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TAXATION LAW
I
Anchor Banking Corporation, which was organized in 2000 and existing under the laws of the Philippines
and owned by the Sy a!ily of "akati City, set up in 20#0 a branch office in Shanghai City, China, to take
ad$antage of the presence of !any ilipino workers in that area and its boo!ing econo!y% &uring the
year, the bank ,!anage!ent decided not to include the P20 "illion net inco!e of the Shanghai Branch in
the annual Philippine inco!e tax return filed with the B'(, which showed a net taxable inco!e of P)0
"illion , because the Shanghai Branch is treated as a foreign corporation and is taxed only on inco!e
fro! sources within the Philippines, and since the loan and other business transactions were done in
Shanghai, these inco!es are not taxable in the Philippines%
a* 's the bank correct in excluding the net inco!e of its Shanghai Branch in the co!putation of its
annual corporate inco!e tax for 20#0+ ,xplain your answer% -./*
b* Should the Shanghai Branch of Anchor Bank re!it profit to its 0ead 1ffice in the Philippines in
20##, is the branch liable to the #./ branch profit re!ittance tax i!posed under Section 22 -A*-.* of
the #334 5ax Code+ ,xplain your answer -./*
II
oster Corporation -C* is a Singapore6based foreign corporation engaged in construction and installation
pro7ects% 'n 20#0, 8lobal 1il Corporation -81C*, a do!estic corpoartion engaged in the refinery of
petroleu! products, awarded an anti6pollution pro7ect to oster Corporation, whereby C shall design,
supply !achinery and e9uip!ent, and install an anti6pollution de$ice for 81C:s refinery in the Philippines,
pro$ided that the installation part of the pro7ect !ay be sub6contracted to a local construction co!pany%
Pursuant to the contract, the design and supply contracts were done in Singapore by C, while the
installation works were sub6contracted by the C with the Philippine Construction Corporation -PCC*, a
do!estic corporation% 5he pro7ect with a total cost of P#00 "illion was co!pleted in 20## at the following
cost co!ponents; -design < P20"illion= !achinery and e9uip!ent < P.0 "illion= and installation <P)0
"illion*% Assu!e that the pro7ect was >0/ co!plete in 20#0 and #00/ co!plete in 20##, based on the
certificates issued by the certificates issued by the architects and engineers working on the pro7ect% 81C
paid C as follows; P?0 "illion in 20#0 and P>0 "illion in 20##, and C paid PCC ion foreign currency
through a Philippine bank as follows; P#0 "illion in 20#0 and P20 "illion in 20##%
a* 's C liable to Philippines inco!e tax, and if so, how !uch re$enue shall be reported by it in 20#0
and in 20##+ ,xplain your answer% -./*
b* 's PCC, which adopted the percentage of co!pletion !ethod of reporting inco!e and expenses,
liable to $alue added tax in 20#0 and in 20##% ,xplain your answer% -./*
III
"r% @ose Castillo is a resident ilipino Citizen% 0e purchased a parcel of land in "akati City in #340 at a
consideration of P# "illion% 'n 20##, the land , which re!ained unde$eloped and idle, had a fair !arket
$alue of P20"illion% "r% Antonio Ayala, another ilipino citizen, is $ery !uch interested in the property and
he offered to buy the sa!e for P20 "illion% 5he Assessor of "akati City re6assessed in 20## the property
at P#0 "illion%
a* Ahen is "r% Castillo liable for real property tax on the land beginning 20## or beginning 20#2+
,xplain your answer% -2/*
b* 's "r% Castillo liable for inco!e tax in 20## based on the offer to buy by "r% Ayala+ ,xplain your
answer% -)/*
c* Should "r% Castillo agree to sell the land to "r% Ayala in 20#2 for P20 "illion, sub7ect to the condition
as stated in 5he &eed of Sale that the buyer shall assu!e the capital gains tax thereon, how !usch is
the inco!e tax due on the transaction and when !ust the tax return be filed and the tax be paid by the
taxpayer+ ,xplain your answer% -./*
IV
"r% Pedro Aguirre, a resident citizen, is working for a large real estate de$elop!ent co!pany in the
country and in 20#0, he was pro!oted to Bice6President of the co!pany% Aith !ore responsibilities
co!es higher pay% 'n 20##, he decided to buy a new car worth P2 "illion and he traded6in his old car with
a !arket $alue of P200,000%00 and paid the difference of P#%2 "illion to the car co!pany% 5he old car,
which was bought three -)* years ago by the father of "r% Pedro Aguirre at price of P400,000%00 was
donated by hi! and registered in the na!e of his son% 5he corresponding donor:s tax thereon was duly
paid by the father%
a* 0ow !uch is the cost basis of the old car to "r% Aguirre+ ,xplain your answer -2/*
b* Ahat is the nature of the old car < capital asset or ordinary asset+ ,xplain your answer% -)/*
c* 's "r% Aguirre liable to pay inco!e tax on the gain fro! the sale of his old car+ ,xplain your answer%
-./*
V
Spouses Pablo 8onzales and 5eresita 8onzales, both resident citizens ac9uire during their !arriage a
residential house and lot located in "akati City, which is being leased to a tenant for a !onthly rental of
P#00,000%00% "r% Pablo 8onzales is the President of P8 Corporation and he recei$es P.0,000%00 salary
per !onth% 5he spouses ha$e only one -#* !inor child% 'n late @une 20#0, he was i!!ediately brought to
the hospital because of the heart attack and he was pronounced dead on @une )0, 20#0%Aith no
liabilities, the estate of the late Pablo 8onzales was settled extra67udicially in early 20##%
a* 's "r% Pablo 8onzales re9uired to file inco!e tax for 20#0+ 'f so, how !uch inco!e !ust he declare
for the year+ 0ow !uch personal and additional exe!ption is he entitled to+ ,xplain your answer%
-./*
b* 's "rs% 5eresita 8onzales re9uired to file inco!e tax return fot 20#0+ 'f so, how !uch inco!e !ust
she declare for the year+ 0ow !uch personal exe!ption is she entitled to+ ,xplain your answer% -./*
c* 's the ,state of the late Pablo 8onzales re9uired to file inco!e tax return for 20#0+ 'f so, how !uch
inco!e !ust it declare for the year+ 0ow !uch personal exe!ption is it entitled to+ ,xplain your
answer% -./*
VI
5he B'( issude in 20#0 a final assess!ent notice and de!and letter against C Corporation co$ering
deficiency inco!e tas for the year 2002 in the a!ount of P#0 "illion% C Corporation earlier re9uested the
ad$ice of a lawyer on whether or not it should file a re9uest for reconsideration or a re9uest for
rein$estigation% 5he lawyer said it does not !atter wheteher the protest files against the assess!ent is a
re9uest for reconsideration or a re9uest for rein$estigation, because it has sa!e conse9uences or
i!plications%
a* Ahat are the differences between a re9uest for reconsideration and a re9uest for rein$estigation+
-./*
b* &o you agree with the ad$ice of the lawyer+ ,xplain your answer -./*
VII
a* "ay the bank deposits < peso and foreign currency of the an indi$idual taxpayer be disclosed by a
co!!ercial bank to the Co!!issioner of 'nternal (e$enue, in connection with a tax in$estigation being
conducted by re$enue officials, without $iolating the rele$ant bank secrecy laws+ ,xplain your answer%
-./*
b* 'n 20##, the Co!!issioner of the D%S% 'nternal (e$enue Ser$ice -'(S* re9uested in writing the
Co!!issioner of 'nternal (e$eneu to get the infor!atrion fro! a bank in the Philippines, regarding the
deposits of a D%S% Citizen residing in the Philippines, who is under exa!iniation by the officials of the DS
'(S, pursuant to the DS6Philippine 5ax 5reaty and othert existing laws% Should the B'( Co!!issioner
agree to obtain such infor!arion fro! the bank and pro$ide the sa!e to the '(S+ ,xplain your answer%
-./*
c* 's the bank secrecy law9 in the Philippines $iolated when the B'( issues a Aarrant of 8arnish!ent
directed against a do!estic bank, re9uiring it not to allow any withdrawal fro! any existing bank deposit
of he delin9uent taxpayer !entioned in the Aarrant and to freeze the sa!e until the tax delin9uency of
said taxpayer is settled with the B'(+ ,xplain your answer% -./*
VIII
'n the exa!ination conducted by the re$enue officials against the corporate taxpayer in 20#0, the B'(
issued a final assess!ent notice and de!and letter which states; E't is re9uested that the abo$e
deficiency tax be paid i!!ediately upon receipt hereof, inclusi$e of penalties incident to delin9uency% 5his
is our final decision based on in$estigation% 'f you disagree, you !ay appeal this final decision within thirty
-)0* days fro! receipt hereof, otherwise said deficiency tax assess!ent shall beco!e final, executory
and de!andable%E 5he assess!ent was i!!ediately appealed by the taxpayer to the Court of 5ax
Appeals, without filing its protest against the assess!ent and without a denial thereof by the B'(% 'f you
were the 7udge, would your deny the petition for re$iew filed by the taxpayer and consider the case as
pre!aturely filed+ ,xplain your answer -./*
IX
1n April #?, 20#2, the corporation filed its annual corporate inco!e tax return for 20##, showing an
o$erpay!ent of inco!e tax of P# "illion% Ahich is to be carried o$er to the succeeding year-s*% 1n "ay
#., 20#2, the corporation sought ad$ice fro! you and said that it conte!plates to file an a!ended return
for 20##, which shows that instead of carry o$er of the execss inco!e tax pay!ent, the sa!e shall be
considenred as a clai! for tax refund and the s!all box shown as ErefundE in the return will be filled up%
Aithi a year, the corporation will file the for!al re9uest for refund for the excess pay!ent%
a* Aill you reco!!end to the corporation such a course of action and 7ustify that the a!ended return
is the latest official act of the corporation as to how it !ay treat such o$erpay!ent of tax or should you
consider the option granted to taxpayers as irre$ocable, once pre$iously exercised by it+ ,xplain your
answer% -./*
b* Should the petition for re$iew filed with the C5A on the basisof the a!ended tax return be denied by
the B'( and the C5A, could the corporationstill carry o$er such excess pay!ent of inco!e tax in the
succeeding years, considering that there is no precripti$e period pro$ided for in the inco!e tax law
with respect to carry o$er of excess inco!e tax pay!ents+ ,xplain your answer% -./*
X
,xplain the following state!ents;
a* 5he ac9uittal of the taxpayer in a cri!inal action under the 5ax Code does not necessarily result in a
exeoneration of said taxpayer fro! his ci$il liability to pay taxes% -)/*
b* Should the accused be found guilty beyond reasonable doubt for $iolation of Section 2.. of the 5ax
Code for failure to file tax return or to to spply correct infor!ation*, the i!position of the ci$il liability by
the C5A should be auto!atic and no assess!ent notice fro! the B'( is necessary+ -2/*
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