PROBLEM EXERCISES in TAXATION

Patterned after tax cases decided by the Supreme Court and

Court of Tax Appeals

Prepared by: Dr. Jeannie P. Lim

Baguio City

1. Will the imposition of a business tax by the City government against an entity already paying a franchise tax result to double
taxation considering that both taxes are based on the gross receipts and sales of taxpayer’s business?
Answer. A franchise tax is a tax on the privilege of transacting business in the state and exercising corporate franchises
granted by the state, and is imposed only on franchise holders. On the other hand, a “city or business tax” is a percentage tax
based on a given ratio between the gross sales or receipts and the burden imposed upon the taxpayer. It is imposed on any
person engaged in the sale of goods or services. They are not of the same kind or character. Hence, no double taxation. (Sky
Cable Corp. vs. City Treasurer of Quezon City, CTA case No. 102, February 10, 2014)

2. X Municipality imposes regulatory fees on the “cell sites“ or telecommunications towers of X Corporation. X protested
contending that the “cell sites” are already subjected to taxes. X argues that there is double taxation because the same object
of taxation is taxed twice for the same purpose. Rule on the argument.
Answer. An ordinance imposing regulatory fees on project cost whose purpose is to regulate certain construction activities of
the identified special projects, which includes “cell sites” or telecommunications towers is NOT a tax because the fees
imposed in the said ordinance are primarily regulatory in nature and not primarily revenue-raising in nature. Hence, there is no
double taxation considering that the impositions are not for the same purpose. ( SMART vs. Mun. of Malvar, Batangas, GR No.
204429, February 18, 2014)

3. International juridical double taxation – The imposition of comparable taxes in two or more states on the same taxpayer in
respect of the same subject matter and for identical periods. There is international double taxation when one of the taxing
authorities is a foreign government.

4. Real Estate dealers are required to withhold taxes on every sale of real property they make. These dealers argued that they
are being singled out because other businesses are not required to withhold taxes on every sale they make or conclude during
the course of their business operations. The dealers believe that there is violation of the uniformity and equality clause of the
Constitution. Are the dealers correct?
Answer. The taxing authority has the power to make reasonable classifications for purposes of taxation. Inequalities resulting
from a singling out of one particular class for taxation or exemption do not infringe any constitutional limitation. The real estate
industry is, by itself, a class and can be validly treated differently from other business enterprises. The Congress has the
power to choose the subject or object of taxation provided all those similarly situated in that group are treated alike without
distinction. (CREBA, Inc. vs. the Hon. Executive Sec. Alberto Romulo, March 9, 2010)

NOTE: The choice of the legislative body is valid only when the requisites of classification statutes are met.

5. The real estate dealers/developers argue that the creditable withholding tax they are required to collect and remit to the BIR
every time they sell a real property is a clear deprivation of property without due process because there are instances when at
the end of the tax period no income is realized but losses. Is the contention of the real estate dealers/developers tenable?
Answer. The imposition of creditable withholding tax (CWT) does not constitute a deprivation of property without due process
because the seller may claim tax refund if net income is less than the taxes withheld. Practical problems in claiming tax refund
do not affect the constitutionality and validity of the CWT as a method of collecting taxes. (CREBA, Inc. vs. the Hon. Executive
Sec. Alberto Romulo, March 9, 2010)

6. The BIR issued RMO No. 1-2000 requiring taxpayers who intend to avail of special treatment under tax treaties/conventions to
file their application with the International Tax Affairs Division (ITAD) of the BIR at least 15 days before the transaction. X is
qualified to avail of preferential tax treatment under a tax treaty but failed to comply with the 15-day period notice to BIR.
Hence, BIR denied X’s claim for tax refund/credit. Will RMO No. 1-2000 prevail over tax treaties or Tax conventions?
(Deutsche Bank Ag Manila Branch vs., CIR, August 19, 2013)
Answer. RMO No. 1-2000 requires that any availment of the tax treaty relief must be preceded by an application with the
International Tax Affairs Division (ITADS) of the BIR at least 15 days before the transaction. It was implemented to obviate any
erroneous interpretation and/or application of the treaty provisions. The objective of the BIR is to forestall assessments against
corporations who erroneously availed themselves of the benefits of the tax treaty but are not legally entitled thereto, as well as
to save such investors from the tedious process of claims for a refund due to an inaccurate application of the tax treaty
provisions. However, there is nothing in RMO N0. 1-2000 that would indicate deprivation of entitlement to a tax treaty relief for
failure to comply with the 15-day period.

Therefore, RMO No. 1-2000 should not operate to divest entitlement to the relief provided under a treaty or convention
as it would impair the value of the tax treaty, a denial will constitute a violation of the duty required by good faith in complying
with an international agreement. At most, the application for a tax treaty relief from the BIR should merely operate to confirm
the entitlement of the taxpayer to the relief. The obligation to comply with a tax treaty must take precedence over the objective

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 of RMO-1-2000. The BIR must not impose additional requirements that would negate the availment of the reliefs provided for
under an international agreement.

7. As a general rule Revenue Regulations are non-retroactive. The only exception to this is when the retroactive application will
not cause injury to the taxpayer. Who is not entitled to the benefit of this rule?
Answer. Sec. 246, NIRC maintains that this rule does not apply to (a) a taxpayer who deliberately misstates or omits material
facts from his tax return or in any document required of him by the BIR, (b) to a taxpayer who acted in bad faith, and (c) where
the facts subsequently gathered by the BIR are materially different from the facts on which the ruling was based. ( Filinvest
Dev’t. Corp., July 18, 2011, BPI Family Savings Bank, Inc. vs. Supreme Transliner, Inc. et. al., February 25, 2011)

20. Sec. 246 of the 1997 NIRC provides: “Any revocation, modification or reversal of any of the rules and regulations promulgated in
accordance with the preceding Sections or any of the rulings or circulars promulgated by the CIR shall NOT be given
retroactive application if the revocation, modification or reversal will be prejudicial to the taxpayers, Give the EXCEPTIONS.
Answer. Retroactive application shall be imposed:
a) Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by
the BIR;
b) Where the facts subsequently gathered by the BIR are materially different from the facts on which the ruling is based;
or
c) Where the taxpayer acted in bad faith.

21. The CIR issued two rulings on the determination of the tax base for the imposition of ad valorem tax on cigar and
cigarettes, BIR Ruling 100-00 dated Oct. 2, 2000 excluded the VAT from the tax base in computing the 15% excise tax due.
BIR Ruling 120-01 dated Feb. 11, 2001 included back the VAT in computing the tax base for purposes of the 15% ad valorem
tax and expressly revoked the BIR Ruling 100-00. X, was assessed deficiency ad valorem tax on its removals of cigarette
products during the period Nov. 10, 2000 to Jan. 22, 2001. The deficiency assessment came about because of the failure of
the company to include in its tax base the VAT. Is the assessment correct?
Answer. No. The retroactive application of BIR Ruling 120-01 would be prejudicial to X. Since the exceptions above-mentioned
are not attendant in the case at bar, then the rule on the non-retroactivity of rulings would apply. The assessment gave BIR
Ruling 120-01 a retroactive effect. Thus, such assessment is incorrect as it is in contravention with Sec. 246 of the Tax Code.

22. RMC No. 7-35 states that overpaid income taxes are not covered by the 2-year prescriptive period under the Tax
Code and that taxpayers may claim refund of tax credits for the excess quarterly income tax with the BIR within 10 years
under Art. 1144 of the Civil Code. X Corporation relying in good faith in the circular did not immediately file its claims for
refunds and tax credit of its 1995-1996 excess quarterly income payments. Upon filing in 1998, the request for tax refund was
denied.

(a) Is RMC No. 7-35, with respect to the 10-year prescriptive period valid?
(b) If RMC No. 7-35 is not valid, may the government be compelled to allow tax refunds or credit on the ground of
estoppel?
Answer. (a) No. The Tax Code states that the taxpayer may file a claim for refund or credit with the BIR within 2 years from the
date of payment of the tax or penalty. The two-year prescriptive period is to be computed from the time of filing the final
adjustment return and the tax as finally computed for the taxable period.

RMC No. 7-35 is changing the prescriptive period of 2 years to 10 years, created a clear inconsistency with the provision
of the Tax Code. The CIR rendered an interpretation which is not in harmony with the statute. Hence, his interpretation could
not be given weight for to do so would in effect, amend the statute.

(b) No. Fundamental is the rule that the State cannot be put in estoppel by the mistake or errors of its officials or agents. This
rule is even more important in matters involving taxes. Taxes are the lifeblood of the nation through which the government
agencies continue to operate and with which the State effects its function for the welfare of its people. The errors of certain
administrative officers should never be allowed to jeopardize the government’s financial position.

23. A revenue bill was approved by the Lower House of the Congress and transmitted to the Upper House.
After the latter’s review, it came out with its own version dealing with the same subject matter. This version was approved by
the President and became a revenue bill. Is this bill constitutional? Why?
Answer. This is constitutional and valid because the revenue bill originated from the Lower House. The version of the Upper
House involves the same subject matter although its version is different from that of the version of the lower house. This is
consonant with the Senate’s power, not only to concur, modify, and revise but also to propose amendments, even if the result
will cause extensive changes resulting in re-writing the whole. ( Abakada vs. Ermita)

24. Tax Laws are prospective in character and therefore they are prospective in application. When are tax laws given
retroactive effects?
Answer. Retroactive application is allowed when – (a) That tax law itself so provides, (b) when the retroactive application is
implied in the language of the law, (c) when the retroactive application is among the intention of the Congress in the
enactment of that law, and (d) when it involves income taxation.

25. The BIR assessed National Power Corporation (NPC) for deficiency VAT for the sale of its power plants to private
entities. NPC endorsed the BIR’s demand letter to PSALM,, a GOCC created for the purpose of managing the orderly sale,
disposition and privatization of NPC’s generation assets, real estate and other disposable properties and assets. In turn,
PSALM filed with the Department of Justice (DOJ) a petition for the adjudication of the dispute with the BIR the issue of WON

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 the sale of the power plants should be subject to VAT. The BIR alleged that DOJ had no jurisdiction since the dispute involved
laws administered by the BIR and therefore the jurisdiction is with the CTA. Resolve.
Answer. The DOJ has jurisdiction. The dispute SOLELY is between PSALM and NPC both government-owned and controlled
corporations, and the BIR, a National Government. PD 242 clearly applies and the Sec. of Justice has jurisdiction over the
case. When the dispute is between private entities and the BIR on tax cases that can be decided upon by the CIR in the
administrative level, the dispute may be appealed to the CTA. Where the disputing parties are all public entities (government
entities), the case shall be governed by PD 242.

NOTE: Disputes between the BIR and a GOCC involving tax assessment are appealable to the CTA.

26. Where do you question the validity of (a) Revenue Regulation and (b) BIR Ruling?
Answer. (a) The validity of a revenue regulation should be questioned before the regular court (RTC), ( British American
Tobacco vs. Camacho, GR No. 163583, August 20, 2008) and (b) the validity of a BIR Ruling should be questioned before the
CTA via a petition for review (Asia Auctioneers, Inc. vs. Parayno, Jr., GR No. 163445, December 18, 2007).

27. T sent a query to the CIR asking WON he is taxable under the new law. The CIR holds that T is liable. T, however, doubts the
unfavorable ruling and would like to question the same? Where should he contest the CIR’s Ruling?
Answer. T must first file his REQUEST FOR RULING REVIEW before the Secretary of Finance within 30 days from receipt of
the unfavorable ruling in compliance with the Principle of Exhaustion of Administrative Remedies. If SoF sustains the CIRs
Ruling, T may then proceed to the RTC via a Petition for Review within 30 days from receipt of the adverse decision of the
SoF. (DOF Department Order No. 23-2001, October 25, 2001).

28. When is an appeal (REQUEST FOR RULING REVIEW) before the Sec. of Finance not necessary? (BDO vs. Republic, GR
No. 198756, January 13, 2015)
Answer. The rule on exhaustion of administrative remedies, particularly an appeal to the SoF, may be dispensed with if,
among others: (a) the issue involves purely question of law, (b) when there are circumstances indicating the urgency of judicial
intervention; and (c) when exhaustion will result in an exercise in futility.

29. What are the two (2) powers of the CIR?

Answer. The CIR exercises (a) Quasi-legislative functions, such as the original and exclusive power of interpret tax laws,
issuing ruling, rules and regulations, and (b) Quasi-judicial functions such as deciding taxpayers’ disputes on tax assessment
and collections and claims for tax refund or tax credit.

NOTE: (a) If the ruling of the CIR was issued in the exercise of his quasi-legislative function, and/or rulings of the Sec. of
Finance issued in the exercise of his quasi-legislative function- both should be appealed with the Regional Trial Court. (b) If
the CIR’s ruling was issued in the exercise of his quasi-judicial functions, and/or the decision of the SoF exercising his quasi-
judicial function – both should be appealed to the CTA. (CIR vs. CTA and Petron, GR No. 207843, July 15, 2015)

30. T filed a petition before the CTA questioning the legality of and constitutionality of the CIR’s interpretation of the tax provision
of the Tax Code (Quasi-legislative power). CIR argues that CTA has no jurisdiction over the controversy. Is the CIR correct?
(CIR vs. CTA and Petron, GR No. 207843, July 15, 2015)
Answer. The CIR is correct. CTA has no jurisdiction to take cognizance of the petition as its resolution would necessarily
involve a declaration of the validity or constitutionality of the CIR’s interpretation of the Tax Code, which is subject to the
exclusive review by the Sec. of Finance and ultimately by the regular courts.

31. T seasonably disputed an assessment before the CIR, among his defenses is a question on the validity or constitutionality of
the tax law adopted by the CIR in its investigation. Subsequently, the CIR denied T’s dispute and issued its final decision on
the disputed assessment (FDDA). T comes to you for your legal services. Where will you file your appeal?
Answer. The CTA has undoubted jurisdiction to pass upon the constitutionality or validity of a tax law or regulation when raised
by the taxpayer as a defense in disputing or contesting as assessment or even in claiming for a refund. It is only in the lawful
exercise of its power to pass upon all matters brought before it, as sanctioned by Sec. 7 of RA 1125, as amended.

The Supreme Court held in the case of BDO vs. Republic, GR No. 198756, August 16, 2016 that the CTA may take
cognizance of cases directly challenging the constitutionality or validity of a tax law or regulation or administrative issuance
(revenue orders, revenue memorandum circulars and rulings) The law intends the CTA to have exclusive jurisdiction to
resolve all tax problems. Petitions for writs of certiorari against the acts and omissions of the said quasi-judicial agencies
should, thus, be filed before the CTA.

32. X believes that the Revenue Regulation recently issued by the BIR has expanded the law it seeks to implement. X was
seeking reconsideration in the application of said Revenue Regulation but the CIR denied his motion. X seasonably filed a
petition for review before the CTA arguing that the regulation is void. Did the CTA acquire jurisdiction on the matter? ( British
American Tobacco Inc., vs. Camacho, 562 SCRA 511)
Answer. No. CTA has no jurisdiction to pass upon the validity of revenue regulation; it is the RTC that exercises jurisdiction
over the same. Among the CTA’s jurisdiction is to determine the validity of a decision or ruling rendered by the CIR on issues
involving (a) disputed assessment, (b) refund of internal revenue taxes, (c) penalties imposed without authority and (d) other
matters found in other laws, part of law, or special law administered by the BIR.

33. Franchise distinguished from tax exemption:

Answer.
Franchise Tax Exemption
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 Granted by the Government (Congress or LGUs) under itsGranted by the government (Congress or LGUs) under its
inherent police power inherent power of taxation
It is always revocable Generally, it is not revocable within the period of its
existence
It is not protected by the Non-=impairment clause of the Protected by the non-impairment clause of the Constitution
Constitution if it is embodied in a valid contract

 Franchise has been broadly construed as referring, not only to authorizations that Congress directly issues in the
form of a special law, but also to those granted by administrative agencies in which the power to grant franchises
has been delegated by Congress. (Diaz vs. Sec. of Finance, 654 SCRA 96, 2011)

 Toll way fees are not taxes but regulatory fees, and therefore may be subjected to VAT.

 VAT on toll way operations cannot be deemed a tax on tax (tax pyramiding) due to the nature of VAT as an indirect
tax. Once shifted, the VAT ceases to be a tax and simply becomes part of the cost that the buyer must pay in order
to purchase the good, property or service.

34. One of the incentives granted to inventors is tax exemption from income tax (the exemption does not include other taxes such
as VAT). X sold his invention to R Manufacturing who undertook to produce and distribute the invented products here and
abroad. Can R enjoy X’s privilege?
Answer. The tax exemption granted to inventors does not extend to the entity that commercially produces and distributes the
invented products because tax exemption is NON-TRANSFERRABLE.

35. Mile Corporation is a foreign corporation operating inside the export processing zone. It imported a 14-wheeler truck for its
own use. Hence, no taxes and duties were collected by the government under its special tax privileges. When the vehicle
arrived “Mile” realized that the vehicle does not fit its requirement. “Mile” decided to sell the unit and bring in another one that
will be of use to the corporation. Mr. Randante, a businessman from the customs territory learned of this sale and immediately
took advantage of the cheap price offered by “Mile. Is there any tax implication should the sale between the seller and buyer
materialized?
Answer. Mr. Randante shall be liable to pay all taxes that were waived by the government when “Mille” imported the vehicle
because the tax exemption privilege granted to “Mile” is non-transferrable. The export processing zone is considered a foreign
territory and the buyer is deemed to have imported the vehicle himself.

36. Rural Banks are enjoying tax exemption under RA 7353. X, Y and Z are rural banks. An agreement among them to merge and
consolidate was arrived at in order to expand their business operations. What is the tax implication of their agreement to
merge and consolidate? (One Network Bank, Inc. vs. CIR, CTA case No. 8640, April 11, 2014)
Answer. Section 15 of RA 7353, which grants tax exemption in favor of rural banks, does not extend to mergers or
consolidations of banks. While Sec. 18 thereof encourages the consolidation and mergers of rural banks, the law did not go so
far as to give a fresh tax exemption to consolidated rural banks for another five (5) years of operation. Tax exemption is never
presumed. The law granting the exemption must be clear, unequivocal and stated in clear language to plain to be mistaken.
Moreover, tax exemption is non-transferrable.

37. X Corporation was granted a legislative franchise for 20 years. Today, the government decides to withdraw X’s tax privilege by
cancelling the franchise. X vehemently protested contending that: (a) it has been enjoying the tax privilege for the last 10 years
and therefore the government is estopped from revoking its franchise, (b) that to withdraw its tax exemption without its consent
will squarely violate the non-impairment clause of the Constitution. Are the arguments of X meritorious? Reason.
Answer. X’s arguments are not tenable. The general rule holds that government is not bound by the Doctrine of Estoppel.
Franchise is tax exemption granted unilaterally by the State and it is always revocable. Franchise is not protected by the Non-
impairment Clause of the Constitution because it is not a contract entered into between the government and the taxpayer. No
“meeting of minds” resulted from a franchise. Franchise is different from a contractual tax exemption. The latter is a valid
contract between the government and the taxpayer. This is not revocable at will without the consent of the other party and it is
protected by the non-impairment clause of the Constitution.

38. X was encouraged to invest in government bonds because it gives higher interest rates and the interest income earned
therefrom as provided in the bond contract is tax exempt. The bonds X purchased mature in 61 months. Of late, the interest
rate was lowered and the interest income was even subjected to final withholding taxes. X questions the changes made on his
investment and invokes the non-impairment clause of the constitution. Is X correct?
Answer. Yes. X is correct because he enjoys a contractual tax exemption when his purchased the government bonds. That
contractual tax exemption, in the real sense of the term and where the non-impairment clause of the Constitution can rightly be
invoked are those agreed to by the taxing authority in contracts, such as those contained in government bonds or debentures,
lawfully entered into by them under enabling laws in which the government, acting in its private capacity, sheds its cloak of
authority and waives its governmental immunity. This contractual tax exemption should not be confused with tax exemption
granted under franchises which is not protected by the non-impairment clause of the Constitution. (1999 case)

39. PAGCOR contends that RA 9337 that withdrew its tax exemption from corporate income tax is null and void. That the
withdrawal of its franchise violated the non-impairment clause of the Constitution. Is PAGCOR correct?
Answer. PAGCOR’s argument that the withdrawal of its exemption from corporate income tax under RA 9337 is null and void
and in violation of the non-impairment clause of the Constitution has no legal basis. A perusal of the legislative records of the
Bicameral Committee dated October 27, 1997 would show that the exemption of PAGCOR from the payment of corporate
income tax was due to the acquiescence of the Committee on Ways and Means to the request of PAGCOR that it be exempt

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 from such tax and it was not based on a classification showing substantial distinctions which make for real differences. House
Bill No. 3555 would also show that it is the legislative intent that PAGCOR be subject to corporate income tax and excludes it
from all other taxes. The exemption enjoyed by PAGCOR is a mere franchise. Sec. 11, Art. XII of the Constitution provides
that no franchise or right shall be granted except under the condition that it shall be subject to amendment, alteration or repeal
by the Congress when the common good so requires. Franchise partakes the nature of a grant, which is beyond the purview
of the non-impairment clause of the Constitution. Thus, the franchise enjoyed by PAGCOR is revocable anytime and its
revocation did not violate the “NIC” of the Constitution. ( PAGCOR vs. BIR, March 15, 2011)

40. Under RA 9337, the Philippine Amusement and Gaming Corporation (PAGCOR) is now excluded from among the GOCCs
that are exempt from corporate income tax. When said exemption was withdrawn PAGCOR invoked violation of its right to
equal protection under the Constitution. Is there a violation as claimed by PAGCOR?
Answer. PAGCOR cannot find support in the equal protection clause of the Constitution, because legislative records of the
Bicameral Conference Meeting dated Oct. 27, 1997, of the Committee on Ways and Means, would show that its previous
exemption from payment of corporate income tax was allowed merely on PAGCOR’s own request to be exempted and was
not made pursuant to a valid classification statute based on substantial distinctions and the other requirements of a
reasonable classification by legislative bodies. Hence, the withdrawal did not violation the equal protection clause because
there was no intention at all to grant it tax exemption. Its exemption was due to the acquiescence of the Committee on Ways
and Means to the request made by it.

PAGCOR enjoys a franchise (tax exemption) that partakes the nature of a grant. The Constitution provides that no
franchise or right shall be granted except under the condition that it shall be subject to amendment, alteration or repeal by the
Congress when the common good so requires. RA 9337 of the Congress withdrawing the exemption of PAGCOR from
corporate income tax did not violate the Non-impairment Clause” of the Constitution because franchise is always revocable.

41. PAGCOR has other income realized from other related services. (a) Is the income subject to corporate income tax? (b)
PAGCOR Gives benefits to its managerial and supervisory employees, is PAGCOR subject to Fringe Benefit Taxes? (c) Is
PAGCOR exempt from the payment of VAT on its purchases of goods and services? (PAGCOR vs. CIR, GR Nos. 210704 &
210725, November 22, 2017)
Answer. (a) PAGCOR’S income from gaming operations is subject only to 5% franchise tax under PD 1869, as amended. All
other income from other related services is subject to the normal corporate income tax of 30%. (b) PAGCOR is a mere
withholding agent in the Fringe Benefit Tax. The FBT is imposed on PAGCOR’S managerial and supervisory employees who
received the benefit. PAGCOR’S liability as a withholding agent is NOT covered by the tax exemption it enjoys under its
Charter. (c) PAGCOR enjoys exemption from indirect taxes (VAT) under its Charter.

42. BIR contends that since PAGCOR is now subject to corporate income tax it should likewise be subject to the 12% VAT. Is the
BIR Correct? (PAGCOR vs. BIR, March 15, 2011)
Answer. RR No. 16-2005 subjecting PAGCOR to the VAT is invalid for being contrary to RA No. 9337. Nowhere is it provided
under RA 9337 that PAGCOR can be subjected to VAT. The said law removed the exemption of PAGCOR from corporate
income tax but retained its exemption from other direct and indirect taxes like VAT which is provided by its charter (PD 1869),
a special law that granted it tax exemption.

43. R Corporation (domestic) entered into a merger with its wholly-owned domestic subsidiaries S Corporation and U Corporation.
S and U transferred all their assets and liabilities to R. R Corporation is the surviving corporation. R did not issue any shares of
stocks to S and U in consideration of the assets and liabilities it got from S and U because S and U are wholly-owned by R. Is
the merger between R, S and U tax free?
Answer. This activity is called upstream merger between a parent and its subsidiaries where the parent company will not be
issuing any shares to the subsidiaries in exchange for the assets transferred to it. In effect, the transfer is in the nature of
donation made by the subsidiaries to the parent, hence subject to donor’s tax. The intended merger has the effect of
dissolving and liquidating the subsidiaries without payment of the corresponding taxes. ( BIR Ruling No. 614-12, November 9,
2012)

44. X is a stockholder of W Corporation. He decided to exchange his real property to shares of stocks of said corporation without
monetary consideration so that he can gain control of the corporation. What is the tax implication of said transaction? (Kudao
& Sons, Inc. vs. CIR, CTA case No. 8501, January 13, 2014)
Answer. Transfer of real property in exchange for controlling shares of stock is a tax-free exchange transaction under Sec.
40(C)(2) of the NIRC but is subject to VAT under Sec. 109 of the Tax Code. Tax base for DST purposes in a sale of shares of
stock is the total par value of the shares sold and NOT the gross purchase price. (CIR vs. Eco Leisure & Hospitality Holding
Co., Inc. CTE EB N0. 1013, January 14, 2014)

45. X Corporation purchased all properties from Y Corporation under a Purchase and Sale Agreement. The BIR noticed that the
seller still has unpaid DST. Having evidence to prove that X is now in possession of all properties of Y, BIR enforces the tax
liabilities of Y against X. Is the BIR correct? [CIR vs. Bank of Commerce, GR No. 180529 (2013)]
Answer. The purchase and sale of identified assets between 2 corporations under a Purchase and Sale Agreement does not
constitute a merger as defined under the Tax Code, the seller and purchases are still considered separate and different
entities from one another. Thus, X, the purchaser cannot be held liable for the payment of the deficiency tax liability of Y.

46. The government entered into a contract with X. The latter will supply foreign rice in support of the government’s feeding
program. T is not a party to the contract and he files a taxpayer’s suit against the government questioning the validity of the
contract entered into involving the use of public funds in the purchase of the rice. Will the action prosper?

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 Answer. A taxpayer need not be a party to the contract to challenge its validity. All that is required in a taxpayer’s suit is that
the party suing as taxpayer must specially prove sufficient interest in preventing illegal expenditure of money (public funds)
raised by taxation. (2005 case)

 The application of Direct Injury Test in a taxpayer’s suit is no longer considered the sole criteria in said action.

 This class suit is primarily filed to question illegal expenditure or misappropriation of public funds.

47. X filed a taxpayer’s suit before the RTC questioning a loan contract entered into by the government because the interest
expense therein is deemed to be higher than the lowest bid. The court dismissed the case for reason that X has no personality
to question the contract as he was not a party to the contract. In addition X failed to prove that he is directly injured by the
contract. Is the dismissal valid? (Mamba vs., Lara, 608 SCRA 149)
Answer. Under a taxpayer’s suit, the taxpayer need not be a party to the contract to challenge its validity. As long as taxes are
involved, people have a right to question contracts entered into by the government. The old “direct injury test” in taxpayer’s suit
has been relaxed as it involved procedural technicality. It now uses “transcendental importance”, “paramount public interest” or
“far-reaching implication” where ordinary citizens and taxpayers were allowed to sue even if they failed to show direct injury to
them as long as there is misappropriation of public funds, the class action of taxpayers’ suit may be availed of to question
illegal disbursement. Hence, the dismissal is not correct.

48. Is there a violation of “public purposeness” in taxation if taxes (money realized from the use of power of taxation) are used for
the benefits of identified private individuals?
Answer. General Rule – taxes should be spent for the benefit of the greater majority of the people. However, if the expenditure
of public funds (a) will enhance the social justice program of the government, (b) it is of transcendental importance and (c) it
has a far reaching implication benefiting not only the present but also the future generation, the use of public funds raised from
taxation is not deemed misappropriation that can be questioned under a taxpayer’s suit.

49. E Corporation sold its commercial building to X, (corporate taxpayer to natural person) who on the same day of purchase sold
the very same property to S Corporation. Is the scheme designed to avoid taxes or evade taxes?
Answer. This is a case of tax evasion. The three (3) elements of tax evasion were present. The two transfers were tainted with
fraud. When E sold the property to X, it paid the 6% capital gains tax instead to the normal income tax of 5% - 32%. Then X
sold the same property to S paying also the 6% capital gains tax. Had this been a bona fide transaction of a sale from E to S,
the normal income tax would have been paid. ( CIR vs. Estate of Benigno Toda, Jr., 483 SCRA 293)

50. Can the CIR issue an administrative tax amnesty?

Answer. Nothing in the tax Code gives the CIR the power to issue tax amnesty. A tax amnesty, being a general pardon or
intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a
revenue or tax law, partakes of an absolute forgiveness or waiver by the government of its right to collect what otherwise
would be due it. (Republic vs. IAC) The power of taxation is legislative in character and a legislative prerogative (NPC vs.
Albay). The waiver partakes of the nature of tax exemption. The Constitution requires that law granting tax exemption must
have the concurrence of a majority of all members of Congress. The power to tax includes the power to exempt thereof. It
follows, therefore, that only the legislatures have the power to grant tax amnesty and not the CIR.

51. Under the Tax Amnesty Law, a taxpayer is not qualified if his tax case has already been decided with finality by the court. X,
applied for tax amnesty, submitted all records and documents required and paid the tax under the program. The CIR would
like to continue with its tax assessment to which X objected because among the benefits attached to the tax amnesty program
is that the taxpayer shall be exempt from tax examination. The CIR showed X a copy of a revenue regulation holding that
taxpayer with pending tax investigation is not qualified under a tax amnesty program. CIR insisted on the continuance of the
assessment. X refused to partake in the investigation and questioned the government on that score? Is the contention of the
CIR tenable?
Answer. The CIR cannot continue with the tax examination because X has availed itself of the Tax Amnesty Program. All the
benefits attached to the program are not suspensive or conditional in character but they are immediate in application. The
revenue regulation of the BIR holding that a taxpayer with pending tax assessment is not qualified under a Tax Amnesty
Program has expanded the law it seeks to implement. The Revenue Regulation cannot be given due course because what the
law provides is “taxpayers with tax cases already decided by competent court” cannot avail of the tax amnesty, X’s case is still
pending investigation.

52. X is a corporation operating within the special economic zones. Can it validly avail of the tax amnesty program of the
government? (b) What is Tax Amnesty? (c) What may a taxpayer enjoy under a tax amnesty program? (Asia International
Auctioneers, Inc. vs. CIR, Sept. 12, 2012)
Answer. X may validly avail of the tax amnesty program of the government because taxpayers within the special economic
zones are not excluded from the coverage of the program. The Tax Amnesty Law did not specifically exclude them.

(a) Tax amnesty is a general pardon or the intentional overlooking by the State of its authority to impose penalties on
persons otherwise guilty of violation a tax law. It partakes of an absolute waiver by the government of its right to collect
what is due it and to give the tax evaders who wish to relent a chance to start with a clean slate.

(b) Amnesty taxpayers after complying with the requisites provided under the program shall be exempt from tax
investigation/assessment of the BIR, among other benefits provided under the Tax Amnesty Law. .

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  Nature of tax amnesty – It is similar to tax exemption which is disfavored and generally construed strictly against the
taxpayer and liberally in favor of the taxing authority.

 The taxpayer has the liberty to choose which tax amnesty programs it wishes to avail of as long as it is within the
bounds of law.

53. In 2010 X availed of the tax amnesty program of the BIR by submitting all the requisite documents thereto and payment of the
corresponding tax. Within the same year BIR wanted to conduct an examination of X’s books and business records. X
protested contenting that he is exempt from assessment under the Tax Amnesty program of the government. The tax officials
posit that his availment of the tax amnesty program is still subject to verification and validation; meanwhile X is not exempt
from tax investigation. Is the government correct?
Answer. Amnesty taxpayers like X may immediately enjoy the privileges and immunities under the Tax Amnesty Law (RA
9480) as soon as requisite documents and papers are filed with the RDO or an authorized agent bank and payment of the
amnesty tax. The benefits provided under the amnesty law are not depended upon the verification and validation of the BIR.
(CS Garment, Inc. vs. CIR, March 12, 2014)

54. PBCom filed its quarterly ITR for the 1 st & 2nd qrts. Of 1985. Later, if suffered losses and reported a net loss for 1985 & 1986.
However, it earned rent for which taxes were previously withheld by their lessees. In Aug. 1987, if requested for a tax credit
representing tax overpayments in the 1st & 2nd qrts. Of 1985. In July 1988, it also claimed refund of the creditable taxes
withheld from 1985 & 1986 rentals. The CIR change the prescriptive period for tax refund under a RMC. PBCom relied on said
circular. Is the claim for refund beyond the 2-year period valid as the same was based on the Revenue Memorandum
Circular?
Answer. The claim for refund is already time barred. Taxes are the lifeblood of the nation, thus the modes to enforce collection
should be summary and rarely interfered with. From the same perspective, claims for refund/credit should be exercised with
the time fixed by law in order not to unduly delay the BIR in its collection functions. The RMC issued by the CIR is beyond the
provision of the law. An erroneous interpretation of the law does not vest the taxpayer with a shield against judicial action.
Revenue Regulations and BIR Rulings cannot amend Tax laws.

55. The CIR issued 2 Revenue Memorandum Circulars affecting pawnshops. X, a pawnshop operator contested the RMC’s and
filed a case in the RTC. CIR filed a Motion to dismiss contending that RTC has no jurisdiction. RTC denied CIR’s Motion to
Dismiss. Was the RTC correct?
Answer. The power to review rulings issued by the CIR is lodged with the CTA and not with the RTC. The Revenue
Memorandum Circulars are ruling or opinions issued by the CIR implementing the provisions of the Tax Code on the taxability
of pawnshop. Clearly the regular court has no jurisdiction over the issues obtaining.

56. The VAT law provides that the President, upon the recommendation of the Sec. of Finance, shall raise the VAT rate of 10% to
12% after the given conditions are met satisfactorily. Was there an invalid delegation of legislative power to tax to the
president?
Answer. There was no undue delegation of legislative power to tax but only the discretion as to the execution of the law, which
is constitutionally permitted. The Congress does not abdicate its functions or unduly delegate power when it describes what
job must be done, who must do it and what is the scope of his authority. In the VAT issue, the Sec. of Finance merely acted as
the agent of the legislative department in determining and declaring when the event of increase should commence. The
President cannot set aside the findings of the Sec. of Finance but she must act accordingly. ( Abakada Guro Party List vs.
Ermita, Sept. 1, 2005)

57. Sec. 12, Art, VI of the 1987 Phil. Constitution encourages the use of Filipino labor, domestic materials and locally produce
goods. (Concept of “preferential use” and “Filipino First policy”). However, our government grants tax and duty-free importation
to businessmen operating inside the export processing zone. Is this not violative of the “preferential use” of the Constitution?
Answer. The mere fact that the law authorizes the importation and trade of foreign goods does not suffice to declare the
statute granting tax and duty-free exemption unconstitutional on at ground alone. It is true that the Constitution does not
encourage the unlimited entry of foreign goods, services and investments into the country yet does not prohibit them either.
The current dictates of time and global market is to allow an exchange on the basis of equality and reciprocity, frowning only
foreign competitions that are discriminatory and unfair. ( Coconut Oil Refiners Association, Inc. vs. Torres, July 29, 2005)

58. A petition was filed questioning the constitutionality & validity of EO No. 97(A) issued pursuant to RA No. 7227 which, among
other things, created the Subic Special Economic Zone and granted thereto special tax privileges. Petitioners allege that the
EO violated their right to equal protection by limiting the tax and duty-free privileges to businesses and residents within the
fenced-in area of the Economic Zone. Is the contention correct?
Answer. No. The order is not violative of the equal protection clause and it is not discriminatory. There are real and substantial
differences between those inside and outside the Zone, thus justifying a valid and reasonable classification. Equal protection is
not an absolute right and is subject to reasonable classification. RA 7227 aims to accelerate the conversion of military
reservation to productive uses. Therefore, the “lands covered under the Bases Agreement” are its object. The classification
does not merely apply to existing conditions because upon the conversion of the Zone into a self-sustaining industrial and
commercial area, there will indeed be a long-term difference between the Zone and the areas outside. Also, all residents and
businesses within the “secured area” are treated similarly.

59. SC Johnson was licensed by SC Johnson & Son (USA) to use its trademarks. The agreement was registered with the Bureau
of Patents (Phils.) For this privilege, SC Johnson pays royalties to the US Corp. which was subject to 25% withholding tax. In
1993, SC Johnson filed for tax refund of overpaid withholding tax. It claims that under the Most Favored Nation (MFN) Clause

7
 of the RP-US Tax Treaty in relation to the RP-West Germany Tax Treaty, the royalty payments it made were subject only to
10% tax. Is SC Johnson & Son Correct?
Answer. The 10% tax claimed is not correct. The RP-US Tax Treaty states that the applicable rate would be the lowest rate of
Philippine tax that may be imposed on royalties of the same kind paid under similar circumstances (Most Favored Nation
Clause) to a resident of a third state. The 10% rate provided in the RP-West Germany Treaty is not applicable. This is
because the RP-US Treaty does not provide for a matching tax credit of 20% for taxes paid to the Philippines on royalties
expressly allowed in the RP-West Germany Treaty. The entitlement of the 10% rate by US firms despite the absence of a
matching 20% credit would derogate from the design behind the “MFN” clause to grant equality of international treatment since
the tax burden laid upon the income of the investor is not the same in the two countries. The similarity of payment of taxes is a
condition for the enjoyment of the MFN treatment precisely to underscore the need for equality of treatment. Royalty is not a
tax.

60. Real Estate dealers are required to withhold taxes on every sale of real property they make. These dealers argued that they
are being singled out because other businesses are not required to withhold taxes on every sale they conclude during the
course of their business operations. The dealers believe that there is violation of the uniformity and equality clause of the
Constitution. Are the dealers correct?
Answer. The taxing authority has the power to make reasonable classifications for purposes of taxation. Inequalities resulting
from a singling out of one particular class for taxation or exemption do not infringe any constitutional limitation. The real estate
industry is, by itself, a class and can be validly treated differently from other business enterprises. The Congress has the
power to choose the subject or object of taxation provided all those similarly situated in that group are treated alike without
distinction. (CREBA, Inc. vs. the Hon. Executive Sec. Alberto Romulo, March 9, 2010)

 The choice of the legislative body is valid only when the requisites of classification statutes are met.
 Only the legislative body exercises the power to choose the object/subject of taxation and to classify or reclassify them
for tax purposes.

61. May a taxpayer who has pending claims for unutilized input tax under the 0% VAT transactions credit or set-off said claims
against his other tax liabilities? Reason.
Answer. No. Taxes and claims for refund cannot be set-off (legal compensation) for the simple reason that the government
and the taxpayer are not creditor and debtor of each other. There is material distinction between a tax and a claim for tax
credit and tax refund. Claims for refunds just like debts are due from the governments in its corporate capacity, while taxes are
due to the government in its sovereign capacity.

Moreover, set-off is available only if both obligations are due, demandable and fully liquidated, Liquidated debts are those
where the exact amounts have already been determined. In the instant case, the claim of the taxpayer for VAT refund is still
pending and the amount is still to be determined. A fortiori, the liquidated obligation of the taxpayer to the government cannot
therefore, be set-off against the unliquidated claim which the taxpayer conceived to exist in his favor.

62. May the CIR be held personally liable for damages caused to a taxpayer in the performance of his official duties? (Chato vs.
Fortune Tobacco, June 19, 2007)
Answer. Yes. The rule in this jurisdiction is that a public officer may be validly sued in his/her private capacity for acts done in
the course of the performance of the functions of the office, where said public officer: (a) acted with malice, bad faith, or
negligence; or (2) where the public officer violated a constitutional right of the plaintiff.

In the cited case, the then CIR issued a Rev. Regulation (RMC 3793) in violation of Fortune Tobacco’s constitutional right
against deprivation of property without due process of law and the right to equal protection of the laws.

63. X was suspected to have amassed ill-gotten wealth while in public office. He maintained various accounts in several and
different banks under fictitious names. Upon investigation, the CIR placed these bank accounts under constructive distraint.
X’s counsel challenged the CIR’s action for want of an assessment against X. Is the CIR justified in freezing the accounts of
X?
Answer. The CIR is justified in placing the accounts of X under constructive distraint. The act of maintaining fictitious accounts
is an act of concealing properties to evade payment of taxes which warrants the remedy of constructive distraint under Sec.
206 of the Tax Code.

64. Is the BIR authorized to freeze inquiries of a bank deposit of a taxpayer?

Answer. Sec. 206 of RA 8424 provides the legal basis of such authority. To safeguard the interest of the government, the CIR
may place under constructive distraint the property of a taxpayer who, in his opinion (a) is concealing property for purposes of
tax evasion, (b) intends to leave the country, (c) obstruct the collection of taxes, (d) is retiring from business and (e) removing
property from where they are collected for purposes of tax evasion.

65. The legal officers of the BIR relying on the provision of Sec. 220 of the NIRC instituted judicial action on behalf of the
government against X. The same officials filed a Petition for Review on Certiorari before the Supreme Court. The highest
Court dismissed the petition. Basis of dismissal – A Petition for Review on Certiorari before the CA or the SC, without the
participation of the Solicitor General is defective, being the legal officer of the Republic of the Philippines, he is the rightly
person who should represent the government in tax cases before the CA and the SC, not the legal officers of the bureau.

66. Distinguish indirect taxes from withholding taxes. (Asia International Auctioneers, Inc. vs. CIR, Sept. 26, 2012)
Answer. In indirect taxes the incidence of taxation falls on one person but the burden thereof can be shifted or passed on to
another person, such as when the tax is imposed upon goods before reaching the consumer who ultimately pays for it. In

8
 withholding of taxes, the incidence and burden of taxation fall on the same entity, the statutory taxpayer. The burden of
taxation is not shifted to the withholding agent who merely collects, by withholding the tax due from income payments of
entities arising from certain transactions and remits the same to the government.

67. The Tax Amnesty Law (RA 9480) expressly disqualifies a withholding agent from the tax amnesty program because he is not
a taxpayer when he withheld taxes for and in behalf of the government, only erring taxpayers are qualified under the said law.
CIR contends that “X” is disqualified to avail itself of amnesty because it is “deemed” a withholding agent for deficiency VAT
and excise taxes. Both taxes are indirect taxes where the incidence of taxation falls on one person but the burden thereof can
be shifted or passed on to another person. Is X disqualified? (Asia International Auctioneers, Inc. vs. CIR, Sept. 26, 2012)
Answer. In this particular case, the CIR did not assess taxpayer as a withholding agent that failed to withhold or remit the
deficiency VAT and excise taxes to the BIR under the relevant provisions of the NIRC. Indeed, a withholding agent who
withheld taxes but did not remit the correct amount withheld to the government cannot avail of tax amnesty. Indirect taxes like
VAT and excise taxes are different from withholding taxes. Deficiency VAT and excise taxes cannot be deemed as withholding
taxes merely because they constitute indirect taxes. Hence, X has the proper standing to avail of the tax amnesty program.

68. Briefly explain why a withholding agent is given the authority to file a refund claim?
Answer. In the case of CIR vs. Smart Communication, Inc., 629 SCRA 342 (2010), the SC held that a withholding agent has a
legal right to file a claim for refund for two reasons: (a) he is considered a “taxpayer” under the NIRC as he is personally liable
for the withholding tax as well as for deficiency assessment, surcharges, and penalties should the amount of the tax withheld
be finally found to be less than the amount that should have been withheld under the law. (b) As an agent of the taxpayer, his
authority to file the necessary income tax and to remit the tax withheld to the government impliedly includes the authority to file
a claim for refund and to being an action for recovery of such acclaim.

69. X, a local domestic bank earned income on its foreign currency loans granted to its borrowers. X was supposed to pay the
onshore (local) tax on interest derived from such loan thru its payor-borrower acting as the withholding agent and payment
done thru the withholding tax system. The payor-borrower failed to withhold the onshore tax on its payment made to X. The
BIR enforces collection of the tax against X, the interest income earner. X contends that it is not liable because the tax was
supposed to be the liability of the payor-borrower being the withholding agent. Is X correct? (RCBC vs. CIR, Sept. 7, 2011)
Answer. The liability of the withholding agent (WA) for its failure or negligence to withhold taxes is different and independent
from the liability of the income earner to pay the tax on the corresponding income earned. The WA cannot be made liable for
the tax due because it is X who earned the income subject to the withholding tax. The WA is liable only insofar as he failed to
perform his duty to withhold the tax and remit the same to the government. But the liability for the tax remains with X, the
taxpayer, who had earned the income on the transaction.

70. X paid Y an amount of money representing the income of the latter. X failed to withhold the corresponding tax therefrom. The
BIR assesses Y the unpaid withholding tax relative thereto. Y refused to pay contending that it is not the withholding agent in
the said transaction and therefore the liability to withhold taxes should rest on X. The BIR believes otherwise. Is Y correct that
the withholding tax due from the transaction where it earned an income should be collected from X, the payor-withholding
agent?
Answer. The liability of the withholding agent is independent from that of the taxpayer. X cannot be made liable for the tax due
because it is Y who earned the income subject to withholding tax. The withholding agent is liable only insofar as he failed to
perform his duty to withhold the tax and remit the same to the government. The liability of the tax remains with the taxpayer
because the gain was realized and received by him. Y cannot evade his liability to pay the tax by shifting the blame on X, the
payor-withholding agent. (RCBC vs. CIR, September 7, 2011)

71. The decision of the SC in the case of CIR vs. Pilipinas Shell Petroleum Corp., April 25, 2012 that the excise tax imposed on
petroleum products is the direct liability of the manufacturer, hence, it cannot shift the excise taxes it paid to international
carriers buying its petroleum products because the latter are exempt from excise taxes. Manufacturers are not entitled to claim
tax refund. The SC recently re-examined said ruling and in the latest case of CIR vs. Pilipinas Shell Petroleum Corp.,
February 19, 2014, The SC granted the petroleum manufacturer’s claim for refund or tax credit of excise taxes on petroleum
sold to international carriers exempt from excise taxes on petroleum products giving primary consideration to its broad
implication on the country’s commitment to international agreement.

72. Of late, our government appropriated big sum of money for the relocation of the illegal settlers. A cause oriented group
questioned the same for being violative of the general principle in taxation that taxes are exacted only for a public purpose
which means that taxes cannot be used for purely private purpose or for the exclusive benefit of private persons, it would be a
robbery for the State to tax its citizens and use the funds generated for a private purpose (benefiting a group of identified
private individuals). Is the contention valid? (Planters Products, Inc. vs. Fertiphil Corp., 548 SCRA 485)
Answer. The Supreme Court held that public money may now be used for the relocation of illegal settlers, for lost-cost housing
and urban or agrarian reform because these projects enhance the social justice programs of the government. Public purpose
is an elastic concept that can be hammered to fit modern standards. This is traditionally viewed as essentially government
functions, like the delivery of basic services to the people, building roads and bridges that benefit the greater majority of the
people.

73. When may the BIR commence the collection of deficiency interest and delinquency interest?
Answer. Deficiency interest shall be collected from the date prescribes for the payment of the tax until the full payment thereof.
Whereas, the delinquency interest shall be collected on the due date appearing on the notice and demand of the
Commissioner until fully paid. (Takenaka Corp. (Phil. Br.) vs. CIR, CTA EB case No. 745, September 4, 2012)

9
74. The Canons of a Sound Tax System has three (3) elements, namely: (a) Fiscal adequacy, (b) Administrative feasibility and (c)
Theoretical justice. Administrative feasibility means that the system should provide for tax laws that are simple, concise and
readily understood not only for the benefit of the taxpayers but likewise it must be capable of being effectively administered
and enforced with the least inconvenience to the both the government and the taxpayer. If these requisites are not met, is the
tax measure invalid on that score? (Diaz, vs. Sec. of Finance, July 19, 2011)
Answer. Non-observance of the canons will not render a tax imposition invalid “except to the extent that specific
constitutionally or statutory limitations are impaired.” Even if the imposition of VAT on toll way operators may seem
burdensome to implement, it is not necessarily invalid unless some aspect of it is shown to have violated any law or the
Constitution.

On Transfer Taxes:
NOTE: The TRAIN Law which took effect January 1, 2018 has practically amended ESTATE TAX and DONOR’S TAX as to their
tax rates, time of payment, allowable deductions and other administrative matters.

184. During the lifetime of X, he executed a will. Among the conditions he stated in the will is that “all my real properties shall not be
transferred by any means whatsoever within 15 years from my death”. Under this conditional transfer, when does the estate
tax accrue? What value shall be considered for purposes of computing the estate tax?
Answer. The estate tax accrues at the time of death. Death is the generating source from which the power of the State to
impose estate tax commences, hence, the death tax should be measured by the value of the properties at the time of death
regardless of (a) postponement of actual possession, or (b) subsequent appreciation or depreciation of the property. ( Lorenzo
vs. Posadas)

185. X, the administrator of Y’s estate. Prepared and paid the estate tax in due time. In the estate tax return X deducted all unpaid
obligations of Y that were left unpaid by the decedent. 6 months thereafter the BIR sent the administrator a deficiency
assessment notice contending that some of the debts deducted in the estate tax return are disallowed for reason that they
were condoned by Y’s creditors. Hence, non-deductible. X argues that the debts were existing and unpaid at the time of death
and he has no knowledge of the alleged condonation of the debts. The BIR did not agree. Are the debts deductible from the
gross estate of Y? Reason. (Dizon vs. CTA, GR No. 340944, April 30, 2008)
Answer. In determining the deductible items and claims against the estate, the Date of Death Valuation Rule applies. Which
means that post developments are not considered. What eventually occurs after the estate tax has been paid should not affect
the payment already made.

186. X and his family are wrapping-up all their affairs in the country because in a month’s time or so they are migrating to Italy. X sold
his three-door apartment to his cousin for only Php 5.0 million. The property at the time of sale has a fair market value of Php
9.5 million. What is the tax implication if subject property is sold for insufficient consideration? [Sec. 100 in relation to Sec.
24(D), NIRC]
Answer. When ordinary assets are transferred for less than adequate and full consideration in money or money’s worth, the
amount by which the FMV of the property exceeded the value of the consideration shall be deemed a gift and subject to
Donor’s Tax. (FMV – Consideration = Deemed gift subject to Donor’s Tax)

187. X sold his shares of stocks to a friend for a price less than the fair market value then prevailing. BIR imposes donor’s tax on the
transaction. X refuses and argues that there was no donative intent in the transfer of the shares of stocks as it was in fact a
sale and not a donation. Is X correct? (Philamlife vs. SOF, GR No. 210987, November 24, 2014)
Answer. X is not correct. Absence of donative intent, if that be the case, does not exempt the sale of stocks from donor’s tax
since Sec. 100 of the Tax Code categorically states that the amount by which the FMV of the property exceeded the value of
the consideration shall be deemed a gift. Donative intent is not a factor in determining whether or not donor’s tax is imposable
in the disposition of ordinary assets.

188. Are political campaign expenses deductible?

Answer. As to the candidate, political party or contributor, the political campaign expenses are not deductible. If the amounts
contributed are fully utilized, they are exempt from tax and thus there’s no need for any deduction at all. However, any excess
in the campaign fund (unused) shall be taxable and subject to income tax to the candidate and the political party.

To the supplier of goods or services, he may avail of a deduction. RR No. 8-2009 provides that a 5% creditable withholdings
tax shall be paid for their purchases of goods and services intended to be given as campaign contributions to political parties
or candidates. This 5% CWTax shall be credited or deducted against the total income tax liability of the supplier of goods or
services.

189. Are donations/contributions to international NGOs deductible from gross income?

Answer. The NS-NP Corporation or organization must be created or organized under Philippine laws and that an NGO must
be a non-profit domestic corporation. A foreign corporation whether resident or non-resident cannot be accredited as a donee
institution, hence, the contribution to it is non-deductible from gross income. (BIR Ruling No. 19-01, May 10, 2001)

190. X left a will which is now before the probate court. During the pendency of the estate proceeding of the deceased, the BIR filed a
collection case against the estate. The heirs insist that the collection is premature. The CIR believes otherwise? Is the CIR
correct? (Marcos II vs. CA, June 5, 1997)

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 Answer. The pendency of the estate proceeding of a deceased person does not prevent the BIR from filing collection of unpaid
taxes. The BIR is not required to secure the approval of the probate court to enforce the judicial collection of unpaid taxes.

191. During the lifetime of X, he executed a will. Among the conditions he stated in the will is that “all my real properties shall not be
transferred by any means whatsoever within 15 years from my death”. Under this conditional transfer, when does the estate
tax accrue? What value shall be considered for purposes of computing the estate tax? (Lorenzo vs. Posadas)
Answer. The estate tax accrues at the time of death. Death is the generating source from which the power of the State to
impose estate tax commences, hence, the death tax should be measured by the value of the properties at the time of death
regardless of (a) postponement of actual possession, or (b) subsequent appreciation or depreciation of the property.

On VAT:

Under the TRAIN LAW, the new threshold for VAT purposes is a gross sales or gross receipt of Php 3.0
million from Php 1,919,500.00. For Lease of residential units is Php 15,000 from Php 12,800.00 per month.

192. X is PEZA-Registered. Sometimes it engages in activities which are not registered with PEZA. Is income derived from
unregistered activities of X taxable?
Answer. The income tax exemption of a PEZA-Registered Enterprise applies only to income derived from its registered
activities. When X engages in activities which are not registered with PEZA, the income or receipts derived from all its
unregistered activities shall be subject to regular internal revenue tax, such as VAT. In such case, X is obliged to register as a
VAT taxpayer and issue a VAT official receipt or invoice for every sale or transaction which is subject to VAT, Should X use its
VAT official receipt or invoice to evidence its VAT exempt sale, the words “VAT Exempt Sale” must be prominently printed on
the VAT official receipts/invoice as failure to do so make it liable to account for the VAT as if the sale is not VAT exempt.
(Sutherland Global Services, Phil. Inc. vs. CIR, CTA case No. 8180, January 13, 2014, CIR vs. First Sumiden Realty, Inc. CTA
EB No. 975, January 7, 2014)

Sale of fixed assets used in PEZA-Registered activities is subject to ordinary income tax. (BIR Ruling 291-2012, April
25, 2012)

Enterprises registered with PEZA, BOI and BOI-ARMM is NOW subject to ordinary tax investigation following the
revocation of MOA with PEZA, BOI and BOI-ARMM. (RR No. 14-2012, April 2, 2012)

193. X Medical Services, Inc. is a medical/health services provider. X sells medicards to its clients at a package price which includes
discounts on doctors’ fees, laboratory and examination fees, medicines, and other hospital bills in case of need and use. The
buyers can use the medicards for medical services at a discounted rate. Are the amounts received by X Corporation which is
earmarked for payment to doctors, hospitals and clinics subject to 12% VAT?
Answer. Amounts earmarked and eventually paid to X by X’s clients do not form part of X’s gross receipts for VAT purposes.
X’s gross receipts shall be the total amount of money or its equivalent representing the service fee actually and constructively
received during the taxable period for the services performed or to be performed for another persons (doctors), excluding the
VAT.

194. X corporation cease operation due to very poor business activities. It has excess income tax payments and decided to claim
refund thereof. Where is the reckoning point of the 2-year prescriptive period to validly claim the same?
Answer. In case of DISSOLUTION, the 2-YEAR prescriptive period to file claim for refund of taxes begins 30 DAYS AFTER
APPROVAL BY SEC of dissolution. (Mindanao Geothermal Partnership vs. CIR, CTA case No. 8250, November 9, 2012)

195. X Corporation (an exporter of native products) filed its claim for tax credit of its unutilized input taxes. It submitted to the BIR all
its documents in support of said claim. The BIR denied the claim for reason that the BIR’s permit to print its sales invoices
(ATP) was not properly indicated in the sales invoices used by X. Is the denial valid?
Answer. In the case of Philex Mining Corp. vs. CIR, CTA case No. 8371, April 15, 2014, the court held that there is no law or
regulation requiring it, failure to print the ATP on invoices or receipts should not result in outright denial of a claim or the
invalidation of invoices or receipts for purposes of claiming a refund. The BIR can just require the taxpayer to produce its
permit to print sales invoices or receipts to check whether the authority exists.

The absence or non-printing of the word ‘ZERO-RATED” sale in the sales invoices of the VAT businessman is FATAL
to a claim for refund and/or credit of unutilized input tax attributable to zero-rated sales per requirement under a vale revenue
regulation.

196. X filed its claim for unutilized input taxes. The BIR denied the claim for failure of X to submit complete documents in support of
said administrative claim. X filed a judicial claim before the CTA within 30 days from receipt of the denial. Will his appeal
prosper?
Answer. Failure to submit complete documents in support of taxpayer’s administrative claim for refund of unutilized input tax is
NOT FATAL to judicial claim. Judicial claims before the CTA are litigated DE NOVO and decided based on what has been
presented and formally offered by parties during the trial. When a taxpayer’s claim reaches the judicial level or when claim is
elevated to CTA, the Rules of Court and the Revised CTA Rules govern the matter of proving the claim. (Ayala Corp. vs. CIR,
CTA case No. 8262, March 21, 2014)

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197. X ceased business operations effective December 31, 2012. On July 1, 2013, it filed an Application for Registration Update with
the BIR. On July 7, 2013, it filed an administrative claim for issuance of a Tax Credit Certificate (TCC) of its unutilized input
VAT with the BIR. The BIR denied the claim for being premature. Is the denial correct?
Answer. The administrative claim for issuance of TCC is prematurely filed since the effectivity date of X’s formal cessation of
business is reckoned from the first day of the following month, or on August 1, 2013, where the application for Registration
Update was filed on July 1, 2013. (Associated Swedish Steels Phils., Inc. vs. CIR, CTA EB case No. 854, August 23, 2012)

198. The decision of the SC in the case of CIR vs. Pilipinas Shell Petroleum Corp., April 25, 2012 that the excise tax imposed on
petroleum products is the direct liability of the manufacturer, hence, it cannot shift the excise taxes it paid to international
carriers buying its petroleum products because the latter are exempt from excise taxes. Manufacturers are not entitled to claim
tax refund. The SC recently re-examined said ruling and in the latest case of CIR vs. Pilipinas Shell Petroleum Corp.,
February 19, 2014, The SC granted the petroleum manufacturer’s claim for refund or tax credit of excise taxes on petroleum
sold to international carriers exempt from excise taxes on petroleum products giving primary consideration to its broad
implication on the country’s commitment to international agreement.

199. X Corporation (an exporter of native products) filed its claim for tax credit of its unutilized input taxes. It submitted to the BIR all
its documents in support of said claim. The BIR denied the claim for reason that the BIR’s permit to print its sales invoices
(ATP) was not properly indicated in the sales invoices used by X. Is the denial valid?
Answer. In the case of Philex Mining Corp. vs. CIR, CTA case No. 8371, April 15, 2014, the court held that there is no law or
regulation requiring it, failure to print the ATP on invoices or receipts should not result in outright denial of a claim or the
invalidation of invoices or receipts for purposes of claiming a refund. The BIR can just require the taxpayer to produce its
permit to print sales invoices or receipts to check whether the authority exists. ( Silicon Phils., Inc. vs. CIR, GR No. 172378,
January 17, 2011, Intel Technology Phils., Inc. vs. CIR)

200. The absence or non-printing of the word ‘ZERO-RATED” sale in the sales invoices of the VAT businessman is FATAL to a claim
for refund and/or credit of unutilized input tax attributable to zero-rated sales per requirement under a valid revenue regulation.
(Panasonic Communications Imaging Corp. of the Phils., vs. CIR; JRA Philippines, Inc. vs. CIR, GR No. 177127, October 11,
2010)

201. X, is a VAT-registered businessman engage in export activities. X filed a claim for tax credit of his unutilized input taxes within
the reglamentary period. X has submitted all documents in support of said claim. CIR denied his claim for reason that the word
“Zero-Rated Sales” is not duly imprinted in X’s sales invoices and receipts but was merely rubber stamped ion violation of the
invoicing requiring under the VAT law. Is the denial valid?
Answer. The words “Zero-Rated Sales” although merely stamped and not pre-printed in the sales invoices and receipts
constitutes sufficient compliance with law. Since the imprinting of the words “ZRS” was required merely to distinguish sales
subject to 12% VAT from those that are subject to 0% VAT and exempt sales, to enable the BIR to properly implement and
enforce the other VAT provisions of the Tax Code. The CIR should not literally interpret the provisions of the Tax Code to the
extent of denial of taxpayer’s right when the later has proven compliance to all requisites of law. (Toledo Power, Inc. vs. CIR,
January 20, 2014)

202. The VAT law provides that the President, upon the recommendation of the Sec. of Finance, shall raise the VAT rate of 10% to
12% after the given conditions are met satisfactorily. Was there an invalid delegation of legislative power to tax to the
president?
Answer. There was no undue delegation of legislative power to tax but only the discretion as to the execution of the law, which
is constitutionally permitted. The Congress does not abdicate its functions or unduly delegate power when it describes what
job must be done, who must do it and what is the scope of his authority. In the VAT issue, the Sec. of Finance merely acted as
the agent of the legislative department in determining and declaring when the event of increase should commence. The
President cannot set aside the findings of the Sec. of Finance but she must act accordingly. ( Abakada Guro Party List vs.
Ermita, Sept. 1, 2005)

203. What is “Destination Rule” for purposes of the Value Added Tax? (GR 153205, Jan 22, 2007)
Answer.
a. This principle is followed in our VAT law who means that exports are exempt, whereas imports are taxable and subject
to VAT.

b. Goods and services are taxed only in the country where they are consumed. Hence, selling of goods and services by
businessmen here to end-consumers abroad is non-VATable.

204. What is the Cross Border Doctrine in taxation?

Answer.
a. This Doctrine finds application in the Philippine VAT system which means that no VAT shall be imposed to form part of
the cost of goods destined for consumption outside the territorial border of the taxing authority.

b. Sales of goods, properties and services by a VAT-registered supplier from Customs Territory to an ecozone enterprise
shall be treated as export sales, while sales to an ecozone enterprise made by a Non-VAT or unregistered supplier
would only be exempt from VAT and the supplier shall not be able to credit credit/refund of its input VAT. (2005 case)

205. X is PEZA-Registered. Sometimes it engages in activities which are not registered with PEZA. Is income derived from
unregistered activities of X taxable?

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 Answer. The income tax exemption of a PEZA-Registered Enterprise applies only to income derived from its registered
activities. When X engages in activities which are not registered with PEZA, the income or receipts derived from all its
unregistered activities shall be subject to regular internal revenue tax, such as VAT. In such case, X is obliged to register as a
VAT taxpayer and issue a VAT official receipt or invoice for every sale or transaction which is subject to VAT, Should X use its
VAT official receipt or invoice to evidence its VAT exempt sale, the words “VAT Exempt Sale” must be prominently printed on
the VAT official receipts/invoice as failure to do so make it liable to account for the VAT as if the sale is not VAT exempt.
(Sutherland Global Services, Phil. Inc. vs. CIR, CTA case No. 8180, January 13, 2014, CIR vs. First Sumiden Realty, Inc. CTA
EB No. 975, January 7, 2014)

Sale of fixed assets used in PEZA-Registered activities is subject to ordinary income tax. (BIR Ruling 291-2012, April
25, 2012)

Enterprises registered with PEZA, BOI and BOI-ARMM is NOW subject to ordinary tax investigation following the
revocation of MOA with PEZA, BOI and BOI-ARMM. (RR No. 14-2012, April 2, 2012)

206. Distinguish transitional input tax from creditable input (unutilized) tax: (Fort Bonifacio Development Corporation vs. CIR, etc.,
January 22, 2013)
Answer. Transitional input tax credits are input taxes on a taxpayer’s beginning inventory of goods, materials and supplies
equivalent to 2% of the value of such inventory or the actual VAT paid on such goods, materials and supplies, whichever is
higher, which shall be creditable against the output tax. It may only be availed of once by first-time VAT taxpayers. On the
other hand, creditable input taxes are input taxes of VAT taxpayers in the course of their trade or business, which should be
applied within 2 years after the close of the taxable quarter when the sales were made.

The 2% transitional input tax credit should not be limited to the value of the improvements on the real properties but
should include the value of the real properties as well.

207. What the requisites for a valid claim of unutilized input tax credit?
Answer.
a) The taxpayer-claimant must be a vat registered taxpayer
b) He is engaged in sales which are zero-rated or effectively zero-rated;
c) The claim is filed within 2 years after the close of the taxable quarter when such sales were made, and
d) The creditable input VAT due or paid must be attributable to such sales, except the transitional input VAT, to the extent
that such input tax has not been applied against the output VAT.

An application for tax refund or credit must be accompanied by copies of the taxpayer’s VAT return(s) for taxable
quarter(s) concerned showing that the claimant is entitled to the refund or credit of input VAT and the same has not been
applied against its output VAT-liabilities. (Atlas Consolidated Mining and Development Corp., vs. CIR, January 26, 2011)

208. X is a VAT registered enterprise engaged in export activities. In January 2010 it bought plenty of raw materials. The purchase
invoices reflected the value of input taxes X absorbed from all its purchases. Today, it seeks for the refund of its unutilized
input taxes. If X comes to you to effect the claim can you still do it in its behalf knowing that the claim must be done within 2
years from payment?
Answer. The prescriptive period of 2 years to claim from payment of an IR tax does not apply to export activities. Rather, it
applies to invalid payments such as overpayment, illegal or erroneous payment and for penalties imposed in relation thereto.
The prescriptive period to claim unutilized input taxes for export activities is 2 years and the reckoning point is not from
payment but from the end of the quarter of actual export.

209. In case of VAT Cancellation (retiring from business or change of VAT status to non-VAT) – the two (2) year period to claim
excess Input Tax is reckoned from cancellation of the taxpayer’s VAT Registration.

210. WHAT ARE THE RULES ON DETERMINING THE PRESCRIPTIVE PERIOD FOR CLAIMING A REFUND OR CREDIT OF
UNUTILIZED INPUT TAX?
Answer.
a) The administrative claim (before the CIR) must be filed within the two-year period prescriptive period ( Aichi Doctrine)

b) The proper reckoning date for the 2-year prescriptive period is the close of the taxable quarter when the relevant sales
were made (San Roque Doctrine)

The taxpayer can file a judicial claim (before the CTA) in two ways: (a) file within 30 days after CIR denies the
administrative claim within the 120 days resolution time or (b) file a judicial claim within 30 days from the expiration of the 120-
day period if CIR does not act within the 120-day period. [Nippon Express (Phils.) Corp. vs. CIR, March 12, 2013]

Taxpayer MUST wait for a resolution of his administrative claim within 120 days from submission of complete
documents in support of his claim before he can appeal before the CTA or in case of CIR’s inaction, taxpayer can appeal
within 30 days from lapsed of the 120-day without a resolution on his claim. A judicial claim with the CTA without a decision of
the CIR filed before the lapse of the 120-day period is premature whereas, a judicial claim filed after the lapsed of the 30-day
with the CTA when there is inaction is a claim filed out of time. (CIR vs. Silicon Phils., Inc. March 12, 2014)

 The 30-day period always applies whether there is a denial or inaction on the part of the CIR. As a general rule, the 30-
day period of appeal is both mandatory and jurisdictional. (Aichi and San Roque)

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  Doctrine of the Twin Prescriptive period does not apply to a claim for unutilized input taxes but to a claim for tax refund
or credit under an invalid payment. (Sec. 229, NIRC)

NOTE: The Doctrine of the Twin Prescriptive Period for invalid payments under RA 1125, DOES NOT APPLY TO AN APPEAL
BEFORE THE CTA INVOLVING CLAIMS FOR UNUTILIZED INPUT TAXES.

The above rules do not apply to EPZA-REGISTERED ENTITIES because they are exempt from the enforcement of
Customs Laws and other Rules and Regulations, such as the prescriptive periods and/or procedural requirements of the Tariff
and Customs Code of the Philippines to a refund claim. ( Phil. Associated Smelting & Refining (PASAR) Corp. vs. Comm. Of
Customs and Bureau of Customs, CTA case No. 8404, February 20, 2014)

Reiterations: The 120—day period given to the CIR to resolve taxpayer’s

claim his now reduced to 90 DAYS ONLY under the Train Law.

1. Atlas Consolidated Mining & Development Corp., vs. CIR, GR Nos. 141104 & 128763, June 8,
2007 – The SC held that the 2-year prescriptive period for filing a claim for unutilized input taxes is
reckoned from the date of the filing of the quarterly VAT return and payment of the tax due. If the
said period is about to expire and the CIR has not yet acted on the taxpayer’s written claim, the
taxpayer MAY interpose a petition for review with the CTA within the two-year period.

2. CIR vs. Mirant Pagbilao Corp, GR No. 172129, September 12, 2008 - This case, OVERTURNED
the ATLAS case above. The SC held that the 2-year prescriptive period to file a refund of unutilized
input taxes arising from a zero-rated sale should be reckoned from the CLOSE OF THE TAXABLE
QUARTER when the sales were made.

3. In the case of CIR vs. Aichi Forging Asia, GR No. 184823, October 6, 2010 – The 120 + 30-day
Rule on appeal to the CTA was established. This holds that the taxpayer has 30 days to file an
appeal to the CTA if the CIR denies his claim within the 120-day period or if there is inaction within
the said period, the taxpayer has 30 days to appeal to the CTA which period is reckoned
immediately from the expiration of the 120-day period. The 30-day period to appeal to the CTA is
both mandatory and jurisdictional.

4. In the case of CIR vs. San Roque Power Corporation, GR No. 187485, February 12, 2013 – The
SC ruled that the 2-year period to file a claim for tax refund or credit of unutilized input tax applies
to taxpayer’s administrative claim before the CIR. It does not apply to a judicial claim before the
CTA, i.e., an appeal to the CTA can be pursued even outside of the 2-year period).

5. In the case of Aichi Forging Company of Asia, Inc., vs. CTA, GR. 193625. August 30, 2917 – The
SC reiterates the proper interpretation of the 2-year period under Sec. 112 (VAT). There are 2
instances when an appeal to the CTA is considered fatally defective even when the appeal was
initiated WITHIN the 2-year period: (a) when there is no decision and the appeal is take PRIOR to
the lapse of the 120—day mandatory waiting period, except only when the appeal was make within
the window period of December 10, 2002 to October 6, 2010; (b) when the appeal to the CTA is
taken BEYOND 30 days from either decision or inaction (deemed a denial) of the CIR.

An appeal OUTSIDE the 2-year period is NOT legally infirm for as long as it is taken WITHIN
30 days from decision or inaction on the administrative claim that must have been initiated within
the 2-year prescriptive period of claim.

211. X, a VAT-registered businessman is engaged in export activities. He has unutilized input VAT payments not otherwise used for
any internal revenue tax. What is the prescriptive period within which he must claim the input tax credit? [CIR vs. Mirant
Pagbilao Corp., 565 SCRA 154 (2008)]
Answer. The unutilized input VAT payments not otherwise used for any internal revenue tax due the taxpayer must be claimed
within two (2) years reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the input
VAT regardless of whether said tax was paid or not. Hence, the reckoning frame would always be the end of the quarter when
the pertinent sales or transactions was made, regardless of when the input VAT was paid.
NOTE: The “2-year from payment” under Secs. 204(C) and 229 of the NIRC applies only to instances of invalid payments –
overpayment, illegal payment, erroneous payment or penalties imposed without authority.

212. The CIR is given 120 days to resolve a claim for unutilized input taxes. Where is the reckoning point of the 120-day period? (CIR
vs. CE Casecnan Water and Energy Co., CTA En Banc case No. 971, January 7, 2014)
Answer. The 120 day-day period is reckoned from the submission of the “complete documents” necessary to support the
application for tax credit as determined by the taxpayer. Should the taxpayer decide to submit only certain documents, or
should the taxpayer fail, or opted not to submit any document at all, in support of its application for refund or tax credit
certificate under Sec. 112, NIRC, it is reasonable to conclude that the reckoning date of the 120-day period thereunder, should

14
 be reckoned from the filing of the said application. Hence, the completeness of documents to support a claim is determined by
the taxpayer.

213. X is a VAT-registered businessman engaged in export activities. He exported his products on April 20, 2015. At the end of April
2015 he has Php 1.0 million unutilized input taxes. (a) When may he file a claim for the refund or credit of his unutilized input
taxes? (b) What is the possible remedy of X if there is inaction of the CIR on his claim?
Answer.
a) The 2-year period to claim for the refund or credit of unutilized input taxes is reckoned from the end of the quarter of
date of export (June 30, 2015) and not from payment of the input taxes.

b) The CIR is mandated to resolve the claim for refund or credit of unutilized input taxes within 120 days from submission
of complete documents by the claimant thereof. The inaction of the CIR within the 120 days is an implied denial of X’s
claim. Thereafter, X may file a petition for review with the CTA. Within 30 days from the expiration of the 120—day
period .

NOTE: Partial filing is allowed provided the completion is done within the 2-year period of administrative claim.

214. X exported his goods on September 22, 2010. On January 24, 2012 it filed an administrative claim for unutilized input taxes and
on March 16, 2012 X submitted complete documents to the BIR in support of the claim. Where is the reckoning period of the
120-day for the CIR to act on the claim? (CE Cebu Geothermal Power Co., Inc. vs. CIR, CTA case No. 7740, September 2,
2011)
Answer. The administrative claim was filed on September 22, 2010 and the complete documents in support of such claim were
filed only on March 16, 2012. The Court held that the CIR had 120-days from the latter date, or until July 14, 2012 within which
to decide the claim.

215. Under the VAT law, the CTA does not acquire jurisdiction over a judicial claim for unutilized input taxes in zero-rated sales that is
filed before the expiration of the 120-day period because the 120+30 day periods are mandatory and jurisdictional. What are
the exceptions to this rule? (CIR vs. San Roque Power Corp/ Taganito Mining Corp vs. CIR/ Philex Mining Corp. vs. CIR,
February 12, 2013)
Answer. Under the doctrine of equitable promissory estoppel, such as (a) if the CIR, through specific ruling, misleads a
particular taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling is applicable only to such particular
taxpayer and (b) where the CIR, through a general interpretative rule issued under Sec. 4 of the NIRC, misleads the taxpayer
into filing prematurely judicial claims with the CTA. In these cases, the CIR cannot be allowed to later on question the CTA’s
assumption of jurisdiction over such claim since equitable estoppel has set in as expressly authorized under Sec. 246 of the
NIRC. Taxpayers should not be prejudiced by an erroneous interpretation by the CIR, particularly on a difficult question of law.
BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made, NOT by a particular
taxpayer, but by a government agency tasked with processing tax refunds and credits.

216. X is a VAT registered taxpayer. It is engaged in export activities. The goods it produced were actually exported abroad on August
24, 2012. All receipts and documents relative to the export are intact and available. Thereafter, X applied for the refund of its
unutilized creditable input taxes. The BIR disallowed the claim for reason that the sales receipts of X did not indicate that the
transaction was a “Zero-rated Sales.” X contends that such requirement is not provided under the Tax Code. Is the BIR’s
disallowance valid? (Eastern Telecommunication Phils., Inc. vs. CIR, August 12, 2012, Microsoft Phils., Inc., vs. CIR, April 67,
2011)
Answer. Sec. 244 of the Tax Code explicitly grants the Sec. of Finance the authority to promulgate the necessary rules and
regulations for the effective enforcement of the provisions of the Tax Code. The invoicing requirements he set under RR No. 7-
95 was integrated with Sec. 113 of the NIRC when RA 9337 was adopted. Thus, the need for taxpayers engaged in export
activities to indicate in their receipts and invoices that fact that the sale is “zero-rated” is mandatory. Failure to comply will
warrant the disallowance for any claim for credit of unutilized input taxes. Hence, BIR is correct.

The SC ruled that the printing of the word “zero-rated” is required to be placed on VAT invoices covering the zero-rated
sales in order to be entitles to claim for tax credit or refund. This requirement prevents buyers from falsely claiming input VAT
from their purchases when no VAT is actually paid. Absent of such word, the government may be refunding taxes it did not
collect. (Microsoft Phils., Inc., vs. CIR, April 6, 2011, Panasonic vs. CIR)

217. X ceased business operations effective December 31, 2012. On July 1, 2013, it filed an Application for Registration Update with
the BIR. On July 7, 2013, it filed an administrative claim for issuance of a Tax Credit Certificate (TCC) of its unutilized input
VAT with the BIR. The BIR denied the claim for being premature. Is the denial correct?
Answer. The administrative claim for issuance of TCC is prematurely filed since the effectivity date of X’s formal cessation of
business is reckoned from the first day of the following month, or on August 1, 2013, where the Application for Registration
Update (notice of dissolution) was filed on July 1, 2013. ( Associated Swedish Steels Phils., Inc. vs. CIR, CTA EB case No.
854, August 23, 2012)

218. Who are the customers or recipient of services under a “Zero-Rated Sales” for VAT purposes? (Accenture, Inc. vs. CIR, July 11,
2011)
Answer. It is not enough that the recipient of the services be proven to be a foreign corporation doing business outside of the
Philippines; it must be specifically proven that the recipient of services must a non-resident foreign corporation as well.

219. X is a domestic corporation operating a “call center.” The recipients of its services are entities doing business outside of the
Philippines. If X is VAT registered taxpayer its transactions with the non-resident foreign corporations abroad the payment of

15
 which is in foreign currency inwardly to X. Is the sale a zero-rated transaction? Can X claim for tax credit on its unutilized input
taxes? (Accenture, Inc. vs. CIR, July 11, 2012)
Answer. Yes, the sale is zero-rated sales. It is allowed to claim input tax credit.

220. X is a service provider to entities doing businesses in the Philippines. Some of its customers are branches of foreign
corporations. The payment of X’s services to these foreign branches operating in the Philippines are course thru inward
remittances in foreign currency by their head offices. Are the services of X under the given facts subject to 12% VAT?
(Accenture, Inc. vs. CIR, July 11, 2012)
Answer. If the provider and recipient of services are both doing business in the Philippines, the payment of foreign currency in
irrelevant. The transaction is subject to the regular 12% VAT.

221. X is a VAT registered corporation it is engaged in export activities. It seeks from the BIR the refund of its unutilized input taxes.
All necessary documents in support of its claim were attached to the application for tax credit. Upon verification and
investigation, the BIR denied the claim for reason that X’s sales invoices failed to reflect the authority of print (ATP) said
receipt. X contends that there is no such requirement provided under the Tax Code. Is the denial of the BIR on that basis
valid? (Silicon Phils., Inc. vs. CIR, January 17, 2011)
Answer. The denial has no legal basis. X is correct – there is no law or regulation requiring it to reflect the ATP in its sales
invoices. In the absence of such law or regulation or failure to print the ATP on the invoices or receipts should not result in the
outright denial of a claim or the invalidation of the invoices or receipts for purposes of claiming a refund. What is required
under the Tax Code is the printing of the words “Zero-Rated Sale” in the sales invoices if such is the case and failure thereof is
fatal to its claim. The BIR can simply verify whether the invoices or receipts are duly registered by requiring the claimant to
present the ATP from the BIR.

222. X is covered by the Zero (0%) Rated VAT. As of the last day of the third quarter of 2010 it has unutilized input taxes. In
September 1, 2012 it filed a claim for tax credit. Together with the application X has submitted all documents and proof of its
entitlement thereto. Within 30 days from the expiration of the 2-year prescriptive period to claim X filed a judicial claim before
the CTA contending that the inaction/silence of the CIR is an implied denial of its claim. BIR argues that the judicial claim is
time barred having been filed beyond the 2-year period to claim and moved for the dismissal of the petition for review. Is the
tax official correct? (CIR vs. Mindanao II Geothermal Partnership, January 15, 2014)
Answer. In a claim for refund for unutilized input VAT, only the administrative claim (before the CIR) must be filed within the 2-
year prescriptive period, which begins to run from the close of the taxable quarter when relevant sales were made. However,
the claim for unutilized input taxes is different from the claim for refund/credit of an invalid payment. In the former, after an
administrative claim of the taxpayer, the CIR is given a 120-day period to resolve the validity of the claim. If CIR denies the
claim within said period the taxpayer can file a judicial claim before the CTA within 30 days from receipt of the denial or in case
there is inaction and the 120-day period has expired without resolution on the claim, the taxpayer may within 30 days from
expiration of the 120-day period to resolve, file a judicial claim with the CTA. The 120- plus 30 days periods are mandatory.

223. X filed its claim for unutilized input taxes. The BIR denied the claim for failure of X to submit complete documents in support of
said administrative claim. X filed a judicial claim before the CTA within 30 days from receipt of the denial. Will his appeal
prosper?
Answer. Failure to submit complete documents in support of taxpayer’s administrative claim for refund of unutilized input tax is
NOT FATAL to judicial claim. Judicial claims before the CTA are litigated DE NOVO and decided based on what has been
presented and formally offered by parties during the trial. When a taxpayer’s claim reaches the judicial level or when claim is
elevated to CTA, the Rules of Court and the Revised CTA Rules govern the matter of proving the claim. (Ayala Corp. vs. CIR,
CTA case No. 8262, March 21, 2014)

224. CIR failed to raise the issue of T’s failure to comply with the “120 + 30 days Rule” at the first instance when T filed a Petition for
Review before the CTA. What is the effect of the CIR’s failure to raise premature filing of T’s judicial claim during the
proceedings before the CTA? Team Sual Corporation vs. CIR, GR No. 201225-16, 2018)
Answer. Even if the CIR failed to raise the issue of T’s non-compliance with the 120 + 30 days Rule at the first instance, such
failure would not operate to vest the CTA with jurisdiction over T’s judicial claim for refund. The SC has already settled the rule
that a judicial claim for refund which does not comply with the 120-day mandatory waiting period renders the same VOID. As
such, no right can be claimed or acquired from it, notwithstanding the failure of the CIR to raise it as a ground for dismissal.

225. T filed a claim for unutilized input taxes before the CIR for its payments on local purchase of goods and services and supporting
its claim with documents other than VAT invoices and receipts, respectively. The CIR denied the claim. Is the denial
meritorious? (Team Energy Corporation vs. CIR, GR Nos. 197663 & 197770, March 14, 2018)
Answer. The denial is valid. The SC had already passed upon the issue on the validity of a claim in relation to the supporting
documents required for such claim The Court has stated that to claim refund of unutilized or excess input VAT, purchase of
goods or properties must be supported by VAT INVOICES, while purchase of services must be supported by VAT OFFICIAL
RECEIPTS. Invoices and Receipt are not the same.

226. X is a VAT registered taxpayer. Its business is to convert the steam supplied to it by PNOC-EDC into electricity and to deliver the
electricity to NAPOCOR. In the course of X’s business, it bought and eventually sold a Nissan Patrol to NAPOCOR. The BIR
assessed VAT on the sale of the motor vehicle. X contends that the sale is an isolated transaction and not a transaction done
“in the course of trade or business” hence it is not VATable. Is X correct? (Mindanao II Geothermal Partnership vs. CIR, March
11, 2013)
Answer. While the sale of the vehicle is an isolated transaction, it does not follow that an isolated transaction cannot be an
incidental transaction for purposes of the VAT liability of the seller. Sec. 105, NIRC would show that a transaction “in the
course of trade or business” includes “transactions incidental thereto.” Prior to the sale, the Nissan Patrol was part of X’s

16
 property, plant and equipment. Therefore, the sale is an incidental transaction made in the course of X’s business which
should be liable for VAT.

This Mindanao II case should be contra-distinguished from the case of Power Sector Asset and Liabilities
Management Corp. (PSALM) vs. CIR case (2017). Here, the BIR assessed the NPC of VAT on the sale of its generation
assets and other properties. NPC gave the assessment notice to PSALM, the entity created by government to manage the
privatization of NPC. PSALM appealed to the DOJ as it involves 2 government institutions contending the CTA has no
jurisdiction. BIR insists that this is a tax dispute and therefore CTA has jurisdiction. PSALM is correct. PD 242 applies. Hence,
DOJ has jurisdiction and not the CTA. In addition, the power plants were not previously used by PSALM’s business. The sale
of the power plants cannot be considered an incidental transaction made in the course of NPC’s or PSALM’s business. Hence,
the sale of the power plants should NOT be subject to VAT. .
227. X is engaged in lease subsequently decided to sell the property leased. Is the sale VATable? (CIR vs. Magsaysay Lines, July 26.
2006)
Answer. The regular conduct or pursuit of a commercial or economic activity including transactions incident thereto, by any
person regardless of whether or not the person engage therein is non-stock, non-profit private organization (regardless of the
disposition of the income) and whether or not it sells exclusively to members or their guests or government entity is VATable.

The 2006 case of Magsaysay Lines – The SC rules that the sale of the vessels of the National Development
Corporation to Magsaysay Lines, Inc. is NOT subject to VAT because it was not in the course of trade or business, as it was
involuntary and made pursuant to the government’s privatization program. This is also true in the case of National Power
Corp. (NPC) selling assets to private entities; it is NOT subject to VAT. The sale was not in the course of trade or business as
it was not in pursuit of a commercial or economic activity but a governmental function mandated by law to privatize the NPC
generation assets.

NOTE: If the sale conducted is in the pursuit of a commercial activity resulted to a loss, the sale is still VATable.

228. X, a non-profit, non-stock affiliate of Y Insurance Company organized by the latter to perform collection, consultative and other
technical services, including functioning as an internal auditor of Y and its other affiliates. The BIR assessed X for deficiency
VAT. X contends that the services it rendered to Y were on a “non-profit, reimbursement-of-cost-only” basis, that it was not
engaged in the business of providing services to Y and its affiliates. X was established to ensure operational orderliness and
administrative efficiency of Y and its affiliates, and not in the sale of services. Thus, since it was not engaged in business, it
was not VATable. Is X’s contention valid? (CIR vs. CA & Commonwealth Management & Services Corp. March 30, 2000)
Answer. The services of X to Y and its affiliates for a fee or consideration are subject to VAT. VAT is a tax on the value added
by the performance of the service. It is immaterial whether profit is derived from rendering the service or not. The Tax Code
provides that even a non-stock, non-profit organization or government entity, is liable to pay VAT on the sale of goods or
services even in the absence of profit attributable thereto, provided the sale or performance of the services were made in the
course of trade or business which requires that the regular conduct or pursuit of a commercial or an economic activity
regardless of whether or not the entity is profit-oriented.

229. The local branch of American Express is facilitating the collection of receivables from credit card members situated in the
Philippines and payment to service establishments in the Philippines in behalf of its Hong Kong based clients. Are the services
of the local branch of American Express subject to VAT and other business taxes? (CIR vs. Am. Express, Int’l. Inc. (Phil.
Branch) June 29, 2005)
Answer. Yes, for the following reasons:

a) It regularly renders in the Philippines the service of facilitating the collection and payment of receivables belonging to a
foreign company that is clearly a separate and distinct entity;
b) Such service is commercial in nature
c) For such service, American Express is clearly paid consideration in foreign currency;
d) It is not an entity exempt under any of our laws or international agreements.

230. Are the PEZA-registered businesses exempt from VAT? (Toshiba Information Equipment (Phils.), Inc. vs. CIR, March 9, 2010)
Answer. Prior to the issuance by the BIR of RR No. 74-99, whether a PEZA-registered enterprise was exempt from VAT or
subject to VAT depended on the type of fiscal incentive availed of by said enterprise. If the enterprise availed itself of 5% gross
income taxation under RA 7916, it was exempt from VAT. If it availed itself of income tax holiday under the Omnibus
Investments Code, it was subject to VAT. Today, upon issuance of RMC 74-99, the rule clearly established that following the
CROSS-BORDER DOCTRINE, based on the fiction that ecozone are foreign territory, a sale by a supplier in the customs
territory to a PEZA-registered enterprise is considered an export sale and therefore subject to zero-rated VAT. Such sale is
referred to as “technical export”.

231. What is the prescriptive period to claim for a refund of taxes of an enterprise duly registered under the EPZA Law?
(Commissioner of Customs vs. Phil. Phosphate Fertilizer Corp., September 1, 2004).
Answer. The EPZA Law itself is silent on the matter, and the prescriptive periods under the TCC and other revenue laws are
inapplicable by specific mandate of Sec 17(1) of the EPZA Law. This does not mean however, that the prescriptive period will
not lie. The provisions on solutio indebitii of the Civil Code may find application. Solutio indebitii is a quasi-contract, thus the
claim for refund must be commenced within six (6) years from date of payment pursuant to Art. 1145(2) of the New Civil Code.
(This is an isolated exemption to the 2-year prescriptive period for refund under the Tax Code)

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232. X is a business man registered as a non-VAT taxpayer. He sells his products to businesses inside the export-processing zone in
Cavite. At the end of the 4 th quarter of 2011, X has unutilized input taxes in the amount of Php 350,000.00. May he avail of the
privilege of tax refund of the same?
Answer. No. X is not qualified to claim any unutilized input taxes on his inward exports to businesses inside the ecozone
because his is not a VAT registered taxpayer. Only VAT-registered businessmen or corporations may avail of the tax
refund/credit of unutilized input taxes on their export activities.

233. An excise tax is an indirect tax like the VAT. The burden of taxation is allowed to be shifted to another person. Excise taxes are
taxes on certain goods whether (a) locally manufactured or produced in the Philippines for domestic consumption or for any
other disposition and (b) to things imported. X bought excisable goods from the manufacturers and importers. The excise
taxes were passed on to it by the sellers. Thereafter it sought the refund of the taxes shifted to it contending that it should not
be liable because it is not the manufacturer or the importer of the goods. The BIR denied the claim. Is the denial valid?
(Diageo Phils., Inc. vs. CIR, November 12, 2012)
Answer. Yes, the denial is legal. When indirect taxes are passed on to the buyer it is no longer in the nature or considered a
tax but the same forms part of the purchase price of the goods sold or services rendered. X cannot claim the excise taxes
because this is different from the unutilized creditable input taxes that businessmen claims under the VAT law particularly in
cases of zero-rated or effectively zero-rated sales.

NOTE: In the event that there is an invalid payment of an indirect tax, the claimant is the payor even if the burden of taxation
has been shifted to another person.

234. X Corporation enjoys blanket tax exemption under PD 1869 (the Charter creating PAGCOR). X rents a building from Y where it
operates its casino activities. Y passes to X the VAT on lease as required by law. X refused to pay invoking its blanket tax
exemption. Y paid the subject taxes for fear of the legal consequences of non-payment of the tax to the BIR. Thereafter, albeit
belatedly Y realized it should not have paid because the transactions it had with X is subject to “zero rate” VAT. Immediately,
Y filed an administrative claim for tax refund with the CIR, but the latter failed to resolve in favor of Y. Is the refusal of the CIR
on Y’s claim for refund valid? Reason. [CIR vs. Acecite (Phils.) Hotel Corporation, February 16, 2007]
Answer. The blanket tax exemption of X under PD 1869 applies to both direct and indirect taxes which extend to entities and
individuals dealing with it in its casino operations. Considering that Y paid the tax under a mistake of fact and was not aware at
the time of payment that the transactions it has with X is “zero-rated”, the invalid payment can be recovered or refunded. The
principle of solution indebeti” applies to the Government as well, the basis thereto is grounded upon the right of recovery of
money paid through misapprehensions of facts belongs in equity and in good conscience to the person who paid it and the
government cannot enrich itself at the expense of another

235. X, a domestic corporation is engaged in the manufacture of raw materials for the production of medicines. X sells to many PEZA-
registered enterprises operating within the export processing zone. (a) What is the nature of the sale of X to the businesses
inside the ecozone? (b) Is X entitled to any tax privilege?
Answer. While an ecozone is geographically within the Philippines, it is deemed a separate customs territory and is regarded
in law as foreign soil. Sales by suppliers from outside the borders to the ecozone to this separate customs territory are
deemed as exports and treated as export sales. X is entitled to input tax credit if X is a registered VAT-businessman. (2006
case)

236. X Corporation is registered with the PEZA engage in the manufacture of garments for sale abroad. X joins local trade fairs to
show case its products and made sales in those occasions. Is X VATable on its sales during those occasions? (b) If X sells its
used vehicle to its manager, is the sale VATable? (c) Is X VATable on its sales of garments to its employees? (CS Garments,
Inc. vs. CIR, March 12, 2014)
Answer.
a) Sales in local trade fairs are considered ordinary sales and therefore are VATable. These sales are not included in the
exemptions from VAT of a Zero-rate Sales of exporters.
b) Sale of ordinary assets used in business is an incidental sale that is VATable.
c) Sale of goods to one’s own employees is an ordinary sale covered by VAT.

237. X is a VAT registered exporter. He seasonably filed an administrative claim for unutilized input tax. Before the CIR resolves his
case can he claim the unutilized input tax attributable to his zero-rated sales as an expense for income tax purposes?
Answer. No. The unutilized creditable input tax related to his zero-rated sale can only be recovered through the application of
refund or tax credit. Nowhere in the Tax Code is it provided for another mode for recovering the same may be used.
Therefore, the unapplied input taxes cannot be treated outright as deductible expense for income tax purposes. ( RMC No. 57-
2013, August 23, 2013)

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On Tax Assessment and Remedies (NIRC):

238. What is the requirement of a valid assessment? (CIR vs. Metro Star Superama, December 8, 2010)
Answer. The sending of a preliminary assessment notice (PAN) to the taxpayer to inform him of the assessment is part of the
“due process requirement in the issuance of a deficiency tax assessment.” The absence of which render nugatory any
assessment made by the tax authorities. Hence, failure to send a “PAN” stating the facts and the law, Rules and Regulations
on which the assessment was made as required under Sec. 228, NIRC, the assessment made the CIR is VOID. Thereby, any
collection under a void assessment has no leg to stand on.

239. Requirements for validity of taxpayer’s protest: (Sec. 3.1.5, Rev. Reg. 12-99)
Answer. The taxpayer shall state the facts, the applicable law, rules and regulations, or jurisprudence on which the protest is
based, otherwise, his protest shall be considered void and without force and effect. If there are several issues involved in the
disputed assessment and the taxpayer fails to state the facts, the applicable law, rules and regulations, or jurisprudence in
support of his protest against some of the several issues on which the assessment is based, the same shall be considered
undisputed issue(s), in which case the taxpayer shall be required to pay the corresponding deficiency tax(es) attributable
thereto.

240. X, a businessman is under tax investigation. He was required to produce all his business records, sales invoices, purchase
receipt, proof of tax payments and other papers used in his business operations. X was not able to comply contending that his
business establishment inclusive of all his business records, documents, tax returns and papers were totally submerged and
destroyed in flood water during the super typhoon that hit the country. (a) Is X exempt from tax investigation under his
allegations? (b) How will the BIR pursue the tax audit if taxpayer does not cooperate with the production of his records?
Answer. (a) No. the absence of taxpayer’s business records and other documents used relative to his business operations and
proof of tax payments will not exempt him from tax examination by the tax officials. (b) The investigating revenue officers may
resort to the “Best Evidence Obtainable” Rule as provided in Sec. 5(B) of the NIRC in their audit. (CIR vs. Hon. Gonzalez, LM
Camus Engineering Corporation, October 13, 2010)

241. The tax examiners under the authority of the CIR sent X a Letter of Authority in support of a tax investigation. The LA (authority
to investigate) states that X is being investigated on his business activities covering the year 2012 and all “unverified prior
years”. Is the LA valid? (CIR vs. Sony Phils., Inc. November 17, 2010)
Answer. The practice of the BIR of issuing Letters of Authority covering an audit of “unverified prior years” is prohibited. If the
audit of a taxpayer shall include more than one (1) taxable period the other periods or years it shall be specifically indicated in
the LA.

242. Is the issuance of a Letter of Authority (LA) mandatory prior to a tax audit/examination of a taxpayer?
Answer. There is no need for the issuance of a LA if the alleged erroneous payment of tax is already manifested on the face of
the taxpayer’s Monthly Remittances of Final Income Taxes Withheld. There is no need for the CIR to examine and scrutinize
the books of accounts and other accounting records of the taxpayer to determine its correct tax liabilities. (Masin-AES Pte.
Ltd. (Phil. Br.) vs. CIR, CTA case No. 8543, April 10, 2014)

In ascertaining the correctness of any tax return, or (b) in making a return when none has been made filed, or (c) in
determining the tax liability of any person, or (d) in collecting any such liability, or (e) in evaluating tax compliance, the CIR is
authorized to examine any book, paper or other data which may be relevant or material in such inquiry.

243. BIR issued an LOA to X for assessment of taxes for taxable year 2015 and prior years. The tax official conducted an assessment
and disallowed expenses covering the next fiscal year 2016. Is the assessment valid? (CIR vs. Lancater Phils., Inc. GR No.
183408, July 12, 2017)
Answer. The LOA specified the assessment for the taxable year 2015, the other “prior or subsequent years” not specifically
covered by the assessment notice is VOID. Therefore, the disallowance of expenses for the year 2016 is unauthorized and
invalid. A valid LOA does not necessarily clothe validity to an assessment issued pursuant thereto, as tax official designated in
the LOA acted in excess or outside of the authority granted under the said LOA.

244. Who are the “duly authorized representatives” of the CIR who can issue PAN, FAN, Formal demand letter for tax payments
(FLD) and final decision on disputed assessment (FDDA)?
Answer. The “duly authorized representatives” refers to (1) Revenue Regional Directors, (2) Assistant Commissioner - Large
Taxpayers Service, and (3) Assistant Commissioner – Enforcement and Advocacy Service. Taxpayers shall submit/file their
responses and protests with the duly authorized representative of the CIR who signed the PAN, FLD or FAN.

If protest is denied by the Commissioner’s duly authorized representative, the same is not considered final, executory
and demandable and may still be appealed to the CIR within 30 days from receipt thereof. NOTE: An MR to the CIR will not
toll the 30-day period to appeal to the CTA. (Belle Corp. vs. CIR, CTA case No. 8175, September 18, 2012)

245. What is the Doctrine of Operative Fact?

Answer. This principle has been incorporated in Sec. 226 of the NIRC (The non-retroactivity of rulings). This rule provides that
taxpayers may rely upon a rule or ruling issued by the CIR from the time the rule or ruling is issued up to its reversal by the
CIR or by the Court. Any reversal is not given retroactive effect.

Application: X applied for tax credit of its unutilized input taxes in April 28, 2005. The claim was well within the 2-year period.
At the time of X’s application it relied upon BIR Ruling DA 489-03 which maintains that the taxpayer’s claim need not wait for

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 the lapse of the 120-day period before it could seek judicial relief with the CTA by way of petition for review. Many taxpayers
relied on this BIR issuance and it was allowed because of the Doctrine of Equitable Estoppel. In the case of CIR vs. Aichi
Forging Company of Asia, Inc., GR No. 184823, October 10, 2010, 632 SCRA 422, the Supreme Court ruled that BIR Ruling
DA 489-03 is erroneous and rectified the same reiterating the jurisdictional and mandatory 120 + 30 day period should apply in
a claim for unutilized input taxes under the Tax Code.

In view of this development, the SC maintained that the only exception to the 120 + 30 period are those claims validly
filed between December 10, 2003 to October 6, 2010 when the ruling was issued until its overturned in the Aichi case.

NOTE: Administrative practices, not formalized into a rule or ruling are not covered by this doctrine because a mere
administrative practice may not be uniformly and consistently applied. They are usually not known to the general public and
can be availed of only by those with informal contacts with the government agency.

246. “M” Resources, Inc. filed its corporate income tax return before the due date. Subsequently it amended its tax return within the
reglamentary period. “M” is now under audit, it challenges the validity of the assessment on the ground that the same is based
on its mere first “tentative return” and not on the amended return it filed. It is the position of “M” that the BIR should have
confined its assessment to the “final (amended) return. Is “M” correct? (Magnetic Resonance Imaging Services, Inc. vs., CIR,
CTA case No. 6608, October 20, 2009)
Answer. Sec. 5(A) and 6(A) of the Tax Code provide that once tax return has been filed, CIR or his duly authorized
representative is authorized to examine correctness of return filed. The Court held that in ascertaining the correctness of “M’s”
final return, the CIR is not prevented from looking into a taxpayer’s tentative return nor in determining taxpayer’s tax liability,
CIR may examine any book, paper, record or any material relevant to such inquiry, including any return, statement or
declaration filed by the taxpayer.

A tax return is a self-serving document of the taxpayer. The government is not bound by a tax return.

247. X validly disputed an assessment. While his protest has not yet been resolved by the CIR, X submitted a compromise proposal
to the BIR. Upon receipt of the proposal CIR dismissed the protest of X contending that there is now an abandonment of X’s
protest of the assessment. Is the tax official correct?
Answer. The mere act of applying for a compromise does not equate to abandonment of any claim/protest against the validity
of an assessment and/or a waiver. It is the act of immediately paying the tax assessment covered by the waivers of the statute
of limitations that renders the taxpayer estopped from questioning the validity of said waivers. (Dole Phils., Inc. vs., CIR, CTA
case No. 8155, March 21, 2014)

248. Does the CTA acquired jurisdiction of a taxpayer’s appeal contesting a final assessment of the CIR?
Answer. No. The jurisdiction of the CTA is to review by appeal decisions of the CIR on disputed assessment and NOT those
that are uncontested or those that have become final already. (CIR vs. Villa, 22 SCRA 3)

249. Does CTA acquire jurisdiction on question related on the authority of the revenue officer to examine the books and records of
any person? (CIR vs. Lancaster Phils., Inc. GR No. 183408, July 12, 2017)
Answer. Yes. It may be considered covered by the terms “other matters” under Sec. 7, RA 1125 or its amendment under RA
9282. The authority to make an examination or assessment being a matter provided for by the NIRC is well within the
exclusive and appellate jurisdiction of the CTA.

250. X validly disputed an assessment within the prescriptive period. Within 180 days the CIR sent him a Final Decision on the
disputed Assessment. X seasonably appealed before the CTA Division. CTA Division rendered a decision sustaining CIR’s
denial. X moved for reconsideration. CTA Division amended its decision. The CIR failed to move for a reconsideration of the
Amended Decision of CTA Division within 15 days from receipt thereof. Thereafter XZ filed a Motion to execute the final
decision of the CTA Division.

When the CIR received a copy of the Order of execution of judgment, he immediately filed a Petition for Review before the
CTA En Banc and moved for the revocation of the CTA’s decision. Is the action of the CIR proper?
(Asia Trust Development Bank, Inc. vs. CIR, GR Nos. 201530/201680-81, April 19, 2017)
Answer. The failure of the CIR to move for a timely reconsideration of the CTA Division’s Amended Decision is a ground for
the dismissal of his Petition for Review before the CTA En Banc. Sec. 1, Rule 8 of the Revised Rules of CTA provides that
failure to file timely motion for reconsideration or new trial with the CTA Division is a ground for the dismissal of the appeal
before the CTA En Banc.

251. X received a final assessment notice from the BIR. Notwithstanding, X did not attend to the BIR’s concern. Two (2) years
thereafter the BIR issued a warrant of levy. X filed a complaint before the RTC for a declaration of nullity of notice of seizure of
real property, declaration of forfeiture of real property, deed of sale and for specific performance for reconveyance of his real
property. The CIR moved for the dismissal of his complaint contending that the regular court has no jurisdiction. Is the CIR
correct? (Alcantara vs. Republic, GR No. 192536, March n15, 2017)
Answer. X failed to avail of his administrative remedies resulting to the assessment’s finality. The BIR can pursue collection in
such instance by issuing a warrant of levy to seize X’s properties. Despite assailing the supposedly illegal confiscation of his
property in satisfaction of his tax liabilities, X was really challenging the assessment and collection of taxes made against him
for being in violation of his right to due process. The complaint concerned the validity of the assessment and eventual
collection of the taxes by the BIR, which does not fall within the jurisdiction of the CTA. Ergo, CIR is correct.

252. X received a valid assessment from RDO. X failed to dispute the same seasonably within the 30-day period from receipt thereof.

20
 Thereafter, BIR enforces tax collection. X appealed to the CTA disputing the validity of the assessment which was used as the
basis of the BIR’s collection. Did the CTA acquire jurisdiction on X’s appeal? (Castalloy Technology et.al., vs. RDO of Cebu
City (Region 13) for and in behalf of CIR, CTA case No. 8244, January 30, 2014)
Answer. When X received the assessment from the BIR, he has an administrative remedy. He should have initiated the
prescribed administrative procedure to obtain relief and to pursue it to its appropriate conclusion before seeking judicial
intervention in order to give the administrative agency an opportunity to decide the matter correctly and prevent unnecessary
and premature resort to court. Before a taxpayer is allowed to seek judicial remedy, he must prove that the principles of
administrative remedies were exhausted. Therefore, “no dispute no appeal” to the CTA.

253. X, a domestic corporation, received an income tax deficiency assessment from the BIR on May 17, 2010. On June 15, 2010, “X”
filed its protest with the BIR. On August 13, 2010, it submitted to the BIR all relevant documents in support of its protest. The
CIR did not formally rule on the protest but on February 10, 2012 the Bureau filed a collection case against X. On March 5,
2012 X was served a summons and a copy of the complaint for collection of deficiency tax filed by the BIR with the RTC. On
the following day, X brought a petition for review before the CTA. The BIR contended that the petition is premature since there
was no formal denial of the protest of X and should therefore be dismissed. (a) Has the CTA acquired jurisdiction over the
case? (b) Does the RTC have jurisdiction over the collection case filed by the BIR? Explain.
Answer. Yes, the CTA has acquired jurisdiction over the case because this qualifies as an appeal from the CIR’s decision on
the disputed assessment. When the CIR decided to collect the tax assessed against X without first deciding on the taxpayer’s
protest, that is an implied denial of X’s protest, in which event the taxpayer may file an appeal with the CTA. (Republic vs. Lim
Tian Teng & Sons, Inc., Dayrit vs. Cruz)

The RTC has no jurisdiction over the collection case filed by the BIR. The filing of an appeal with the CTA has the
effect of divesting the RTC of jurisdiction over the CIR’s filing of the collection case with the RTC which was considered as an
implied decision of denial, it gives a justifiable basis for the taxpayer to move for dismissal in the RTC of the Government’s
action to collect the tax liability under dispute. (Yabes vs. Flojo, San Juan vs. Vasquez). There is no final, executory and
demandable assessment that can be enforced by the BIR, once a timely appeal is filed before the CTA.

254. What will happen to an assessment if the final decision on the disputed assessment (FDDA) is found to be void for failure to state
facts and law as bases of its issuance? (CIR Vs Liquigaz Phils. Corp., GR No. 215557, April 18, 2016)
Answer. The assessment remains valid notwithstanding the nullity of the FDDA because the assessment itself differs from a
decision on the disputed assessment.

255. T filed a claim for its unutilized input VAT on capital goods purchased. CIR did not act on T’s claim. Within the reglamentary
period T filed a judicial claim before the CTA. In CIR’s answer to T’s petition for review the former holds that T is not entitled to
a refund for reason that T failed to submit some documents required of it in support of its claim. CTA ordered both parties to
file their Memorandum. T complied but CIR did not despite notice. Thereafter, CTA-in-Division rendered a decision in favor of
T and ordered the CIR to issue a Certificate of Tax Credit to T. CIR did not file an MR to said decision. Hence, said decision
became final and executory. CIR filed his MR before the CTA En Banc praying for the annulment of the CTA Division’s
decision on the order of tax credit in favor of T. May CTA En Banc annul the decision of the Division? Briefly explain. (CIR vs.
KEPCO IIijan Corp., GR No. 1994322, June 21, 2016)
Answer. CTA En Banc cannot annul decisions of the CTA Division that has become final and executory already. That decision
of the CTA Division is the decision of the CTA En Banc in the given case, because of CIR’s failure to file his Memorandum as
ordered by the CTA Division.

256. The Regional Director sent X a preliminary assessment notice with a deficiency tax of Php 1.7 million on income tax, Vat and
withholding taxes. X was not able to dispute the same in due time. The RD then sent X a final assessment notice. This time, X
seasonably disputed the notice and he submitted all his documentary evidences in support of his dispute. The RD denied X’s
protest. Within 15 days from receipt of said denial X files a Motion for Reconsideration before the office of the CIR. Within 180
days the CIR sent X a resolution likewise denying X’s Motion. Within 30 days from receipt thereof, X filed an appeal before the
CTA. The CTA dismissed the petition for review contending that it has no jurisdiction because the appeal is time barred. Is the
dismissal correct? Reason. (PAGCOR vs. BIR, GR No. 208731, January 27, 2016)
Answer. Yes, the appeal is time barred; it was filed beyond the 30—day period of appeal to the CTA. It must be noted that
Sec. 228 and Sec.3.1.5 of RR No. 12-99 will readily show that neither of these provisions of law provides for the remedy of an
appeal to the CIR in case the RD’s renders an adverse decision or failure to act. The law provides that the remedy of the
taxpayer in case of an adverse decision of the CIR or his inaction or that of his authorized representative is to appeal to the
CTA within 30 days after the lapse of 180 days from submission of required supporting documents or inaction. In addition, the
RD is the alter ego of the CIR, the former’s decision is the decision of the CIR. An appeal to the CIR from the RD will not toll
the period of appeal to the CTA.

257. “T” lost his right to dispute a formal assessment because he forgot about it. May he be given a relief through the filing of a claim
for refund after paying the tax assessed?
Answer. The relief sought by “T” is not justified. He was trying to circumvent the law. Once the assessment has become final
and executory and therefore binding upon the taxpayer, the procedure for refund is not available to revive the right to contest
the validity of the assessment. After the lapse of the 30-day period to assess, the assessment becomes final and therefore,
any payment committed in relation thereto shall be deemed a valid payment not covered by a tax refund. (It is not any of these
– “OIEP”) (CIR vs. Jose Concepcion, 22 SCRA 1058, 1998)

258. The CIR issued a letter stating that alkylate is subject to excise taxes. Thereafter, the Bureau of Customs issued CMC No. 164-
2012 to implement the letter. X taxpayer, being affected by the letter and its implementation questioned the validity of the letter

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 before the CTA. Did the CTA acquire jurisdiction on the matter? (Petron Corp. vs. CIR et.al., CTA case No. 8544, November
15, 2012)
Answer. The jurisdiction of the CTA to resolve tax disputes EXCLUDES power to rule on constitutionality or validity of a law,
rule or regulation. This authority is vested before the regular courts. The available recourse of X is to question the said ruling
with the Sec. of Finance and eventually, before the regular courts and not with the CTA

259. X received a valid assessment. Disputed the same seasonably and have complied with the reportorial requirements within the
prescribed 60 days from dispute. The CIR failed to act on his protest within the 180-day period. X did not file an appeal to the
CTA within 30-days from the expiration of the 180-day period. Did X lose his right to appeal to the CTA?
Answer. The general rule is that when there is inaction by the CIR and the period has already expired this is deemed an
implied denial of the taxpayer’s protest for which he may already perfect his appeal within 30 days therefrom to the CTA.

NOTE: In the case of Lacsona Land Co., vs. CIR, a CTA case NO. 5777, January 4, 2000, The CTA held that in cases of
inaction, Sec. 228 gives the taxpayer an option. First, he may appeal to the CTA within 30 days from the lapse of the 180-day
period provided under the said section. Second, he may wait until the CIR decides on his protest before he elevates the case
to the CTA. The taxpayer is given the option to decide whether he will seek immediate relief instead of waiting for the CIR
decision, if however, he chooses to wait for positive action on the part of the CIR; the same could not result in the assessment
becoming final, executory and demandable. (see also RCBC case 2009)

260. X, a domestic corporation, received an income tax deficiency assessment from the BIR on May 17, 2010. On June 15, 2000, “X”
filed its protest with the BIR. On August 13, 2010, it submitted to the BIR all relevant supporting documents in support of its
protest. The CIR did not formally rule on the protest but on February 10, 2012 the Bureau filed a collection case against X. On
March 5, 2012 X was served a summons and a copy of the complaint for collection of tax deficiency tax filed by the BIR with
the RTC. On the following day, X brought a petition for review before the CTA. The BIR contended that the petition is
premature since there was no formal denial of the protest of X and should therefore be dismissed. Has the CTA acquired
jurisdiction over the case? Does the RTC have jurisdiction over the collection case filed by the BIR? Explain. (Republic vs. Lim
Tian Teng & Sons, Inc., Dayrit vs. Cruz)
Answer. Yes, the CTA has acquired jurisdiction over the case because this qualifies as an appeal from the CIR’s decision on
the disputed assessment. When the CIR decided to collect the tax assessed against X without first deciding on the taxpayer’s
protest, that is an implied denial of X’s protest, in which event the taxpayer may file an appeal with the CTA.

The RTC has no jurisdiction over the collection case filed by the BIR. The filing of an appeal with the CTA has the
effect of divesting the RTC of jurisdiction over the CIR’s filing of the collection case with the RTC which was considered as an
implied decision of denial, it gives a justifiable basis for the taxpayer to move for dismissal in the RTC of the Government’s
action to collect the tax liability under dispute. (Yabes vs. Flojo, San Juan vs. Vasquez). There is no final, executory and
demandable assessment that can be enforced by the BIR, once a timely appeal is filed before the CTA.

261. When may the BIR commence the collection of deficiency interest and delinquency interest? (Takenaka Corp. (Phil. Br.) vs. CIR,
CTA EB case No. 745, September 4, 2012)
Answer. Deficiency interest shall be collected from the date prescribes for the payment of the tax until the full payment thereof.
Whereas, the delinquency interest shall be collected on the due date appearing on the notice and demand of the
Commissioner until fully paid.

262. X, a businessman is under tax investigation. He was required to produce all his business records, sales invoices, purchase
receipt, proof of tax payments and other papers used in his business operations. X was not able to comply contending that his
business establishment inclusive of all his business records, documents, tax returns and papers were totally submerged and
destroyed in flood water during the super typhoon that hit the country. (a) Is X exempt from tax investigation under his
allegations? (b) How will the BIR pursue the tax audit if taxpayer does not cooperate with the production of his records?
Answer. No. the absence of taxpayer’s business records and other documents used relative to his business operations and
proof of tax payments will not exempt him from tax examination by the tax officials. (b) The investigating revenue officers may
resort to the “Best Evidence Obtainable” Rule as provided in Sec. 5(B) of the NIRC in their audit. (CIR vs. Hon. Gonzalez, LM
Camus Engineering Corporation, October 13, 2010)

263. X Engineering Firm was assessed of deficiency income tax. Payment was made accordingly, thereafter, and within the same
year X was again subjected to another assessment on deficiency withholding tax then to VAT and other taxes. Is the repeated
assessment within the year allowed under the Tax Code? (CIR vs. Hon. Raul Gonzales & L. M. Camus Engineering Corp.,
October 13, 2010)
Answer. If it involves income tax, only one examination of the books of accounts of taxpayer is allowed per taxable year.
Whereas, if it involves withholding taxes, VAT and other business taxes examination may be pursued oftener than once a
year. In addition, in case of fraud, irregularities or mistakes as determined by the CIR, the examination can also be done more
than once per taxable period.

264. X seasonably disputed an assessment. The CIR issued a Final Decision on the Disputed Assessment (FDDA) categorically
denying the X’s dispute. Can X avail of tax amnesty under the given facts? ( CIR vs. Phil. Aluminum Wheels, Inc., GR No.
216161, August 9, 2017)
Answer. The FDDA issued by the BIR is NOT a tax case “subject to a final and executory judgment by the courts” as
contemplated by Sec. 8(f) of RA 9480. The taxpayer has 30 days from receipt of the FDDA to question its validity before the
CTA.

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265. What are the requisites in a claim for tax refund in case there is an overpayment of income tax? (United Int’l. Pictures AB vs.
CIR, October 11, 2012, CIR vs. Mirant (Phils.) Operations Corp. June 15, 2011)
Answer. The claim for refund should be filed within 2 years as prescribed under Sec. 229, NIRC, (b) the income upon which
the taxes were withheld were included in the return of the recipient, and (c) the fact of withholding is established by a copy of a
statement duly issued by the payor (withholding agent) to the payee showing the amount paid and the tax withheld therefrom.

266. X corporation cease operation due to very poor business activities. It has excess income tax payments and decided to claim
refund thereof. Where is the reckoning point of the 2-year prescriptive period to validly claim the same?
Answer. In case of DISSOLUTION, the 2-YEAR prescriptive period to file claim for refund of IR taxes begins 30 DAYS AFTER
APPROVAL BY SEC of dissolution. (Mindanao Geothermal Partnership vs. CIR, CTA case No. 8250, November 9, 2012)

267. In 2010 X Corporation has excess withholding taxes. During said year X amended its income tax return. If X would like to claim
for tax credit certificate from the BIR. Where is the reckoning point of the two year period to apply for the claim? (Mausell
Phils. Inc., vs. CIR, CTA case No. 7860, October 21, 2011)
Answer. The two year period is reckoned from the date when the first (original) tax return was filed and not from the date when
amended return was filed. In claiming for issuance of tax credit certificate for excess withholding taxes, the original, not just the
amended tax return must be presented in evidence so that the court can ascertain if the claim was filed on time.

268. Where is the reckoning point of the 2-year period to claim refund for excess creditable withholding taxes (CWT)?
Answer. To an individual taxpayer, the 2-year period for claiming a refund of excess creditable withholding tax is reckoned
from the time of payment of tax pursuant to Sec. 204(C), in relation to Sec. 229 of the NIRC. To a corporate taxpayer, the
reckoning point is the date of filing of its annual ITR. (Jardine Lloyd Ins. vs. CIR. 9/23/2-11) But the excess CWT NOT
reflected in the annual ITR of a taxpayer exempt from income tax, the reckoning point is the date of the monthly remittance of
the claimed CWT. (Locators’ Association Inc., vs. CIR, CTA case No. 7906, September 22, 2011)

269. X Corporation committed an error in the payment of its third quarter corporate income tax. The overpayment was noticed much
later after it had already filed its Final Adjustment Return on April 15, 2006. Can X still claim for tax refund when it failed to
signify its intention to avail of refund in its last return?
Answer. The prescriptive period for tax refund or tax credit is two (2) years from payment but to a corporate taxpayer, this
period is reckoned from the filing of its Final Adjustment Return (“FAR”). Failure to signify one’s intention in the “FAR” to avail
of the overpayment does not mean outright barring of a valid request for a refund for as long as the claim is made within the 2-
year prescriptive period. (2005 case)

270. On April 18, 2014, X overpaid its final withholding tax on the first quarter of 2014. Its Final Adjustment Return was filed on April
11, 2015. On April 9, 2017 well within 2 year period from the filing of its “FAR”, X files a claim for tax credit. The CIR denied
the claim contending that the claim is time barred. Is the CIR correct? (Metropolitan Bank & Trust Company vs. CIR, GR No.
182582, April 17, 2017)
Answer. The tax involved in the given problem is final withholding tax, not annual corporate income tax. Final withholding
taxes are considered as full and final payment of the income tax due, and thus, are not subject to any adjustments. The 2-year
prescriptive period commences to run from the time the refund is ascertained, or the date such tax was paid, and NOT upon
the discovery by the taxpayer of the erroneous or excessive payment of taxes. Since X remitted its final withholding tax on
April 18, 2014, it only had until April 18, 2016 to file its administrative and judicial claims for refund. Its claim was filed only on
April 9, 2017 which was clearly beyond the 2-year period from payment. Hence, the denial of the CIR is correct. NOTE: the
reckoning period of 2-year from the submission of the “FAR” applies to tax refund/credit of Corporate Income Tax.

271. X made an error in the payment of his taxes. The notice the overpayment three days before the expiration of the 2 year period to
claim for refund. X hurriedly prepared for the written claim and filed it on the last day of the prescriptive period. On the same
last day he filed an appeal before the CTA because RA 1125 provides that an appeal to the CTA relative to tax refund/credit
should be filed within the prescriptive period of two years of claim. The BIR opposed the appeal. Is X correct? (CIR vs.
McGeorge Food Industries, Inc. October 20, 2010)
Answer. The simultaneous claim for tax refund and Petition for Appeal to the CTA is valid in view of the Doctrine of Twin
Prescriptive Period of RA 1125.

272. Phil. Government and Japan entered into an Agreement (Exchange of Notes) whereby the Philippines, by itself or through its
executing agency, undertook to assume all taxes imposed by the Phils. on Japanese contractors engaged in power plant
projects. Thereafter, the BIR issued a Rev. Memorandum Circular (RMC) that the remedy for a Japanese contractor engaged
in power plant project that previously paid taxes directly to the BIR is to recover or obtain a refund from the government
executing agency.

273. X, Japanese Corporation was contracted by National Power Corporation (NPC), an executing agency, to implement the project.
X, sought from the CIR a refund of taxes it erroneously paid on such project. The CIR denied the claim because the RMC
clearly specifies the proper remedy of X contractor to recover taxes it paid from the executing agency and not from the CIR. Is
the CIR correct in relaying his denial on the RMC? (Mitsubishi Corporation – Manila Branch vs. CIR, GR No. 175772, June 5,
2017)
Answer. No. The CIR’s denial is not valid. The NIRC vests unto the CIR the authority to credit or refund taxes erroneously paid
by a taxpayer and not to any person or agency. The administrative issuance (RMC) that directs the claimant to file the refund
from NPC, or the government’s executing agency is invalid for being inconsistent with the NIRC’s provision on claims for
refund of erroneously collected taxes. When there is a conflict between administrative issuance or Revenue Regulations and
the Tax Code, the Tax Code shall p0revail.

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274. The BIR filed a collection case against X before the regular court. X believes that the right of the BIR to collect has prescribed.
The regular court decided the case against X. Where will X file his appeal questioning the validity of the collection? Is it before
the CA or the CTA? (CIR vs. Hambrecht & Quist Phils., Inc., November 17, 2010)
Answer. His appeal (petition for review) must be filed with the CTA within 30 days from receipt of the adverse decision of the
regular court and not with the CA. In the case at bar, the issue at hand is whether or not the BIR’s right to collect the taxes had
already prescribed. The validity of the assessment itself is a separate and distinct issue from the issue of whether to the right
of the CIR to collect the validly assessed tax has prescribed. This issue of prescription, being a matter provided under the
NIRC, is well within the jurisdiction of the CTA to decide.

275. What is the prescriptive period for tax assessment under the Tax Code (RA 8424) and provide the exceptions thereto? (2005
case)
Answer. The right of the government to assess is three (3) years after the last day prescribed by law for the filing of the return
or from actual payment of the tax whichever is later. A tax return filed before the last day prescribed by law for the filing thereof
shall be considered as filed on the last day. (Sec. 203)

Exceptions:
a) If during the 3-year period to assess, there is a valid written agreement entered into between the taxpayer and the
government to suspend the period of assessment. (Sec. 222)
b) Where there is a discovery that the taxpayer failed a fraudulent return or failed to file a tax return when one is required,
the period to assess is 10 years from discovery of the fraud or the omission to file a return; (sec. 222)
c) In case of waiver by the taxpayer.
d) When there is injunction duly issued by the CTA; (Sec. 223)
e) When the taxpayer requests for a reinvestigation which is granted by the CIR; (Sec. 223)
f) When the taxpayer cannot be located in the address given by him in the tax return upon which a tax is
g) being assessed or collected; (Sec. 223)
h) When the taxpayer is out of the country. (Sec. 223)
i) When a warrant of distraint or levy is duly served upon the taxpayer, his authorized representative or a member of his
household with sufficient discretion, and NO property could be located. (Sec. 223)

276. In 2009 X Corporation was assessed deficiency withholding tax payments under its tax return filed for the year 2007. X paid the
penalties as imposed. In the same year (2009) the tax officials discovered that X had income undeclared in 2007. Can the
BIR enforced collection of said income now (June 2014)? (Platinum Plans, Phil. Inc. vs. CIR, CTA case No. 7878, September
7, 2011)
Answer. Late remittances of withholding taxes can be subjected to penalties only within the prescriptive period of 3 years from
the time of filing of the tax return. Deficiency assessment comprising of deficiencies in amount paid with respect to income
payments declared in the return is subject to 3 years prescriptive period of assessment. On the other hand, deficiency
assessments of income payments NOT subjected to withholding tax and NOT declared in the tax return is subject to the 10-
year prescriptive period of assessment. Certainty, the BIR can still collect the undeclared income of 2007 today. (2014)

277. When will of a criminal action for tax liabilities prescribed? (CIR vs. BPI, 411 SCRA 456 [2003])
Answer.
a) The period for filing a criminal case for violation of the Tax Code is five (5) years from commission or discovery of
violation whichever is later. (Sec. 281)

b) Where there was a failure to effect a timely valid assessment, the period for filing a criminal case for tax liabilities
prescribed.

278. X Corporation received an adverse decision of its appeal before the CTA that was heard by a division. Within the reglamentary
period it filed a petition for certiorari before e the SC. The SC dismissed the appeal. Is the dismissal valid? (CIR vs. CTA &
Ayala Land, Inc. September 13, 2012)
Answer. The SC ruled that the dismissal of the appeal before it is warranted in view of X’s failure to file before the CTA en
banc a motion for reconsideration of the assailed resolution. The settled rule is that a MR is a condition sine qua non for the
filing of a petition for certiorari. Its purpose is to give an opportunity for the court to correct any actual or perceived error
attributed to it by the re-examination of the legal and factual circumstances of the case. The rationale of the rule rests upon the
presumption that the court or administrative bodies which issued the assailed order or resolution may amend the same, if
given the chance to correct its mistakes or error. The “plain, speedy and adequate remedy” referred to in Sec.1, Rule 65, RC
is a motion for reconsideration of the questioned order or resolution.

279. X received a decision of the RTC, sustaining the collection case filed by the Mun. Treasurer of Taguig. X believes there is abuse.
It went directly to the Supreme Court on Rule 45 (petition for review on certiorari) The SC dismissed the appeal. Did X commit
an error in going to the SC? (Team Pacific Corporation vs. Daza vs. Mun. Treasurer of Taguig, July 11, 2012)
Answer. By going directly to the SC on Rule 45, X lost sight of the fact that CTA has the exclusive appellate jurisdiction over,
among others, appeals from judgment, resolutions or orders of the RTC in tax collection cases originally decided by them in
the respective territorial jurisdictions. Appeals to the CTA must be perfected within 30 days from receipt of the decision and
shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42, RC. The
perfection of an appeal in the manner and within the period fixed by law is not only mandatory but jurisdictional and non-
compliance with these legal requirements is fatal to X’s cause.

280. X validly disputed an assessment sent to him by the CIR. Within 60 days from dispute X submitted all documents in support of
his dispute. The CIR failed to resolve his dispute within the 180-day period. One year thereafter, the tax officials enforce

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 collection X argues that the collection is premature because there is no resolution to his valid dispute. The BIR contends that
there is failure on X’s part to seasonably appeal the assessment to the CTA when there was that inaction. Hence, there is
finality of the assessment repining to a collection case. Is the BIR correct? (Lascona Land, Inc., vs. CIR, March 5, 2012)
Answer. When there is inaction of the CIR regarding a valid dispute, the taxpayer has 2 alternative options: (a) to appeal to the
CTA within 30 days from the expiry of the 180-day period to resolve or (2) to await the final decision of the CIR on the disputed
assessment and appeal such final decision to the CTA within 30 days upon receipt of a copy of the adverse decision. The
word “decision” in Par. 1, Sec. 7 of RA 1125, has been interpreted to mean the decision of the CIR on the protest of the
taxpayer against the assessment. Taxpayers cannot be left in quandary by the CIR’s inaction on the protested assessments.
The taxpayer must be informed of its action in order that the taxpayer would be able to take recourse to the CTA at the
opportune time. To adopt the interpretation of the CIR will not only sanction inefficiency but will likewise condone the BIR’s
inaction.

281. X received a valid assessment from the CIR. “X” disputed the same seasonably within 30 days. Instead of resolving X’s Motion
for Reconsideration, the CIR sends him a final demand letter for payment of delinquent taxes within the 180-day period. Is the
demand for collection valid? Why?
Answer. A final demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested
assessment, provided the letter of demand indicates to X in a clear and unequivocal language that it constitutes the CIR’s final
determination of the disputed assessment. Within 30 days from receipt of that demand letter X should file before the CTA a
petition for review otherwise the tax becomes unappealable and therefore demandable. (2005 case)

282. What are the requirements set by law for the refund of excess creditable withholding tax? (United International Pictures, AB vs.
CIR, October 11, 2011)
Answer.
a) The claim for refund was made within 2 years as prescribed by law, (Sec. 229, NIRC)
b) It must be shown on the return that the income received was declared as part of the gross income, (Sec. 10, RR 6-85),
c) The fact of withholding is established by a copy of a statement duly issued by the payor-withholding agent to the payee
showing the amount paid and the amount of tax withheld therefrom.

283. NOTE: THE IRREVOCABLE RULE of Sec. 76, NIRC applies exclusive to the carry-over option! This means that once a TAX
CREDIT (carry-over option) is chosen in claims of excess payments the taxpayer can no longer decide to use instead the
remedy of TAX REFUND thereafter. (University Physicians Services Inc., vs. CIR, GR No. 205955, March 7, 2018)

Illustration:
T initially chose tax refund to recover its overpaid taxes. In its tax return covering the subsequent taxable year, T applied the
option of carry-over of the same amount it previously opted to be refunded. The CTA denied the refund claim based on Sec.
76, NIRC contending that the T is bound by its first choice which is irrevocable. HELD. The Supreme Court ruled that the
Irrevocable Rule does not apply in case the taxpayer’s first choice was tax refund but subsequently changed its mind and
opted to avail of tax credit instead. The IRREVOCABLE RULE applies only in case where the first choice was TAX CREDIT
and subsequently taxpayer changes its mind to avail to TAX REFUND.

284. X, a corporation overpaid its quarterly income tax in 2010. In its final adjustment return it indicated that would carry-over (tax
credit) that excess payment in the following year. Subsequently, in 2011, X changed its mind and opted to apply for tax refund
or for the issuance of a tax credit certificate for the amount representing such overpayment. X claim was denied by the CIR. C
argued that the resulted to the unjust enrichment of the government at its expense. Is the denial warranted? (United
International Pictures, AB vs. CIR, October 11, 2011, Mirant (Phils.) Operations, Corporation vs. CIR, June 15, 2011)
Answer. The BIR is correct. In cases of invalid payments of taxes (overpayment, illegal payment, erroneous payment or there
are penalties imposed without authority in a tax computation) the taxpayer has the following remedies: (a) claim for tax refund,
(b) apply for tax credit or (c) ask for the issuance of a tax credit certificate corresponding to the amount of the invalid payment.
These remedies are alternative remedies. The availment of one will abandon the other two remedies. Once a choice of the
remedies is made that decision is irrevocable.

285. X overpaid his income tax in 2010. He applied for tax credit so that the excess payment will be deducted from his tax liabilities
the following year. However, in the succeeding two years, he sustained losses in his business operation. Having realized no
income, he had nowhere to apply the excess payment. Instead, X applied from tax refund. Is X correct? (Belle Corporation vs.
CIR, January 10, 2011, CIR vs. PI Management International Phils., Inc. April 4, 2011)
Answer. No. X cannot alter his choice of tax credit. Such option shall be considered irrevocable for that taxable period and no
application for cash refund or issuance of a tax credit certificate shall be allowed. (Sec. 76, NIRC) The carry-over of the excess
income tax payments in not limited only to the following taxable year but is carried over to the succeeding taxable year(s) until
it is fully utilized.

In view of its irrevocable choice, a taxpayer remained entitled to utilize that amount of excess tax in succeeding taxable
years. There is no prescriptive period for the unutilized excess income tax payments as a tax credit and it can be applied in
subsequent taxable years until it is fully utilized.

286. X overpaid his income tax in the year 2009. He decided to avail of tax credit for the succeeding year. However, in the next
following 2 years he sustained losses in his business operation as a result of which he could not deduct his 2009
overpayment. X moved for the refund of the money overpaid to the government but the CIR denied his claim under the
IRREVOCABLE RULE of Sec. 76, NIRC. Is the tax official correct?
Answer. Yes, the CIR is correct. Once the taxpayer has chosen an option to either seek refund or to credit his invalid
payments against his future tax liabilities, he could no longer make another choice. His crediting of that overpayment shall

25
 continue until the whole amount of the excess payment has been fully applied, no matter how many tax cycles it takes. His
right thereto will not prescribe. (United Int’l. Pictures AB vs. CIR, October 11, 2012, CIR vs. Mirant (Phils.) Operations Corp.
June 15, 2011; Belle Corp. vs. CIR, January 10, 2011 ; CIR vs. BPI, July 7, 2009; CIR vs. McGeorge Food Industries, October
20, 2010; CIR vs. Phil-Am Life & Gen. Insurance Company, September 29, 2010; AsiaWorld Properties Phil. Corp. vs. CIR,
July 29, 2010))

Sec. 76, NIRC states that the “option shall be considered irrevocable for that taxable period” – referring to the period
comprising the succeeding taxable period until the excess payment is fully utilized.

It further states that “no application for cash refund or issuance of a tax credit certificate shall be allowed therefore.”

287. X, a businessman, has an excess payment of his income tax in 2007. He indicated in his return of his desire to avail of tax credit
on that excess payment in the subsequent taxable years. Thereafter, without availment of that tax credit X left to work abroad.
X came back in 2013 and engages in a new business venture. At the end of 2013, X deducted his excess payment in 2007
from his tax payment for 2013. If you are the tax official, will you allow X such tax credit? Reason. (CIR vs. PL Management
Int’l. Phils., Inc. April 4, 2011)
Answer. If I am the tax official, I will allow X to avail of his tax credit in view of the Irrevocability Rule, X is entitled to utilize that
amount of excess payment as tax credit in succeeding taxable years until fully exhausted provided he can prove compliance
with the requisites of a valid claim. In this regard, prescription did not bar him from applying the amount as tax credit
considering that there is no prescription period for the carrying-over of the amount as tax credit in subsequent taxable years.
He may consume the same until wholly utilized.

288. X filed a claim for tax refund. The CIR did not act on the claim. Did the inaction create a presumption in favor of the correctness
of the tax return that entitled the taxpayer to a claim for tax refund? (CIR vs. Far East Bank & Trust Company, etc. March 15,
2015)
Answer. The burden of establishing the factual basis of a claim for a refund rests on the taxpayer. There is no presumption of
correctness of a tax return in case of inaction of the CIR; the taxpayer must still present substantial evidence to prove his claim
for refund. There is no automatic grant of tax refund.

289. X received a valid assessment from the CIR. “X” disputed the same seasonably within 30 days. Instead of resolving X’s Motion
for Reconsideration, the CIR sends him a demand letter for payment of delinquent taxes. Is the demand for collection valid?
Why?
Answer. A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested
assessment, provided the letter of demand indicates to X in a clear and unequivocal language that it constitutes the CIR’s final
determination of the disputed assessment. Within 30 days from receipt of that demand letter X should file before the CTA a
petition for review otherwise the tax becomes unappealable and therefore demandable. (2005 case)

290. Can a Motion for Reconsideration and Motion for Reinvestigation be interchanged as a mode of dispute? (BPI vs. CIR, 473
SCRA 205 (2005)
Answer. Request for reconsideration and request for reinvestigation can no longer be used interchangeably and their
differences so lightly brushed aside. Sec. 223 of the Tax Code provides that the running of the prescriptive period for collection
of taxes can only be suspended by a request for reinvestigation NOT request for reconsideration for the reason that a
reinvestigation which entails the reception and evaluation of additional evidence, will take more time than a reconsideration of
a tax assessment, which will be limited to the evidence already at hand; this justifies why the former can suspend the running
of the statute of limitations on collection of the assessed tax, while the latter cannot.

291. X Corporation filed its Corporate Annual Income Tax for taxable year ending Sept. 30, 1981. Subsequently, X’s Senior Vice
President signed three separate waivers of the Statute of Limitations. The waivers were not signed by the CIR or any of his
agents. On July 29, 1987, the BIR assessed and claimed deficiency income tax from X. The latter disputed the assessment as
having been issued beyond the 3-year prescriptive period. Is the concurrence of the CIR required in a waiver of the Statute of
Limitations executed by the taxpayer to make the same valid and binding? [Carnation (Phils.) case]
Answer. Yes. For a waiver to have a binding effect and thus work to toll the running of the prescriptive period of assessment, it
must be accepted by the CIR. This is so because the law speaks of an “agreement in writing” by and between the CIR and the
taxpayer, as among the exceptions as to the period of limitation of assessment and collection of taxes.

292. It is the FAN, not the PAN, which will toll the prescriptive period for assessment. (CIR vs. Transitions Optical Philippines, Inc. GR
No. 227544, November 22, 2017)

293. Requisites of a valid waiver:

Answer.
a) It must not be an indefinite waiver. There should be an agreed date between the BIR and the taxpayer within which the
former may assess and/or credit revenue taxes.
b) It must be signed by the taxpayer and accepted by the CIR before the expiration of the original period to assess or to
collect, and
c) The waiver must be duly notarized, and
d) A copy of the accepted waiver must be duly served upon the taxpayer. ( Phil. Journalists, Inc. vs. CIR, 2004)

Taxpayer is estopped from questioning the validity of a WAIVER of the defense of prescription in case: (a) he impliedly
admitted the validity of the Waiver. He never raised the invalidity at the earliest opportunity, or (b) the taxpayer benefitted from

26
 the Waivers. Because of the Waivers, he was given more time to comply with the audit requirements of the BIR. (Transitions
Optical case, 2017.)

294. CBT Corporation filed its Corporate Annual Income Tax Return for taxable year ending September 30, 2001. Subsequently, CBT
Corporation’s SVP signed three separate waivers of the Statute of Limitations. The waivers were not signed by the CIR or any
of his agents. On July 29, 2008, the BIR assessed and claimed deficiency income tax from “CBT”. The latter disputed the
assessment as having been issued beyond the prescriptive period. Is the concurrence of the CIR required in a waiver of the
Statute of Limitations executed by the taxpayer to make the same valid and binding?
Answer. Yes. For a waiver to have a binding effect and thus work to toll the running of the prescriptive period of assessment, it
must be accepted by the CIR. This is because the law speaks of an “agreement in writing” by and between the CIR and the
taxpayer, as among the exceptions as to the period of limitation of assessment and collection of taxes. (CIR vs. CA, GR. No.
115712, February 25, 2000)

When the waiver is VOID, an assessment enforced beyond the prescriptive period to assess under the defective
waiver is VOID. (CIR vs. System Technology Institute, Inc., GR No. 220835, July 26, 2017)

295. X seasonably perfected an appeal before the Tax Court. While his appeal is pending before the CTA, the BIR discovered certain
documents showing that X is liable for additional charges. Accordingly, the BIR amended its assessment to include the newly
discovered additional charges. Should the amendment be allowed?
Answer. The Supreme Court held that amendment pending appeal should not be allowed. The CTA, being a court with purely
appellate jurisdiction, has no jurisdiction over additional charges considering that the same were not originally on issue when
the case was elevated to the tax court. To allow amendment would violate the due process clause of the Constitution because
X was not given an opportunity to dispute the additional charges assessed. CIR vs. Guerrero, 19 SCRA 205. (Exception –
when the amendment applies only to the surcharge and interest it should be allowed but NOT to the main tax involved. (BF
Goodrich Rubber case)

However, in the case of Batangas Land Transportation vs. Collector, 102 Phil. 822, the S.C. allowed the amendment
pending appeal in order to avoid multiplicity of suits. NOTE: Guerrero case is of recent vintage.

296. X’s properties (real and personal) were subjected to a warrant of distraint and levy pursuant to a final assessment. Subsequently,
the Labor Arbiter of the NLRC issued a writ of execution against several properties of X to satisfy a judgment for unpaid wages
of his employees. Said employees alleged that their labor claims are preferred and creates a lien on the properties under
Art.110 of the Labor Code. Are the employees’ contentions correct? Reason.
Answer. The employees’ claims are without merit. It is settled that the claim of the government predicated on a tax lien is
superior to the claim of a private litigant predicated on a judgment. The tax lien attaches not only from the service of the
warrant of distraint on personal property but from the time the tax became due and demandable. Moreover, the distraint was
made prior to the writ of execution. It must be noted that Art. 110 of the Labor Code applies only in the case of bankruptcy or
judicial liquidation of the employer which is not the case involved in the given facts. (CIR vs. NLRC, 238 SCRA 43)

297. Six of the barges of Maritime Company were subject to warrant of distraint by the CIR to answer for the internal revenue tax
liability of the taxpayer. However, four of the barges were also placed under constructive distraint to answer a judgment lien in
favor of the employees of the company for unpaid wages. Who has a preferential lien over the barges, the company
employees or the BIR?
Answer. The Government has a preferential lien pursuant to Art. 2247 and 2241 of the Civil Code. The preferential lien of the
employees for the unpaid wages under Art. 110 of the Labor Code applies only to bankruptcy cases where the employer is
under liquidation due to bankruptcy. The preferential lien of the government for taxes is not only limited to taxes accruing on
the property subject of the distraint, but it applies to all kinds of internal revenue taxes. (CIR vs. NLRC, 238 SCRA 43)

NOTE: Wages prevails over taxes in case of bankruptcy!

298. The BIR forwarded a criminal case to the DOJ for prosecution against T for smuggling. In the said case, the Judge rendered a
decision in favor of the government. Can the criminal action be used as a vehicle for tax collection?
Answer. The criminal action as a collection vehicle is authorized under Sec. 205(b) of the Tax Code. The aforesaid section in
pertinent part provides that the “ judgment in a criminal case shall not only impose the penalty but also order the payment of
the taxes subject of the criminal case as finally decided by the Commissioner.”

299. Briefly explain how judicial collection of tax liability is pursued in court.
Answer. Civil action is a remedy resorted to (a) when a tax liability becomes collectible or (b) when the tax assessment has
become final. A civil action shall commence only upon the approval of the CIR except when expressly delegated by the CIR to
the Regional Directors or to the chief of the legal apartment of the BIR. The civil action for the collection of tax liability shall be
filled in the regular courts. In such case, the taxpayer is precluded from raising the following defenses: (1) The BIR has no
authority to collect the tax within the prescriptive period and (2) the legality or validity of the assessment.

Once the assessment has become final, the civil case for collection of such tax liability becomes akin to an action to
enforce a judgment such that no inquiry can be made thereon as the merits of the original case or the justness of the final
judgment relied upon. (Mambulao Lumber Co. vs. Republic)

300. Do the provisions of the Civil Code on suspension of the prescriptive period by extra judicial demand suspend the running of the
period of prescription of actions in tax collection cases?

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 Answer. The provision of the Civil Code on suspension of prescriptive periods, such as by extra-judicial demands, will NOT
suspend the running of the prescriptive period of actions in tax collection cases. In cases where the tax law provides for a
statute of limitation, the latter exclusively governs. Where the tax law is silent on any such statute of limitation, the
enforcement of the tax liability becomes imprescriptible. In no instance, therefore, will tax liabilities and collection under the
Civil Code provisions on prescription of actions apply.

NOTE: A right of refund however, by the taxpayer may be governed in the absence of a provision to the contrary in the tax
law, by the Civil Code provision. Such as, payment by mistake can be claimed within six (6) years from payment per provision
of the Civil Code.

301. When is the prescriptive period for filing a criminal action for tax evasion?
Answer. In criminal cases involving tax fraud, as when the taxpayer files a false or fraudulent return with intent to evade taxes,
the five-year prescriptive period within which to file a criminal case for tax evasion is counted NEITHER from the commission
of the fraud NOR the discovery thereof by the BIR, BUT FROM THE ENDORSEMENT OR REFERRAL OF THE CASE TO
THE GOVERNMENT FOR CRIMINAL PROSECUTION. (Lim, Sr. vs. CA, 190 SCRA 616, Oct. 18, 1990)

Compromise validly entered into between the CIR and the T prior to the institution of the corresponding criminal action
arising out of a violation of the provisions of the Tax Code is a bar to such criminal action. ( People vs. Magdaluyo, GR No.
16235, April 20, 1961)

302. What is a compromise penalty?

Answer. A taxpayer’s criminal liability from his violation of the pertinent provisions of the Tax Code may be settled extra-
judicially instead of the BIR instituting a criminal action in court against the taxpayer. It is now a well settled doctrine that
compromise penalty cannot be imposed or collected without the agreement and conformity of the taxpayer. ( CIR vs. UST,
November 28, 1958, Wander Mechanical Engineering Corp. vs. CTA, et. al., 64 SCRA 555). If an offer of compromise by the
BIR is rejected by the taxpayer, the CIR should file a criminal action if it believes that the taxpayer is criminally liable for
violation of the tax law as the only way to enforce a penalty. Thus, compromise penalty is in lieu of a criminal prosecution. As
penalty, it can be imposed only on a finding of criminal liability. (CIR vs. Abad, 23 SCRA 1132)

303. LAST REMINDER ON TAXPAYER’S JUDICIAL REMEDIES:

a) Civil/Criminal cases involving Php 1 million and above – CTA Division. (Rule 42, RRC)
b) Civil/Criminal tax cases involving less than Php 1 million – RTC, MTC, MCTC, MeTC (Rule 42, RRC)
c) Decisions of CIR, CC, SF, STI – Petition for Review to CTA Division (Rule 42, RRC)
d) Decisions of the CBAA on real property from LBAA – Petition for Review to CTA EN BANC (Rule 43, RRC)
e) Decision of RTC in the exercise of its original jurisdiction – Petition for Review to CTA Division (Rule 42, RRC)
f) Decision of RTC in the exercise of its appellate jurisdiction – Petition for Review to CTA EN BANC (Rule 43, RRC)

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 On Local and Real Property Taxation:

304. What are the taxes imposable by (a) Provinces, (b) Municipalities, (c) Cities and (b) Barangays:

Provinces Municipalities Cities Barangay

1. On store and retailers of not
1. Real property tax more than P50K (in cities) and
2. Business of Printing Tax on all kinds of All kinds of taxes imposable P30K (in Municipalities) of capital
and Publication businesses operating within by provinces and 2. Service fees or charges
3. Franchise tax its territorial jurisdiction municipalities 3. Barangay clearance
4. Sand, gravel and except printing press 4. Other fees and charges –
other quarry resources breeding of fighting cocks,
5. Professional tax cockfights and cockpits,
6. Tax on vehicles used recreation, billboards,
for delivery of goods signboards, outdoor ads
5. Public utility charges – toll fees
on roads, bridges, wharves,
piers.

305. X municipality imposed a franchise tax on Y Corporation operating within its territorial jurisdiction. Y Corporation opposed the
imposition contending that X has no authority to do so. Is Y correct?
Answer. Under the Local Government Code, a municipality is bereft of authority to levy and impose franchise tax on franchise
holders operating within its territorial jurisdiction. That authority belongs to the Province or City only. The nullity is not cured by
the subsequent conversion of the municipality into a city.

306. Where should the local business tax be based, on gross receipts or gross revenues? (Ericson Telecom, Inc. vs. City of Pasig,
November 22, 2007)
Answer. As provided under Sec. 143 of the Local Government Code, the local business tax should be computed based on
gross sales/receipts. “Gross sales/ receipts” include money or its equivalent actually or constructively received in consideration
of services rendered or articles sold, exchanged or leased, whether actual or constructive. Computing the local business tax
on the basis of gross revenue will inevitably result in double taxation, inasmuch as the taxpayer’s revenue or income for a
taxable year will definitely include its gross receipts already reported during the previous year and for which the local business
tax has already been paid.

307. What are the limitations as to imposable rates in local taxation? (Cagayan Electric Power & Light Co., Inc. vs. City of Cagayan
De Oro, November 14, 2012)
Answer. A city may exceed by not more than 50% the tax rates allowed to provinces and municipalities. A municipality may
impose a business tax at a rate not exceeding 2% of gross sales or receipts of any business subject to VAT under the Tax
Code. A city may impose a business tax of up to 3% of a business’ gross or receipts of the preceding calendar year. In the
case of “CDO”, the 10% tax rates imposed by the Ordinance in question clearly violates Sec. 143 (h) of the LGC. In view of the
lack of separability clause in the Ordinance, the SC declared void the entirety of the Ordinance without prejudice to the
enactment of the City of Cagayan de Oro of a tax ordinance that complies with the limits set by the Local Government Code.

308. Can the local government avail of the remedy of distraint and levy of personal property such as the issuance of warrants of
garnishment over bank deposits of erring taxpayers?
Answer. Yes. (Meralco vs. Barlis, May 18, 2001)

309. Does the local (city or province) government have the power to impose a franchise tax on a business enjoying a legislative
franchise?
Answer.
a) Yes. The local government may impose a local franchise pursuant to the authority granted by the LGC which provides
that, notwithstanding any exemption granted by law, the province/city may impose a franchise tax on all businesses
enjoying a franchise. There was thus an implied repeal by the LGC of PD 551 insofar as the latter imposes a 2% tax
“in lieu of all taxes and assessments of whatever nature.”

b) The LGC did not violate the non-impairment clause of the Constitution, as the former was enacted in pursuance of the
constitutional policy to ensure autonomy to local government. Likewise, local legislative bodies are granted direct
authority by the Constitution to levy taxes. The Constitution also reserves to Congress the right to amend, alter or
repeal all franchises when the public interest so requires. But even without such reservation clause, franchise are
subject to alterations through a reasonable exercise of police power and the power to tax, both of which cannot be
contracted away. (1999 case)

310. Government agencies (PNB, Land Bank, DBP) performing proprietary functions are taxable including GOCCs and they are
subject to tax audit by the BIR like an ordinary taxpayer.

311. X questions the validity of an ordinance which has appropriated money for the construction of a public market, including the
validity of contracts entered into by the local government for the occupancy of stalls in the said public market, X argues that
there was no publication of the ordinance such that it operated unfairly against those who were interested to lease a space but

29
 were not given the opportunity to make deposits for the market stalls. X’s locus standi to bring the suit was questioned
because he is not a party to the contract. Will the suit of X prosper?
Answer.
a) In a taxpayer’s suit, the petitioner need not be a party to the contract between the government and a private party to
challenge its validity. But, he must clearly establish that such ordinance operated unfairly against those who were not
notified. X’s unsubstantiated allegation that the public was not notified does not suffice to overcome the presumption of
regularity in the performance of official functions.

b) The general rule for a taxpayer’s suit is that: “Any taxpayer may impugn the validity of a tax measure or the
expenditure of public funds if he has locus standi or standing in court (a personal and substantial interest in the case,
such that the party has sustained or will sustain direct injury as a result of the challenged act”)

NOTE: In the recent case of Coconut Oil Refiners Association, Inc. vs. Torres, July 29, 2005, a taxpayer’s suit may be
allowed to prosper even where there is no direct injury to the party claiming the right of judicial review where serious
constitutional questions are involved.

312. Are provinces prohibited from imposing amusement tax in the form of percentage tax? ( Pelizloy Realty Corp. vs. The Province of
Benguet, April 10, 2013)
Answer. No. They are not. Amusement taxes are fixed at a certain percentage of the gross value in money of goods sold,
bartered or imported; or of the gross receipts or earnings derived by any person engaged in the sale of services. Provinces
are categorically allowed to impose amusement taxes on the proprietor, lessees or operators of theaters, cinemas, concert
halls, circuses; boxing stadia and other places of amusement. These are places where performances, events, shows,
exhibitions, spectacles, performances and other events meant to be viewed by an audience are held. Operators of swimming
pools, resorts, bath houses, hot springs and tourist spots do not belong to the same category or class as theaters, etc. it
follows that they cannot as among the other places of amusement contemplated by Sec. 140 of the LGC to be covered by
amusement taxes of the province.

313. The general rule provides that taxes already enumerated under the NIRC are now beyond the taxing authority of the local
government. Can the provincial government validly collect excise taxes on quarry resources independent of the national
government? (Lepanto Consolidated Mining Company vs. Hon. Mauricio B. Ambanloc, June 29, 2010)
Answer. Yes, provincial government is specifically given the authority to tax quarry resources (sand, stones and the like)
extracted within and from their territorial boundaries independent of the national government. What the Tax Code taxes are the
goods/products themselves whereas what the local government taxes is the privilege of extracting the products from the
riverbeds.

314. X, dissatisfied with the local treasurer’s denial of or inaction on his protest over an assessment filed within 30 days a petition for
certiorari under Rule 65. Did he avail of the correct remedy in questioning the local treasurer’s decision? (Team Pacific Corp.
vs. Daza as Mun. Treasurer of Taguig, July 11, 2012)
Answer. X erroneously availed of the wrong remedy in filing a petition for certiorari under Rule 65 to question the treasurer’s
decision or inaction on his protest. The local treasurer cannot be said to be performing a judicial or quasi-judicial function in
assessing X of business taxes and/or effectively denying X’s protest. For this reason, the treasurer’s actions are not the proper
subject of Rule 65 on petition for certiorari. Certiorari is an extraordinary remedy designed for the correction of errors of
jurisdiction and NOT errors of judgment. It is likewise considered mutually exclusive with an ordinary appeal. Furthermore,
question of facts is not allowed in a petition for certiorari, prohibition and mandamus.

As a special civil action, certiorari is available only if the following requisites concur: (a) it must be directed against a
tribunal, board, or other officer exercising judicial or quasi-judicial functions; (b) the tribunal, board or officer must have acted
without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction, and (c) there is
no appeal nor any plain, speedy and adequate remedy in the ordinary course of law. Judicial function entails the power to
determine what the law is and what the legal rights of the parties are and then undertakes to determine these questions and
adjudicate upon the rights of the parties. Quasi-judicial functions, on the other hand, refers to the action and discretion of
public administrative officers or bodies, which are required to investigate facts or ascertain the existence of facts, hold
hearings and draw conclusions from them as a basis for their official action and to exercise discretion of a judicial nature.

X should have brought on appeal the treasurer’s denial or inaction of his protest as the case may be to the RTC.
Judgments, resolutions or orders of the RTC in tax collection cases originally decided by them in their respective territorial
jurisdiction must be filed with the CTA within 30 days from receipt of said adverse decision of the regular court. Note as well
that CTA has no jurisdiction over decisions or inaction of a local treasurer.

315. X seasonably protested to the assessment of the local government of his alleged deficiency tax liabilities. The local treasurer
denied his protest. Thereafter, X filed an appeal before the RTC labeling said review as an appeal. Is X correct? (The Mun. of
Magallanes, Agusan Del Norte, CTA AC No. 68, January 5, 2012)
Answer. The review taken by the RTC over the denial of the protest by the local treasurer would fall within the court’s original
jurisdiction. The review is the initial judicial cognizance of the matter because the decision of the local treasurer is not a
decision of a court but an administrative officer. Hence, labeling said review as an exercise of appellate jurisdiction is
inappropriate, the denial of the protest is not a judgment or order of a lower court, but a local government official.

316. Remedies of taxpayers aggrieved by a tax ordinance:

30
 Answer. There are three (3) administrative remedies available to an aggrieved taxpayer: A tax ordinance may either be (a)
reviewed or suspended by the Provincial Treasurer or the Secretary of Finance, (b) the subject of a formal protest with the
Secretary of Finance, or (c) question the tax ordinance as to its legality and refer for the opinion of the Provincial fiscal.
317. X believes that the tax ordinance passed by the City government is unconstitutional, where should he file his appeal questioning
the same? Is it before the SF, DOJ, CTA or the Regular Courts?
Answer. Before filing an appeal X may secure the opinion of the City prosecutor about the legality of the tax ordinance,
thereafter, X may file an appeal before the Secretary of Justice. Any question on the constitutionality or legality of a tax
ordinance may be raised on appeal with the Secretary of Justice within 30 days from the effectivity thereof. (Sec. 187, LDC;
Hagonoy Vendor Association vs. Mun. of Hagonoy, 2002)

318. Procedure for assailing the validity of a tax ordinance: (Cagayan Electric Power & Light Co., Inc. vs. City of Cagayan De Oro,
November 14, 2012)
Answer. The LGC requires a dissatisfied taxpayer who questions the validity or legality of a tax ordinance to file his appeal to
the Secretary of Justice within 30 days from the effectivity thereof. In case the Secretary of Justice decides the appeal, the
aggrieved taxpayer has 30 days to go to court. If there is inaction thereon within 60 days, the subject taxpayer could proceed
to seek relief in court. These three separate periods are clearly given for compliance as a prerequisite before seeking redress
in a competent court. Such statutory periods are set to prevent delays as well as enhance the orderly and speedy discharge of
judicial functions. These provisions of statutes are mandatory
.
319. RA 6055 granted educational institutions that converted themselves to non-stock, non-profit educational foundations exemptions
from payment of all taxes, import duties, assessments and other charges imposed by the Government on all income derived
from property, real or personal, used exclusively for the educational activities of the Foundation. X, now a foundation believes
that it is exempted from building permit fees as the same is covered by its exemption under “other charges” Is X correct?
(Angeles University Foundation vs. City of Angeles, et. al., June 27, 2012)
Answer. X is not correct. Building permit fees are not impositions on property but on the activity subject for government
regulations. Under the National Building Code, only public buildings and traditional indigenous family dwellings are exempted
from the payment of building permit fees. Charges and fees are not the same. A “fee” is an imposition fixed by law or
ordinance for the regulation or inspection of a business or activity while “Charges” refer to pecuniary liability, as rents or fees
against persons or property or an amount of money paid for services rendered. An exemption from tax does not include
exemption from regulatory fees and/or charges.

320. The local government of X province learned that several business companies within the locality use pipelines to transport
petroleum products to their dealers. May the local government impose taxes on the gross receipts on petroleum companies
that use said pipelines to transport petroleum to other localities and dealers?
Answer. In the case of First Phil. Industrial Corporation vs. CA, December 29, 1998, The Supreme Court held that pipeline
operators are in the truest sense of the word common carriers and are therefore exempt from the gross receipt tax imposed by
the local government. There are two reasons why the imposition of local taxes on pipelines by the local government should be
considered null and void. (a) Under the NIRC, the right to impose tax on the gross receipts of a common carrier belongs to the
national government, and (b) The petroleum companies that use pipelines are common carriers transporting their goods by
land as defined under Sec. 133 of the Local Government Code.

321. Three (3) big oil companies jointly financed the installation of pipelines from the shore to their respective oil/gas depot to facilitate
the transfer of such products to their facilities. The local government imposes business taxes against the pipelines contending
that such are common carriers. May the local government impose business taxes on the pipelines?
Answer. Local government cannot impose “common carriers taxes” because such tax is already imposed under the NIRC to
prevent a duplication of the same tax. [First Phil. Industrial Corp. (1998)]

322. X, a domestic condominium corporation is engaged in selling of real property within the city proper; it received an assessment
from the City Government of its unpaid local business taxes. X contends that it is not liable because the business of selling
real property is exempt from local taxation. Is X correct?
Answer. X is correct. While the power of the LGUs to impose taxes within their territorial jurisdiction is derived from the
Constitution itself, which recognizes the power of these units “to create their own resources of revenue and to levy taxes, fees
and charges”, such authority is subject to the guidelines and limitations as the Congress may provide, consistent with the
basic policy of local authority. Among the limitations set by the Congress in the Local Government Code, is that proviso which
generally exempt condominium corporations from local business taxation, Irrespective of any local ordinance that seeks to
declare otherwise. (2005 case)

323. May the regular courts enjoin the collection of local taxes?
Answer. Unlike the NIRC, the LTC does not contain any specific provision prohibiting courts from enjoining the collection of
local taxes. Such statutory lapse or intent may have allowed preliminary injunction where local taxes are involved. But it
cannot negate the procedural rules and requirements under Rule 58 of the Rules of Courts. ( Valley Trading Co vs. CFI of
Isabela, March 31, 1989) Hence, the regular courts may enjoin the collection of local taxes subject to Rule 58 (Preliminary
Injunction).

324. What are the remedies of a taxpayer under the Local tax Code?
Answer.
A. Administrative
Before payment –
a. Appeal – any question on constitutionality or legality of tax ordinance within 30 days from effectivity thereof
to the Sec. of Justice (Sec. 187, LGC)

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 b. Declaratory relief whenever applicable

After payment -
a) Protest – within 60 days from receipt of assessment (Sec. 195, LGC).Payment under protest is not
necessary.
b) Payment and subsequent refund or tax credit – within 2 years from payment of tax to the local treasurer
(Sec. 196, LGC)
c) Right to redemption – 1 year from the date of forfeiture (Sec. 181, LGC)

B. Judicial.
1. Court action – within 30 days after receipt of decision or lapse of 60 days of Secretary of Justice’s inaction (Sec.
187, LGC)
a) Within 30 days from receipt when protest of assessment is denied.
b) If no action is taken by the treasurer in refund cases and the 2 year period is about to lapse (Sec.
95)
c) If remedies available do not provide plain, speedy and adequate remedy.
1. Action for declaratory relief

2. Injunction – if irreparable damage would be caused to the taxpayer and no adequate remedy is available.

On Real Property Tax:

325. Are properties owned by GOCCs subject to real property taxes?

Answer. Yes. In the case of Mactan-Cebu Int’l. Airport Authority, the Supreme Court held that properties owned by GOCCs are
subject to real property taxes “unless otherwise provided.” The exemption from real property taxes under Sec. 234 of the
RPTC specifically states that only real properties owned by the Republic of the Philippines or any of its political subdivisions
(local governments) are exempted.

When a GOCC is using a land owned by the government there is no real property on the land payable by the said
GOCC, but when it introduces improvements on the land, such improvement is subject to real properties taxes. (Phil. Ports
Authority case) payable by the GOCC.

326. Government instrumentalities of the national government are not subject to real property taxes except those portions that are
leased to private persons or entities. Such as: Philippine Fisheries Development Authority, Lucena Fishing Port Complex;
Mactan International Airport Authority; Philippine Reclamation Authority among others.

327. The local treasurer of City X sent PEZA (a government instrumentality) a notice of assessment for reason that she came to know
that some real properties of PEZA are leased to private entities for commercial purposes. PEZA invokes its tax exemption
privilege. Is PEZA subject to real property taxes?
Answer. PEZA being an instrumentality of the national government, it cannot be taxes by local government units. EPZA the
predecessor of PEZA was declared non-profit in character with all its revenues devoted for its development, improvement and
maintenance. It has been explicitly declared exempt from real property taxes under its charter. Even if EPZA’s lands and
buildings whose beneficial use have been granted to other persons it is still exempt from taxes. The exemption of EPZA (now
PEZA) extends to PEZA-registered enterprises or entities operating within the economic zones. (City of Lapu-lapu vs. PEZA,
G. R. 184203, November 26, 2014)

328. Sec. 252 of the LGC provides that a taxpayer must first pay the real property tax assessed before he is allowed to protest the
assessment. Is a taxpayer required to pay the real property tax if he is questioning the authority of the local assessor to
assess real property taxes? Or is he required to pay the real property taxes if he claims that the real property is exempt from
real property taxes?
Answer. The SC held that by claiming exemption from realty taxation, the taxpayer is simply raising a question of the
reasonableness or correctness of the amount assessed, as such; the real property tax must be paid prior to the making of a
protest. On the other hand, if the taxpayer is questioning the authority of the local assessor to assess real property taxes and
of the treasurer to collect, it is not necessary to pay the real property taxes prior to the protest. A claim for tax exemption,
whether full or partial does not question the authority of local assessor to assess real property taxes.

329. Properties of public dominion are not subject to execution or foreclosure sale. (RP represented by the Phil. Reclamation
Authority vs. City of Paranaque, July 18, 2012)

330. Where is the reckoning of the prescriptive period for collection of real property taxes?
Answer. The local government unit concerned has five (5) years counting from the end of each quarter rather than on a yearly
basis to initiate either an administrative or judicial action to collect the deficiency tax for said period. (Tacloban City
Government vs. Leyte Park Hotel, Inc. CTA OC No. 012, November 15. 2011)

331. What are the remedies of taxpayer under the Real Property Tax Code?
Answer.
A. Administrative –

32
 a) Protest – payment under protest is required. (*“PAY FIRST BEFORE PROTEST”) Filed within 30 days from
date of payment to provincial, city or municipal treasurer.
b) Refund or tax credit – within 2 years from the date the taxpayer is entitled thereto (Sec. 253, LGC)
c) Redemption of real property within 1 year from date of sale (Sec. 261, LGC)
d) Appeal – within 60 days from assessment of provincial, city or municipal assessor to LBAA, Within 30 days
from receipt of decision of LBAA to CBAA, within 30 days from CBAA to the CTA and within 15 days from
CTA to the SC.

B. Judicial –
a) Court action – appeal of CBAA’s decision within 30 days to CTA
b) Suit assailing validity of tax; recovery of refund of taxes paid (Sec. 64, PD 464)
c) Suit to declare invalidity of tax due to irregularity in assessment and collection (Sec. 64, PD 464)
d) Suit assailing the validity of tax sale.

*In the case of Meralco vs. City Assessor, GR No. 166102, August 5, 2015, The SC rules that posting a surety bond
before filing an appeal of the assessment with the LBAA constitutes substantial compliance with the requirement of
Pay First Before Protest in Sec. 252 of the Local Government Code. t

332. What are the administrative remedies available to a real property owner to contest the assessment for real property tax?
Answer. A real property owner who is not satisfied with the assessment or reasonableness of the real property tax sought to
be collected by the city or province where the property is located, he should:

a) Pay the realty tax under protest – The protest in writing shall be filed within 30 days from payment of the tax assessed.
The Treasurer has a period of 60 days to act on the protest.
b) In the event of a denial or inaction, the appellate procedure is to file a verified petition with the LBAA within 60 days
from denial of protest or receipt of the notice of assessment.
c) In the event of a denial, an appeal may be taken to the CBAA by filing a notice of appeal within 30 days from receipt
thereof.
d) From the CBAA, the dispute may be taken to the CTA En Banc by filing a verified petition for review under Rule 43 of
the Rules of Court.

The foregoing procedure is indispensable if what is being questioned by the taxpayer is the correctness of the
assessment. This involves a question of fact which could not be subject to a petition for certiorari, prohibition and
mandamus.

333. The City Assessor’s Office of “X” City issued Tax Declaration with increased values for certain properties within the City. The
owners were not amenable to the values assigned and sought reconsideration from the same office. Thereafter, the Assessor
reduced the assessed values of the properties. Is the Assessor justified in doing so?
Answer. No. Once the local Assessor sends notice to the owner or lawful possessor of real property of its assessed value, the
former is automatically divested of any jurisdiction to entertain any request for a review or readjustment. The proper remedy of
the property owners is to appeal the valuation made by the Assessor to the Local Board of Assessment Appeals within 60
days from receipt of the assessment. (Callanta vs. City of Cebu, January 30, 1996)

334. The City Assessor’s Office of “X” City issued Tax Declaration with increased values for certain properties within the City. The
owners were not amenable to the values assigned and sought reconsideration from the same office. Thereafter, the Assessor
reduced the assessed values of the properties. Is the Assessor justified in doing so?
Answer. No. Once the local Assessor sends notice to the owner or lawful possessor of real property of its assessed value, the
former is automatically divested of any jurisdiction to entertain any request for a review or readjustment. The proper remedy of
the property owners is to appeal the valuation made by the Assessor to the Local Board of Assessment Appeals within 60
days from receipt of the assessment. (Callanta vs. City of Cebu, January 30, 1996)

335. X, received a copy of the latest Tax Declaration on his real property from the Office of the Assessor, X believes that there should
be no increase in the assessed market value on his realty because for the last 10 years he has not introduced any additional
improvement thereon, the house constructed within the property that he and his family presently occupy is the same house he
inherited from this deceased mother. What remedies are available to X if the local government enforces real property tax
collection based on the latest tax declaration. Reason.
Answer. X is still required to pay real property tax under the latest assessed market value of his property as stated in the tax
declaration he received. Whenever the local assessor sends a notice to the owner or lawful possessor of real property of its
revised assessed value, the property owner who does not agree thereto must dispute such assessment within 60 days from
receipt of notice/Tax Declaration. Thereafter, upon receipt of an adverse decision he may file an appeal before the Local
Board of Assessment Appeals questioning the taxability and/or increase of the market value of real property. Failure on his
part to question such assessment within the reglamentary period provided by law, the local government’s right to collect
becomes absolute upon the expiration of such period with respect to that property. (1998 case)

336. The taxpayer (LRT) resisted the assessment on the carriageways and terminal stations for realty taxes upon the theory that such
real properties are for public use similar in nature to public roads. Is the contention valid? (LRT Case)
Answer. The court held that it was not for public use since only those who are riding the LRT use them and that there is no
grant of real property tax exemption in the Charter of the LRT was provided.

33
 Unlike public roads which are open for use by everyone, the LRT is accessible only to those who pay the required fare.
It is thus apparent that petitioner does not exist only solely for public service, and that the LRT carriageways and terminal
stations are not exclusively for public use. Moreover, the charter of petitioner does not provide for any real estate tax
exemption in its favor. Even granting that the national government indeed owns the carriageways and terminal stations, the
exemption would not apply because their beneficial use has been granted to petitioner (LTR), a taxable entity.

337. Are power plant barges and its accessory equipment mounted on the barges subject to real property taxation? (Province of
Batangas et. al., vs. Napocor, Feb. 16, 2007)
Answer. Yes. These are intended by their nature and object to be immovable properties by destination, being in the nature of
machinery and other implements intended by the owner for an industry or work which may be carried on in a building or a
piece of land and which tend directly to meet the needs of said industry or work. Further, subject accessories are mounted on
the barges and attached to gas turbine power plants designated to generate electric power installed at a specific location with
a character of permanency.

338. X owns a big track of land beside a river where sand, gravel, earth and other quarry resources are extracted. The Province
where said property is located imposes taxes on the goods. X objected to the imposition thereof. Can the province validly tax
X on the products extracted from his private properties?
Answer. A province has no authority to impose taxes on stones, sand, gravel, earth and other quarry resources extracted from
private lands. It may not also levy excise taxes on such articles as they are already taxed by the NIRC. A province may not
invoke the Regalian Doctrine to extend that coverage of its ordinance to quarry resources extracted from private land, because
taxes, being burdens are not to be presumed beyond what the applicable statute expressly and clearly declares, tax statutes
being construed strictissimi juris against the government. [Province of Bulacan (1998)]

339. “Giant Electric” is a domestic corporation engaged in the supply and distribution of electricity in the region. It was assessed real
property taxes on its steel towers, electric posts, barges, transformer and transmission lines that it installed for its operations.
“Giant” contends that the said properties are personal properties and therefore not subject to real property tax. Is “Giant’s”
contention tenable?
Answer. The CTA en banc held that the steel towers, electric posts, barges, transformers and transmission lines are now
included in the term machinery provided under Sec. 199 (o) of the LGC. Under the said provision, facilities which are
permanently attached to real properties which are actually, directly and exclusively used to meet the needs of the particular
industry, business or activity are considered as machineries subject to real property tax. (Cotabato Electric Cooperative vs.
CBASA, CTA EB Case No. 377, October 2, 2009)

340. Does CTA have jurisdiction to enjoin the levy and the auction of taxpayer’s real property in relation to his tax liabilities on real
property taxes? (Philippine Ports Authority vs. City of Davao, GR No. 190324, June 6, 2018)
Answer. The CTA has jurisdiction over taxpayer’s (T) appeal to resolve the question of WON it was liable for real property tax.
The real property tax was the very reason for the acts which T wanted to have enjoined. It is therefore the CTA and not the
CA, that has the power to preserve the subject of the appeal, to give effect to its final determination, and, when necessary to
control auxiliary and incidental matters and to prohibit or retrain acts which might interfere with its exercise of jurisdiction over
the taxpayer’s appeal. The acts of the City government of Davao carried out pursuant to the imposition of the real property tax
also within the jurisdiction of the CTA.

 Under the LGC, Local Government is NOT empowered to impose business taxes on persons or entities engaged in the business
of manufacturing and distribution of petroleum products. Batangas vs. Pilipinas Shell Petroleum Corp., GR No. 187631, July 8,
2015)

 As between the Civil Code and the Local Government Code, the latter shall prevail in determining whether machinery is real
property subject to real property tax. (Meralco vs. City Assessor case).

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On Tariff and Customs Code:
341. Define the following basic terms in customs laws:

a) Customs duties – These are taxes on the importation and exportation of commodities.
b) Specific duty – This is a duty (tax) on imports that is proportional to the number of items or units. It is computed based
on weight, volume gauge or other measure of quantity without regard to the value of the goods or commodities.
c) Ad Valorem duty – This is a duty which is equal to a certain percentage of the value of the imported goods or
commodity.
d) Anti-dumping duty – This is a special duty imposed on importation of a product into the country at less than its normal
value which may possibly cause material injury to a domestic industry producing the like product.
 The decision WON to impose a definite anti-dumping duty remains the prerogative of the Tariff Commission.
e) Countervailing duty – This is imposed on imported goods in addition to other ordinary duties, taxes and charges
whenever the imported goods is granted directly or indirectly by the government in the country of origin any kind or
form of subsidy upon the production, manufacture or exportation of such goods to bring down its costs. The importation
of such goods into our country might be injurious to domestic industries producing the same products because of its
cheaper prices.
f) Marking duty – This is an additional duty on ad valorem basis imposed for improperly marked articles including the
deceptive practice of passing imported articles as coming from a particular country other than its actual country of
origin.
g) Discriminatory or retaliatory duty – This is a duty imposed on imported goods whenever it is found that its country of
origin discriminates against commerce of the Philippines.
h) Safeguard duty – This is a general safeguard measure upon a positive determination of the Tariff Commission (TC)
that a product is being imported into our country in increased quantities, which will cause a serious injury or threat to
our domestic industry. (Ex. Importation of cement)
 The imposition is recommended by the TC to the DTI if it involves non-agricultural products and to the DA in
case of agricultural products. In case of non-agricultural products the Dec. of Trade & Industry shall first
establish that the application of safeguard measures will be in the interest of the general public . (RA 8800 –
The Safeguard Measures Act)
 The Sec. of the DTI cannot impose general safeguard measures without the final determination by the Tariff
Commission.

342. When may the power of the President to tax under the “Flexibility Clause be exercised?
Answer. His power shall be exercised upon the recommendation of NEDA and in the interest of the general welfare and
national Security. In addition, he shall exercise the said power only when Congress is NOT in session.

343. Are the Orders of the President pursuant to his power of taxation immediately executory?
Answer. His Orders shall take effect 30 days after promulgation, except in the imposition of additional duty not exceeding 10%
ad valorem which shall take effect at the discretion of the President.

344. What goods are subject to customs duties under the TCC?
Answer. All articles or goods when imported from any foreign country into the Philippines shall be subject to duties upon each
importation even though previously exported from the Philippines, except as otherwise specifically provided for in the TCC.
(Sec. 104, CMTA)

345. What are the tax exemption privileges of OFWs/ OCW?

Answer. They can bring in tax and duty free home appliances and other durables limited to one (1) of every kind once every
calendar year accompanying them on their return or arrival within a period of not exceeding 60 days after return with a value of
not exceeding Php 150,000.

346. When are “balikbayan boxes” exempt from customs duties?

Answer. When the boxes (max. 3 in each calendar year) contain personal and household effects only and shall neither be in
commercial quantities nor intended for sale, barter or for hire and that the total FCA value shall not exceed Php150,000 for all
balikbayan boxes per sender in any calendar year.
 De minimis importation of Php 10,000 and below shall not be included in the counting of max 3 boxes.
 Balikbayan boxes brought in by qualified OCW from abroad accompanied by the passenger or unaccompanied
baggage shall be included in the counting of the maximum 3 boxes allowed.

347. Are imported relief goods for calamity victims from abroad subject to duties?
Answer. Relief consignment imported goods (food, medicines, equipment and materials for shelter, donated or leased to
government institutions and accredited private entities for free distribution to or use of victims of calamities shall be exempt
from duties and taxes. (Sec. 120-21, CMTA)

348. What are the remedies of the taxpayer under the Tariff and Customs Code:
Answer.
1. Administrative:

a) Protest - Any importer or interested party if dissatisfied with the published value of duties on imported goods may
within 15 days from date of publication or within 5 days from the date the importer is entitled to refund if payment
is rendered erroneous or illegal by events occurring after the payment.

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 Taxpayer – within 15 days from assessment. Payment under protest is necessary (Sec. 2308, 2210, TCC)

b) Refund - A written claim for refund may be submitted by the importer in abatement cases on missing packages,
deficiencies in the contents of packages or shortages before arrival of the goods in the Philippines, articles lost or
destroyed after such arrival, dead or injured animals, and for manifest clerical errors, and

c) Drawback cases where the goods are – re-exported. (Secs. 1701-1708, TCC)

a. Settlement of any seizure by payment of fine or redemption. But, this shall not be allowed in any case (1)
where importation is absolutely prohibited, or (2) the release would be contrary to law, or (3) when there is an
actual and intentional fraud. (Sec. 2307, TCC)

b. Appeal – within 15 days to Commr. of Customs after notification by collector of his decision (Sec. 2313, TCC)

2. Judicial
a) Appeal to the CTA division within 30 days from receipt of the decision of the Commissioner of Customs or
Secretary of Finance (Sec 2403, TCC, Sec. 7, RA 1125)
b) Action to question the legality of seizure before the Bureau
c) Abandonment (Sec. 1801)

349. X’s goods were kept in the customs warehouse while waiting for the release papers. For unknown reasons all the goods
disappeared while in customs custody. X filed a damage suit and demanded payment in dollars. (a) The customs officials
invoke the state immunity doctrine. (b) Granting that it is liable, is the payment in dollar as demanded valid? (c) What
conversion rate should apply – the rate prevailing at the time the goods arrived or the rate at the time of payment? (Commr. of
Customs vs. AGHFA Incorporated, March 28, 2011)
Answer. The CC cannot escape liability for the lost shipment of goods and hide behind the state immunity doctrine. The BoC
cannot escape ineptitude and gross negligence in the safekeeping of importer’s goods. The doctrine must be fairly observed
and the State should not avail itself of this prerogative to take undue advantage of parties that may have legitimate claims
against it.

Under RA 529, as amended by RA 4100, stipulations on the satisfaction of obligations in foreign currency are void. Thus, the
payments of monetary obligations, subject to certain exceptions, must be discharges in the currency which is the legal tender
in the Philippines.

The rate of exchange for the conversion in the peso equivalent should be the prevailing rate at the time of payment.

350. When is smuggling committed?

Answer. It is committed when a person (a) fraudulently imports or brings into the Philippines or assists in transporting or
bringing into the Philippines any article contrary to law, or (b) receives, conceals, buys, sells or in any manner facilitates the
transportation, concealment or sale of such articles after importation knowing the same to have been imported contrary to law.
(Rodriguez vs. CA, Oct. 10, 1995)

351. Can the government forfeit vehicles used in smuggling? (El Greco Ship Manning & Mgmt. Corp. vs. Commr. of Customs,
December 4, 2008)
Answer. Vessel, vehicles or aircraft used in smuggling may be forfeited by the government if it is privately owned. If the
transport vehicle is a common carrier for hire, chartered or leased and the agent in charged thereof at the time of use has no
knowledge of the unlawful use thereof, it cannot be forfeited.

352. The customs officials seized allegedly untaxed vehicles and parts of businessman Jao, prompting the latter to file a petition for
certiorari, prohibition and mandamus with prayer for a temporary restraining order with the RTC. The RTC granted the
injunction and prohibited the respondent from seizing, detaining, transporting and selling at public auction the disputed article.
Contending that the RTC had no jurisdiction over the subject matter, the tax officials filed a petition for review with the Court of
Appeals. Decide.
Answer. The petition of the tax officials is impressed with merits. The RTC is devoid of any competence to pass upon the
validity or regularity of the seizure and forfeiture proceedings conducted by the Bureau of Customs or to enjoin or otherwise
interferes with these proceedings. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive
jurisdiction to hear and determine all questions touching upon seizure and forfeiture of dutiable goods. The RTC is precluded
from assuming cognizance over said matters even through petitions of certiorari, prohibition & mandamus. ( Jao vs. CA,
October 6, 1995)
Mison vs. Natividad. Even the illegality of the warrant of seizure and detention cannot justify the trial court’s interference with
the collector’s jurisdiction between the existence of the collector’s power to the issue and the regularity of the proceedings
taken under such power. Even if there be irregularity in the exercise of such power, the RTC does not have the competence to
review, modify, or reverse whatever conclusions may result therefrom. (Taxpayer’s remedies – appeal to the CTA)

353. X’s imported goods were seized by tax officials from the Bureau of Customs on reports and verification that subject articles were
smuggled. X filed an injunction before the regular court. Did the regular court acquire jurisdiction over the case?
Answer. The RTC is devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings
conducted by the BC and to enjoin or otherwise interfere with these proceedings. It is the customs authorities that has
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 exclusive jurisdiction over such proceedings (seizure and forfeiture) and regular courts cannot interfere with the exercise
thereof or stifle or put it to naught. The RTC is precluded from assuming cognizance over such matters even through petitions
for certiorari, prohibition or mandamus.

The question of whether probable cause exists for the seizure of certain articles is not for the RTC to determine.
[Ogario, (2000), Rallos vs. Gako, Jr, (2000)]

Even the illegality of the warrant of seizure and detention cannot justify the trial court’s interference with the collector’s
jurisdiction between the existence of the collector’s power to the issue and the regularity of the proceedings taken under such
power. In the latter, even if there be such an irregularity in the proceedings, the RTC does not have the competence to review,
modify or reverse whatever conclusions may result therefrom. ( Mison vs. Natividad) Remedy of the aggrieved taxpayer –
appeal to the CTA.

Under the Doctrine of primary jurisdiction, the Bureau of Customs has exclusive administrative jurisdiction to conduct
searches, seizure and forfeiture of contraband without interference from the courts. It could conduct searches and seizure
without need of a judicial warrant except if the search is to be conducted in a dwelling place.

NOTE: Goods in the custody of the BC are not subject to attachment. Regular courts have no jurisdiction on goods held by the
BC because importation has not yet ended. It is deemed terminated only upon payment of the duties imposed on the goods
imported and the legal permit for its release or withdrawal shall have been granted.

354. The Bureau of Customs raided and seized goods in the warehouse of X Corporation on the belief that they were unlawfully
released from the customs custody. X filed a case before the regular court questioning the validity and regularity of the seizure
and forfeiture proceeding. Will the action prosper?
Answer. The regular courts (RTC) are devoid of any competence to pass upon the validity or regularity of seizure and
forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings. The
Collector sitting in the seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions
touching on the seizure and forfeiture of dutiable goods and the regular courts cannot interfere with nor deprive him of such
jurisdiction. (2005 case)

355. X is an importer-assembler of car and auto parts. After the car is assembled here he registers them with the LTO and sells them
to local buyers. The BIR and the Bureau of Customs assessed X of unpaid IR taxes and duties. X contends that he is not
liable because (a) the released of the parts from customs means that all duties were settled and cleared otherwise there is no
way that the goods could have left the Customs custody, and (b) the buyer shall be liable for the whatever taxes are due on
the sale. Decide.
Answer. As between the importer-assembler/manufacturer and the buyer of the car, the former has the obligation to pay to the
BIR and the BOC, Imposing the tax burden on the buyer would only encourage the proliferation of smugglers who can evade
taxes by passing on their obligation to their unsuspecting buyers. Moreover, the fact that the importer-assembler was able to
secure the release of the parts from customs and to register the assembled car with the LTO does not necessarily mean that
all taxes and duties were legally paid and settled. [ Harrison Motors, (2000)]

356. When may the Customs officials subject articles to forfeiture proceedings?
Answer. The TCC provides that any article which is removed from customs custody without tax payment and clearance shall
be forfeited. The forfeiture of the subject goods is not dependent on whether or not the importation was terminated rather it is
premised on the illegal withdrawal of the goods from customs custody. Thus, regardless of the termination of importation,
customs authorities may validly seize goods which, for all intents and purposes, still belong to the government if said goods
were released contrary to law from any public or private warehouse under customs supervision and control.

During the forfeiture proceedings the person or entity from whom such articles were seized shall be given an
opportunity to prove or show the source of such articles and the payment of duties and taxes thereon. [ Carrara Marble Phils.
(19990]

357. When is the redemption of forfeited good imported not allowed?

Answer. (a) When there is fraud committed by the importer, (b) where the importation is absolutely prohibited or (c) where the
release of the property would be contrary to law. [ Transglobe Int’l. (1999)]

358. What is the prescriptive period to claim for a refund of taxes of an enterprise duly registered under the EPZA Law?
Answer. The EPZA Law itself is silent on the matter, and the prescriptive periods under the TCC and other revenue laws are
inapplicable by specific mandate of Sec 17(1) of the EPZA Law. This does not mean however, that the prescriptive period will
not lie. The provisions on solutio indebiti of the Civil Code may find application. Solutio indebiti is a quasi-contract, thus the
claim for refund must be commenced within six (6) years from date of payment pursuant to Art. 1145(2) of the New Civil Code.
(This is an isolated exemption to the 2-year prescriptive period for refund under the Tax Code) (Commissioner of Customs vs.
Phil. Phosphate Fertilizer Corp., September 1, 2004).

359. X lost his baggage on board an aircraft on his return flight to the Philippines from the United States. X filed a claim in an amount
more than that which is specified in the tariff. Is the air carrier liable on the amount demanded by X?
Answer. An air carrier is not liable for the loss of baggage in an amount in excess of the limits specified in the tariff which was
filed with the proper authorities, such tariff being binding on the passenger regardless of the passenger’s lack of knowledge
thereof or assents thereto. [British Airways (1998)]

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360. Taxes are generally imprescriptible: statutes, however, may provide otherwise. State the rules that have been adopted on this
score by –
a) Tariff and Customs Code (TCC)
b) Local Government Code (LGC)
Answer. (a) TCC does not express any general statute of limitation. It provided, however, that “when articles have entered and
passed free of duty or final adjustment of duties made, with subsequent delivery, such entry and passage free of duty or
settlement of duties will, after the expiration of one (1) year from the date of the final payment of duties, in the absence of fraud
or protest, be final and conclusive upon all parties, unless the liquidation of import entry was merely tentative. (Sec. 1603,
TCC)

(b) LGC – Local taxes, fees and charges shall be assessed within five (5) years from the date they become due. In
case of fraud or intent to evade the payment of taxes, fees and charges, the same may be assessed within ten (10) years from
discovery of the fraud or intent to evade payment. They shall be collected either by administrative or judicial action within five
(5) years from date of assessment. (Sec. 194, LGC)

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GOOD LUCK and GOD BLESS!

JPL / 2018. ALL RIGHTS RESERVED.

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