UNIVERSITY OF SANTO TOMAS 2.

Equal protection clause

FACULTY OF CIVIL LAW
UPDATES ON TAX BAR SYLLABUS BASED ON SUPREME Equal protection merely requires that all persons or things of the
COURT BAR BULLETIN NO. 31 same class should be treated alike, under like circumstances and
conditions, both as to privilege conferred and responsibilities
Atty. Eufrocina M. Sacdalan-Casasola imposed. Similar subjects, in other words, should not be treated
Author, Lecturer, Professor & differently, so as to give undue favor to some and unjustly
Bar Reviewer of Taxation Law discriminate against others. The guarantee means that no person or
class of persons shall be denied the same protection of laws which is
Happy New Year!!!! enjoyed by other persons or other classes in like circumstances. The
"equal protection of the laws is a pledge of the protection of equal
NEW SC TAX SYLLABUS FOR 2022 BAR EXAM laws." It limits governmental discrimination. (First E-Bank Tower
Condo Corp v. BIR, GR 215801, Jan. 15, 2020)
(3 QUESTIONS ONLY)
B. UNIFORMITY AND EQUITABILITY IN TAXATION
(1) Principles of taxation under the Constitution AND PROGRESSIVE SYSTEM OF TAXATION
(2) Basic concepts of Income tax
(3) Basic concepts of VAT ―ART. VI, SEC. 28. (1) The rule of taxation shall be uniform and
(4) Basic concepts of Donor‘s tax equitable. The Congress shall evolve a progressive system of
(5) Remedies taxation.‖
(5.1) Prescription,
(5.2) Remedies Against Assessment Notices 1. Equality and Uniformity of Taxation
(5.3) Jurisdiction of courts
Uniformity of taxation, like the kindred concept of equal protection,
I. BASIC PRINCIPLES OF TAXATION UNDER THE requires that all subjects or objects of taxation, similarly situated, are
CONSTITUTION to be treated alike, both in privileges and liabilities. (Alta Vista Golf
v. City of Cebu, GR 180235, Jan. 20, 2016)
What is the nature of the provisions of the Constitution relating
to taxation? On the other hand, equitability requires that the burden of the tax
should consider the taxpayer‘s ability to shoulder the tax burden.
The provisions of the Constitution relating to or affecting taxation are ―Equitable‖ means fair, just, reasonable and proportionate to the
NOT considered as grants of power, BUT they operate merely as taxpayer‘s ability to pay.
limitations or restrictions on an otherwise unlimited power of
taxation. 2. “Progressive System of Taxation”

A. DUE PROCESS AND EQUAL PROTECTION ―Progressive system of taxation‖ only means that the rate of tax to be
CLAUSES levied to taxpayers should be in accordance with the taxpayer‘s
ability to pay.
―ART. III, SEC. 1. No person shall be deprived of life, liberty, or
property without due process of law, nor shall any person be denied Taxation is progressive when its rate goes up depending on the
the equal protection of the laws.‖ resources of the person affected. When the taxable income of an
individual taxpayer becomes higher, his tax rate likewise increases.
What do the terms "Due Process Clause" and "Equal Protection This system is based on the implementation of social justice principle
Clause" mean in relation to taxation? that the more affluent should contribute more for the community‘s
benefit and is best exemplified by the increase of income tax rates as
The following terms, in relation to taxation, shall have the following the taxable income increases.
meanings:
This is the income tax system being used in the case of individual
1. Due process clause taxpayers under the Tax Code.

It is an elementary rule enshrined in the Philippine Constitution that
no person shall be deprived of property without due process of law.
In balancing the scales between the power of the State to tax and its
inherent right to prosecute perceived transgressors of the law on one
side, and the Constitutional rights of a citizen to due process of law
and the equal protection of the laws on the other, the scales must tilt
in favor of the individual, for a citizen‘s right is amply protected by
the Bill of Rights under the Constitution. Thus, if the tax authority
has determined that a taxpayer has deficiency taxes which should be
paid, it is a requirement that the taxpayer has to be given due notice
first before he could be penalized for non-payment thereof. (CIR v.
Fitness by Design, GR 215957, Nov. 9, 2016, Per J. Leonen)
C. APPROPRIATION, REVENUE OR TARIFF BILLS
TO ORIGINATE EXCLUSIVELY IN THE HOUSE
OF REPRESENTATIVES
ART. VI, SEC. 24. All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application, and
private bills, shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with
amendments.
 D. GRANT OF CONGRESS OF AUTHORITY TO THE forces, or to any penal institution, or government orphanage or
PRESIDENT TO FIX TARIFF RATES (FLEXIBLE leprosarium.‖
TARIFF CLAUSE)
J. GRANT OF POWER TO THE LGUS TO CREATE
Art. VI, Sec. 28(2). The Congress may, by law, authorize the ITS OWN SOURCES OF REVENUE
President to fix within specified limits, and subject to such limitations
and restrictions as it may impose, TARIFF rates, import and export ART. X, Sec. 5. Each local government unit shall have the power to
quotas, tonnage and wharfage dues, and other duties or imposts create its own sources of revenues and to levy taxes, fees and charges
within the framework of the national development program of the subject to such guidelines and limitations as the Congress may
Government. provide, consistent with the basic policy of local autonomy. Such
taxes, fees, and charges shall accrue exclusively to the local
E. EXEMPTION FROM REAL PROPERTY TAX OF governments.‖
ALL LANDS, BUILDINGS AND IMPROVEMENTS
ACTUALLY, DIRECTLY AND EXCLUSIVELY K. SALARIES OF THE JUDICIARY TO BE FIXED BY
USED FOR RELIGIOUS, CHARITABLE, OR LAW.
EDUCATIONAL PURPOSES.
ART VIII, SEC. 10. The salary of the Chief Justice and of the
Article VI, Sec. 28(3). - Charitable institutions, churches and Associate Justices of the Supreme Court, and of judges of lower
parsonages or covenants appurtenant thereto, mosques, non-profit courts, shall be fixed by law. During their continuance in office, their
cemeteries and all LANDS, BUILDINGS and IMPROVEMENTS salary shall not be decreased.‖
actually, directly and exclusively used for religious, charitable or
educational purposes shall be exempt from TAXATION.‖ READ: COURAGE, Judiciary Employees Assn. of the Phils. et. Al
v. CIR, GR 213446, July 3, 2018
F. EXEMPTION FROM TAXATION OF ALL
REVENUES AND ASSETS OF NONSTOCK L. NATIONAL TAXES AS THE BASE AMOUNT FROM
NONPROFIT EDUCATIONAL INSTITUTIONS WHICH TO COMPUTE THE JUST SHARE OF THE
LGUS
ART. XIV, SEC. 4(3) All REVENUES and assets of non-stock, non-
profit educational institutions used actually, directly, and exclusively ART. X, Sec. 6. Local government units shall have a just share, as
for educational purposes shall be EXEMPT FROM TAXES and determined by law, in the national taxes which shall be automatically
duties. Upon the dissolution or cessation of the corporate existence of released to them.
such institutions, their assets shall be disposed of in the manner
provided by law.

READ: La Sallian Educational Innovators Foundation (DLSU

College of St. Benilde) v. CIR, GR 202792, Feb. 27, 2019

G. EXEMPTION FROM TAX ON DONATIONS TO

NSNP EDUCATIONAL INSTITUTIONS

ART. XIV. SEC. 4(4). Subject to conditions prescribed by law, all

grants, endowments, DONATIONS, or contributions used actually,
directly, and exclusively for educational purposes shall be exempt
from tax.‖

H. MAJORITY VOTE OF CONGRESS TO GRANT TAX

EXEMPTION

ART. VI, Sec. 28(4). No law granting any tax exemption shall be
passed without the concurrence of a majority of the Members of the
Congress.

I. NO APPROPRIATION OR USE OF PUBLIC MONEY

FOR RELIGIOUS PURPOSES

ART. VI, Sec. 29(2). No public money or property shall be

appropriated, applied, paid, or employed, directly or indirectly, for
the use, benefit, or support of any sect, church, denomination,
sectarian institution, or system of religion, or of any priest, preacher,
minister, other religious teacher, or dignitary as such, except when
such priest, preacher, minister, or dignitary is assigned to the armed
II. BASIC CONCEPTS OF INCOME TAXES b. Supplementary compensation income – All other
income received from the SAME employer,
A. Sec. 23. General Principles of Income Taxation EXCEPT fringe benefits subject to FBT

(A) A (RESIDENT) CITIZEN of the Philippines residing therein is

taxable on all income derived from sources WITHIN AND GROSS COMPENSATION INCOME
WITHOUT the Philippines; LESS: Mandatory Contributions
(B) A NONRESIDENT CITIZEN is taxable only on income derived De Minimis Benefits (within the ceiling)
from sources WITHIN the Philippines; 13th Month Pay and Other Benefits (P90,000)
(C) An individual citizen of the Philippines who is working and TAXABLE INCOME
deriving income from abroad as an overseas contract worker (OFW) × Graduated Income Tax Rate
is taxable only on income derived from sources WITHIN the TAX DUE
Philippines: LESS: Withholding Tax on Compensation
Provided, That a SEAMAN who is a citizen of the INCOME TAX PAYABLE/REFUNDABLE
Philippines and who receives compensation for services
rendered abroad as a member of the complement of a vessel
engaged exclusively in international trade shall be treated C. Sec. 32(B)(7)(F). Mandatory Contributions (Exclusions)
as an overseas contract worker; therefore, taxable from
sources WITHIN the Philippines Employee‘s contributions to
(D) An ALIEN INDIVIDUAL, whether a resident or not of the
Philippines, is taxable only on income derived from sources WITHIN (1) GSIS;
the Philippines; (2) SSS;
(E) A DOMESTIC CORPORATION is taxable on all income derived (2) Philhealth; and
from sources WITHIN AND WITHOUT the Philippines; and (3) Pag-Ibig.
(F) A FOREIGN CORPORATION, whether engaged or not in trade (4) Union dues
or business in the Philippines, is taxable only on income derived from
sources WITHIN the Philippines. D. Sec. 33(C )(4). De Minimis Benefits

B. Sec. 24. Taxation of Income of Individuals De Minimis Benefits (DMB)

Sec. 24(A)(2)(A) Taxation of Income of Pure Compensation Income
Earners
Rates of Income Tax on Individual‘s Taxable Income Effective Jan.
1, 2018 – Dec. 31, 2022
DMB are benefits of relatively SMALL VALUE provided by an
employer to his employees merely as a means to promote their good
health, goodwill, contentment, or efficiency of the employees.
These are exempt from WHT on compensation and FBT.

Benefits not included in the enumeration and in ―Other Benefits‖

OVER NOT Basic Additiona Of Excess shall not be considered as ―DMB‖; hence, subject to WHT on
OVER Amount l Rate Over compensation income, and consequently to income tax.
250,000 0%
250,000 400,000 20% 250,000 E. Sec. 32(B)(7)(E). 13th Month Pay & Other Benefits

400,000 800,000 30,000 25% 400,000 Gross benefits not exceeding P90,000 for the 13th Mo. Pay and Other
800,000 2,000.000 130,000 30% 800,000 Benefits combined – (EXEMPT)
2,000,000 8,000,000 490,000 32% 2,000,000 13th month pay – 1/12th of 1 year salary
Other benefits – includes
8,000,000 2,410,000 35% 8,000,000
(1) PIB,
(2) Christmas bonus,
(3) Excess of the DMB over their respective ceilings
TAXATION OF PURE COMPENSATION INCOME EARNERS (4) Loyalty awards

1. Pure compensation income earners

Individuals whose source of income is purely derived
under an employer-employee relationship
2. Compensation Income
All remuneration for services performed by an
employee for his employer under an employer-
employee relationship
a. Regular compensation income – Salaries and
wages
F. Sec. 79(A). Withholding Tax on Compensation Income
ONLY TAXABLE INCOME EXCEEDING P250,000 SHALL be
subject to the WITHHOLDING TAX ON COMPENSATION
INCOME in accordance with the new Withholding Tax Table on
Compensation Income.
Thus, a compensation income earner with a salary of P685/day is
NOT subject to the withholding tax on compensation income.
How does the government collect the tax on compensation
income?
The tax on compensation income is withheld at source under the
CWT system wherein the tax withheld is intended to equal or at least
approximate the tax due of the payee on the said income.
Compensation is constructively paid within the meaning of the
regulations when it is credited to the account of or set apart for an
employee so that it may be drawn upon by him at any time although
not then actually reduced to possession. (ING Bank N.V. Manila
Branch v. CIR, Gr 167679, July 22, 2015)
TAXATION OF INCOME OF MINIMUM WAGE EARNER
An MWE - is an employee in the private sector who is paid with the
SMW (or in the public sector, who is paid not more than the SMW)
rate prescribed for in a particular geographical region by the National
Wages and Productivity Commission of the DOLE.
The SMW exempted from income tax is that which is referred to in
the Labor Code. It is distinct and different from other payments
including allowances, honoraria, commissions, benefits that an
employer may pay or provide an employee.
MWEs ARE EXEMPT FROM INCOME TAX
MWEs are EXEMPT FROM INCOME TAX on the income derived
as a MWE, regardless of amount:
(1) SMW – (P537 in NCR)
(2) Overtime pay
(3) Holiday pay
(4) Hazard pay
(5) Night shift differential pay
When may the income of an MWE be subject to income tax?
However, If the MWE would derive income from sources OTHER
THAN his SMW, OTP, HP, HP, & NSDP, DMB, 13th Month Pay
and Other Benefits, then said income shall form part of his
TAXABLE INCOME subject to the graduated income tax rates under
Sec. 24(A)(2)(a), NIRC. (Soriano v. SOF, GR 184450, Jan. 24, 2017)
COURAGE v. CIR, G.R. No. 213446, July 3, 2018
The MAIN ISSUE here is Constitutionality or validity of RMO 23-
2014, viz:
1. RMO 23-2014 is ultra vires insofar as:
a. Sections III and IV of RMO 23-2014, for subjecting to
withholding taxes non-taxable allowances, bonuses and
benefits received by government employees;
b. Sections VI and VII, prescribing penalties to government
officials for defining new offenses.
2. RMO 23-2014 violates the equal protection clause as it
discriminates against government employees;
3. RMO 23-2014 violates fiscal autonomy enjoyed by government
agencies;
4. The implementation of RMO 23-2014 results in diminution of
benefits of government employees, a violation of Article 100 of the
Labor Code; and
5. Respondents may be compelled through a writ of mandamus to
increase the tax-exempt ceiling for 13th month pay and other
benefits.
What court has exclusive appellate jurisdiction to determine the
constitutionality or validity of revenue issuances?
The CTA has the exclusive appellate jurisdiction to determine the
constitutionality or validity of tax laws, rules and regulations, and
other administrative issuances of the CIR.
The Court held that rulings reviewed by the Secretary of Finance
under Section 4, NIRC, are appealable to the CTA.
The Court also declared that "it is now within the power of the CTA,
through its power of certiorari, to rule on the validity of a particular
administrative rule or regulation so long as it is within its appellate
jurisdiction. Hence, it can now rule not only on the propriety of an
assessment or tax treatment of a certain transaction, but also on the
validity of the RRs or RMCs on which the said assessment is based.
Subsequently, in BDO v. Republic, the Court, sitting En Banc, further
held that the CTA has exclusive appellate jurisdiction to review, on
certiorari, the constitutionality or validity of revenue issuances, even
without a prior issuance of an assessment.
The Court also recognized, for the first time, in The City of Manila v.
Grecia-Cuerdo, the CTA‘s jurisdiction over petitions for certiorari
assailing interlocutory orders issued by the RTC in a local tax case.
This Court further explained that the CTA‘s authority to issue writs
of certiorari is inherent in the exercise of its appellate jurisdiction.
What are the purposes of the withholding tax system?
The withholding tax system was devised for 3 primary reasons,
namely:
(1) To provide the taxpayer a convenient manner to meet his probable
income tax liability;
(2) To ensure the collection of income tax which can otherwise be
lost or substantially reduced through failure to file the corresponding
returns; and
(3) To improve the government's cash flow.
This results in administrative savings, prompt and efficient collection
of taxes, prevention of delinquencies and reduction of governmental
effort to collect taxes through more complicated means and remedies.
CREBA v. Romulo, 628 Phil. 508, 535-536, 2010
Can the BIR withhold taxes on the compensation income paid to
government officials and employees?
Yes. As an employer, govt. offices including GOCCs (such as but
not limited to the BSP, MWSS, PDIC, GSIS, SSS), as well as
provincial, city and municipal governments are constituted as
withholding agents for purposes of the creditable tax required to be
withheld from compensation paid for services of its employees
Are the intelligence fund given to government officials considered
as part of the gross taxable compensation income?
As a general rule, NO, for intelligence funds duly appropriated and
liquidated.
Other than those pertaining to intelligence funds duly appropriated
and liquidated, any amount not in compliance with the foregoing
requirements shall be considered as part of the gross taxable
compensation income of the taxpayer.
Intelligence funds not duly appropriated and not properly liquidated
shall form part of the compensation of the government officials/
personnel concerned, unless returned.
ISSUE 1A: W/N Sections III & IV of RMO 23-2014 subjecting to
withholding taxes the allowances, bonuses and benefits received
by government employees are valid
YES. It is clear that to completely determine whether benefits given
to employees are exempt from withholding tax on compensation,
under Section 33 of the NIRC of 1997, there is a need to confirm
several factual issues. As such, petitioners cannot but first resort to
the proper courts and administrative agencies which are better
equipped for said task.
All told, the Court finds Sections III and IV of the assailed RMO
valid. The NIRC of 1997, as amended, is clear that all forms of
compensation income received by the employee from his employer
are presumed taxable and subject to withholding taxes.
The Government of the Philippines, its agencies, instrumentalities,
and political subdivisions, as an employer, is required by law to
withhold and remit to the BIR the appropriate taxes due thereon. Any
claims of exemption from withholding taxes by an employee, as in
the case of petitioners, must be brought and resolved in the
appropriate administrative and judicial proceeding, with the
employee having the burden to prove the factual and legal bases
thereof.
ISSUE 1B W/N secs. VI & VII of RMO 23-2014 prescribing
penalties government officials and defining new offenses are valid
Sec.VII of RMO 23-2014 is valid, but Sec. VI contravenes, in part,
the provisions of the NIRC of 1997, as amended, and its
implementing rules.
Section VII simply mirrors the relevant provisions of the NIRC of
1997, as amended, on the penalties for the failure of the withholding
agent to withhold and remit the correct amount of taxes, as
implemented by RR No. 2-98.
However, with respect to Section VI of the assailed RMO, the Court
finds that the CIR overstepped the boundaries of its authority to
interpret existing provisions of the NIRC of 1997, as amended.
Accordingly, the Court finds that the CIR gravely abused its
discretion in issuing Section VI ofRMO No. 23-2014 insofar as it
includes the Governor, City Mayor, Municipal Mayor, Barangay
Captain, and Heads of Office in agencies, GOCCs, and other
government offices, as persons required to withhold and remit
withholding taxes, as they are not among those officials designated
by the 1997 NIRC, as amended, and its implementing rules.
Who are the WHAs insofar as government offices are concerned?
To recall, the Govt. of the Phils., or any political subdivision or
agency thereof, or any GOCC, as an employer, is constituted by law
as the withholding agent, mandated to deduct, withhold and remit the
correct amount of taxes on the compensation income received by its
employees.
In relation thereto, Section 82 of the NIRC of 1997, as amended,
states that the return of the amount deducted and withheld upon any
wage paid to government employees shall be made by the officer or
employee having control of the payments or by any officer or
employee duly designated for such purpose.
Consequently, RR 2-98 identifies the Provincial Treasurer in
provinces, the City Treasurer in cities, the Municipal Treasurer in
municipalities, Barangay Treasurer in barangays, Treasurers of
GOCCs, and the Chief Accountant or any person holding similar
position and performing similar function in national government
offices, as persons required to deduct and withhold the appropriate
taxes on the income payments made by the government.
Issue 2: Did RMO 23-2014 violate the Equal Protection Clause as
it discriminates against government employees?
No. The Court finds untenable petitioners' contention that the
assailed provisions of RMO 23-2014 contravene the equal protection
clause, fiscal autonomy, and the rule on non-diminution of benefits.
The constitutional guarantee of equal protection is not violated by an
executive issuance which was issued to simply reinforce existing
taxes applicable to both the private and public sector.
As discussed, the withholding tax system embraces not only private
individuals, organizations and corporations, but also covers
organizations exempt from income tax, including the Govt. of the
Phils., its agencies, instrumentalities, and political subdivisions.
While the assailed RMO is a directive to the Govt., as a reminder of
its obligation as a withholding agent, it did not, in any manner or
form, alter or amend the provisions of the Tax Code, for or against
the Government or its employees.
ISSUE 3: Are Sections III & IV OF RMO 23-2014 issued by the
CIR with grave abuse of discretion?
NO. While Section III enumerates certain allowances which may be
subject to withholding tax, it does not exclude the possibility that
these allowances may fall under the exemptions identified under
Section IV -thus, the phrase, "subject to the exemptions enumerated
herein.―
In other words, Sections III and IV articulate in a general and broad
language the provisions of the NIRC of 1997, as amended, on the
forms of compensation income deemed subject to withholding tax
and the allowances, bonuses and benefits exempted therefrom.
Thus, Sections III and IV cannot be said to have been issued by the
CIR with grave abuse of discretion as these are fully in accordance
with the provisions of the NIRC of 1997, as amended, and its
implementing rules.
ISSUE 4: Did RMO 23-2014 violate fiscal autonomy enjoyed by
government agencies resulting in diminution of benefits of
government employees, which is a violation of Art. 100 of the
Labor Code?
No. The fiscal autonomy enjoyed by the Judiciary, Ombudsman, and
Constitutional Commissions, as envisioned in the Constitution, does
not grant immunity or exemption from the common burden of paying
taxes imposed by law.
To borrow former Chief Justice Corona's words in his Separate
Opinion in Francisco, Jr. v. House of Representatives, "fiscal
autonomy entails freedom from outside control and limitations, other
than those provided by law. It is the freedom to allocate and utilize
funds granted by law, in accordance with law and pursuant to the
wisdom and dispatch its needs may require from time to time."80
It bears to emphasize the Court's ruling in Nitafan v. CIR that the
imposition of taxes on salaries of Judges does not result in diminution
of benefits. This applies to all government employees because the
intent of the framers of the Organic Law and of the people adopting it
is "that all citizens should bear their aliquot part of the cost of
maintaining the government and should share the burden of general
income taxation eguitably
Issue 5: May the CIR be compelled through a Writ of Mandamus
to increase the tax exempt ceiling for 13th Month Pay and Other
Benefits?
This is rendered moot and academic due to the enactment of RA
10653.
The Court takes judicial notice of RA 10653, which was signed into
law on Feb. 12, 2015, which increased the income tax exemption for
13th month pay and other benefits, under Sec. 32(B)(7)(e) of the
NIRC of 1997, as amended, from P30,000.00 to P82,000.00.
Said law also states that every 3 years after the effectivity of said Act,
the Pres. of the Phils. shall adjust the amount stated therein to its
present value using the Consumer Price Index, as published by the
PSA.
Recently, RA 10963 (TRAIN Act) further increased the income tax
exemption for 13th month pay and other benefits to P90,000.00.
What is now the effect on the government employees, including
petitioners, who relied in good faith on the belief that the
appropriate taxes on all the income they received are withheld
and paid?
As a final point, the Court cannot tum a blind eye to the adverse
effects of this Decision on ordinary government employees, including
petitioners herein, who relied in good faith on the belief that the
appropriate taxes on all the income they receive from their respective
employers are withheld and paid. Nor does the Court ignore the
situation of the relevant officers of the different departments of
government that had believed, in good faith, that there was no need to
withhold the taxes due on the compensation received by said ordinary
government employees. Thus, as a measure of equity and
compassionate social justice, the Court deems it proper to clarify and
declare, pro hac vice, that its ruling on the validity of Sections III and
IV of the assailed RMO is to be given only prospective effect.
TAXATION OF INCOME OF PURELY SELF-EMPLOYED
INDIVIDUALS AND PROFESSIONALS
Who is a Purely Self-Employed Individual or Professional?
PURELY SELF-EMPLOYED – is a SOLE PROPRIETOR or an
independent contractor who reports income earned from self-
employment, including those hired under a contract of service or job
order, and
A PROFESSIONAL – is an individual whose income is derived
purely from the practice of a specific profession and not under an
employer-employee relationship. It also refers to a person who
engages in some art or sport for money, as a means of livelihood,
rather than as a hobby.
It includes but is not limited to doctors, lawyers, engineers, architects,
CPAs, professional entertainers, artists, professional athletes,
directors, producers, insurance agents, insurance adjusters,
management and technical consultants, bookkeeping agents, and
other recipients of professional, promotional and talent fees.
A. Taxation of Income of Purely Self-Employed Individuals &
Professionals whose GS/GR does not exceed the VAT
Threshold (P3 Million)
OPTION to avail of:
(1) Graduated income tax rates based on the TAXABLE INCOME
(plus 3% OPT); OR
(2) 8% FLAT INCOME TAX RATE based on GS/GR and other non-
operating income in excess of the P250,000, in lieu of the graduated
IT rates and the 3% percentage tax
VAT THRESHOLD – is the VAT registration threshold which you
need to cross within the next 30 days. or the amount of GS/GR that
you can earn before you need to register for VAT.
How do you avail of the 8% FLAT INCOME TAX RATE?
TP should SIGNIFY INTENTION TO ELECT the 8% FLAT
INCOME TAX RATE in the 1st quarter return; or in the initial
quarter return of the TY. Otherwise, he is DEEMED to have availed
of the graduated income tax rates.
Such election is IRREVOCABLE and no amendment shall be made
for the TY.
AFS is not required to be attached in filing the final ITR. However,
existing rules and regulations on bookkeeping and
invoicing/receipting shall still apply.
Who are not qualified to avail of the 8% FLAT INCOME TAX
RATE?
(1) Pure compensation income earner
(2) VAT-registered taxpayer, regardless of GS/GR,
(3) NonVAT taxpayers whose GS/GS exceeded P3M
(4) Other nonVAT taxpayers under Title V, NIRC.
(5) Partners of GPP on their distributive share from GPP which is
already NET OF COST AND EXPENSES.
(6) Those enjoying exemption under the BMBE.
When may a TP who availed of the 8% be subjected later to the
graduated income tax rate?
When the GS/GR and other non-operating income ANYTIME
DURING THE YEAR EXCEEDED P3 Million, TP shall
AUTOMATICALLY be subject to the graduated income tax rates
even if the FLAT 8% income tax rate as option was INITIALLY
selected.
However, a tax credit for the previous quarter/s income tax payment/s
under the 8% IT rate option computed net of P250,000 shall be
allowed.
The annual ITR of a taxpayer with GS/GR and other non-operating
income of more than P3 Million shall be accompanied by an AFS.
TP is required to register as VAT taxpayer and VAT to be imposed
prospectively.
But the 3% OPT on the non-VAT portion shall be collected without
penalty if timely paid when TP ceases to be a Non-VAT
B. When the GS/GR exceeds P3 Million then TP has no option
but to use the Graduated Income Tax Rate.
If the GS/GR exceeds P3Million -
Subject to the graduated income tax rates and liable also to VAT/OPT
If the TP has no option to avail the 8% IT rate on his income from
business since the business income is EITHER subject to VAT or to
OPT under Secs. 117-127 – then, he is subject to the graduated IT
rates and liable also to OPT/VAT.
TAXATION OF INCOME OF MIXED INCOME EARNERS
Who are considered as Mixed Income Earners?
Those individuals earning BOTH
(1) compensation income from employment, and
(2) income from trade, or business or practice of profession and other
sources aside from employment.
A. If The MIE’s GS/GR from Business/Professional Income
does not exceed P3M and he opted to avail the 8% Flat
Income Tax Rate
The income tax rates applicable are:
(1) For the Compensation Income – graduated income tax rates for
individuals based on the taxable income.
(2) For Income from Business or Practice of Profession - 8% flat
income tax rate based on GS/GR and other non-operating income, IN
LIEU of the graduated income tax rates and the 3% OPT , BUT
without the benefit of deducting P250,000 from the GS/GR since said
amount is already incorporated in the first tier of the graduated
income tax rates for the compensation income earner applied in
computing the income tax on compensation income.
B. If the GS/GR from Business/Professional Income exceeds
P3M and he opted to be taxed under the Graduated Income
Tax Rates
They have to determine:
1. TAXABLE INCOME from compensation, and
2. TAXABLE INCOME derived from business/profession
3. Then COMBINE both TAXABLE INCOMES.
4. The resulting COMBINED TOTAL taxable income will be
subjected to the graduated income tax rates.
TPs using the graduated income tax rates, shall also be subject to
either OPT or 12% VAT
WHEN MAY PRIZES BE EXEMPT FROM INCOME TAX?
(SEC. 32(B)(7)(C ) & (D), NIRC)
Prizes and awards made primarily in recognition of religious,
charitable, scientific, educational, artistic, literary, or civic
(RECCSAL) achievement shall be excluded from gross income, but
only if:
(i) The recipient was selected without any action on his part to enter
the contest or proceeding; and
(ii) The recipient is not required to render substantial future services
as a condition to receiving the prize or award.
Prizes granted to athletes, whether in local and international sports
competitions and tournaments whether held in the Philippines or
abroad, provided the sports competition is sanctioned by the national
sports associations in the Phils. (those duly accredited by the
Philippine Olympic Committee).
TAX ON INTEREST INCOME DERIVED FROM DEPOSITS
IN FCDUs
15% FWHT of the interest income of RESIDENT individuals
EXCEPT a nonresident individual
Applicable also to domestic corporations (Sec. 27D(1), NIRC)
CGT FROM SALE OF SHARES OF STOCK NOT TRADED IN
THE LSE (SEC. 24(C))
15% FWHT based on the NET CAPITAL GAINS DURING THE
TAXABLE YEAR on sale or other disposition of shares of stock of
DOMESTIC CORPS. Not traded in the LSE.
Applicable to INDIVIDUALS and domestic corps.
Tax on sale, barter or exhange of shares of stock listed and traded
thru the LSE (Sec. 127(A), NIRC) – 6/10 OF 1% of the GSP or gross
value in money of the shares
RA 11494 (Bayanihan to Heal as one)– REPEALED Sec. 127(B),
NIRC on the tax on sale of shares of stock traded thru the IPO.
TAXATION OF GENERAL PROFESSIONAL PARTNERSHIP
AND ITS PARTNERS
A. Taxation of GPPs
GPP is not subject to income tax
It is only acting as a "pass-through‖ entity where its income is
ultimately taxed to the partners comprising it.
For purposes of computing the distributive share of the partners, the
net income of the GPP shall be computed in the same manner as a
corporation.
As such, a GPP may claim either the
(1) Itemized deductions which are ordinary and necessary, incurred
or paid for the practice of profession; or
(2) in lieu thereof, it can opt to avail of the OSD allowed to
corporations in claiming the deductions in an amount not exceeding
40 % of its gross income.
But the GPP is subject to business tax (either VAT or OPT)
B. Taxation of the Distributive Shares of the Partners
However, the partners shall be liable to pay income tax on their
separate and individual capacities for their respective distributive
share in the net income of the GPP.
The distributable net income of the partnership may be determined by
claiming either itemized deductions or OSD.
The share in the net income of the partnership, actually or
constructively received, shall be reported as taxable income of each
partner.
The partners comprising the GPP can no longer claim further
deduction from their distributive share in the net income of the GPP
and are not allowed to avail of the 8% income tax rate option since
their distributive share from the GPP is already net of cost and
expenses.
If the partner also derives other income from trade, business or
practice of profession apart and distinct from the share in the net
income of the GPP, the deduction that can be claimed from the other
income would either be the itemized deductions or OSD.
CGT FROM SALE OR OTHER DISPOSITION OF LANDS
AND BUILDINGS (SEC. 27D(5))
A 6% FINAL TAX is hereby imposed on the gain presumed to have
been realized on the sale, exchange or disposition of lands and/or
buildings which are not actually used in the business of a corporation
and are treated as capital assets, based on the GSP/FMV in
accordance with Sec. 6(E), NIRC, whichever is higher, of such lands
and/or buildings.
SALE OF MACHINERIES AND EQUIPMENT BY A
CORPORATION IS NOT SUBJECT TO THE CAPITAL
GAINS TAX UNDER SEC. 27(D)(5)
Since machineries and equipment are not among the ORDINARY
ASSETS enumerated in Sec. 39(A)(1), NIRC, the same are
considered as CAPITAL ASSETS. None of the properties were used
in petitioner‘s trade or ordinary course of business because petitioner
never commenced operations. They were not part of the inventory.
None of them were stocks in trade. Based on the definition of capital
assets under Sec. 39, NIRC, they are capital assets.
In relation to this, Sec. 27D(5), NIRC treats the sale of land and
buildings, and the sale of machineries and equipment, differently.
Domestic corporations are imposed a 6% capital gains tax only on the
presumed gain realized from the sale of lands and/or buildings, BUT
does not impose the 6% CGT tax on the gains realized from the sale
of machineries and equipment.
Therefore, being a capital asset which is NOT subject to Final CGT,
MACHINERIES and EQUIPMENT are considered as ‗OTHER
CAPITAL ASSETS‖, the gain or loss sustained from the sale of
which shall be REPORTED in the ANNUAL INCOME TAX
RETURN as capital gains or losses derived from the disposition of
―OTHER CAPITAL ASSETS‖ accounted for at 100% (and that
capital losses are also allowed only to be deducted to the extent of
capital gains) subject to the normal corporate income tax. (SMI-ED
Phils. Tech v. CIR, G.R. 175410, Nov. 12, 2014, [Per J. Leonen, 2nd
Div.])
INDIVIDUALS NOT REQUIRED TO FILE ITR
1. Pure compensation income earners who are qualified to the
SUBSTITUTED FILING regardless of the amount of
taxable income
2. MWE, or any individual who is exempt from income tax
pursuant to the provisions of the Tax Code and other laws,
general or special
3. Senior citizens who qualify as MWEs
4. An individual whose sole income has been subjected
to FWT
5. Nonresident citizens on his income from sources outside
the Philippines
6. Non-resident alien who is not engaged in trade or business
in the Philippines
SUBSTITUTED FILING
1. Applicable only to INDIVIDUALS
2. Receiving PURE COMPENSATION INCOME regardless
of amount
3. From only ONE EMPLOYER in the Philippines during the
calendar year
TAX WITHHELD = TAX DUE
The Certificate of Withholding filed by the employer duly stamped
―RECEIVED‖ by the BIR shall be the substituted filing by such
employers.
La Sallian Educational Innovators Foundation v. CIR (GR 202792,
Feb. 27, 2019)
FACTS: The CIR assessed DLSU ST BENILDE with deficiency
income tax and VAT on the g round that the foundation, a nonstock
nonprofit educational institution, was actually a profit oriented
organization because it collected expensive tuition fees from its
students and that 70% of its earnings went to administrative purposes.
ISSUE: W/N DLSU ST. BENILDE has lost its Tax-Exempt
Status under the 1987 Constitution
No. No less than the 1987 Constitution expressly exempts all
revenues and assets of non-stock, non-profit educational institutions
from taxes provided that they are actually, directly and exclusively
used for educational purposes, to wit:
Sec. 4.(1) The State recognizes the complementary roles of public
and private institutions in the educational system and shall exercise
reasonable supervision and regulation of all educational institutions.
xxx
(3) All revenues and assets of non-stock, non-profit educational
institutions used actually, directly, and exclusively for educational
purposes shall be exempt from taxes and duties.
This constitutional exemption is reiterated in Sec.30 (H) of the 1997
Tax Code, as amended, which provides as follows:
Sec. 30. Exemptions from Tax on Corporations. -The following
organizations shall not be taxed under this Title in respect to income
received by them as such: xxx
(H) A non-stock and non-profit educational institution
Clearly, non-stock, non-profit educational institutions are not
required to pay taxes on ALL their revenues and assets if they are
used actually, directly and exclusively for educational purposes.
Did DLSU fail to comply with the Constitutional requirements
for exemption from tax of a Non-stock Non-profit Educational
Institution?
No. DLSU CSB remains a tax exempt entity because it has presented
adequate legal and factual basis to prove that it remains as a tax
exempt entity under Article XIV, Sec. 4, Par. 3 of the 1987
Constitution.
Based on jurisprudence and tax rulings, a taxpayer shall be granted
with this tax exemption after proving that:
(1) It falls under the classification of non-stock, non-profit
educational institution; and
(2) The income it seeks to be exempted from taxation is used
actually, directly and exclusively for educational purposes.
Income may even be earmarked for promoting the school’s
educational purposes.
Considering the clear explanation of the nature of the money
involved, it is evident that ALL of Foundation's income is actually,
directly and exclusively USED OR EARMARKED for promoting
its educational purpose. To reiterate, respondent never argued that the
income of the Foundation was used in any manner other than for
promoting its purpose as a non-stock. non-profit educational
institution. In fact, there is not even a single argument or evidence
presented to cast a doubt in the proper usage of Foundation's income.
Furthermore, a simple reading of the Constitution would show that
Art. XIV, Sec. 4 (3) does not require that the revenues and income
must have also been earned from educational activities or activities
related to the purposes of an educational institution. The phrase "all
revenues" is UNQUALIFIED by any reference to the source of
revenues. Thus, so long as the revenues and income are used actually,
directly and exclusively for educational purposes, then said revenues
and income shall be EXEMPT from taxes and duties.
In the instant case, the Foundation firmly and adequately argued that
none of its income inured to the benefit of any officer or entity.
Instead, its income has been actually, exclusively and directly used
for performing its purpose as an educational institution. Undoubtedly,
petitioner Foundation has also proven this second requisite.
Thus, the tax exempt status of petitioner Foundation under the 1987
Constitution is clear.
May a non-profit institution be considered as profit driven simply
because of generating profits?
No. In several cases, this Court has ruled that a non-profit institution
will not be considered profit driven simply because of generating
profits.
To hold that an educational Institution is subject to income tax
whenever it is so administered as to reasonably assure that it will not
incur in deficit, is to nullify and defeat the aforementioned
exemption. Indeed, the effect, in general, of the interpretation
advocated by appellant would be to deny the exemption whenever
there is net income, contrary to the tenor of said Sec.30(E ) which
positively exempts from taxation those corporations or associations
which, otherwise, would be subject thereto, because of the existence
of said net income.
Needless to say, every responsible organization must be so run as to,
at least insure its existence, by operating within the limits of its own
resources, especially its regular income. In other words, it should
always strive, whenever possible, to have a surplus.
SEC. 34. ALLOWABLE DEDUCTIONS
Itemized Deductions Vis-À-Vis Optional Standard Deduction
(OSD)
In general, there shall be allowed at the option of the taxpayer
(1) Itemized deductions, or
(2) OSD at the rate of 40%
In case of INDIVIDUAL taxpayers (EXCEPT NRANETB), OSD
shall be computed at the rate of 40% of GS/GR.
In case of CORPORATIONS, OSD shall be computed at the rate of
40% of its GROSS INCOME.
This shall NOT be allowed for:
(1) Individual taxpayers earning PURE compensation inncome; and
(2) Those who opted to be taxed at 8% FLAT INCOME TAX RATE
on their income from business/practice of profession.
How to avail the option of OSD
Unless the taxpayer, who is signifies in the income tax return the
intention to elect the OSD, it shall be considered as having availed of
the ITEMIZED DEDUCTIONS.
Such ELECTION of the option, when made in the return, shall be
IRREVOCABLE for the taxable year for which the return is made.
Election to claim either the itemized deductions or the OSD for the
taxable year must be signified by checking the appropriate box in the
ITR filed for the 1ST QTR. or initial QTR. of the taxable year after
the commencement of a new business/practice of profession.
An individual who claimed for the OSD shall not be required to
submit an AFS with his ITR
But liable to the Business tax (OPT or VAT), in addition to income
tax. SEC. 26, in relation to SEC. 34(L).
BASIC CONCEPTS OF DONOR’S TAX
A. Sec. 99: New Donor’s Tax Rate
The donor‘s tax for each calendar year shall be 6% computed on the
basis of the total gifts in excess of P250,000 exempt gift, LESS other
deductions, if any, made during the calendar year, REGARDLESS of
relationship of the donor to the donee on or after January 1, 2018.
NATURE OF THE P250,000 EXEMPTION PROVIDED BY LAW
UNDER SEC. 99 OF THE TAX CODE?
The exemption of P250,000 provided for by law under Sec. 99 of the
Tax Code partakes the nature of DEDUCTION (NOT EXCLUSION)
from the gross gift of the donor to arrive at the taxable NET GIFT
during the calendar year.
B. Transfers which may be considered a Donation
(1) Sale, exchange, or transfer of property for less than an adequate
and full consideration; (EXCEPTION under the TRAIN Law);
(2) Condonation or remission of debt;
(3) Renunciation by the surviving spouse of her share in the
conjugal/community property after the dissolution of the marriage in
favor of the heirs of the deceased or any other person
(4) Renunciation by the heir of his share in the hereditary estate in
favor of specific/identified heirs to the exclusion or disadvantage of
the other co-heirs in the hereditary estate.
WHEN IS THERE A DEEMED SALE OR EXCHANGE OF
PROPERTY FOR LESS THAN ADEQUATE AND FULL
CONSIDERATION UNDER THE TRAIN LAW?
When property (EXCEPT the REAL PROPERTY under Sec. 24D) is
SOLD OR EXCHANGED for less than adequate and full
consideration in money or money‘s worth,
To the extent of the amount by which the FMV exceeded the GSP:
It shall be DEEMED A GIFT and shall be deemed included in
computing the amount of gifts made DURING the CALENDAR
YEAR.
A sale, exchange, OR OTHER TRANSFER of property made:
1. In the ORDINARY COURSE OF BUSINESS
2. Transaction which is BONA FIDE
3. At arm‘s length, and
4. Free from any donative intent (Ex. Bargain sale)
will be CONSIDERED as made for an adequate and full
consideration in money or money‘s worth. (Sec. 100, NIRC)
C. Basis of the Donor’s Tax on the “Deemed Gift” in the case of
Sale of Shares of Stock Not Traded in the LSE
When there is a PRICE DIFFERENCE in the sale of shares of stock
not traded in the LSE between the BOOK VALUE/PAR VALUE and
the SELLING PRICE, that will be considered as a DEEMED GIFT
subject to donor's tax.
The absence of donative intent does not exempt the sale of shares of
stock from donor‘s tax since Sec. 100 of the NIRC categorically
states that the amount by which the FMV (book value/par value) of
the property exceeded the GSP shall be DEEMED GIFT.
Thus, even if there is no actual donation, the difference in price is
considered a donation by fiction of law. (Philamgen v. CIR, GR
210987, Nov. 24, 2014)
D. Purpose of the “Deemed Gift” Provision
The legislative intendment of the ―deemed gift provision‖ under Sec.
100, NIRC is to discourage the parties to a sale from manipulating
their selling price in order to save on income taxes.
This is because under the Tax Code, the measurement of gain from a
disposition of property merely considers the amount realized from the
sale, which is the selling price minus the basis of the property sold.
Hence, if the parties would declare a lower selling price per
document of sale than the actual amount of money which changed
hands, there is foregone revenue and the government is placed at a
very disadvantageous position.
E. Sale of real property considered as Capital Asset (Sec.
24(D)(1) cannot legally be subject to Donor’s Tax
In the case of sale of residential REAL PROPERTY located in the
Philippines which is considered as CAPITAL ASSET, the sale cannot
legally be subject to donor‘s tax even if the selling price is lower than
the FMV of the property because in the sale of real property which is
a capital asset located in the Philippines, the sale is subject to the
capital gains tax which is BASED on the PRESUMED GAIN derived
by the seller.
In this situation, there could be NO ―deemed gift‖ subject to donor‘s
tax because a deemed gift arises only if a tax is AVOIDED as a result
of selling a property at a price lower than its FMV.
In this particular case, the Tax Code itself provides that the basis for
determining the CGT is the FMV/ZV, whichever is higher. and
therefore, there can be no instance where a seller can avoid any tax
by selling his capital assets below its FMV because there is always a
―presumed gain‖ no matter what.
F. Condonation or Remission of Debt
When it is obvious that the creditor merely desires to benefit the
debtor, and without any consideration therefore cancels the debt, It
has the EFFECT OF A DONATION made on the part of the
CREDITOR.
The amount of the debt CANCELLED to the extent of the FMV of
the debt condoned is considered as a gift from the creditor to the
debtor; therefore subject to donor‘s tax.
The DEBTOR, however, does not derive any income from the
cancellation or condonation of his indebtedness because if the
creditor merely desires to benefit the debtor in view of the absence of
consideration for the cancellation, the amount of the debt is
considered as a gift from the creditor to the debtor and need not be
included in the latter‘s gross income.
However, if the debtor performs services for a creditor, who, in
consideration thereof cancels the debt, income to that amount is
realized by the debtor as compensation for his services and subject to
income tax on the part of the debtor.
G. Special Renunciation by an Heir of his Share in the
Heritable Estate
In the case of a SPECIAL RENUNCIATION, wherein the
RENUNCIATION WAS MADE IN FAVOR OF A SPECIFIC
PERSON TO THE EXCLUSION OR DISADVANTAGE OF THE
OTHER CO-HEIRS IN THE HEREDITARY ESTATE, the heir
renouncing his right is considered to have made a donation which is
SUBJECT TO DONOR‘S TAX.
The said renunciation though has no tax implications to the co-heir-
DONEE because he is merely a recipient of the donation.
H. General Renunciation of Share in the Heritable Estate by an
Heir
In the case of a GENERAL RENUNCIATION OF THE share in the
heritable estate by an heir, such that the share of the heir who waives
his right to the inheritance goes to ALL THE OTHER CO-HEIRS in
accordance with their respective interest in the inheritance, the law on
accretion applies and the property waived is considered to pass
through the other co-heirs by OPERATION OF LAW; hence, it has
no tax implication.
When a compulsory heir renounces his share in the inheritance, it
means that the property is not transferred to him, and therefore he
could not donate the property which has never become his, hence,
the RENUNCIATION IS NOT SUBJECT TO DONOR‘S TAX.
EXEMPTION FROM DONOR’S TAX UNDER SEC. 101 OF
THE TAX CODE.
1. Gifts made to or for the use of the National Government or any
entity created by any of its agencies which is not conducted for profit,
or to any political subdivision of the said Government; and
2. Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution, accredited
nongovernment organization, trust or philanthropic organization or
research institution or organization: Provided, however, That not
more than thirty 30% of said gifts shall be used by such donee for
administration purposes.
[The exemption of dowries or gifts made by parents to their children
on account of marriage and before its celebration or within one year
thereafter to the extent of P10,000 was DELETED under RA 10963
(TRAIN Law)].
REQUISITES FOR EXEMPTION FROM DONOR’S TAX OF
DONATIONS TO NSNP ORGANIZATIONS
1. Donation must be made to a qualified donee nonstock nonprofit
organizations paying no dividends governed by trustees who receive
no compensation
2. 70% of the donations must be devoted for the purpose for which it
was created.
3. Not more than 30% of the donation shall be used for
administration purposes.
4. The donor shall give a Notice of Donation on every donation
worth at least P50,000 to the RDO which has jurisdiction over his
place of business within 30 days after receipt of the qualified-donee
institution‘s duly issued Certificate of Donation;
5. The Certificate of Donation shall be attached to the said Notice of
Donation, stating that not more than 30% of the said donation for the
taxable year shall be used by such qualified-donee institution for
administration purposes
Are election campaign contributions exempt from Donor’s Tax?
YES. Any contribution in cash or in kind to a candidate for elective
post and to the political party or coalition of parties for campaign
purposes are exempt from donor‘s tax provided that the recipient
candidates and political parties should comply with the requirement
of duly reporting the utilized contributions with the COMELEC.
Only those donations/contributions that have been utilized/spent
during the campaign period as set by the COMELEC are EXEMPT
FROM DONOR‘s tax.
Donations utilized before or after the campaign period are SUBJECT
TO DONOR‘S TAX and not deductible as political campaign
contribution on the part of the donor.
BASIC CONCEPTS OF VALUE-ADDED TAX
A. TAX ON VALUE-ADDED
It is a tax on the VALUE-ADDED made by every seller to the cost of
the sale or lease of goods, properties or services in the ordinary
course of trade or business.
Seller determines the VAT PAYABLE by deducting his accumulated
INPUT TAXES from his OUTPUT TAXES during the same period.
Net effect is that the seller pays the VAT only on the value that he
added to the cost of the goods, properties or services that he actually
sold.
B. VAT IS A FORM OF SALES TAX
The tax is based on the GROSS SALES or GROSS RECEIPTS of the
sellers of goods, properties or services.
The amount of tax is shown as a SEPARATE ITEM in the VAT
invoice or official receipt.
It is similar to and often compared to a sales tax and known in some
countries as GOODS AND SERVICES TAX (GST). (CIR v. COFA,
G.R. 212735, Dec. 5, 2018)
C. VAT IS A TAX ON CONSUMPTION
Wherein the seller is one statutory liable for the payment of the tax,
BUT the amount of the tax separately shown in the O.R./S.I. is
SHIFTED or PASSED ON TO THE END CONSUMER in which
goods or services are actually CONSUMED.
D. VAT IS AN INDIRECT TAX
because the amount of the tax may be SHIFTED or PASSED ON by
the SELLER to the BUYER, transferee or lessee of the goods,
properties or services.
The output tax due from VAT-registered sellers becomes the input
tax paid by VAT-registered purchasers on local purchase of goods or
services, which the latter in turn may credit against their output tax
liabilities.
Meaning, altho the SELLER is the one STATUTORILY LIABLE for
the payment of the tax, in the end, it is the END CONSUMER who
FINALLY BEARS THE BURDEN OF THE TAX.
On the other hand, for a non-VAT purchaser, the VAT shifted forms
part of the cost of goods, properties, and services purchased, which
may be deductible as an expense for income tax purposes. (TEC v.
CIR, G.R. No. 197663/G.R. No. 197770. March 14, 2018, LEONEN,
J., Third Div.)
E. WHAT IS THE RATE AND BASIS OF THE VAT?
The standard rate of VAT is 12% which is based on the GROSS
SELLING PRICE in the case of sale of goods or properties, including
transactions deemed sale.
In the case of sale of service, including lease of properties, the basis
of the 12% VAT is the GROSS RECEIPTS.
In the case of importations withdrawn from customs custody, the
12% VAT is Total value used by the BOC in determining tariff and
customs duties, Plus: customs duties, excise tax, if any, and other
charges, such as postage, commission, and similar charges, prior to
the release of the goods from customs custody, whether said
importation is to be used in business or for personal use.
F. PERSONS LIABLE TO VAT (SEC. 105)
Any person who, in the course of trade or business, sells, barters,
exchanges, leases goods or properties, renders services, and any
person who imports goods shall be subject to the VAT imposed in
Secs. 106 to 108 of this Code.
The VAT is an indirect tax and the amount of tax may be shifted or
passed on to the buyer, transferee or lessee of the goods, properties or
services. This rule shall likewise apply to existing contracts of sale or
lease of goods, properties or services at the time of the effectivity of
RA 7716.
The phrase ―in the course of trade or business‖ means the
REGULAR CONDUCT or pursuit of a COMMERCIAL or an
economic activity, including TRANSACTIONS INCIDENTAL
thereto, by any person regardless of whether or not the person
engaged therein is a non-stock, non-profit private organization
(irrespective of the disposition of its net income and whether or not it
sells exclusively to members or their guests), or government entity.
The rule of regularity, to the contrary notwithstanding, services as
defined in this Code rendered in the Philippines by NONRESIDENT
FOREIGN PERSONS shall be considered as being rendered in the
course of trade or business.
When may “incidental transactions” be subject to VAT?
Transactions that are made incidental to the pursuit of a commercial
or economic activity are considered as entered into in the course of
trade or business.
"Incidental" means something else as primary; something necessary,
appertaining to, or depending upon another, which is termed the
―principal.‖ Hence, an isolated transaction is not necessarily
disqualified from being made incidentally in the course of trade or
business.
G. TRANSACTIONS DEEMED SALE
(1) Transfer, use, or consumption not in the course of business of
goods originally intended for sale or for use in the course of business.
(Ex. Withdrawal of goods for personal use, EXCEPT those exempt
from VAT like drugs and meds, equipments and raw materials for
covid -19 prevention.)
)(2) Distribution or transfer to shareholders or investors as share in
the profits of VAT-registered person; or to creditors in payment of
debts. (Ex. Distribution of property dividends which are real
properties primarily intended for sale)
(3) Consignment of goods if actual sale is not made within 60 days
following the date such goods were consigned. Consigned goods
returned by the consignee within the 60-day period are not deemed
sold;
(4) Retirement from or cessation of business with respect to all goods
on hand, whether capital goods, stock-in-trade, supplies or materials
as of the date of such retirement or cessation, whether or not the
business is continued by the new owner or successor.
H. VAT EXEMPT TRANSACTIONS (SEC. 109)
1. SEC. 109(1)(D) IMPORTATION OF PROFESSIONAL
INSTRUMENTS BY RETURNING RESIDENTS
(D) Importation of professional instruments and implements, tools of
trade, occupation or employment, wearing apparel, domestic animals,
and personal and household effects belonging to persons coming to
settle in the Philippines or Filipinos or their families and descendants
who are now residents or citizens of other countries, such parties
hereinafter referred to as Overseas Filipinos, in quantities and of the
class suitable to the profession, rank or position of the persons
importing said items, for their own use and not for barter or sale,
accompanying such persons, or arriving within a reasonable time:
Provided, That the Bureau of Customs may, upon, the production of
satisfactory evidence that such persons are actually coming to settle
in the Philippines and that the goods are brought from their former
place of abode, exempt such goods from payment of duties and taxes:
Provided, further, That vehicles, vessels, aircrafts, machineries and
other similar goods for use in manufacture, shall not fall within this
classification and shall therefore be subject to duties, taxes and other
charges;
2. (1)(Q). LEASE OF RESIDENTIAL UNIT
Lease of a residential unit with a monthly rental not exceeding
P15,000.00;
3. (1)(X). TRANSFER OF PROPERTY PURSUANT TO
SEC.40(C)(2), NIRC, AS AMENDED
See: CIR v. Lucio L Co., GR 241424, Feb. 26, 2020
(NOTE: THE MAIN ISSUE HERE IS NOT VAT but claim for
refund for erroneously paid CGT when it is supposed to be a tax-free
exchange).
Are the association dues and membership fees being collected by
the condominium corporation from the unit owners subject to
income tax, VAT and withholding tax? Explain.
No. Association dues, membership fees, and other assessments are
not subject to income tax because they do not constitute profit or gain
since they are collected purely for the benefit of the condo owners
and are the incidental consequence of a condo corp.‘s responsibility
to effectively oversee, maintain, or improve the common areas of the
condo, as well as its governance.
Said collections are not results of the regular conduct or pursuit of a
commercial or an economic activity, or any transactions incidental
thereto. Hence, it could not be said to be engaged in trade or business.
Accordingly, said collections should not be subject to income tax,
VAT and WHT. (First E-Bank Tower Condo Corp v. BIR, GR
215801 and 218924, Jan. 15, 2020)
 4. (1)(Z). SALE OF GOLD TO THE BSP
Previously considered as a zero-rated sale of goods
Now transferred to VAT-exempt transaction
5. (1)(CC). SALE OR LEASE OF GOODS OR
PROPERTIES OR THE PERFORMANCE OF
SERVICES OTHER THAN THE TRANSACTIONS
MENTIONED IN THE PRECEDING PARAGRAPHS
Sale or lease of goods or properties or the performance of services,
other than the transactions mentioned in the preceding paragraphs,
the gross annual sales and/or receipts do not exceed the amount of
P3,000,000.
I. CLAIM FOR REFUND OF EXCESS INPUT TAXES
FROM ZERO-RATED SALES (SEC. 112)
PRIOR to the TRAIN Law:
I. ADMINISTRATIVE CLAIM
(a) It is only the administrative claim that must be filed within the 2-
year prescriptive period from the close of the taxable QUARTER
when the zero-rated sales were made.
(b) The CIR has 120 DAYS TO ACT ON THE CLAIM FOR
REFUND from the submission of all the supporting documents.
II. JUDICIAL CLAIM
(a) File the judicial claim within 30 days from the RECEIPT of the
CIR‘S DENIAL within the 120-day period, OR
(2) File the judicial claim within 30 days from the LAPSE of the 120-
day period. (This is considered as ―deemed-a-denial decision,‖ and
its failure to file will render it as final and unappealable. TEC v. CIR,
GR 197663, March 14, 2018.
This 30-day period to file an appeal is BOTH MANDATORTY AND
JURISDICTIONAL.
EXCEPTION:
PREMATURE (JUDICIAL) FILING – This refers to the filing of the
judicial claim before the expiration of the 120-day period when the
CIR should act on the claim for refund. As an EXCEPTION to the
general rule, PREMATURE FILING is if filed between 10
December 2003 and 5 October 2010, when BIR Ruling No. DA-489-
03 was still in force (San Roque and Aichi doctrines).
LATE (JUDICIAL) FILING - This refers to the filing of the judicial
claim AFTER the 30-day period to file a judicial claim. Late filing is
ABSOLUTELY PROHIBITED, even during the time when BIR
Ruling No. DA-489-03 was in force.
UNDER the TRAIN LAW
I. ADMINISTRATIVE CLAIM
(a) It is only the administrative claim that must be filed within the 2-
year prescriptive period after the close of the taxable QUARTER
when such zero-rated sales were made.
(b) The CIR shall grant the refund within 90 DAYS TO ACT ON
THE CLAIM FOR REFUND from the submission of the supporting
documents.
II. JUDICIAL CLAIM
(a) Should the CIR find that the grant of refund is not proper, the CIR
MUST STATE IN WRITING TH LEGAL AND FACTUAL BASIS
FOR THE DENIAL.
(b) File the judicial claim with the CTA within 30 days from the
RECEIPT of the CIR‘S DECISION DENYING THE CLAIM. This
30-day period to file an appeal is BOTH MANDATORY AND
JURISDICTIONAL.
In the event that the 90-day period has lapsed without having the
refund released to the taxpayer, the VAT refund claim may still
continue to be processed administratively. Provided, however, That
the BIR official, agent, or employee who was found to have
deliberately caused the delay in the processing of the VAT refund
claim may be subjected to penalties imposed under said section for
GRAVE MISCONDUCT.
When may a taxpayer claim a refund for the Input VAT
attributable to its Zero-Rated Sales?
Under Section 112(A) of the 1997 NIRC, the seller may claim a
refund or tax credit for the input VAT attributable to its zero-rated
sales subject to the following conditions:
(1) The taxpayer-CLAIMANT is VAT-REGISTERED;
(2) The taxpayer is engaged in zero-rated or effectively zero-rated
SALES;
(3) The claim must be filed within 2 years after the close of the
taxable quarter when such ZERO-RATED were made;
(4) The creditable input tax due or paid must be ATTRIBUTABLE
to such ZERO-RATED sales, EXCEPT the TRANSITIONAL
INPUT TAX, to the extent that such input tax has not been applied
against the output tax; and
(5) In case of zero-rated sales under Sec. 106(A)(2)(a)(l) [and (2)],
Sec. 106(B)]and Sec. 108(B)(l) [and (2)] of the 1997 NIRC, the
acceptable foreign currency exchange proceeds have been duly
accounted for in accordance with BSP rules and regulations.
To comply with the substantiation requirements for refunds, can
the issuance of VAT Sales Invoice and VAT Official Receipts be
interchanged?
No. The legislature intended to distinguish the use of a sales invoice
from an official receipt.
It separately categorized VAT on sale of goods from VAT on sale of
services, not only by its treatment with regard to tax but also with
respect to substantiation requirements.
There was a clear delineation between official receipts and Sales
invoices and that these 2 documents could not be used
interchangeably.
Sec. 113 on invoicing requirements must be read in conjunction with
Secs 106 and 108, which specifically delineates sales invoices for
sales of goods and official receipts for sales of services.
RMC 42-03 provides that SI is the supporting document for the claim
of input tax on purchase of goods whereas OR is the supporting
document for the claim of input tax on purchase of services." It
further states that a taxpayer's failure to comply with the invoicing
requirements will result to the DISALLOWANCE of the claim for
input tax by the purchaser claimant. (CIR v. Filminera Resources
Corp. GR 235325, Sept. 16, 2020)
J. VAT IS IMPOSED ON EACH SALE OF GOODS OR
SERVICES
For context, VAT is a tax imposed on each sale of goods or services
in the course of trade or business, or importation of goods "as they
pass along the production and distribution chain.
It is an indirect tax, which "may be shifted or passed on to the buyer,
transferee or lessee of the goods, properties or services.
The output tax due from VAT-registered sellers becomes the input
tax paid by VAT-registered purchasers on local purchase of goods or
services, which the latter in turn may credit against their output tax
liabilities.
On the other hand, for a non-VAT purchaser, the VAT shifted forms
part of the cost of goods, properties, and services purchased, which
may be deductible as an expense for income tax purposes.
"Output tax'· means the VAT due on the sale or lease of taxable
goods, properties or services by a VAT-registered or VAT-registrable
person.
Input tax' means the [VAT] due from or paid by a VAT-registered
person in the course of his [or her] trade or business on importation of
goods or local purchase of goods or services, including lease or use of
property, from a VAT-registered person. It shall also include the
transitional input tax determined in accordance with Sec. 111 of this
Code."
K. CONCEPT OF VAT AND ITS COLLECTION THRU THE
TAX CREDIT METHOD
VAT is a tax on consumption, an indirect tax that the provider of
goods or services may pass on to his customers.
Under the VAT method of taxation, which is invoice-based, an entity
can subtract from the VAT charged on its sales or outputs the VAT it
paid on its purchases, inputs and imports. For example, when a seller
charges VAT on its sale, it issues an invoice to the buyer, indicating
the amount of VAT he charged.
For his part, if the buyer is also a seller subjected to the payment of
VAT on his sales, he can use the invoice issued to him by his supplier
to get a reduction of his own VAT liability. The difference in tax
shown on invoices passed and invoices received is the tax paid to the
government (VAT payable). In case the tax on invoices received
exceeds that on invoices passed, a tax refund may be claimed.
Under the 1997 NIRC, if at the end of a taxable quarter the seller
charges OUTPUT TAXES EQUAL TO THE INPUT TAXES that his
suppliers passed on to him, NO PAYMENT is required of him.
It is when his OUTPUT TAXES EXCEED his input taxes that he has
to PAY the excess to the BIR.
If the input taxes exceed the output taxes, however, the excess
payment shall be CARRIED OVER to the succeeding quarter or
quarters.
Should the input taxes result from ZERO-RATED OR
EFFECTIVELY ZERO-RATED transactions , any excess over the
output taxes shall instead be REFUNDED to the taxpayer.
Why is the VAT System considered as “invoice based”?
Our VAT system is invoice-based because it relies on sales invoices
or official receipts.
A VAT-registered entity is liable to VAT, or the output tax at the rate
of 0% or 12% on the GSP of goods or gross receipts realized from the
sale of services.
VAT is computed at 12% of the GSP or GR indicated in the SALES
invoice for sale of goods or official receipt for sale of services. This
tax shall also be recognized as INPUT TAX credit to the purchaser of
the goods or services.
For this purpose, the term 'gross selling price' means the total amount
of money or its equivalent which the purchaser pays or is obligated to
pay to the seller in consideration of the sale, barter or exchange of the
goods or properties, EXCLUDING the VAT. But the excise tax, if
any, on such goods or properties shall form part of the GSP
The term 'gross receipts' means the total amount of money or its
equivalent representing the contract price, compensation, service fee,
rental or royalty, including the amount charged for materials supplied
with the services and deposits and advanced payments actually or
constructively received during the taxable quarter for the services
performed or to be performed for another person, EXCLUDING the
VAT.
May the claim for refund of input tax be governed by Sec. 229?
NO. Because excess input tax is not an excessively, erroneously, or
illegally collected tax.
A claim for refund of this tax is in the nature of a tax exemption,
which is based on Secs. 11O(B) and 112(A) of 1997 NIRC, allowing
VAT-registered persons to recover the excess input taxes they have
paid in relation to their zero-rated sales.
The term 'excess' input VAT simply means that the input VAT
AVAILABLE AS REFUND/CREDIT EXCEEDS THE OUTPUT
TAX, NOT that the input VAT is excessively collected because it is
more than what is legally due.
Accordingly, claims for tax refund/credit of excess input tax are
governed not by Sec. 229 but only by Sec. 112 of the NIRC.
L. EXCESS INPUT VAT VS. EXCESSIVELY COLLECTED
NIRT
EXCESS INPUT VAT
Not excessively collected because the
amount paid is correct and proper.
It is a tax liability passed on by a
VAT-registered seller to a VAT-
registered buyer as part of the
purchase price, and it is the VAT-
registered buyer who applies the input
VAT as credit for his own output
VAT.
The term ―excess input VAT‖ simply
means that the input VAT available as
credit EXCEEDS the output VAT,
NOT BECAUSE the input VAT is
EXCESSIVELY collected than what
is legally due.
Here, the 120-day period (now 90
days) to file a claim for refund only
applies to the administrative claim
EXCESSIVELY
COLLECTED NIRT
The amount of the tax paid
is NOT CORRECT and
proper.
Here, the statutory seller is
the ONE STATUTORILY
LIABLE TO PAY THE
TAX. It is not a passed-on
tax.
The excessively collected
taxes is MORE THAN
WHAT IS LEGALLY
DUE.
Here, both the admin and
judicial claim for refund
MUST be filed within the
same 2-year period.
TAX REMEDIES
5.1. PRESCRIPTIVE PERIODS
A. ASSESSMENT AND COLLECTION OF NATIONAL
INTERNAL REVENUE TAXES (NIRT)
PERIOD OF LIMITATION UPON ASSESSMENT AND
COLLECTION (SEC. 203)
Except as provided in Section 222, internal revenue taxes shall be
assessed within 3 years after the last day prescribed by law for the
filing of the return, and NO proceeding in court without assessment
for the collection of such taxes shall be begun AFTER the expiration
of such period:
Provided, That in a case where a return is filed BEYOND the period
prescribed by law, the 3-year period shall be counted from the day the
return was filed.
For purposes of this Section, a return filed BEFORE the last day
prescribed by law for the filing thereof shall be considered as filed on
such last day.
PURPOSE OF THE STATUTE OF LIMITATIONS IN THE
ASSESSMENT OF TAXES
Since time immemorial, the SC has consistently recognized and
applied the Statute of Limitations to preclude the Govt from
exercising the power to ASSESS and COLLECT taxes BEYOND the
PRESCRIBED PERIOD. (Pilipinas Shell v. CIR, GR 195876, Dec.
5, 2016)
The government MUST ASSESS internal revenue taxes on time so as
not to extend indefinitely the period of assessment and deprive the
taxpayer of the assurance that it will no longer be subjected to further
investigation for taxes after the expiration of a reasonable period of
time. (CIR v. STI, GR 220835, July 26, 2017)
1. ORDINARY PRESCRIPTIVE PERIOD FOR
ASSESSMENT OF NIRT
What is the ordinary period for the BIR to assess and collect
Internal Revenue Taxes under Sec. 203, NIRC?
Sec. 203 of the NIRC, as amended, provides for a period of 3 years
for the BIR to ASSESS and COLLECT internal revenue taxes,
counted from the last day prescribed by law for the filing of the return
or from the ACTUAL day the return was FILED, whichever comes
later.
Consequently, any ASSESSMENT ISSUED AFTER the expiration
of such 3-YEAR period is no longer valid and effective.
The law is clear that FOR A COLLECTION TO BE VALID, THE
ASSESSMENT MUST BE WITHIN THE 3-YEAR PERIOD OF
LIMITATION.
Essentially, WHEN THE ASSESSMENT IS ISSUED BEYOND
THE 3-YEAR PERIOD, THE GOVERNMENT‘S RIGHT TO
COLLECT DEFICIENCY TAXES ALSO PRESCRIBES. Hence,
there is no more basis for its collection SAVE FOR CERTAIN
EXCEPTIONS (which are found under Sec. 222 of the Tax Code.) 3. EXTRAORDINARY PRESCRIPTIVE PERIODS FOR
(La Flor dela Isabela v. CIR, GR 202105, April 28, 2021) ASSESSMENT OF NIRT

Ordinary Prescriptive Period for Assessment (Sec. 203, NIRC) Extraordinary Prescriptive Periods for Assessment (Sec. 222(A)
& (B), NIRC
Date of Filing of Prescriptive Period
Explanation Kind of Return
Return of Assessment Prescriptive period to assess Explanation
Filed
BEFORE due date 3 years from due date Sec. 203, NIRC
1. False Return 10 years from Sec. 222(a),
2. Fraudulent the ―DISCOVERY‖ OF THE NIRC
ON due date 3 years from due date Sec. 203, NIRC Return with intent FALSITY, FRAUD, OR
to evade tax FAILURE TO FILE RETURN.
3. Failure to file a
return
AFTER due date 3 years from actual Sec. 203, NIRC 4. Filed a waiver WSL should be submitted Sec. 222(b),
filing (WHICHEVER of the statute of BEFORE EXPIRATION OF NIRC
IS LATER) limitations (WSL) THE 3-YEAR
In case of 3 years from filing of CIR v. Phoenix PRESCRIPTIVE PERIOD TO
SUBSTANTIAL SUBSTANTIAL Assurance, GR L- ASSESS, and assessment
AMENDMENT amendment 19727, May 20, may be EXTENDED within
1965, the period agreed upon, which
may be FURTHER
EXTENDED before the
2. ORDINARY PRESCRIPTIVE PERIODS FOR expiration of the period
COLLECTION OF NIRT previously agreed upon.

Whether there is Prescriptive period of Explanation

assessment or no
collection
assessment
When the return When the TP FAILED TO
FILED is not PROTEST the issued
false, NOR FLD/FAN within 30 days
fraudulent AND from the receipt thereof, OR
FLD/FAN was when the FLD/FAN WAS
ISSUED within PROTESTED in a
the 3- year period Request for Reconsideration;
to assess OR in a Request for
Reinvestigation which was
NOT GRANTED,
for which FLD/FAN has
become final, executory and
demandable (because the
filing of those protests DID
NOT toll the running of the
Statute of Limitations),
COLLECTON should be
made by distraint, levy or
court actions within 3 years
from the date the
FLD/FAN was released,
mailed or sent by the BIR to
the TP,
When the return No proceeding in COURT
FILED is not without assessment for the
false nor COLLECTION of such taxes
fraudulent BUT shall be begun after the
NO expiration of the ORDINARY
FLD/FAN WAS 3-year period to assess.
ISSUED Meaning, initiating court
action for COLLECTION
should be begun only. within
3 years from the filing of
return IF NO FLD/FAN was
issued Within the 3-YR
PERIOD TO ASSESS.
What is the meaning of the term “discovery”?
Sec. 203,
NIRC ―Discovery‖ happens only after the manner of commission and the
CIR v. BPI nature of the fraud has been definitely ascertained. This occurs when
GR 227049, the BIR renders its final decision and requires the taxpayer to pay the
SEPT. 16, deficiency tax. (RMC 101-90 (Nov. 26, 1990); Sec. 281, NIRC;
2020
Imelda Sze v BIR, GR 210238, Jan. 6, 2020
When is there a prima facie evidence of False and Fraudulent
Return?
Under Sec. 248(B) of the NIRC, there is a prima facie evidence of a
false OR fraudulent return if there is a substantial underdeclaration of
taxable sales, receipts or income or if there is substantial
overstatement of deductions.
The failure to report sales, receipts or income in an amount
exceeding 30% what is declared in the returns constitutes substantial
underdeclaration, and a claim of deduction in an amount exceeding
30% of actual deductions shall render the taxpayer liable for
substantial overstatement of deductions . (CIR v. Asalus Corp., G.R.
221590, Feb. 22, 2017)
Sec. 203,
NIRC What is the applicable prescriptive period for the tax assessment
CIR v.
in the case of an alleged Fraudulent Return?
Pilipinas Shell
GR 197945,
July 9, 2018 it is the 3-year prescriptive period that applies in this PARTICULAR
CASE.
Although the CIR has power to assess and collect taxes, this power is
limited by Secs. 203 & 222, NIRC.
The BIR has to prove first that the return was filed fraudulently with
intent to evade payment.
Since the BIR failed to demonstrate clearly that private respondent 4. EXTRAORDINARY PRESCRIPTIVE PERIODS FOR
had filed a fraudulent return with the intent to evade tax, or that it had COLLECTION OF NATIONAL INTERNAL
failed to file a return at all, the period for assessments has obviously REVENUE TAXES
prescribed. Such instances of negligence or oversight on the part of
the BIR cannot prejudice taxpayers, considering that the prescriptive Extraordinary Prescriptive Period for Collection of National
period was precisely intended to give them peace of mind. Internal Revenue Taxes (Sec. 222(C), Nirc) And (Sec. 222(A),
NIRC
For the 10-year period under Sec. 222(a) to apply, it is not enough
that fraud is alleged in the complaint, it MUST be established by Prescriptive period of
clear and convincing evidence. The petitioner, having failed to Return Filed Explanation
collection
discharge the burden of proving fraud, cannot invoke Section 222(a).
1. FALSE RETURN If ASSESSED within Sec. 222(C),
(Republic v. GMCC United Devt. Corp., Gr 191856, Dec. 7, 2016
2. FRAUDULENT 10 years AFTER the NIRC
[Per J. Leonen]) RETURN WITH ―DISCOVERY‖ of the La Flor dela
INTENT TO EVADE falsity, fraud or Isabela v. CIR,
IS FAILURE TO FILE AN ITR CONSIDERED A CRIME TAX omission, it may be GR 202105,
INVOLVING MORAL TURPITUDE? 3. FAILURE TO FILE COLLECTED BY April 28, 2021
RETURN distraint, levy or court
NO. FAILURE TO FILE AN ITR is NOT a crime involving moral actions within 5 years
turpitude as the mere OMISSION is already a violation following the
REGARDLESS OF THE FRAUDULENT INTENT OR assessment,
WILLFULNESS OF THE INDIVIDUAL. This conclusion is
BUT If there is NO Sec. 222(a),
supported by the provisions of the NIRC as well as previous Court ASSESSMENT, a NIRC
decisions which show that with regard to the filing of an ITR, the proceeding in COURT (―Discovery‖
NIRC considers 3 distinct violations: (1) a false return, (2) a for the COLLECTION could mean the
fraudulent return with intent to evade tax, and (3) failure to file a of the tax may be filed issuance of a
return. at anytime within 10 ―Collection
years AFTER THE letter‖. (CIR v.
But the filing of a "fraudulent return with intent to evade tax" is a ―DISCOVERY‖ OF Pilipinas Shell
THE FALSITY, GR 197945,
CRIME involving MORAL TURPITUDE as it entails willfulness and
FRAUD OR July 9, 2018)
fraudulent intent on the part of the individual. The same, however, OMISSION.
cannot be said for "failure to file a return" where the mere omission
already constitutes a violation. Thus, this Court held that even if the 4. In case of FRAUD The fact of FRAUD Sec. 222(a),
conviction of respondent Marcos II is affirmed THAT HE DID NOT ASSESSMENT which shall be JUDICIALLY NIRC
FILE HIS ITR, the same not being a crime involving moral turpitude has become final, TAKEN
cannot serve as a ground for his disqualification (as executor of the executory and COGNIZANCE of in
demandable the CIVIL or
assets of Pres. Marcos deposited in the Swiss banks.)
CRIMINAL ACTION
for the collection
In Dela Torre v. COMELEC, the Court held that "not every criminal thereof.
act involves moral turpitude," and that ''as to what crime involves
moral turpitude is for the Supreme Court to determine."39 5. IN CASE THERE Any internal revenue
IS WAIVER OF THE tax which has been
In De Jesus-Paras v. Vailoces: the Court held that ―It is well-settled STATUTE OF assessed WITHIN THE
LIMITATIONS PERIOD AGREED
that "embezzlement, forgery, robbery, and swindling are crimes
UPON IN THE
which denote moral turpitude and, as a general rule, all crimes of WAIVER OF THE
which FRAUD IS AN ELEMENT are looked on as involving moral STATUTE OF
turpitude" (58 C.J.S., 1206). (Republic v. Ferdinand Marcos, Jr. and LIMITATIONS may be
Imelda Marcos, GR 130371 & GR 130855, Aug. 4, 2009) COLLECTED by
distraint or levy,
Meaning of Moral Turpitude AND/OR By a
proceeding in court
Black's Law Dictionary defines it as "an act of baseness, vileness, or within the period so
depravity in the private duties which a man owes his fellow men, or agreed upon in writing
before the expiration of
to society in general, contrary to the accepted and customary rule of the 5-year period.
right and duty between man and woman, or conduct contrary to
justice, honesty, modesty, or good morals." The period so agreed
upon may be further
In In re Vinzon [A.C.No. 561, April 27, 1967 [Per J. Dizon, En extended by subsequent
Banc], the term "moral turpitude" is considered as encompassing written agreements
"everything which is done contrary to justice, honesty, or good made before the
expiration of the period
morals.― (Republic v. Ferdinand Marcos, Jr. and Imelda Marcos, GR
previously agreed
130371 & GR 130855, Aug. 4, 2009 [Per J.del Castillo, Third Div.] upon,
 5. WAIVER OF THE STATUTE OF LIMITATIONS
What is a Waiver of the Statute of Limitations?
A Waiver of the Statute of Limitations is a bilateral agreement
between a TP and the BIR to extend the period of assessment and
collection of taxes to a date certain.
The TP should be furnished with a copy of the waiver not only to
give notice of the existence of the document but of the acceptance by
the BIR and the perfection of the agreement. PDI v CIR, GR 162852,
Dec. 16, 2004 [Per J. Ynares-Santiago, First Div.]
Revised Guidelines for the Proper Execution of the Waiver of the
Statute Of Limitations (RMO 14-2016)
(1) The WSL MAY BE, but not necessarily, in the form prescribed
by RMO 20-90 or RDAO 05-01. The TP's failure to follow the
aforesaid form does not invalidate the waiver, for as long as the
following requirements are complied with:
(a) The WSL shall be EXECUTED BEFORE the expiration of the
period to assess/collect taxes. The date of execution shall be
specifically indicated in the waiver.
(b) The WSL shall be signed by the TP himself or his duly
authorized representative. ln the case of a corp., the WSL must be
signed by any of its responsible officials;
(c) The EXPIRY DATE of the period agreed upon to assess/collect
the tax after the regular 3-year period of prescription SHOULD be
indicated;
(2) Except for waiver of COLLECTION of taxes which shall indicate
the particular taxes assessed, the waiver need not specify the
particular taxes to be assessed nor the amount thereof, and it may
simply state "all internal revenue taxes" considering that during the
assessment stage, the CIR or her duly authorized representative is still
in the process of examining and determining the tax liability of the
taxpayer.
(3) Since the TP is the applicant and the executor of the extension of
the period of limitation for its benefit in order to submit the required
documents and accounting records, the TP is charged with the burden
of ensuring that the WSL is validly executed by its authorized
representative, The authority of the TP's representative who
participated in the conduct of audit or investigation shall not be
thereafter contested to invalidate the waiver.
(4) The WSL MAY BE notarized. However, it is sufficient that the
waiver is in writing as specifically provided by the NIRC, as
amended
(5) Considering that the waiver is a voluntary act of the TP, the
waiver shall take legal effect and be binding on the TP upon its
execution thereof.
(6) lt shall be the DUTY OF THE TP to submit its duly executed
waiver to the CIR or the concerned RDO or group supervisor as
designated in the LOA/MOA who shall then indicate ACCEPTANCE
by signing the same. Such waiver shall be executed and duly
accepted PRIOR TO THE EXPIRATION OF THE PERIOD TO
ASSESS OR TO COLLECT. The TP shall have the duty to retain a
copy of the accepted waiver.
(7) Note that there shall only be 2 material dates that need to be
present on the waiver:
(a) The date of execution of the waiver by the TP or its authorized
representative; and
(b) The expiry date of the period the TP waives the statute of
limitations
(8) Before the expiration of the period set on the previously executed
waiver, the period earlier set may be extended by subsequent written
waiver made in accordance with this RMO.
Can the taxpayer impugn the validity of a WSL by assailing its
validity only after the FAN proved to be adverse?
No. In Asia Transmission Corp. v. CIR, GR 230861. Sept. 19, 2018,
the Court held that the TP has the PRIMARY RESPONSIBILITY for
the proper preparation of the waiver of the prescriptive period for
assessing deficiency taxes. Hence, the CIR may not be blamed for
any defects in the execution of the waiver, and being in bad faith
here, the TP cannot impugn the validity of the 8 defective waivers
that he PREVIOUSLY submitted.
While it is true that a waiver must strictly comply with the
requirements prescribed by the regulations, the SC qualified and held
that a TP cannot impugn the validity of the waiver on the basis of the
defects he himself has caused after benefiting from it, as he will be
deemed estopped by his BAD FAITH. Despite the waiver‘s non-
compliance with the requirements in the regulations, the SC ruled in
favor of the BIR and treated the waiver as valid and binding upon the
TP since the defect was attributable to the TP‘s deliberate acts.
With the issuance of RMO 14-2016 and the pronouncement in this
case, it appears that tax assessments can no longer be won simply
based on technicalities by attacking the validity of waivers.
Taxpayers should make it a point to focus not just on procedural or
technical issues but more on the merits or the strength of its
substantive factual and legal bases against a tax assessment of the
BIR.
While executing a waiver may allow more time for a taxpayer to
gather and submit relevant documents before an assessment is
finalized, it also prolongs the tax audit taking a toll on the TP‘s time
and resources, not to mention the continuous running of the interest
penalty should the assessment be found valid. So, this time, TPs
should take all factors into consideration and not just rely on previous
decisions wherein the BIR is always blamed for any defect in the
execution of the waiver.
What is the effect of the execution by a taxpayer of a WSL on his
defense of prescription?
WSL is just an agreement in writing between the TP and the CIR that
the period to assess and to collect the taxes due is extended to a
certain date. It is NOT a waiver of the right of the taxpayer to invoke
the defense of prescription when prescription has already set in.
THUS, If prescription has already set in at the time of the execution
of the waiver or if the said waiver is invalid, the taxpayer can still
raise the defense of prescription.
5.2. PROCEDURAL DUE PROCESS IN THE ASSESSMENT
OF NATIONAL INTERNAL REVENUE TAXES
REMEDIES AGAINST ASSESSMENT NOTICES
What is the importance of due process in administrative
proceedings?
The principle of due process furnishes a standard to which
governmental action should conform in order to impress it with the
stamp of validity.
Administrative due process is anchored on fairness and equity in
procedure. It is satisfied if the party is properly notified of the charge
against it and is given a fair and reasonable opportunity to explain or
defend itself.
Moreover, it demands that the party's defenses be considered by the
administrative body in making its conclusions, and that the party be
sufficiently informed of the reasons for its conclusions. (CIR v. Avon
Products Manufacturing, Inc.. GR 201398-99, Oct. 3, 2018, Per J.
LEONEN (Third Div))
A. ISSUANCE OF LETTER OF AUTHORITY
LETTER OF AUTHORITY (LOA/ELA)
The assessment process of NIRT COMMENCES with the issuance
by the CIR or by his duly authorized representative (ACIR,
LTS/ACIR, EAS, Regional Director of a Letter of Authority (LOA)
(now called eLA) which should be served within 30 days from its
date of issuance to TAXPAYERs who had been selected for audit.
A LOA is a letter authorizing a designated Revenue Officer (RO)
and a Group Supervisor to examine, to verify, and to scrutinize a
TP‘s books of accounts and other accounting records relative to his
tax payments for a particular taxable period NOT exceeding 1 taxable
year. It notifies a TP that it is under investigation for possible
deficiency tax assessment. CIR v. Lancaster, GR 183408, July 12,
2017 [Per J. MARTIRES, Second Div.]
It should include a CHECKLIST of records required to be submitted
in 10 days (can be extended).
If there is no LOA, there will be no valid ASSESSMENT or tax
audit.
B. TAX AUDIT
Can a taxpayer be subjected to audit more than once for the
same tax type and same tax period?
As a GR, No. If the same taxable period is again subjected to another
round of examination for the same type of tax, the second assessment
is without basis. (Sec. 235, NIRC)
When the tax authority had already sifted through a TP‘s books of
accounts and thus had ample opportunity to make a complete
assessment, and come up with findings of deficiency taxes, it may not
undertake another assessment for the same type of tax for the same
period already covered by the previous assessment.
It is also unfair for a taxpayer to be subjected to another round of tax
audit and assessment especially if the second assessment is already
BEYOND the prescribed period to assess.
Are the instances when a second audit may be conducted by the
BIR Examiner?
Yes. The EXCEPTIONS to the rule are:
(1) When the CIR determined that fraud, irregularities or mistakes,
were committed;
(2) When the TP requests for a reinvestigation;
(3) When there is a need to verify the TP‘s compliance with WHT
laws and regulations;
(4) When the TP‘s CGT liabilities must be verified; and
(5) When the CIR chooses to exercise his power under Sec.5(B) of
the NIRC to obtain 3rd party information, in which case, another or
separate examination and inspection may be made. (Sec. 235, NIRC)
C. ISSUANCE OF NOTICE OF DISCREPANCY
(previously, NOTICE OF INFORMAL CONFERENCE)
NOTICE OF DISCREPANCY
Just recently, the SOF issued RR 22-2020, amending RR 12-99 by
renaming the then Notice of Informal Conference as provided for in
RR 12-99 to a Notice of Discrepancy .
It provides that If a TP is found to be liable for deficiency tax in the
course of an investigation conducted by a RO, the TP SHALL be
informed through a Notice of Discrepancy.
This Notice of Discrepancy aims to fully afford the TP with an
opportunity to present and explain his side on the discrepancies
found.
The RO who audited the TP's records SHALL STATE in his
INITIAL report of investigation his findings of discrepancies.
Based on the INITIAL REPORT, the TP shall be informed, in
writing, by the RDO or by the Assessment Div./Reg. Investigation
Division (RRO) or by the Chief of Division (NO) of the discrepancy
in the TP's payment of his internal revenue taxes, for the purpose of
the ―Discussion of Discrepancy‖. (RR 22-2020 (Sept. 16, 2020))
D. DISCUSSION OF DISCREPANCY
There is a need to discuss the said discrepancies. The DISCUSSION
shall in no case extend beyond 30 DAYS FROM RECEIPT OF THE
NOTICE OF DISCREPANCY.
The TP here is given the opportunity to present his side of the case,
and explain the discrepancy found during the investigation of the RO
assigned and submit documents to support the explanation or
arguments.
If the TP disagrees with the discrepancy detected during the audit, the
TP must present an explanation and submit the documents to support
his explanation within 30 days after receipt of the Notice of
Discrepancy.
If it is still found that the TP is still liable for deficiency tax and TP
does not address the discrepancy through payment of the deficiency
taxes or the TP does not agree with the findings, the investigating
office shall endorse the case to the reviewing/ approving official in
the NO or RRO, for issuance of a PAN within 10 days from the
conclusion of the Discussion.
Failure on the part of RO‘s to comply with the periods indicated
herein shall be meted with penalty as provided by existing laws, rules
and regulations. (RR 22-2020 (Sept. 16, 2020))
Is the issuance of Notice of Discrepancy mandatory?
Yes. One of the first requirements of Sec.3 of RR 12-99, is that a
NIC(now NOD) be first accorded to the taxpayer.
The use of the word ―SHALL‖ in subsection 3.1.1 describes the
MANDATORY nature of the service of a NIC (now NOD).
The purpose of sending a NOD is but part of the ―due process
requirement in the issuance of a deficiency tax assessment,‖ the
absence of which renders nugatory any assessment made by the tax
authorities. (Spouses Pacquiao v. CTA and CIR, GR 213394, April 6,
2016)
E. SERVICE OF NOTICE
For an assessment to be valid, how should the assessment notices
be served to the taxpayer?
The modes of services of the PAN or the FAN to the taxpayers are as
follows:
(1) Personal service
(2) Substituted Service
(3) Registered Mail -
(4) Service to tax agent/tax practitioner. (RR 12-99 (Sept. 14, 1999))
Should there be due process in the issuance of Notice in order
that the PAN/FAN issued by the CIR may be considered valid?
YES. In the case of CIR v. T Shuttle Services, Inc., GR 240729, Aug.
24, 2020, the Court held that failure of the CIR to accord respondent
due process in the issuance of notice will not make the PAN/FAN
issued by the CIR to be considered as valid.
Here, the CIR's argument that the deficiency tax assessments have
already become final, executory, and demandable necessarily fails
since the deficiency IT and VAT assessments should be premised on
the validity of the assessments themselves.
A detailed record of all assessment notices issued by the CIR is
required.
And among the details to be recorded by the Chief, Assessment Div.
or the Head of the Reviewing Office are the "name of taxpayer /
person who received the assessment notice" and, more importantly,
the position / designation / relationship to the taxpayer, if not served
to the taxpayer named in the assessment notice, which were not
proven, and therefore VOID.
Is the failure to strictly comply with notice requirements in
serving the Notice tantamount to a denial of due process?
As laid out in CIR vs. Metro Star Superama, Inc., GR 85371, Dec. 8,
2010, the Supreme Court held that an assessment is made when sent
within the prescribed period, even if received by the TP after its
expiration, this ruling makes it the more imperative that the release,
mailing or sending of the notice be clearly and satisfactorily proved.
Mere notations made without the TP‘s intervention, notice or control,
without adequate supporting evidence cannot suffice; otherwise, the
TP would be at the mercy of the revenue officers, without adequate
protection or defense.
What is the rule on the receipt of a FAN in case it was made by
registered mail?
Service of the PAN or the FAN to the TP may be made by registered
mail.
Under Sec. 3(v), Rule 131, ROC, there is a DISPUTABLE
PRESUMPTION that "a letter duly directed and mailed was received
in the regular course of the mail."
However, the presumption is subject to controversion and direct
denial, in which case the burden is shifted to the party favored by the
presumption to establish that the subject mailed letter was actually
received by the addressee.
In view of TP‘s categorical denial of due receipt of the PAN and the
FAN, the burden was shifted to the CIR to prove that the mailed
assessment notices were indeed received by TP or by its authorized
representative. (CIR v. T Shuttle Services, Inc., GR 240729, Aug. 23,
2020)
Can the assessment be considered valid if it is proven that there is
failure to duly serve the Notice?
NO. As it was established that the deficiency taxes for CY 2007 are
VOID FOR FAILURE TO ACCORD DUE PROCESS IN THEIR
ISSUANCE, the CIR's argument THAT the assessment has become
final, executory and demandable necessarily fails.
The CTA En Banc' s finding revealed that the CIR failed to prove that
the PAN and the FAN were properly and duly served upon and
received by respondent.
Here, the CIR failed to identify and authenticate the signatures
appearing on Registry Receipt for the purpose of ascertaining
whether such signatures were those of TP's authorized representative.
Additionally, the argument of the CIR that the deficiency tax
assessments have already become final, executory, and demandable
should be premised on the VALIDITY of the assessments
themselves.
Besides, even granting that the PAN and the FAN were properly and
duly served upon and received by respondent, the Court affirms the
CTA En Banc's ruling that the FAN and the assessment notices
attached to it are still VOID FOR FAILURE TO DEMAND
PAYMENT OF THE TAXES DUE WITHIN A SPECFIED PERIOD
OF TIME. ..
F. PRELIMINARY ASSESSMENT NOTICE (PAN)
It is a written communication issued by the CIR or his duly
authorized representative informing a TP, who had been audited, of
the findings of his deficiency tax/es, showing in details the facts and
the law, rules and regulations, and/or jurisprudence on which the
assessment is based. Otherwise, the assessment is void. (CIR v. V. Y.
Domingo Jewellers, Inc., GR 221780, March 25, 2019)
The PAN is a part of due process. It gives both the taxpayer and the
CIR the opportunity to settle the case at the earliest possible time
without the need for the issuance of a FAN. (CIR v. Transition
Optical Phils., G.R. No. 227544, Nov. 22, 2017 [Per J. LEONEN])
What is the effect if the PAN was not issued prior to the FAN?
If no PAN was issued prior to the issuance of the FAN, it is
tantamount to a DENIAL OF DUE PROCESS.
The PAN is not merely a formal requirement but a substantive one.
However, the law recognizes several EXCEPTIONS wherein the
PAN need not be issued. (CIR v. Metro Star, GR No. 185371, Dec. 8,
2010.)
What are the instances when a PAN shall not be required to be
issued by the BIR and still not considered as a violation of the
procedural due process?
(1) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax appearing on the
face of the tax return filed by the taxpayer; or
(2) When a discrepancy has been determined between the tax
withheld and the amount actually remitted by the withholding agent;
or
(3) When a TP who opted to claim a refund or tax credit of excess
CWT for a taxable period was determined to have CARRIED OVER
and automatically applied the same amount claimed against the
estimated tax liabilities for the taxable quarter/s of the succeeding
TY; or
(4) When the excise tax due on excisable articles has not been paid;
or
(5) When an article locally purchased or imported by an exempt
person, such as, but not limited to, vehicles, capital equipment,
machineries and spare parts, has been sold, traded or transferred to
non-exempt persons.(Sec. 228, NIRC)
In these cases, an FLD/FAN may be issued OUTRIGHT. (CIR v. V.
Y. Domingo Jewellers, Inc., GR 221780, March 25, 2019)
G. REPLY
Is the filing of a written Reply to a PAN mandatory?
No. For purposes of the procedural due process, the filing by the
taxpayer of a REPLY to a PAN is NOT MANDATORY.
BUT, the TP MUST BE GIVEN THE CHANCE TO RESPOND
WITHIN 15 days from date of receipt of the PAN whether he/it
disagrees with the findings of deficiency taxes. This is a substantive,
and not just a formal, due process requirement.
Failure on the part of the BIR to give the TP a chance to respond to
the PAN within the 15-day period from the receipt of the PAN, will
be in VIOLATION of TP‘s due process rights because this period is
a substantive requirement, not merely a formal requirement. CIR v.
V. Y. Domingo Jewellers, Inc., GR 221780, March 25, 2019 [Per J.
PERALTA, Third Div.]
When should the FLD/FAN be issued?
(1) WHEN THE TP FAILED TO RESPOND THE PAN within 15
days from date of receipt thereof – the TP shall be considered in
DEFAULT, in which case, a FLD/FAN shall be ISSUED calling for
payment of the TP‘s deficiency tax liability, inclusive of the
applicable penalties.
(2) WHEN THE TP RESPONDS WITHIN 15 DAYS from date of
RECEIPT of the PAN that he/it disagrees with the findings of
deficiency tax or taxes - an FLD/FAN shall be issued within 15 days
from FILING/SUBMISSION of the TP‘s response, calling for
payment of the TP‘s deficiency tax liability, inclusive of the
applicable penalties. (RR 12-99)
In case the taxpayer replied to the PAN, can the FLD/FAN be
issued beyond 15 days from the filing/submission of the
taxpayer’s reply?
YES. An FLD/FAN issued BEYOND 15 days from filing/submission
of the TP‘s RESPONSE to the PAN shall be VALID. Provided that,
it is issued WITHIN the period of limitation to ASSESS internal
revenue taxes.
The non-observance of the 15-day period, however, shall constitute
an administrative infraction and the revenue officers who caused the
delay shall be subject to administrative sanctions. (RMC 11-2014)
H. FORMAL LETTER OF DEMAND/ FINAL ASSESSMENT
NOTICE (FLD/FAN)
FORMAL LETTER OF DEMAND & FINAL ASSESSMENT
NOTICE (FLD/FAN)
A FLD is a written demand issued to a TP who fails to respond to a
PAN or whose reply to the PAN was found to be without merit,
whether in full or in part, to PAY the amount of the deficiency taxes
stated thereon WITHIN THE PRESCRIBED PERIOD OF TIME.
It is a notice to the effect that the amount therein stated is due as tax
and a CONTAINS A DEFINITE DUE DATE demanding for
payment of the AMOUNT DUE. This signals the time ―when
penalties and interests begin to accrue against the TP and enabling the
latter to determine his remedies. Thus, it must be ―sent to and
received by the TP, and MUST DEMAND payment of the taxes
described therein within a specified period.‖
It is accompanied by a FAN which states the facts, the law, rules and
regulations, or jurisprudence, if any, on which the assessment is
based, otherwise, it is void.
The FLD/FAN shall be issued by the CIR or his duly authorized
representative within 15 days from filing/submission of the TP‘s
REPLY or when TP failed to respond to the PAN within 15 days
from FAILURE to respond to the PAN.
Thus, failure to ISSUE an FLD demanding payment of the taxes due
within a specific period will render the assessment VOID. CIR v. T
Shuttle Services, Inc., GR 240729, Aug. 24, 2020 [Per J. Inting, 2nd
Div.
Distinguish a PAN from a FAN
A PAN is a written communication issued by the CIR or his duly
authorized representative after the issuance of a Notice of
Discrepancy informing a TP who has been audited of the findings of
his deficiency tax/es and after discussing what is stated in the Notice
of Discrepancy.
A FAN is also a written communication issued by the CIR or his duly
authorized representative to a TP who fails to respond to a PAN
within 15 days from receipt thereof, or whose reply to the PAN was
found to be without merit, whether in full or in part.
It shall show in details,, the facts, the law, rules and regulations,
and/or jurisprudence on which the proposes assessment is based,
otherwise , the PAN shall be void.
It shall state the facts, the law, rules and regulations, and/or
jurisprudence on which the assessment is based, if any, shows the
computation of tax liabilities and served together with a written
demand to pay deficiency taxes within the prescribed period,
otherwise, the FAN/FLD shall be void.
Requisites of a valid FLD/FAN
(1) The FAN SHALL be in writing and dated;
(2) It MUST be SERVED/SENT to the taxpayer within the 3-year
prescriptive period to assess, i.e., within 3 years AFTER the due date
for fling of the return OR the actual date filed, WHICHEVER IS
LATER. (An assessment notice is considered DULY served/sent
even if the TP received the same after the 3-year period, for as long
as it was released, mailed or sent within the 3-year prescriptive period
to assess.)
(3) There MUST have been a PAN previously issued, EXCEPT in
those instances when PAN is not required by law.
(4) It SHOULD state not only the law, but also the facts, the rules
and regulations, and/or jurisprudence, if any, on which the
assessment is based and MUST be accompanied by a FLD
demanding for the payment of tax on a prescribed date stated therein.
(5) It SHOULD be issued by the CIR or his duly authorized
representatives calling for the payment of TP‘s deficiency taxes,
inclusive of the applicable penalties. (CIR v. BPI, GR 227040, Sept.
16, 2020)
Written Notice of FLD/FAN is in observance of due process
The written notice requirement for both the FLD and the FAN is in
observance of due process – that no person shall be deprived of his
property without due process of law and to afford the taxpayer
adequate opportunity to file a protest on the assessment and thereafter
file an appeal in case of an adverse decision.
Merely NOTIFYING the taxpayer of his tax liabilities without details
or particulars is not enough. (CIR v. Liquigaz, G.R. No. 215534, April
18, 2016)
What is the obligation of TP upon receipt of an FLD/FAN?
As soon as it is served, an obligation arises on the part of the TP to
pay the amount assessed and demanded or to file an administrative
protest within 30 days from the receipt of the FLD/FAN.
It also signals the time when penalties and interests begin to accrue
against the taxpayer.
Thus, the NIRC imposes a penalty, in addition to the tax due, in case
the TP fails to pay the deficiency tax within the time prescribed for its
payment in the FAN.
Likewise, an interest is to be collected from the date prescribed for
payment until the amount is fully paid.
Failure to file an administrative protest within 30 days from receipt of
the FAN will render the assessment final, executory, and
demandable. (CIR v. Transitions Optical, GR 227544, Nov. 22, 2017;
Per J. LEONEN)
Would failure to state a definite due date for the payment of tax
liabilities in the FAN make the assessment void?
YES. The matter of whether the subject assessments contained a
definite period within which to pay the assessed taxes is a question of
fact which this Court will not entertain in the present appeal under
Rule 45.
There being no showing of gross error or abuse on the part of the
CTA En Banc in its findings of fact, the Court accords respect to the
latter's finding that the FAN dated July 20, 2010 and the assessment
notices attached to it DID NOT CONTAIN A DEFINITE PERIOD
WITHIN WHICH TO PAY THE ASSESSED TAXES.
As such, even assuming that the assessments were duly served on and
received by respondent, they are still VOID and WITHOUT ANY
LEGAL CONSEQUENCE.
When may assessment notices be declared null and void?
Tax assessments issued in violation of the due process rights of a
taxpayer are null and void.
Due process requires the BIR to consider the defenses and evidences
submitted by the taxpayer and to render a decision based on these
submissions.
Failure to adhere to these requirements constitutes a denial of due
process and taints the administrative proceedings with invalidity.
The principle of due process furnishes a standard to which
governmental action should conform in order to impress it with the
stamp of validity. Fidelity to such standard must of necessity be the
overriding concern of govt. agencies exercising quasi-judicial
functions.
Although a speedy administration of action implies a speedy trial,
speed is not the chief objective of a trial. Respect for the rights of all
parties and the requirements of procedural due process equally apply
in proceedings before administrative agencies with quasi-judicial
perspective in administrative decision-making and for maintaining
the vision which led to the creation of the administrative office. (CIR
v. Avon Products Manufacturing, Inc.. GR 201398-99, Oct. 3, 2018,
[Per J. LEONEN])
I. PROTESTING/DISPUTING AN ASSESSMENT
Period to File Protest
The taxpayer or his duly authorized representative or tax agent may
file an administrative protest against the aforesaid FLD/FAN within
30 days from date of receipt thereof, by filing a written Request for –
(1) Reconsideration, or
(2) Reinvestigation. (RR 12-99)
Disputed Assessment
A Disputed Assessment is a WRITTEN PROTEST,
ADMINISTRATIVELY filed by a TP against the FLD/FAN within
30 days from date of receipt thereof by filing EITHER of the
following 2 remedies, where the filing of one precludes the filing of
the other:
(1) REQUEST FOR RECONSIDERATION - refers to a plea of re-
evaluation of an assessment on the basis of existing records without
need of additional evidence. It may involve both a question of fact or
of law or both. This DOES NOT TOLL the running of the Statute of
Limitations.
(2) REQUEST FOR REINVESTIGATION - refers to a plea of re-
evaluation of an assessment on the basis of newly discovered or
additional evidence that a taxpayer intends to present in the
reinvestigation. It may also involve a question of fact or of law or
both. But this one TOLLS the running of the Statute of Limitations
when granted. (RR 12-99, as amended; BPI v. CIR, GR 181836, July
9, 2014)
Requisites of a valid Protest
A valid protest should state the following:
1. The nature of protest as to whether it is a request for
reconsideration or reinvestigation. If it is a request for
reinvestigation, it should specify the newly discovered or additional
evidence the taxpayer intents to present.
2. Date of the Assessment Notice
3. The applicable law, rules and regulations, or jurisprudence on
which the protest is based.
Otherwise, the protest shall be consindered void and without force
and effect. (RR 18-2013. Sec. 3.1.4.)
When may a Request for Reinvestigation suspend the statute of
limitations?
A request for reinvestigation alone will not suspend the statute of
limitations unless two things concur:
(1) There must HAVE BEEN FILED a request for reinvestigation
and
(2) The CIR must have GRANTED it.
The burden of proof that the request for reinvestigation had been
actually granted shall be on the CIR.
Such grant may be expressed in its communications with the TP or
implied from the action of the CIR or his authorized representative in
response to the request for reinvestigation.
Undoubtedly, it entails the reception and evaluation of additional
evidence & will take more time than a Motion for Reconsideration,
and thus justifying why it can suspend the running of the statute of
limitations, while the former cannot. If there is no showing that it has
been granted, then the running of the 3-year period is NOT
SUSPENDED. China Banking Corp. v. CIR, G.R. 172509. Feb. 4,
2015)
Submission of Relevant Supporting Documents
For REQUEST FOR REINVESTIGATION, the TP shall submit all
relevant supporting documents in support of his protest within 60
days from date of filing of his letter of protest, otherwise, the
assessment shall become FINAL.
This rule shall NOT apply to request for reconsideration.
The term ―relevant supporting documents‖ refers to those documents
necessary to support the legal and factual bases in disputing a tax
assessment as determined by the taxpayer.
The term ―the assessment shall become final‖ means that the failure
of the TP who requested for a reinvestigation to submit all relevant
supporting documents within 60-day period shall render the
FLD/FAN final by operation of law.
He shall be barred from disputing the correctness of the FLD/FAN by
the introduction of newly discovered or additional evidence because
he is deemed to have lost his chance to present these evidences.
The BIR shall then deny the request for reinvestigation through the
issuance of a FDDA. (RMC 11-2014)
Failure to file Protest, effect
If the taxpayer fails to file a valid protest against the FLD/FAN
within 30 days from date of receipt thereof, the assessment shall
become final, executory and demandable. CIR v. BPI, G.R. 224327.
June 11, 2018, Peralta, J. , Second Division
No request for reconsideration or reinvestigation shall be granted on
tax assessments that have already become final, executory and
demandable; hence the taxpayer‘s liability becomes fixed and subject
to collection as the assessment becomes final and collectible. RR 18-
2013, Nov. 28, 2013.
J. FINAL DECISION ON DISPUTED ASSESSMENT
(FDDA)
Period within which the CIR should act upon the protest filed
Where a TP questions an assessment and asks the CIR to reconsider
or reinvestigate the same because he (TP) believes that he is not
liable therefor, the assessment becomes a ―disputed assessment‖ that
the CIR or his duly authorized representative MUST DECIDE
WITHIN 180 days from the submission of the supporting documents.
The purpose of this is to give the CIR the opportunity to ―re-examine
its findings and conclusions‖ and to decide the issues raised within
his competence.
What constitutes as a valid FDDA?
All decisions on protest to the FLD/FAN, whether the TP's protest is
accepted or denied partially or wholly, shall be communicated to the
TP through the issuance of a FDDA. RMO 26-2016
An FDDA is the decision of the CIR or his duly authorized
representative on a disputed assessment which SHALL categorically
state:
(i) The facts, the applicable law, rules and regulations, or
jurisprudence, if any, on which such DECISION is based, otherwise,
the decision shall be VOID, and
(ii) That the same is his FINAL DECISION.
The use of the word ―SHALL‖ in Sec. 228, NIRC and in RR 12-99
indicates that the requirement of informing the taxpayer of the legal
and factual bases of the assessment and the decision made against a
taxpayer is MANDATORY. (CIR v. United Salvage and Towage
(Phils.), Inc., G.R. No. 197515, July 2, 2014)
Failure of the FDDA to reflect the facts and the law on which it is
based will make the decision VOID. It, however, does not extend to
the nullification of the entire assessment. (RR 12-99; CIR v.
Liquigaz, G.R. No. 215534, April 18, 2016)
What is the rationale for this requirement
Sec. 228 of the NIRC should not be read restrictively as to limit the
written notice only to the assessment itself.
The written notice requirement for both the FAN and the FDDA is in
observance of due process—to afford the taxpayer adequate
opportunity to file a PROTEST on the assessment in the case of
FLD/FAN; and thereafter to be able to file an APPEAL in case of an
adverse decision in the FDDA.
To rule otherwise would tolerate abuse and prejudice.
Taxpayers will be unable to file an intelligent appeal before the CTA
as they would be unaware on how the CIR or his authorized
representative appreciated the defense raised in connection with the
assessment.
On the other hand, in the case of issuance of the FDDA, it raises the
possibility that the amounts reflected in the FDDA were
ARBITRARILY MADE if the factual and legal bases thereof are not
shown.
What are the effects of a void FDDA?
An FDDA that does not inform the taxpayer in writing of the facts
and law on which it is based renders the decision VOID.
Therefore, it is as if there was NO DECISION RENDERED by the
CIR.
It is tantamount to a DENIAL BY INACTION by the CIR, which
may still be APPEALED before the CTA and the assessment
evaluated on the basis of the available evidence and documents.
Thus the merits of the assessment should have been discussed and not
merely brushed aside on account of the void FDDA. CIR v. Liquigaz
Phils., G.R. 215534 & 215557. April 18, 2016,
But will a void FDDA lead to a void assessment?
No. A void FDDA does not extend to the nullification of the entire
assessment.
In resolving the issue on the effects of a void FDDA, it is necessary
to differentiate an ―ASSESSMENT‖ from a ―DECISION.‖ The Court
has long recognized that a ―decision‖ differs from an ―assessment.‖
The difference is likewise readily apparent in Sec. 7 of RA 1125, as
amended, where the CTA is conferred with appellate jurisdiction over
the DECISION of the CIR in cases involving disputed assessments,
and on inaction of the CIR in disputed assessments. It is clear that
what is appealable to the CTA is the adverse ―DECISION‖ of the
CIR on disputed assessment and NOT the ASSESSMENT itself.
An assessment becomes a disputed assessment after a taxpayer has
filed its protest to the assessment in the administrative level.
Thereafter, the CIR either issues a FDDA or fails to act on it and is,
therefore, considered as ―deemed-a-denial‖ DECISION. The taxpayer
may then APPEAL the FDDA or the inaction or the ―deemed-a-
denial decision‖ of the CIR. As such, the FDDA is not the only
means that the final tax liability of a TP is fixed, which may then be
appealed by the TP. Under the law, even the inaction on the part of
the CIR may likewise result in the finality of a TP‘s tax liability as it
is deemed a denial of the protest filed by the latter, which may be
appealed before the CTA.
Clearly, a decision of the CIR on a disputed assessment differs from
the assessment itself. Hence, the invalidity of one does not
necessarily result to the invalidity of the other—unless the law or
regulations otherwise provide. (CIR v. Liquigaz, Phils. G.R. 215534
& 215557. April 18, 2016)
What are the effects of a void assessment?
The law imposes a SUBSTANTIVE, not merely a formal,
requirement on the requisites for the validity of an assessment notice.
To proceed heedlessly with tax collection without first establishing a
VALID assessment is evidently violative of the cardinal principle in
administrative investigations: that TPs should be able to present their
case and adduce supporting evidence.
The reason for requiring that TPs be informed in writing of the facts
and law on which the assessment is made is the constitutional
guarantee that no person shall be deprived of his property without due
process of law.
Merely NOTIFYING the taxpayer of its tax liabilities without
elaborating on its details is insufficient.
The old requirement of merely notifying the taxpayer of the CIR's
findings was changed in 1998 to INFORMING the TP of not only
the law, but also of the facts on which an assessment would be made;
otherwise, the assessment itself would be INVALID.
A void assessment bears no valid fruit. (CIR v. Liquigaz Phils.,
G.R. 215534 & 215557. April 18, 2016)
REMEDIES OF A TAXPAYER
IN CASE OF DENIAL OR INACTION BY THE CIR’s DULY
AUTHORIZED REPRESENTATIVE
1. IN CASE OF DENIAL
If the protest is DENIED, in whole or in part, by the CIR‘s duly
authorized representative, the taxpayer may either:
(1) Appeal to the CTA within 30 days from date of receipt of the
FDDA; or
(2) File an administrative appeal to the CIR through a REQUEST
FOR RECONSIDERATION to the CIR within 30 days from date of
receipt of the said FDDA. (This will toll the period for the filing of a
judicial claim.
No request for reinvestigation shall be allowed in administrative
appeal and only issues raised in the decision of the CIR‘s duly
authorized representative shall be entertained by the CIR.
2. IN CASE OF INACTION
If the protest is not acted upon by the CIR‘s duly authorized
representative within 180 days COUNTED from the date of filing the
request for reconsideration; or within 180 days from date of
submission by the TP of the supporting documents within 60 days
from the date of filing of the protest in case of a request for
reinvestigation, the taxpayer has 2 remedies, viz:
(1) Appeal to the CTA within 30 days after the expiration of the 180-
day period; or
(2) Await the final decision of the CIR‘s duly authorized
representative on the disputed assessment, and once denied, he may
appeal such FDDA to the CTA within 30 days from the receipt of the
copy of said decision. (PAGCOR v. BIR, G.R. 208731, Jan. 27, 2016)
These options are MUTUALLY EXCLUSIVE and resort to one bars
the application of the other. (Lascona Land v. CIR, GR 171251,
March 5, 2012)
The decision, ruling or inaction of the CIR or his duly authorized
representative are necessary in order to vest the CTA with
jurisdiction to entertain the appeal.
The 30-day period within which to file an appeal is jurisdictional and
mandatory and failure to comply therewith would bar the appeal and
deprive the CTA of its jurisdiction to entertain and determine the
correctness of the assessments.
IN CASE OF DENIAL OR INACTION BY THE CIR
1. IN CASE OF DENIAL
If the protest or administrative appeal (Motion for Reconsideration)
by the CIR‘s duly authorized representative is DENIED in whole or
in part by the CIR, the TP may appeal to the CTA within 30 days
from date of receipt of the said decision. Otherwise, the assessment
shall become final, executory and demandable.
A motion for reconsideration of the CIR‘s denial of the protest shall
not toll the 30-day period to appeal to the CTA. (Fishwealth Canning
v. CIR, GR 179343, Jan. 21, 2010 [Per J. Carpio Morales, First Div.]
Failure to comply with the 30-day statutory period deprived the CTA
of its jurisdiction to entertain and determine the correctness of the
assessment.
2. IN CASE OF INACTION
If the protest or administrative appeal is not acted upon by the CIR
within 180 days counted from the date of filing of the protest, the
taxpayer has 2 options, i.e.:
(1) APPEAL to the CTA within 30 days after the expiration of the
180-day period; OR
(2) Await the final decision of the CIR on the disputed assessment
and once denied, appeal such FDDA to the CTA within 30 days from
the receipt of the copy of said decision. (RCBC v. CIR, GR 168498,
April 24, 2007)
And these options are MUTUALLY EXCLUSIVE and resort to one
bars the application of the other. (Phil. Dream Co. v. CIR, GR
216044, Aug. 27, 2020)
What is the effect of failure to file an appeal?
Although appeal is an essential part of our judicial process, it has
been held, time and again, that the right thereto is not a natural right
or a part of due process but is merely a statutory privilege.
Thus, the perfection of an appeal in the manner and within the period
prescribed by law is not only MANDATORY but also
JURISDICTIONAL and FAILURE of a party to conform to the rules
regarding appeal will render the FDDA FINAL AND EXECUTORY
AND DEMANDABLE.
Once the FDDA attains finality, it becomes the law of the case
irrespective of whether the decision is erroneous or not and no court-
not even the Supreme Court -has the power to revise, review, change
or alter the same.
The basic rule of finality of judgment is grounded on the fundamental
principle of PUBLIC POLICY and sound practice that, at the risk of
occasional error, the judgment of courts and the award of quasi-
judicial agencies must become final at some definite date fixed by
law.
When assessment becomes final, executory and demandable,
collection proceedings will follow, i.e. summary remedies of distraint
and levy, as well as judicial remedies. (Mitsubishi Motors Phils v.
BoC, G.R. 209830. June 17, 2015)
CIR v. Avon Products Mfg. , Inc.. GR 201398-99, Oct. 3, 2018,
[Per J. LEONEN, Third Div.]
ISSUE 1: W/N the CIR fail to observe administrative due
process, and consequently made the assessments void
YES. The CIR‘s total disregard of due process rendered the identical
PAN, FAN, and CL null and void, and of no force and effect and
therefore, the assessments made are ALSO VOID.
The facts demonstrate that Avon was deprived of due process. It was
not fully apprised of the legal and factual bases of the assessments
issued against it.
The Details of Discrepancy attached to the PAN, as well as the FLD
with the FAN, did not even comment or address the defenses and
documents submitted by Avon.
Thus, Avon was left unaware on how the CIR or her authorized
representatives appreciated the explanations or defenses raised in
connection with the assessments.
There was clear INACTION of the CIR at every stage of the
proceedings which is a deplorable transgression of Avon's right to
due process. The right to be heard, which includes the right to present
evidence, is meaningless if the CIR can simply ignore the evidence
without reason.
ISSUE 2: W/N Avon’s right to appeal before the CTA has
already prescribed; and W/N the assessment against it has
already prescribed
NO. Avon‘s right to appeal before the CTA has not prescribed since
Avon opted to wait for the decision of the CIR and appealed it within
the 30-day period.
The CIR in this case asserts that since Avon filed its protest on May
9, 2003, it only had 30 days from Nov. 5, 2003, i.e., the end of the
180 days, or until Dec. 5, 2003 within which to appeal to the CTA.
As Avon only filed its appeal on Aug. 13, 2004, its right to appeal has
prescribed.
Avon counters that it acted in good faith and in accordance with Rule
4, Sec. 3 of the RRCTA and jurisprudence when it opted to wait for
the decision of the CIR and appeal it within the 30-day period.
The Collection Letter, albeit void, constitutes a constructive denial of
Avon's protest and is the final decision of the CIR for purposes of
counting the reglementary 30-day period to appeal.
Since Avon received the Collection Letter on July 14, 2004, its
Petition for Review was TIMELY FILED on Aug. 13, 2004.
In any case, even if this Court were to disregard the Collection Letter
as a final decision of the CIR on Avon's protest, the Collection Letter
constitutes an act of the CIR on "other matters" arising under the
NIRC, which, pursuant to Phil. Journalists, Inc. v. CIR, may be the
subject of an appropriate appeal before the CTA.
Sec. 228, NIRC requires taxpayers to exhaust administrative
remedies by filing a request for reconsideration or reinvestigation
within 30 days from receipt of the assessment.
Exhaustion of administrative remedies is required prior to resort to
the CTA precisely to give the CIR the opportunity to "re-examine its
findings and conclusions" and to decide the Issues raised within her
competence
JUDICIAL PROCEDURES IN FILING AN APPEAL AGAINST
ASSESSMENT NOTICE
APPEAL TO THE CTA IN DIVISION
A TP adversely affected by a DECISION or the INACTION of the
CIR on disputed assessments may appeal to the CTA in Division thru
a Petition for Review.
Said appeal should be filed within 30 days after receipt of a copy of
such decision, or within 30 days from the expiration of the period
fixed by law for the CIR to act on the disputed assessments. (Sec. 11,
RA 1125, as amended; Rule 8, Sec. 3, RRCTA)
It bears to stress that the perfection of an appeal within the statutory
period is a jurisdictional requirement and failure to do so renders the
questioned decision or decree final and executory and no longer
subject to review. (Misnet, Inc. v. CIR, G.R. 210604, June 3, 2019)
Can the CTA acquire jurisdiction over a Petition for Review
based on an assessment which was not disputed?
No. CTA was without jurisdiction to entertain the petition, as the rule
is that for the CTA to acquire jurisdiction, the assessment must first
be disputed by the taxpayer and either ruled upon by the CIR to
warrant a decision, or denied by the CIR through inaction.
The CTA First Division ruled that what were appealed to it were the
subject assessments, not a decision or the CIR's denial of its protest;
thus, the said assessments had attained finality, and the CTA in
Division was without jurisdiction to entertain the appeal. (CIR v. V. Y.
Domingo Jewellers, Inc., GR 221780, March 25, 2019)
MOTION FOR RECONSIDERATION TO THE CTA IN
DIVISION
In case of denial of the Petition for Review before the CTA in
Division, a Motion for Reconsideration or Motion for New Trial must
be filed first within 15 days from the receipt of the denial in the same
division of the CTA that rendered the assailed decision. (Rule 15,
Sec. 1, RRCTA)
This is an indispensable requirement for filing an appeal before the
CTA En Banc. Failure to file such motion for reconsideration or new
trial is a cause for dismissal of the appeal before the CTA En Banc
It is an established doctrine in this jurisdiction that the attention of the
Court should first be called to its supposed error, and its correction
asked for on a motion for reconsideration. Thus, failure to file the
same is a fatal and insurmountable barrier.
The filing of a motion for reconsideration or new trial shall suspend
the running of the period within which an appeal may be perfected.
(Sec. 4, Rule 15, RRCTA)
APPEAL TO THE CTA EN BANC
A TP adversely affected by a decision or resolution of the CTA
Division on a Motion for Reconsideration or New Trial may
APPEAL to the CTA En Banc by filing before it a Petition for
Review within 15 days from receipt of a copy of the questioned
decision or resolution. (Sec. 18, RA 1125, as amended)
Upon proper motion and the payment of the full amount of the docket
fee and other lawful fees and deposit for costs before the expiration
of the reglementary period, the Court may grant an additional period
not exceeding 15 days from the expiration of the original period
within which to file the petition for review.
MOTION FOR RECONSIDERATION TO THE CTA EN BANC
If the TP‘s appeal to the CTA en Banc is again denied, then TP can
file a Motion for Reconsideration this time to the CTA en Banc
within 15 days from the receipt of the notice of decision. (Sec. 1,
Rule 16, RRCTA)
However, if during its pendency, the movant shall appeal to the
Supreme Court, the Motion for Reconsideration or for New Trial
filed before the CTA en Banc shall be deemed abandoned. (Sec. 2,
Rule 16, RRCTA)
What is the propriety of the decisions of the CTA?
It should be noted that the CTA has developed an expertise on the
subject of taxation because it is a specialized court dedicated
exclusively to the study and resolution of tax problems.
Thus, the Supreme Court has no jurisdiction to review tax cases at the
first instance without first letting the CTA study and resolve the
same. (Gaw, Jr. v. CIR, G.R. 222837, July 23, 2018; Misnet, Inc. v.
CIR, G.R. 210604, June 3, 2019)
APPEAL TO THE SUPREME COURT
A party adversely affected by a decision or ruling of the CTA en banc
in the Motion for Reconsideration may appeal therefrom by filing
with the Supreme Court a verified Petition for Review on certiorari
within 15 days from receipt of a copy of the decision or resolution of
the CTA en Banc, as provided in Rule 45 of the Rules of Court. (Sec.
19, RA 1125, as amended)
In a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, only questions of law may be raised.
The Court is not a trier of facts and does not normally undertake the
re-examination of the evidence presented by the contending parties
during the trial of the case considering that the findings of facts of the
CTA are conclusive and binding on the Court –and they carry even
more weight when the CTA En Banc affirms the factual findings of
the trial court.
However, the Supreme Court had recognized several exceptions to
this rule, including instances when the appellate court manifestly
overlooked relevant facts not disputed by the parties, which, if
properly considered, would probably justify a different conclusion.
(Nippon Express Phils. v. CIR, G.R. 185666, Feb. 4, 2015)
It is not a matter of right, but of sound judicial discretion.
JURISDICTION OF THE CTA IN DIVISIONS
The CTA in Divisions shall exercise:
(a) Exclusive original or appellate jurisdiction to review by
appeal the following:
(1) DECISIONS of the CIR in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the NIRC or other laws
administered by the BIR;
(2) INACTION by the CIR in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or OTHER MATTERS arising under the NIRC or
other laws administered by the BIR, where the NIRC or other
applicable law provides a specific period for action:
Provided, that in case of disputed assessments, the inaction of the
CIR within the 180-day-period under Sec. 228 of the NIRC shall be a
deemed denial for purposes of allowing the taxpayer to appeal his
case to the Court and does not necessarily constitute a formal
decision of the CIR on the tax case;
Provided, further, that should the taxpayer opt to await the final
decision of the CIR on the disputed assessments beyond the 180-day-
period abovementioned, the taxpayer may appeal such final decision
to the Court under Sec. 3(a), Rule 8 of these Rules;
and Provided, still further, that in the case of claims for refund of
taxes erroneously or illegally collected, the taxpayer must file a
petition for review with the Court prior to the expiration of the 2-year
period under Sec. 229 of the NIRC;
(3) Decisions, resolutions or orders of the RTCs in local tax cases
decided or resolved by them in the exercise of their original
jurisdiction;
(4) Decisions of the CoC in cases involving liability for customs
duties, fees or other money charges, seizure, detention or release of
property affected, fines, forfeitures or other penalties in relation
thereto, or other matters arising under the Customs Law or other laws
administered by the BoC; BQ2013
(5) Decisions of the SoF on customs cases elevated for automatic
review from decisions of the CoC adverse to the Government under
Sec. 1128 of the CMTA; and
(6) Decisions of the SoTI, in the case of nonagricultural product,
commodity or article, and the Sec. of Agriculture, in the case of
agricultural product, commodity or article, involving dumping and
countervailing duties under Sec. 711 and 713 respectively, of the
CMTA, and safeguard measures under RA 8800 (now Sec. 712 of
the CMTA), where either party may appeal the decision to impose or
not to impose said duties;
(b) Exclusive jurisdiction over cases involving CRIMINAL
OFFENSES, to wit:
(1) Original jurisdiction over all criminal offenses arising from
violations of the NIRC or CMTA and other laws administered by the
BIR or the BoC, where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is P1 Million or MORE;
and
(2) Appellate jurisdiction over appeals from the judgments,
resolutions or orders of the RTCs in their original jurisdiction in
criminal offenses arising from violations of the NIRC or CMTA and
other laws administered by the BIR or BoC, where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed
is LESS THAN P1 Million or where there is no specified amount
claimed;
(c) Exclusive jurisdiction over TAX COLLECTION cases, to wit:
(1) Original jurisdiction in tax collection cases involving final and
executory ASSESSMENTS for taxes, fees, charges and penalties,
where the principal amount of taxes and fees, exclusive of charges
and penalties, claimed is P1 Million or more; and
(2) Appellate jurisdiction over appeals from the judgments,
resolutions or orders of the RTCs in tax collection cases originally
decided by them within their respective territorial jurisdiction, where
the principal amount of taxes and fees, exclusive of charges and
penalties, claimed is less than P1 Million.
JURISDICTION OF THE CTA EN BANC
The CTA en banc shall exercise exclusive appellate jurisdiction to
review by appeal the following:
(a) Decisions or resolutions on MR or MNT of the Court in Divisions
in the exercise of its exclusive appellate jurisdiction over:
(1) Cases arising from administrative agencies – BIR, BOC, DOF,
DTI, DA;
(2) Local tax cases decided by the RTCs in the exercise of their
original jurisdiction; and
(3) Tax collection cases decided by the RTCs in the exercise of their
original jurisdiction involving final and executory assessments for
taxes, fees, charges and penalties, where the principal amount of
taxes and penalties claimed is less than P1 Million;
(b) Decisions, resolutions or orders of the RTCs in local tax cases
decided or resolved by them in the exercise of their appellate
jurisdiction; (i.e., those originally decided by MTCs);
(c) Decisions, resolutions or orders of the RTCs in tax collection
cases decided or resolved by them in the exercise of their appellate
jurisdiction; (those originally decided by MTCs);
(d) Decisions, resolutions or orders on MR or MNT of the Court in
Division in the exercise of its exclusive original jurisdiction over tax
collection cases with final and executory assessments where the
principal amount of taxes and penalties claimed exceeds P1 Million;
(e) Decisions of the CBAA in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real
property originally decided by the provincial or city board of
assessment appeals (LBAA);
(f) Decisions, resolutions or orders on MR or MNT of the Court in
Division in the exercise of its exclusive original jurisdiction over
cases involving criminal offenses arising from violations of the NIRC
or the CMTA and other laws administered by the BIR or BoC where
the amount involved exceeds P1 Million;
(g) Decisions, resolutions or orders on MR or MNT of the Court in
Division in the exercise of its exclusive appellate jurisdiction over
criminal offenses mentioned in the preceding subparagraph; and
where the amount involved does not exceed P1 Million.
(h) Decisions, resolutions or orders of the RTCs in the exercise of
their appellate jurisdiction over criminal offenses (originally decided
by the MTCs).
GOOD LUCK EVERYONE!
LET US Pray altogether to the Almighty God to guide you when you
are answering your Bar Exams.
This is your professor,
Atty. Eufrocina Sacdalan- Casasola
GOD SPEED!