Pilipinas Shell vs CIR

Facts:
Pilipinas Shell files a claim for refund for the excise taxes it has paid from selling petroleum products to
international carriers. It claims that Sec. 135 of the Tax Code exempts imposition of excise tax on petroleum
products from point of production until its removal from the same. If it will apply, Pilipinas Shell says that it will
greatly affect the domestic oil industry since it gives them a burden contrary to the state’s policy protecting the
industry itself. It also asserts that the imposition of said tax is contrary to international laws to which the PH is a
signatory.

Issue: Whether Pilipinas Shell is entitled to a refund?

Ruling:

Yes. The term "excise taxes" was used and defined as a tax on property applicable "to goods
manufactured or produced in the Philippines and to things imported." It has two kinds: first, "specific tax" which
is imposed and based on weight or volume capacity or any other physical unit of measurement; and "ad
valorem tax" which is imposed and based on the selling price or other specified value of the goods. A tax is not
excise where it does not subject directly the produce or goods to tax but indirectly as an incident to, or in
connection with, the business to be taxed. As already held, a tax exemption being enjoyed by the buyer cannot
be the basis of a claim for tax exemption by the manufacturer or seller of the goods for any tax due to it as the
manufacturer or seller. The excise tax imposed on petroleum products under Section 148 is the direct liability of
the manufacturer who cannot thus invoke the excise tax exemption granted to its buyers who are international
carriers. Further, it has been ruled that Section 135(a) should be construed as prohibiting the shifting of the
burden of the excise tax to the international carriers who buy petroleum products from the local manufacturers.
Said international carriers are thus allowed to purchase the petroleum products without the excise tax
component which otherwise would have been added to the cost or price fixed by the local manufacturers or
distributors/sellers. There can also be no violation of any international treaty because the avowed purpose of a
tax exemption is always "some public benefit or interest, which the law-making body considers sufficient to
offset the monetary loss entailed in the grant of the exemption." The exemption from excise tax of aviation fuel
purchased by international carriers for consumption outside the Philippines fulfilled a treaty obligation pursuant
to which our Government supports the promotion and expansion of international travel through avoidance of
multiple taxation and ensuring the viability and safety of international air travel. Justice Bersamin, however,
argues that Sec. 135 should not only be construed as what the majority declares in this case since the shifting
of the tax burden by the manufacturer-sellers is a business prerogative resulting from the collective impact of
market forces.
SEPARATE OPINION

BERSAMIN, J.:
I CONCUR in the result.

I write this separate opinion only to explain that I hold a different view on the proper
interpretation of the excise tax exemption under Section 135(a) of the NIRC. I hold that the excise tax
exemption under Section 135(a) of the NIRC is conferred on the petroleum products on which the excise
tax is levied in the first place in view of its nature as a tax on property, the liability for the payment of
which is statutorily imposed on the domestic petroleum manufacturer.

I submit the following disquisition in support of this separate opinion.

The issue raised here was whether the manufacturer was entitled to claim the refund of the excise
taxes paid on the petroleum products sold to international carriers exempt under Section 135(a) of the
NIRC.

We ruled in the negative, and held that the exemption from the excise tax under Section 135(a) of
the NIRC was conferred on the international carriers to whom the petroleum products were sold. In the
decision promulgated onn April 25, 2012,1 the Court granted the petition for review on certiorari filed by
the Commissioner of Internal Revenue (CIR), and disposed thusly:

WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated March 25, 2009
and Resolution dated June 24, 2009 of the Court of Tax Appeals En Banc in CTA EB No. 415 are hereby
REVERSED and SET ASIDE. The claims for tax refund or credit filed by respondent Pilipinas Shell
Petroleum Corporation are DENIED for lack of basis.

No pronouncement as to costs.

SO ORDERED.2ChanRoblesVirtualawlibrary
We thereby agreed with the position of the Solicitor General that Section 135(a) of the NIRC must be
construed only as a prohibition for the manufacturer–seller of the petroleum products from shifting the tax
burden to the international carriers by incorporating the previously–paid excise tax in the selling price. As
a consequence, the manufacturer–seller could not invoke the exemption from the excise tax granted to
international carriers. Concluding, we said: –

Respondent’s locally manufactured petroleum products are clearly subject to excise tax under Sec. 148.
Hence, its claim for tax refund may not be predicated on Sec. 229 of the NIRC allowing a refund of
erroneous or excess payment of tax. Respondent’s claim is premised on what it determined as a tax
exemption “attaching to the goods themselves,” which must be based on a statute granting tax exemption,
or “the result of legislative grace.” Such a claim is to be construed strictissimi juris against the taxpayer,
meaning that the claim cannot be made to rest on vague inference. Where the rule of strict interpretation
against the taxpayer is applicable as the claim for refund partakes of the nature of an exemption, the
claimant must show that he clearly falls under the exempting statute.

The exemption from excise tax payment on petroleum products under Sec. 135 (a) is conferred on
international carriers who purchased the same for their use or consumption outside the Philippines. The
only condition set by law is for these petroleum products to be stored in a bonded storage tank and may
be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of
Finance, upon recommendation of the Commissioner.3

x x x

Because an excise tax is a tax on the manufacturer and not on the purchaser, and there being no express
grant under the NIRC of exemption from payment of excise tax to local manufacturers of petroleum
products sold to international carriers, and absent any provision in the Code authorizing the refund or
crediting of such excise taxes paid, the Court holds that Sec. 135 (a) should be construed as prohibiting
the shifting of the burden of the excise tax to the international carriers who buys petroleum products from
the local manufacturers. Said provision thus merely allows the international carriers to purchase
petroleum products without the excise tax component as an added cost in the price fixed by the
manufacturers or distributors/sellers. Consequently, the oil companies which sold such petroleum
products to international carriers are not entitled to a refund of excise taxes previously paid on the
goods.4ChanRoblesVirtualawlibrary
In its Motion for Reconsideration filed on May 23, 2012, Pilipinas Shell principally contends that the
Court has erred in its interpretation of Section 135(a) of the 1997 NIRC; that Section 135(a) of the NIRC
categorically exempts from the excise tax the petroleum products sold to international carriers of
Philippine or foreign registry for their use or consumption outside the Philippines; 5 that no excise tax
should be imposed on the petroleum products, whether in the hands of the qualified international carriers
or in the hands of the manufacturer–seller; 6 that although it is the manufacturer, producer or importer who
is generally liable for the excise tax when the goods or articles are subject to the excise tax, no tax should
accordingly be collected from the manufacturer, producer or importer in instances when the goods or
articles themselves are not subject to the excise tax; 7 and that as a consequence any excise tax paid in
advance on products that are exempt under the law should be considered erroneously paid and subject of
refund.8cralawlawlibrary

Pilipinas Shell further contends that the Court’s decision, which effectively prohibits petroleum
manufacturers from passing on the burden of the excise tax, defeats the rationale behind the grant of the
exemption;9 and that without the benefit of a refund or the ability to pass on the burden of the excise tax
to the international carriers, the excise tax will constitute an additional production cost that ultimately
increases the selling price of the petroleum products. 10

The CIR counters that the decision has clearly set forth that the excise tax exemption under Section
135(a) of the NIRC does not attach to the products; that Pilipinas Shell’s reliance on the Silkair rulings is
misplaced considering that the Court made no pronouncement therein that the manufacturers selling
petroleum products to international carriers were exempt from paying the taxes; that the rulings that are
more appropriate are those in Philippine Acetylene Co., Inc. v. Commissioner of Internal
Revenue11 and Maceda v. Macaraig, Jr.,12 whereby the Court confirmed the obvious intent of Section 135
of the NIRC to grant the excise tax exemption to the international carriers or agencies as the buyers of
petroleum products; and that this intention is further supported by the requirement that the petroleum
manufacturer must pay the excise tax in advance without regard to whether or not the petroleum
purchaser is qualified for exemption under Section 135 of the NIRC.

In its Supplemental Motion for Reconsideration, Pilipinas Shell reiterates that what is being exempted
under Section 135 of the NIRC is the petroleum product that is sold to international carriers; that the
exemption is not given to the producer or the buyer but to the product itself considering that the excise
taxes, according to the NIRC, are taxes applicable to certain specific goods or articles for domestic sale or
consumption or for any other disposition, whether manufactured in or imported into the Philippines; that
the excise tax that is passed on to the buyer is no longer in the nature of a tax but of an added cost to the
purchase price of the product sold; that what is contemplated under Section 135 of the NIRC is an
exemption from the excise tax, not an exemption from the burden to shoulder the tax; and that inasmuch
as the exemption can refer only to the imposition of the tax on the statutory seller, like Pilipinas Shell, a
contrary interpretation renders Section 135 of the NIRC nugatory because the NIRC does not impose the
excise tax on subsequent holders of the product like the international carriers.

As I earlier said, I agree to GRANT Pilipinas Shell’s motions for reconsideration.

Excise tax is essentially a tax on goods, products or articles

Taxes are classified, according to subject matter or object, into three groups, to wit:
(1) personal, capitation or poll taxes; (2) property taxes; and (3) excise or license
taxes. Personal, capitation or poll taxes are fixed amounts imposed upon residents
or persons of a certain class without regard to their property or business, an
example of which is the basic community tax. 13 Property taxes are assessed on
property or things of a certain class, whether real or personal, in proportion to their
value or other reasonable method of apportionment, such as the real estate
tax.14 Excise or license taxes are imposed upon the performance of an act, the
enjoyment of a privilege, or the engaging in an occupation, profession or
business.15 Income tax, value–added tax, estate and donor’s tax fall under the third
group.

Excise tax, as a classification of tax according to object, must not be confused with
the excise tax under Title VI of the NIRC. The term “excise tax” under Title VI of
the 1997 NIRC derives its definition from the 1986 NIRC, 16 and relates to taxes
applied to goods manufactured or produced in the Philippines for domestic sale or
consumption or for any other disposition and to things imported.17 In contrast, an
excise tax that is imposed directly on certain specified goods – goods
manufactured or produced in the Philippines, or things imported – is undoubtedly a
tax on property.18

The payment of excise taxes is the direct liability of the manufacturer or

producer

The production, manufacture or importation of the goods belonging to any of the

categories enumerated in Title VI of the NIRC (i.e., alcohol products, tobacco
products, petroleum products, automobiles and non–essential goods, mineral
products) are not the sole determinants for the proper levy of the excise tax. It is
further required that the goods be manufactured, produced or imported
for domestic sale, consumption or any other disposition. 19 The accrual of the tax
liability is, therefore, contingent on the production, manufacture or importation of
the taxable goods and the intention of the manufacturer, producer or importer to
have the goods locally sold or consumed or disposed in any other manner. This is
the reason why the accrual and liability for the payment of the excise tax are
imposed directly on the manufacturer or producer of the taxable goods, 20 and arise
before the removal of the goods from the place of their production. 21

The manufacturer’s or producer’s direct liability to pay the excise taxes similarly
operates although the goods produced or manufactured within the country are
intended for export and are “actually exported without returning to the Philippines,
whether so exported in their original state or as ingredients or parts of any
manufactured goods or products.” This is implied from the grant of a tax credit or
refund to the manufacturer or producer by Section 130(4)(D) of the NIRC, thereby
presupposing that the excise tax corresponding to the goods exported were
previously paid. Section 130(4)(D) reads:chanRoblesvirtualLawlibrary
x xx
 
(D) Credit for Excise Tax on Goods Actually Exported. – When goods locally produced or manufactured
are removed and actually exported without returning to the Philippines, whether so exported in their
original state or as ingredients or parts of any manufactured goods or products, any excise tax paid
thereon shall be credited or refunded upon submission of the proof of actual exportation and
upon receipt of the corresponding foreign exchange payment: Provided, That the excise tax on
mineral products, except coal and coke, imposed under Section 151 shall not be creditable or
refundable even if the mineral products are actually exported. (Emphasis supplied.)
Simply stated, the accrual and payment of the excise tax under Title VI of the NIRC materially rest on the
fact of actual production, manufacture or importation of the taxable goods in the Philippines and on
their presumed or intended domestic sale, consumption or disposition. Considering that the excise tax
attaches to the goods upon the accrual of the manufacturer’s direct liability for its payment, the
subsequent sale, consumption or other disposition of the goods becomes relevant only to determine
whether any exemption or tax relief may be granted thereafter.

The actual sale, consumption or disposition of the taxable goods confirms the proper tax treatment
of goods previously subjected to the excise tax

Conformably with the foregoing discussion, the accrual and payment of the excise tax on the goods
enumerated under Title VI of the NIRC prior to their removal from the place of production are absolute
and admit of no exception. As earlier mentioned, even locally manufactured goods intended for
export cannot escape the imposition and payment of the excise tax, subject to a future claim for tax credit
or refund once proof of actual exportation has been submitted to the Commissioner of Internal Revenue
(CIR).22 Verily, it is the actual sale, consumption or disposition of the taxable goods that confirms the
proper tax treatment of goods previously subjected to the excise tax. If any of the goods enumerated
under Title VI of the NIRC are manufactured or produced in the Philippines and eventually sold,
consumed, or disposed of in any other manner domestically, therefore, there can be no claim for any tax
relief inasmuch as the excise tax was properly levied and collected from the manufacturer–seller.

Here, the point of interest is the proper tax treatment of the petroleum products sold by Pilipinas Shell to
various international carriers. An international carrier is engaged in international transportation or
contract of carriage between places in different territorial jurisdictions. 23

Pertinent is Section 135(a) of the NIRC, which provides:chanRoblesvirtualLawlibrary

SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. –
Petroleum products sold to the following are exempt from excise tax:

(a) International carriers of Philippine or foreign registry on their use or consumption outside the
Philippines: Provided, That the petroleum products sold to these international carriers shall be stored in a
bonded storage tank and may be disposed of only in accordance with the rules and regulations to be
prescribed by the Secretary of Finance, upon recommendation of the Commissioner; x xx

xxx
As the taxpayer statutorily and directly liable for the accrual and payment of the excise tax on the
petroleum products it manufactured and it intended for future domestic sale or consumption, Pilipinas
Shell paid the corresponding excise taxes prior to the removal of the goods from the place of
production. However, upon the sale of the petroleum products to the international carriers, the
goods became exempt from the excise tax by the express provision of Section 135(a) of the NIRC. In
the latter instance, the fact of sale to the international carriers of the petroleum products previously
subjected to the excise tax confirms the proper tax treatment of the goods as exempt from the excise
tax.

It is worthy to note that Section 135(a) of the NIRC is a product of the 1944 Convention of International
Civil Aviation, otherwise known as the Chicago Convention, of which the Philippines is a Member State.
Article 24(a) of the Chicago Convention provides –

Article 24
Customs duty
(a) Aircraft on a flight to, from, or across the territory of another contracting State shall be admitted
temporarily free of duty, subject to the customs regulations of the State. Fuel, lubricating oils, spare
parts, regular equipment and aircraft stores on board an aircraft of a contracting State, on arrival
in the territory of another contracting State and retained on board on leaving the territory of
that State shall be exempt from customs duty, inspection fees or similar national or local duties
and charges. This exemption shall not apply to any quantities or articles unloaded, except in
accordance with the customs regulations of the State, which may require that they shall be kept
under customs supervision. x xx (Bold emphasis supplied.)
This provision was extended by the ICAO Council in its 1999 Resolution, which stated that “fuel …
taken on board for consumption” by an aircraft from a contracting state in the territory of another
contracting State departing for the territory of any other State must be exempt from all customs or other
duties. The Resolution broadly interpreted the scope of the Article 24 prohibition to include “import,
export, excise, sales, consumption and internal duties and taxes of all kinds levied upon . . . fuel.”24

Given the nature of the excise tax on petroleum products as a tax on property, the tax exemption espoused
by Article 24(a) of the Chicago Convention, as now embodied in Section 135(a) of the NIRC, is clearly
conferred on the aviation fuel or petroleum product on–board international carriers. Consequently, the
manufacturer’s or producer’s sale of the petroleum products to international carriers for their use or
consumption outside the Philippines operates to bring the tax exemption of the petroleum products into
full force and effect.

Pilipinas Shell, the statutory taxpayer, is the proper party to claim the refund of the excise taxes
paid on petroleum products sold to international carriers

The excise taxes are of the nature of indirect taxes, the liability for the payment of which may fall on a
person other than whoever actually bears the burden of the tax. 25cralawred

In Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company,26 the Court has
discussed the nature of indirect taxes in the following manner:chanRoblesvirtualLawlibrary

[I]ndirect taxes are those that are demanded, in the first instance, from, or are paid by, one person in the
expectation and intention that he can shift the burden to someone else. Stated elsewise, indirect taxes are
taxes wherein the liability for the payment of the tax 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. When the seller passes on the tax to his buyer, he, in effect, shifts
the tax burden, not the liability to pay it, to the purchaser, as part of the price of goods sold or
services rendered.27ChanRoblesVirtualawlibrary
In another ruling, the Court has observed:chanRoblesvirtualLawlibrary

Accordingly, the party liable for the tax can shift the burden to another, as part of the purchase price of
the goods or services. Although the manufacturer/seller is the one who is statutorily liable for the tax, it is
the buyer who actually shoulders or bears the burden of the tax, albeit not in the nature of a tax, but part
of the purchase price or the cost of the goods or services sold. 28ChanRoblesVirtualawlibrary
Accordingly, the option of shifting the burden to pay the excise tax rests on the statutory taxpayer, which
is the manufacturer or producer in the case of the excise taxes imposed on the petroleum products.
Regardless of who shoulders the burden of tax payment, however, the Court has ruled as early as in the
1960s that the proper party to question or to seek a refund of an indirect tax is the statutory taxpayer, the
person on whom the tax is imposed by law and who paid the same, even if he shifts the burden thereof to
another.29 The Court has explained:chanRoblesvirtualLawlibrary

In Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue, the Court held that the sales tax is
imposed on the manufacturer or producer and not on the purchaser, “except probably in a very remote and
inconsequential sense.” Discussing the “passing on” of the sales tax to the purchaser, the Court therein
cited Justice Oliver Wendell Holmes’ opinion in Lash’s Products v. United States wherein he
said:chanRoblesvirtualLawlibrary
“The phrase ‘passed the tax on’ is inaccurate, as obviously the tax is laid and remains on the manufacturer
and on him alone. The purchaser does not really pay the tax. He pays or may pay the seller more for the
goods because of the seller’s obligation, but that is all. x xxThe price is the sum total paid for the goods.
The amount added because of the tax is paid to get the goods and for nothing else. Therefore it is part of
the price x xx.”
Proceeding from this discussion, the Court went on to state:chanRoblesvirtualLawlibrary
It may indeed be that the economic burden of the tax finally falls on the purchaser; when it does the tax
becomes a part of the price which the purchaser must pay. It does not matter that an additional amount is
billed as tax to the purchaser. x x x The effect is still the same, namely, that the purchaser does not pay
the tax. He pays or may pay the seller more for the goods because of the seller’s obligation, but that is all
and the amount added because of the tax is paid to get the goods and for nothing else.

But the tax burden may not even be shifted to the purchaser at all. A decision to absorb the burden of the
tax is largely a matter of economics. Then it can no longer be contended that a sales tax is a tax on the
purchaser.30
The Silkair rulings involving the excise taxes on the petroleum products sold to international carriers
firmly hold that the proper party to claim the refund of excise taxes paid is the manufacturer–seller.

In the February 2008 Silkair ruling,31 the Court declared:chanRoblesvirtualLawlibrary

The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on
whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another.
Section 130 (A) (2) of the NIRC provides that “[u]nless otherwise specifically allowed, the return shall be
filed and the excise tax paid by the manufacturer or producer before removal of domestic products from
place of production.” Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to
claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport
Agreement between RP and Singapore.
Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to
Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser
In the November 2008 Silkair ruling,32 the Court reiterated:chanRoblesvirtualLawlibrary

Section 129 of the NIRC provides that excise taxes refer to taxes imposed on specified goods
manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition
and to things imported. The excise taxes are collected from manufacturers or producers before removal of
the domestic products from the place of production. Although excise taxes can be considered as taxes on
production, they are really taxes on property as they are imposed on certain specified goods.

Section 148(g) of the NIRC provides that there shall be collected on aviation jet fuel an excise tax of
P3.67 per liter of volume capacity. Since the tax imposed is based on volume capacity, the tax is referred
to as “specific tax.” However, excise tax, whether classified as specific or ad valorem tax, is basically an
indirect tax imposed on the consumption of a specified list of goods or products. The tax is directly levied
on the manufacturer upon removal of the taxable goods from the place of production but in reality, the tax
is passed on to the end consumer as part of the selling price of the goods sold

x x x

When Petron removes its petroleum products from its refinery in Limay, Bataan, it pays the excise tax
due on the petroleum products thus removed. Petron, as manufacturer or producer, is the person liable for
the payment of the excise tax as shown in the Excise Tax Returns filed with the BIR. Stated otherwise,
Petron is the taxpayer that is primarily, directly and legally liable for the payment of the excise taxes.
However, since an excise tax is an indirect tax, Petron can transfer to its customers the amount of the
excise tax paid by treating it as part of the cost of the goods and tacking it on to the selling price.

As correctly observed by the CTA, this Court held in Philippine Acetylene Co., Inc. v. Commissioner of
Internal Revenue:chanRoblesvirtualLawlibrary
It may indeed be that the economic burden of the tax finally falls on the purchaser; when it does the tax
becomes part of the price which the purchaser must pay.
Even if the consumers or purchasers ultimately pay for the tax, they are not considered the taxpayers. The
fact that Petron, on whom the excise tax is imposed, can shift the tax burden to its purchasers does not
make the latter the taxpayers and the former the withholding agent.

Petitioner, as the purchaser and end–consumer, ultimately bears the tax burden, but this does not
transform petitioner’s status into a statutory taxpayer.

In the refund of indirect taxes, the statutory taxpayer is the proper party who can claim the refund.
Section 204(c) of the NIRC provides:

Sec. 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes. The
Commissioner may –

x x x

(b) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund
the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in
his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their
value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless
the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years
after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment
shall be considered as a written claim for credit or refund. (Emphasis and underscoring
supplied)chanroblesvirtualawlibrary
The person entitled to claim a tax refund is the statutory taxpayer. Section 22(N) of the NIRC defines a
taxpayer as “any person subject to tax.” In Commissioner of Internal Revenue v. Procter and Gamble
Phil. Mfg. Corp., the Court ruled that:chanRoblesvirtualLawlibrary
A “person liable for tax” has been held to be a “person subject to tax” and properly considered a
“taxpayer.” The terms “liable for tax” and “subject to tax” both connote a legal obligation or duty to pay a
tax.
The excise tax is due from the manufacturers of the petroleum products and is paid upon removal of the
products from their refineries. Even before the aviation jet fuel is purchased from Petron, the excise tax is
already paid by Petron. Petron, being the manufacturer, is the “person subject to tax.” In this case, Petron,
which paid the excise tax upon removal of the products from its Bataan refinery, is the “person liable for
tax.” Petitioner is neither a “person liable for tax” nor “a person subject to tax.” There is also no legal
duty on the part of petitioner to pay the excise tax; hence, petitioner cannot be considered the taxpayer.

Even if the tax is shifted by Petron to its customers and even if the tax is billed as a separate item in the
aviation delivery receipts and invoices issued to its customers, Petron remains the taxpayer because the
excise tax is imposed directly on Petron as the manufacturer. Hence, Petron, as the statutory taxpayer, is
the proper party that can claim the refund of the excise taxes paid to the
BIR.33ChanRoblesVirtualawlibrary
It is noteworthy that the foregoing pronouncements were applied in two more Silkair cases34 involving the
same parties and the same cause of action but pertaining to different periods of taxation.

The shifting of the tax burden by manufacturers–sellers is a business prerogative resulting from the
collective impact of market forces. Such forces include government impositions like the excise tax.
Hence, the additional amount billed to the purchaser as part of the price the purchaser pays for the goods
acquired cannot be solely attributed to the effect of the tax liability imposed on the manufacture–seller. It
is erroneous to construe Section 135(a) only as a prohibition against the shifting by the manufacturers–
sellers of petroleum products of the tax burden to international carriers, for such construction will deprive
the manufacturers–sellers of their business prerogative to determine the prices at which they can sell their
products.

Section 135(a) of the NIRC cannot be further construed as granting the excise tax exemption to the
international carrier to whom the petroleum products are sold considering that the international carrier has
not been subjected to excise tax at the outset. To reiterate, the excise tax is levied on the petroleum
products because it is a tax on property. Levy is the act of imposition by the Legislature such as by its
enactment of a law.35 The law enacted here is the NIRC whereby the excise tax is imposed on the
petroleum products, the liability for the payment of which is further statutorily imposed on the domestic
petroleum manufacturer. Accordingly, the exemption must be allowed to the petroleum products because
it is on them that the tax is imposed. The tax status of an international carrier to whom the petroleum
products are sold is not based on exemption; rather, it is based on the absence of a law imposing the
excise tax on it. This further supports the position that the burden passed on by the domestic petroleum
manufacturer is not anymore in the nature of a tax – although resulting from the previously–paid excise
tax – but as an additional cost component in the selling price. Consequently, the purchaser of the
petroleum products to whom the burden of the excise tax has been shifted, not being the statutory
taxpayer, cannot claim a refund of the excise tax paid by the manufacturer or producer.
Applying the foregoing, the Court concludes that: (1) the exemption under Section 135(a) of the NIRC is
conferred on the petroleum products on which the excise tax was levied in the first place; (2) Pilipinas
Shell, being the manufacturer or producer of petroleum products, was the statutory taxpayer of the excise
tax imposed on the petroleum products; (3) as the statutory taxpayer, Pilipinas Shell’s liability to pay the
excise tax accrued as soon as the petroleum products came into existence, and Pilipinas Shell accordingly
paid its excise tax liability prior to its sale or disposition of the taxable goods to third parties, a fact not
disputed by the CIR; and (3) Pilipinas Shell’s sale of the petroleum products to international carriers for
their use or consumption outside the Philippines confirmed the proper tax treatment of the subject goods
as exempt from the excise tax.

Under the circumstances, therefore, Pilipinas Shell erroneously paid the excise taxes on its petroleum
products sold to international carriers, and was entitled to claim the refund of the excise taxes paid in
accordance with prevailing jurisprudence and Section 204(C) of the
NIRC, viz:chanRoblesvirtualLawlibrary

Section 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. – The
Commissioner may – x xx

xxx

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund
the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in
his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their
value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the
taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after
payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be
considered as a written claim for credit or refund.
IN VIEW OF THE FOREGOING, I VOTE TO GRANT the Motion for Reconsideration and
Supplemental Motion for Reconsideration of Pilipinas Shell Petroleum Corporation and, accordingly:

(a) TO AFFIRM the decision dated March 25, 2009 and resolution dated June 24, 2009 of the Court of
Tax Appeals En Banc in CTA EB No. 415;and

(b) TO DIRECT petitioner Commissioner of Internal Revenue to refund or to issue a tax credit

certificate to Pilipinas Shell Petroleum Corporation in the amount of P95,014,283.00 representing the
excise taxes it paid on the petroleum products sold to international carriers in the period from Oct. 2001 to
June 2002.
Construction and Applicability of Tax Laws

G.R. No. L-30644 | March 9, 1987 COMMISSIONER OF INTERNAL REVENUE v. FIREMAN'S

FUND INSURANCE COMPANY, CA

FACTS
From January, 1952 to 1958, private respondent Fireman's Fund Insurance Co. entered into
various insurance contracts involving casualty, fire and marine risks, for which the corresponding
insurance policies were issued. From January, 1952 to 1956, documentary stamps were bought and
affixed to the monthly statements of policies issues; and from 1957 to 1958 documentary stamps were
bought and affixed to the corresponding pages of the policy register, instead of on the insurance policies
issued. In 1959, respondent company discovered that its monthly statements of business and policy
register were lost and reported such to the NBI and the CIR. The CIR through its examiner, after
conducting an investigation of said loss, ascertained that respondent company failed to affix the required
documentary stamps to the insurance policies issued by it and failed to preserve its accounting records
within the time prescribed by Sec. of the Revenue Code by using loose leaf forms as registers of
documentary stamps without written authority from the CIR. As a consequence of these findings,
petitioner assessed and demanded from petitioner the payment of documentary stamp taxes for the years
1952 to 1958 in the total amount of P 79,806.87 and plus compromise penalties, a total of P 81,406.87.

ISSUE
Whether the CIR may impose and require the payment of the subject stamp tax for the documents
in question.

RULING

NO. There is no justification for the government, which has already realized the revenue which is
the object of the imposition of subject stamp tax, to require the payment of the same tax for the same
documents. Enshrined in our basic legal principles is the time honored doctrine that no person shall
unjustly enrich himself at the expense of another. It goes without saying that the government is not
exempted from the application of this doctrine.
While there appears to be no question that the purpose of imposing documentary stamp taxes is to
raise revenue, however, the corresponding amount has already been paid by respondent and has actually
become part of the revenue of the government. In the same manner, evidence was shown to prove that the
affixture of the stamps on documents not authorized by law is not attended by bad faith as the practice
was adopted from the authority granted to one of respondent's general agents.

it is a general rule in the interpretation of statutes levying taxes or duties, that in case of doubt,
such statutes are to be construed most strongly against the government and in favor of the subjects or
citizens, because burdens are not to be imposed, nor presumed to be imposed beyond what statutes
expressly and clearly import (Manila Railroad Co. v. Collector of Customs, 52 Phil. 950 [1929]).

There appears to be no question that the purpose of imposing documentary stamp taxes is to raise revenue
and the corresponding amount has already been paid by respondent and has actually become part of the
revenue of the government. In the same manner, it is evident that the affixture of the stamps on documents
not authorized by law is not attended by bad faith as the practice was adopted from the authority granted to
Wise & Company, one of respondent’s general agents (CTA Decision, Rollo, p. 20). Indeed, petitioner argued
that such authority was not given to respondent company specifically, but under the general principle of
agency, where the acts of the agents bind the principal, the conclusion is inescapable that the justification
for the acts of the agents may also be claimed for the acts of the principal itself (Brief for the Respondents,
pp. 12-13).

Be that as it may, there is no justification for the government which has already realized the
revenue which is the object of the imposition of subject stamp tax, to require the payment of the same tax.
for the same documents. Enshrined in our basic legal principles is the time honored doctrine that no person
shall unjustly enrich himself at the expense of another. It goes without saying that the government is not
exempted from the application of this doctrine

CIR V CA G.R. No. 115349. April 18, 1997

FACTS

The Institute of Philippine Culture (IPC), is auxiliary unit of private respondent ATENEO DE
MANILA UNIVERSITY and accepts sponsorships for its research activities from international
organizations, private foundations and government agencies. Private respondent received from petitioner
Commissioner of Internal Revenue (CIR) demand letters for alleged deficiency contractors tax and
alleged deficiency income tax, Denying said tax liabilities, private respondent sent petitioner a letter-
protest and subsequently filed with the latter a memorandum contesting the validity of the assessments.
Petitioner rendered a letter-decision canceling the assessment for deficiency income tax but modifying the
assessment for deficiency contractors tax by increasing the amount due. Unsatisfied, private respondent
requested for a reconsideration or reinvestigation of the modified assessment. At the same time, it filed in
the respondent court a petition for review of the said letter-decision of the petitioner. While the petition
was pending before the respondent court, petitioner issued a final decision reducing the assessment for
deficiency contractors tax from P193,475.55 to P46,516.41, exclusive of surcharge and interest. The
Court of Appeals disagreed with the Petitioner Commissioner of Internal Revenue and affirmed the
assailed decision of the Court of Tax Appeals. Unfazed, petitioner now asks us to reverse the CA through
this petition for review.

ISSUE :

Is Ateneo de Manila University, through its auxiliary unit or branch -the Institute of Philippine
Culture- performing the work of an independent contractor and, thus, subject to the three percent
contractors tax levied by then Section 205 of the National Internal Revenue Code?

RULING:

The petition is unmeritorious. Section 205 of the National Internal Revenue Code provides that
business agents and other independent contractors, except persons, associations and corporations under
contract for embroidery and apparel for export, as well as their agents and contractors, and except gross
receipts of or from a pioneer industry registered with the Board of Investments under the provisions of
Republic Act No. 5186. The term independent contractors include persons (juridical or natural) not
enumerated above (but not including individuals subject to the occupation tax under Section 12 of the
Local Tax Code) whose activity consists essentially of the sale of all kinds of services for a fee regardless
of whether or not the performance of the service calls for the exercise or use of the physical or mental
faculties of such contractors or their employees.

Petitioner Commissioner of Internal Revenue erred in applying the principles of tax exemption
without first applying the well-settled doctrine of strict interpretation in the imposition of taxes. To fall
under its coverage, Section 205 of the National Internal Revenue Code requires that the independent
contractor be engaged in the business of selling its services. Hence, to impose the three percent
contractors tax on Ateneos Institute of Philippine Culture, it should be sufficiently proven that the private
respondent is indeed selling its services for a fee in pursuit of an independent business. And it is only
after private respondent has been found clearly to be subject to the provisions of Sec. 205 that the
question of exemption therefrom would arise. Only after such coverage is shown does the rule of
construction -- that tax exemptions are to be strictly construed against the taxpayer -- come into play,
contrary to petitioner’s position. After reviewing the records of this case, court found no evidence that
Ateneos Institute of Philippine Culture ever sold its services for a fee to anyone or was ever engaged in a
business apart from and independently of the academic purposes of the university.

The records do not show that Ateneos IPC in fact contracted to sell its research services for a fee.
Clearly then, as found by the Court of Appeals and the Court of Tax Appeals, petitioners theory is
inapplicable to the established factual milieu obtaining in the instant case.

In the first place, the petitioner has presented no evidence to prove its bare contention that,
indeed, contracts for sale of services were ever entered into by the private respondent. Moreover, the
Court of Tax Appeals accurately and correctly declared that the funds received by the Ateneo de Manila
University are technically not a fee.

They may however fall as gifts or donations which are tax-exempt as shown by private
respondents compliance with the requirement of Section 123 of the National Internal Revenue Code
providing for the exemption of such gifts to an educational institution. Therefore, it is clear that the funds
received by Ateneos Institute of Philippine Culture are not given in the concept of a fee or price in
exchange for the performance of a service or delivery of an object. Rather, the amounts are in the nature
of an endowment or donation given by IPCs benefactors solely for the purpose of sponsoring or funding
the research with no strings attached. As found by the two courts below, such sponsorships are subject to
IPCs terms and conditions. No proprietary or commercial research is done, and IPC retains the ownership
of the results of the research, including the absolute right to publish the same. In the case at bench, it is
clear from the evidence on record that there was no sale either of objects or services because, as adverted
to earlier, there was no transfer of ownership over the research data obtained or the results of research
projects undertaken by the Institute of Philippine Culture. Furthermore, it is clear that the research activity
of the Institute of Philippine Culture is done in pursuance of maintaining Ateneos university status and
not in the course of an independent business of selling such research with profit in mind.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. PHILIPPINE HEALTH CARE
PROVIDERS, INC., Respondent. G.R. No. 168129, April 24, 2007

FACTS:

Philippine Health Care Providers, Inc., (PHCPI) is a corporation whose purpose is to

establish, maintain, conduct and operate a prepaid group practice health care delivery
system or a health maintenance organization (HMO) and to provide for the
administrative, legal, and financial responsibilities of the organization.
E.O. 273 was issued amending the NIRC by imposing VAT on the sale of goods and
services. Before the effectivity of the said E.O., PHCPI inquired whether their services in
its health care program are exempt from the payment of the VAT. On June 8, 1988, CIR
issued VAT Ruling No. 231-88 stating that PHCPI, as a provider of medical services, is
exempt from the VAT coverage.
Meanwhile, on January 1, 1996,  R.A. 7716 (Expanded VAT or E-VAT Law) took effect,
amending further the NIRC of 1977. On January 1, 1998, R.A. No. 8424 (NIRC of 1997)
became effective with the adoption and reproduced the provisions of E.O. No. 273 on
VAT and R.A. No. 7716 on E-VAT.
On October 1, 1999, the BIR sent PHCPI a Preliminary Assessment Notice for
deficiency in its payment of “deficiency VAT” in the amount of ₱100,505,030.26 and
DST in the amount of ₱124,196,610.92, or a total of ₱224,702,641.18 for taxable years
1996 and 1997.
Subsequently, respondent filed a protest with the BIR. Another protest was filed
questioning the assessment notices on February 23, 2000 by which the CIR did not take
action on the protests. Hence, on September 21, 2000, PHCPI filed with the CTA a
petition for review.
On April 5, 2002, the CTA rendered its Decision partially granting the petition
where it ordered PHCPI to pay the deficiency VAT amounting to ₱22,054,831.75
inclusive of 25% surcharge plus 20% interest from January 20, 1997 until fully paid for
the 1996 VAT deficiency and ₱31,094,163.87 inclusive of 25% surcharge plus 20%
interest from January 20, 1998 until paid for the 1997 VAT deficiency. Accordingly, VAT
Ruling No. 231-88 is declared void and without force and effect. The 1996 and 1997
deficiency DST assessment against petitioner is hereby CANCELLED AND SET
ASIDE. Respondent is ORDERED to DESIST from collecting the said DST deficiency
tax.
Respondent filed a motion for partial reconsideration of the above judgment concerning
its liability to pay the deficiency VAT where the CTA granted PHCPI’s motion, thus the
 VAT assessment issued for the taxable years 1996 and 1997 were
WITHDRAWN and SET ASIDE.
The CTA held that the PHCPI is a service contractor subject to VAT since it does
not actually render medical service but merely acts as a conduit between the members
and petitioner’s accredited and recognized hospitals and clinics.
CIR filed a motion for reconsideration but it was denied, hence the instant petition for
review on certiorari:
ISSUES:
(1) Whether respondent’s services are subject to VAT; and
(2) Whether VAT Ruling No. 231-88 exempting respondent from payment of VAT
has retroactive application.
HELD:
(1) Respondent does not actually provide medical and/or hospital services, as
provided under Section 103 on exempt transactions, but merely arranges for the same,
its services are not VAT-exempt.
(2) NO. It shall not have retroactive application. Section 246 of the 1997 Tax
Code, as amended, provides that any revocation, modification or reversal of rulings,
circulars, rules and regulations promulgated by the CIR have no retroactive application
if it would prejudice the taxpayer. The exceptions to this rule are: (1) where the taxpayer
deliberately misstates or omits material facts from his return or in any document
required of him by the BIR;; (2) where the facts subsequently gathered by the BIR are
materially different from the facts on which the ruling is based, or (3) where the taxpayer
acted in bad faith.
There is no showing that respondent deliberately committed mistakes or omitted
material facts when it obtained VAT Ruling from the BIR. Respondent’s failure to
describe itself as a health maintenance organization, which is subject to VAT, is not
tantamount to bad faith. Respondent’s letter which served as the basis for the VAT
ruling sufficiently described its business. When the CIR ruling was issued the term
health maintenance organization was yet unknown or had no significance for taxation
purposes. Respondent, therefore, believed in good faith that it was VAT exempt for the
taxable years 1996 and 1997. The CIR is precluded from adopting a position contrary to
one previously taken where injustice would result to the taxpayer.
Therefore, the VAT assessment against respondent for the taxable years 1996 and
1997 is hereby withdrawn and set side.
 COMMISSIONER OF INTERNAL REVENUE v. SAN ROQUE POWER CORPORATION. G.R.
No. 187485; February 12, 2013.

FACTS:
 San Roque Power Corporation, Taganito Mining Corporation, and Philix Mining Corporation,
are all domestic corporations having their respective line of business.
The petition stemmed from the separate claims of the parties before the CIR for tax refund and/or credit.
The respective petitions were decided on the basis of their filing of such within the periods prescribed by
the law.

Thus, after review, the CTA En Banc rendered the following judgments:

With respect to San Roque Corporation, the CTA En Banc denied CIRs petition holding that San Roque's
judicial claim was not prematurely filed.

As regards to Taganito Mining Corporation, the CTA En Banc granted the CIRs petition on the fround
that Taganitos judicial claim was prematurely filed.

As to Philex Mining Corporation, the CTA En Banc denied Philexs petition on the ground that its judicial
claim long after the expiration of the 120-day period.

ISSUE: Whether or not the judicial claims for tax refund or credit were filed within the mandatory
period prescribed by law?

HELD: Records show that a mere 13 days after it filed its amended administrative claim with the
Commissioner on 28 March 2003, San Roque filed a Petition for Review with the CTA docketed as CTA
Case No. 6647.

Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly given by law to
the Commissioner to decide whether to grant or deny San Roque's application for tax refund or credit. It is
indisputable that compliance with the 120-day waiting period is mandatory and jurisdictional. The
waiting period, originally fixed at 60 days only, was part of the provisions of the first VAT law,
Executive Order No. 273, which took effect on 1 January 1988. The waiting period was extended to 120
days effective 1 January 1998 under RA 8424 or the Tax Reform Act of 1997. Thus, the waiting period
has been in the statute books for more than fifteen (15) years before San Roque filed its judicial claim.
Failure to comply with the 120-day waiting period violates a mandatory provision of law. It violates the
doctrine of exhaustion of administrative remedies and renders the petition premature and thus without a
cause of action, with the effect that the CTA does not acquire jurisdiction over the taxpayers petition.
Philippine jurisprudence is replete with cases upholding and reiterating these doctrinal principles.

San Roque's failure to comply with the 120-day mandatory period renders its petition for review with the
CTA void. San Roque's void petition for review cannot be legitimized by the CTA or this Court because
Article 5 of the Civil Code states that such void petition cannot be legitimized except when the law itself
authorizes its validity. There is no law authorizing the petitions validity.

For violating a mandatory provision of law in filing its petition with the CTA, San Roque cannot claim
any right arising from such void petition. Thus, San Roque's petition with the CTA is a mere scrap of
paper.

The mere fact that a taxpayer has undisputed excess input VAT, or that the tax was admittedly
illegally, erroneously or excessively collected from him, does not entitle him as a matter of right to a tax
refund or credit. Strict compliance with the mandatory and jurisdictional conditions prescribed by law to
claim such tax refund or credit is essential and necessary for such claim to prosper. Well settled is the rule
that tax refunds or credits, just like tax exemptions, are strictly construed against the taxpayer. The burden
is on the taxpayer to show that he has strictly complied with the conditions for the grant of the tax refund
or credit.

This Court cannot disregard mandatory and jurisdictional conditions mandated by law simply
because the Commissioner chose not to contest the numerical correctness of the claim for tax refund or
credit of the taxpayer. Non-compliance with mandatory periods, non-observance of prescriptive periods,
and non-adherence to exhaustion of administrative remedies bar a taxpayers claim for tax refund or credit,
whether or not the Commissioner questions the numerical correctness of the claim of the taxpayer. The
120-day period may extend beyond the two-year prescriptive period, as long as the administrative claim is
filed within the two-year prescriptive period. However, San Roque's fatal mistake is that it did not wait
for the Commissioner to decide within the 120-day mandatory period. At the time San Roque filed its
petition for review with the CTA, the 120+30 day mandatory periods were already in the law. Section
112(C) expressly grants the Commissioner 120 days within which to decide the taxpayers claim.

The taxpayer cannot simply file a petition with the CTA without waiting for the Commissioners decision
within the 120-day mandatory and jurisdictional period. The CTA will have no jurisdiction because there
will be no decision or deemed a denial decision of the Commissioner for the CTA to review. In San
Roque's case, it filed its petition with the CTA a mere 13 days after it filed its administrative claim with
the Commissioner. Indisputably, San Roque knowingly violated the mandatory 120-day period, and it
cannot blame anyone but itself.

Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or
inaction of the Commissioner. As this law states, the taxpayer may, if he wishes, appeal the decision of
the Commissioner to the CTA within 30 days from receipt of the Commissioners decision, or if the
Commissioner does not act on the taxpayers claim within the 120-day period, the taxpayer may appeal to
the CTA within 30 days from the expiration of the 120-day period.

As to Taganito, it also filed its petition for review with the CTA without waiting for the 120-day period to
lapse. Taganito filed a Petition for Review on 14 February 2007 with the CTA. Taganito is similarly
situated as San Roque - both cannot claim being misled, misguided, or confused by the Atlas doctrine.

However, Taganito can invoke BIR Ruling No. DA-489-03 dated 10 December 2003, which expressly
ruled that the taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek
judicial relief with the CTA by way of Petition for Review. Thus, Taganito is deemed to have filed its
judicial claim with the CTA on time.

With respect to Philex, it timely filed its administrative claim on 20 March 2006, within the two-year
prescriptive period. Even if the two-year prescriptive period is computed from the date of payment of the
output VAT under Section 229, Philex still filed its administrative claim on time. The Commissioner had
until 17 July 2006, the last day of the 120-day period, to decide Philexs claim. Since the Commissioner
did not act on Philexs claim on or before 17 July 2006, Philex had until 17 August 2006, the last day of
the 30-day period, to file its judicial claim. The CTA EB held that 17 August 2006 was indeed the last
day for Philex to file its judicial claim. However, Philex filed its Petition for Review with the CTA only
on 17 October 2007, or four hundred twentysix (426) days after the last day of filing. In short, Philex was
late by one year and 61 days in filing its judicial claim.

Philex did not file any petition with the CTA within the 120-day period. Philex did not also file any
petition with the CTA within 30 days after the expiration of the 120-day period. Philex filed its judicial
claim long after the expiration of the 120-day period, in fact 426 days after the lapse of the 120-day
period. Theinaction of the Commissioner on Philexs claim during the 120-day period is, by express
provision of law, deemed a denial of Philexs claim. Philex had 30 days from the expiration of the 120-day
period to file its judicial claim with the CTA. Philexs failure to do so rendered the deemed a denial
decision of the Commissioner final and inappealable. The right to appeal to the CTA from a decision or
deemed a denial decision of the Commissioner is merely a statutory privilege, not a constitutional right.
The exercise of such statutory privilege requires strict compliance with the conditions attached by the
statute for its exercise.

xxx
There are three compelling reasons why the 30-day period need not necessarily fall within the two-year
prescriptive period, as long as the administrative claim is filed within the two-year prescriptive period.

First, Section 112(A) clearly, plainly, and unequivocally provides that the taxpayer may, within two (2)
years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of the creditable input tax due or paid to such sales.

In short, the law states that the taxpayer may apply with the Commissioner for a refund or credit within
two (2) years, which means at anytime within two years. Thus, the application for refund or credit may be
filed by the taxpayer with the Commissioner on the last day of the two-year prescriptive period and it will
still strictly comply with the law. The two-year prescriptive period is a grace period in favor of the
taxpayer and he can avail of the full period before his right to apply for a tax refund or credit is barred by
prescription.

Second, Section 112(C) provides that the Commissioner shall decide the application for refund or credit
within one hundred twenty (120) days from the date of submission of complete documents in support of
the application filed in accordance with Subsection (A). The reference in Section 112(C) of the
submission of documents in support of the application filed in accordance with Subsection A means that
the application in Section 112(A) is the administrative claim that the Commissioner must decide within
the 120-day period. Thus, the two-year prescriptive period does not refer to the filing of the judicial claim
with the CTA but to the filing of the administrative claim with the Commissioner.

Third, if the 30-day period, or any part of it, is required to fall within the two-year prescriptive period
(equivalent to 730 days), then the taxpayer must file his administrative claim for refund or credit within
the first 610 days of the two-year prescriptive period. Otherwise, the filing of the administrative claim
beyond the first 610 days will result in the appeal to the CTA being filed beyond the two-year prescriptive
period.

Thus, section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language.
The taxpayer can file his administrative claim for refund or credit at anytime within the two-year
prescriptive period. If he files his claim on the last day of the two-year prescriptive period, his claim is
still filed on time. The Commissioner will have 120 days from such filing to decide the claim. If the
Commissioner decides the claim on the 120th day, or does not decide it on that day, the taxpayer still has
30 days to file his judicial claim with the CTA. This is not only the plain meaning but also the only
logical interpretation of Section 112(A) and (C).

***
The input VAT is not excessively collected as understood under Section 229 because at the time the input
VAT is collected the amount paid is correct and proper. The input VAT is a tax liability of, and legally
paid by, a VAT-registered seller of goods, properties or services used as input by another VAT-registered
person in the sale of his own goods, properties, or services. The second VAT-registered person, who is
not legally liable for the input VAT, is the one who applies the input VAT as credit for his own output
VAT. If the input VAT is in fact excessively collected as understood under Section 229, then it is the first
VAT-registered person - the taxpayer who is legally liable and who is deemed to have legally paid for the
input VAT - who can ask for a tax refund or credit under Section 229 as an ordinary refund or credit
outside of the VAT System. In such event, the second VAT-registered taxpayer will have no input VAT
to offset against his own output VAT.

In a claim for refund or credit of excess input VAT under Section 110(B) and Section 112(A), the input
VAT is not excessively collected as understood under Section 229. At the time of payment of the input
VAT the amount paid is the correct and proper amount. Under the VAT System, there is no claim or issue
that the input VAT is excessively collected, that is, that the input VAT paid is more than what is legally
due. The person legally liable for the input VAT cannot claim that he overpaid the input VAT by the mere
existence of an excess input VAT. The term excess input VAT simply means that the input VAT
available as credit exceeds the output VAT, not that the input VAT is excessively collected because it is
more than what is legally due. Thus, the taxpayer who legally paid the input VAT cannot claim for refund
or credit of the input VAT as excessively collected under Section 229.

Under Section 229, the prescriptive period for filing a judicial claim for refund is two years reckoned
from the date the person liable for the tax pays the tax. Thus, if the input VAT is in fact excessively
collected, that is, the person liable for the tax actually pays more than what is legally due, the taxpayer
must file a judicial claim for refund within two years from his date of payment. Only the person legally
liable to pay the tax can file the judicial claim for refund. The person to whom the tax is passed on as part
of the purchase price has no personality to file the judicial claim under Section 229.

Under Section 110(B) and Section 112(A), the prescriptive period for filing a judicial claim for excess
input VAT is two years from the close of the taxable quarter when the sale was made by the person
legally liable to pay the output VAT. This prescriptive period has no relation to the date of payment of the
excess inputVAT. The excess input VAT may have been paid for more than two years but this does not
bar the filing of a judicial claim for excess VAT under Section 112(A), which has a different reckoning
period from Section 229. Moreover, the person claiming therefund or credit of the input VAT is not the
person who legally paid the input VAT. Such person seeking the VAT refund or credit does not claim that
the input VAT was excessively collected from him, or that he paid an input VAT that is more than what is
legally due. He is not the taxpayer who legally paid the input VAT.

Under Section 110(B), a taxpayer can apply his input VAT only against his output VAT. The only
exception is when the taxpayer is expressly zero-rated or effectively zero-rated under the law, like
companies generating power through renewable sources of energy. Thus, a non zerorated VAT-registered
taxpayer who has no output VAT because he has no sales cannot claim a tax refund or credit of his
unused input VAT under the VAT System. Even if the taxpayer has sales but his input VAT exceeds his
output VAT, he cannot seek a tax refund or credit of his excess input VAT under the VAT System. He
can only carry-over and apply his excess input VAT against his future output VAT. If such excess input
VAT is an excessively collected tax, the taxpayer should be able to seek a refund or credit for such excess
input VAT whether or not he has output VAT.

The VAT System does not allow such refund or credit. Such excess input VAT is not an excessively
collected tax under Section 229. The excess input VAT is a correctly and properly collected tax.
However, such excess input VAT can be applied against the output VAT because the VAT is a tax
imposed only on the value added by the taxpayer. If the input VAT is in fact excessively collected under
Section 229, then it is the person legally liable to pay the input VAT, not the person to whom the tax was
passed on as part of the purchase price and claiming credit for the input VAT under the VAT System,
who can file the judicial claim under Section 229. Thus, it is clear that there must be a wrongful payment
because what is paid, or part of it, is not legally due.

***

There is nothing in RMC 49-03 that states, expressly or impliedly, that the taxpayer need not wait for the
120-day period to expire before filing a judicial claim with the CTA. RMC 49-03 merely authorizes the
BIR to continue processing the administrative claim even after the taxpayer has filed its judicial claim,
without saying that the taxpayer can file its judicial claim before the expiration of the 120-day period.

Thus, if the taxpayer files its judicial claim before the expiration of the 120-day period, the BIR will
nevertheless continue to act on the administrative claim because such premature filing cannot divest the
Commissioner of his statutory power and jurisdiction to decide the administrative claim within the 120-
day period.

On the other hand, if the taxpayer files its judicial claim after the 120- day period, the Commissioner can
still continue to evaluate the administrative claim. There is nothing new in this because even after the
expiration of the 120-day period, the Commissioner should still evaluate internally the administrative
claim for purposes of opposing the taxpayers judicial claim, or even for purposes of determining if the
BIR should actually concede to the taxpayers judicial claim. The internal administrative evaluation of the
taxpayers claim must necessarily continue to enable the BIR to oppose intelligently the judicial claim or,
if the facts and the law warrant otherwise, for the BIR to concede to the judicial claim, resulting in the
termination of the judicial proceedings.
What is important, as far as the present cases are concerned, is that the mere filing by a taxpayer of a
judicial claim with the CTA before the expiration of the 120-day period cannot operate to divest the
Commissioner of his jurisdiction to decide an administrative claim within the 120-day mandatory
period,unless the Commissioner has clearly given cause for equitable estoppel to apply as expressly
recognized in Section 246 of the Tax Code.

***

BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made by a
government agency tasked with processing tax refunds and credits, the One Stop Shop Inter-Agency Tax
Credit and Drawback Center of the Department of Finance. This government agency is also the addressee,
or the entity responded to, in BIR Ruling No. DA-489-03.

Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR
Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court
in Aichi on 6 October 2010, where this Court held that the 120+30 day periods are mandatory and
jurisdictional.

However, BIR Ruling No. DA-489-03 cannot be given retroactive effect for four reasons: first, it is
admittedly an erroneous interpretation of the law; second, prior to its issuance, the BIR held that the 120-
day period was mandatory and jurisdictional, which is the correct interpretation of the law; third, prior to
its issuance, no taxpayer can claim that it was misled by the BIR into filing a judicial claim prematurely;
and fourth, a claim for tax refund or credit, like a claim for tax exemption, is strictly construed against the
taxpayer.

San Roque, therefore, cannot benefit from BIR Ruling No. DA-489-03 because it filed its judicial claim
prematurely on 10 April 2003, before the issuance of BIR Ruling No. DA-489-03 on 10 December 2003.
To repeat, San Roque cannot claim that it was misled by the BIR into filing its judicial claim prematurely
because BIR Ruling No. DA-489-03 was issued only after San Roque filed its judicial claim. At the time
San Roque filed its judicial claim, the law as applied and administered by the BIR was that the
Commissioner had 120 days to act on administrative claims.

This was in fact the position of the BIR prior to the issuance of BIR Ruling No. DA-489-03. Indeed, San
Roque never claimed the benefit of BIR Ruling No. DA- 489-03 or RMC 49-03, whether in this Court,
the CTA, or before the Commissioner.

With respect to Taganito, it filed its judicial claim after the issuance of BIR Ruling No. DA-489-03 on 10
December 2003. Truly, Taganito can claim that in filing its judicial claim prematurely without waiting for
the 120-day period to expire, it was misled by BIR Ruling No. DA-489-03. Thus, Taganito can claim the
benefit of BIR Ruling No. DA-489-03, which shields the filing of its judicial claim from the vice of
prematurity.

Philex cannot claim the benefit of BIR Ruling No. DA-489-03 because Philex did not file its judicial
claim prematurely but filed it long after the lapse of the 30-day period following the expiration of the
120-day period.

***

Section 4.106-2(c) of Revenue Regulations No. 7-95, by its own express terms, applies only if the
taxpayer files the judicial claim after the lapse of the 60-day period, a period with which San Roque failed
to comply.

Under Section 4.106-2(c), the 60-day period is still mandatory and jurisdictional.

There can be no dispute that under Section 106(d) of the 1977 Tax

Code, as amended by RA 7716, the Commissioner has a 60-day period to act on the administrative
claim.This 60-day period is mandatory and jurisdictional.

Section 4.106-2(c) did not change Section 106(d) as amended by RA

7716, but merely implemented it, for two reasons. First, Section 4.106-2(c) still expressly requires
compliance with the 60-day period. This cannot be disputed.

Second, under the novel amendment introduced by RA 7716, mere inaction by the Commissioner during
the 60-day period is deemed a denial of the claim. Thus, Section 4.106-2(c) states that if no action on the
claim for tax refund/credit has been taken by the Commissioner after the sixty (60) day period, the
taxpayer may already file the judicial claim even long before the lapse of the two-year prescriptive period.
Prior to the amendment by RA 7716, the taxpayer had to wait until the two-year prescriptive period was
about to expire if the Commissioner did not act on the claim. With the amendment by RA 7716, the
taxpayer need not wait until the two-year prescriptive period is about to expire before filing the judicial
claim because mere inaction by the Commissioner during the 60-day period is deemed a denial of the
claim. This is the meaning of the phrase but before the lapse of the two (2) year period in Section 4.106-
2(c). As Section 4.106- 2(c) reiterates that the judicial claim can be filed only after the sixty (60) day
period, this period remains mandatory and jurisdictional. Clearly,

Section 4.106-2(c) did not amend Section 106(d) but merely faithfully implemented it.
Section 112(D) of the 1997 Tax Code is clear, unequivocal, and categorical that the Commissioner has
120 days to act on an administrative claim. The taxpayer can file the judicial claim (1) only within thirty
days after the Commissioner partially or fully denies the claim within the 120- day period, or (2) only
within thirty days from the expiration of the 120- day period if the Commissioner does not act within the
120-day period. There can be no dispute that upon effectivity of the 1997 Tax Code on 1 January 1998, or
more than five years before San Roque filed its administrative claim on 28 March 2003, the law has been
clear: the 120- day period is mandatory and jurisdictional. San Roques claim, having been filed
administratively on 28 March 2003, is governed by the 1997 Tax Code, not the 1977 Tax Code. Since San
Roque filed its judicial claim before the expiration of the 120-day mandatory and jurisdictional period,
San Roques claim cannot prosper.

San Roque cannot also invoke Section 4.106-2(c), which expressly provides that the taxpayer can only
file the judicial claim after the lapse of the 60-day period from the filing of the administrative claim.

Even if, contrary to all principles of statutory construction as well as plain common sense, we gratuitously
apply now Section 4.106-2(c) of Revenue Regulations No. 7-95, still San Roque cannot recover any
refund or credit because San Roque did not wait for the 60-day period to lapse, contrary to the express
requirement in Section 4.106-2(c). In short, San Roque does not even comply with Section 4.106-2(c). A
claim for tax refund or credit is strictly construed against the taxpayer, who must prove that his claim
clearly complies with all the conditions for granting the tax refund or credit. San Roque did not comply
with the express condition for such statutory grant.
BANCO DE ORO, ET AL VS Republic of the Philippines, et al G.R. No. 198756, August 16, 2016

FACTS
The Bureau of Treasury (BTr) in a notice announced the auction of 10- year Zero-Coupon Bonds
denominated as the Poverty Eradication and Alleviation Certificates or the PEACE Bonds on October 16,
2001, which the BTr states shall not be subject to 20% final withholding tax since the issue is limited to
19 buyers/lenders.

At the auction, Rizal Commercial Banking Corporation (RCBC) participated on behalf of Caucus of
Development NGO Networks (CODE-NGO) and won the bid.

Thus, bonds were issued to RCBC, who, as appointed issue manager and lead underwriter of CODE-
NGO, then sold and distributed said government bonds to petitioner-banks.

On October 7, 2011, barely 11 days before maturity of the PEACe Bonds, the BIR issued the following:

BIR Ruling No. 370- 201119 declaring that the PEACe Bonds, being deposit substitutes, were subject to
20% final withholding tax . Under this, DOF directed BTr to withhold 20% final tax from the face value
of the PEACe Bonds. BIR Ruling No. DA 378-201157 clarified that the final withholding tax should be
imposed and withheld not only on RCBC/CODE NGO but also on all subsequent holders of the Bonds.

Banco de Oro, et al. thus filed a petition for Certiorari, Prohibition and Mandamus under Rule 65 to the
Supreme Court contending the assailed 2011 BIR Ruling, with urgent application of TRO and/or writ of
Preliminary Injuction.

SC then issued a TRO enjoining the implementation of the BIR ruling, subject to the condition that 20%
FWT be delivered to the banks to be placed in escrow. SC Decision promulgated January 13, 2015, SC
granted petition and ruled that the number of lenders/ investors at every transaction determines whether a
debt instrument is a deposit substitute subject to 20% FWT. When at any transaction, funds are
simultaneously obtained from 20 or more lenders/investors, there is deemed to be public borrowing and
bonds are deemed deposit substitutes. Hence, seller is required to withhold 20% FWT on the imputed
interest income from the bonds.

The two BIR Rulings is void for disregarding the 20-lender rule provided in Section 22 (Y) of the Tax
Code. BTr reprimanded for its continued retention of the amount corresponding to 20% FWT. Separate
Motions for Reconsideration and clarification were filed both by BDO, et al and the Republic, et al.

ISSUES

1. Does CTA have jurisdiction to determine the constitutionality or validity of tax laws, rules and
regulations, and other administrative issuances of CIR?
2. May the 20-lender rule apply to PEACe Bonds?
 3. Assuming the PEACe Bonds are considered “deposit substitutes,” whether government or the
Bureau of Internal Revenue is estopped from imposing and/or collecting the 20% final
withholding tax from the face value of these Bonds?
4. Whether BTr is liable to pay 6% legal interest rate?

HELD
#1
YES. CTA has jurisdiction and may take cognizance of cases directly challenging constitutionality or
validity of a tax law, regulation or administrative issuance such as revenue order, revenue memorandum
circular, and ruling.

RA 9282: appeals from the decisions of quasi-judicial agencies on tax-related problems must be brought
exclusively to the CTA

#2
YES. The 20-lender rule may apply to PEACe Bonds, depending on the number of lenders “at any one
time”

The definition of deposit substitutes in Section 22(Y) specifically defined “public” to mean “twenty (20)
or more individual or corporate lenders at any one time.” Hence, if there are 20 or more lenders, the debt
instrument is considered a deposit substitute which is subject to the 20% FWT.
“The reckoning of the phrase “20 or more lenders” should be at the time when the petitioner-intervenor
RCBC Capital sold the PEACe bonds to investors. Should the number of investor to whom petitioner-
intervenor RCBC Capital distributes the PEACe bonds, therefore, be found to be 20 or more, the PEACe
Bonds are considered deposit substitutes subject to 20% final withholding tax. Petitioner-intervenors
RCBC/CODE-NGO and RCBC Capital, as well as the final bondholders who have recourse to
government upon maturity are liable to pay the 20% final withholding tax.”

#3
YES. The Bureau of Internal Revenue is estopped from imposing and/or collecting the 20% final
withholding tax from the face value of these Bonds

The Supreme Court interpretation in its January 2015 decision of the phrase “at any one time” to
determine the phrase “20 or more lenders” to include both the primary and secondary market cannot be
applied to the PEACe Bonds and should be applied prospectively.

RCBC and the rest of the investors relied in good faith on the BIR Rulings which provide that PEACe
Bonds are not treated as deposit substitutes and are subject to the 20% final withholding tax.

HELD
#4
YES. BTr may be held liable.
The BTr made no effort to release the amount corresponding to the 20% FWT which is an utter disregard
and defiance of the order of the Court

BTr is ordered to immediately release and pay the bondholders the amount of P4,966,207,796.41,
representing the 20% final withholding tax on the PEACe Bonds, with legal interest of 6% per annum
from October 19, 2011 until full payment.

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE ESTATE OF BENIGNO P.

TODA, JR., Represented by Special Co-administrators Lorna Kapunan and Mario Luza Bautista,
respondents. (G.R. No. 147188; September 14, 2004)

The CIR wants to assail the decision of the CTA holding the Estate of Toda not liable for the deficiency
IT of Cibeles Insurance Corporation (CIC) in the amount of 79 million pesos for 1989, and ordered the
cancellation and setting aside of the CIR's assessment.

The case at bar stemmed from a NOA sent to CIC arising from an alleged simulated sale of a 16-storey
commercial building known as Cibeles Building, situated on two parcels of land on Ayala Avenue,
Makati City. It is undisputed that CIC authorized Toda, Jr., President and owner of 99.991% of CIC, to
sell the Cibeles Building and the two parcels of land on which the building stands for an amount of not
less than P90 million. Toda sold it to Altonaga for 100 million pesos who then sold it on the same day to
Royal Match Inc. (RMI) for 200 million. All these transactions are evidenced by notarized deeds of sale.

For the sale of the property to RMI, Altonaga paid capital gains tax in the amount of P10 million. CIC
paid 26 million pesos for its gains from the sale of said property.

3 years before Toda died, he had sold his entire shares of stocks in CIC to Choa for 12.5 million pesos.

The BIR issued the 79-million NOA and demand letter against CIC. CIC moved to reconsider because it
has a new set of stockholders which it called "new CIC." It also pointed out Toda's undertaking to keep
CIC and its stockholdings free from all tax liabilities during the period within which the realty was sold.

The issued a NOA against the Estate of Toda. The Estate filed a protest but the BIR rejected arguing
that a fraudulent scheme was deliberately perpetuated by the CIC wholly owned and controlled by Toda
by covering up the additional gain of P100 million, which resulted in the change in the income structure
of the proceeds of the sale of the two parcels of land and the building thereon to an individual capital
gains, thus evading the higher corporate income tax rate of 35%
ISSUES:
[1] Is this a case of tax evasion or tax avoidance?
[2] Has the period for assessment of deficiency income tax for the year 1989 prescribed? and
[3] Can respondent Estate be held liable for the deficiency IT of CIC for the year 1989, if any?

HELD:
[1] Yes, there is tax evasion in this case.

Tax evasion connotes the integration of three factors: (1) payment of tax less than legally due; (2) a state
of mind being evil, in bad faith, willful,or deliberate and not accidental; and (3) unlawful course of action.
The intermediary transaction, i.e., the sale of Altonaga, which was prompted more on the mitigation of
tax liabilities than for legitimate business purposes, constitutes one of tax evasion.

Generally, a sale or exchange of assets will have an income tax incidence only when it is consummated.
The incidence of taxation depends upon the substance of a transaction. The tax consequences arising from
gains from a sale of property are not finally to be determined solely by the means employed to transfer
legal title. Rather, the transaction must be viewed as a whole, and each step from the commencement of
negotiations to the consummation of the sale is relevant. A sale by one person cannot be transformed for
tax purposes into a sale by another by using the latter as a conduit through which to pass title.

To allow a taxpayer to deny tax liability on the ground that the sale was made through another and
distinct entity when it is proved that the latter was merely a conduit is to sanction a circumvention of our
tax laws. Hence, the sale to Altonaga should be disregarded for income tax purposes.

[2] No, the period has not prescribed.

According to the Tax Code, in cases of (1) fraudulent returns; (2) false returns with intent to evade tax;
and (3) failure to file a return, the period within which to assess tax is ten years from discovery of the
fraud, falsification or omission, as the case may be.

In this case, the false return was filed on 15 April 1990, and the falsity thereof was claimed to have been
discovered only on 8 March 1991. The assessment for the 1989 deficiency income tax of CIC was issued
on 9 January 1995. Clearly, the issuance of the correct assessment for deficiency income tax was well
within the prescriptive period.

[3] Yes, the Estate of Toda can be held liable for the deficiency IT of CIC.

Generally, a corporation has a juridical personality distinct and separate from the persons owning or
composing it. However, certain instances in which personal liability may arise.
[1] He assents to the (a) patently unlawful act of the corporation, (b) bad faith or gross negligence in
directing its affairs, or (c) conflict of interest, resulting in damages to the corporation, its stockholders, or
other persons;
[2] He consents to the issuance of watered down stocks or, having knowledge thereof, does not forthwith
file with the corporate secretary his written objection thereto;
[3] He agrees to hold himself personally and solidarily liable with the corporation; or
[4] He is made, by specific provision of law, to personally answer for his corporate action.

Here, when the late Toda undertook and agreed to hold the BUYER and Cibeles free from any all income
tax liabilities of Cibeles for the fiscal years 1987, 1988, and 1989, he thereby voluntarily held himself
personally liable therefor. Respondent estate cannot, therefore, deny liability for CICs deficiency income
tax for the year 1989 by invoking the separate corporate personality of CIC, since its obligation arose
from Todas contractual undertaking, as contained in the Deed of Sale of Shares of Stock.

REPUBLIC ACT No. 11213

An Act Enhancing Revenue Administration and Collection by Granting an Amnesty on All Unpaid
Internal Revenue Taxes Imposed by the National Government for Taxable Year 2017 and Prior
Years with Respect to Estate Tax, Other Internal Revenue Taxes, and Tax on Delinquencies

Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled:

TITLE I
PRELIMINARY PROVISIONS

Section 1. Short Title. - This Act shall be known as the "Tax Amnesty Act".

Section 2. Declaration of Policy. - It is hereby declared the policy of the State to protect and enhance
revenue administration and collection, and make the country’s tax system more equitable, by simplifying
the tax compliance requirements. Towards this end, the State shall:

(a) Provide a one-time opportunity to settle estate tax obligations through an estate tax amnesty
program that will give reasonable tax relief to estates with deficiency estate taxes;

(b) Broaden the tax base by offering a general tax amnesty for all unpaid internal revenue taxes
that will help cleanse, organize, and improve the Bureau of Internal Revenue’s database;

(c) Enhance revenue collection by providing a tax amnesty on delinquencies that will minimize
administrative costs in pursuing tax cases and declog the dockets of the Bureau of Internal
Revenue and the courts; and
 (d) Provide a more equitable tax system by adopting a comprehensive tax reform program that
will simplify the requirements on tax amnesties with the use of simplified forms, and utilization
of information technology in broadening the tax base.

Section 3. Definition of Terms. - As used in this Act:

(a) Basic tax assessed refers to the latest amount of tax assessment issued by the Bureau of
Internal Revenue against the taxpayer, exclusive of interest, penalties, and surcharges.

(b) Net estate refers to the gross estate less all allowable deductions as provided in the National
Internal Revenue Code of 1997, as amended, or the applicable estate tax laws prevailing at the
time of death of the decedent;

(c) Net undeclared estate refers to the difference between the total net estate valued at the time of
death and the net estate previously declared with the Bureau of Internal Revenue, if any;

(d) Statement of Assets, Liabilities, and Networth refers to a declaration of the assets, liabilities,
and networth. as of December 31, 2017, as follows:

(1) Assets within or without the Philippines, whether real or personal, tangible or
intangible, whether or not used in trade or business: Provided, That property other than
money shall be valued at the cost at which the property was acquired: Provided, further
That foreign currency assets and/or securities shall be valued at the rate of exchange
prevailing as of the date of the Statement of Assets, Liabilities, and Net worth;

(2) All existing liabilities which are legitimate and enforceable, secured or unsecured,
whether or not incurred in trade or business; and

(3) The networth of the taxpayer, which shall be the difference between the total assets
and total liabilities.

(e) Total asset refers to the amount of the aggregate assets whether within or without the
Philippines, real or personal, tangible or intangible, or ordinary or capital.

TITLE II
ESTATE TAX AMNESTY

Section 4. Coverage. - There is hereby authorized and granted a tax amnesty, hereinafter called Estate
Tax Amnesty, which shall cover the estate of decedents who died on or before December 31, 2017, with
or without assessments duly issued therefor, whose estate taxes have remained unpaid or have accrued as
of December 31, 2017: Provided, however, That the Estate Tax Amnesty hereby authorized and granted
shall not cover instances enumerated under Section 9 hereof.

Section 5. Entitlement Under Estate Tax Amnesty. - Except for instances covered by Section 9 hereof, the
estate may enjoy the immunities and privileges of the Estate Tax Amnesty and pay an estate amnesty tax
at the rate of six percent (6%) based on the decedent’s total net estate at the time of death: Provided, That
if an estate tax return was previously filed with the Bureau of Internal Revenue, the estate tax rate of six
percent (6%) shall be based on net undeclared estate. The provisions of the National Internal Revenue
Code of 1997, as amended, or the applicable estate tax laws prevailing at the time of death of the
decedent, on valuation, manner of computation, and other related matters shall apply suppletorily, at the
time of the entitlement: Provided, further, That if the allowable deductions applicable at the time of death
of the decedent exceed the value of the gross estate, the heirs, executors, or administrators may avail of
the benefits of tax amnesty under Title II of this Act, and pay the minimum estate amnesty tax of Five
thousand pesos (₱5,000).

Section 6. Availment of the Estate Tax Amnesty; When and Where to File and Pay. - The executor or
administrator of the estate, or if there is no executor or administrator appointed, the legal heirs, transferees
or beneficiaries, who wish to avail of the Estate Tax Amnesty shall, within two (2) years from the
effectivity of the Implementing Rules and Regulations of this Act, file with the Revenue District Office of
the Bureau of Internal Revenue, which has jurisdiction over the last residence of the decedent, a sworn
Estate Tax Amnesty Return, in such forms as may be prescribed in the Implementing Rules and
Regulations. The payment of the amnesty tax shall be made at the time the Return is filed: Provided, That
for nonresident decedents, the Estate Tax Amnesty Return shall be filed and the corresponding amnesty
tax be paid at Revenue District Office No. 39, or any other Revenue District Office which shall be
indicated in the Implementing Rules and Regulations:

Provided, further, That if the estate involved has properties which are still in the name of another
decedent or donor, the present holder, heirs, executors or administrators thereof shall only file one (1)
Estate Tax Amnesty Return and pay the corresponding estate amnesty tax thereon based on the total net
estate at the time of death of the last decedent covering all accrued taxes under the National Internal
Revenue Code of 1997, as amended, arising from the transfer of such estate from all prior decedents or
donors through which the property or properties comprising the estate shall pass:

Provided, furthermore, That the appropriate Revenue District Officer shall issue and endorse an
acceptance payment form, in such form as may be prescribed in the Implementing Rules and Regulations
of this Act for the authorized agent bank, or in the absence thereof, the revenue collection agent or
municipal treasurer concerned, to accept the tax amnesty payment. Proof of settlement of the estate,
whether judicial or extrajudicial, shall likewise be attached to said Return in order to verify the mode of
transfer and the proper recipients:

Provided, finally, That the avaiiment of the Estate Tax Amnesty and the issuance of the corresponding
Acceptance Payment Form do not imply any admission of criminal, civil or administrative liability on the
part of the availing estate.

Section 7. Presumption of Correctness of the Estate Tax Amnesty Returns. - The Estate Tax Amnesty
Returns shall be conclusively presumed as true, correct, and final upon filing thereof, and shall be deemed
complete upon full payment of the amount due.

The Acceptance Payment Form, and the Estate Tax Amnesty Return shall be submitted to the Revenue
District Office after complete payment. The completion of these requirements shall be deemed full
compliance with the provisions of this Act. A Certificate of Avaiiment of the Estate Tax Amnesty shall be
issued by the Bureau of Internal Revenue within fifteen (15) calendar days from submission to the Bureau
of Internal Revenue of the Acceptance Payment Form and the Estate Tax Amnesty Return. Otherwise, the
duplicate copies of the Acceptance Payment Form, stamped as received, and the Estate Tax Amnesty
Return shall be deemed as sufficient proof of avaiiment.

Section 8. Immunities and Privileges. - Estates covered by the Estate Tax Amnesty, which have fully
complied with all the conditions set forth in this Act, including the payment of the estate amnesty tax
shall be immune from the payment of all estate taxes, as well as any increments and additions thereto,
arising from the failure to pay any and all estate taxes for taxable year 2017 and prior years, and from all
appurtenant civil, criminal, and administrative cases and penalties under the National Internal Revenue
Code of 1997, as amended.

Without prejudice to compliance with applicable laws on succession as a mode of transfer, the Bureau of
Internal Revenue, in coordination with the applicable regulatory agencies, shall set up a system enabling
the transfer of title over properties to heirs and/or beneficiaries and cash withdrawals from the bank
accounts of the decedent, -when applicable.

Upon full compliance with all the conditions set forth in this Title and payment of the corresponding
estate amnesty tax, the tax amnesty granted under this Title shall become final and irrevocable.

Section 9. Exceptions. - The Estate Tax Amnesty under Title II of this Act shall not extend to estate tax
cases which shall have become final and executory and to properties involved in cases pending in
appropriate courts:

(a) Falling under the jurisdiction of the Presidential Commission on Good Government;

(b) Involving unexplained or unlawfully acquired wealth under Republic Act No. 3019, otherwise
known as the Anti-Graft and Corrupt Practices Act, and Republic Act No. 7080 or An Act
Defining and Penalizing the Crime of Plunder;

(c) Involving violations of Republic Act No. 9160, otherwise known as the Anti-Money
Laundering Act, as amended;

(d) Involving tax evasion and other criminal offenses under Chapter II of Title X of the National
Internal Revenue Code of 1997, as amended; and

(e) Involving felonies of frauds, illegal exactions and transactions, and malversation of public
funds and property under Chapters III and IV of Title VII of the Revised Penal Code.

TITLE III
GENERAL TAX AMNESTY

Section 10. Coverage. - There is hereby authorized and granted a tax amnesty, hereinafter called General
Tax Amnesty, which, shall cover all national internal revenue taxes such as, but not limited to, income
tax, withholding tax, capital gains tax. donor’s tax, value-added tax, other percentage taxes, excise tax and
documentary stamp tax collected by the Bureau of Internal Revenue, including value-added tax and
excise taxes collected by the Bureau of Customs for taxable year 2017 and prior years, with or without
assessments duly issued therefor, that have remained unpaid: Provided, however, That the General Tax
Amnesty hereby authorized and granted shall not cover persons or cases enumerated under Section 16 and
Title IV hereof.

Section 11. Entitlement Under the General Tax Amnesty. - Except for the instances covered in Section 16
hereof, any person, whether natural or juridical, may enjoy the immunities and privileges of the General
Tax Amnesty by paying, at the taxpayers option, an amnesty tax at:

(i) the rate of two percent (2%) based on the taxpayer’s total assets as of December 31,2017, as
declared in the Statement of Total Assets; or
 (ii) based on the taxpayer’s total networth as of December 31, 2017, as declared in the Statement
of Assets, Liabilities, and Networth filed pursuant to Section 12 hereof and in accordance with
the following schedule of amnesty tax rates and minimum amnesty tax payments required:

(a) Individual (whether resident or nonresident citizens, including resident or nonresident

aliens), Trusts and Estates………5% or ₱75,000, whichever is higher.

(b) Corporations

(1) With subscribed capital of above ₱50 million………5% or ₱1,000,000,

whichever is higher.

(2) With subscribed capital of above ₱20 million up to ₱50 million………5% or

₱500,000, whichever is higher.

(3) With subscribed capital of ₱5 million up to ₱20 million………5% or

₱250,000, whichever is higher.

(4) With subscribed capital of below ₱5 million………5% or ₱100,000,

whichever is higher.

(c) Other juridical entities, including, but not limited to, cooperatives and foundations,
that have become taxable as of December 31, 2017………5% or ₱75,000, whichever is
higher:

Provided, That if the taxpayer opts to pay the amnesty tax based on total networth and the computed
networth is negative, the taxpayer may still avail of the benefits of tax amnesty under this Title, and pay
the minimum amnesty tax.

Section 12. Availment of the General Tax Amnesty; When and. Where to File and Pay. - Any person,
natural or juridical, who wishes to avail of the General Tax Amnesty shall, within one (1) year from the
effectivity of the Implementing Rules and Regulations, file with the appropriate office of the Bureau of
Internal Revenue, which has jurisdiction over the taxpayer, a sworn General Tax Amnesty Return
accompanied by a notarized Statement of Total Assets or notarized Statement of Asssets, Liabilities, and
Networth, as the case maybe, as of December 31, 2017. The payment of the amnesty tax shall be made at
the time the Return is filed:

Provided, That the Revenue District Officer shall issue and endorse an Acceptance Payment Form, in
such form as may be prescribed in the Implementing Rules and Regulations of this Act authorizing the
authorized agent bank, or in the absence thereof, the revenue collection agent or municipal treasurer
concerned, to accept the amnesty tax payment:

Provided, further, That the availment of the General Tax Amnesty and the issuance of the corresponding
Acceptance Payment Form do not imply any admission of criminal, civil or administrative liability on the
part of the availing taxpayer:

Provided, furthermore, That if the tax amnesty is availed based on the period indicated hereunder, the
taxpayer shall be entitled to the corresponding reduction in the total amnesty tax due:
 (a) If paid on or before the end of the third calendar month from the effectivity of the
Implementing Rules and Regulations………20%;

(b) If paid after the end of the third calendar month until the end of the sixth calendar month from
the effectivity of the Implementing Rules and Regulations………15%; and

(c) If paid after the end of the sixth calendar month until the end of the ninth calendar month from
the effectivity of the Implementing Rules and Regulations………10%.

Section 13. Contents of the Statement of Total Assets and. Statement of Assets, Liabilities, and
Networth. -

(A) The Statement of Total Assets shall contain a declaration of the total assets as of December
31, 2017, as follows:

(1) Assets within or without the Philippines, whether real or personal, tangible or
intangible, whether or not used in trade or business:

(a) Real properties shall be accompanied by a description of their classification,

exact location, and valued at acquisition cost, if acquired by purchase, or the
zonal valuation or fair market value as shown in the schedule of values of the
provincial, city or municipal assessors at the time of inheritance or donation,
whichever is higher, if acquired through inheritance or donation;

(b) Personal properties other than money, shall be accompanied by a specific

description of the kind and number of assets (e.g. automobiles, shares of stock,
etc.) or other investments, indicating the acquisition cost less the accumulated
depreciation or amortization, or the corresponding book value for shares of stock,
in proper cases, if acquired by purchase, or the fair market price or value at the
date of the Statement of Total Assets, if acquired through inheritance or
donation;

(c) Assets denominated in foreign currency shall be converted into the

corresponding Philippine currency equivalent, at the rate of exchange prevailing
as of the date of the Statement of Total Assets; and

(d) Cash on hand and in bank in peso as of the date of the Statement of Total
Assets, as well as cash on hand and in bank in foreign currency, converted to
Philippine peso at the rate of exchange prevailing as of the date of the Statement
of Total Assets.

(B) The Statement of Assets, Liabilities, and Networth shall contain a true and complete
declaration of assets, liabilities, and networth of the taxpayer as of December 31, 2017, as
follows:

(1) Assets within or without the Philippines, whether real or personal, tangible or
intangible, whether or not used in trade or business:
 (a) Real properties shall be accompanied by a description of their classification,
exact location, and valued at acquisition cost, if acquired by purchase, or the
zonal valuation or fair market value as shown in the schedule of values of the
provincial, city or municipal assessors, at the time of inheritance or donation,
whichever is higher, if acquired through inheritance or donation;

(b) Personal properties other than money, shall be accompanied by a specific

description of the kind and number of assets (e.g. automobiles, shares of stock,
etc.) or other investments, indicating the acquisition cost less the accumulated
depreciation or amortization, or the corresponding book value for shares of stock,
in proper cases, if acquired by purchase, or the fair market price or value at the
date of the Statement of Assets, Liabilities, and Networth, if acquired through
inheritance or donation;

(c) Assets denominated in foreign currency shall be converted into the

corresponding Philippine currency equivalent, at the rate of exchange prevailing
as of the date of the Statement of Assets, Liabilities, and Networth; and

(d) Cash on hand and in bank in peso as of the date of the Statement of Assets,
Liabilities, and Networth, as well as cash on hand and in bank in foreign
currency, converted to Philippine peso at the rate of exchange prevailing as of the
date of the Statement of Assets, Liabilities, and Networth.

(2) All existing liabilities, which are legitimate and enforceable, secured or unsecured,
whether or not incurred in trade or business, disclosing or indicating clearly the name and
address of the creditor and the amount of the corresponding Lability.

(3) The total networth of the taxpayer, which shall be the difference between the total
assets and total liabilities.

Section 14. Presumption of Correctness of the Statement of Total Assets, and Statement of Assets,
Liabilities, and Networth. - The Statement of Total Assets or the Statement of Assets, Liabilities, and
Networth, filed at the option of the taxpayer, shall be conclusively presumed as true, correct, and final
upon filing thereof, and shall be deemed complete upon full payment of the amount due.

The Acceptance Payment Form, and the General Tax Amnesty Return shall be submitted to the Revenue
District Office after complete payment. The completion of these requirements shall be deemed full
compliance with the provisions of this Act. A Certificate of Availment of the General Tax Amnesty shall
be issued by the Bureau of Internal Revenue within fifteen (15) calendar days from submission to the
Bureau of Internal Revenue of the Acceptance Payment Form and the General Tax Amnesty Return.
Otherwise, the duplicate copies, stamped as received, of the Acceptance Payment Form, and the General
Tax Amnesty Return shall be deemed as sufficient proof of availment.

Section 15. Immunities and Privileges. - Those who avail of the General Tax Amnesty and have fully
complied with all the conditions set forth in this Act and upon payment of the amnesty tax shall be
entitled to the following immunities and privileges:

(a) With respect to the years covered by the tax amnesty, the taxpayer shall be immune from the
payment of taxes, as well as additions thereto, and from all appurtenant civil, criminal, and
administrative cases and penalties under the National Internal Revenue Code of 1997, as
 amended, arising from the failure to pay any and all internal revenue taxes for taxable year 2017
and prior years and from such other investigations or suits insofar as they relate to the assets,
liabilities, networth, and internal revenue taxes that are subject of the tax amnesty.

(b) Any information or data contained in, derived from or provided by a taxpayer in the Tax
Amnesty Return, Statement of Total Assets or Statement of Assets, Liabilities, and Networth, as
the case may be, and appurtenant documents shall be confidential in nature and shall not be used
in any investigation or prosecution before any judicial, quasi-judicial, and administrative bodies.
However, the taxpayer may use this as a defense, whenever appropriate, in cases brought against
the taxpayer.

(c) The books of accounts and other records of the taxpayer for the years covered by the tax
amnesty availed of shall not be examined by the Bureau of Internal Revenue: Provided, That the
Commissioner of Internal Revenue may authorize in writing the examination of the said books of
accounts and other records to verify the validity or correctness of a claim for any tax refund, tax
credit (other than refund or credit of taxes withheld on wages), tax incentives, and/or exemptions
under existing laws.

All these immunities and privileges shall not apply when the taxpayer failed to file a General Tax
Amnesty Return and a Statement of Total Assets, or Statement of Assets, Liabilities, and Networth, as the
case may be.

Upon full compliance with all the conditions set forth in this Title and payment of the corresponding
general amnesty tax, the tax amnesty granted under this Title shall become final and irrevocable.

Section 16. Exceptions. - The General Tax Amnesty under this Act shall not extend to the following:

(a) Withholding tax agents who withheld taxes but failed to remit the same to the Bureau of
Internal Revenue:

(b) Taxpayers with cases pending in appropriate courts involving:

(1) Those that fall under the jurisdiction of the Presidential Commission on Good
Government;

(2) Unexplained or unlawfully acquired wealth under Republic Act No. 3019, otherwise
known as the Anti-Graft and Corrupt Practices Act, and Republic Act No. 7080 or An
Act Defining and Penalizing the Crime of Plunder;

(3) Violations of Republic Act No. 9160, otherwise known as the Anti-Money
Laundering Act, as amended;

(4) Tax evasion and other criminal offenses under Chapter II of Title X of the National
Internal Revenue Code of 1997, as amended; and

(5) Felonies of frauds, illegal exactions and transactions, and malversation of public
funds and property under Chapters III and IV of Title VTI of the Revised Penal Code;

(c) Tax cases that have become final and executory; and
 (d) Delinquencies and assessments that have become final and executory.

TITLE IV
TAX AMNESTY ON DELINQUENCIES

Section 17. Coverage. - There is hereby authorized and granted a tax amnesty herein called the Tax
Amnesty on Delinquencies, which shall cover all national internal revenue taxes such as, but not limited
to, income tax, withholding tax, capital gains tax, donor’s tax, value-added tax, other percentage taxes,
excise tax and documentary stamp tax collected by the Bureau of Internal Revenue, including value-
added tax and excise taxes collected by the Bureau of Customs for taxable year 2017 and prior years.

For purposes of this Act, the Tax Amnesty on Delinquencies may be availed of in the following instances:

(a) Delinquencies and assessments, which have become final and executory, including delinquent
tax account, where the application for compromise has been requested on the basis of: (1)
doubtful validity of the assessment; or (2) financial incapacity of the taxpayer, but the same was
denied by the Regional Evaluation Board or the National Evaluation Board, as the case may be,
on or before the Implementing Rules and Regulations take effect;

(b) Pending criminal cases with the Department of Justice or the courts for tax evasion and other
criminal offenses under Chapter II of Title X and Section 275 of the National Internal Revenue
Code of 1997, as amended, with or without assessments duly issued;

(c) Tax cases subject of final and executory judgment by the courts on or before the
Implementing Rules and Regulations take effect; and

(d) Withholding tax agents who withheld taxes but failed to remit the same to the Bureau of
Internal Revenue.

Section 18. Entitlement of Tax Amnesty on Delinquencies. - Any person may enjoy the immunities and
privileges of the Tax Amnesty on Delinquencies and pay the following tax amnesty rates:

(a) Delinquencies and assessments which have become final and executory……… 40% of the
basic tax assessed;

(b) Tax cases subject of final and executory judgment by the courts……… 50% of the basic tax
assessed;

(c) Pending criminal cases with criminal information filed with the Department of Justice or the
courts for tax evasion and other criminal offenses under Chapter II of Title X and Section 275 of
the National Internal Revenue Code of 1997, as amended, with assessments duly issued and
otherwise excluded in Titles II and III hereof……… 60% of the basic tax assessed; and

(d) Withholding agents who withheld taxes but failed to remit the same to the Bureau of Internal
Revenue……… 100% of the basic tax assessed.1âwphi1

Section 19. Availment of the Tax Amnesty on Delinquencies; When and Where to File and Pay. - Any
person, natural or juridical, who wishes to avail of the Tax Amnesty on Delinquencies shall, within one
(1) year from the effectivity of the Implementing Rules and Regulations of this Act, file with the
appropriate office of the Bureau of Internal Revenue, which has jurisdiction over the residence or
principal place of business of the taxpayer, a sworn Tax Amnesty on Delinquencies Return accompanied
by a Certification of Delinquency. The payment of the amnesty tax shall be made at the time the Return is
filed:

Provided, That the Revenue District Officer shall issue and endorse an Acceptance Payment Form, in
such form as may be prescribed in the Implementing Rules and Regulations of this Act authorizing the
authorized agent bank, or in the absence thereof, the revenue collection agent or municipal treasurer
concerned, to accept the amnesty tax payment:

Provided, further, That the availment of the Tax Amnesty on Delinquencies and the issuance of the
corresponding Acceptance Payment Form do not imply any admission of criminal, civil or administrative
liability on the part of the availing taxpayer.

Section 20. Immunities and Privileges. - The tax delinquency of those who avail of the Tax Amnesty on
Delinquencies and have fully complied with all the conditions set forth in this Act and upon payment of
the amnesty tax shall be considered settled and the criminal case under Section 18(c) and its
corresponding civil or administrative case, if applicable, be terminated, and the taxpayer shall be immune
from all suits or actions, including the payment of said delinquency or assessment, as well as additions
thereto, and from all appurtenant civil, criminal, and administrative cases, and penalties under the
National Internal Revenue Code of 1997, as amended, as such relate to the taxpayer’s assets, liabilities,
networth, and internal revenue taxes that are subject of the tax amnesty, and from such other
investigations or suits insofar as they relate to the assets, liabilities, networth and internal revenue taxes
that are subject of the tax amnesty: Provided, That any notices of levy, attachments and/or warrants of
garnishment issued against the taxpayer shall be set aside pursuant to a lifting of notice of
levy/garnishment duly issued by the Bureau of Internal Revenue or its authorized
representative: Provided, further, That the Authority to Cancel Assessment shall be issued by the Bureau
of Internal Revenue in favor of the taxpayer availing of the Tax Amnesty on Delinquencies within fifteen
(15) calendar days from submission to the Bureau of Internal Revenue of the Acceptance Payment Form
and the Tax Amnesty on Delinquencies Return. Otherwise, the duplicate copies, stamped as received, of
the Acceptance Payment Form, and the Tax Amnesty on Delinquencies Return shall be deemed as
sufficient proof of availment: Provided, furthermore, That the Tax Amnesty on Delinquencies Return and
the Acceptance Payment Form shall be submitted to the Revenue District Office after complete payment.
The completion of these requirements shall be deemed full compliance with the provisions of this Act.

Upon full compliance with all the conditions set forth in this Title and payment of the corresponding tax
on delinquency, the tax amnesty granted under this Title shall become final and irrevocable.

TITLE V
CONFIDENTIALITY AND NON-USE OF INFORMATION AND DATA, AND AMENDMENT
TO THE STATEMENT OF TOTAL ASSETS AND STATEMENT OF ASSETS, LIABILITIES,
AND NETWORTH

Section 21. Confidentiality and Non-use of Information and Data in the Statement of Total Assets and
Statement of Assets, Liabilities, and Networth. - Any information or data contained in, derived from or
provided by a taxpayer in the Tax A_mnesty Return, Statement of Total Assets or Statement of Assets,
Liabilities, and Networth, as the case may be and appurtenant documents shall be confidential in nature
and shall not be used in any investigation or prosecution before any judicial, quasijudicial, and
administrative bodies.
Any statement of assets, liabilities, and networth, financial statements, information sheets, and any such
other statements or disclosures that may have been previously submitted by the taxpayer as required by
existing laws are deemed to have been amended by the Tax Amnesty Return and/or the Statement of
Total Assets or Statement of Assets, Liabilities, and Networth., as the case may be, filed under this Act
and may not be the subject of any investigation or prosecution or be used in any investigation or
prosecution before any judicial, quasi-judicial, and administrative bodies.

TITLE VI
GENERAL PROVISIONS

Section 22. Information Management System. - For purposes of enhancing revenue administration,

revenue collection and policy formulation, the Department of Finance, in coordination with the Bureau of
Internal Revenue, Land Registration Authority, Department of Trade and Industry, Securities and
Exchange Commission, Land Transportation Office, and other agencies concerned, shall institute an
Information Management Program for the effective use of information declared or obtained from the Tax
Amnesty Returns and Statements of Total Assets or Statements of Assets, Liabilities, and Networth, as
the case may be, required to be filed under this Act.

All the statements and returns required under this Act shall be filed and processed separately from all
other records of the Bureau of Internal Revenue in accordance with the Implementing Rules and
Regulations of this Act.

If the data requirements consist of information found in the income tax return of taxpayers, the
requirements under Section 71 of the National Internal Revenue Code of 1997, as amended, shall still be
complied with. The Information Management System shall also comply with the provisions of Republic
Act No. 10173, otherwise known as the "Data Privacy Act" and such other law’s relating to
confidentiality of information.

Section 23. Disposition of Proceeds from the Tax Amnesty. - An amount equivalent to Five hundred
million pesos (₱500,000,000) of the collection from the tax amnesty herein granted shall accrue to the
Department of Finance and shall be used exclusively for purposes of establishing tax database under
Section 22 of this Act.

Any excess shall be allocated to augment the appropriations needed for the social mitigating measures
and the Build BuildBuild infrastructure projects as provided under Section 82 of Republic Act No. 10963,
otherwise known as the "Tax Reform for Acceleration and Inclusion (TRAIN)" Act.

TITLE VII
OFFENSES AND PENALTIES

Section 24. Section 270 of the National Internal Revenue Code of 1997, as amended, is hereby further
amended to read as follows:

"Section 270. Unlawful Divulgence of Information. - Except as provided in Sections 6(F) and 71 of this
Code and Section 26 of Republic Act No. 6388, any officer or employee of the Bureau of Internal
Revenue who divulges to any person or makes known in any other manner than may be provided by law
information regarding the business, income, or estate of any taxpayer, the secrets, operation, style or
work, or apparatus of any manufacturer or producer, or confidential information regarding the business of
any taxpayer, knowledge of which was acquired by him in the discharge of his official duties, shall, upon
conviction for each act or omission, be punished by a fine of not less than Fifty thousand pesos (₱50,000)
but not more than One hundred thousand pesos (₱100,000), or suffer imprisonment of not less than two
(2) years but not more than five (5) years, or both.

"Any officer or employee of the Bureau of Internal Revenue who divulges or makes known in any other
manner to any person other than the requesting foreign tax authority information obtained from banks and
financial institutions pursuant to Section 6(F), knowledge or information acquired by him in the discharge
of his official duties, shall, upon conviction, be punished by a fine of not less than Five hundred thousand
pesos (₱500,000) but not more than One million pesos (₱1,000,000), or suffer imprisonment of not less
than two (2) years but not more than five (5) years, or both."

Section 25. Unlawful Divulgence of Tax Amnesty Return and Appurtenant Documents. - It shall be
unlawful for any person having knowledge of the Tax Amnesty Return and appurtenant documents, to
disclose any information relative thereto, and any violation hereof shall be penalized a fine of One
hundred fifty thousand pesos (₱150,000) and imprisonment of not less than six (6) years but not more
than ten (10) years: Provided, That if the offender is an officer or employee of the Bureau of Internal
Revenue or any government entity, the penalties under Section 270 of the National Internal Revenue
Code of 1997, as amended, shall apply: Provided, further, That the offender shall likewise suffer an
additional penalty of perpetual disqualification to hold public office.

TITLE VIII
CONGRESSIONAL OVERSIGHT COMMITTEE AND FINAL PROVISIONS

Section 26. Report to Oversight Committee. - The Commissioner shall submit to the Oversight
Committee referred to in Section 290 of the National Internal Revenue Code of 1997, as amended,
through the Chairpersons of the Committee on Ways and Means of the Senate of the Philippines and the
House of Representatives, a detailed report on the implementation of this Act within six (6) months after
the two (2)-year period of availment of the Estate Tax Amnesty and one (l)-year period of availment of
the General Tax Amnesty and Tax Amnesty on Delinquencies.

Section 27. Implementing Rules and Regulations. - The Secretary of Finance shall, in coordination with
the Commissioner of Internal Revenue, promulgate and publish the necessary rules and regulations of this
Act within ninety (90) days from its effectivity.

The failure of the Secretary of Finance to promulgate the said rules and regulations shall not prevent the
implementation of this Act upon its effectivity.

Section 28. Separability Clause. - If any provision of this Act is subsequently declared invalid or
unconstitutional, the other provisions hereof which are not affected thereby shall remain in full force and
effect.

Section 29. Repealing Clause. - All other laws, acts, presidential decrees, rules and regulations or parts
thereof inconsistent with the provisions of this Act are hereby expressly repealed, amended or modified
accordingly.

Section 30. Effectivity. - This Act shall take effect fifteen (15) days after its complete publication in the
Official Gazette or in at least one (1) newspaper of general circulation.

Approved,
VICENTE C. SOTTO III
President of the Senate

GLORIA MACAPAGAL-ARROYO
Speaker of the House of Representatives

This Act which is a consolidation of House Bills Numbered 4814 and 8554, and Senate Bill No. 2059 was
passed by the House of Representatives and the Senate on December 12, 2018 and December 13, 2018,
respectively.

MYRA MARIE D. VILLARICA

Secretary of the Senate

DANTE ROBERTO P. MALING

Acting Secretary General
House of Representatives

Approved: February 14, 2019

(Sgd.) RODRIGO ROA DUTERTE

President of the Philippines

SECRETARY OF FINANCE CESAR V. PURISIMA and COMMISSIONER OF INTERNAL

REVENUE KIM S. JACINTO-HENARES vs. PHILIPPINE TOBACCO INSTITUTE, INC., G.R.
No. 210251, 17 April 2017, J. Carpio TOPIC: Sin Tax Reform Law

DOCTRINE: A mere administrative issuance, like a BIR regulation, cannot amend the law; the former
cannot purport to do any more than implement the latter. The courts will not countenance an
administrative regulation that overrides the statute it seeks to implement.

FACTS:

On 20 December 2012, President BenignoS.Aquino III signed RA 10351 (Sin Tax Reform Law)
which restructured excise tax on alcohol and tobacco products by amending pertinent provision of RA
8424 (NIRC of 1997). Section 5 of RA 10351, which amended Section 145(C) of NIRC, increased the
excise tax rate of cigars and cigarettes and allowed cigarettes packed by machine to be packed in other
packaging combinations of not more than 20. The Sec. of Finance, upon CIR Commissioner’s
recommendation, issued RR 17-2012 wherein Section 11 imposed an excise tax on individual cigarette
pouches of 5’s and 10’s even if they are bundled or packages in packaging combinations not exceeding 20
cigarettes. CIR then issued RMC 90-2012 which provided the initial classifications in tabular form of
locally manufactures cigarette brands packed by machine according to tax rates prescribed under RA
10351 based on 20120 BUR price survey and suggested net retail price declared in the latest sworn
statement filed by the local manufacturer or importer. PMFTC, Inc., a member of respondent PTI, paid
under protest to CIR the excise taxes required in order to withdraw cigarettes from its manufacturing
facilities. PTI filed a petition for declaratory relief with an application for writ of preliminary injunction
with RTC, seeking to have RR 17-2012 and RMC 20-2012 declared null and void for violating the
Constitution and imposing tax rates not authorized by RA 10351. PTI stated that the excise tax rate of
either ₱12 or ₱25 under RA 10351 should be imposed only on cigarettes packed by machine in packs of
20's or packaging combinations of 20's and should not be imposed on cigarette pouches of 5's and 10's.
RTC granted the petition for declaratory relief. Hence, the instant petition filed by Sec. of Finance and
CIR through OSG. Meanwhile, SC issued a TRO against PTI and RTC.

ISSUE:
Whether or not RTC erred in nullifying Section 11 of RR 17-2012 and Annex D-1 of RMC 90-
2012.
RULING:
No. RTC did not err in nullifying said provisions. The basis of RR 17-2012 is RA 10351. RA
10351, in amending Section 145(C) of the NIRC provided that "duly registered cigarettes packed by
machine shall only be packed in twenties and other packaging combinations of not more than twenty.'
However, now here is it mentioned that the other packaging combinations of not more than 20 will be
imposed individual tax rates based on its different packages of 5's, 10's, etc. In such a case, a cigarette
pack of 20's will only be subjected to an excise tax rate of P 12.00 per pack as opposed to packaging
combinations of 5's or 10's which will be subjected to a higher excise tax rate of ₱24.00 for10's and
₱48.00 for 5's. The lawmakers, as established during bicameral conference on the Sin Tax bills, intended
to impose the excise tax on every pack of cigarettes that come in 20 sticks. Individual pouches or
packaging combinations of 5's and l0's for retail purposes are allowed and will be subjected to the same
excise tax rate as long as they are bundled together by not more than 20 sticks. Thus, by issuing Section
11of RR 17-2012 and Annex D-1 on Cigarettes Packed by Machine of RMC 90-2012, the BIR went
beyond the express provisions of RA 10351. Section 11 of RR 17-2012 and Annex D-1 of RMC 90-2012
are amendatory provisions which require cigarette manufacturers to be liable to pay for more tax than the
RA 10351 allows. The BIR, in issuing these revenue regulations, created an additional tax liability for
packaging combinations smaller than 20 cigarette sticks. In so doing, the BIR amended the law, an act
beyond the power of the BIR to do. Petition denied
Planters Product V. Fertiphil Corp. (2008)

 Planters Product v. Fertiphil Corp.

G.R. No. 166006  March 14, 2008
REYES, R.T., J.

Lessons Applicable:  Bet. private and public suit, easier to file public suit, Apply real party in interest test
for private suit and direct injury test for public suit, Validity test varies depending on which inherent
power

Laws Applicable:

FACTS:

 President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which
provided, among others, for the imposition of a capital recovery component (CRC) on the
domestic sale of all grades of fertilizers which resulted in having Fertiphil paying P 10/bag
sold to the Fertilizer and Perticide Authority (FPA).
 FPA remits its collection to Far East Bank and Trust Company who applies to the payment of
corporate debts of Planters Products Inc. (PPI)
 After the Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy.  Upon
return of democracy, Fertiphil demanded a refund but PPI refused.  Fertiphil filed a
complaint for collection and damages against FPA and PPI with the RTC on the ground that
LOI No. 1465 is unjust, unreaonable oppressive, invalid and unlawful resulting to denial of
due process of law.  
 FPA answered that it is a valid exercise of the police power of the state in ensuring the
stability of the fertilizing industry in the country and that Fertiphil did NOT sustain damages
since the burden imposed fell on the ultimate consumers.
 RTC and CA favored Fertiphil holding that it is an exercise of the power of taxation ad is as
such because it  is NOT for public purpose as PPI is a private corporation.
 ISSUE:
1. W/N Fertiphil has locus standi
2. W/N LOI No. 1465 is an invalid exercise of the power of taxation rather the police power

Held:
1. Yes.  In private suits, locus standi requires a litigant to be a "real party in interest" or party who stands
to be benefited or injured by the judgment in the suit.  In public suits, there is the right of the ordinary
citizen to petition the courts to be freed from unlawful government intrusion and illegal official action
subject to the  direct injury test or where there must be personal and substantial interest in the case such
that he has sustained or will sustain direct injury as a result.  Being a mere procedural technicality, it has
also been held that locus standi may be waived in the public interest such as cases of transcendental
importance or with far-reaching implications whether  private or public suit, Fertiphil has locus standi.

2. As a seller, it bore the ultimate burden of paying the levy which made its products more expensive and
harm its business.  It is also of paramount public importance since it involves the constitutionality of a tax
law and use of taxes for public purpose.

3. Yes. Police power and the power of taxation are inherent powers of the state but distinct and have
different tests for validity.  Police power is the power of the state to enact the legislation that may
interfere with personal liberty on property in order to promote general welfare.  While, the power of
taxation is the power to levy taxes as to be used for public purpose.  The main purpose of police power is
the regulation of a behavior or conduct, while taxation is revenue generation. The lawful subjects and
lawful means tests are used to determine the validity of a law enacted under the police power.  The power
of taxation, on the other hand, is circumscribed by inherent and constitutional limitations.

In this case, it is for purpose of revenue.  But it is a robbery for the State to tax the citizen and use the
funds generation for a private purpose.  Public purpose does NOT only pertain to those purpose which are
traditionally viewed as essentially governmental function such as  building roads and delivery of basic
services, but also includes those purposes designed to promote social justice. Thus, public money may
now be used for the relocation of illegal settlers, low-cost housing and urban or agrarian reform.

Delegation of Powers of Taxation & Double Taxation

Pepsi-Cola Bottling Co. of the Philippines Inc. vs. Municipality of Tanauan, Leyte Martin, J.:

Facts: 1. Pepsi filed a complaint before the CFI to declare SEC 2 of RA No. 2264 (Local Autonomy Act)
as unconstitutional and as an undue delegation of taxing authority. Pepsi also sought to have Ordinances
23 and 27 by the Municipality of Tanauan be declared as null and void 2. In a Stipulation of Facts entered
into by the parties: a. Ordinances No. 23 and 27 cover the same subject matter and the imposed
production tax are the same. b. The Municipal Treasurer is seeking to enforce compliance by Pepsi of
Ordinance No. 27 alone 3. Ordinance No. 23 - levies and collects from soft drinks producers and
manufacturers at tax of 1/16 of a centavo for every bottle of soft drink corked. 4. Ordinance No. 27 –
levies and collects “on soft drinks produced or manufactured within the territorial jurisdiction of the
municipality a tax of 1 centavo on each gallon of volume capacity. 5. Tax imposed on both Ordinances
No. 23 and 27 is denominated as “municipal production tax” 6. CFI dismissed the complaint and upheld
the constitutionality of the 2 ordinances.
Issue/s: a. Is Sec 2, RA 2264 an undue delegation of power, confiscatory and oppressive? b. Do
ordinances nos. 23 and 27 constitute double taxation and impose percentage or specific taxes? c. Are
ordinances nos. 23 unjust and unfair?

Ruling: 1. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a
matter of right to every gov’t without being expressly conferred by the people. It is purely legislative and
which the central legislative body cannot delegate wither to the executive of judicial department of the
gov’t without infringing upon the theory of separation of powers. Legislative powers may be delegated to
local governments in respect of matters of local concern. This is sanctioned by immemorial practice. By
necessary implication, the legislative power to create political corporations for purposes of local selfgov’t
carries with it the power to confer on such local governmental agencies the power to tax. The plenary
(unlimited) nature of the taxing power thus delegated would not suffice to invalidate the said law as
confiscatory and oppressive. In delegating the authority, the State is not limited to the exact measure of
that which is exercised by itself. When it is said that the taxing power may be delegated to municipalities
and the like, it is meant that there may be delegated such measure of power to impose and collect taxes as
the legislature may deem expedient. Thus municipalities may be permitted to tax subjects which for
reasons of public policy the state has not deemed wise to tax for more general purposes. There is no
validity to the assertion that the delegated authority can be declared unconstitutional on the theory of
double taxation. It must be observed that the delegating authority specifies the limitations and enumerates
the taxes over which local taxation may not be exercised. Moreover, double taxation, in general, is not
forbidden by our fundamental law, since we have not adopted as part of our fundamental law the
injunction

Delegation of Powers of Taxation & Double Taxation against double taxation found in the Constitution of
the United States and some states of the Union. Double taxation becomes obnoxious (objectionable) only
where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same
jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the other by
the city of municipality. 2. Ordinance No. 27 was intended as a plain substitute of Ordinance No. 23 and
operates as a repeal of the latter even without words to that effect. As admitted, it is Ordinance no. 27
alone that is being enforced by the Municipal Treasurer. As long as the tax levied under the authority of a
city or municipal ordinance is not within the exceptions and limitations in the law, the same comes within
the ambit of the general rule. The limitation applies to the prohibition against municipalities and
municipal districts to impose “any percentage tax on sales or other taxes in any form based thereon nor
impose taxes on articles subject to specific tax, except gasoline, under the provisions of the NIRC. As
such, a municipal ordinance which prescribes a set ratio between the amount of the tax and the volume of
sale of the taxpayer imposes a sales tax and is null and void for being outside the power of the
municipality to enact. (That is Ordinance 23) But, the imposition of “a tax of one centavo (P0.01) on
each gallon of volume capacity” on all soft drinks produced or manufactured under Ordinance No. 27
does not partake of the nature of a percentage tax on sales, or other taxes in any form based thereon. The
tax is levied on the produce (whether sold or not) and not on the sales. There is not set ratio between the
volume of sales and the amount of the tax. Nor can the tax levied be treated as a specific tax. Specific
taxes are those imposed on specified articles (spirits, wines, fermented liquors, products oftobacco other
than cigars and cigarettes, matches, firecrackers, etc.) and soft drink is not one of those specified. 3. The
tax of imposed by Ordinance No. 27 cannot be considered unjust and unfair. Municipal corporations are
allowed much discretion in determining the rates of imposable taxes. This is in line with the constitutional
policy of according the widest possible autonomy to local governments in matters of local taxation, an
aspect that is given expression in the Local Tax Code. Unless the amount is so excessive as to be
prohibitive, courts will go slow in writing off an ordinance as unreasonable. ACCORDINGLY, the
constitutionality of Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act, as
amended, is hereby upheld and Municipal Ordinance No. 27 of the Municipality of Tanauan, Leyte, series
of 1962, repealing Municipal Ordinance No. 23, same series, is hereby declared of valid and legal effect.

AbakadaGuro Party-list et. al vs. Executive Secretary (G.R. No. 168056) - Digest
Facts:
On May 24, 2005, the President signed into law Republic Act 9337 or the VAT Reform Act. Before
the law took effect on July 1, 2005, the Court issued a TRO enjoining government from
implementing the law in response to a slew of petitions for certiorari and prohibition questioning
the constitutionality of the new law. 

The challenged section of R.A. No. 9337 is the common proviso in Sections 4, 5 and 6: “That the
President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006,
raise the rate of value-added tax to 12%, after any of the following conditions has been satisfied: 

(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous
year exceeds two and four-fifth percent (2 4/5%); 

or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and
one-half percent (1½%)” 

Petitioners allege that the grant of stand-by authority to the President to increase the VAT rate is
an abdication by Congress of its exclusive power to tax because such delegation is not covered by
Section 28 (2), Article VI Consti. They argue that VAT is a tax levied on the sale or exchange of
goods and services which can’t be included within the purview of tariffs under the exemption
delegation since this refers to customs duties, tolls or tribute payable upon merchandise to the
government and usually imposed on imported/exported goods.
Petitioners further alleged that delegating to the President the legislative power to tax is contrary to
republicanism. They insist that accountability, responsibility and transparency should dictate the
actions of Congress and they should not pass to the President the decision to impose taxes. They
also argue that the law also effectively nullified the President’s power of control, which includes the
authority to set aside and nullify the acts of her subordinates like the Secretary of Finance, by
mandating the fixing of the tax rate by the President upon the recommendation of the Secretary of
Justice.

Issue:
Whether or not the RA 9337's stand-by authority to the Executive to increase the VAT rate,
especially on account of the recommendatory power granted to the Secretary of Finance,
constitutes undue delegation of legislative power? 

Ruling:
The powers which Congress is prohibited from delegating are those which are strictly, or inherently
and exclusively, legislative. Purely legislative power which can never be delegated is the authority to
make a complete law- complete as to the time when it shall take effect and as to whom it shall be
applicable, and to determine the expediency of its enactment. It is the nature of the power and not
the liability of its use or the manner of its exercise which determines the validity of its delegation. 

The exceptions are: 

(a) delegation of tariff powers to President under Constitution

(b) delegation of emergency powers to President under Constitution

(c) delegation to the people at large 

(d) delegation to local governments 

(e) delegation to administrative bodies 

For the delegation to be valid, it must be complete and it must fix a standard. A sufficient standard
is one which defines legislative policy, marks its limits, maps out its boundaries and specifies the
public agency to apply it. 

In this case, it is not a delegation of legislative power BUT a delegation of ascertainment of facts
upon which enforcement and administration of the increased rate under the law is contingent. The
legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a
specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon
factual matters outside of the control of the executive. No discretion would be exercised by the
President. Highlighting the absence of discretion is the fact that the word SHALL is used in the
common proviso. The use of the word SHALL connotes a mandatory order. Its use in a statute
denotes an imperative obligation and is inconsistent with the idea of discretion. 

Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the
existence of any of the conditions specified by Congress. This is a duty, which cannot be evaded by
the President. It is a clear directive to impose the 12% VAT rate when the specified conditions are
present. 

Congress just granted the Secretary of Finance the authority to ascertain the existence of a fact---
whether by December 31, 2005, the VAT collection as a percentage of GDP of the previous year
exceeds 2 4/5 % or the national government deficit as a percentage of GDP of the previous year
exceeds one and 1½%. If either of these two instances has occurred, the Secretary of Finance, by
legislative mandate, must submit such information to the President. 

In making his recommendation to the President on the existence of either of the two conditions, the
Secretary of Finance is not acting as the alter ego of the President or even her subordinate. He is
acting as the agent of the legislative department, to determine and declare the event upon which its
expressed will is to take effect. The Secretary of Finance becomes the means or tool by which
legislative policy is determined and implemented, considering that he possesses all the facilities to
gather data and information and has a much broader perspective to properly evaluate them. His
function is to gather and collate statistical data and other pertinent information and verify if any of
the two conditions laid out by Congress is present. 

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 our complex economy that is
frequently the only way in which the legislative process can go forward. 

There is no undue delegation of legislative power but only of the discretion as to the execution of a
law. This is constitutionally permissible. Congress did not delegate the power to tax but the mere
implementation of the law. 
CIR vs. CA, CTA and FORTUNE TOBACCO CORPORATION G.R. No. 119761 August 29, 1996,
Taxation
OCTOBER 25, 2017

FACTS:

‘Champion,’ ‘Hope,’ and ‘More’ were classified as foreign brands since they were listed in the World
Tobacco Directory as belonging to foreign companies.

However, Fortune Tobacco changed the names of ‘Hope’ to ‘Hope Luxury’ and ‘More’ to ‘Premium
More,’ thereby removing the said brands from the foreign brand category and registered as a local brand.”
Ad Valorem taxes were imposed on these brands.

RMC 37-93, Reclassification of Cigarettes Subject to Excise Tax, was issued by the BIR which aims to
collect deficiencies on ad valorem taxes against Fortune Tobacco following their reclassification as
foreign branded cigarettes.

“HOPE,” “MORE” and “CHAMPION” being manufactured by Fortune Tobacco Corporation were
considered locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on
cigarettes under RA 7654.

Fortune Tobacco filed a petition for review with the CTA. RMC 37-93 is found to be defective, invalid
and unenforceable.

The CA sustained the decision of the CTA. Hence, this appeal.

ISSUE:

Is RMC 37-93 a mere interpretative ruling, therefore not requiring, for its effectivity, hearing and filing
with the UP Law Center?

RULING:

A reading of RMC 37-93, particularly considering the circumstances under which it has been issued,
convinces us that the circular cannot be viewed simply as a corrective measure (revoking in the process
the previous holdings of past Commissioners) or merely as construing Section 142(c)(1) of the NIRC, as
amended, but has, in fact and most importantly, been made in order to place “Hope Luxury,” “Premium
More” and “Champion” within the classification of locally manufactured cigarettes bearing foreign
brands and to thereby have them covered by RA 7654.
Specifically, the new law would have its amendatory provisions applied to locally manufactured
cigarettes which at the time of its effectivity were not so classified as bearing foreign brands. Prior to the
issuance of the questioned circular, “Hope Luxury,” “Premium More,” and “Champion” cigarettes were
in the category of locally manufactured cigarettes not bearing foreign brand subject to 45% ad valorem
tax.

Hence, without RMC 37-93, the enactment of RA 7654, would have had no new tax rate consequence on
private respondent’s products. Evidently, in order to place “Hope Luxury,” “Premium More,” and
“Champion” cigarettes within the scope of the amendatory law and subject them to an increased tax
rate, the now disputed RMC 37-93 had to be issued. In so doing, the BIR not simply intrepreted the law;
verily, it legislated under its quasi-legislative authority.The due observance of the requirements of notice,
of hearing, and of publication should not have been then ignored.

Indeed, the BIR itself, in its RMC 10-86, has observed and provided:

In order that there shall be a just enforcement of rules and regulations, in conformity with the basic
element of due process, the following procedures are hereby prescribed for the drafting, issuance and
implementation of the said Revenue Tax Issuances:

(1)       This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit Memorandum
Orders; and (c) Revenue Memorandum Circulars and Revenue Memorandum Orders bearing on internal
revenue tax rules and regulations.

(2)       Except when the law otherwise expressly provides, the aforesaid internal revenue tax issuances
shall not begin to be operative until after due notice thereof may be fairly presumed.

Due notice of the said issuances may be fairly presumed only after the following procedures have been
taken;

 
xxx      xxx     xxx

(5)       Strict compliance with the foregoing procedures is

enjoined.

Nothing on record could tell us that it was either impossible or impracticable for the BIR to observe and
comply with the above requirements before giving effect to its questioned circular.

All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen short of a valid and
effective administrative issuance.

The decision of the Court of Appeals, sustaining that of the Court of Tax Appeals, is AFFIRMED.

G.R. No. L-42780             January 17, 1936

MANILA GAS CORPORATION, plaintiff-appellant,

vs.
THE COLLECTOR OF INTERNAL REVENUE, defendant-appellee.

DeWitt, Perkins and Ponce Enrile for appellant.

Office of the Solicitor-General Hilado for appellee.

MALCOLM, J.:

This is an action brought by the Manila Gas Corporation against the Collector of Internal Revenue for the
recovery of P56,757.37, which the plaintiff was required by the defendant to deduct and withhold from
the various sums paid it to foreign corporations as dividends and interest on bonds and other indebtedness
and which the plaintiff paid under protest. On the trial court dismissing the complaint, with costs, the
plaintiff appealed assigning as the principal errors alleged to have been committed the following:

1. The trial court erred in holding that the dividends paid by the plaintiff corporation were subject
to income tax in the hands of its stockholders, because to impose the tax thereon would be to
impose a tax on the plaintiff, in violation of the terms of its franchise, and would, moreover, be
oppressive and inequitable.

2. The trial court erred in not holding that the interest on bonds and other indebtedness of the
plaintiff corporation, paid by it outside of the Philippine Islands to corporations not residing
 therein, were not, on the part of the recipients thereof, income from Philippine sources, and hence
not subject to Philippine income tax.

The facts, as stated by the appellant and as accepted by the appellee, may be summarized as follows: The
plaintiff is a corporation organized under the laws of the Philippine Islands. It operates a gas plant in the
City of Manila and furnishes gas service to the people of the metropolis and surrounding municipalities
by virtue of a franchise granted to it by the Philippine Government. Associated with the plaintiff are the
Islands Gas and Electric Company domiciled in New York, United States, and the General Finance
Company domiciled in Zurich, Switzerland. Neither of these last mentioned corporations is resident in the
Philippines.

For the years 1930, 1931, and 1932, dividends in the sum of P1,348,847.50 were paid by the plaintiff to
the Islands Gas and Electric Company in the capacity of stockholders upon which withholding income
taxes were paid to the defendant totalling P40,460.03 For the same years interest on bonds in the sum of
P411,600 was paid by the plaintiff to the Islands Gas and Electric Company upon which withholding
income taxes were paid to the defendant totalling P12,348. Finally for the stated time period, interest on
other indebtedness in the sum of P131,644,90 was paid by the plaintiff to the Islands Gas and Electric
Company and the General Finance Company respectively upon which withholding income taxes were
paid to the defendant totalling P3,949.34.

Some uncertainty existing regarding the place of payment, we will not go into this factor of the case at
this point, except to remark that the bonds and other tokens of indebtedness are not to be found in the
record. However, Exhibits E, F, and G, certified correct by the Treasurer of the Manila Gas Corporation,
purport to prove that the place of payment was the United States and Switzerland.

The appeal naturally divides into two subjects, one covered by the first assigned error, and the other by
the second assigned error. We shall discuss these subjects and errors in order.

1. Appellant first contends that the dividends paid by it to its stockholders, the Islands Gas and
Electric Company , were not subject to tax because to impose a tax thereon would be to do so on
the plaintiff corporation, in violation of the terms of its franchise and would, moreover, be
oppressive and inequitable. This argument is predicated on the constitutional provision that no
law impairing the obligation of contracts shall be enacted. The particular portion of the franchise
which is invoked provides:

The grantee shall annually on the fifth day of January of each year pay to the City of
Manila and the municipalities in the Province of Rizal in which gas is sold, two and one
half per centum of the gross receipts within said city and municipalities, respectively,
during the preceding year. Said payment shall be in lieu of all taxes, Insular, provincial
and municipal, except taxes on the real estate, buildings, plant, machinery, and other
personal property belonging to the grantee.

The trial judge was of the opinion that the instant case was governed by our previous decision in
the case of Philippine Telephone and Telegraph Co., vs. Collector of Internal Revenue ([1933],
58 Phil. 639). In this view we concur. It is true that the tax exemption provision relating to the
Manila Gas Corporation hereinbefore quoted differs in phraseology from the tax exemption
provision to be found in the franchise of the Telephone and Telegraph Company, but the ratio
decidendi of the two cases is substantially the same. As there held and as now confirmed, a
corporation has a personality distinct from that of its stockholders, enabling the taxing power to
reach the latter when they receive dividends from the corporation. It must be considered as settled
 in this jurisdiction that dividends of a domestic corporation, which are paid and delivered in cash
to foreign corporations as stockholders, are subject to the payment in the income tax, the
exemption clause in the charter of the corporation notwithstanding.

For the foreign reasons, we are led to sustain the decision of the trial court and to overrule
appellant's first assigned error.

2. In support of its second assignment of error, appellant contends that, as the Islands Gas and
Electric Company and the General Finance Company are domiciled in the United States and
Switzerland respectively, and as the interest on the bonds and other indebtedness earned by said
corporations has been paid in their respective domiciles, this is not income from Philippine
sources within the meaning of the Philippine Income Tax Law. Citing sections 10 (a) and 13 (e)
of Act No. 2833, the Income Tax Law, appellant asserts that their applicability has been squarely
determined by decisions of this court in the cases of Manila Railroad Co. vs. Collector of
Internal Revenue (No. 31196, promulgated December 2, 1929, nor reported), and Philippine
Railway Co. vs. Posadas (No. 38766, promulgated October 30, 1933 [58 Phil., 968]) wherein it
was held that interest paid to non-resident individuals or corporations is not income from
Philippine sources, and hence not subject to the Philippine Income Tax. The Solicitor-General
answers with the observation that the cited decisions interpreted the Income Tax Law before it
was amended by Act No. 3761 to cover the interest on bonds and other obligations or securities
paid "within or without the Philippine Islands." Appellant rebuts this argument by "assuming, for
the sake of the argument, that by the amendment introduced to section 13 of Act No. 2833 by Act
No. 3761 the Legislature intended the interest from Philippine sources and so is subject to tax,"
but with the necessary sequel that the amendatory statute is invalid and unconstitutional as being
the power of the Legislature to enact.

Taking first under observation that last point, it is to be observed that neither in the pleadings, the
decision of the trial court, nor the assignment of errors, was the question of the validity of Act No. 3761
raised. Under such circumstances, and no jurisdictional issue being involved, we do not feel that it is the
duty of the court to pass on the constitutional question, and accordingly will refrain from doing so.
(Cadwaller-Gibson Lumber Co. vs. Del Rosario [1913], 26 Phil., 192; Macondray and Co. vs. Benito and
Ocampo, P. 137, ante; State vs. Burke [1912], 175 Ala., 561.)

As to the applicability of the local cases cited and of the Porto Rican case of Domenech vs. United Porto
Rican Sugar co. ([1932], 62 F. [2d], 552), we need only observe that these cases announced good law, but
that each he must be decided on its particular facts. In other words, in the opinion of the majority of the
court, the facts at bar and the facts in those cases can be clearly differentiated. Also, in the case at bar
there is some uncertainty concerning the place of payment, which under one view could be considered the
Philippines and under another view the United States and Switzerland, but which cannot be definitely
determined without the necessary documentary evidence before, us.

The approved doctrine is that no state may tax anything not within its jurisdiction without violating the
due process clause of the constitution. The taxing power of a state does not extend beyond its territorial
limits, but within such it may tax persons, property, income, or business. If an interest in property is
taxed, the situs of either the property or interest must be found within the state. If an income is taxed, the
recipient thereof must have a domicile within the state or the property or business out of which the
income issues must be situated within the state so that the income may be said to have a situs therein.
Personal property may be separated from its owner, and he may be taxed on its account at the place where
the property is although it is not the place of his own domicile and even though he is not a citizen or
resident of the state which imposes the tax. But debts owing by corporations are obligations of the
debtors, and only possess value in the hands of the creditors. (Farmers Loan Co. vs. Minnesota [1930],
280 U.S., 204; Union Refrigerator Transit Co. vs. Kentucky [1905], 199 U.S., 194 State Tax on Foreign
held Bonds [1873, 15 Wall., 300; Bick vs. Beach [1907], 206 U. S., 392; State ex rel. Manitowoc Gas
Co. vs. Wig. Tax Comm. [1915], 161 Wis., 111; United States Revenue Act of 1932, sec. 143.)

These views concerning situs for taxation purposes apply as well to an organized, unincorporated territory
or to a Commonwealth having the status of the Philippines.

Pushing to one side that portion of Act No. 3761 which permits taxation of interest on bonds and other
indebtedness paid without the Philippine Islands, the question is if the income was derived from sources
within the Philippine Islands.

In the judgment of the majority of the court, the question should be answered in the affirmative. The
Manila Gas Corporation operates its business entirely within the Philippines. Its earnings, therefore come
from local sources. The place of material delivery of the interest to the foreign corporations paid out of
the revenue of the domestic corporation is of no particular moment. The place of payment even if
conceded to be outside of tho country cannot alter the fact that the income was derived from the
Philippines. The word "source" conveys only one idea, that of origin, and the origin of the income was the
Philippines.

In synthesis, therefore, we hold that conditions have not been provided which justify the court in passing
on the constitutional question suggested; that the facts while somewhat obscure differ from the facts to be
found in the cases relied upon, and that the Collector of Internal Revenue was justified in withholding
income taxes on interest on bonds and other indebtedness paid to non-resident corporations because this
income was received from sources within the Philippine Islands as authorized by the Income Tax Law.
For the foregoing reasons, the second assigned error will be overruled.

Before concluding, it is but fair to state that the writer's opinion on the first subject and the first assigned
error herein discussed is accurately set forth, but that his opinion on the second subject and the second
assigned error is not accurately reflected, because on this last division his views coincide with those of the
appellant. However, in the interest of the prompt disposition of this case, the decision has been written up
in accordance with instructions received from the court.

Judgment affirmed, with the cost of this instance assessed against the appellant.

Hull, Vickers, Imperial, Butte, and Recto, JJ., concur.

LOCAL GOVERNMENT CODE

Section 159. Exemptions. - The following are exempt from the community tax:

(1) Diplomatic and consular representatives; and

(2) Transient visitors when their stay in the Philippines does not exceed three (3) months.
Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall
not extend to the levy of the following:

(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units.

MANILA INTERNATIONAL AIRPORT AUTHORITY vs. COURT OF APPEALS

G.R. No. 155650 July 20, 2006

Facts:

MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable
years 1992 to 2001. MIAA’s real estate tax delinquency was estimated at P624 million.

The City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the
Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the
Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency.

MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for
preliminary injunction or temporary restraining order. The petition sought to restrain the City of
Parañaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport
Lands and Buildings.

Paranaque’s Contention: Section 193 of the Local Government Code expressly withdrew the tax
exemption privileges of “government-owned and-controlled corporations” upon the effectivity of the
Local Government Code. Respondents also argue that a basic rule of statutory construction is that the
express mention of one person, thing, or act excludes all others. An international airport is not among the
exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA
cannot claim that the Airport Lands and Buildings are exempt from real estate tax.

MIAA’s contention: Airport Lands and Buildings are owned by the Republic. The government cannot tax
itself. The reason for tax exemption of public property is that its taxation would not inure to any public
advantage, since in such a case the tax debtor is also the tax creditor.

Issue:
WON Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws? Yes.
Ergo, the real estate tax assessments issued by the City of Parañaque, and all proceedings taken pursuant
to such assessments, are void.

Held:

1. MIAA is Not a Government-Owned or Controlled Corporation

MIAA is not a government-owned or controlled corporation but an instrumentality of the National

Government and thus exempt from local taxation.

MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no
stockholders or voting shares.

MIAA is also not a non-stock corporation because it has no members. A non-stock corporation must have
members.

MIAA is a government instrumentality vested with corporate powers to perform efficiently its
governmental functions. MIAA is like any other government instrumentality, the only difference is that
MIAA is vested with corporate powers.

When the law vests in a government instrumentality corporate powers, the instrumentality does not
become a corporation. Unless the government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only governmental but also corporate
powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the
levying of fees and charges. At the same time, MIAA exercises “all the powers of a corporation under the
Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive
Order.”

2. Airport Lands and Buildings of MIAA are Owned by the Republic

a. Airport Lands and Buildings are of Public Dominion

The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the
State or the Republic of the Philippines.

No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like
“roads, canals, rivers, torrents, ports and bridges constructed by the State,” are owned by the State. The
term “ports” includes seaports and airports. The MIAA Airport Lands and Buildings constitute a “port”
constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are
properties of public dominion and thus owned by the State or the Republic of the Philippines.

The Airport Lands and Buildings are devoted to public use because they are used by the public for
international and domestic travel and transportation. The fact that the MIAA collects terminal fees and
other charges from the public does not remove the character of the Airport Lands and Buildings as
properties for public use.

The charging of fees to the public does not determine the character of the property whether it is of public
dominion or not. Article 420 of the Civil Code defines property of public dominion as one “intended for
public use.” The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to
airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such
fees does not change the character of MIAA as an airport for public use. Such fees are often termed user’s
tax. This means taxing those among the public who actually use a public facility instead of taxing all the
public including those who never use the particular public facility.

b. Airport Lands and Buildings are Outside the Commerce of Man

The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be
the subject of an auction sale.

Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition
through public or private sale. Any encumbrance, levy on execution or auction sale of any property of
public dominion is void for being contrary to public policy. Essential public services will stop if
properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will
happen if the City of Parañaque can foreclose and compel the auction sale of the 600-hectare runway of
the MIAA for non-payment of real estate tax.

c. MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48,
Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real
properties owned by the Republic. n MIAA’s case, its status as a mere trustee of the Airport Lands and
Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the
Republic. Only the President of the Republic can sign such deed of conveyance.

d. Transfer to MIAA was Meant to Implement a Reorganization

The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not
meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was
merely toreorganize a division in the Bureau of Air Transportation into a separate and autonomous body.
The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned
solely by the Republic. No party claims any ownership rights over MIAA’s assets adverse to the
Republic.

e. Real Property Owned by the Republic is Not Taxable

Sec 234 of the LGC provides that real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person following are exempted from payment of the real property tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt
from real estate tax. For example, the land area occupied by hangars that MIAA leases to private
corporations is subject to real estate tax.