithi$ the -ridictio$ o the !oca! -$it topa. %8uezon City, et al., v. ABS0CB! Broadcasting Corporation'


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P'&@5&&& fro! her sales co!!issio" a"d re!itted the sa!e tothe B*R.

She filed a clai! for refu"d alle9i"9 that her salesco!!issio" is "ot ta#able because the sa!e was aco!pe"satio" for her ser$ices re"dered i" ,er!a"y a"d

therefore co"sidered as i"co!e fro! sources outside thePhilippi"es.

*s her co"te"tio" correct 7S3&I is ow"ed by 1red 0orporatio"5 a 1ilipi"oow"edPhilippi"e corporatio". E"site 0o. also ow"s '&&I of theshares 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"9

of the A9ree!e"t of Sale were all do"e i" the Philippi"es. TheA9ree!e"t pro$ides that the purchase price will be paid toE"site (td6s ba" accou"t i" the .S. a"d that title to thePhilippi"e Sta!pi"9 Pla"t5 *"c. a"d Susa"to 0o. shall betra"sferred to ,e"eral 0o.5 i" Toro"to 0a"ada where stoccertificates will be deli$ered. ,e"eral 0o. sees your ad$iceas to whether or "ot it will sub?ect the pay!e"ts of thepurchase price to withholdi"9 ta#. E#plai" your ad$ice.

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bei$g deried ro# !abor or pero$a! erice re$dered o-tide o thePhi!ippi$e i co$idered a i$co#e ro# +itho-t. Si$ce )arry i a$O(=' the$ he i to be taed o$!y o$ hi i$co#e deried ro# +ithi$ thePhi!ippi$e -ch a the re$ta! o$ hi Phi!ippi$e reide$ce' a$d $ot o$ hii$co#e ro# +itho-t.

'. Oba!a Airli"es5 *"c.5 a forei9" airli"e co!pa"ywhich does "ot !ai"tai" a"y fli9ht to a"d fro! the Philippi"essold air ticets i" the Philippi"es5 throu9h a 9e"eral salesa9e"t5 relati"9 to the carria9e of passe"9ers a"d car9obetwee" two poi"ts5 both outside the Philippi"es.

a. *s Oba!a5 *"c.5 sub?ect to i"co!e ta#es o" the saleof the ticets 7

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. No$,i#pair#e$t c!a-eDg. )a+,#a/i$g proce8

1& Bi!! ho-!d e#brace o$!y o$e -bect epreed i$the tit!e thereoD

2& Three %& readi$g o$ three eparate dayD& Pri$ted copie i$ i$a! or# ditrib-ted three %& day

beore paage.h. Preide$tia! po+er to gra$t repriee' co##-tatio$ a$d

pardo$ a$d re#itta! o i$e a$d oreit-re ater co$ictio$ by i$a!-dg#e$t.

8. The specific or direct co"stitutio"al li!itatio".a. No i#prio$#e$t or $o$,pay#e$t o a po!! taDb. Taatio$ ha!! be -$ior# a$d e-itab!eDc. (o$gre ha!! eo!e a progreie yte# o taatio$Dd. A!! appropriatio$' ree$-e or tari bi!! ha!! origi$ate

ec!-ie!y i$ the 7o-e o Repree$tatie' b-t the Se$ate #ay propoea$d co$c-r +ith a#e$d#e$tD

e. The Preide$t ha!! hae the po+er to eto a$y partic-!ar ite# orite# i$ a$ appropriatio$' ree$-e' or tari bi!!' b-t the eto ha!! $ot aectthe ite# or ite# to +hich he doe $ot obectD

. "e!egated po+er o the Preide$t to i#poe tari rate'i#port a$d eport -ota' to$$age a$d +harage d-e8

1& "e!egatio$ by (o$gre2& thro-gh a !a+& -bect to (o$greio$a! !i#it a$d retrictio$& +ithi$ the ra#e+or/ o $atio$a! dee!op#e$t progra#.

g. Ta ee#ptio$ o charitab!e i$tit-tio$' ch-rche'paro$age a$d co$e$t app-rte$a$t thereto' #o-e' a$d a!! !a$d'b-i!di$g a$d i#proe#e$t o a!! /i$d act-a!!y' direct!y a$d ec!-ie!y

-ed or re!igio-' charitab!e or ed-catio$a! p-rpoeDh. No ta ee#ptio$ +itho-t the co$c-rre$ce o #aority ote o

a!! #e#ber o (o$greDi. No -e o p-b!ic #o$ey or property or re!igio- p-rpoe

ecept i priet i aig$ed to the ar#ed orce' pe$a! i$tit-tio$'goer$#e$t orpha$age or !eproari-#D

. *o$ey co!!ected o$ ta !eied or a pecia! p-rpoe to be-ed o$!y or -ch p-rpoe' ba!a$ce i a$y' to ge$era! -$dD

/. The S-pre#e (o-rt po+er to reie+ -dg#e$t or order o!o+er co-rt i$ a!! cae i$o!i$g the !ega!ity o a$y ta' i#poe'ae#e$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+.


12/83


13/83

the -bect a$d obect o taatio$' i$c!-di$g gra$ti$g a >0H dico-$t i$the pay#e$t o -$paid rea! etate tae' a$d the co$do$atio$ o a!!pe$a!tie o$ i$e re-!ti$g ro# !ate pay#e$t.

'&. The rewards law to ta# collectors does "ot $iolate

eDual protectio". The e-a! protectio$ c!a-e recog$i;e a a!idc!aiicatio$' that i' a c!aiicatio$ that ha a reao$ab!e o-$datio$ orratio$a! bai a$d $ot arbitrary. =ith repect to RA F>' it: epreedp-b!ic po!icy i the opti#i;atio$ o the ree$-e,ge$eratio$ capabi!ity a$dco!!ectio$ o the B4R a$d the BO(. Si$ce the -bect o the !a+ i theree$-e, ge$eratio$ capabi!ity a$d co!!ectio$ o the B4R a$d the BO('the i$ce$tie a$d9or a$ctio$ proided i$ the !a+ ho-!d !ogica!!ypertai$ to the aid age$cie. *oreoer' the !a+ co$cer$ o$!y the B4Ra$d the BO( beca-e they hae the co##o$ diti$ct pri#ary -$ctio$ oge$erati$g ree$-e or the $atio$a! goer$#e$t thro-gh the co!!ectio$o tae' c-to# d-tie' ee a$d charge.

4$d-bitab!y' -ch -bta$tia! diti$ctio$ i ger#a$e a$d i$ti#ate!yre!ated to the p-rpoe o the !a+. 7e$ce' the c!aiicatio$ a$d treat#e$taccorded to the B4R a$d the BO( -$der RA F> -!!y atiy thede#a$d o e-a! protectio$. %ABA:A%A +uro Party $ist, etc., v. Purisima,etc., et a!.' ' A-g-t 1' 200?&

''. The prosecutio" of o"e 9uilty perso" while otherseDually 9uilty are "ot prosecuted5 howe$er5 is "ot5 by itself5 ade"ial of the eDual protectio" of the laws. =here the oicia!actio$ p-rport to be i$ co$or#ity to the tat-tory c!aiicatio$' a$erro$eo- or #ita/e$ peror#a$ce o the tat-tory d-ty' a!tho-gh aio!atio$ o the tat-te' i $ot +itho-t #ore a de$ia! o the e-a!protectio$ o the !a+. The -$!a+-! ad#i$itratio$ by oicer o a tat-te air o$ it ace'

re-!ti$g i$ it -$e-a! app!icatio$ to thoe +ho are e$tit!ed to be treateda!i/e' i $ot a de$ia! o e-a! protectio$ -$!e there i ho+$ to bepree$t i$ it a$ e!e#e$t o i$te$tio$a! or p-rpoe-! dicri#i$atio$. Thi#ay appear o$ the ace o the actio$ ta/e$ +ith repect to a partic-!arc!a or pero$' or it #ay o$!y be ho+$ by etri$ic eide$ce ho+i$g adicri#i$atory deig$ oer a$other $ot to be i$erred ro# the actio$ite!.%Santos v. People, et al,


14/83

i#pair#e$t pre-ppoe the #ai$te$a$ce o a goer$#e$t +hich retai$ade-ate a-thority to ec-re the peace a$d good order o ociety. %SmartCommunications, Inc. v. (he City of %avao, etc., et al.' >F1'Septe#ber 16' 200?&

NOTES AN" (O**ENTS8 Philippine $ong %istance (elephoneCompany, Inc., v. City of %avao, et al., etc.,F1' Septe#ber 16' 200?& citi$g (olentino v. Secretary of /inance,>>' A-g-t 2>' 1FF' 2> S(RA 60' 6?>& The a-thor opi$e thati$ce practica!!y a!! ra$chie gra$ted to te!eco##-$icatio$ co#pa$ieare i#i!ar!y +orded that the aboe doctri$e i$d app!icatio$ to theother&

'. 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"sa$d a!! other -$it o goer$#e$t +a that-ch prii!ege re-!ted to erio- ta bae eroio$ a$d ditortio$ i$ the tatreat#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#. %Philippine PortsAuthority v. City of Iloilo,


15/83

-bect to a-dit by the B-rea- o 4$ter$a! Ree$-e.Q Nothi$g i#e$tio$ed i$ Sectio$ F abo-t !oca! tae. The c!ear i$te$t i or the Qi$!ie- o a!! taeQ c!a-e to app!y o$!y to tae -$der the Natio$a! 4$ter$a!Ree$-e (ode a$d $ot to !oca! tae. Ee$ +ith repect to $atio$a!i$ter$a! ree$-e tae' the Qi$ !ie- o a!! taeQ c!a-e doe $ot app!y toi$co#e ta.

4 (o$gre i$te$ded the Qi$ !ie- o a!! taeQ c!a-e i$ S#artra$chie to a!o app!y to !oca! tae' (o$gre +o-!d hae epre!y#e$tio$ed the ee#ptio$ ro# #-$icipa! a$d proi$cia! tae. (o$greco-!d hae -ed the !a$g-age i$ Sectio$ F%b& o (!aeci!!a o!dra$chie' a o!!o+8

i$ !ie- o a$y a$d a!! tae o a$y /i$d' $at-re or decriptio$!eied' etab!ihed or co!!ected by a$y a-thority +hatoeer' municipal,

provincial or $atio$a!' ro# +hich the gra$tee i hereby epre!yee#pted' . %E#phai -pp!ied&.

7o+eer' (o$gre did $ot epre!y ee#pt S#art ro# !oca!tae. (o$gre -ed the Qi$ !ie- o a!! taeQ c!a-e o$!y i$ reere$ce to$atio$a! i$ter$a! ree$-e tae. The o$!y i$terpretatio$' -$der the r-!e o$

trict co$tr-ctio$ o ta ee#ptio$' i that the Qi$ !ie- o a!! taeQc!a-e i$ S#art ra$chie reer o$!y to $atio$a! a$d $ot to !oca! tae.GSmart Communications, Inc. v. (he City of %avao, etc., et al.' >F1'Septe#ber 16' 200? citi$g Philippine $ong %istance (elephone Company, Inc. v.City of %avao' @ Phi!. >@1' >F %200&I

NOTES AN" (O**ENTS8 The a-thor opi$e that the aboe i$dapp!icatio$ to a!! te!eco##-$icatio$ co#pa$ie.

%%. The i" lieu of all ta#es clause i" the fra"chise ofABS0BN has beco!e fu"ctus officio with the abolitio" of thefra"chise ta# o" broadcasti"9 co!pa"ies with yearly 9rossreceipts e#ceedi"9 Te" ;illio" Pesos. The c!a-e i$ !ie- o a!!

tae doe $ot pertai$ to VAT or a$y other ta. 4t ca$$ot app!y +he$+hat i paid i a ta other tha$ a ra$chie ta. Si$ce the ra$chie tao$ the broadcati$g co#pa$ie +ith year!y gro receipt eceedi$g te$#i!!io$ peo ha bee$ abo!ihed' the i$ !ie- o a!! tae c!a-e ha $o+beco#e functus officio' re$dered i$operatie. %8uezon City, et al., v. ABS0CB! Broadcasting Corporation' ' 1FFF&

%@. ;ethods for a$oidi"9 double ta#atio" Fi"directduplicate ta#atio"G.

15


16/83

a. Ta treatie +hich ee#pt oreig$ $atio$a! ro# !oca!taatio$ a$d !oca! $atio$a! ro# oreig$ taatio$ -$der the pri$cip!e oreciprocity.

b. Ta credit +here oreig$ tae are a!!o+ed a ded-ctio$ro# !oca! tae that are d-e to be paid.

c. A!!o+i$g oreig$ tae a a ded-ctio$ ro# gro i$co#e.

%. Ta# creditge$era!!y reer to a$ a#o-$t that i -btracteddirect!y ro# o$e: tota! ta !iabi!ity' a$ a!!o+a$ce agai$t the ta ite!' or aded-ctio$ ro# +hat i o+$ed.

A ta credit red-ce the ta d-e' i$c!-di$g J+he$eer app!icab!e Jthe i$co#e ta that i deter#i$ed ater app!yi$g the correpo$di$g tarate to taab!e i$co#e. %Commissioner of Internal Revenue v. Central $uzon%rug Corporation, F6@' Apri! 1>' 200>&

%C. A ta# deductio" i dei$ed a a -btractio$ ro i$co#e orta p-rpoe' or a$ a#o-$t that i a!!o+ed by !a+ to red-ce i$co#e prior tothe app!icatio$ o the ta rate to co#p-te the a#o-$t o ta +hich i d-e.

A ta ded-ctio$ red-ce the i$co#e that i -bect to ta i$ order toarrie at taab!e i$co#e. %Commissioner of Internal Revenue v. Central $uzon%rug Corporation, F6@' Apri! 1>' 200>&

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

i"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

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$e"ues a"d assets of proprietary educatio"ali"stitutio"s5 i"cludi"9 those which are cooperati$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"s forrei"$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 of ge$era!!y payab!e i$ payab!e i$ #o$ey'

16


17/83

Pay!e"t #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 to

co#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 Bar

Duestio"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


18/83

S(RA ' a cae decided by the S-pre#e (o-rt +hoe act-a!a$tecede$t are i#i!ar to the prob!e#.

>. *" case of doubt5 ta# laws !ust be co"struedstrictly a9ai"st the State a"d liberally i" fa$or of the ta#payer

beca-e tae' a b-rde$ +hich #-t be e$d-red by the tapayer' ho-!d$ot be pre-#ed to go beyo$d +hat the !a+ epre!y a$d c!ear!y dec!are.*$incoln Philippine $ife Insurance Company, Inc., etc., v. Court of Appeals, et al.,2F S(RA F2' FF&

@. *"terpretatio" i" the i!positio" of ta#es5 is "ot thesi!ilar doctri"e as that applied to ta# e#e!ptio"s. The r-!e i$the i$terpretatio$ o ta !a+ i that a tat-te +i!! $ot be co$tr-ed ai#poi$g a ta -$!e it doe o c!ear!y' epre!y' a$d -$a#big-o-!y. Ata ca$$ot be i#poed +itho-t c!ear a$d epre +ord or that p-rpoe.

Accordi$g!y' the ge$era! r-!e o re-iri$g adhere$ce to the !etter i$co$tr-i$g tat-te app!ie +ith pec-!iar trict$e to ta !a+ a$d theproiio$ o a tai$g act are $ot to be ete$ded by i#p!icatio$. 4$

a$+eri$g the -etio$ o +ho i -bect to ta tat-te' it i baic that i$cae o do-bt' -ch tat-te are to be co$tr-ed #ot tro$g!y agai$tthe goer$#e$t a$d i$ aor o the -bect or citi;e$ beca-e b-rde$are $ot to be i#poed $or pre-#ed to be i#poed beyo$d +hat tat-teepre!y a$d c!ear!y i#port. GCommissioner of Internal Revenue v. /ortune(o"acco Corporation, ' -!y 21' 200? citi$g CIR v. Court

of Appeals' ? Phi!. 22' 0,1 %1FF@&I A b-rde$' tae ho-!d $ot be-$d-!y eacted $or a-#ed beyo$d the p!ai$ #ea$i$g o the ta !a+.%I"id., citi$g CIR v. Philippine American Accident Insurance Company, Inc., ?' *arch 1?' 200>' > S(RA 66?&

. Strict i"terpretatio" of ta# e#e!ptio" laws. Tae are+hat cii!i;ed peop!e pay or cii!i;ed ociety. They are the !ieb!ood othe $atio$. 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$. %8uezon City, et al., v. ABS0CB!Broadcasting Corporation' 5 %&&'+hich he!d that i$ 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$

18


19/83

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 Surigao

Consolidated 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# theta 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.' 1Phi!. 220' 22? %1FF>&I

'


20/83

Castaneda, > cited i$ Segarra' Ve$ice 7'Ta Treatie8 Tric/ or t reat M' Phi!ippi$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$.

20


21/83

NAT*ONA( *NTERNA( RE3ENE 0OE

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

'. Rep. Act No. ':&


22/83

60&

>. The i"co!e fro! the re"tal of the house5 bou9htfro! the ear"i"9s of coow"ed properties5 shall be treated asthe i"co!e of a" u"re9istered part"ership to be taab!e a acorporatio$ beca-e o the c!ear i$te$tio$ o the brother to oi$ together i$a e$t-re or #a/i$g #o$ey o-t o re$ta!.

@. *"co!ei gai$ deried a$d eered ro# capita!' ro# !aboror ro# both co#bi$ed. Cor ea#p!e' to ta a toc/ diide$d +o-!d be tota a capita! i$creae rather tha$ the i$co#e. *Commissioner of Internal

Revenue v. Court of Appeals, et al., +.R. !o. ?GED, anuary G, ?HHH#

. The ter# ta#able i"co!e #ea$ the perti$e$t ite# ogro i$co#e peciied i$ the Ta (ode' !e the ded-ctio$ a$d9orpero$a! a$d additio$a! ee#ptio$' i a$y' a-thori;ed or -ch type oi$co#e by the Ta (ode or other pecia! !a+. %Sec. 1' N4R( o 1FF@&

C. The ca"cellatio" a"d for9i$e"ess of i"debted"ess#ay a#o-$t to %a& pay#e$t o i$co#eD %b& gitD or to a %c& capita!tra$actio$ depe$di$g -po$ the circ-#ta$ce.

'&. *f a" i"di$idual perfor!s ser$ices for a creditor who5

i" co"sideratio" thereof5 ca"cels the debt5 it is i"co!e to theete$t o the a#o-$t rea!i;ed by the debtor a co#pe$atio$ or hierice.

''. A" i"sol$e"t debtor does "ot realie ta#able i"co!efro! the ca"cellatio" or for9i$e"ess. *Commissioner v. Simmons+in Co., Cd 2@ ((A 10 th&

'%. The i"sol$e"t debtor realies i"co!e resulti"9 fro!the ca"cellatio" or for9i$e"ess of i"debted"ess whe" hebeco!es sol$e"t. *$a-eland +rocery Co., v. Commissioner 6 BTA %C&2?F&

'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"debtedfor9i$es the debt5 the tra"sactio" has the effect of pay!e"t of adi$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! -ticei$ a!! phae o $atio$a! dee!op#e$t. 4$ re!atio$ thereto' Sectio$ 2 o Artic!e L444o the (o$tit-tio$ tate that the pro#otio$ o ocia! -tice ha!! i$c!-de the

co##it#e$t to create eco$o#ic opport-$itie baed o$ reedo# o i$itiatiea$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, @@?#

22


23/83

'. "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$i"9 bee"ear"ed i" the place where the ser$ice was re"dered a$d $otco$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' heha!! 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 thepero$a! a$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 of both!a"a9erial a"d ra" a"d file e!ployees 7

S3H& 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


24/83

%0& year o age at ti#e oretire#e$tD

& Aai!ed o the be$eit o ec!-io$ o$!y o$ce. GSec. 2%B& %6& %a&' N4R( o 1FF@I The retiri$g oicia! or e#p!oyee ho-!d$ot hae preio-!y aai!ed o the prii!ege -$der the retire#e$tp!a$ o the a#e or a$other e#p!oyer. G1tpar.' Sec. 2.@? %B& %1&'Re. Reg. No. 2,F?I

%@. +hat i"d of separatio" Fretire!e"tG pay ise#cluded fro! 9ross i"co!e5 he"ce ta#e#e!pt 7

S3


25/83

"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.

e. Bad debtsd-e to the tapayer' act-a!!y acertai$ed to

be +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$co#eother ro# co#pe$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.


. 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$e.No$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$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$doreig$ corporatio$ o$ their gro i$co#e ro# +ithi$ #ay a!o ded-ctthi epe$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$diid-a! +hoare e$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. No$reide$t

citi;e$ a$d $o$reide$t a!ie$ i$diid-a! e$gaged i$ trade or b-i$e i$the Phi!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$dreide$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.


25


26/83

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

S3


27/83

%Commissioner of Internal Revenue v, Isa"ela cultural Corporation, ,FF&

8C. +ho are related parties 7S3


28/83

c. T+o corporatio$ #ore tha$ ity perce$t %>0H& i$ a!-e o theo-tta$di$g toc/ o +hich i o+$ed' direct!y or i$direct!y' by or or thea#e i$diid-a!D

d. A gra$tor a$d a id-ciary o a$y tr-tD ore. The id-ciary o a tr-t a$d the id-ciary o a$other tr-t i the

a#e pero$ i a gra$tor +ith repect to each tr-tD or

. A id-ciary o a tr-t a$d a be$eiciary o -ch. GSec. 6 %B&'N4R( o 1FF@I

:&. +hat are the reDuisites for $alid deductio" of baddebts fro! 9ross i"co!e 7 S3


29/83

4$ the cae o #arried i$diid-a! +here o$!y o$e o the po-e iderii$g gro i$co#e' o$!y -ch po-e ha!! be a!!o+ed the pero$a!ee#ptio$. GSec. > %A&' N4R( o 1FF@ a a#e$ded by Rep. Act No. F>0DSec. 2.@F %4& %1& %a&' Re. Reg. No. 2,F? a a#e$ded by Re. Reg. No. 10,200?I

NOTES AN" (O**ENTS8 4t i c!ear ro# Rep. Act No. F>0 that

each 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$t or +hichadditio$a! ee#ptio$ #ay be c!ai#ed1& ha!! $ot eceed o-r %& depe$de$t. G1t 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

NOTES AN" (O**ENTS8a. 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 tapayer

c. i -ch depe$de$t i1& $ot #ore tha$ 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$idered

or 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 assets ha!! reer to a!! rea! propertie he!d by atapayer' +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$e' o a character +hich i -bect tothe a!!o+a$ce or depreciatio$D or rea! property -ed i$ the trade orb-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$d b-i$eD

e. Pai$ti$g' c-!pt-re' ta#p co!!ectio$' obect o art +hichare $ot -ed i$ 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#

29


30/83

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$0 o 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' or

co$do#i$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 the

c!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&

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


31/83

a. a!e' b. echa$ge' c. or other dipoitio$' i$c!-di$g pacto de retroa!e a$d otheror# o co$ditio$a! a!e. GSec. 2 %"& %1&' N4R( o 1FF@' $-#beri$ga$d arra$ge#e$t -pp!iedI

d. Sa!e' echa$ge' or other dipoitio$ i$c!-de ta/i$g by the

goer$#e$t thro-gh co$de#$atio$ proceedi$g. *+utierrez v. Court of (a)Appeals, et al., 101 Phi!. @1; +onzales v. Court of (a) Appeals, et al.,121 Phi!.?61&

%B& i$ re!atio$ to Sec. 2 %"& %1&' both othe N4R( o 1FF@ID

b. a$ etate or tr-t %I"id.&D c. a do#etic corporatio$. GSec. 2@ %"& %>&' 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$

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

31


32/83

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 the

a!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!icreaso" for suspe"di"9 the i!positio" of the ;0*T.

As a result of the ruli"9 ;B0 filed a" applicatio" forrefu"d of the P88 !illio". ue to the B*R6s i"actio"5 ;B0 filed apetitio" 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


33/83

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


34/83

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$e year priorto the death o the decede$t' or i the property +a tra$erred to hi# bygit +ithi$ 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$t' or i theproperty +a tra$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$t' or i theproperty +a tra$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 precriptieperiod.

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


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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"9spouse 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# 7 E#plai".S3


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assi9"ed to re$iew the sale5 would you issue a ta# assess!e"to" the tra"sactio" 7 E#plai" your a"swer briefly.

S3 citi$g ario- a-thorit ieU

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 added to-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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@. +ho are liable for the $alueadded ta#.a. A$y pero$ +ho' i$ the co-re o hi trade or b-i$e' 1& Se!!' barter' echa$ge or !eae good orpropertie' or

2& re$der erice' a$db. a$y pero$ +ho i#port good

7o+eer' i$ the cae o i#portatio$ o taab!e good' the i#porter'+hether a$ i$diid-a! or corporatio$ a$d +hether or $ot #ade i$ theco-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,addedta payab!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$p-t tae eceed the o-tp-t tae' the eceha!! be carried oer to the -cceedi$g -arter or -arter. Sho-!d thei$p-t tae re-!t ro# ;ero,rated or eectie!y ;ero,rated tra$actio$ or

ro# 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;ethe 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 the

e$act#e$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 o goodor erice' i$c!-di$g !eae or -e o propertie' i$ the co-re o hi tradeor 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

37


38/83

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

'. The 3AT re9istratio" fee does NOT $iolate reli9iousfreedo!. The VAT regitratio$ ee i#poed o$ $o$,VAT e$terprie+hich i$c!-de a#o$g other' re!igio- ect +hich e!! a$d ditrib-tere!igio- !iterat-re i $ot io!atie o re!igio- reedo#' a!tho-gh a ieda#o-$t i $ot i#poed or the eercie o a prii!ege b-t o$!y or thep-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 Trade orBusi"ess as used i" the 3AT syste!. The ter# Qdoi$g b-i$eQor co-re o b-i$e co$ey the idea o b-i$e bei$g do$e' $otro# 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 $ines, Inc., etal., 5&&&5&&&.&&. The bid was !ade by ;a9saysay (i"es5purportedly for a "ew co!pa"y still to be for!ed co!posed ofitself5 Baliwa9 Na$i9atio"5 *"c.5 a"d 1*; (i!ited of the ;arde",roup based i" Ho"9o"9 . The bid was appro$ed by the0o!!ittee o" Pri$atiatio"5 a"d a Notice of Award was issuedto ;a9saysay (i"es. *s the sale sub?ect to 3AT 7

S3


39/83

b-i$e or propertie origi$a!!y i$te$ded or a!e or or -e i$ the co-reo b-i$e.

b. "itrib-tio$ or tra$er to81& Shareho!der or i$etor a hare i$ the proit o

the VAT, regitered pero$D or2& (reditor i$ pay#e$t o debt or ob!igatio$

c. (o$ig$#e$t o good i act-a! a!e i $ot #ade +ithi$ity %60& day o!!o+i$g the date -ch good +ere co$ig$ed.(o$ig$ed good ret-r$ed by the co$ig$ee +ithi$ the 60,day period are$ot dee#ed o!d.

d. Retire#e$t ro# or ceatio$ o b-i$e' +ith repectto a!! good o$ ha$d'

1& +hether capita! good' toc/,i$,trade' -pp!ie or#ateria! a o the date o -ch retire#e$t' or ceatio$'

2& +hether or $ot the b-i$e i co$ti$-ed by the $e+o+$er or -cceor. GRe. Reg. No. 16,200>' Sec. .106,@'paraphrai$g' arra$ge#e$t a$d $-#beri$g -pp!iedI

%&. Tra"sactio"s co"sidered retire!e"t or cessatio" ofbusi"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!esticcorporatio" 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 bedeter#i$ed by the 73"(( a$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-$dredTho-a$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$


40/83

c. deried ro# the a!e or echa$ge o erice'1& i$c!-di$g the -e or !eae o propertie. GN4R( o

1FF@' Sec. 10? %A&' a a#e$ded by R.A. No. F@' arra$ge#e$t a$d$-#beri$g -pp!iedI

%' 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$actio$

40


41/83

charge $o o-tp-t ta' b-t ca$ c!ai# a re-$d or a ta credit certiicate orthe 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 to

recoer' 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$ices such asfacilitati"9 the collectio" of recei$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 to

it -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>&

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


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Phi!ippi$e' it i dee#ed a eparate c-to# territory a$d i regarded i$!a+ a oreig$ oi!. Sa!e by -pp!ier ro# o-tide the border o theeco;o$e to thi eparate c-to# territory are dee#ed a eport a$dtreated a eport a!e. Thee a!e are ;ero,rated or -bect to a tarate o ;ero perce$t. %Commissioner of Internal Revenue v. Se-isui ushiPhilippines, Inc., %a&' +ord i$ 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

!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"ue

Re9ulatio"s that alter the le9al reDuire!e"ts for erorati"9are 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-$try a$dor+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 ;itsuia"d 0o.5 (td.5 which e"tered i"to a co"tract with NAPO0ORfor the operatio" a"d !ai"te"a"ce of two power bar9esappoi"ted B+S0e"!ar as its coordi"atio" !a"a9er.B+S0;* was established as the subco"tractor to perfor! theactual wor i" the Philippi"es. The 0o"sortiu! paid B+S0;*i" acceptable forei9" e#cha"9e a"d accou"ted for i"accorda"ce with the rules a"d re9ulatio"s of the BSP.

Throu9h a 1ebruary ':5 'CC< ruli"9 the B*R declared thatB+S0;* !ay choose to re9ister as a 3AT perso"s sub?ect to3AT at ero rate. 1or 'CC>5 it filed the proper 3AT retur"s

showi"9 ero rati"9. O" ece!ber %C5 'CC@5 belie$i"9 that it

42


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is co$ered by Re$. Re9s. 5 dated 1ebruary %&5 'CC>5B+S0;* paid '&I output 3AT for the period Aprilece!ber'CC>5 throu9h the 3olu"tary Assess!e"t Pro9ra! F3APG.

O" /a"uary @5 'CCC5 B+S0;* was able to obtai" a Ruli"9fro! the B*R reco"fir!i"9 that it is sub?ect to 3AT at ero

rati"9. O" this basis5 B+S0;* applied for a refu"d of theoutput 3AT it paid.a. *s B+S0;* sub?ect to the '&I 3AT or is it ero

rated 7S3' a$-ary 22' 200@&

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


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ada$ced tech$o!ogica! #ea$ o pac/agi$g' -ch a hri$/ +rappi$g i$p!atic' ac--# pac/i$g' tetra,pac/' a$d other i#i!ar pac/agi$g#ethod. Po!ihed a$d9or h-/ed rice' cor$ grit' ra+ ca$e -gar a$d#o!ae' ordi$ary a!t' a$d copra ha!! be co$idered i$ their origi$a!tate.

S-gar +hoe co$te$t o -croe by +eight' i$ the dry tate' ha a

po!ari#eter readi$g o FF.>o a$d aboe are pre-#ed to be rei$ed-gar.

(a$e -gar prod-ced ro# the o!!o+i$g ha!! be pre-#ed' ori$ter$a! ree$-e p-rpoe' to be rei$ed -gar8

%1& prod-ct o a rei$i$g proce'%2& prod-ct o a -gar rei$ery' or

%& prod-ct o a prod-ctio$ !i$e o a -gar #i!! accredited bythe B4R to be prod-ci$g -gar +ith po!ari#eter readi$g o FF.>o a$daboe' a$d or +hich the -eda$i-ed thereor' a$d eriied by theS-gar Reg-!atory Ad#i$itratio$' ide$tiie the a#e to be o apo!ari#eter readi$g o FF.>o a$d aboe.

Bagae i $ot i$c!-ded i$ the ee#ptio$ proided or -$der thi

ectio$.%B& Sa!e or i#portatio$ o erti!i;erD eed' eed!i$g a$di$ger!i$gD ih' pra+$' !ietoc/ a$d po-!try eed' i$c!-di$g i$gredie$t'+hether !oca!!y prod-ced or i#ported' -ed i$ the #a$-act-re oi$ihed eed %ecept pecia!ty eed or race hore' ighti$g coc/'a-ari-# ih' ;oo a$i#a! a$d other a$i#a! ge$era!!y co$idered apet&D

Specia!ty eed reer to $o$,agric-!t-ra! eed or ood or racehore' ighti$g coc/' a-ari-# ih' ;oo a$i#a! a$d other a$i#a!ge$era!!y co$idered a pet.

%(& 4#portatio$ o pero$a! a$d ho-eho!d eect be!o$gi$g tothe reide$t o the Phi!ippi$e ret-r$i$g ro# abroad a$d $o$reide$tciti;e$ co#i$g to reett!e i$ the Phi!ippi$e8 Proided' That -ch goodare ee#pt ro# c-to# d-tie -$der the Tari a$d (-to# (ode othe Phi!ippi$eD

%"& 4#portatio$ o proeio$a! i$tr-#e$t a$d i#p!e#e$t'+eari$g appare!' do#etic a$i#a!' a$d pero$a! ho-eho!d eect%ecept a$y ehic!e' ee!' aircrat' #achi$ery' other good or -e i$the #a$-act-re a$d #ercha$die o a$y /i$d i$ co##ercia! -a$tity&be!o$gi$g to pero$ co#i$g to ett!e i$ the Phi!ippi$e' or their o+$ -ea$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 propert ie or theperor#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 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$d by ra$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$ie oraociatio$ & doi$g !ie i$-ra$ce b-i$e o a$y ort i$ thePhi!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 r ice' 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.

44
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%0&to$ a$d aboe' i$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#it re-ire#e$t' at the ti#e o ac-iitio$ co-$ted ro# the date o theee!: origi$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$d -pp!ie ha!! be -ed ec!-ie!y or ha!! pertai$ to

45
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the 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$ thePhi!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-$t herei$ tated ha!! 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$e +hich are other+ie -bect to VAT' the a#e ha!! beco#bi$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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taab!e i$co#e. G2$d to the !at par.' Sec. 2 %A& %2&' N4R( o 1FF@ aa#e$ded by Rep. Act No. F>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$+hich ha bee$ correct!y +ithhe!d8 Provided' That a$ i$diid-a! derii$gco#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$diid-a!+ho i ee#pt ro# i$co#e ta p-r-a$t to the proiio$ o the Ta(ode a$d other !a+' ge$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$idual who is "ot reDuired to file a" i"co!eta# retur" !ay "e$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 pays itsi"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$ a i$a!ad-t#e$t ret-r$ i i!ed coeri$g the tota! taab!e i$co#e or the +ho!etaab!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 duri"9a si"9le ta#able year. -arter!y ret-r$ are re-ired to be i!ed or theirt three -arter' the$ a$ a$$-a! i$co#e ta ret-r$ i i!ed coeri$g thetota! taab!e i$co#e or the +ho!e o the preio- ca!e$dar year.

''. 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$creai$ggoer$#e$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!posed orprescribed 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"ally

liable u"der the Ta# 0ode for the pay!e"t of the ta# reDuired tobe withheld5i$ order to co#pe! the +ithho!di$g age$t to +ithho!d the ta-$der a$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


48/83

'>. "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$a! H -rcharge or !ate i!i$g or !ate pay#e$t GSec. 2?

%A&' N4R( o 1FF@I %a!o /$o+$ a the de!i$-e$cy -rcharge&' a$db. the >0H +i!!-! $eg!ect or ra-d -rcharge. GSec. 2? %B&'

I"id.I

8. efi"e deficie"cy i"co!e ta#.S3


49/83

i$ the $otice a$d de#a$d by the (o##iio$er o 4$ter$a! Ree$-e.GSec.2F %c&' N4R( o 1FF@I

>. After resol$i"9 the issues the B*R 0o!!issio"erreduced the assess!e"t. +as it proper to i!pose deli"Due"cyi"terest despite the reductio" of the assess!e"t 7 +hy 7

S3' a a#e$ded' a$d ico#poed o a Preidi$g -tice a$d eight %?& Aociate -tice'orga$i;ed i$to three %& diiio$.

8. +hat are the purposes for the creatio" of the 0ourtof Ta# Appeals 7

S3


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their origi$a! or appe!!ate -ridictio$D %4 origi$a! "4V4S4OND i appe!!ate &!BA!C&

. "eciio$ o the (o##iio$er o (-to# i$ cae i$o!i$g!iabi!ity or c-to# d-tie' ee or other #o$ey charge' ei;-re' dete$tio$or re!eae o property aected' i$e' oreit-re or other pe$a!tie i$re!atio$ thereto' or other #atter arii$g -$der the (-to# )a+ or other

!a+ ad#i$itered by the B-rea- o (-to#D %"4V4S4ON&>. "eciio$ o the (e$tra! Board o Ae#e$t Appea! i$ the

eercie o it appe!!ate -ridictio$ oer cae i$o!i$g the ae#e$ta$d taatio$ o rea! property origi$a!!y decided by the proi$cia! or cityboard o ae#e$t appea!D %&! BA!C&

6. "eciio$ o the Secretary o Ci$a$ce o$ c-to# caee!eated to hi# a-to#atica!!y or reie+ ro# deciio$ o the(o##iio$er o (-to# +hich are adere to the o the Tari a$d (-to# (odeD %Thi ha reere$ce tooreit-re cae +here the deciio$ i to re!eae the ei;ed artic!e J"4V4S4ON&

@. "eciio$ o the Secretary o Trade a$d 4$d-try' i$ cae o

$o$agric-!t-ra! prod-ct' co##odity or artic!e' a$d the Secretary oAgric-!t-re i$ the cae o agric-!t-ra! prod-ct' co##odity or artic!e'i$o!i$g d-#pi$g a$d co-$terai!i$g d-tie -$der Sectio$ 01 a$d 02'repectie!y' o the Tari a$d (-to# (ode' a$d aeg-ard #ea-re-$der Rep-b!ic Act No. ??00' +here either party #ay appea! the deciio$to i#poe or $ot to i#poe aid d-tie. %"4V4S4ON& b. /urisdictio" o$er cases i"$ol$i"9 cri!i"al offe"ses asherei" pro$ided-

1. E#clusi$e ori9i"al ?urisdictio" o$er all cri!i"al casesarii$g ro# io!atio$ o the Nati

Taxation Notes 2010

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