o a elie ale Pirae fire bey oat WMO Barrylonl, Compauce Lhevting kin, fyb. OVP 2466 402 Laoke Magee LLe 4 rime LAW OF BASIC TAXATION IN THE PHILIPPINES Cy BENJAMIN B. ABANt (4932.1997) Profesor of Lew and Bar Reviewer San Beda College of Law, niversty of Sant Tomas, Fer Eastern Univers, Arullano Univers, Universit of Maile irector I, Head Revenue Executive dsrstent etre) Bureeu of Inernal Revenue Technieal Consultan. Offic of the BIR Commissioner Member, Tax Treaty Negotiating Pane! Republi ofthe Philpines REVISED EDITION ‘ath Pntng Updated by ALICIA DE LEON-TOMACRUZ iter (eed) ANITA S. REGALADO SC (Cra), LLB LEM Book StorePhilippine Copyright, 1994 by Benjamin B. Aban, LL.B, M.A All Rights Reserved ISBN 971-08-5662: Philippine Copyright, 2001 by ‘The Heirs of Benjamin B, Aban AULRighis Reserved ISBN-971.086187°5, 2008 Reprint Any copy of this book without the signature of ony of the copyright ownere or their authorized representative ond the corresponding serial number thereon. ts an unauthorized copy and proceeds from an illegal source. Except as provided by law, no part of thie book may be ‘reproduced or transmitied in any form or by ony meana, lectronie or mechanical, including photocopsing of recording, or by any information or retrieval system without the written consent of the copyright owners oF their ‘authorized representative. Any violation thereof shell be proceeded against in civil and criminal ectione No 0073 163 Tandeng Sora Stroct,Calovean City PREFACE TO THE REVISED EDITION ‘This revised edition i intended to offer acontinuing guide not only to law tudents, acountante and legal practitioner, but also to ‘ll taxpayers in general who should be cognizant of their obligation '@ pay the proper tazes as well os their rights and privileges under sxsting laws, rules and regulations Incorporated herein are discussions regarding the amendments 1 the National Internal Revenue Code introduced by Republic Act 1s 5484, otherwise known as the Tax Reform At of 1997. Recent ‘decisions and applicable circular ofthe Supreme Cour, pertinent rulings ofthe Court of Tax Appeals, relevant statutes and executive pronouncements, more particularly, administrative issuances of the ‘Department of Finance, the Bureau of Internal Revenue and the ‘Bureau of Customs which elucidate bose principles underiying the ‘system of taxation inthe Philippines ore correlatvely discussed for {fuller comprehencion ofeach arpor of taxation. his hoped that this revised edition, which is based largely on the personal notes and observations of and maintains, ast were the style of presentation of prevailing tax axe and jurlspraence hy the late Benjamin B. Aban, will continue (o be of as much eervice and ‘shall receive the same acceptance asthe previous edition Grateful acknowledgment is extended to Aty, Alicia De Leon ‘Tomacrus for her kind asristance in updating this book. The invaluable services of Atty. Anita S- Regalodo in updating and ‘editing this present revision, as well asin supervising ite printing, ‘hereby perpetuating this edurational legacy, te deeply appreciated ‘May 19, 2001, Quezon City, Philippines, ‘The Heirs of Benjamin B. AbanPREFACE TO THE FIRST EDITION Although the appreach tha followed inthis book i partcuarty rend ht att adane the euhar oa eae ond CP and a pated le ya tx practioner arpa staid Saar fttmNe bin gaara ae Poot ‘eetobe ond waa in their reaps eee 08 Baand nda clot friend ‘Ara istngutohed offices eta ie dete etre his haar erode jor ie ‘echnical advice ond Jeon 4. Clover ‘ublcation ofthis book Les Angie CA, USA. oster Sunday, Apri 1888 DEDICATION 70 MY "BIG sxx Mrs, Naty Lope: Abar Clarence Maria Suzette Jose Edgardo Maria Christina ~and~ 70 MY “MAGNIFICENT SEVEyr_ Frederick Stefan Bianca Angeiine Katrina Ed. Benjamin It 1 Benjamin I Julieite Bettina THIS BOOK IS AFFECTIONATELY DEDICATES