CONSOLIDATED SYLLABUS

IN TAXATION
As of January , 2019

TAX 1

A. General Principles of Taxation

a. Concept1Underlying Basis2 and Purpose
1. Taxation, Taxes Defined
2. Attributes or Characteristics of Taxes

1) Cebu Portland Cement v. CTA, L-29059, 15 Dec 1987, 156 SCRA 535 (Lifeblood
of the Government)
2) Mun. of Makati v. CA, et al, L-89898, 01 Oct 1990, 190 SCRA 206 (Exempt from
execution)
3) CIR v. Algue, Inc. et al, L-28896, 17 Feb 1988, 158 SCRA 9 (Lifeblood Theory;
Rationale is Symbiotic Relationship; timeliness of assessment / collection;
effect of warrant of distraint & levy; deductibility of promotional expense) 3
4) BPI Family Savings Bank v. CA et al, 330 SCRA 507, 12 Apr 2000 (Mutual
Observance of fairness & honesty; claim for refund due to losses, how to prove
entitlement)4
b. Principles of a Sound Tax System
1. Fiscal Adequacy
2. Theoretical Justice
3. Administrative Feasibility
4. Will the non-observance of these principles invalidate the tax law?
No, unless other inherent and constitutional limitations are infringed.

c. Scope of Taxation
1
What is the concept of taxation? It can be viewed in two ways, namelya) as a power to
tax and (b) as the act or process by which taxing power is exercised.
2
What is the theory or underlying basis of taxation? It is a necessity without which no
government could exist; revenues collected are intended to finance government and its
activities. It can reach what traditionally are within police power measures to attain:
i. Social justice
ii. Equitable distribution of wealth
iii. Economic progress
iv. Protection of local industries, public welfare and the like
3
The substantive issue here is the deductibility of P75,000 promotional fees paid by Algue
to certain individuals who were also its stockholders and who rendered services so that
Algue would earn commission fees. The procedural issue whether or not Allgue seasonably
filed its appeal to the CTA from receipt of Warrant of Distraint and Levy. Due to a special
circumstance, this case presents an excepted to the rule that a Warrant of Distraint and Levy
is “proof of the finality of the assessment” and “renders hopeless a request for
reconsideration,” being “tantamount to an outright denial thereof and makes the said request
deemed rejected.”
4
This is a claim for tax refund due to losses, which was denied by the CTA allegedly for
failure to present the Annual Income Tax Return of the following year, which would show
whether the overpaid taxes had not been credited in that year’s tax liability.

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 1. No attribute of sovereignty is more pervading,
unlimited, plenary, comprehensive and supreme
2. Wide spectrum of the power to tax reaches every
trade or occupation, every object of industry, use or enjoyment, every
species of possession
3. Imposes burden, if not followed could result to
seizure and penalty
4. Pervasive affecting constantly and consistently all
relations of life
5. It also involves the power to destroy per Justice
Marshall [but Justice Holmes said no while the US SC sits]

5) CIR v Tokyo Shipping Co, 244 SCRA 332, 26 May 1995 [Claim for Refund of tax on
GPB from charter of vessel; claim for refund construed strictississimi juris finding of
fact by CTA that vessel left without sugar laden; 15 years lapsed without refund
though at one point lawyer of BIR said it was approved; kill the goose that lay the
golden eggs]

d. Limitation of Taxation
1. Inherent Limitations
a. Public Purpose

6) Gomez v. Palomar, 25 SCRA, 25 827

7) Lutz v. Araneta, 98 Phil. 148
8) Tio v. VRB, 98 Phil. 148

a. Legislative in Nature
b. Territorial

9) Commissioner v. BOAC, 149 SCRA 395

a. International Comity

10) CIR v Mitsubishi Metal Corp, 181 SCRA 214, 22 Jan 1990 [Exemption of Japanese
govt owned bank does not extend to Jap corp, who in turn lent the loan to a local
company; exemption construed strictississimi]

e. Exemption of Government from tax

2. Constitutional Limitations
Directly affecting taxation
a. Non-imprisonment for non-payment of poll tax
b. Rule of taxation should be uniform and equitable;
progressive system of taxation to evolve; authorized
President to fix limits by Congress
c. Bills to originate from the House of Representatives

11) Tolentino vs. Secretary of Finance, 235 SCRA 630

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 d. Exempt charitable and religious institution from property
tax

12) Abra Valley College, Inc. v. Aquino, 162 SCRA 106

13) Rev. .Lladoc v. CIR, 14 Phil. 292
14) Bishop of Nueva Segovia v. Prov. Board of Ilocos Norte, 51 Phil. 352

e. Exempting law must be passed by majority of all members

of Congress
f. Special purpose tax should be used for said purpose and
excess to revert to general fund
g. Veto power of the President
h. Review power of the SC
i. Grant of power to local government
j. Exemption of non-stock, non-profit educational
institution, etc from taxes

Indirectly affecting taxation

a. Due Process Clause
b. Equal Protection Clause
c. Police Power and Eminent Domain higher, can override
constitutional rights, subject to limitations

Distinguish Taxation from Police Power and Eminent Domain

Taxation is subordinate to:

1) Due Process
1) Separation of Church and State
1) Non-impairment clause of contracts
1) Free exercise and enjoyment of religious profession

15) Phil Bank of Communications v. CIR, et al, 302 SCRA 241, 28 Jan 1999
[Summary collection does not infringe due process)
16) Sison v. Ancheta, GR 59431, 25 Jul 1984 [Uniformity, Equal Protection and Due
Process Clauses not violated when BP 135 adopted gross income taxation)
[when the tax “operates with the same force and effect in every place where the
subject may be found”. It was held to comply with uniformity requirement; “Equality
and uniformity in taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate.]
17) Reyes v. Almanzor, 196 SCRA 322 (Arbitrary valuation violated Due Process
18) Nitafan et al v. CIR, GR 78780, 23 Jul 1987 (Salaries of justices & Judges are not
exempt from income tax)
19) Carlos Superdrug Corp. v. DSWD, 526 SCRA 130, 140, 143, 145
20) Reyes v. Almanzor, 196 SCRA 322
21) Commissioner of Internal Revenue v. CA, 261 SCRA 236
22) Cagayan Electric Power and Light and Co., Inc. vs. Commissioner, GR No. 60126
23) Gomez v. Palomar, 25 SCRA 827
24) Eastern Theatrical Co. v. Alfonso, 83 Phil. 852
25) Ormoc Sugar Co., Inc. v. Treasurer of Ormoc City, 22 SCRA 603
26) Tolentino v. Secretary of Finance, 235 SCRA 630

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 27) PAL v. Sec of Finance, GR 115852, 25 Aug 1994 (Withdrawal of PAL’s exemption
from VAT without being mentioned in title not violative of bill embracing one
subject)
28) Tolentino v Sec of Finance & CIR, GR 11545, 64 SCAD 352, 235 SCRA 630 (Does
VAT law violate the “progressivity rule of taxation” given that VAT is
regressive?; equality & uniformity rule?)
29) ABAKADA Guro v. Exec Secretary, 469 SCRA 1, etc 1 Sep 2005 & 18 Oct 2005

e. Aspects of Taxation
Levy

30) CIR v. Botelbo Shipping Corp, 20 SCRA 487

31) Tan v. Del Rosario, Jr.5 237 SCRA 324(1994) (Legislative discretion to
determine nature (kind), subject (purpose), extent (rate), coverage (subject),
land situs (place), SNITS is valid;

Assessment & Collection

Payment

f. Classification of Taxes
According to subject matter (Capitation Tax, Property Tax, Excise
Tax)
According to burden or incidence (Direct or indirect)

32) Maceda v. Macaraeg 223 SCRA 217

33) ABAKADA Guro v. Exec Secretary, GR 168056 1 Sep 2005 & 18 Oct 2005

According to determination of amount (Ad Valorem, Specific)

34) Tan v Mun of Pagbilao GR 14264, 30 Apr 1963 7 SCRA 887

According to purpose (General, Special)

35) PAL v. Romeo Edu, GR 41383, 15 Aug 1998 164 SCRA 320 (exempt from taxes)
36) ESSO Std Eastern v CIR GR 28508-9, 7 Jul 1989 175 SCRA 149 (Margin Fee a
license – police power, not taxing)
37) Lozano v. Energy Regulatory Board, GR 95119-21, 18 Dec 1990 192 SCRA 363
(OPSF not a tax)

According to authority imposing the tax (National, Local)

38) Meralco Securities v. Central Board of Assessments Appeals, GR L-46245, 31

May 1982 114 SCRA 260 (Real Property under Real Property Tax Code, a
national tax; This is no longer true under the Local Government Code)

According to graduation (tax base / tax rate) – (Progressive,

regressive, etc)

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Tan v. Del Rosario, 237 SCRA 324 (1994) – This is a challenge to the validity of Simplified
Net Income Taxation applied to general professional partnerships; uniformity of taxation
merely requires that all subjects or objects of taxation similarly are to be treated alike both in
privileges and liabilities.

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 g. Distinguished from other exactions
License

39) Procter & Gamble v. Mun of Jagna, 94 SCRA 894, (nature and amount of license)
40) Golden Ribbon Lumber v City of Butuan, 12 SCRA 611 (non payment is illegal)

Toll

41) City of Ozamis v Lumapas, 65 SCRA 33

Special Assessments (Now, Special Levy under the Local

Government Coe)

42) Apostolic Prefect v Treasurer of Baguio, 71 PHIL 547

Debt or an ordinary obligation

43) Victoria Millling v Phil Ports Authority, GR 73705 27 Aug 1987, 153 SCRA 317
(share of govt from earnings of arrastre and stevedoring from contractual
compensation not tax)
44) CIR v Prieto 109 PHIL 592

h. Interpretation and Construction of Tax Statutes

How are tax laws interpreted or construed?
a. Rules of Statutory Construction are applied, legislative
intent is primordial
b. In case of doubt, construed in favor of taxpayer
c. But for exemptions, construed against taxpayer
i. Except when it applies to government
ii. Special class of subjects under special conditions
iii. When the law says so

45) CIR v CA, Central Vegetable Mfg Co & CTA, GR 107135, 23 Feb 1999
46) Luzon Stevedoring v CTA, GR 30232, 29 Jul 1988, 163 SCRA 647
47) CIR v. Gotamco & Sons, GR 31092, 27 Feb 1987, 148 SCRA 36
48) CIR v. CA, CTA and Ateneo de Manila, GR 115349, 18 Apr 1997, 271 SCRA 605

How are the rules applied? Apply first the doctrine that imposition
is a burden thus construed strictly vs. govt, then if applicable, the
burden shifts to taxpayer to prove he is exempt.

i. Classifications of Exemptions
Express

i. Section 30 of NIRC
ii. Section 105 of Tariffs and Customs Code
iii. Special Laws, like the Omnibus Investment Code

Implied or by Omission

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 i. Government is impliedly not subject to tax but it
can tax itself
ii. Equity
iii. Contractual

49) Prov of Mizamis Oriental v. Cagayan Electric, GR 45355, 12 Jan 1990, 181 SCRA
38

j. Instances Exemptions construed liberally

The law says so
Special classes of persons under special circumstances

50) CIR v. CA, ROH Auto Products Phils & CTA, GR 108358, 20 Jan 1995, 240 SCRA
368

In favor of the government, etc

51) Maceda v. Macaraeg, 197 SCRA 77

Exemptions granted to traditional exemptees, such as religious /

charitable

k. Certain Doctrines in Taxation

Prospectivity of tax laws

How may tax laws be applied? General rule, prospective, but the
law can provide that it has retro effect and it is still valid, except if
too harsh and oppressive as to violate due process clause of the
constitution.

52) Hydro Resources v CA, GR L-80276 21 Dec 1990, 192 SCRA 604 [ad valorem tax
imposed by law passed after transfer of ownership not applicable; contract of sale
subject to suspensive condition; LC issued prior to law is not subject to ad valorem;
no retro effect unless stated by law]

53) Central Azucarera de Don Pedro v. CTA, 20 SCRA 344 [interest on deficiency tax
was imposed by a law passed after the deficiency was incurred is not a retroactive
application]

May tax laws be given retroactive effect? Yes, Lorenzo v. Posadas

64 Phil 353; Smietanka v First Trust Savings Bank, 257 US 602;
Law on Federal Taxation, Vo; 1 p.154

Is the government bound by the errors of its agents? While the

government is not bound by the error of its agent in issuing a
ruling, in the interest of justice and fair play, reversal of ruling may
not be given retro effect

54) CIR v. Benguet Corp, 463 SCRA 28 (2005)

55) CIR v. Burmeisters & Wain Scandinavian, GR 153205 Jan 2007
Non-prescriptive

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56) CIR v. Ayala Securities Corp, GR L-29485, 21 Nov 1980 – tax on undue
accumulation of income does not prescribe because the law imposing does not
provide for the fixed period within which to file a tax return; the SC reconsidered its
earlier decision dated April 8, 1976; see Sec 29, NIRC

May taxes prescribe? No, but the law can provide for its
prescription, such as NIRC, Customs and LGC

Double Taxation
What is double taxation? Is it valid or constitutional?

Direct Duplicate Taxation – same taxing authority, same year,

same taxes but applying to some of the properties
Indirect Duplicate Taxation – when otherwise
57) Pepsi Cola v. Tanauan, 69 SCRA 460 [mun ordinance impose .01 per gallon per
RA is not undue delegation; no double taxation; not specific tax]

58) CIR v. SC Johnson & Sons, 309 SCRA 87 (1999), [Most favored nation clause;
double taxation; claim for refund in the nature of exemption; construction of RP-US
tax Treaty – tax rate on royalty US v Germany, international juridical double taxation
defined]

Measures to avoid double taxation

i. Treaty
ii. Reciprocity
iii. Tax Credit

Means of escaping taxation – tax avoidance / tax evasion

59) CIR v. Rufino, GR L-33665-68, 27 Feb 1987, 148 SCRA 42, [tax exempt merger of
two corporations]
60) Delpher Trades Corp v IAC, 157 SCRA 349 [tax exempt transfer of property to a
corporation resulting to control]
61) CIR v. Benigno Toda, 438 SCRA 290 (2004) – meaning of fraud; tax avoidance /
evasion

Is equitable recoupment allowed though prescription has set in?

62) Collector v. UST, 104 PHIL 1062 – (rejected this common law doctrine)

Set off of taxes

63) Philex Mining v. CIR,L-125704, 28 Aug 1998 (General rule: no offsetting)

[Refundable VAT v. Excise tax);
64) CIR v ESSO Standard, 172 SCRA 369 18 Apr 1989, 172 SCRA 623 [ Offset of
Percentage Tax and amusement taxes v. matured back pay certificates];
Domingo v. Garlitos, 8 SCRA 443 [1963] (exception: allowed)[Estate and
Inheritance Taxes v specificallu appropriated fund for the payment of
obligation to the estate]

Taxpayer suit may be filed

When disbursement of public funds involved

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 BUT NOT to enjoin COMELEC to call election
Funds were not raised through taxation
Maceda v. Macaraeg, 197 SCRA 771 [Exemption of NPC from taxes]

Are compromises allowed? Yes by the BIR under NIRC and by Customs
under TCCP. NO similar provisions under the LGC, thus Civil Code applies
suppletorily

Are tax laws political in nature? No, it applies to territory and not by
reason of occupying forces.

l. DEFINITIONS OF DIFFERENT TAXES UNDER THE NIRC

Capital Gains Tax is a tax imposed on the gains presumed to have

been realized by the seller from the sale, exchange or other disposition
of capital assets located in the Philippines, including pacto de retro
sales and other forms of conditional sale.

Documentary Stamp Tax is a tax on documents, instruments, loan

agreements and papers evidencing the acceptance, assignment, sale or
transfer of an obligation, rights or property incident thereto.

Donor’s Tax is a tax on a donation or gift, and is imposed on the

gratuitous transfer of property between two or more persons who are
living at the time of the transfer.

Estate Tax is a tax on the right of the deceased person to transmit

his / her estate to his / her lawful heirs and beneficiaries at the time of
death and on certain transfers which are made by law as equivalent to
testamentary disposition.

Income Tax is a tax on all yearly profits arising from property,

profession, trades or offices or as a tax on a person’s income,
emoluments, profits and the like.

Percentage Tax is a business tax imposed on persons or entities who

sell or lease goods , properties or services in the ordinary course of
trade or business whose gross annual sales or receipts do not exceed
P1.5million and are not VAT-registered.

Value-Added Tax is a business tax imposed and collected from the

seller in the course of trade or business on every sale of properties
(real or personal) lese of goods or properties (real or personal) or
vendors of services. It is an indirect tax, thus it can be passed on to the
buyer.

Withholding Tax on Compensation is the tax withheld from

individuals receiving purely compensation income.

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 Expanded Withholding Tax is a kind of withholding tax which is
prescribed only for certain payors and is creditable against the income
tax due of the payee for the taxable quarter / year.

Final Withholding Tax is a kind of withholding tax which is

prescribed only for certain payors and is not creditable against the
income tax due of the payee for the taxable year. Income tax withheld
constitutes the full and final payment of the Income Tax due from the
payee on the said income.

Withholding Tax on Government Money Payments is the tax

withheld by government offices and instrumentalities, including
government owned or controlled corporations and local government
units, before making any payments to private individuals,
corporations, partnerships and / or associations.

B. THE NATIONAL INTERNAL REVENUE CODE

a. Taxes imposed under the NIRC (Sec 21, NIRC)

b. Bureau of Internal Revenue (Sec 2 to 20, NIRC)

Powers and duties of the Bureau of Internal Revenue

Exclusive and original power of the CIR to interpret tax laws,
subject to review by the Secretary of Finance
Assess and Collect

65) CIR v. Pascor Realty & Dev Corp, 309 SCRA 402 (1999), Meaning of Assessment;
is assessment prejudicial to filing a tax evasion case?

66) Marcos II v. CA, 270 SCRA 47(1997) Burden of Proof on taxpayer to prove
erroneous assessment; inapplicability of the statute on non-claims under the Rules
of Court to taxes

67) Meralco Securities Corp v. Savellano, 117 SCRA 804 (BIR cannot be compelled by
Mandamus to issue assessment)

Enforce forfeitures, penalties & fines, execute decision of CTA & ordinary
courts

68) Republic v CTA 366 SCRA 489(2001); Aznar v CIR 58 SCRA 519(1974); CIR v.
Benigno Toda 438 SCRA 290 (2004) (meaning of fraud)

Effect police powers

Obtain information, etc

69) Sy Po v CTA, GR No. 81446, 18 Aug 1988 (best evidence to support assessment);
CIR v. Hantex Trading GR L-136975, 31 Mar 2005; Aurelio P. Reyes v. Coll of
Internal Revenue, CTA No. 42, 26 Jul 1956 and William Li Yao v. Coll, CTA No. 30,
30 Jul 1956 G.R. No. L-11875 December 28, 1963 (use of net worth method)

70) Bache & Co. v. Ruiz, 37 SCRA 823 (requirement for a search warrant)

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 3. BIR Rules and Regulations

71) CIR v. CA, ROH Auto Products Phil Inc and CTA, GR No. 108358, 20 Jan 1995,
240 SCRA 368 (Nature of administrative rules and regulations)

72) CIR v. CA, CTA and Fortune Tobacco Corp, GR No. 119761, 29 Aug 1996, 261
SCRA 236 (Extent of BIR Interpretative rule)

73) CIR v. Burroughs Ltd, GR No. 66653, 19 Jun 1986, 142 SCRA 324 (Effect of
revocation of ruling)

74) PBC v. CIR, GR No. 112024, 29 Jan 1999 (wrong interpretation will not prejudice
the government)

75) ABS-CBN v. CTA & CIR, GR No. 52306, 12 Oct 1981 (circulars or rulings,
prospective)

76) CIR v. Benguet Corporation, 463 SCRA 28 (2005) – Non-retroactivity of ruling;

while government is not bound by the error of its agents issuing ruling, in the
interest of justice and fair play, it may be not given retroactive effect (same holding in
Sy Po v. CTA, GR No. 81446, 18 Aug 1988;

77) CIR v. Burmeisters & Wain Scandinavian, GR No. 153205, Jan 2007 – Non-
retroactivity of BIR ruling; 0% VAT on export of services

C. Income Tax – c/o Atty Tristan Lopez

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