TAXATION LAW II NOTES | Under Atty.

Llamado

TAXPAYER’S REMEDIES If return filed after the last day- 3 years counted from last
day of actual (Late) filing
Exception: 10 years from date of discovery of non- filing of
Administrative Protest- Taxpayer’s remedy before
return; filing of false or fraudulent return with intent to
payment
evade tax.
Assessment Process (RR 12-99), General (Amended by
Period of collection
RR 18-2013)
 5 years from assessment
 10 years- without assessment, in case of false or
1. Tax Audit: examination of books of accounts and
fraudulent return with intent to evade tax or failure
other accounting records
to file return
- Issuance of letter authority
2. Notice of Informal Conference
“Sec 222. Exceptions as to Period of Limitation of
3. Issuance of Preliminary Assessment Notice (PAN)
Assessment and Collection of Taxes-
4. Exceptions to issuance of PAN
5. Reply to PAN-15 days from receipt. In meritorious
a) In the case of a false or fraudulent return with intent
and upon written request, extension not exceeding
to evade tax or a failure to file a return, the tax may
10 days may be given the TP to respond. (Sec. 3 (a),
be assessed OR a proceeding in court for the
RR No. 12-85)
collection of such tax may be filed without
6. Issuance of Formal Letter of Demand and
assessment, at any time within 10 years from
Assessment Notice/Final Assessment Notice
discovery of the falsity, fraud, or omission.”
7. Disputed Assessment – reply of taxpayer
8. Administrative Decision on a Disputed Assessment
Thus, in case of a false or fraudulent return with intent to
evade tax, or failure to file a return, BIR has two options
Requisites of a Valid Assessment
1. Asses the correct tax liability ( within 10 years from
Monthly VAT- calibrate at the end of the quarter
date of discovery) and subsequently collect on said
FAR- you cannot do monthly adjustment return of income
assessment within 5 years from assessment; or
VAT- quarterly VAT return
2. File a proceeding in court for collection within 10
days from date of discovery (of the falsity, fraud or
Withholding- monthly (every 10th of the month following the
omission) without assessment.
actual
withholding)
What constitutes fraud?
Date of Prescriptive period Prescriptive 1) Fraud is a question of fact that cannot be presumed
filing the of Assessment period of but must be sufficiently established.
return Collection 2) Mere understatement of income does not constitute
Before due 3 years from due date fraud. It must be proven as a fact that there was
date 5 years from intentional and substantial understatement of tax
On due 3 years from due date receipt of FAN liability.
date by taxpayer; 3) Fraud exists in case of substantial and intentional
Beyond 3 years from actual overstatement or deductions, i.e., when there are
due date filing NOTE: if fictitious expenses.
Fraudulent 10 years from discovery taxpayer files 4) Fraud is a question of fat. And the circumstances
filing of bad faith/fraud fraudulent constituting fraud must be alleged and proved in
return or did not court.
file any return, 5) Fraud constituted by law is actual and not
the BIR may constructive. Must amount wrong doing with sole
collect without object of avoiding tax. (Aznar v. Collector, 8 SCRA
assessment 519)
within 10 years
of filing of What constitutes a false return?
fraudulent
return or 1) SC reiterated the declaration in the Aznar case that
discovery of non- a “mere showing that the returns filed by the
filing taxpayer were false, notwithstanding the absence of
Non-filing 10 years from discovery intent to defraud, is sufficient to warrant the
of non-filing application of the 10-year prescriptive period under
Section 222 of the NIRC” (CIR v. Asalus
Period of Assessment Corporation)
GR: 3 years from last day of filing of return 2) SC stated that the entry of wrong information due to
If return filed before last day- 3 years counted from last day mistake, carelessness, or ignorance, without intent
of filing (as provided by law)

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 TAXATION LAW II NOTES | Under Atty. Llamado

to evade tax, does not constitute a false return. (CIR 6. Duty of TP to submit duly executed waiver to CIR or
v. Philippine Daily Inquirer) officials designated in the LOA who shall indicate
3) CTA En Banc- “Each and every error does not and acceptance by signing the same.
should not result in the operation of the 10-year
prescriptive period. Otherwise, on the strength of a) Accepted prior to expiry date
the Aznar definition of “flasks returns”, BIR b) TP’s duty to retain a copy
examiners conducting regular tax audits, who
logically as a matter of course, would always come 7. Note the two (2) material dates indicated in the
up with tax findings of either under declaration of waiver:
income or over declaration of deductions, or both,
could mercilessly or arbitrarily raise the argument a) Date of execution by TP/authorized representative;
of “false return” giving rise to the 10 year and
prescriptive period. (CIR v. Hoya Glass Disk b) Expiry date of Period of TP’s waiver.
Philippines)
8. Before the expiry date, waiver may be extended.
SUSPENSION of Period of Assessment/ Collection
Start of Tax Audit: Issuance of LOA/TVNs/LN
1) 3 year period may be SUSPENDED- if TP and BIR
execute a waiver against prescription of assessment TAX VERIFICATION NOTICE (VTN)- issues for the ff.
before the end of the 3 year period, or in the case of Cases ( by head of office) not requiring in-depth investigation:
a subsequent extension, before the end of the period
so stated I n the previous/earlier waiver.  To verify estate taxes when TP has no other tax
2) When the CIR prohibited from collecting on the tax, liabilities
such as when TP appeals the decision of the CIR on  Processing of VAT refund claims under Sec. 112
disputed assessment with the CTA.  Claims for tax refund of Job Order Personnel
3) When TP requests for reinvestigation which is  Claims for tax refund for erroneous/double payment
granted by the CIR. of taxes
4) When the TP cannot be located in the address given
in the return LETTER NOTICE- issued to explain variances on tax
5) When warrant of distraint or levy is duly served and payments based on matching with third-party information
no property could be located. (e.g. Summary list of sales v. Summary List of Purchases)
6) When TP is out of the Philippines.
LETTER OF AUTHORITY- in-depth investigation
SUSPENSION of Period of Assessment/Collection
On waivers- (as RMO 20-90, as amended by RMO 14- Taxpayer’s remedies
2016)
A. Administrative Protest of Assessment
1. Not necessarily in the form prescribed by RMO 20- B. Claim for Refund
90. Valid for as long as following are complied with: C. Appeal to the CTA

a) Waiver executed before expiration of period to Assessment Process (under RMO 12-99)
ASSESS or to COLLECT. Date of execution should Filing of return-> letter of authority-> informal
be indicated in waiver; conference-> PAN-> FAN-> Administrative protest-> final
b) Signed by taxpayer or duly authorized decision on disputed assessment-> appeal to CIR-> judicial
representative; appeal
c) Should state the EXPIRY date of Period agreed upon
to assess/collect tax. Due Process Requirements in the Issuance of Tax
Assessment (RR 18-13)
2. Except for waiver on COLLECTION, not required to
indicate specific taxes assessed.

3. TP charged with burden of ensuring that waivers are PAN FLD/FAN FDDA
validly executed by its authorized representative.
Authority of rep. Who participated on audit cannot
be contested to invalidate waiver.

4. Not required to be notarized. Required to be in NOTE: Notice for Informal Conference (NIC)-
WRITING. reintroduced under RR 7-2018

5. Since voluntary on part of TP, shall take effect and

be binding on TP upon execution.

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 TAXATION LAW II NOTES | Under Atty. Llamado

Procedure in Protesting the Assessment o To verify estate taxes when TP has no other tax
liabilities
o Processing of VAT refund claims under Sec. 112
NIC o Claims for tax refund of Job Order Personnel
o Claims for tax refund for erroneous/double payment
of taxes

PAN LETTER NOTICE – Issued to explain variances on tax

payments based on matching with third-party
information(eg. Summary list of sales v. Summary list of
Purchases)
FLD/FAN
LETTER OF AUTHORITY – In-depth Investigation. There
is no substitute for LOA. In 120 days, it needs to be done.

ADMIN PROTEST o LOA tells you who are the personnel assigned to
investigate.
o Memorandum of Assignment
o Process Starts with LOA
FDDA o If none, there will be no valid assessment
o This should cover one taxable year

XPN: If there is a tax force (POGO already has a tax force for
APPEAL TO CIR assessment. The LOA covers more than one-year)

NOTICE OF INFORMAL CONFERENCE (NIC)

Requisites:
JUDICIAL APPEAL
1. In writing
2. Contain discrepancies in the TP’s tax payments to
Remedies in conjunction with the BIR authority to afford TP opportunity to present his/her/its side
collect taxes 3. Shall not extend beyond 30 days
4. If assessment is disputed, within 7 days from
o LGU are proactive in making assessment.
conclusion of the informal conference, BIR official
o This is for DUE PROCESS
shall endorse case to Assessment Division or
CIR/DULY authorized rep. for issuance of PNA.
A. PROTEST

SUSPENSION of Period of Assessment/Collection

PRELIMINARY ASSESSMENT (PAN)
On Waivers – As RMO 20-90, as amended by RMO 14-2016
1. In Writing
1. Not Necessarily in the form prescribed by RMO 20- 2. Must contain the facts and law on which it is based
90. Valid for as long as ff. are complied with: otherwise, void
3. NO PAN = Void assessment for lack of due process.
a) Waiver executed before expiration of period to Substantive and not merely a formal requirement
ASSESS or to COLLECT. Date of execution 4. TP must be given an opportunity to respond to the
should be indicated in waiver – YOU WILL BE PAN; otherwise, the FAN issued shall be void
THE ONE TO ASSESS, BIR WILL CHECK. 5. 15 days to respond to the PAN.
6. SCENARIO: If a REPLY of a FAN was sent a day
b) Signed by taxpayer or duly authorized after the TP responds to the PAN, there is no
representative violation of due process.
7. However, if a FAN is sent without a REPLY, will be
c) Should state the EXPIRY date of period, agreed a violation of due process.
upon to assess/collect tax. 8. MUST indicate the specific period within which the
2. Except for waiver on COLLECTION, not required to alleged tax liabilities shall be paid
indicate specific taxes assessed. 9. NOT REQUIRED WHEN:
a. Mathematical Error – Merely factual, no
TAX VERIFICATION NOTICE (TVN) contest
b. Discrepancy between the tax withheld and
Issued for the ff. cases (by head of Office) not requiring in- the amount actually remitted
depth investigation

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 TAXATION LAW II NOTES | Under Atty. Llamado
c. Taxpayer who opted to claim a refund or tax
credit of excess CWT carried over the
amount – PLEASE RECALL:
i. Witholding Tax- Income payee and
Income recepient.
d. Excise tax has not been paid
e. An article locally purchased or imported by
and exempt person has been sold or traded
to non-exempt persons. Ex. PEZA.
FINAL ASSESSMENT NOTICE (FLD/FAN)
1. Must be in writing. Contains name address, TIN; kind of
tax, period covered, basic tax and penalites: date tax must be
paid. It will include a summary table, and will be attached
with a details of discrepancy, and possible sources.
2. State the facts, the law, rules, regulation, or jurisprudence
on which assessment is based; otherwise, the assessment
shall be void.
3. Signed by the CIR or his authorized rep.
4. Issued within the prescriptive period under the law or
extended period agreed upon between the parties
5. Served by personal delivery or be registered mail to proper
person
6. FAN is covered by validly issued LOA
ADMINISTRATIVE PROTEST
1. Within 30 days from receipt of FLD/FAN
CLAIM FOR REFUND
2. Request for Reconsideration or Request for
Reinvestigation
3. In case of Reinvestigation, submit documents within
60 days from filing of protest – STRICT
COMPLIANCE NEEDED
Request for Reconsideration
- A plea of re-evaluation of an assessment on the basis
of existing records without addtl evidence. It may
involve both a question of fact or of law or both.
Request for Reinvestigation
- A plea of re-evaluation of an assessment on the basis
of newly discovered or additional evidence that a
taxpayer intends to present in the reinvestigation. It
may also involve a question of fact or of law or both.
The taxpayer shall state in his protest:
1. Nature of protest whether reconsideration or
reinvestigation, specifying newly discovered or addtl
evidence he intends to present if it is a request for
reinvestigation;
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2. Date of the assessment notice; and
3. The applicable law, rules and regulations, or
jurisprudence on which his protest is based,
otherwise, his protest shall be considered void and
without force and effect.
FINAL DECISION ON DISPUTED ASSESSMENT
(FDDA)
APPEAL TO THE CIR
If the protest is denied, in whole or in part, by the
commissioner’s duly authorized representative, the taxpayer
may either:
1. Appeal to the CTA within thirty (30) days from date
of receipt of the said decision; or
2. Elevate his protest through request for
reconsideration to the Commissioner within thirty
(30) days from date of receipt of the said decision.
(RR 18-13)
JUDICIAL APPEAL
o Within 30 days from denial of protest or denial of
request for reconsideration to the CIR; OR within 30
days from lapse of 180 days from the filing of protest
o Petition for Review before the CTA
COMPUTATION OF DEFICIENCY TAX
o Deficiency Interest: Computed from the 1M
o Delinquency Interest: Computed from the 1.4M
SEC. 229. Recovery of Tax Erroneously or Illegally
Collected. - no suit or proceeding shall be maintained in
any court for the recovery of any national internal revenue
tax hereafter alleged to have been erroneously or illegally
assessed or collected, or of any penalty claimed to have
been collected without authority, of any sum alleged to
have been excessively or in any manner wrongfully
collected without authority, or of any sum alleged to have
been excessively or in any manner wrongfully collected,
until a claim for refund or credit has been duly filed with
the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has
been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after
the expiration of two (2) years from the date of payment of
the tax or penalty regardless of any supervening cause
that may arise after payment: Provided, however, That the
Commissioner may, even without a written claim therefor,
refund or credit any tax, where on the face of the return
upon which payment was made, such payment appears
clearly to have been erroneously paid.
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 TAXATION LAW II NOTES | Under Atty. Llamado
Section 229 vs. section 112 (A)
o Claim for refund under section 112 (A) for
unutilized input VAT payments attributable to zero-
rate sales- must be filed with CIR within 2 years
AFTER THE CLOSE OF THE TAXABLE
QUARTER when the sales were made.
1. The CIR has 90 days (120) days to decide on the
claim.
2. Within 30 days from the decision of the CIR (before
the lapse of the 30 day period) of within 30 days from
the lapse of the 90 (120) day period, and no action
from the CIR, the TP shall file an appeal with the
CTA. (CIR v. Aichi, G.R, No, 184823, October 10,
2010)
o Claim for refund under Section 229- must be filed
within 2 years from DATE OF ACTUAL PAYMENT.
- Administrative and Judicial Claim must be filed
within the 2-year period.
o Final Adjustment Return- April 15
o When do you withhold?
- It is reckoned from the time of the erroneous
payment of tax
o The seller is the one liable, as he is the one
statutorily liable to pay the VAT.
o PEZA registered entities- exempt
o Sec. 112 speaks of zero-rated sale transaction.
Exporters to foreign territory.
o Tax refunds founded principally on the legal
principle of solutio indebiti (UNJUST
ENRICHMENT)
Tax refunds may be based on the following:
A. Erroneously or Illegally Assessed or Collected ITR
B. Penalties imposed without Authority
C. Any sum alleged to have been excessive or in any
manner wrongfully collected.
Requirements for Claim for Refund
Counting of 2 year period
1) When tax paid in installments- period of two years
counted from date of final payment. Partial payment
of tax cannot be made basis of claim for refund. (Coll.
Of Internal Revenue v. Prieto)
2) In case of payments effected through withholding
tax system- 2 year period counted from the date of
filing of the adjusted final tax return.
The petitioner corp. not claiming a refund of overpaid WT,
per se. It is asking for recovery of the amount refundable or
creditable determined upon petition’s corp. filing of its final
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adjustment return on or before April 15,1982 when its tax
liability for 1981 fell due. (ACCRA Investments Corp. vs. CA)
In filing for claims for excess and unutilized creditable
withholding taxes, TP should satisfy the ff. Conditions:
1. The claim is filed with the CIR within 2 year period.
2. The fact of withholding is established by copies of the
certificates of tax withheld (BIR Form No. 2307)
3. It is shown that the income payment received (which
was the source of withholding) was declared as part
of gross income of the TP.
4. The excess and unutilized CWT not carried over and
used in subsequent taxable periods.
- You can apply it against your input tax or you
carry it forward (doesn’t expire)
 The proper party to seek a refund of indirect tax is
the statutory taxpayer
o The proper party to question, or seek refund of, an
indirect tax is the statutory taxpayer, or the person
on whom the tax is imposed by law and who paid the
same even if he shifts the burden thereof to another.
o In a decided case, Petron is the proper party to seek
a refund even if passed on the indirect tax to Silkair.
(Silkair v. CIR)
JUDICIAL REMEDY
A. Jurisdiction of CTA
B. Who may appeal
C. Mode of Appeal
I. Exclusive Jurisdiction to Review by
Appeal-
1. Decision of the CIR in cases involving disputed
assessments, refunds of internal revenue taxes, fees
or other charges or other matters arising under the
NIRC or other laws administered by the BIR (mode:
petition for review under Rule 42)
2. Inaction by the CIR in cases involving disputed
assessments, refunds of internal revenue taxes, fees
or other charges, penalties in relation three to, or
other matters arising from NIRC or other laws
administered by the BOR, where the zanria provides
a specific period for action, in which case the inaction
shall be deemed a denial (mode: petition for review
under Rule 42)
3. Decisions, orders or resolutions of the RTC in
local tax cases originally decided in the exercise of
their original or appellate jurisdiction ( mode:
Petition for review under Rule 43)
4. Decisions of the Commission of Customs (COC)
in class involving liability of customs duties, fees or
other money charges, seizure, detention or release of
property affected, fines, forfeitures, or other
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 TAXATION LAW II NOTES | Under Atty. Llamado
penalties in relation thereto, or other matters
arising under Customs law or other laws
administered by the BOC (mode: petition for review
under a rule 42)
5. Decisions of the Central Board Assessment
Appeals (CBAA) in the exercise of its appellate
jurisdiction over cases involving the assessment and
taxation of real property originally decided by the
provincial or city board of Assessment appeals
(mode: petition for review under Rule 43)
6. Decision of the Sec. of a Finance on customs cases
elevated to them automatically for review from
decisions of the COC which are adverse to the
government under Sec. 2315 of the Tariff and
Customs Code (mode: petition for review under Rule
42)
7. Decisions of the Secretary of Trade and
Industry, in cases of non agricultural product,
commodity or article and the Secretary of
Agriculture in cases of agricultural product,
commodity or article involving dumping and
countervailing duties, and safeguard measures
(under RA 8808). Where either party may appeal to
the decision to impose or not impose said duties
(mode: petition for review under Rule 42)
II. Criminal and Civil Cases-
The criminal action and the corresponding civil action for the
recovery of civil liability for taxes and penalties shall at all
times be simultaneously instituted with and jointly
determined in the proceeding before the CTA.
1. Exclusive ORIGINAL jurisdiction
a) Violations of the NIRC, Tariff and Customs Code
and other laws administered by the BIR or
BOC, where the principal amount of taxes and
fees, exclusive of charges and penalties claimed is P
1 Million and ABOVE
2. Exclusive APPELLATE jurisdiction
a) Violations of NIRC, TCC and other laws
administered by the BIR and CLC
originally decided by the regular court
where the principal amount of taxes and
fees is LESS than P 1 Million or NO
specified amount claimed.
b) Judgements, resolutions or orders of the
RTC in tax cases originally decided by
them.
c) Judgements, resolutions or orders of the
RTC in the exercise of their appellate
jurisdiction over tax cases originally
decided by the MeTC, MTC and MCTC via
a petition for review.
d) Tax collection cases-
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o From judgements, resolutions or orders of the RTC
originally decided by them, via an appeal.
o From judgements, resolutions or orders of the RTC
in the exercise of its appellate jurisdiction in tax
collection cases originally decided by the MeTC,
MTC and MCTC, via a petition for review.
Who may appeal?
Any party adversely affected by a decision, ruling or inaction
of the CIR. COC, Secretary of Finance, Secretary of Trade,
Secretary of Agriculture, or the RTC, May file an appeal-
a) Within thirty (30) days after receipt of adverse
decision or ruling; OR
b) After the expiration of the period fixed by law for
action, in which case the inaction shall be deemed a
denial.
What is the mode of appeal?
1. Appeal by petition for review under procedure
analogous to Rule 42 of 1997 Rules of Civil
Procedure
o A CTA Division will hear the appeal
o In case of adverse decision of the CTA Division,
party adversely affected may file a MR or Motion for
New Trial (MNT) before same CTA Division.
o In case of adverse decision by CTA Division on MR
or MNT, adverse party may file petition for evils
with CTA En Banc.
2. Appeals with respect to decisions of rulings of the
CBAA and RTC in the exercise of appellate
jurisdiction- file analogous procedure to petition for
review under Rule 43 of RCP with the CTA, which
shall hear case en Banc.
3. In case of adverse decision of CTA En Banc- file a
Verified Petition fro Review on Certiorari with the
Supreme Court under Rule 45 of the 1997 Rules of
Civil Procedure.
A. ADMINISTRATIVE REMEDIES
1. TAX LIEN
a) An unpaid internal revenue tax, together with
related interest, penalties and costs, constitutes a
lien in favor of the government from the time an
Assessment is made and until paid, upon all
property and rights to property and rights to
property belonging to the TP under Section 219 of
NIRC.
b) HOWEVER, the lien is NOT VALID against any
mortgagee, purchaser or judgement creditor until
notice of such lien shall have been filed in the
register of deeds of the province or city where the
property of the TP is located.
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 TAXATION LAW II NOTES | Under Atty. Llamado
c) A tax lien is a legal claim or charge on property
(whether real or personal) established by law as a
security for the payment of tax obligations. (HK
Shanghai Banking Corp. v. Rafferty)
d) A tax lien created in favor of the government is
superior to all other claims or preferences. (Rep. v.
Peralta)
2. ACTUAL DISTRAINT
Distraint is a remedy where the collection of the tax is
enforced on the goods, chattels or effects of the TP including
other personal property of whatever character, including
stocks, and other securities, debts, credits, bank accounts and
interests I neights to personal property.
a) This is resorted to upon failure of the person. Owing
any delinquent tax to pay the same at the time
required. It consists of seizure of goods, chattels or
effects, and personal property of such persons in
sufficient quantity to satisfy tax, together with any
increment thereto incident to delinquency, and the
expenses of the distraint of cost of subsequent sale.
(Sec. 207 (A))
b) Procedure for Actual Distraint (Sec. 208-212 of
NIRC)
1. Officers serving warrant shall make an
account of goods or other personal property
distrained, a copy of which signed by himself, shall
be left either with the owner or person from
whose possession such goods were taken, or at
the dwelling or place of business of such
person with someone of suitable age, to which
lost shall be added a statement of the sum demanded
and note of the time and place of sale.
2. The RDO or authorized representative shall cause a
notification to be exhibited in NOT LESS THAN 2
public places (one of which is Office of Mayor of
municipality/city where property is located) in the
municipality or city where the distraint is made,
specifying TIME/PLACE of sale and ARTICLES
DISTRAINED.
The TIME of sale shall not be less than 20 days after
notice to owner or possessor of property or
publication or posting of such notice.
3. At the appointed time of sale, the distraint articles
shall be sold, at public auction, to he highest bidder.
4. Any residue over and above what is required to pay
entire claim shall be returned to the owner.
5. Any time prior to the sale, if all charges are paid to
officer conducting the sale, the goods distrained
shall be released to the owner.
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6. Two days after sale, officer making sale shall make
a report of his proceedings in writing to the CIR.
7. When amount bid for distraint property is not equal
to amount of tax due or very much less than the
actual MV of goods, the CIR or his deputy may
purchase the same in behalf of the government.
8. Property purchase may be resold by the CIR or his
deputy subject to rules prescribed by Sec. of Finance.
3. CONSTRUCTIVE DISTRAINT
a) Under the Section 296, the CIR to safeguard the
interest of Government, May place under
constructive distraint the property of a delinquent
taxpayer who, in his opinion is:
1. Retiring from any business subject to tax
2. Intending to leave the PH or to remove his property
therefrom or to hide or conceal his property;
3. Intending to perform any act tending to instruct the
proceedings for collecting the tax due or which may
be due from him.
b) Specifies cases when a Notice/ Warrant of
Constructive Distraint may be issued: (RMC-
No. 5-2001)
1. When a TP who applies for retirement from business
has huge amount of assessment pending with the
BIR.An Assessment is huge if amount is equal to or
bigger than net worth or equity of TP;
2. When a TP who is under investigation has a record
of leaving the PH at least 2x year unless such trips
are justified and/or connected with his
business/profession/employment.
3. When a TP other than a banking institution, who is
under investigation has a record of transferring his
bank deposits. And other valuable personal
property/ies from the Phil to any foreign country;
4. When a TP uses aliases in bank accounts, other than
the name for which he is legally and/or popularly
known;
5. When the TP keeps bank deposits and owns other
property/ies under the name of other persons,
whether or not related to him and the same are not
under any lawful trust capacity;
6. When the TP’s big amount of undeclared income is
known to the public or to theBIR by credible means
and there is strong reason to believe that TO will
have tendency to hide/conceal his property/ies;
A “big amount of umderdeclared income” means an amount
EXCEEDING 30% of TP’s gross sales/revenues declared per
return.
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 TAXATION LAW II NOTES | Under Atty. Llamado
7. When the BIR receives information or complaint
pertaining to underdeclared income in an amount
exceeding 30% of gross sales, gross receipts or gross
revenues declared per return of TP, and there is
credible and substantial evidenced supporting this.
c. Procedure:
1) TP or person having possession or control of property
shall sign a receipt covering the property distraint
and obligating himself to preserve said property
intact and unaltered and not to dispose of the same
in any manner without express authority from CIR.
2) In case of refusal or failure to sign receipt by TP or
person in possession of property, the revenue officer
effecting the distraint shall proceed to prepare a list
of such property, and in the presence of two (2)
witnesses, leave a copy of said list in the
premises where the property distrained is
located, after which property is deemed to
have been placed under constructive distraint.
4. LEVY OF REAL PROPERTY
a) Levy refers to the seizure of real properties and
interest in or rights to such properties for the
satisfaction of taxes due from the delinquent TP.
Levy can be made BEFORE, SIMULTANEOUSLY
or AFTER the distraint of personal property.
b) Procedure on Levy (Sec. 208-212 of NIRC)
1. Revenue Officer designated by CIR or his duly
authorized representative shall prepare a duly
authenticated certificate showing the name of the
TP and the amounts of tax and penalty due from
him.
2. Levy shall be effected by writing upon said
certificate the description of real property (RP) upon
which levy is made.
3. A written notice of the levy shall be mailed to
or serviced upon the Register of Deeds of
province/city where RO is located and upon the
delinquent TP, or if TP is absent from Phil., to his
agent or manager of business, or if none, to occupant
of the RP.
4. Within 20 days after levy, the officer conducting the
proceedings shall advertise the RO or usable portion
thereof as May be necessary to satisfy the claim and
cost of sale. Advertisement shall be for a period of at
least 30 days.
The advertisement shall-
i. By posting a notice at main entrance of
municipal/city hall and in a public place in
barrio/district where RP is located; and
ii. Be by publication 1x a week for 3
consecutive weeks in a newspaper of
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general circulation in the municipality/city
where the property is located.
iii. Contains a (a) statement of amount of
taxes and penalties due; (b) time & place of
sale; (c) name of TP against whom taxes
are levied; and (d) short description of
property.
5. At any time before date of sale, the TP May
discontinue all proceedings by laying the taxes,
penalties and interests. Otherwise, the sale shall
proceed.
6. Within 5 days after sale, a return by the levying
officer shall be entered upon the records of the
Revenue Collection Officer, Revenue District Officer
and Regional Director.
7. The Revenue Collection Officer, in consultation with
the RDO, shall make out and deliver to the
purchaser a Certificate of Sale-
i. Showing the proceedings of sale;
ii. Describing property sold;
iii. Stating the name of the purchaser; and
iv. Setting out exact amount of taxes, penalties and
interest.
8. In case proceeds of sale exceeds the claim and cost of
sale, the excess shall be turned over to the owner of
RP.
9. Within 1 year from date of sale, the delinquent TP,
or any one for him, shall have the right of paying to
the RDO the amount of taxes, penalties and interest
there on from date of delinquency to the date of sale,
together with interest on said purchase price to date
of redemption.
10. The payment by TP of the required amounts during
the redemption period-
i. Shall entitle the person paying to the
delivery of the certificate issued to the
purchaser and a certificate from the said
RDO that he has redeemed the property;
ii. RDO shall pay over to the purchaser the
amount by which such property has been
redeemed; and
iii. Property shall be free from all lien of such
taxes and penalties.
11. Note, however that the owner shall not be deprived
of the possession of the RP and shall be entitled to
the rents and other income thereof until expiration
of the redemption period.
5. FORFEITURE TO GOVERNMENT
a) In case there is no bidder on RP, or the highest
bid is insufficient to pay the taxes, penalties and
costs, the revenue officer shall declare the RP
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 TAXATION LAW II NOTES | Under Atty. Llamado
forfeited in favor of the government. (Section
215 of NIRC)\
b) Two days thereafter, the revenue officer shall
make a return of his proceedings.
c) The Register of Deeds concerned, upon
registration with his officer of the declaration of
forfeiture, SHALL transfer the title of the RP
forfeited to the Government without the
necessity of an order from the competent court.
d) Within 1 year from date of such forfeiture, the
TP, or any for him, may redeem said property by
paying the CIR or the latter’s Revenue
Collection Officer the full amount of taxes and
penalties, together with interests and cost of
sale.
e) If not redeemed, the forfeiture shall become
absolute.
6. The remedy of distraint or personal property and
levy on real property may be repeated if necessary
until the full amount due, including all expenses, is
located.
7. An injunction is not available to restrain collection
of tax. No court shall have authority to grant the
injunction to restrain the collection of any internal
revenue tax imposed by the NIRC.
Exception: when the decision of the CIR is pending
appeal before the CTA, the CTA May enjoin the
collection of taxes if such collection will jeopardize
the interest of the government and/or TP. In such
case, the court, at any stage of the proceeding, may
suspend the collection of tax and require the TP
either to (a) deposit the amount claimed; or (b) to idle
surety bond for more than double the amount with
court.
B. CIVIL AND CRIMINAL ACTION
1. A civil action is resolved to when a tax liability
becomes collectible, i.e., the assessment becomes
final and unappealable, or the decision of the CIR
has become final, executory and demandable.
Note, however, that a civil action for tax collection
filed with the regular courts cannot be instituted
without the approval of the CIR. (Sec. 220, NIRC)
the authority to file a case, not being one of those
non-delegable powers, may be delegated by the CIR.
2. A criminal action cannot be instituted also without
approval of the CIR.
a) The remedy of criminal action is resorted to not only
for collection of taxes but also for enforcement of
statutory penalties of all sorts (Sec. 221)
© DimDoms
b) The extinction of one’s criminal liability does not
necessarily result in the extinguishment of his civil
liability. Similarly, the subsequent satisfaction of a
tax liability will not operate to extinguish the
criminal liability.
c) The criminal complaint is instituted not to demand
payment of tax but to penalize the taxpayer for the
violation of the Tax code.
COMPROMISE AND ABATEMENT
1. Cases which may be compromised:
a) Delinquent accounts;
b) Cases under administrative Protest after issuance of
FAN to TP which are still pending with the BIR;
c) Civil tax cases being disputed before the courts;
d) Collection cases filed in court;
e) Criminal violations other than those already filed in
court or those involving criminal tax fraud; and
f) Cases covered by PAN but taxpayer is not agreeable
to findings.
2. Doubtful Validity as basis for compromise:
An application for compromise may be accepted on this basis
when it is shown-
a) The delinquent account or disputed Assessment is
one resulting from jeopardy assessment, i.e., tax
assessment which was assessed without the benefit
of complete or partial audit; or
b) The assessment to be arbitrary appearing to be
based on presumptions and there is reason to believe
that it is lacking in legal and/or factual basis; or
c) The TP failed to elevate to the CTA an adverse
decision of the CIR, within 30 days, and there is
reason to believe that assessment is lacking in legal
and/or factual basis; or
d) The assessment is made based on Best Evidence
Obtained Rule, and there is reason to believe that
the same can be disputed by sufficient evidence; or
e) The assessment was issued within prescriptive
period as extended by waiver, the authenticity of
such waiver is being questioned and there is strong
reason to believe and evidence to prove that it is not
authentic; or
f) An assessment is based on an issue where a court of
competent jurisdiction has ruled against the CIR,
but for which the SC has not decided upon with
finality.
3. Financial Incapacity ass basis for compromise:
- An application for compromise may be accepted
on the basis when it is shown-
a) The corporation has ceased operation or is already
dissolved; or
b) The TO is suffering from surplus or earnings deficit
resulting to impairment in original capital by at
least 50%; or
c) The TP is suffering from net worth deficit taken from
the latest AFS;
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 TAXATION LAW II NOTES | Under Atty. Llamado
d) The TP has been granted by the SEC or by any
competent tribunal a moratorium or suspension of
payments to creditors, or otherwise declared
bankrupt or insolvent.
4. Compromise settlement is subject to the ff.
Minimum amounts:
a) For cases of financial incapacity- 10% of basic
assessed tax;
b) For other cases (doubtful validity)- 40% of basic
assessed tax.
c) Where basic tax exceeds P 1 million pesos or
settlement offered is less than minimum rates, the
compromise shall be subject to approval of the
National Evaluation Board (NEB), chaired by
commissioner and with 4 deputy commissioners as
members.
5. Cases which cannot be compromised:
a) Witholding tax cases;
b) Criminal tax fraud cases confirmed as such by the
CIR/duly authorized representative;
c) Criminal violation already filed in court;
d) Delinquent accounts with duly approved schedule of
installment payments;
e) Cases where final reports of reinvestigation or
reconsideration have been issued resulting to
reduction in the original assessment and TP is
agreeable to such decision by signing the required
agreement form;
f) Cases which become final and executory after final
judgement of court, where compromise is requested
on basis of doubtful validity;
g) Estate tax cases where compromise is requested on
the ground of financial incapacity of the TP.
TAXING POWER OF LOCAL GOVERNMENTS
Authority to grant tax exemptions
LGUs may, through ordinances duly approved, grant tax
exemptions, incentives or reliefs. (Sec. 192, LGC)
Withdrawal of tax exemption privileges
Unless otherwise provided in the code, tax exemptions/
incentives granted to, or presently enjoyed by all persons,
have been withdrawn by effectivity of the code. (Sec. 193,
LGC)
Authority to adjust tax rates
LGUs shall have authority to adjust rates not oftener than
once every 5 years, but in no case shall adjustment exceed
10% of rates fixed under LGC. (Sec. 191, LGC)
The power shall be exercised by:
 Sangguniang PANLALAWIGAN- province
 Sangguniang PANLUNGSOD- city
 Sanggunuang BAYAN- municipalities
© DimDoms
 Sangguniang BARANGAY- barangays
Procedure for approval and Effectivity of Tax
Ordinances
Tax Ordinances and Revenue Measure
1) Procedure for approval- shall be in accordance with
LGC. Public hearings shall be conducted for the
purpose prior to the enactment thereof.
2) Appeal to the Sec. of DOJ- any question on the
constitutionality or legality of tax ordinances or
revenue measures may be raised on appeal within
30 days from effectivity to Sec. who shall render
decision within 60 days from date of receipt.
- Such appeal will not suspend effectivity of
ordinance and collection of tax.
- Within 30 days after receipt of decision or lapse
of the 60-day period to decide, in case of
inaction, TP can file appropriate proceedings
with relevant court.
3) Publication- within 10 days from approval, certified
true copies of tax ordinance/revenue measure shall
be published in full for 3 consecutive days in
newspaper of local circulation, or in the latter’s
absence, the same may be posted in at least 2
conspicious and publicly accessible places.
4) Furnishing of copies- Copies of all tax ordinances/
revenue measures should be furnished to the
respective local treasurers for public dissemination.
FUNDAMENTAL PRINICPLES
 Taxation shall be uniform in each local subunit.
 Taxes, fees, charges and other impositions shall be
EQUITABLE, and based as much as possible on the
taxpayer’s ability to pay.
 Taxes shall be levied and collected only for PUBLIC
purpose.
 Taxes shall not be UNJUST, EXCESSIVE,
OPPRESSIVE, or CONFISCATORY.
 Taxes shall not be contrary to law, public policy,
national economic policy, or in restraint of trade.
 The collection of local taxes, fees, charges and other
impositions shall in no case be let to any person.
 The revenue collected shall inure SOLELY to the
benefit of, and subject to the disposition by, the LGU
levying the tax, or fee, charge, or other imposition
unless otherwise specifically provided therein.
 Each LGU shall, as far as practicable evolve a
progressive system of taxations. (Secs. 2, 130 of
LGC)
COMMON LIMITATIONS ON POWER TO TAX
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 TAXATION LAW II NOTES | Under Atty. Llamado
Unless otherwise provided in the LGC, the exercise of the
taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the imposition of the ff:
1) Income tax, except when levied on banks and other
financial institutions;
2) DST;
3) Taxes on estates, inheritance, gifts, legacies and
other acquisitions mortis causa, except as otherwise
provided in the Code;
4) Customs duties, registration fees of vessels, and
wharfage on wharves, tonnage dues, and all other
kinds of customs fees, charges and dues, except
wharfage on wharves constructed and maintained
by the LGU concerned;
5) Taxes, fees, charges and other impositions upon
goods CARRIED INTO or OUT OF, or PASSING
THROUGH, the territorial jurisdictions of LGU in
the guise of charges for wharfage, tolls for bridges or
otherwise, or other taxes, in any form upon such
goods or merchandise;
6) Taxes, fees or charges on AGRICULTURAL and
AQUATIC products when sold by MARGINAL
FARMERS OR FISHERMEN;
7) Taxes on business enterprises certified to by the BOI
as PIONEER or NON-PIONEER for a period of 6
years and 4 years, resp., from date of registration.
8) Excise taxes on articles enumerated under the
NIRC, as amended, and taxes, fees and charges on
petroleum products;
9) Percentage or VAT on sales, barters or exchanges or
similar transactions on goods or services except as
otherwise provided in the LGC;
10) Taxes on the gross receipts of transportation
contractors and persons engaged in the
transportation of passengers or freight by hire and
common carriers by air, land or water, except as
provided in the Code;
11) Taxes on premiums paid by way of reinsurance or
retrocession;
12) Taxes, fees, or charges for the registration of motor
vehicles and for the issuance of all kinds of licenses
or permits for the driving thereof, except tricycles;
13) Taxes, fees or charges on Philippine products
actually exported, except as otherwise provided in
the LGC;
14) Taxes, fees or charges, on Countryside and
Barangay Business Enterprises, and duly registered
cooperatives under the Cooperative Code of the
Philippines, resp.; and
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15) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities, and
LGUs. (Sec. 133, LGC)
Rule Where Person Already Taxed on His Main
Business
When a person is already taxed on his main business, he
cannot be further taxed for an activity incidental or merely a
part of, and necessary to its main business.
1) The business of auto supplies and battery charging
is part of main business of automobile repairing and
is, therefore not taxable separately.
2) The right to manufacture implies the right to sell/
distribute the manufactured products.
TAXING POWERS OF PROVINCES
Except as otherwise provided in the LGC, a province may
impose only the ff. taxes, fees or charges:
1) Tax on the transfer of real property
ownership;
a) Transfer covered- sale, donation, barter or any other
mode (eg. Foreclosure) of transferring ownership of
real property.
b) Rate of tax- not exceed 50% of 1% of total
consideration or of the FMV, in case the monetary
consideration is not substantial, whichever is
higher. (Most LGUs tax vase is HIGHER of zonal
and FMV)
c) Duties of Officials relative to payment of transfer tax
d) Real property covered- lands, buildings and
machineries.
e) Time of payment- Seller/donor/transferor/ executor/
administrator to pay tax within 60 days from date of
execution of the deed, (sale/donation/ or other mode
of disposition), or 60 days from the date of decedent’s
death.
f) Exemption from tax- sale/transfer of real property
pursuant to CARP law is exempt from tax.
g) Duties of Officials relative to payment of transfer
tax:
 The concerned RD, before registering a deed, shall
require presentation of proof of payment of transfer
tax.
 The provincial assessor shall also make same
requirement before cancelling an old Tax decl. and
issuing a new one.
 Notaries public shall furnish the Provincial
Treasurer within 30 days from date of notarization
before him of any deed transferring ownership of
real property with copy of said deed. (Sec. 135, LGC)
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 TAXATION LAW II NOTES | Under Atty. Llamado

at rate of not more than 3-% of gross receipts from

2) Tax on the business of printing and admission fees.
publication; c) In case of theaters/cinemas, tax first deducted and
withheld by proprietors/lessees/operators and paid
a) Coverage- persons engaged in printing and/or to province. Treasurer before GR divided between
publication of books, cards, posters, pamphlets, and PLO and distributors of cinematographic films.
others of similar nature. d) Exempt from payment of tax: holding of operas,
b) Rate of tax- 50% of 1% gross annual receipts for the concerts, dramas, recitals, paintings, literary and
preceding calendar year. In case of newly started oratorical presentations, except pop/rock or similar
business, 1/20 of 1% of capital investment. concerts.
c) Exemption from tax- receipts from printing and/or e) Amusement tax is a tax on admission to theaters or
publishing books or other reading materials by the places of amusement. (not a tax on theaters or places
DECS, as school texts or references are not subject of amusement or privilege of holding shows)
to tax imposed. f) Liability for payment of tax attaches upon sale of
admission ticket although tax payable at later date
3) Franchise tax; by PLO.

a) Franchise generally refers to a special privilege 7) Annual fixed tax per delivery truck or van of
conferred by the Govt. on an individual or corp., manufacturers or producers and wholesalers of, or
which does not belong to the citizens by common dealers in, certain products. (Secs. 134-141, LGC)
right. Under PH Law, this has reference to franchise
for operation of street railway, electric light, power a) In the delivery or distribution of distilled spirits,
and telephone lines which are granted by the fermented liquors, softdrinks, cigars and cigarettes
legislature. and other products that may be determined by Sang.
b) Coverage- notwithstanding any exemption, province Panlalawigan.
may impose a tax on businesses enjoying franchise b) In an amount not exceeding 500 pesos.
based on gross receipts realized within its territorial c) Manufacturers/producers/wholesales/dealers-
jurisdiction. exempt from tax on peddlers.
c) Rate of tax- shall not exceed 50% of 1% of gross
annual receipts for the preceding year. In case of
newly started business, 1?20 of 1% of capital TAXING POWERS OF MUNICIPALITIES
investment.
Except as otherwise provided in the LGC, a municipality may
4) Tax on sand, gravel and other quarry impose only the ff. taxes, fees or charges:
resources;
1) Taxes, fees and charges not otherwise levied by
a) Amount of tax- not more than 10% of FMV in provinces (Sec. 142)
locality per cubic meter of quarry resources 2) Tax on business (Sec. 143)
extracted from public lands. Does not extend to 3) Fees and charges on business and occupation and
lands leased for mining purposes or those covered by practice of any profession or calling (Sec. 147)
mining claims. - Fees and charges commensurate with cost of
b) Issuance of permit- permit to extract issued regulation, inspection and licensing before any
exclusively by provincial governor pursuant to person may engage in such business or
ordinance of Sang. Panlalawigan. occupation or practice of profession or calling.
4) Fees for sealing and licensing weights and measures
5) Professional tax; (Sec. 148);
5) Fishery rentals, fees and charges (Sec. 149);
a) Levied on each person engaged in exercise or o Exclusive authority to grant fishery privileges
practice of his profession requiring government o Issue licenses for operation of fishing vessels of
examination 3 tons or less
b) Paid to province where he practices profession or
where he maintains principal office. Tax on Business
c) Payable annually, on or before January 31
d) Fixed tax on the privilege of exercising or engaging 1) Manufacturers, assemblers, repackers, processors,
in profession- not based on amount of earnings. brewers, distillers, rectifiers, and compounders of
liquor, distilled spirits, and wines OR manufacturers
6) Amusement tax; and of any articles of commerce of whatever kind or
nature- rate not exceeding 37% 1/2% of 1%.
a) Amusement places includes theaters, cinemas, 2) Wholesalers, distributors, or dealers in any article of
concert halls, circuses and other places of commerce of whatever kind or nature- rate not
amusement where one seeks admission. exceeding 50% of 1%.
b) Tax on admission to be collected by 3) Exporters, AND on manufacturers, millers,
proprietors/lessees/operators of amusement places producers, wholesalers, distributors, dealers or
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 TAXATION LAW II NOTES | Under Atty. Llamado

retailers of ESSENTIAL COMMODITIES c) Where plantation and factory located at different

enumerated below- rate not exceeding ½ of 37 1/2 %
of `1%, 50% of 1% and 1%/2%;
a) Rice and corn
4) Retailers- P400K or less (2%); more than P400K
(1%); provided Brgy. has exclusive power to levy tax
(Sec. 152) on GS/GR of P50K or less (in case of cities),
and P30K or less (in case of municipalities)
5) Contractors and other independent contractors-
P2M or more-rate not exceeding 50% of 1%
6) Banks and other financial institutions- not
exceeding P50 per peddler.
7) On any business not otherwise specified herein,
which Sanggunian deem proper to tax- rate not
exceeding P50 per peddler.
8) On any business not otherwise specified herein,
which Sanggunian deem proper to tax- rate not
exceeding 2% of gross sales of preceding year.
- Municipalities within Metro Manila may levy
taxes at rates which shall no exceed 50% the
maximum rates herein prescribed.
places- 70% shall be divided as follows:
i. 60% to the city/ municipality where factory is
located; and
ii. 40% to city or municipality where plantation is
located.
TAXING POWERS OF CITIES
Except as otherwise provided in the LGC, a city may levy the
taxes, fees and charges which the province or municipality
may impose.
1) Rates of taxes that city may levy may exceed the
maximum rates allowed for the province or
municipality by not more than 50% except for rates
of professional and amusement taxes.
TAXING POWERS OF BARANGAYS

Payment of business tax
 Payable every separate or distinct establishment or
place where business subject to tax is conducted.
 One line of business does not become exempt by
being conducted with some other business for which
tax has been paid.
 In case two businesses with same tax rates- tax shall
be computed on the combined gross receipts of the 2
businesses.
Except as otherwise provided in the LGC, a barangay may
impose only the ff: taxes, fees or charges:
1) Taxes on stores/retailers with gross sales/receipts of
preceding calendar year of P50K or less ( in case of
cities); P30K or less (in case od municipalities)- rate
not exceeding 1%;
2) Service fees or charges- reasonable fees for
regulating use of barangay- owned properties or
service facilities such as palay, copra, or tobacco
dryers;

 In case of two businesses subject to different tax 3) Barangay clearance- precondition to issuing
rates- gross receipts separately reported for business permit;
computing the tax.
4) Other fees and charges-
Situs of Business Tax
a) On commercial breeding of fighting cocks, cockfights
 Recording of Sales/ Payment of Tax- for collection of and cockpits;
tax on business (manufacturers, asssemblers, b) On places of recreation which charge admission fees;
repackers etc.) and
a) If maintaining a branch/ sales outlet (elsewhere)- c) On billiards, signboards, neon signs, and outdoor
sales recorder in the branch/ sales outlet making the advertisements.
sale or transaction.
- Business tax paid to municipality where COMMON REVENUE -RAISING POWERS
branch/sales outlet is located.
b) If no branch/ sales outlet- sales recorded in the Under the LGC, provinces, cities, municipalities and
principal office and business tax paid in the barangays are authorized to impose and collect the ff:
municipality where principal office is located.
1) Service fees and charges- reasonable fees for sevices
 Sales Allocation- shall apply to manufacturers, rendered
assemblers, contractors, produces and exporters 2) Public utility charges- LGUs may fix rates for
with factories, project offices, plants and plantations operation of public utilities owned, operated and
in the pursuit of business. maintained by them with their jurisdiction.
3) Tolls, fees and charges- concerned sanggunian may
a) 30%of all sales recorded in principal office- taxable fix rates and prescrible the terms for imposition of
where principal office is located. toll fees or charges for the use of any public road, pier
b) 70% of all recorded in principal office- taxable by city or wharf, waterway, bridge, ferry or
where factory, project office, plant or plantation is telecommunication system funded and constructed
located. by concerned LGU.
© DimDoms 13
 TAXATION LAW II NOTES | Under Atty. Llamado
- When public safety and welfare requires,
collection of tolls may be discontinued and use
of the public facility be free and open for public
use.
COMMUNITY TAX
Cities or Municipalities may levy community tax
Who are liable:
Individuals- every inhabitant of the PH
o 18 years old or over; or
o Regularly employed for at least 30 days; or
o Engaged in business or occupation; or
o Owns real property; or
o Required to file ITR
o Rate- P 5.00 + annual addtl. Tax of P1/P1,000 but no
case shall exceed P5K
o Place of payment- place of residence
COLLECTION OF TAXES
Tax period and Manner of Payment
o Tax period- calendar year
o Payable in 4 quarterly installments
Accrual of Tax
o 1st day of January of each year
o New taxes/ fees/ charges or changes in rates shall
accrue on 1st day of Quarter next following effectivity
of ordinance imposing new levies or rates.
TAXPAYER’S REMEDIES
Period of Assessment
 5 years from date taxes became due; in case of fraud,
10 years from date of discovery of fraud or intent to
evade tax.
 No action for collection of such taxes (administrative
or judicial) shall be instituted after expiration of
such period.
Period of Collection
 5 years from date of assessment
Suspension of Period – period suspended for the time
during which:
1) Treasurer is legally prevented from making
assessment or collection;
2) TP requests for reinvestigation and executes a
waiver in writing before expiration of period to
assess/collect.
3) TP is out of country or otherwise cannot be located.
Protest of Assessment
© DimDoms
1) Issuance of Notice of Assessment by concerned
treasurer
2) Filing of written protest- within 60 days from receipt
of notice of assessment, otherwise assessment
becomes finals and executory;
3) Decision of Treasurer- local treasurer shall decide
within 60 days from filing of protest.
4) Appeal- TP shall have 30 days from receipt of denial
of protest or from lapse of 60 day period to decide, in
case of inaction, to appeal with court of competent
jurisdiction; otherwise, assessment becomes
conclusive and unappealable.
 Claim for Refund or Tax Credit
1) Written claim for refund precondition to filing
judicial claim for refund for recovery of any
tax/fee/charge erroneously or illegally collected.
2) No case or proceeding in court for claim for refund
can be entertained after expiration of 2 years from
date of payment of tax/fee/charge, OR from date TP
is entitled to a refund or credit.
 Local Government’s Lien
 Civil Remedies
1) By administrative action
- Through distraint of goods, chattels, or effect,
and other personal property of whatever
character, including stocks and other securities,
debts, credits, bank accounts and interest in and
rights to personal property.
- By levy upon real property and interest in or
rights to real property; and
2) By judicial action
3) Either of these remedies or all may be pursued
concurrently or simultaneously at the discretion of
the LGU.
LEVY ON REAL PROPERTY
 When made- after expiration of time required to pay
tax, real property may be levied on, before,
simultaneously, or after the distraint of personal
property belonging to delinquent TP.
 Binding force- local treasurer shall prepare a duly
authenticated certificate showing the name of TP;
amount of tax, fee or charge and penalty due. Said
certificate shall operate with the force of legal
execution throughout the Philippines.
 How effected- writing upon said certificate the
description of property
o Written notice of levy mailed/served upon
assessor and Register of Deeds where
property is located and Assessor/RD shall
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 TAXATION LAW II NOTES | Under Atty. Llamado
annotate levy on the tax declaration and
CT, respectively.
o Written notice shall also be served on
delinquent TP, or if absent from the PH, to
his agent or manager of business.
 Levy after distraint- if the distraint property is
not sufficient to pay for the deficiency tax, concerned
treasurer shall, within 30 days proceed with the
levy.
 Report on the levy- report shall be submitted
within 10 days after receipt of the warrant.
 Advertisement and Sale
o w/in 30 days after levy, the local treasurer shall
publicly advertise the sale.
o Advertisement shall be done by posting a notice
at the main entrance of municipal/city hall, and
by publication 1c a week for 3 weeks in
newspaper of general circulation.
 Report of the sale and delivery of certificate of sale
by local treasurer to the purchaser describing
property sold, stating all taxes, fees and charges.
 Redemption of property sold- within 1 year from date
of sale TP can redeem the property by paying the tax
+2% per month on the purchase price.
o Right of purchaser- to be paid the price he paid
for +2% per month on the purchase price.
o Right of owner- entitled to possession of
property and rentals before redemption.
Distraint /Levy Exemptions
Personal Property exempt from distraint/levy
 Tools and implements necessarily used by
delinquent TP in his trade ir employment
 One horse, cow, carabao or beast of burden
necessarily used by TP in his ordinary occupation
 Necessary clothing and that of his family
 Household furniture and utensils necessary for
housekeeping and used for said purpose, value not
exceeding P10K
 Provisions, including crops, actually provided for
individual or family use sufficient for 4 mos.
 Professional libraries of doctors, engineers, lawyers
and judges;
 1 fishing boat and net not exceeding P10K used by a
fishermen to earn his livelihood
 Any material or article forming part of a house of any
real property
REAL PROPERTY TAX
 Nature of Property Taxes
- Taxes assessed on all property, or all property of
a certain class, Located within a certain
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territory on a specified date in proportion to its
value.
- RPT is an annual ad valorem tax imposed by
the LGU on real property within their
jurisdiction, determined on the basis of a fixed
proportion of value of the property.
 Purpose of property tax
Main source of revenue for LGUs
- Municipalities and barangay share the tax
collected in their respective jurisdictions with
the provinces. In the cities, the barangay where
the property subject to tax is situated, likewise
share in the real property tax collections.
Fundamental Principles on Appraisal and Assessment
of RPT
1) RP shall be APPRAISED at its current and fair
market value.
2) RP shall be classified for assessment purposes on the
basis of ACTUAL VALUE.
3) RP shall be assessed on the basis of a uniform
standard of value within each LGU.
4) The appraisal, assessment, levy and collection of
RPT shall not be let to any person.
5) The appraisal and assessment of RPT shall be
equitable. (Sec. 198, LGC)
Steps in Assessment of RP
- The assessment of RP for ad valorem taxes
involves two (2) distinct acts:
1. Preparation of a roll or list of all the property subject
to tax; and
a) The property tax roll (or assessment roll) or schedule
is prepared by the sworn declaration of the owner or
by a declaration by the assessor himself.
b) It is also ting of all taxable and/or tax emery real
properties in the name of the owner, or anybody with
interest in it.
2. Valuation of such property
 Declaration of RP by Owner/ Administrator
- Declaration of all persons owing or
administering RP, including improvements
therein, to prepare or cause to be prepared and
file which the local assessor, a sworn statement
declaring the true value of their property,
whether previously declared or undeclared,
taxable or exempt, which shall be the FMV of
property, as determined by declarant.
- Sworn declaration shall be filed with the local
assessor once every 3 years. During period from
January 1 to June 30, starting 1992.
Effects of declaration:
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 TAXATION LAW II NOTES | Under Atty. Llamado
1) Binding upon owner
2) Does not create title
- An owner who neglects to declare RP, allowing
opportunity for another to declare it in his own
name, does not his ownership or estoppel from
claiming the same.
 Declaration of RP acquired or improved by
owner/administrator
- Within 60 days after acquisition of such
property or upon completion or occupancy of the
improvement, whichever comes earlier. (Sec.
203, LGC)
 Declaration of RP by Assessor
- In case of refusal of owner to declare within the
time prescribed, in the name of the defaulting
owner, if known, or against an unknown owner.
(?)
 Real Property Identification system
- All declarations of real property shall. E kept
and filed under a uniform classification system
to be established by the local assessor. (Sec. 207,
LGC)
 Notification of Transfer of RP
- Any person who shall transfer RP shall notify
the provincial/city/municipal assessor
concerned within 60 days from date of transfer.
 Duties of Certain Officials
Register of Deeds
 Preparation of abstract of registry showing
description of property, their owners, dates of most
recent transfer, with copies of deeds of
sale/donation/partition,
 Requiring certification of non- delinquency, ie ., that
real property taxes (current and prior years) and
have been paid prior to registration.
 Failure to present this may be cause for RD to refuse
registration of the sale/transfer.
Official Issuing Building Permit
 Transmittal within 30 days of a copy of building
permit within 30 days of its issuance to concerned
local assessor where property is situated.
Duty of Geodetic Engineer
 To furnish copy of approved original or subdivision
plans executed by them within 30 days from receipt
of such plans from Land Management Bureau. LRA
or HLURB (Sec. 221, LGC)
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 Schedule of Fair Market Values
o Preparation
- Preparation of schedule prior to general revision
- Publication in newspaper of general circulation
of schedule of FMVs
o Assessor’s authority to take evidence
- Assessor may summon owners of the properties
affected by the revision of values
o Amendment of Schedule
- The local assessor may recommend to the
concerned sanggunian amendments to correct
errors in valuation of the schedule of values. The
concerned Sanggunian shall act upon the
recommendation within 30 days from receipt
thereof, by issuing ordinance.
 Classes of real property assessment
o Residential
o Commercial
o Industrial
o Agricultural
o Mineral
o Timberland
o Special- All lands, buildings and other
improvements thereon
- Actually, directly and exclusively used for
hospitals, cultural, or scientific purposes;
- Owned and used by local water districts; and
- Owned by GOCC rendering essential public
services in the supply and distribution of electric
power
 Actual use of property basis for assessment
o Actual use- purpose for which a property is
principally or predominantly utilized by owner or
person in possession. It contemplates “present” as
distinguished from “potential use”.
o Actual use determining factor in applying
appropriate percentage or level of assessment to
market value of RP as basis of taxation.
 Assessment levels
o Fixed by ordinance
o Applied to the FMV of the RP to determine the
assessed value of the RP, that will be subject to the
RPT.
 General Revision of Assessments and Property
Classification
o The local assessor shall undertake a general revision
of RP assessments within 2 years after effectivity of
the LGC and every 3 years thereafter. (Sec.
219,LGC)
o Tax assessments by tax examiners are presumed
correct and made in good faith with the TP having
the burden of proving otherwise.
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 TAXATION LAW II NOTES | Under Atty. Llamado
 Valuation of Real Property
o The assessment of RP shall not be increased oftener
than ONCE every 3 years except in case of new
improvements substantially increasing the value of
said property OR of any change in its actual use.
(Sec. 220, LGC)
o In the ff. instances the concerned local assessor shall
make a classification, appraisal and assessment of
the RP listed and described in the declaration
regardless of any previous assessment or TP’s
valuation thereon:
1) RP is declared and listed for the first time;
2) There is ongoing general revision of the
classification and assessment; or
3) A request is made by the person in whose name the
property is declared.
 Date of Effectivity of Assessment or
Reassessment
o All assessments or reassessments made after the 1st
day of January of the SUCCEEDING year.
o The reassessment of RP due to any of the following:
1) Partial or total destruction;
2) Major change in its actual use;
3) Any great and sudden inflation or deflation of RP
values;
4) Gross illegality of the assessment when made; or
5) Any abnormal causes;
Shall be made within 90 days from the date of any such
cause(s) occurred, and shall take effect at the beginning of the
quarter next following the reassessment.
 Assessment of Property subject to back taxes
o RP declared for the first time- shall be assessed for
taxes period during which it would have been liable
but in not case more than 10 years prior to date of
initial assessment. The taxes shall be computed
based on the applicable schedule of values in force
during the relevant period/s.
o If the taxes are paid ON OR BEFORE the end of the
quarter following the date of notice of assessment
was received by owner- no interest for delinquency
shall be imposed thereon; otherwise, subject to 2%
interest/ month from date of receipt until fully paid.
 Notification of new or revised assessment
o In case property is assessed for the first time or
when existing assessment is increased or decreased-
local assessor shall give written notice within 30
days of such new or revised assessment.
o A notice of assessment should inform the TP of the
value of a specific property subject to tax, including
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the classification and appraisal of properties;
otherwise there is no tax assessment.
o Assessment is deemed made when the notice is
released, mailed or sent to the TP for the purpose of
giving effect to said assessment.
APPEAL ON ASSESSMENT
Appeal on Assessment : appeal to LBAA
 Shall be made by the owner who is not satisfied with
the assessment of his property, within 60 days from
receipt of the written notice of assessment.
 By filing a petition under oath
 Together with copies of the tax declarations and
such affidavits/documents submitted in support of
appeal.
 Whenever local assessor sends a notice of revised
assessment to owner/possessor, the local assessor
shall thereafter no longer have any jurisdiction to
entertain any request for review of readjustment.
The appropriate forum is with the LBAA.
Appeal on assessment: Action by the LBAA
 The LBAA shall decide the appeal within 120 days
from date of receipt
 The LBAA, I mother exercise of its appellate
jurisdiction, shall have power to summon witnesses,
conduct ocular inspection, and issue subpoena and
subpoena duces tecum.
 The Secretary of the LBAA shoal furnish the owner
of property and the concerned local assessor with
copy of the decision.
Appeal on Assessment: appeal to CBAA
 Am unsatisfied property owner May Appeal the
LBAA’s decision to the CBAA within 30 days after
receipt of decision of the Board.
 The decision of the CBAA shall be final and
executory.
 Appeal on assessments shall not suspend the
collection of the corresponding RPT on the property
as assessed by the local assessor, without prejudice
to subsequent adjustment depending on the final
decision on the appeal.
IMPOSITION OF THE TAX
Power to Levy RPT
 A province/city/municipality within Metro Manila
May levy an annual ad valorem tax on RP such as
land, building, machinery and other improvement
not expressly exempted.
Rates of Levy
 In case of province- not exceeding 1% of the assessed
value of RP; and
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 TAXATION LAW II NOTES | Under Atty. Llamado
 In case of city/municipality within Metro Manila- not
exceeding 2% of the assessed value of the RP.
Exemptions from RPT- The ff. are exempted:
1) RP owned by the Republic of the Philippines or any
of its political subdivision, except when the
beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person in
which case, the latter shall be liable.
- The law makes no distinction between property
held in government capacity and those
possessed in a proprietary character.
2) Charitable institutions, churches, parasonages or
convents appurtenant thereto, mosques, non profit
or religious cemeteries, and all lands, buildings and
improvements actually, directly and exclusively
used for religious, charitable or educational
purposes.
3) All machines and equipment that are ACTUALLY,
DIRECTLY and EXCLUSIVELY used by local water
districts and GOCC engaged in the supply and
distribution of water and/ or generation and
transmission of electric power.
4) All RP OWNED by duly registered cooperatives; and
5) Machinery and equipment used for pollution control
and environmental protection.
Persons liable to RPT
1) Owner or holder of the legal title of the property
2) Where there is a transfer of ownership
a. After accrual of the tax, from a non-exempt person
to an exempt person, the tax must still be paid.
b. After accrual of the tax, from an exempt person to a
non- exempt person, there is no liability to pay the
tax because the tax has already vested.
c. The purchaser is not liable for taxes due before his
acquisition of his property.
SPECAL LEVIES ON REAL PROPERTY
Special Assessment
 It is a particular kind of levy imposed on landowners
to meet the cost and/or maintenance of public
improvements financed by a province, city or
municipality, or by the National Government,
 The principle underlying special assessments to
meet the cost of public improvements is that the
property upon which they are imposed is peculiarly
benefit and therefore, the owners do not in fact, pay
anything in excess of what they receive by reason of
such improvement.
 Unless a corresponding benefit can be found, no
special assessment may be sustained as it would be
“manifestly unfair” and “palpably arbitrary and
plain abuse.”
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Special levies authorized by the LGC- in addition to the basic
realty tax, the LGC authorizes the imposition of the ff.:
 Additional levy for special education fund (SEF) –
annual tax of 1% of assessed value, proceeds of
which shall accrue exclusively to the SEF created
under the R.A. 5447
 Additional ad valorem tax on idle lands- at a rate not
exceeding 5% of the assessed value.
 Special levy by the LGUs- May be imposed on lands
specially benefited by public works projects or
improvements by the LGU concerned. It shall not
exceed 60% of the actual cost of such projects,
including the costs of acquiring land and such other
RP in connection therewith.
Idle lands shall include the ff.:
 Agricultural lands more that 1 ha. In area suitable
for cultivation, dairying, inland fishery, and other
agricultural uses, ½ of which remain uncultivated by
owner.
 Lands, other than agricultural, located in a city or
municipality more than 1,000 sqm, ½ of which
unutilized or unimproved by owner;
 Regardless of land area, the above shall also apply
to residential lots in subdivision duly approved by
proper authorities.
Idle lands exempt from tax
Province/city/municipality within Metro Manila, may exempt
idle lands for any of the ff. reasons;
1) Force majeure
2) Civil disturbance
3) Natural calamity
4) Any cause which physically or legally prevents the
owner of person having legal interest in the property
from improving, utilizing or cultivation the same.
COLLECTION OF THE TAX
Date of Accrual
Accrue on the 1st day of January and from the date it shall
constitute a lien on the property, superior to any other lien.
Payment of tax
The law allows payment of tax in 4 equal installments:
INSTALLMENT SHOULD BE PAID ON
OR BEFORE
1st installment 31 March
2nd installment 30 June
3rd installment 30 September
4th installment 31 December
Payment under Protest
o No protest shall be entertained unless TP pays first
the tax,
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 TAXATION LAW II NOTES | Under Atty. Llamado

o An annotation on the TP receipts will be indicated-
“paid under protest”
o The protest must be filed 30 days from payment of
tax, and the local treasurer shall decide on the
protest within 60 days from filing.
o The tax paid under protest shall be held in trust by
the treasurer concerned.
o If protest decided in favor of TP, treasurer shall
refund the amount paid protested.
o In the event protest denied or upon the lapse of the
60-day period, TP shall appeal to the LBAA, and
then to the CBAA.
Payment under Protest
 Payment under protest required only when there is
a tax assessment, the validity of which is being
questioned.
Refund of excessive collection
 When assessment for basic tac or special levy is
found to be illegal or erroneous, TP may file a claim
for refund within 2 years from date the TP is entitled
to such reduction or adjustment.
 Treasurer has to decide within 60 days from receipt
of claim. If denied, or upon lapse of the 60-day
period, TP may appeal to the LBAA, then to the
CBAA.
1) Issuance of warranty of levy- after the expiration of
the time required to pay the tax
1. Warrant shall be mailed to or service upon the
delinquent TP, on in case out of the country or
cannot be located, the administrator/ occupant
of property.
2. Written notice of warrant shall be served to the
concerned local assessor and Register of Deeds
where the property is located who shall
annotate the levy on the tax declaration and
TCT, resp.
2) Condonation or reduction of RPT and interest
1. In case of general failure of crops or substantial
decrease in the price of agricultural or agri-
based products, or calamity in any province, city
or municipality, the concerned sanggunian may
pass an ordinance, upon recommendation of the
Local Disaster Coordinating Council, condoning
or reducing, wholly or partially, RPT due for
succeeding year/s.
2. The President of the PH may, when public
interest requires, condone or reduce RPT or any
interest for any year in any province/
municipality within Metro Manila area/city.

Periods for collection of RPT

 5 years- basic tax and other special levy shall be

collected within 5 years from date they become due.
No action for collection of tax shall be instituted after
expiration of such period.

 10 years- in case of fraud or intent to evade payment

of tax, within 10 years from discovery of such fraud
or intent to evade payment.

 Suspension of prescriptive period-

o The local treasurer legally prevented from collecting

the tax;
o Owner of property requests for reinvestigation and
executed waiver in writing before expiration of such
period to collect; and
o Owner of property is out of the country or cannot be
located.

REMEDIES FOR COLLECTION OF RPT

 LGUs lien

o The basic RPT, SEF and any other special levy

constitutes a lien on the property subject to tax,
superior to all other liens.
o May be enforced by administrative or judicial action
and can be extinguished upon payment of the tax.

 Levy on Real Property

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