Taxation Law II
Dean Manuel Quibod
ESTATE and DONOR’S TAXES
Introduction
From where we left in income tax, we go to Title III. Title III
is on Estate and Donor’s Taxes. Estate and donor’s taxes
are what we call, collectively, as transfer taxes, because
these are taxes imposed on the gratuitous transfer of
properties.
For purposes of taxation, we recognize and we tax two
forms of gratuitous transfers:
1) Succession – when there is death that sets in and
the decedent left behind properties. These
properties will be transferred to the heirs or
beneficiaries of the estate. That is a taxable
transmission. The transfer is subject to what we
call as the Estate Tax.
2) Donation/Gift – such transfer, by way of gift or
donation is also a taxable transfer. It will be
subject to what we call the Donor’s Tax or the
Gift Tax.
Prior to this imposition of transfer taxes, there were two
types of Death Taxes:
1) Estate Tax
2) Inheritance Tax
Inheritance Tax was removed sometime in the 70s or in
the early 80s. This was deleted because somehow, the
property is subjected to tax twice.
Example: When A dies, and A’s properties are transferred,
the estate will pay for the estate tax, If B is the recipient of
the properties, B will also pay inheritance tax. So the
transfer is technically taxed twice. That is too
burdensome, that is why it was removed.
In the case of donation, there were also two taxes
before:
1) Donor’s Tax
2) Donee’s Tax
Example: If A gives a gift to B, A will pay the donor’s tax.
B, as the donee, will also pay a tax. So, the consequence
is the same with the death taxes. Therefore, Donee’s tax
was also removed.
Since then, until now, we have only two types of transfer
taxes. On account of death, an estate tax is paid. In the
case of a gift or donation, the donor pays the gift tax or
the donor’s tax.
There is also a gift or a donation wherein the effectivity
takes place upon death. Normally, the gift or donation is
inter vivos. But when you have a gift or a donation which
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
is mortis causa, then this is not governed anymore of the
rules of donation but is governed by the rules on
testamentary succession. Because the effectivity of the
transfer takes place upon death, the donation mortis
causa is subject to the estate tax, not to the donor’s tax.
You should be able to distinguish and compare the
estate and the donor’s taxes. They are both transfer
taxes and they are both excise taxes, because it is not a
tax on property, it is a tax on the act of transferring
gratuitously. It is the transmission that is taxable, not the
property.
Between the estate and the donor’s tax, when you talk
about the rate, the estate tax is higher than the donor’s
tax. In the case of the estate tax, it ranges from 0% to
20%. The first 200,000 of the taxable estate is exempted. In
excess of 200,000, the rates will run from 5%-20%.
When you go to the donor’s tax, the donor’s tax rates are
lower. The first 100,000 is exempted and the excess of the
100,000 is taxable. The rate begins at 2%-15%.
For the purpose of estate planning, it would be better
that you make donations while the donor is still alive and
not to have the transfer to take effect upon death. It is
thus advisable that you make donations in favor of your
heirs before you die. However, take note that when you
analyze the rates, it is not also wise that you donate in
lump sums. So if you have properties with a taxable value
of 100,000,000, you should not transfer it one time,
because it will fall on the highest rate.
Estate planning applies only when you have properties
and these properties are titled, since transferring these
properties is difficult. You need to deal with the Registry of
Deeds. There are rigid requirements when you want to
transfer real properties. But when we talk about personal
properties like jewelries, cars, cash, that is easier to
conceal and transferring them can be done
immediately.
Example: Real property is worth P50,000,000.00. You have
the option to sell it, donate it inter vivos or mortis causa.
SALE DONATION SUCCESSION
(6% capital tax + (2%-15% donor’s (5%-20% estate
1.5% tax) *see Section tax) *see Section
documentary 84 for the rates* 99 for the rates*
stamp tax )
50,000,000 x 7.5% 1,004,000 + 15% 1,215,000 + 20%
(40,000,000) (40,000,000)
=3,750,000 =7,004,000 =9,215,000
So if you wait for death to come before you transfer your
property, you will be paying a higher tax. If you donate
the property inter vivos, you will be paying less. If you
really want to donate though, you shall not donate all in
one time so that the highest rate will not apply to you.
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You break it up into smaller pieces. That is where further 2,000,000 5,000,000 135,000 11% 2,000,000
planning comes in, taking into consideration the life 5,000,0O0 10,000,000 465,000 15% 5,000,000
expectancy of the donor. You have to play around the 10,000,000 And over 1,215,000 20% 10,000,000
brackets in order to determine what set-up will bring you
at a lower tax bracket. If not, your best option is to sell the As an overview, for purposes of arriving at the taxable
property. As shown in the illustration, it is in sale that you estate, you have to determine the properties composing
will have the lowest tax rate. the gross estate. The properties composing the gross
estate are determined by the status of the decedent,
This comparison is actually a way of knowing what mode whether he is a citizen, a resident alien or a non-resident
of transfer is better in order for you to have tax savings. alien. This is provided more specifically in Section 85.
This is not tax evasion. This is tax avoidance. You are trying
to give your client a better option of a mode of transfer SEC. 85. Gross Estate. - The value of the gross estate of the
which will allow them to pay a lesser tax. You will still pay decedent shall be determined by including the value at
the tax. You are not escaping. But you just want to have the time of his death of all property, real or personal,
the best mode of transfer. If you are able to plan it better, tangible or intangible, wherever situated: Provided,
it would be wiser to have a donation. In Donation, you however, that in the case of a nonresident decedent who
also have to consider whether the property is conjugal or at the time of his death was not a citizen of the
community because in that case, you can split the Philippines, only that part of the entire gross estate which
donation. Otherwise, if you do not split, it will be treated is situated in the Philippines shall be included in his
as one donation and it will fall at the highest bracket. taxable estate.

These are the effects brought about by the various taxes xxx
imposed on transfer of property. You can also notice in
the illustration, that donor’s tax is really lower that estate
Take note that the value that you put in is the value of
tax.
the property at the time of death.
The estate tax is to be filed and paid within six months
When the decedent is a citizen, whether resident or non-
from death. The donor’s tax is to be filed and paid within
resident or a resident alien, the composition of the gross
30 days from making a donation.
estate will be all properties, real, personal, tangible or
intangible, wherever situated. That would be the
Donation is computed cumulatively during the year.
composition of the gross estate. When you talk about
Otherwise, if each donation is treated independently,
non-resident aliens, all properties situated only in the
and you can make a donation everyday for 100,000, that
Philippines are included in the gross estate.
will be exempted from tax. But since it is done
cumulatively, all donations made within the year will be
The properties that will compose the gross estate are
added together and will be the basis in determining the
provided in Sections 84, 85, and 104. These are the
tax rates. This is computed in the same manner as
sources of the properties that you will include as part of
computing the quarterly tax returns.
the gross estates.
Estate Tax
After determining the gross estate, you have to subtract
the deductions. These are the charges against the gross
Title III Chapter 1 deals with estate tax, from Section 84 to
estate. You can find these in Section 86.
Section 97.
Taxable Estate = Gross Estate (Sections 84,85, 104) –
SEC. 84. Rates of Estate Tax. - There shall be levied,
Deductions (Section 86)
assessed, collected and paid upon the transfer of the net
estate as determined in accordance with Sections 85 and
Estate Tax = Taxable Estate x
86 of every decedent, whether resident or nonresident of
Applicable Tax Rate (Section 84)
the Philippines, a tax based on the value of such net
estate, as computed in accordance with the following
schedule: That is basically the formula.

The computation becomes more complicated when you

If the net estate is:
talk about citizen married decedents because they have
OVER BUT NOT THE TAX PLUS OF THE conjugal or community properties, depending on
OVER SHALL BE EXCESS whether they were married before or after the effectivity
OVER of the Family Code. If they were married before the
200,000 Exempt family code, their properties are generally conjugal
200,000 550,000 0 5% 200,000 properties. If they were married after the family code,
500,000 2,000,000 15,000 8% 500,000

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their properties are community properties. Community or
conjugal, you bring everything into the estate.
Q: A and B’s community or conjugal properties are worth
50,000,000. A dies. How do you compute his gross estate
since half of the properties is owned by the surviving
spouse, B?
A: In the statutory provisions regarding property relations,
you do not bring the half of the value of the property in
the gross estate of the decedent, you bring the entire
amount which is 50,000,000. Then you deduct all the
debts. Only when there is a remainder of the estate after
paying all debts that the surviving spouse can have her
half share. The other half will be the taxable estate of the
decedent.
Gross estate (dead spouse) = entire community/conjugal
property – deductions
Taxable Estate = Gross Estate –
Share of the surviving spouse
Estate Tax = Taxable estate x tax rate
If you do not subtract the share of the surviving spouse,
you will end up taxing even the surviving spouse for
estate tax. Therefore, before computing for the estate
tax, you first subtract the share of the surviving spouse.
If you do not bring in the entire property, whether
community or conjugal, the deductions might be bigger
than the gross estate. So you have to bring it all in to
settle all the obligations.
There will be a variation if the decedent has both
exclusive and conjugal or community property. In such a
case, you have to match the deductions to whether it is
chargeable to the exclusive property or to the
community or conjugal property.
Example: A and B are spouses. They are governed by the
community property regime. A dies. During the marriage,
A was able to inherit a property from his parents. Any
property acquired by inheritance or donation during the
marriage are considered exclusive properties of the one
who inherited the property. The gross estate of A will be
composed of two parts: the community property and the
exclusive property. Then you match the deductions. If the
exclusive property has debts or liabilities, you deduct that
from the exclusive property and not from the community
property. After all deductions have been subtracted, you
consolidate what remains of the two sets of property.
That will comprise the total taxable estate of the
decedent.
Composition of Gross Estate (Section 85)
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
SEC. 85. Gross Estate. - the value of the gross estate of the
decedent shall be determined by including the value at
the time of his death of all property, real or personal,
tangible or intangible, wherever situated: Provided,
however, that in the case of a nonresident decedent who
at the time of his death was not a citizen of the
Philippines, only that part of the entire gross estate which
is situated in the Philippines shall be included in his
taxable estate.
The provisions on estate tax were lifted from US estate tax
provisions. That is why when you read the provisions, you
will notice that the language is different from the
language in income tax. So you might find it a little
difficult to understand. One example is what we call the
Date of Death Valuation.
Date of Death Valuation is the valuation you use in
valuing the gross estate. It is also at the same time the
valuation you use for purposes of the deductions. This
Date of Death Valuation was patterned after the US
Supreme Court in one decided case. When we trace the
roots of our estate tax provisions, nothing goes back to
Philippine sources. All are from the US Tax Laws.
Dizon vs. CTA
April 30, 2008
FACTS: The decedent left debts worth 50,000,000 at the
time of death (Dean supplied the value of the debt for
discussion purposes). When the heirs tried to settle, they
were able to negotiate and pay only 30,000,000.
ISSUE: For purposes of deductions, what value shall be
used, the 50,000,000 which is the value of the debts at the
time of the death of the decedent, or the 30,000,000,
which is the amount actually paid by the heirs?
RULING: There is no problem in using the lower amount.
But the heirs can legally use the higher amount as
deduction because it was the date of death valuation of
the debt.
Among the properties that should be included in the
gross estate is the decedent’s interest.
(A) Decedent's Interest. - To the extent of the interest
therein of the decedent at the time of his death;
This pertains to interest in all properties of the decedent at
the time of death.
Example: A is a partner in a partnership. His share in the
partnership will be added to the estate.
The scope is so broad to include all properties which
have accrued at the time of death.
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(B) Transfer in Contemplation of Death. - To the extent of
any interest therein of which the decedent has at any
time made a transfer, by trust or otherwise, in
contemplation of or intended to take effect in possession
or enjoyment at or after death, or of which he has at any
time made a transfer, by trust or otherwise, under which
he has retained for his life or for any period which does
not in fact end before his death (1) the possession or
enjoyment of, or the right to the income from the
property, or (2) the right, either alone or in conjunction
with any person, to designate the person who shall
possess or enjoy the property or the income therefrom;
except in case of a bonafide sale for an adequate and
full consideration in money or money's worth.
These are transmissions done because of a perceived
impending death. Any transfers made will be part of the
estate but if it is a bonafide sale, that is excluded already.
These transfers took effect before death but conditions
were set by the transferor before his death.
This provision contemplates of three kinds of transfers:
1) Transfer in contemplation of death - Even if he
made the transfer, but the transfer was made in
contemplation of death, that will be added up
to the gross estate.
2) Transfer conditioned on survivorship - He made a
transfer but there is a condition that while the
transferor is alive, he will be the one to enjoy the
property and in the event that the transferee
predeceases the transferor, the property will be
part of the estate of the latter.
3) Transfer is with retention or reservation of rights
As a consequence of the death of the decedent, the
properties subject of the transfers aforementioned will still
be considered part of the gross estate.
An exception to this is when you make a transfer and you
have already paid Capital Gains Tax, that will no longer
be part of the gross estate. What is being avoided here is
for a transfer to avoid taxation. So if the transfer is already
taxed, then that transfer will no longer be included.
In some editions of the NIRC, there is a presumption that
any transfers made within three years prior to the death
of the decedent are transfers done in contemplation of
death. But that was already removed.
(C) Revocable Transfer. - (1) To the extent of any interest
therein, of which the decedent has at any time made a
transfer (except in case of a bona fide sale for an
adequate and full consideration in money or money's
worth) by trust or otherwise, where the enjoyment thereof
was subject at the date of his death to any change
through the exercise of a power (in whatever capacity
exerciseable) by the decedent alone or by the decedent
in conjunction with any other person (without regard to
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
when or from what source the decedent acquired such
power), t o alter, amend, revoke, or terminate, or where
any such power is relinquished in contemplation of the
decedent's death.
(2) For the purpose of this Subsection, the power to alter,
amend or revoke shall be considered to exist on the date
of the decedent's death even though the exercise of the
power is subject to a precedent giving of notice or even
though the alteration, amendment or revocation takes
effect only on the expiration of a stated period after the
exercise of the power, whether or not on or before the
date of the decedent's death notice has been given or
the power has been exercised.
In such cases, proper adjustment shall be made
representing the interests which would have been
excluded from the power if the decedent had lived, and
for such purpose if the notice has not been given or the
power has not been exercised on or before the date of
his
death, such notice shall be considered to have been
given, or the power exercised, on the date of his death.
This is similar to transfers with retention of rights. These
transfers are made during the lifetime of the decedent
but retained the right to revoke such transfer while he is
still alive. Being a revocable transfer, in the event of the
death of the transferor, that property will be part of the
estate of the latter.
(D) Property Passing Under General Power of
Appointment. - To the extent of any property passing
under a general power of appointment exercised by the
decedent: (1) by will, or (2) by deed executed in
contemplation of, or intended to take effect in possession
or enjoyment at, or after his death, or (3) by deed under
which he has retained for his life or any period not
ascertainable without reference to his death or for any
period which does not in fact end before his death (a) the
possession or enjoyment of, or the right to the income
from, the property, or (b) the right, either alone or in
conjunction with any person, to designate the persons
who shall possess or enjoy the property or the income
therefrom; except in case of a bona fide sale for an
adequate and full consideration in money or money's
worth.
The appointment will be done by deed or by will. The
power may either be general or special. Only properties
passed under a General Power of Appointment are
considered included in the gross estate. If the property is
passed under a special power of appointment, such
property will be excluded from the gross estate.
What happens here is that, either by deed or by will, a
property is passed on to a certain person. If the
designation of the appointment is general, that property
will be included in the estate of the person holding the
appointment. But if his appointment is special, in the
event of his death, that will be excluded because that is
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not intended to be his. That property is for another
person. But in the case of general power of appointment,
that property pass on to him as the beneficiary of the
estate. So in the event of his death, since he is one of
those who will benefit from the property, that will be
added to his gross estate.
(E) Proceeds of Life Insurance. - To the extent of the
amount receivable by the estate of the deceased, his
executor, or administrator, as insurance under policies
taken out by the decedent upon his own life, irrespective
of whether or not the insured retained the power of
revocation, or to the extent of the amount receivable by
any beneficiary designated in the policy of insurance,
except when it is expressly stipulated that the designation
of the beneficiary is irrevocable.
Take note that it applies only to proceeds of life
insurance. It pertains to life insurance policies taken out
by the decedent upon his own life.
If a person dies on a plane crash or shipwreck and the
airline or the shipping company indemnifies the estate or
the family of the decedent because they are covered by
an insurance policy, the proceeds are not included in the
gross estate of the deceased because while it is a life
insurance, it is not taken out by the decedent for his own
life.
If the life insurance taken out by the decedent indicates
or provides for an irrevocable beneficiary, meaning he
named in the policy an irrevocable beneficiary to which
the proceeds will eventually go, then the proceeds are
excluded. This is because of the designation of an
irrevocable beneficiary. But in the absence of any
naming of a beneficiary, then it will form part of the
estate. If the policy provides the 50% of the proceeds will
go the family and 50% will go to an irrevocable
beneficiary then the 50% will be part of the estate. The
other portion given to the irrevocable beneficiary will be
excluded.
(F) Prior Interests. - Except as otherwise specifically
provided therein, Subsections (B), (C) and (E) of this
Section shall apply to the transfers, trusts, estates,
interests, rights, powers and relinquishment of powers, as
severally enumerated and described therein, whether
made, created, arising, existing, exercised or
relinquished before or after the effectivity of this Code.
This pertains to interest of the decedent at the time of his
death.
(G) Transfers of Insufficient Consideration. - If any one of
the transfers, trusts, interests, rights or powers enumerated
and described in Subsections (B), (C) and (D) of this
Section is made, created, exercised or relinquished for a
consideration in money or money's worth, but is not a
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
bona fide sale for an adequate and full consideration in
money or money's worth, there shall be included in the
gross estate only the excess of the fair market value, at
the time of death, of the property otherwise to be
included on account of such transaction, over the value
of the consideration received therefor by the decedent.
These are transfers made during the lifetime of the
decedent. However, the consideration for the transfer
was insufficient.
Example: A sold a property valued at 1,000,000, but he
sold for 50.00 only. That is a transfer for insufficient
consideration.
In the event of death, that property will still be part of the
estate of the transferor, but less the consideration that
was actually paid.
The exception to this is when there is a bonafide sale. So
even if there was insufficient consideration, when it was
taxed properly using the fair market value, then that will
exclude the property from the estate.
(H) Capital of the Surviving Spouse. - The capital of the
surviving spouse of a decedent shall not, for the purpose
of this Chapter, be deemed a part of his or her gross
estate.
This is excluded from the gross estate,
Added to Section 85, you also have Section 104 which
will guide you in determining the extent of the gross
estate of the decedent.
SEC. 104. Definitions. - For purposes of this Title, the
terms "gross estate"and "gifts" include real and personal
property, whether tangible or intangible, or mixed,
wherever situated: Provided, however, That where the
decedent or donor was a nonresident alien at the time of
his death or donation, as the case may be, his real and
personal property so transferred but which are situated
outside the Philippines shall not be included as part of
his "gross estate" or "gross gift": Provided, further, That
franchise which must be exercised in the Philippines;
shares, obligations or bonds issued by any corporation or
sociedad anonima organized or constituted in the
Philippines in accordance with its laws; shares,
obligations or bonds by any foreign corporation eighty-
five percent (85%) of the business of which is located in
the Philippines; shares, obligations or bonds issued by any
foreign corporation if such shares, obligations or bonds
have acquired a business situs in the Philippines; shares or
rights in any partnership, business or industry established
in the Philippines, shall be considered as situated in the
Philippines: Provided, still further, that no tax shall be
collected under this Title in respect of intangible personal
property: (a) if the decedent at the time of his death or
the donor at the time of the donation was a citizen and
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resident of a foreign country which at the time of his
death or donation did not impose a transfer tax of any
character, in respect of intangible personal property of
citizens of the Philippines not residing in that foreign
country, or (b) if the laws of the foreign country of which
the decedent or donor was a citizen and resident at the
time of his death or donation allows a similar exemption
from transfer or death taxes of every character or
description in respect of intangible personal property
owned by citizens of the Philippines not residing in that
foreign country.
The term "deficiency" means: (a) the amount by which
tax imposed by this Chapter exceeds the amount shown
as the tax by the donor upon his return; but the amount so
shown on the return shall first be increased by the amount
previously assessed (or collected without assessment) as
a deficiency, and decreased by the amounts previously
abated, refunded or otherwise repaid in respect of such
tax, or (b) if no amount is shown as the tax by the donor,
then the amount by which the tax exceeds the amounts
previously assessed, (or collected without assessment) as
a deficiency, but such amounts previously assessed, or
collected without assessment, shall first be decreased by
the amount previously abated, refunded or otherwise
repaid in respect of such tax.
Section 104 is a common provision to both estate and
donor’s tax. This enumerates what are the other
properties to be included.
So if you are a non-resident alien, properties outside are
excluded because you are taxable only for properties
within the Philippines.
Included in the gross estate of a non-resident alien are
the following:
1. Franchise which must be exercised in the
Philippines;
2. Shares, obligations or bonds issued by any
corporation or sociedad anonima organized or
constituted in the Philippines in accordance with
its laws;
3. Shares, obligations or bonds by any foreign
corporation eighty-five percent (85%) of the
business of which is located in the Philippines;
4. Shares, obligations or bonds issued by any foreign
corporation if such shares, obligations or bonds
have acquired a business situs in the Philippines;
5. Shares or rights in any partnership, business or
industry established in the Philippines
These are intangible properties situated in the Philippines
and are deemed part of the estate.
Deductions
Citizens and Non-resident
Resident Aliens Aliens
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Gross Estate All properties All properties
wherever within the
situated Philippines
Less: Deductions Section 86 (A) Section 86 (B)
So after determining the properties composing the gross
estate, you have to determine the deductions
chargeable against the estate. You have Section 86 (A)
for Citizens and Resident Aliens and Section 86 (B) for
Non-resident Aliens.
Take note that whether you are a resident or non-resident
citizen, the composition of the taxable estate would
consist of all properties wherever situated. Unlike in
income taxation, when you have a non-resident citizen,
the income that will be taxable is that which was earned
in the Philippines. So for purposes of the properties
composing the state of citizens, all properties wherever
situated must be included.
SEC. 86. Computation of Net Estate. - For the purpose of
the tax imposed in this Chapter, the value of the net
estate shall be determined:
(A) Deductions Allowed to the Estate of Citizen or a
Resident. - In the case of a citizen or resident of the
Philippines, by deducting from the value of the gross
estate -.
(1) Expenses, Losses, Indebtedness, and taxes. - Such
amounts: (a) For actual funeral expenses or in an amount
equal to five percent (5%) of the gross estate, whichever
is lower, but in no case to exceed Two hundred thousand
pesos (P200,000); (b) For judicial expenses of the
testamentary or intestate proceedings; (c) For claims
against the estate: Provided, That at the time the
indebtedness was incurred the debt instrument was duly
notarized and, if the loan was contracted within three (3)
years before the death of the decedent, the administrator
or executor shall submit a statement showing the
disposition of the proceeds of the loan; (d) For claims of
the deceased against insolvent persons where the value
of decedent's interest therein is included in the value of
the gross estate; and (e) For unpaid mortgages upon, or
any indebtedness in respect to, property where the value
of decedent's interest therein, undiminished by such
mortgage or indebtedness, is included in the value of the
gross estate, but not including any income tax upon
income received after the death of the decedent, or
property taxes not accrued before his death, or any
estate tax.
The deduction herein allowed in the case of claims
against the estate, unpaid mortgages or any
indebtedness shall, when founded upon a promise or
agreement, be limited to the extent that they were
contracted bona fide and for an adequate and full
consideration in money or money's worth.
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Under this item, the following can be deducted from the Expenses incurred after the interment, just like the
gross estate: expenses incurred for the ceremonies and services at the
9th day and 40th day from the interment, are not
(a) For actual funeral expenses or in an amount equal to deductible. Once the dead is buried, the expenses that
five percent (5%) of the gross estate, whichever is lower, will be incurred cannot anymore be charged to funeral
but in no case to exceed Two hundred thousand pesos expenses.
(P200,000);
Any portion of the funeral and burial expenses borne and
The allowed funeral expenses is an amount based either defrayed by relatives (abuloy), legally you cannot
on 5% of the gross estate or the actual funeral expenses, charge that. But in reality, you can opt not to declare
whichever is lower. But the funeral expense must be that the expense was shouldered by someone else.
limited only to 200,000.
As to allowable deductible amount in case of funeral
NOTE: Read Revenue Regulation 2-2003. This is the expenses, you have to compare the actual amount
regulation formulated by the BIR for Estate and Donor’s spent vis-à-vis 5% of the decedent’s gross estate, which
tax. shall not exceed P200,000.00. The allowable deductible
amount is whichever is lower.
Under the regulation, the funeral expenses are not
confined to its ordinary or usual meaning. Usually, when Example: Gross Estate = 5,000,000.00
we talk about funerals, you consider the cost of the
coffin, the cost of the memorial lot, the cost of interment, ACTUAL 5% OF THE P200,000.00 ALLOWABLE
the cost incurred during the wake, the cost of services like AMOUNT GROSS MAXIMUM AMOUNT
prayers - these are part of funeral expenses. However, the SPENT ESTATE
regulation expanded this to include: 300,000.00 250,000.00 200,000.00 200,000.00

(a) The mourning apparel of the surviving spouse So in this example, even if you actually incurred
and unmarried minor children of the deceased 300,000.00 as funeral expense, you cannot claim all of
bought and used on the occasion of the burial; - that as deduction. Also, even if 5% of the decedent’s
In our tradition, during the wake the family would gross estate is 250,000.00, you also cannot claim all of
dress in black. So when you bought a black shirt that, because, your allowable deductible amount in
for that purpose, that is chargeable. Or if during case of funeral expenses is only 200,000.00. So in this
the burial, you bought a white dress, the cost of example, the allowable amount is only 200,000.00.
the dress is chargeable also.
(b) Expenses for the deceased’s wake, including Example: Gross Estate = 3,600,000.00
food and drinks;
(c) Publication charges for death notices; - This talks ACTUAL 5% OF THE P200,000.00 ALLOWABLE
about obituary notices. AMOUNT GROSS MAXIMUM AMOUNT
(d) Telecommunication expenses incurred in SPENT ESTATE
informing relatives of the deceased; - Load used 100,000.00 180,000.00 200,000.00 100,000.00
to text messages to loved ones about the
unfortunate event is chargeable. In this example, the allowable deduction is 100,000.00
(e) Cost of burial plot, tombstones, monument or because that is the lower amount.
mausoleum but not their upkeep. In case the
deceased owns a family estate or several burial Example: Gross Estate = 3,800,000.00
lots, only the value corresponding to the plot
where he is buried is deductible; - The cost for the ACTUAL 5% OF THE P200,000.00 ALLOWABLE
maintenance of the mausoleum is not included AMOUNT GROSS MAXIMUM AMOUNT
in the deduction but the cost of constructing it is SPENT ESTATE
chargeable. 150,000.00 190,000.00 200,000.00 150,000.00
(f) Interment and/or cremation fees and charges;
and This is the same with the previous example. You choose
(g) All other expenses incurred for the performance whichever is the lower amount, so the deductible
of the rites and ceremonies incident to interment. amount in this situation is 150,000.00
– In other culture, there are many ceremonies
and rites before the interment. In fact in Chinese You have to determine whichever is lower between the
families, they hire professional mourners. Their actual and the 5%, but the amount must not be more
talent fees can be charged to the funeral than 200,000.00.
expenses.

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(b) For judicial expenses of the testamentary or intestate
proceedings;
Estates can be settled without going to court. The scope
and coverage of this section includes even if the estate
was settled extra-judicially. If the estate was settled extra-
judicially, meaning you engaged an accountant and a
lawyer for the preparation of the documents, the cost of
that preparation is chargeable to the estate. That is a
deductible item against the estate as part of judicial
expenses.
If you go to court, then the cost of going to court for the
judicial settlement will be chargeable to the estate.
Expenses allowed as deductions under this item are the
following:
1. Those incurred for the inventory of the assets
comprising the gross estate
2. Administration expenses
3. Payment of debts of the estate
4. Distribution of the estate to the heirs
These deductible items are expenses incurred during the
settlement of the estate but not beyond the last day
prescribed by law for the extension of the filing of the
estate tax. These expenses shall include fees of the
executor or administrator of the estate, attorney’s fees,
court fees, accountant’s fees, appraiser’s fees, clerks
hired, the cost of preserving and distributing the estate,
the cost of storing or maintain property of the estate,
brokerage fees. These would form part of the judicial
expenses.
(c) For claims against the estate: Provided, That at the
time the indebtedness was incurred the debt instrument
was duly notarized and, if the loan was contracted within
three (3) years before the death of the decedent, the
administrator or executor shall submit a statement
showing the disposition of the proceeds of the loan;
These are what we call ‘payables’. These are debts
incurred by the decedent during his lifetime which he
failed to pay at the time of his death. In the settlement of
the estate, you have to pay all the creditors. Payments
for claims against the estate are chargeable against
gross estate.
Q: How much would you charge as a deduction?
A: Remember the rule of the date of death valuation.
Example: Remember the case wherein the heirs were
able to settle and pay at a reduced amount. They could
charge the entirety of the indebtedness as deductible,
not necessarily the actual amount paid. You are allowed
to claim the actual amount paid, but it does not
preclude you from claiming the real amount of the debt
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
for purposes of the deduction for claims against the
estate.
(d) For claims of the deceased against insolvent persons
where the value of decedent's interest therein is included
in the value of the gross estate;
These are receivables of the decedent when he was still
alive that he failed to collect. . Unfortunately, at the time
of his death, the debtor was already insolvent.
You can add that as part of the gross estate since it is still
considered as receivable, and claim it as a deduction
afterwards. There will be off-setting. This is like bad debts.
(e) For unpaid mortgages upon, or any indebtedness in
respect to, property where the value of decedent's
interest therein, undiminished by such mortgage or
indebtedness, is included in the value of the gross estate,
but not including any income tax upon income received
after the death of the decedent, or property taxes not
accrued before his death, or any estate tax.
This includes unpaid mortgages or any indebtedness in
respect to property. You also have property taxes that
have not been paid at the time of death, you can
charge that against the estate.
There shall also be deducted losses incurred during the
settlement of the estate arising from fires, storms,
shipwreck, or other casualties, or from robbery, theft or
embezzlement, when such losses are not compensated
for by insurance or otherwise, and if at the time of the
filing of the return such losses have not been claimed as
a deduction for the income tax purposes in an income
tax return, and provided that such losses were incurred
not later than the last day for the payment of the estate
tax as prescribed in Subsection (A) of Section 91.
This paragraph talks about casualty losses.
Example: During the settlement of the estate, there is one
property that was lost by fire, that property will be part of
the estate, then claim it as deduction as casualty losses.
So you first include it in the gross estate, then offset it by
claiming it as a deduction.
(2) Property Previously Taxed. - An amount equal to the
value specified below of any property forming a part of
the gross estate situated in the Philippines of any person
who died within five (5) years prior to the death of the
decedent, or transferred to the decedent by gift within
five (5) years prior to his death, where such property can
be identified as having been received by the decedent
from the donor by gift, or from such prior decedent by
gift, bequest, devise or inheritance, or which can be
identified as having been acquired in exchange for
property so received: One hundred percent (100%) of the
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value, if the prior decedent died within one (1) year prior
to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to
his death;Eighty percent (80%) of the value, if the prior
decedent died more than one (1) year but not more than
two (2) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same
period prior to his death;Sixty percent (60%) of the value,
if the prior decedent died more than two (2) years but not
more than three (3) years prior to the death of the
decedent, or if the property was transferred to him by gift
within the same period prior to his death;Forty percent
(40%) of the value, if the prior decedent died more than
three (3) years but not more than four (4) years prior to
the death of the decedent, or if the property was
transferred to him by gift within the same period prior to
his death;Twenty percent (20%) of the value, if the prior
decedent died more than four (4) years but not more
than five (5) years prior to the death of the decedent, or if
the property was transferred to him by gift within the same
period prior to his death;These deductions shall be
allowed only where a donor's tax or estate tax imposed
under this Title was finally determined and paid by or on
behalf of such donor, or the estate of such prior
decedent, as the case may be, and only in the amount
finally determined as the value of such property in
determining the value of the gift, or the gross estate of
such prior decedent, and only to the extent that the value
of such property is included in the decedent's gross
estate, and only if in determining the value of the estate
of the prior decedent, no deduction was allowable under
paragraph (2) in respect of the property or properties
given in exchange therefor.
Where a deduction was allowed of any mortgage or
other lien in determining the donor's tax, or the estate tax
of the prior decedent, which was paid in whole or in part
prior to the decedent's death, then the deduction
allowable under said Subsection shall be reduced by the
amount so paid.
Such deduction allowable shall be reduced by an
amount which bears the same ratio to the amounts
allowed as deductions under paragraphs (1) and (3) of
this Subsection as the amount otherwise deductible under
said paragraph (2) bears to the value of the decedent's
estate.
Where the property referred to consists of two or more
items, the aggregate value of such items shall be used for
the purpose of computing the deduction.
This is also called as the Vanishing Deduction.
This means that a property was previously taxed, either by
estate or by donor’s tax.
Example: So there is a transferor who transferred property
to the transferee. The transmission is a taxable
transmission, either subject to an estate tax or a donor’s
tax. So the property transferred to the transferee is what
we call a property previously taxed. Then, the transferee
died. That is the situation contemplated in this paragraph.
The contemplation period for purposes of the vanishing
deduction for a property previously taxed, is any time
within 5 years from the time he acquired the property.
Therefore, if the transferee died after 5 years from the
time he acquired the property, there will be no more
deduction.
This property will be part of the gross estate. However, the
estate is allowed to claim the deduction since it is a
property previously taxed. That deduction will be allowed
for as long as he was able to hold on to it for a period of 5
years or less, prior to his death. The amount of deduction
will vanish, from 100% - 0%. After five years, there will be
no more deduction. It will still be part of the estate, but
there will be no more deduction
The allowable deduction for property previously taxed is
as follows:
100% of the value of the If he dies not exceeding
property is deductible one year
80% of the value of the More than one year, but
property less than two years
60% of the value of the More than two years, but
property less than three years
40% of the value of the More than three years, but
property less than four years
20% of the value of the More than four years, but
property less than five years
The reason why the estate is allowed to claim a vanishing
deduction as discussed above is that there is that legal
fiction that for a person to be able to have full enjoyment
of a property, he must be able to hold on to it for a
period of five years. So if you were able to hold on to the
property for less than five years, there is a presumption
that your were not able to enjoy the property.
(3) Transfers for Public Use. - The amount of all the
bequests, legacies, devises or transfers to or for the use of
the Government of the Republic of the Philippines, or any
political subdivision thereof, for exclusively public
purposes.
This is self explanatory. Before you deduct, the property
given for public use must be included in the gross estate.
Then you claim that as a deduction under this item.
(4) The Family Home. - An amount equivalent to the
current fair market value of the decedent's family home:
Provided, however, That if the said current fair market
value exceeds One million pesos (P1,000,000), the excess
shall be subject to estate tax.

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As a sine qua non condition for the exemption or
deduction, said family home must have been the
decedent's family home as certified by the barangay
captain of the locality.
The family residence is part of the gross estate, but
claimed as deduction. This is a new feature introduced in
1998 because the experience then is that the only
property left of the decedent is the family residence.
Most of the time therefore, family residences were sold to
pay for the tax. To avoid that unfortunate event, the
family home was allowed as deductible.
To married persons, it is easy to determine the family
residence. But for unmarried individuals, there is a little
difficulty on that. Nonetheless, they are still allowed to
claim this deduction.
The allowable deduction is only up to 1,000,000. So even
if the family home is worth 5,000,000, the estate can only
claim 1,000,000 as deduction. The excess amount will be
subject to the estate tax.
Requirement:
1) Certification from the Barangay Captain stating
that the residence is the family home for
purposes of claiming the deduction.
5) Standard Deduction. - An amount equivalent to One
million pesos (P1,000,000).
Do not confuse this to the 40% OSD discussed in Income
Tax. They are not related. The Standard Deduction
referred to here is a stand-alone deduction in addition to
the previous itemized deductions. In other words, even if
you do not have other expenses, you have an automatic
1,000,000.00 deduction. No questions asked for this, No
need to support and substantiate the amount. This is
given by law outrightly.
There are occasions where you would end up with a
negative taxable estate. This means that you have more
deductions than gross estate, and most of the time it is
because of this standard deduction of 1,000,000.00.
(6) Medical Expenses. - Medical Expenses incurred by
the decedent within one (1) year prior to his death which
shall be duly substantiated with receipts:Provided, That in
no case shall the deductible medical expenses exceed
Five Hundred Thousand Pesos (P500,000).
Medical expenses used to be integrated and
consolidated with funeral expenses. In 1997, it was made
a separate item.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
You are given up to 500,000 deduction for medical
expenses, to cover one year prior to his death.
(7) Amount Received by Heirs Under Republic Act No.
4917. - Any amount received by the heirs from the
decedent - employee as a consequence of the death of
the decedent-employee in accordance with Republic
Act No. 4917:Provided, That such amount is included in
the gross estate of the decedent.
RA 4917 is your Labor Code. This therefore talks about
separation benefits and other payments that the heirs
receive from the employer of the deceased employee.
The amount is added to the gross estate and offset by
claiming it as a deduction.
So these are the deductions for the citizens and resident
alien decedents. In the case of non-resident decedents,
you go to the next section.
(B) Deductions Allowed to Nonresident Estates. - In the
case of a nonresident not a citizen of the Philippines, by
deducting from the value of that part of his gross estate
which at the time of his death is situated in the Philippines:
(1) Expenses, Losses, Indebtedness and Taxes. - That
proportion of the deductions specified in paragraph (1) of
Subsection (A) of this Section which the value of such part
bears to the value of his entire gross estate wherever
situated
Under this item, only the proportion can be deducted. To
get the proportion, you have the following formula:
Expenses, Losses, Philippine Estate
Indebtedness, x Total Estate
Taxes
Example: If a non-resident alien incurred 100,000.00 as
funeral expenses, his estate cannot claim the entire
amount as deduction if the Philippine estate is only 30% of
the total estate within and outside the Philippines. In such
a case, only 30% of the 100,000.00 can be claimed as
deduction.
(2) Property Previously Taxed. - An amount equal to the
value specified below of any property forming part of the
gross estate situated in the Philippines of any person who
died within five (5) years prior to the death of the
decedent, or transferred to the decedent by gift within
five (5) years prior to his death, where such property can
be identified as having been received by the decedent
from the donor by gift, or from such prior decedent by
gift, bequest, devise or inheritance, or which can be
identified as having been acquired in exchange for
property so received:One hundred percent (100%) of the
value if the prior decedent died within one (1) year prior
to the death of the decedent, or if the property was
transferred to him by gift, within the same period prior to
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his death;Eighty percent (80%) of the value, if the prior
decedent died more than one (1) year but not more than
two (2) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same
period prior to his death;Sixty percent (60%) of the value,
if the prior decedent died more than two (2) years but not
more than three (3) years prior to the death of the
decedent, or if the property was transferred to him by gift
within the same period prior to his death;Forty percent
(40%) of the value, if the prior decedent died more than
three (3) years but not more than four (4) years prior to
the death of the decedent, or if the property was
transferred to him by gift within the same period prior to
his death; andTwenty percent (20%) of the value, if the
prior decedent died more than four (4) years but not
more than five (5) years prior to the death of the
decedent, or if the property was transferred to him by gift
within the same period prior to his death.These
deductions shall be allowed only where a donor's tax, or
estate tax imposed under this Title is finally determined
and paid by or on behalf of such donor, or the estate of
such prior decedent, as the case may be, and only in the
amount finally determined as the value of such property
in determining the value of the gift, or the gross estate of
such prior decedent, and only to the extent that the value
of such property is included in that part of the decedent's
gross estate which at the time of his death is situated in
the Philippines; and only if, in determining the value of the
net estate of the prior decedent, no deduction is
allowable under paragraph (2) of Subsection (B) of this
Section, in respect of the property or properties given in
exchange therefore.
Where a deduction was allowed of any mortgage or
other lien in determining the donor's tax, or the estate tax
of the prior decedent, which was paid in whole or in part
prior to the decedent's death, then the deduction
allowable under said paragraph shall be reduced by the
amount so paid.
Such deduction allowable shall be reduced by an
amount which bears the same ratio to the amounts
allowed as deductions under paragraphs (1) and (3) of
this Subsection as the amount otherwise deductible under
paragraph (2) bears to the value of that part of the
decedent's gross estate which at the time of his death is
situated in the Philippines.
Where the property referred to consists of two (2) or more
items, the aggregate value of such items shall be used for
the purpose of computing the deduction.
This has the same application as in the previous section.
However, for purposes of claiming a deduction for
property previously taxed, the property must be located
in the Philippines, both for aliens and citizens. So if a
citizen was able to receive a property located in the USA
through donation, he cannot claim vanishing deduction
for that property even if he died within 5 years from the
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
time the property was donated to him. While the property
is part of his estate, the estate could not claim that as a
deduction.
So the location of the properties is the main consideration
for purposes of the deduction under this item.
(3) Transfers for Public Use. - The amount of all bequests,
legacies, devises or transfers to or for the use of the
Government of the Republic of the Philippines or any
political subdivision thereof, for exclusively public
purposes.
(C) Share in the Conjugal Property. - the net share of the
surviving spouse in the conjugal partnership property as
diminished by the obligations properly chargeable to
such property shall, for the purpose of this Section, be
deducted from the net estate of the decedent.
You have to deduct that as the share of the Surviving
spouse from the conjugal estate, to determine the share
of the decedent.
(D) Miscellaneous Provisions. - No deduction shall be
allowed in the case of a nonresident not a citizen of the
Philippines, unless the executor, administrator, or anyone
of the heirs, as the case may be, includes in the return
required to be filed under Section 90 the value at the time
of his death of that part of the gross estate of the
nonresident not situated in the Philippines.
(E) Tax Credit for Estate Taxes paid to a Foreign Country. -
(1) In General. - The tax imposed by this Title shall be
credited with the amounts of any estate tax imposed by
the authority of a foreign country.
(2) Limitations on Credit. - The amount of the credit taken
under this Section shall be subject to each of the
following limitations: (a) The amount of the credit in
respect to the tax paid to any country shall not exceed
the same proportion of the tax against which such credit
is taken, which the decedent's net estate situated within
such country taxable under this Title bears to his entire net
estate; and (b) The total amount of the credit shall not
exceed the same proportion of the tax against which
such credit is taken, which the decedent's net estate
situated outside the Philippines taxable under this Title
bears to his entire net estate.
Like in income tax, the domestic corporations and the
resident citizens are taxable on all sources. So the foreign
income tax is claimed as tax credits.
In case of citizens and resident aliens, the properties that
would compose the estate are all properties wherever
situated.
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So if a citizen or a resident alien has properties abroad,
such properties will be included in his gross estate, but
such property will be taxed where it is located. So a
foreign estate tax is paid.
In the Philippines, the same property will be declared
again for Philippine estate tax purposes. So the tax that
will be paid in the Philippines will be reduced by the
foreign estate tax paid. In other words, the foreign estate
tax will be claimed as a tax credit.
The application of the tax credit follows the same formula
as in the income tax. Therefore, there will still be a limit to
the amount to be credited against the Philippine estate
tax.
SEC. 87. Exemption of Certain Acquisitions and
Transmissions. - The following shall not be taxed: (A) The
merger of usufruct in the owner of the naked title;(B) The
transmission or delivery of the inheritance or legacy by
the fiduciary heir or legatee to the fideicommissary;(C)
The transmission from the first heir, legatee or donee in
favor of another beneficiary, in accordance with the
desire of the predecessor; and(D) All bequests, devises,
legacies or transfers to social welfare, cultural and
charitable institutions, no part of the net income of which
insures to the benefit of any individual: Provided,
however, That not more than thirty percent (30%) of the
said bequests, devises, legacies or transfers shall be used
by such institutions for administration purposes.
Remember that what we tax for estate tax purposes is the
act of transmission – the gratuitous transfer upon death. In
the following acquisitions mentioned in Section 87, no tax
is imposed:
1) The merger of usufruct in the owner of the naked
title; - In this case, you have the beneficial owner
and the owner of the naked title. This means that
possession and enjoyment of the property is
vested on somebody else. If the usufructuary
dies, the usufruct will go back to the owner of the
naked title. There is now a merger. That is a
transfer but not a taxable transfer.
2) The transmission or delivery of the inheritance or
legacy by the fiduciary heir or legatee to the
fideicommissary; - This is a subsequent
transmission already. There is already a decedent
and the estate tax is already paid. But among
the properties left by the decedent, there is a
certain beneficiary for a certain property. If the
property is finally transferred to its ultimate
beneficiary, that transmission is not taxable
transmission.
3) The transmission from the first heir, legatee or
donee in favor of another beneficiary, in
accordance with the desire of the predecessor; -
Again, this is not a taxable transmission for
purposes of the estate tax.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
4) All bequests, devises, legacies or transfers to
social welfare, cultural and charitable institutions,
no part of the net income of which insures to the
benefit of any individual – This transmission is also
tax-free provided that the transfer is in favor of
the mentioned institutions.
The reason that these are exempted is because the
transfers are not taxable transmission
NB: Except the share of the surviving spouse and the
family home, all these deductions will be charged to the
common estate, whether conjugal or community. Once it
has been deducted, you already have the net
conjugal/community estate. Then you now deduct the ½
share of the surviving spouse and the family home.
SEC. 88. Determination of the Value of the Estate. -
(A) Usufruct. - To determine the value of the right of
usufruct, use or habitation, as well as that of annuity, there
shall be taken into account the probable life of the
beneficiary in accordance with the latest Basic Standard
Mortality Table, to be approved by the Secretary of
Finance, upon recommendation of the Insurance
Commissioner.
(B) Properties. - The estate shall be appraised at its fair
market value as of the time of death.
However, the appraised value of real property as of the
time of death shall be, whichever is higher of:
(1) The fair market value as determined by the
Commissioner, or
(2) The fair market value as shown in the schedule of
values fixed by the Provincial and City Assessors.
This provides for the date of death valuation.
As a rule, the value of the properties to be brought to the
estate is the fair market value at the time of death. For
real properties, the valuations will be the fair market value
as determined by the commissioner or the fair market
value determined by the assessor, whichever is higher.
If the zonal valuation of the BIR for a real property is
2,000,000, and the valuation of the assessor is 500,000,
then the higher amount is the fair market value of the
property that will be brought for purposes of valuation of
the gross estate.
SEC. 89. Notice of Death to be Filed. - In all cases of
transfers subject to tax, or where, though exempt from
tax, the gross value of the estate exceeds Twenty
thousand pesos (P20,000), the executor, administrator or
any of the legal heirs, as the case may be, within two (2)
months after the decedent's death, or within a like period
after qualifying as such executor or administrator, shall
give a written notice thereof to the Commissioner.
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This is one of the differences between the estate and the
donor’s tax. In the case of estate tax there is a
requirement to inform the BIR of the fact of death, In
donation, no notice of donation is required.
This is a simple notice of death that will be made within
two months from the death, addressed to the
commissioner, copy furnished the regional director.
Example: “This is to inform that Mr. Paul Walker died on
December 1, 2013, in Davao City. This is in compliance
with Section 89 of the NIRC.”
SEC. 90. Estate Tax Returns. -
(A) Requirements. - In all cases of transfers subject to the
tax imposed herein, or where, though exempt from tax,
the gross value of the estate exceeds Two hundred
thousand pesos (P200,000), or regardless of the gross
value of the estate, where the said estate consists of
registered or registrable property such as real property,
motor vehicle, shares of stock or other similar property for
which a clearance from the Bureau of Internal Revenue is
required as a condition precedent for the transfer of
ownership thereof in the name of the transferee, the
executor, or the administrator, or any of the legal heirs, as
the case may be, shall file a return under oath in
duplicate, setting forth: (1) The value of the gross estate of
the decedent at the time of his death, or in case of a
nonresident, not a citizen of the Philippines, of that part of
his gross estate situated in the Philippines;(2) The
deductions allowed from gross estate in determining the
estate as defined in Section 86; and(3) Such part of such
information as may at the time be ascertainable and
such supplemental data as may be necessary to
establish the correct taxes. Provided, however, That
estate tax returns showing a gross value exceeding Two
million pesos (P2,000,000) shall be supported with a
statement duly certified to by a Certified Public
Accountant containing the following: (a) Itemized assets
of the decedent with their corresponding gross value at
the time of his death, or in the case of a nonresident, not
a citizen of the Philippines, of that part of his gross estate
situated in the Philippines; (b) Itemized deductions from
gross estate allowed in Section 86; and (c) The amount of
tax due whether paid or still due and outstanding.
(B) Time for Filing. - For the purpose of determining the
estate tax provided for in Section 84 of this Code, the
estate tax return required under the preceding
Subsection (A) shall be filed within six (6) months from the
decedent's death.
A certified copy of the schedule of partition and the order
of the court approving the same shall be furnished the
Commissioner within thirty (30) after the promulgation of
such order.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(C) Extension of Time. - The Commissioner shall have
authority to grant, in meritorious cases, a reasonable
extension not exceeding thirty (30) days for filing the
return.
(D) Place of Filing. - Except in cases where the
Commissioner otherwise permits, the return required
under Subsection (A) shall be filed with an authorized
agent bank, or Revenue District Officer, Collection Officer,
or duly authorized Treasurer of the city or municipality in
which the decedent was domiciled at the time of his
death or if there be no legal residence in the Philippines,
with the Office of the Commissioner.
In the case of income tax, there is a requirement to file a
return. In estate tax, there is also an estate tax return. We
also have donor’s tax return, percentage tax return,
excise tax return, documentary tax return and VAT return.
It is in this aspect that most of the taxes in the NIRC are
what we call self-assessing, because of the requirement
that taxpayers shall file a return. You are the one
assessing how much you have to pay.
After the return is filed, and the tax has been paid, it does
not follow that what was filed was correct. That return will
still be subject to another assessment. BIR will see whether
you declared truthfully. You’re return will be subject to the
three-year period for examination and investigation to
determine whether your return is accurate or not.
If it is not accurate, then you will be notified of the
deficiency. If you disagree with that finding, then your
remedy is to protest the assessment of the deficiency
made by the BIR. If the BIR will deny your protest, then you
go to the Court of Tax Appeals. That is the process.
The BIR investigates on the basis of the tax return you
filed. BIR is given 3 years to do that. After 3 years, re-
assessment is barred. You could raise now the defense
that any assessment notice informing you of the
deficiency has already prescribed. That is a defense for
the taxpayer.
In Section 90 you have this requirement of filing an estate
tax return.
In the return, you will declare the properties composing
the estate. You may file an attachment if the blanks in
the return are insufficient.
If the estate has a gross value exceeding 2,000,000 then
the declarations of what composes the estate and the
deductions should be certified by a Certified Public
Accountant, containing the itemized assets or properties
of the decedent and the itemized deductions and the
amount of tax that is due or paid. The CPA will be the one
to compute and determine the properties composing the
estate, the deductions and the tax due for the estate tax.
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The filing of the return and payment of the tax shall be
maid 6 months after death. There can be an extension of
the time to file and pay, in meritorious cases.
Place of filing is at the residence of the decedent.
SEC. 91. Payment of Tax. –
(A) Time of Payment. - The estate tax imposed by Section
84 shall be paid at the time the return is filed by the
executor, administrator or the heirs.
(B) Extension of Time. - When the Commissioner finds that
the payment on the due date of the estate tax or of any
part thereof would impose undue hardship upon the
estate or any of the heirs, he may extend the time for
payment of such tax or any part thereof not to exceed
five (5) years, in case the estate is settled through the
courts, or two (2) years in case the estate is settled
extrajudicially.
In such case, the amount in respect of which the
extension is granted shall be paid on or before the date
of the expiration of the period of the extension, and the
running of the Statute of Limitations for assessment as
provided in Section 203 of this Code shall be suspended
for the period of any such extension.
Where the taxes are assessed by reason of negligence,
intentional disregard of rules and regulations, or fraud on
the part of the taxpayer, no extension will be granted by
the Commissioner.
If an extension is granted, the Commissioner may require
the executor, or administrator, or beneficiary, as the case
may be, to furnish a bond in such amount, not exceeding
double the amount of the tax and with such sureties as
the Commissioner deems necessary, conditioned upon
the payment of the said tax in accordance with the terms
of the extension.
(C) Liability for Payment.- The estate tax imposed by
Section 84 shall be paid by the executor or administrator
before delivery to any beneficiary of his distributive share
of the estate.
Such beneficiary shall to the extent of his distributive
share of the estate, be subsidiarily liable for the payment
of such portion of the estate tax as his distributive share
bears to the value of the total net estate.
For the purpose of this Chapter, the
term "executor" or "administrator" means the executor or
administrator of the decedent, or if there is no executor or
administrator appointed, qualified, and acting within the
Philippines, then any person in actual or constructive
possession of any property of the decedent.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
You pay the tax at the time the returns are filed.
Therefore, you are also given 6 months from the date of
death to pay the tax. Normally, when we would file a
return, the return will not be accepted if you do not
correspondingly pay the tax due declared in the return.
The payment of the tax may also be extended,
depending on how the said estate is settled, whether
judicially or extra-judicially. If extra-judicial, you will be
given two years extension to pay. If judicial settlement,
the estate is given 5 years extension to pay the tax.
The liability for the payment of the tax is not on the
decedent. The taxpayer here is the estate or the
executor/administrator or the heirs. They will be principally
liable for the payment of the tax.
If the executor/administrator failed to declare something,
he will be principally and primarily liable for the payment.
SEC. 92. Discharge of Executor or Administrator from
Personal Liability. - If the executor or administrator makes
a written application to the Commissioner for
determination of the amount of the estate tax and
discharge from personal liability therefore, the
Commissioner (as soon as possible, and in any event
within one (1) year after the making of such application,
or if the application is made before the return is filed, then
within one (1) year after the return is filed, but not after the
expiration of the period prescribed for the assessment of
the tax in Section 203 shall not notify the executor or
administrator of the amount of the tax.
The executor or administrator, upon payment of the
amount of which he is notified, shall be discharged from
personal liability for any deficiency in the tax thereafter
found to be due and shall be entitled to a receipt or
writing showing such discharge.
Since the liability of the estate tax is personal liability of
the executor/administrator, and the liability may even
extend to his own properties, he can avail of Section 92 in
order for him to be discharged of the liability.
If he was discharged from liability and there is still
deficiency, the beneficiaries will pay based on their
respective shares in the estate. Therefore, the executor/
administrator will no longer be liable.
SEC. 93. Definition of Deficiency. - As used in this Chapter,
the term "deficiency" means:
(a) The amount by which the tax imposed by this Chapter
exceeds the amount shown as the tax by the executor,
administrator or any of the heirs upon his return; but the
amounts so shown on the return shall first be increased by
the amounts previously assessed (or collected without
assessment) as a deficiency and decreased by the
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amount previously abated, refunded or otherwise repaid
in respect of such tax; or
(b) If no amount is shown as the tax by the executor,
administrator or any of the heirs upon his return, or if no
return is made by the executor, administrator, or any heir,
then the amount by which the tax exceeds the amounts
previously assessed (or collected without assessment) as
a deficiency; but such amounts previously assessed or
collected without assessment shall first be decreased by
the amounts previously abated, refunded or otherwise
repaid in respect of such tax.
Section 94-97 are administrative provision for the estate
tax which you will encounter in your Special Proceedings.
SEC. 94. Payment Before Delivery by Executor or
Administrator. - No judge shall authorize the executor or
judicial administrator to deliver a distributive share to any
party interested in the estate unless a certification from
the Commissioner that the estate tax has been paid is
shown.
That is a basic requirement. The court shall not order any
distribution if the tax is yet to be paid. What is required
here is the certification that the tax was already paid, not
the Official Receipt. This is what we call the BIR estate Tax
Clearance. The commissioner will issue an estate tax
clearance as a certification that the tax has been paid.
The Official Receipt is not acceptable since after
payment of the tax evidenced by the receipt, the BIR will
still have to reassess if you declared and paid the
accurate tax. If there is a certification that you have paid
the correct tax then the distribution of the properties will
follow.
SEC. 95. Duties of Certain Officers and Debtors. - Registers
of Deeds shall not register in the Registry of Property any
document transferring real property or real rights therein
or any chattel mortgage, by way of gifts inter
vivos or mortis causa, legacy or inheritance, unless a
certification from the Commissioner that the tax fixed in
this Title and actually due thereon had been paid is show,
and they shall immediately notify the Commissioner,
Regional Director, Revenue District Officer, or Revenue
Collection Officer or Treasurer of the city or municipality
where their offices are located, of the non payment of the
tax discovered by them.
Any lawyer, notary public, or any government officer
who, by reason of his official duties, intervenes in the
preparation or acknowledgment of documents regarding
partition or disposal of donation inter vivos or mortis
causa, legacy or inheritance, shall have the duty of
furnishing the Commissioner, Regional Director, Revenue
District Officer or Revenue Collection Officer of the place
where he may have his principal office, with copies of
such documents and any information whatsoever which
may facilitate the collection of the aforementioned tax.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Neither shall a debtor of the deceased pay his debts to
the heirs, legatee, executor or administrator of his
creditor, unless the certification of the Commissioner that
the tax fixed in this Chapter had been paid is shown; but
he may pay the executor or judicial administrator without
said certification if the credit is included in the inventory
of the estate of the deceased.
You will also find this similar to your Special Proceedings.
In the third paragraph, the debtor is not compelled to
pay to the heirs. You could raise the defense provided in
Section 95. If the heirs will collect the debt, because these
are credits collectible by their father, and then the
amount has not been added to the estate, you as a
debtor is not compelled to pay. But if they added the
credit as part of the taxable estate and actually paid the
estate tax, then the debtor is left with no choice but to
pay. The debtor may choose to pay to the
executor/administrator so that he will not be subjected to
double collection.
SEC. 96. Restitution of Tax Upon Satisfaction of
Outstanding Obligations. - If after the payment of the
estate tax, new obligations of the decedent shall appear,
and the persons interested shall have satisfied them by
order of the court, they shall have a right to the restitution
of the proportional part of the tax paid.
SEC. 97. Payment of Tax Antecedent to the Transfer of
Shares, Bonds or Rights.- There shall not be transferred to
any new owner in the books of any corporation,
sociedad anonima, partnership, business, or industry
organized or established in the Philippines any share,
obligation, bond or right by way of gift inter vivos or mortis
causa, legacy or inheritance, unless a certification from
the Commissioner that the taxes fixed in this Title and due
thereon have been paid is shown
If a bank has knowledge of the death of a person, who
maintained a bank deposit account alone, or jointly with
another, it shall not allow any withdrawal from the said
deposit account, unless the Commissioner has certified
that the taxes imposed thereon by this Title have been
paid: Provided, however, That the administrator of the
estate or any one (1) of the heirs of the decedent may,
upon authorization by the Commissioner, withdraw an
amount not exceeding Twenty thousand pesos (P20,000)
without the said certification.
For this purpose, all withdrawal slips shall contain a
statement to the effect that all of the joint depositors are
still living at the time of withdrawal by any one of the joint
depositors and such statement shall be under oath by the
said depositors.
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This talks about shares of stocks. Since the stock holder P 100,000 Exempt
died, the heirs will now settle the estate and declare P 100,000 200,000 0 2% P100,000
those shares as part of the taxable estate. Normally, the 200,000 500,000 2,000 4% 200,000
shares have to be signed at the back by the stockholder 500,000 1,000,000 14,000 6% 500,000
in the event of a transfer. But since this is by reason of 1,000,000 3,000,000 44,000 8% 1,000,000
death, nobody can sign. But you have now the estate tax 3,000,000 5,000,000 204,000 10% 3,000,000
clearance to present so that the old stock certificates will 5,000,000 10,000,000 404,000 12% 5,000,000
be cancelled and new ones will be issued in the name of 10,000,000 1,004,000 15% 10,000,000
the heirs.
The rates is from 0-15%. The first 100,000 of the taxable
The same thing is true for the titles of real properties since donation is exempted. In excess of 100,000.00, you have
the Register of Deeds will not cause any issuance of new the rates from 2%-15%. When you would compare this to
title if there is yet no estate tax clearance. the rates in estate tax in Section 84, the rates in estate tax
are higher. While the exemption here is to the first 100,000,
There is a common occurrence in most of estates. This
in estate tax, the exemption is in the first 200,000.
involves bank accounts.
Therefore, the preference is to give by way of donation
Example: A and B have a joint account and either A or B
than allowing it to be distributed after death.
can withdraw from it. A died. Under Section 97, B cannot
withdraw from the account. The only situation where the
When you make a donation, every donation made
other depositor can withdraw in the event of the death
during the tax year is not a stand alone donation. The
of the co-depositor is when they have a survivorship
donation that you made earlier during the calendar year
agreement. If there is such a survivorship agreement then
is added to your current donation. So it is cumulative.
in the event of the death of the co-depositor, the living
Your previous gifts are added to your current gifts so that
depositor can withdraw from that bank account. But if the total taxable gifts will determine the total gift tax.
there is no survivorship agreement, nobody can withdraw Whatever gift taxes that were paid prior to the current
from that account. donation are deducted and you pay the balance.
Donor’s Tax
(B) Tax Payable by Donor if Donee is a Stranger. - When
the donee or beneficiary is stranger, the tax payable by
This is simply the tax paid by reason that you made a gift
the donor shall be thirty percent (30%) of the net gifts.
or donation. The donor pays the tax called the donor’s
tax or the gift tax.
For the purpose of this tax, a "stranger", is a person who is
not a: (1) Brother, sister (whether by whole or half-blood),
When the gift or donation is inter vivos then you are liable
spouse, ancestor and lineal descendant; or (2) Relative
under Section 96. But if the donation is mortis causa, you
by consanguinity in the collateral line within the fourth
will be liable for estate tax.
degree of relationship.
SEC. 98. Imposition of Tax. - (A) There shall be levied,
When you make a donation, you cannot just make a
assessed, collected and paid upon the transfer by any
donation to any other person. The donor’s tax will apply if
person, resident or nonresident, of the property by gift, a
there is a donation to a relative. If the donee is a stranger
tax, computed as provided in Section 99.
the donation will be hit by the 30% tax rate. When you
make a donation to your mother-in-law, that is a
(B) The tax shall apply whether the transfer is in trust or
donation to a stranger thus the donation will be taxed at
otherwise, whether the gift is direct or indirect, and
30%.
whether the property is real or personal, tangible or
intangible.
You also take note of the definition of what a stranger is
so you will know when to apply the normal rate or the
SEC. 99. Rates of Tax Payable by Donor. – 30% gift tax.

(A) In General. - The tax for each calendar year shall be

(C) Any contribution in cash or in kind to any candidate,
computed on the basis of the total net gifts made during
political party or coalition of parties for campaign
the calendar year in accordance with the following
purposes shall be governed by the Election Code, as
schedule: If the net gift is:
amended.

OVER BUT NOT THE TAX PLUS OF THE When you go the election code, it will tell you that these
OVER SHALL BE EXCESS are not taxable. The candidate is required to disclose all
OVER donations received during the campaign period in the

Transcribed by: Althea Mae P. Casador Page 16 of 131

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Dean Manuel Quibod
statement of expenditures. So when he received
contributions from friends, those donations are exempted
from donor’s tax. But if all the contributions are not spent,
you have to return the excess. If you do not return, you
will be subject to income tax.
SEC. 100. Transfer for Less Than Adequate and Full
Consideration. - Where property, other than real property
referred to in Section 24(D), is transferred for less than an
adequate and full consideration in money or money's
worth, then the amount by which the fair market value of
the property exceeded the value of the consideration
shall, for the purpose of the tax imposed by this Chapter,
be deemed a gift, and shall be included in computing
the amount of gifts made during the calendar year.
This Section is applicable to those properties which are
not real properties because transfers at less than
adequate considerations in case of real properties are
governed by the rules on capital gains tax.
This do not apply to transactions involving real property
because you will base it to zonal valuation of the BIR, the
valuation of the local assessor and the selling price. You
will use the highest price among the three to be the tax
base. That is not true to other properties.
In the estate tax, when the heirs would settle extra-
judicially and one of heirs will waive his or her share in the
estate in favor of one of the heirs, that is not a taxable
transmission.
If the surviving spouse waives her share from the estate,
such waiver is not a taxable transmission. But if she waives
her ½ conjugal share in favor of the children, this time the
waiver is taxable.
SEC. 101. Exemption of Certain Gifts. - The following gifts
or donations shall be exempt from the tax provided for in
this Chapter:
(A) In the Case of Gifts Made by a Resident.-
(1) Dowries or gifts made on account of marriage and
before its celebration or within one year thereafter by
parents to each of their legitimate, recognized natural, or
adopted children to the extent of the first Ten thousand
pesos (P10,000):
If the parent donates in favor of the children whether
legitimate, recognized or adopted a gift worth
10,000,000, only the 10,000 is exempted. The excess will be
taxable. When spouses donate on account of marriage,
each spouse will be considered as a separate donor. So if
the donation is worth 10,000,000, the parents will be
treated as separate donors for 5,000,000.00 each so that
they could maximize the donor’s tax exemption.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(2) 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
(3) 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
percent (30%) of said gifts shall be used by such donee
for administration purposes.
For the purpose of the exemption, a 'non-profit
educational and/or charitable corporation, institution,
accredited nongovernment organization, trust or
philanthropic organization and/or research institution or
organization' is a school, college or university and/or
charitable corporation, accredited nongovernment
organization, trust or philanthropic organization and/or
research institution or organization, incorporated as a
nonstock entity, paying no dividends, governed by
trustees who receive no compensation, and devoting all
its income, whether students' fees or gifts, donation,
subsidies or other forms of philanthropy, to the
accomplishment and promotion of the purposes
enumerated in its Articles of Incorporation.
This is exempted from tax, and this can also be claimed
as deduction to the income tax. The donation is
exempted under Section 101, and the amount of the
donation can be claimed as deduction against income
tax.
(B) In the Case of Gifts Made by a Nonresident Not a
Citizen of the Philippines. - (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.
(2) Gifts in favor of an educational and/or charitable,
religious, cultural or social welfare corporation, institution,
foundation, trust or philanthropic organization or research
institution or organization: Provided, however, That not
more than thirty percent (30%) of said gifts shall be used
by such donee for administration purposes.
(C) Tax Credit for Donor's Taxes Paid to a Foreign Country.
- (1) In General. - The tax imposed by this Title upon a
donor who was a citizen or a resident at the time of
donation shall be credited with the amount of any donor's
tax of any character and description imposed by the
authority of a foreign country.
(2) Limitations on Credit. - The amount of the credit taken
under this Section shall be subject to each of the
following limitations:
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(a) The amount of the credit in respect to the tax paid to
any country shall not exceed the same proportion of the
tax against which such credit is taken, which the net gifts
situated within such country taxable under this Title bears
to his entire net gifts; and
(b) The total amount of the credit shall not exceed the
same proportion of the tax against which such credit is
taken, which the donor's net gifts situated outside the
Philippines taxable under this title bears to his entire net
gifts.
A citizen who makes a donation abroad will be subject to
a foreign gift tax. That same donation has to be reported
in the Philippines for purposes of the Philippine donor’s
tax. However, the foreign donor’s tax paid may be
availed by way of a tax credit to be deducted subject to
limitation under paragraph C.
SEC. 102. Valuation of Gifts Made in Property. - If the gift is
made in property, the fair market value thereof at the
time of the gift shall be considered the amount of the gift.
In case of real property, the provisions of Section 88(B)
shall apply to the valuation thereof.
The valuation of the gifts is their value on the date of
donation - the fair market value of the property at the
time the gift is made.
SEC. 103. Filing of Return and Payment of Tax. -
(A) Requirements.- any individual who makes any transfer
by gift (except those which, under Section 101, are
exempt from the tax provided for in this Chapter) shall, for
the purpose of the said tax, make a return under oath in
duplicate.
The return shall se forth:
(1) Each gift made during the calendar year which is to
be included in computing net gifts;
(2) The deductions claimed and allowable;
(3) Any previous net gifts made during the same calendar
year;
(4) The name of the donee; and
(5) Such further information as may be required by rules
and regulations made pursuant to law.
(B) Time and Place of Filing and Payment. - The return of
the donor required in this Section shall be filed within thirty
(30) days after the date the gift is made and the tax due
thereon shall be paid at the time of filing.
Except in cases where the Commissioner otherwise
permits, the return shall be filed and the tax paid to an
authorized agent bank, the Revenue District Officer,
Revenue Collection Officer or duly authorized Treasurer of
the city or municipality where the donor was domiciled at
the time of the transfer, or if there be no legal residence in
the Philippines, with the Office of the Commissioner.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
In the case of gifts made by a nonresident, the return may
be filed with the Philippine Embassy or Consulate in the
country where he is domiciled at the time of the transfer,
or directly with the Office of the Commissioner.
So you are given 30 days. For estate tax, you are given 6
months to file the return and pay the tax. In donation, the
return shall be filed and the tax paid within 30 days after
the date the gift was given. Do not say one month after,
that is inaccurate. The proper period is 30 days.
SEC. 104. Definitions. - For purposes of this Title, the
terms "gross estate"and "gifts" include real and personal
property, whether tangible or intangible, or mixed,
wherever situated: Provided, however, That where the
decedent or donor was a nonresident alien at the time of
his death or donation, as the case may be, his real and
personal property so transferred but which are situated
outside the Philippines shall not be included as part of
his "gross estate" or "gross gift": Provided, further, That
franchise which must be exercised in the Philippines;
shares, obligations or bonds issued by any corporation or
sociedad anonima organized or constituted in the
Philippines in accordance with its laws; shares,
obligations or bonds by any foreign corporation eighty-
five percent (85%) of the business of which is located in
the Philippines; shares, obligations or bonds issued by any
foreign corporation if such shares, obligations or bonds
have acquired a business situs in the Philippines; shares or
rights in any partnership, business or industry established
in the Philippines, shall be considered as situated in the
Philippines: Provided, still further, that no tax shall be
collected under this Title in respect of intangible personal
property: (a) if the decedent at the time of his death or
the donor at the time of the donation was a citizen and
resident of a foreign country which at the time of his
death or donation did not impose a transfer tax of any
character, in respect of intangible personal property of
citizens of the Philippines not residing in that foreign
country, or (b) if the laws of the foreign country of which
the decedent or donor was a citizen and resident at the
time of his death or donation allows a similar exemption
from transfer or death taxes of every character or
description in respect of intangible personal property
owned by citizens of the Philippines not residing in that
foreign country.
The term "deficiency" means: (a) the amount by which
tax imposed by this Chapter exceeds the amount shown
as the tax by the donor upon his return; but the amount so
shown on the return shall first be increased by the amount
previously assessed (or collected without assessment) as
a deficiency, and decreased by the amounts previously
abated, refunded or otherwise repaid in respect of such
tax, or (b) if no amount is shown as the tax by the donor,
then the amount by which the tax exceeds the amounts
previously assessed, (or collected without assessment) as
a deficiency, but such amounts previously assessed, or
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collected without assessment, shall first be decreased by
the amount previously abated, refunded or otherwise
repaid in respect of such tax.
Section 104 is a common provision to both estate and
donor’s tax. We have taken the first paragraph in so far
as the properties that will form part of the estate.
However, no tax shall be collected in respect to
intangible personal property if the decedent at the time
of his death or the donor at the time of donation was a
citizen and a resident of a foreign country which at the
time of death or at the time of donation did not impose a
transfer tax.
Illustration:
Donations made between business organizations and
between an individual and a business organization are
considered donations made to a stranger. That is in
Revenue Regulation 2-2003.
When you are an individual or a corporation engaged in
business and you would like to make a donation in favor
of a charitable institution, the donation will not be subject
to an automatic exemption. So if you are not granted an
exemption, you will be subject to the 30% tax because
that is considered as donation to a stranger. So what is
normally done is to write to the BIR asking for a tax ruling
making the donation as tax exempt. Then you now make
a deed of donation and prepare a donor’s tax return,
then attach the ruling so that you will be given a
clearance for the exemption to the donor’s tax.

In 2012: If it is a real property, that clearance will be used for the

February 14 – Donated 1M to son S as valentines gift transfer of the title. Otherwise, the donation will be
April 20 – Donated 5M to daughter D for passing the bar taxable at 30%.
June 8 – Donated jewelries worth 800,000 to J, the
Secretary Donee institutions, including non-stock non-profit
Nov 12 – Donated a car worth 1.5M to son K institution, could also apply for a tax exempted status
under the PCNC (Philippine Council for NGO
In 2013: Certification). PCNC is the clearing house of the BIR
January 20 – Donated 500,000 to L, the younger daughter where you would apply for a tax exemption status. That is
an invitation for potential donors since if you have that
Feb 14 April 20 June 8 Nov 12 status, donors will no longer need to get a tax ruling from
Gross Gift 1,000,000 5,000,000 800,000 1,500,000 the BIR in order for any donations to be tax exempt.
Less: - - - -
Deduction *The following are the discussions and computations
Net Gift 1,000,000 5,000,000 800,000 1,500,000 during our session with Atty. Donalvo*
Add: - 1,000,000 - 6,000,000
Previous BASIC FORMULA: Net estate = Gross estate – Deductions
Net Gift
Considerations in determining what properties compose
Total Net 1,000,000 6,000,000 800,000 7,500,000
the gross estate:
Gift
Gift Tax 44,000 524,000 240,000 704,000
1) Decedent’s citizenship and residency
Less: - 44,000 524,000
2) Whether the decedent is single or married
Previous
3) What properties are included or excluded
Gift Tax
4) What are the deductions, whether ordinary or
paid
special
Amount 44,000 480,000 180,000
Due
PROPERTY RELATIONS
The June 8 donation is a donation to a stranger so you do
The following data pertains to the death of Jill Normana:
not add that to the others. That is a stand alone donation
and the tax rate is 30%. That is to be paid independently.
Property acquired by 600,000
decedent prior to marriage
The 2013 donation will not be included. You will compute
Property acquired by 700,000
all over again for that since it was made in a different
surviving spouse prior to
calendar year.
marriage
Property inherited by 800,000
When you make a donation to a legally adopted child,
decedent during marriage
the donation will not be considered as a donation to a
Property inherited by the 900,000
stranger but subject to the normal donor’s tax rate.
surviving spouse during
marriage
Property acquired through 1,000,000

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labor during marriage Property inherited 800,000 - 800,000

Income derived from 450,000 by decedent
property inherited by during marriage
surviving spouse during Property inherited - - -
marriage including income by the surviving
tax of P50,000 spouse during
Time deposit – including 850,000 marriage
interest before death Property - 1,000,000 1,000,000
P90,000 and interest after acquired through
death P60,000 labor during
marriage
1) How much is the total gross estate under Income derived - - -
Conjugal Partnership of Gains? from property
inherited by
ACCOUNT EXCLUSIVE CONJUGAL TOTAL surviving spouse
Property acquired 600,00 - 600,000 during marriage
by decedent prior including income
to marriage tax of P50,000
Property acquired - - - Time deposit – 90,000 700,000 790,000
by surviving spouse including interest
prior to marriage before death
Property inherited 800,000 - 800,000 P90,000 and
by decedent interest after
during marriage death P60,000
Property inherited - - - TOTAL 890,000 3M 3.890M
by the surviving
spouse during GROSS ESTATE
marriage
Property acquired 1,000,000 1,000,000 Jill Normana, a Japanese residing in Korea, died in 2012.
through labor She left the following properties with their corresponding
during marriage fair market values at the date of his death. How much is
Income derived 450,000 450,000 her gross estate for Philippine tax purposes?
from property
inherited by Rest House-China 20,000,000 Not included
surviving spouse Mansion- 130,000,000 Not included
during marriage Manchester
including income England
tax of P50,000 Shares of Stock in 50,000,000 Not included
Time deposit – 790,000 790,000 Taiwan
including interest Corporation
before death Shares of Stock in 120,000,000 Included
P90,000 and a Japanese
interest after death Corporation, 85%
P60,000 of its business is
TOTAL 1.4M 2.240M 3.640M located in the
Philippines
2) How much is the total gross estate under Time Deposit – 500,000,000 Included
Absolute Community Property? BPI Family Bank
Lease Contract 1,000,000 Not included
ACCOUNT EXCLUSIVE COMMUNITY TOTAL over his Hawaiian
Property - 600,000 600,000 property leased
acquired by to a Filipino
decedent prior to Citizen
marriage Investment in 4,000,000 Included
Property - 700,000 700,000 bonds in Jolibee
acquired by Corporation
surviving spouse
prior to marriage TOTAL Gross Estate: 624,000,000

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incurred within
DEDUCTIONS the year)
Funeral Expenses 100,000
Two types: 1.1M 1,900,000 +
1,000,000
1) Ordinary standard
2) Special deduction =
2.9M
Ordinary Deductions (ELIT-MTV)
VANISHING DEDUCTION
1) Expenses – includes funeral and judicial
2) Losses – includes casualty losses and bad debts Requisites:
3) Indebtedness 1. The property must be in the Philippines
4) Taxes 2. The property must have been gratuitously
5) Mortgage unpaid transferred
6) Transfers for public use 3. The present decedent must have died within 5
7) Vanishing Deduction years from receipt of the property
4. The property must have not previously subjected
Special Deductions (SMeRFS) to vanishing deduction
5. The donor’s or estate tax must have been paid
1) Standard Deduction (1,000,000)
2) Medical Expenses Jill Normana, a Filipina residing in Davao City who died
3) RA 4917 (Retirement benefits) single, has a gross estate of 5,000,000. Part of the gross
4) Family home estate is a 2,100,000 property inherited preciously
5) Share of the Surviving Spouse subjected to transfer taxes 42 months ago at fair market
value of 2,400,000. The real property has been subjected
The share of the surviving spouse is not really part of the to mortgage by the previous owner for 500,000 assumed
special deductions but it is included here so you will not by the heir who died recently. The unpaid balance of the
forget to deduct the same after all deductions have mortgage is 100,000 at the date of death.
been made.
Assuming the funeral and judicial expense are 300,000
Jill presents the following items to the BIR in relation to the and 100,000 respectively, how much is the vanishing
death of her husband: deduction?

ACCOUNT ORDINARY SPECIAL FIRST BASE Value taken 2,100,000 –

Revocable - - (lower amount at 400,000 = 1.7M
donation to the the time of
Ramon donation or
Magsaysay death) –
Foundation mortgage paid
Proceeds of life - - by the decedent
insurance from SECOND BASE First Base/ Gross 1.7M/5M x
SSS – revocable Estate x ELIT MT (200,000 +
Family Home - 1,000,000 100,000 +
(exclusive 100,000) =
property of 136,000
husband) THIRD BASE First Base – 1.7M – 136,000 =
SSS Death - - Second Base 1,564,000
benefits VANISHING Third Base x 40% 1,564,000 x .4 =
Benefits received - 500,000 DEDUCTION 625,600
under RA 4917
Transfers in - - NET ESTATE AND ESTATE TAX
contemplation
death *I cannot find my own computation on this, and it’s
Donation to the 1,000,000 - probably incorrect anyway . Maybe somebody else
government can volunteer his own computation nalang*
Medical - 400,000
Expenses (40% Godbless!
unpaid, 100%

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VALUE ADDED TAX The VAT system consists of essentially three transactions:

Introduction 1) Transactions subject to the 12% VAT

2) Zero-rated transactions
Title IV is the Value-Added Tax or the VAT, as amended 3) Exempted Transactions
by RA 9337. That is the latest amendment when they had
the R-VAT or the Reformed Value-Added Tax. VAT SYSTEM
12% VAT 0% VAT Exempted
Sometime in 2012, RA 10378 was passed. This Republic Sec. 106 (A)(1) – Sec. 106 (A) (2) – Sec. 109 (A-W),
Act amended the provision on International Carriers. The VAT on the sale zero-rated sales as amended by
taxation on International Carriers for income tax purposes of goods or RA 10378
was based on 2 ½% of the Gross Philippine Billngs. properties -export sales
However RA 10378 introduced the concept of -foreign currency
International Carriers Tax Reciprocity. It also amended denominated
Section 109, expanding further the provision. sale (transactions
made in the
SEC. 105. Persons Liable. - Any person who, in the course Philippines but
of trade or business, sells barters, exchanges, leases paid for in
goods or properties, renders services, and any person acceptable
who imports goods shall be subject to the value-added foreign currency
tax (VAT) imposed in Sections 106 to 108 of this Code. eg. Souvenir
shops for tourists
The value-added tax is an indirect tax and the amount of since tourists pay
tax may be shifted or passed on to the buyer, transferee in foreign
or lessee of the goods, properties or services. currency and the
destination of the
This rule shall likewise apply to existing contracts of sale products is
or lease of goods, properties or services at the time of the abroad
effectivity of Republic Act No. 7716. -sale exempted
under special
The phrase "in the course of trade or business" means the laws and treaties
regular conduct or pursuit of a commercial or an to which the
economic activity, including transactions incidental Philippines is a
thereto, by any person regardless of whether or not the signatory
person engaged therein is a nonstock, nonprofit priVATe Sec. 106 (B) – VAT Sec. 108 (B) –
organization (irrespective of the disposition of its net on transactions sale of services
income and whether or not it sells exclusively to members deemed sale performed in the
or their guests), or government entity. Philippines by
VAT registered
The rule of regularity, to the contrary notwithstanding, persons
services as defined in this Code rendered in the Sec. 107 – VAT on
Philippines by nonresident foreign persons shall be importation of
considered as being course of trade or business. goods
Sec. 108 (A)– VAT
The persons liable are those engaged in trade or business, on sale of
persons who sell, persons who barter or exchange goods services and use
or properties, or those who render services, and any or lease of
person who would import. These persons are subject to properties
the VAT.
Zero-rated transactions are those wherein the destination
NB: RA 7716 is the EVAT or the Expanded Value-Added of the goods is not in the Philippines.
Tax.
RULE of THUMB: Rule on destination and Consumption. If
Section 105 defines the persons liable to the VAT. For a the place of destination and consumption of the goods
detailed reading on the provisions, read Revenue are domestic, such goods are subject to the 12% VAT. If
Regulation 16-2005. It is the consolidated regulation on abroad, you use the 0%.
the VAT. That provides a clearer explanation of the
provisions under Title IV. 0% transactions are different from exempted transaction.

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Exempted means that it is not really covered by VAT but
are covered by other forms of Business Tax. These
transactions are exempted, so they are not subject to
either 12% or 0%.
Example: The sale of agricultural food products.
If you are engaged in an activity which is both VAT and
NON-VAT, you have to have two receipts. One for VAT
and one for NON-VAT. If your system is automated, your
cash register will separate those which are VAT from
those which are NON-VAT. It is a requirement that all
taxpayers must register as VAT or NON-VAT. There is a
registration fee of 500.00.
For purposes of the computation of the VAT payable, it is
determined using this formula:
VAT payable = Output VAT- Input VAT
Output VAT is based on the Gross Selling Price or Gross
Value in Money or the Gross Receipts. The output VAT is
generated from your sale of goods or services. The input
VAT is sourced from your purchases and importations.
What you pay is actually the value added because when
you make a sale, you pass on the VAT to the buyer.
Remember in Section 105, the VAT is an indirect tax.
When the purchaser buys the product upon sale, the VAT
is already added or included in the purchase price.
Prior to RA 7716, the VAT was built as a separate item in
the invoice. So if you will buy an item worth 100, the store
will issue a receipt 100+10% (10% was the VAT rate before,
not it is 12%), so you pay 110. The loophole there is that
the buyers of customers will oftentimes refer not to get a
receipt, because if there is a receipt, they will be forced
to pay the 10%, because the VAT was treated as a
separate item. When RA 7716 came out, they did not
allow billing the VAT as a separate item anymore. It
should now be part of the selling price. So the prices that
you will see in the stores are already deemed as VAT-
included. When the taxpayer business establishment now
issues a receipt, they will unbundle from the selling price
how much is the 12%. That is how the VAT would be billed.
It should be added.
Transactions subject to the 12% VAT
Q: How would you extract the 12% VAT?
A: The 12% VAT is extracted using this formula:
Gross Selling Price or Gross Value in Money or Gross
Receipts x 1/9.333 – Input VAT
At the end of the month, the taxpayer will make an
extraction based on their sales. The total sales for the
month multiplied by 1/9.333, (that is the output VAT from
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
their sales during the month), less their input VAT arising
from the purchases or importations.
When you are a VAT taxpayer, you will make purchases
from suppliers. These suppliers also pass on the VAT on
account of the purchased goods or service (eg of
services is when you engage the services of the security
guards). The VAT passed on you is creditable as input
VAT. What you pay as VAT payable is only the difference.
The VAT returns is filed monthly and quarterly. The monthly
is within 20 days and the quarterly is within 25 days from
the close of the taxable month. In the first two months,
you will be filing the monthly returns. On the third month
you will file the quarterly return to cover three months.
Zero-rated Transactions
If you are a zero rated taxpayer, you have a zero output
VAT but you have an input VAT on account of the
purchases you made from your suppliers. Since your sales
are exported, meaning the destination and consumption
is outside, your transactions will be zero-rated or subject
to the zero percent VAT. But since you have input VAT on
account of purchases made, you will end up with what
you call an excess input VAT. You are now allowed to ask
for a refund through the issuance of a tax credit
certificate.
Exempted Transactions
Exempted transactions do not have the same formula.
The reason is that under the law, these transactions are
liable to other kinds of percentage or business taxes.
NB: Importation is an input because that is not a sale. In
the case of importation, the Bureau of Customs will
charge the VAT on importation on top of your customs
duties.
SEC. 106. Value-Added Tax on Sale of Goods or
Properties. –
(A) Rate and Base of Tax. - There shall be levied, assessed
and collected on every sale, barter or exchange of
goods or properties, value-added tax equivalent to
twelve percent (12%) of the gross selling price or gross
value in money of the goods or properties sold, bartered
or exchanged, such tax to be paid by the seller or
transferor.
(1) The term "goods" or "properties" shall mean all
tangible and intangible objects which are capable of
pecuniary estimation and shall include: (a) Real
properties held primarily for sale to customers or held for
lease in the ordinary course of trade or business; (b) The
right or the privilege to use patent, copyright, design or
model, plan, secret formula or process, goodwill,
trademark, trade brand or other like property or right; (c)
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The right or the privilege to use in the Philippines of any
industrial, commercial or scientific equipment; (d) The
right or the privilege to use motion picture films, tapes
and discs; and (e) Radio, television, satellite transmission
and cable television time.
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 value-added tax. The excise tax, if any, on such
goods or properties shall form part of the gross selling
price.
(2) The following sales by VAT-registered persons shall be
subject to zero percent (0%) rate:
(a) Export Sales. - The term "export sales" means:
(1) The sale and actual shipment of goods from the
Philippines to a foreign country, irrespective of any
shipping arrangement that may be agreed upon which
may influence or determine the transfer of ownership of
the goods so exported and paid for in acceptable foreign
currency or its equivalent in goods or services, and
accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);
(2) Sale of raw materials or packaging materials to a
nonresident buyer for delivery to a resident local export-
oriented enterprise to be used in manufacturing,
processing, packing or repacking in the Philippines of the
said buyer's goods and paid for in acceptable foreign
currency and accounted for in accordance with the rules
and regulations of the Bangko Sentral ng Pilipinas (BSP);
(3) Sale of raw materials or packaging materials to
export-oriented enterprise whose export sales exceed
seventy percent (70%) of total annual production;
(4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP); a
(5) Those considered export sales under Executive Order
No. 226, otherwise known as the Omnibus Investment
Code of 1987, and other special laws; and
(6) The sale of goods, supplies, equipment and fuel to
persons engaged in international shipping or international
air transaport operations.
(b) Foreign Currency Denominated Sale. - The
phrase "foreign currency denominated sale" means sale
to a nonresident of goods, except those mentioned in
Sections 149 and 150, assembled or manufactured in the
Philippines for delivery to a resident in the Philippines,
paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP).
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III-Manresa (2013)
(c) Sales to persons or entities whose exemption under
special laws or international agreements to which the
Philippines is a signatory effectively subjects such sales to
zero rate.
(B) Transactions Deemed Sale. - The following
transactions shall be deemed sale:
(1) Transfer, use or consumption not in the course of
business of goods or properties originally intended for
sale or for use in the course of business;
(2) Distribution or transfer to: (a) Shareholders or investors
as share in the profits of the VAT-registered persons; or (b)
Creditors in payment of debt;
(3) Consignment of goods if actual sale is not made
within sixty (60) days following the date such goods were
consigned; and
(4) Retirement from or cessation of business, with respect
to inventories of taxable goods existing as of such
retirement or cessation.
(C) Changes in or Cessation of Status of a VAT-registered
Person. - The tax imposed in Subsection (A) of this Section
shall also apply to goods disposed of or existing as of a
certain date if under circumstances to be prescribed in
rules and regulations to be promulgated by the Secretary
of Finance, upon recommendation of the Commissioner,
the status of a person as a VAT-registered person
changes or is terminated.
(D) Determination of the Tax. - (1) The tax shall be
computed by multiplying the total amount indicated in
the invoice by one-eleventh (1/11).
(2) Sales Returns, Allowances and Sales Discounts. - The
value of goods or properties sold and subsequently
returned or for which allowances were granted by a VAT-
registered person may be deducted from the gross sales
or receipts for the quarter in which a refund is made or a
credit memorandum or refund is issued.
Sales discount granted and indicated in the invoice at the
time of sale and the grant of which does not depend
upon the happening of a future event may be excluded
from the gross sales within the same quarter it was given.
(3) Authority of the Commissioner to Determine the
Appropriate Tax Base. - The Commissioner shall, by rules
and regulations prescribed by the Secretary of Finance,
determine the appropriate tax base in cases where a
transaction is deemed a sale, barter or exchange of
goods or properties under Subsection (B) hereof, or where
the gross selling price is unreasonably lower than the
actual market value.
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If you are a real estate broker, the sale of the real
properties will be subject to the VAT. When you sell
condominiums units, that is also VATable. If you lease a
commercial building, the lessor, on top of the monthly
rent will give also the 12% VAT. So, if the monthly rent is
10,000, you pay 11, 200 including the VAT.
As you will learn later on, it is not the theatre which is
subject to the VAT, because the movie houses are
already subject to the amusement tax. What is taxed
here is the right or privilege to use. Therefore, DVDs which
are sold and other video discs and other types of
reproduction, regardless of the format, the sale of which
will be subject to VAT.
If you receive the bill from your cable provider, VAT is
already included there. There is also VAT in your landline
bills and cellphone bills.
Transactions Deemed Sale
If you are a producer of plywood, when you sell that,
there is a VAT on the sale. But if you are putting up a
building for the expansion of a warehouse and you will
be using the plywood that you produce, that
consumption or use will be deemed as sale.
You are a manufacturer or producer of a certain good or
product which is intended for sale to customers. When
they are sold to customers, that sale is covered by the
12% tax.
The corporation declared dividends. But instead of
distributing cash, they used their products as distribution
of profits. That will be considered a sale.
Example: If you produce canned goods, and when you
declared dividends instead of cash, the products were
distributed to shareholder as the profit, that will be
deemed as a sale. That sale will be covered by the 12%
VAT.
Another is Dacion en pago. If instead of paying in cash, a
debtor paid products, that will be considered as sale,
and will be subject to 12% VAT.
In case of Consignment given for a certain period of
time, if within the period the goods were not sold, that will
be considered as sale. So you have to return the products
consigned before the period will expire.
Also, retirement and cessation of business in relation to
unsold inventories could also be deemed as sale. This is a
situation where the business is closing but you have
unsold inventories. These unsold merchandise will be
considered as deemed sale upon the retirement or
cessation business.
Zero-rated transactions (Section 106 (a)(2))
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Number 1 talks of direct export.
Number 2, talks about a non-resident buyer who
purchases materials in the Philippines and these materials
are brought to this export-oriented enterprise. This export-
oriented enterprise produces the products which will be
brought outside for export. This non-resident buyer, or the
foreign buyer will purchase raw materials locally, the
product will be assembled here but the finished product
will be sold abroad. The purchase of raw materials locally
will be considered as zero-rated. The sale of these raw
materials will be subject to the zero percent VAT
Number 3 talks about a domestic export-oriented
enterprise, 70% of the products of which are sold abroad.
When you purchase raw materials from the domestic
suppliers, and the materials are used to come up with the
finished products, the enterprise will send the finished
product abroad, the sale of these raw materials or
packaging materials to the enterprise will be considered
zero rated.
Number 4 included to encourage those who mine gold
to sell the same, especially the small scale miners to sell
their gold to Bangko Sentral, because the sale of the gold
to Bangko Sentral will be zero-rated. As an incentive for
the miners to sell their gold to BSP, the VAT is 0%.
Number 6 talks about an international carrier, whether
shipping or air. When they would buy goods for the
provisions of the crew, fuel for the use of your vessel or
aircraft, or would engage some maintenance and
upkeep locally to service the needs of the vessel or
aircraft, the sale of these goods, supplies, equipments
and fuel will also be zero-rated. The purchaser here is an
international shipping or international air transport
operator. Domestic carriers are not entitled.
Changes or cessation of status
When you would start to engage in business, you would
normally register as non-VAT. When we go to section 109
there is a threshold. Any person engaged in business with
sales less than the threshold may have the option to
register as VAT or non VAT. So, when you register as non-
VAT, and at any time of the year your sales increase or
went beyond the threshold, you are required to change
your status from non VAT to VAT registered person.
Q: How do you compute VAT when there are discounts in
the price?
A: If it is 20% discounted, you reduce the price by 20% first,
and then extract the VAT. So the formula will be:
Output VAT = Remainder of the price x 1/9.333.
Q: How about Returned items?
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A: for example, in the receipt, 100 items were bough, but
upon delivery, 5 items were damaged. So only 95 were
received by the customer. In this case, there will be sales
returns. So what you will do is to subtract the 5 damaged
items, and multiply the remainder to 1/9.333 to get the
output VAT.
SEC. 107. Value-Added Tax on Importation of Goods. -
(A) In General. - There shall be levied, assessed and
collected on every importation of goods a value-added
tax equivalent to twelve percent (12%) based on the total
value used by the Bureau of Customs in determining tariff
and customs duties plus customs duties, excise taxes, if
any, and other charges, such tax to be paid by the
importer prior to the release of such goods from customs
custody: Provided, That where the customs duties are
determined on the basis of the quantity or volume of the
goods, the value-added tax shall be based on the
landed cost plus excise taxes, If any.
(B) Transfer of Goods by Tax-Exempt Persons. - In the
case of tax-free importation of goods into the Philippines
by persons, entities or agencies exempt from tax where
such goods are subsequently sold, transferred or
exchanged in the Philippines to non-exempt persons or
entities, the purchasers, transferees or recipients shall be
considered the importers thereof, who shall be liable for
any internal revenue tax on such importation.
The tax due on such importation shall constitute a lien on
the goods superior to all charges or liens on the goods,
irrespective of the possessor thereof.
On top of the customs duties, remember that when you
import goods, regardless of whether the goods will be for
resale or for your own consumption, it is still VATable. If
you would import items and you not engaged In business,
it will be presumed that the items imported are for
personal consumption. The basis of computing the VAT is
the dutiable value of the article.
Vehicles used by consular offices or foreign embassies
are tax free and duty free. After 5 years, if they will
request for new vehicles they will sell their old cars. In that
case, the buyers will be considered the importer. The
buyer will pay for the duties as well as the VAT from the
purchase of the imported vehicles.
SEC. 108. Value-added Tax on Sale of Services and Use or
Lease of Properties. - machinery or other apparatus purchased from such
(A) Rate and Base of Tax. - There shall be levied, assessed
and collected, a value-added tax equivalent to twelve
percent (12%) of gross receipts derived from the sale or
exchange of services, including the use or lease of
properties.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
The phrase "sale or exchange of services" means the
performance of all kinds or services in the Philippines for
others for a fee, remuneration or consideration, including
those performed or rendered by construction and service
contractors; stock, real estate, commercial, customs and
immigration brokers; lessors of property, whether personal
or real; warehousing services; lessors or distributors of
cinematographic films; persons engaged in milling
processing, manufacturing or repacking goods for others;
proprietors, operators or keepers of hotels, motels,
resthouses, pension houses, inns, resorts; proprietors or
operators of restaurants, refreshment parlors, cafes and
other eating places, including clubs and caterers; dealers
in securities; lending investors; transportation contractors
on their transport of goods or cargoes, including persons
who transport goods or cargoes for hire another domestic
common carriers by land, air and water relative to their
transport of goods or cargoes; services of franchise
grantees of telephone and telegraph, radio and television
broadcasting and all other franchise grantees except
those under Section 119 of this Code; services of banks,
non-bank financial intermediaries and finance
companies; and non-life insurance companies (except
their crop insurances), including surety, fidelity, indemnity
and bonding companies; and similar services regardless
of whether or not the performance thereof calls for the
exercise or use of the physical or mental faculties.
The phrase 'sale or exchange of services' shall likewise
include:
(1) The lease or the use of or the right or privilege to use
any copyright, patent, design or model, plan secret
formula or process, goodwill, trademark, trade brand or
other like property or right;
(2) The lease of the use of, or the right to use of any
industrial, commercial or scientific equipment;
(3) The supply of scientific, technical, industrial or
commercial knowledge or information;
(4) The supply of any assistance that is ancillary and
subsidiary to and is furnished as a means of enabling the
application or enjoyment of any such property, or right as
is mentioned in subparagraph (2) or any such knowledge
or information as is mentioned in subparagraph (3);
(5) The supply of services by a nonresident person or his
employee in connection with the use of property or rights
belonging to, or the installation or operation of any brand,
nonresident person.
(6) The supply of technical advice, assistance or services
rendered in connection with technical management or
administration of any scientific, industrial or commercial
undertaking, venture, project or scheme;(7) The lease of
motion picture films, films, tapes and discs; and(8) The
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lease or the use of or the right to use radio, television,
satellite transmission and cable television time.
Lease of properties shall be subject to the tax herein
imposed irrespective of the place where the contract of
lease or licensing agreement was executed if the
property is leased or used in the Philippines.
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 value-added tax.
(B) Transactions Subject to Zero Percent (0%) Rate.- The
following services performed in the Philippines by VAT-
registered persons shall be subject to zero percent (0%)
rate.
(1) Processing, manufacturing or repacking of goods for
other persons doing business outside the Philippines
which goods are subsequently exported, where the
services are paid for in acceptable foreign currency and
accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);
(2) Services other than those mentioned in the preceding
paragraph, the consideration for which is paid for in
acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);
(3) Services rendered to persons or entities whose
exemption under special laws or international
agreements to which the Philippines is a signatory
effectively subjects the supply of such services to zero
percent (0%) rate;
(4) Services rendered to persons engaged in international
shipping or international air-transport operations,
including leases of property for use thereof;
(5) Services performed by subcontractors and/or
contractors in processing, converting, of manufacturing
goods for an enterprise whose export sales exceed
seventy percent (70%) of total annual production;
(6) Transport of passengers and cargo by air or sea
vessels from the Philippines to a foreign country; and
(7) Sale of power or fuel generated through renewable
sources of energy such as but not limited to biomass,
solar, wind, hydropower, geothermal, ocean energy, and
other merging energy sources using technologies such as
fuel cells and hydrogen fuels.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(C) Determination of the Tax. - The tax shall be computed
by multiplying the total amount indicated in the official
receipt by one-eleventh (1/11).
NB: Article 119 talks about franchises that are not subject
to the VAT.
Transactions subject to 12% VAT
This time, it is not the sale of goods, but the sale of
services, including the use or lease of properties. So when
you would get janitorial services, the agency will pass on
or charge an additional 12% to the value of the services.
The VAT will be added to form part of the total price of
the service.
Again: It is not the movie houses that will be subject to the
VAT but the distributors of the film. The movie houses
where the films are shown are not subject to the VAT.
They are subject to the local amusement tax.
In a case, VAT was assessed against SM cinemas. They
protested saying that they are not proper subject of the
VAT. The Supreme Court ruled that movie operators are
not subject of the VAT. It is the distributors of the films that
must be taxed.
In so far as those in the catering business, you need not
have a restaurant. You can have your own residential
house as your place of business. Being engaged in that
business, you will be subject to the VAT.
When you would secure a bail bond, the premiums that
you will pay for the bond is VATable.
For as long as the property is used in the Philippines, even
if the contract was done outside of the country, the lease
will still be subject to VAT.
Professional services (lawyers, engineers, accountants),
are not subject to the VAT. Prior to 9337 the medical and
lawyering professions were exempted. They were not
covered by the VAT. After that, the lawyers and doctors
are now added. They were added already as early RA
7716, but there was another law enacted by congress
suspending that. But now, they are already covered.
To determine whether the services is 12% or zero-rated,
you should be guided by the Principle of destination and
consumption. If the consumption and destination, is for
domestic use, 12%. But if the rendering of the services, the
destination of which would be abroad, then it will be
zero-rated.
Transactions subject to 0% VAT
You engage the services of an export-oriented enterprise.
You are a non-resident buyer. You bring in raw materials
in the Philippines. You bring in the garments, textiles,
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buttons, zippers, and the threads. The product will be
assembled in the Philippines. Then after the rendering of
the services, the finish product will be brought out of the
country. The services, while done local,ly but the
destination will be abroad, it could be zero-rated.
Example: The raw materials for rubber shoes are sent here
for assembly. The services rendered are paid for in
acceptable foreign currency. The finished product will be
sold abroad. The services that were done in the
Philippines, for reason that the destination of which is
outside, will be zero rated
An embassy or a foreign consular office in the Philippines
who would engage janitorial or security guard services,
will be subject to 0% tax. When the services are paid to
the agency, the VAT that will be charged on it will still be
0%.
An international carrier by air or by sea which encounters
trouble and engage a local crew to do the repairs and
maintenance and upkeep, then the payment of the
services will be zero rated. Since the services were
supplied to an international shipping, then in the
payment of the services, the VAT will be zero rated,
including lease of property for use thereof.
If you are an export oriented enterprise, since you could
not perform all the services needed in your business, you
would engage a subcontractor. Since the eventual
destination of the product will be outside for export, the
services that will be performed by the subcontractors
when they now bill the export oriented enterprise for the
service they have rendered, the services will be zero
rated.
Domestic common carriers, by air or by sea, with an
international flight are also zero-rated. Domestic flights by
domestic carriers are subject to 12% VAT. Domestic
carriers with international flights, the services that they do
will be zero rated.
As to sale of power or fuel, this is peculiar because the
rule on destination is not applicable. But this is an
incentive for those who would go to alternative sources
of energy or what we call renewable sources of energy.
So Numbers from 1 to 6, destination and consumption is
the rule. In number 7, such rule does not apply. This is to
promote the people to invest to renewable resources. So
if you are an independent power producer and you
could increase geothermal operations, you use gas from
Mt. Apo, the sale of energy to the power companies will
be zero rated.
SEC. 109. Exempt Transactions. – (1) Subject to the
provisions of Subsection (2) hereof, the following
transactions ahll be exempt deom the value added tax:
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
This is amended by RA 10378.
These are the transactions where it is neither subject to
12% or 0%. They are exempted. There is no VAT at all or it
will be subject to a different tax, which we call the
percentage tax. This is different from the zero rated. While
the zero rate would seem like an exemption, it has a
technical meaning different from exempted transactions
because the 0% VAT will require such tax payer to remit
the VAT under the VAT system. Unlike in exempted
transactions, you are not under that requirement
because you are not subject to any rate, 12% or 0%. You
are subject to a different tax rate.
(A) Sale or importation of agricultural and marine food
products in their original state, livestock and poultry of a
kind generally used as, or yielding or producing foods for
human consumption; and breeding stock and genetic
materials therefor.
Products classified under this paragraph shall be
considered in their original state even if they have
undergone the simple processes of preparation or
preservation for the market, such as freezing, drying,
salting, broiling, roasting, smoking or stripping. Polished
and/or husked rice, corn grits, raw cane sugar and
molasses, ordinary salt, and copra shall be considered in
their original state;
When you would sell or import agricultural food products
(kamatis, malunggay, kangkong), or marine food
products, jn their original state, these are exempted from
the VAT. When you process them into a different product,
it is no longer considered exempted. Canned goods are
already subject to VAT. Take note of sugar. If refined,
subject to VAT. If raw cane sugar, exempted.
In the case of copra, it is not technically an agricultural
food product. When RA 7716 took effect, copra was
taken out from exempted transactions. Copra was
subjected to VAT. Misamis Oriental Coco Traders (MOCT)
questioned the inclusion of copra to the VAT system. The
Supreme Court denied the protest of the MOCT because
copra can never be classified a food product. The
congress however included this in the recent
amendment. So now, it is again exempted.
(B) Sale or importation of fertilizers; seeds, seedlings and
fingerlings; fish, prawn, livestock and poultry feeds,
including ingredients, whether locally produced or
imported, used in the manufacture of finished feeds
(except specialty feeds for race horses, fighting cocks,
aquarium fish, zoo animals and other animals generally
considered as pets);
Special feeds are not included. They are subject to VAT.
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(C) Importation of personal and household effects
belonging to the residents of the Philippines returning from
abroad and nonresident citizens coming to resettle in the
Philippines: Provided, That such goods are exempt from
customs duties under the Tariff and Customs Code of the
Philippines;
(D) Importation of professional instruments and
implements, wearing apparel, domestic animals, and
personal household effects (except any vehicle, vessel,
aircraft, machinery, other goods for use in the
manufacture and merchandise of any kind in
commercial quantity) belonging to persons coming to
settle in the Philippines, for their own use and not for sale,
barter or exchange, accompanying such persons, or
arriving within ninety (90) days before or after their arrival,
upon the production of evidence satisfactory to the
Commissioner, that such persons are actually coming to
settle in the Philippines and that the change of residence
is bona fide;
(E) Services subject to percentage tax under Title V;
(F) Services by agricultural contract growers and milling
for others of palay into rice, corn into grits and sugar cane
into raw sugar;
Take note that refined sugar is not exempted. They are
subject to VAT.
G) Medical, dental, hospital and veterinary services
except those rendered by professionals;
Hospital bills for laboratory and other services will be
exempted from the VAT. But services rendered by doctors
are subject to the VAT
(H) Educational services rendered by private educational
institutions, duly accredited by the Department of
Education (DEPED), the Commission on Higher Education
(CHED), the Technical Education And Skills Development
Authority (TESDA) and those rendered by government
educational institutions;
Review schools and educational services not having
accreditation will be subject to VAT. Public government
educational institutions and State Universities are
exempted.
(I) Services rendered by individuals pursuant to an
employer-employee relationship;
(J) Services rendered by regional or area headquarters
established in the Philippines by multinational
corporations which act as supervisory, communications
and coordinating centers for their affiliates, subsidiaries or
branches in the Asia-Pacific Region and do not earn or
derive income from the Philippines;
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(K) Transactions which are exempt under international
agreements to which the Philippines is a signatory or
under special laws, except those under Presidential
Decree No. 529;
(L) Sales by agricultural cooperatives duly registered with
the Cooperative Development Authority to their members
as well as sale of their produce, whether in its original
state or processed form, to non-members; their
importation of direct farm inputs, machineries and
equipment, including spare parts thereof, to be used
directly and exclusively in the production and/or
processing of their produce;
(M) Gross receipts from lending activities by credit or
multi-purpose cooperatives duly registered with the
Cooperative Development Authority;
(N) Sales by non-agricultural, non-electric and non-credit
cooperatives duly registered with the Cooperative
Development Authority: Provided, That the share capital
contribution of each member does not exceed Fifteen
thousand pesos (P15,000) and regardless of the
aggregate capital and net surplus ratably distributed
among the members;
(O) Export sales by persons who are not VAT-registered;
(P) Sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of trade
or business, or real property utilized for low-cost and
socialized housing as defined by Republic Act No. 7279,
otherwise known as the Urban Development and Housing
Act of 1992, and other related laws, residential lot valued
at One million five hundred thousand pesos (P1,500,000)
and below, house and lot, and other residential dwellings
valued at Two million five hundred thousand pesos
(P2,500,000) and below:Provided, That not later than
January 31, 2009 and every three (3) years thereafter, the
amounts herein stated shall be adjusted to their present
values using the Consumer Price Index, as published by
the National Statistics Office (NSO);
The threshold for residential lots starting January 1, 2012 is
P1,919,500; and for house and lot, P 3,199,200. Every three
years, the amounts will be revisited to conform with the
CPI published by the NSO, to know if the values are still
realistic or not. This is called the ‘flexibility clause’.
(Q) Lease of a residential unit with a monthly rental not
exceeding Ten thousand pesos (P10,000) Provided, That
not later than January 31, 2009 and every three (3) years
thereafter, the amount herein stated shall be adjusted to
its present value using the Consumer Price Index as
published by the National Statistics Office (NSO);
New threshold starting January 1 2012 is P12,800. To those
below the threshold, they exempted from VAT. If over the
threshold, they are subject to VAT.
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(R) Sale, importation, printing or publication of books and
any newspaper, magazine, review or bulletin which
appears at regular intervals with fixed prices for
subscription and sale and which is not devoted
principally to the publication of paid advertisements;
Tolentino vs. Secretary of Finance
The sale or importation of books is subject to the VAT.
One of the petitioners there questioning the inclusion of
the sale of books, newspapers, publication as part of the
VAT system was the Philippine Press Institute. After the
enactment of 7716, congress came out with another
legislation exempting the sale of books.
(S) Transport of passengers by international carriers;
This is an amendment under 10378.
(T) Sale, importation or lease of passenger or cargo
vessels and aircraft, including engine, equipment and
spare parts thereof for domestic or international transport
operations;
(U) Importation of fuel, goods and supplies by persons
engaged in international shipping or air transport
operations;
(V) Services of bank, non-bank financial intermediaries
performing quasi-banking functions, and other non-bank
financial intermediaries; and
(W) 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 One
million five hundred thousand pesos
(P1,500,000): Provided, That not later than January 31,
2009 and every three (3) years thereafter, the amount
herein stated shall be adjusted to its present value using
the Consumer Price Index, as published by. the National
Statistics-Office (NSO);
Those in business with annual sale of P1,500,000 has the
option to be VAT or non VAT. If you go over the threshold
at any time during the year you must shift. The new
threshold is P1,919,500, which took effect on January
2012.
All taxpayers must register whether you are VAT or non
VAT. If you just started a business, you register as non VAT.
If by June you have reached the threshold, you must shift
and change your registration.
Those who registered as non VAT by reason that the sale
threshold has not reached the 1.9, does not mean that
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
they do not have business tax. They will liable to a tax
such as a percentage tax under 116.
SEC. 110. Tax Credits. -
(A) Creditable Input Tax. -
(1) Any input tax evidenced by a VAT invoice or official
receipt issued in accordance with Section 113 hereof on
the following transactions shall be creditable against the
output tax:
(a) Purchase or importation of goods:
(i) For sale; or
(ii) For conversion into or intended to form part of a
finished product for sale including packaging materials;
or
(iii) For use as supplies in the course of business; or
(iv) For use as materials supplied in the sale of service; or
(v) For use in trade or business for which deduction for
depreciation or amortization is allowed under this Code.
(b) Purchase of services on which a value-added tax has
actually been paid.
(2) The input tax on domestic purchase or importation of
goods or properties by a VAT-registered person shall be
creditable:
(a) To the purchaser upon consummation of sale and on
importation of goods or properties; and
(b) To the importer upon payment of the value-added tax
prior to the release of the goods from the custody of the
Bureau of Customs.
Provided, That the input tax on goods purchased or
imported in a calendar month for use in trade or business
for which deduction for depreciation is allowed under this
Code, shall be spread evenly over the month of
acquisition and the fifty-nine (59) succeeding months if
the aggregate acquisition cost for such goods, excluding
the VAT component thereof, exceeds One million pesos
(P1,000,000): Provided, however, That if the estimated
useful life of the capital good is less than five (5) years, as
used for depreciation purposes, then the input VAT shall
be spread over such a shorter period: Provided, finally,
that in the case of purchase of services, lease or use of
properties, the input tax shall be creditable to the
purchaser, lessee or licensee upon payment of the
compensation, rental, royalty or fee.
(3) A VAT-registered person who is also engaged in
transactions not subject to the value-added tax shall be
allowed tax credit as follows:
(a) Total input tax which, can be directly attributed to
transactions subject to value-add tax; and
(b) A ratable portion of any input tax which cannot be
directly attributed to either activity.
The term 'input tax' means the value-added tax due from
or paid by a VAT-registered person in the course of his
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
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include the transitional input tax determined in
accordance with Section 111 of this Code.
The term 'output tax' means the value-added tax due on
the sale or lease of taxable goods or properties or
services by any person registered or required to register
under Section 236 of this Code.
(B) Excess Output or Input Tax. - If at the end of any
taxable quarter the output tax exceeds the input tax, the
excess shall be paid by the VAT-registered person. If the
input tax exceeds the output tax, the excess shall be
carried over to the succeeding quarter or
quarters: Provided, That the input tax inclusive of input
VAT carried over from the previous quarter that may be
credited in every quarter shall not exceed seventy
percent (70%) of the output VAT: Provided, however, That
any input tax attributable to zero-rated sales by a VAT-
registered person may at his option be refunded or
credited against other internal revenue taxes, subject to
the provisions of Section 112.
(C) Determination of Creditable Input Tax. - The sum of
the excess input tax carried over from the preceeding
month or quarter and the input tax creditable to a VAT-
registered person during the taxable month or quarter
shall be reduced by the amount of claim for refund or tax
credit for value-added tax and other adjustments, such
as purchase returns or allowances and input tax
attributable to exempt sale.
The claim for tax credit referred to in the foregoing
paragraph shall include not only those filed with the
Bureau of Internal Revenue but also those filed with other
government agencies, such as the Board of Investments
and the Bureau of Customs."
The VAT payable is determined from Output VAT – Input
VAT.
When you would claim credits from input VAT, this will be
sourced from your purchases Upon issuance of receipt,
you will see there that there is a VAT passed on to you.
That will be your source of your input VAT.
Example: You purchased five delivery trucks for the use of
your business. These trucks will be subject to depreciation.
Depreciation is a tax deduction from the point of view of
income taxation. In the course of their purchase, the
seller pass on the VAT to the buyer which will form part of
the purchase price. Since all five trucks are purchased in
one month, the input VAT will bloat during that month.
However, the law does not allow you to claim all of them
at once. You are allowed to spread evenly from the
month of acquisition and 59 months thereafter.
Under this formula, you make a remittance monthly and
quarterly. During the month of March, you purchased 20
delivery trucks. The entirety of the input cannot be
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
claimed one time. You are allowed to spread that out for
a period of 60 months or 5 years.
If the depreciation will only be good for less than 5 years,
you spread the input for the same number of years. You
do not need to extend to five years.
VAT-registered person who is also engaged in
transactions not subject to the value-added tax
This is the dilemma of taxpayer who is engaged both in
non-VAT and VAT activities, like a supermarket, or a
grocery store. You will be selling VATabale and NON
VATable items and you engage janitorial services and
security guard services. Are you allowed to claim the
entire input VAT against the total output VAT? No. You
have to ratably spread it out. If the security guard that
you engage is VAT but he guards non-VAT products, then
you cannot immediately claim. But if you engage a
janitorial service to do the cleaning and upkeep of VAT
activities, the entirety of that service could be claimed as
an input VAT credit. But if the VAT services you engaged
is used for both VAT and nonVAT activity, then if you
could not directly attribute the input VAT against the
output VAT then you should ratably apportion the input
VAT.
If you can directly attributable, then the entirety will be
charged. But if the services are engaged to both VAT
and non-VAT activity, you allocate. If the security agancy
passed on about 20,000 VAT for the services, and 60% of
your activities are VAT, then 60% of your input may be
admitted as creditable against the output VAT. The rest is
not chargeable.
If you have an excess output, you pay the VAT. If you
have an excess input, then you are given an option to
ask for refund or tax credit. If you are subject to 12% VAT,
have the excess carried-over. If you are a xero rated
taxpayer, the excess will be claimed by way of a refund.
SEC. 111. Transitional/ Presumptive Input Tax Credits. -
"(A) Transitional Input Tax Credits. - A person who
becomes liable to value-added tax or any person who
elects to be a VAT-registered person shall, subject to the
filing of an inventory according to rules and regulations
prescribed by the Secretary of Finance, upon
recommendation of the Commissioner, be allowed input
tax on his beginning inventory of goods, materials and
supplies equivalent to two percent (2%) of the value of
such inventory or the actual value-added tax paid on
such goods, materials and supplies, whichever is higher,
which shall be creditable against the output tax.
"(B) Presumptive Input Tax Credits. -
"Persons or firms engaged in the processing of sardines,
mackerel and milk, and in manufacturing refined sugar,
cooking oil and packed noodle based instant meals,
shall be allowed a presumptive input tax, creditable
against the output tax, equivalent to four percent (4%) of
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the gross value in money of their purchases of primary
agricultural products which are used as inputs to their
production.
"As used in this Subsection, the term 'processing' shall
mean pasteurization, canning and activities which
through physical or chemical process alter the exterior
texture or form or inner substance of a product in such
manner as to prepare it for special use to which it could
not have been put in its original form or condition."
READ: Revenue Regulation 16-2005
Transitional Input Tax
Example: He used to be non-VAT taxpayer. He reached
the threshold for annual receipts. She is now required to
shift from non-VAT to VAT. All sales will now be subject to
VAT. At the time of transition, he has unsold merchandise.
The law grants him, under 111b, a transitional input tax
credit, on his beginning inventory or unsold merchandise
equivalent to 2% of the value of the inventory or the
actual VAT paid to such goods materials and supplies.
The VAT passed on to him by the suppliers of the goods
forming part of his inventory can be used by him as input
VAT if he could attribute it that is he was able to trace the
VAT from this unsold inventory at the time of the transition.
But if he cannot trace, he is given 2% of the value of such
inventory as tax credit. So the transitional input that will
be given to her will either be 2% of the value of the
inventory or the actual VAT that was charged on to him
for such purchase of goods, materials and supplies,
whatever is higher, which shall be the creditable against
the output
Presumptive Input Tax
This covers those who use raw materials which are non-
VAT but the finished product is already VATable (Fish
processed as sardines). The law will give you that
presumption that you will be entitled to an input VAT.
Take note that refined sugar is included here. The raw
sugar, is non-VATable. But if you refine it, that is already
VATable.
So the value of the fish that you purchase to process
sardines, 4% of the gross value of which will be the
presumptive input VAT, that will be claimed as a
deduction from the output VAT of your sales.
SEC. 112. Refunds or Tax Credits of Input Tax. -
(A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-
registered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after the
close of the taxable quarter when the sales were made,
apply for the issuance of a tax credit certificate or refund
of creditable input tax due or paid attributable to such
sales, except transitional input tax, to the extent that such
input tax has not been applied against output
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
tax: Provided, however, That in the case of zero-rated
sales under Section 106(A)(2)(a)(1), (2) and (b) and
Section 108 (B)(1) and (2), the acceptable foreign
currency exchange proceeds thereof had been duly
accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas
(BSP): Provided, further, That where the taxpayer is
engaged in zero-rated or effectively zero-rated sale and
also in taxable or exempt sale of goods of properties or
services, and the amount of creditable input tax due or
paid cannot be directly and entirely attributed to any one
of the transactions, it shall be allocated proportionately
on the basis of the volume of sales: Provided, finally, That
for a person making sales that are zero-rated under
Section 108 (B)(6), the input taxes shall be allocated
ratably between his zero-rated and non-zero-rated sales.
"(B) Cancellation of VAT Registration. - A person whose
registration has been cancelled due to retirement from or
cessation of business, or due to changes in or cessation
of status under Section 106(C) of this Code may, within
two (2) years from the date of cancellation, apply for the
issuance of a tax credit certificate for any unused input
tax which may be used in payment of his other internal
revenue taxes.
"(C) Period within which Refund or Tax Credit of Input
Taxes shall be Made. - In proper cases, the Commissioner
shall grant a refund or issue the tax credit certificate for
creditable input taxes within one hundred twenty (120)
days from the date of submission of complete documents
in support of the application filed in accordance with
Subsection (A) hereof.
"In case of full or partial denial of the claim for tax refund
or tax credit, or the failure on the part of the
Commissioner to act on the application within the period
prescribed above, the taxpayer affected may, within
thirty (30) days from the receipt of the decision denying
the claim or after the expiration of the one hundred
twenty day-period, appeal the decision or the unacted
claim with the Court of Tax Appeals.
"(D) Manner of Giving Refund. - Refunds shall be made
upon warrants drawn by the Commissioner or by his duly
authorized representative without the necessity of being
countersigned by the Chairman, Commission on Audit,
the provisions of the Administrative Code of 1987 to the
contrary notwithstanding: Provided, That refunds under
this paragraph shall be subject to post audit by the
Commission on Audit."
This is in relation to 110b.
In the case of zero rated, you have a zero output VAT,
but you have input VAT from your purchases you will have
an excess. The law allows you to file a claim for refund or
ask for the issuance of a tax credit certificate. The fling of
the claim under 112 is not on a monthly basis but the end
of every quarter. So you have 2 years from the close of
every taxable quarter to file for refund.
Cancellation fo VAT registration.
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So if you cease conducting your business, your
registration will be canceled. You have 2 years from the
date of cancellation to file for the issuance of a tax credit
certificate for any unused input tax.
SEC. 113. Invoicing and Accounting Requirements for
VAT-Registered Persons. -
(A) Invoicing Requirements. - A VAT-registered person
shall issue:
(1) A VAT invoice for every sale, barter or exchange of
goods or properties; and
(2) A VAT official receipt for every lease of goods or
properties, and for every sale, barter or exchange of
services.
(B) Information Contained in the VAT Invoice or VAT
Official Receipt. - The following information shall be
indicated in the VAT invoice or VAT official receipt:
(1) A statement that the seller is a VAT-registered person,
followed by his taxpayer's identification number (TIN);
(2) The total amount which the purchaser pays or is
obligated to pay to the seller with the indication that such
amount includes the value-added tax: Provided, That:
(a) The amount of the tax shall be shown as a separate
item in the invoice or receipt;
(b) If the sale is exempt from value-added tax, the term
VAT-exempt sale" shall be written or printed prominently
on the invoice or receipt;
(c) If the sale is subject to zero percent (0%) value-added
tax, the term "zero-rated sale" shall be written or printed
prominently on the invoice or receipt;
(d) If the sale involves goods, properties or services some
of which are subject to and some of which are VAT zero-
rated or VAT-exempt, the invoice or receipt shall clearly
indicate the breakdown of the sale price between its
taxable, exempt and zero-rated components, and the
calculation of the value-added tax on each portion of the
sale shall be shown on the invoice or receipt:
Provided, That the seller may issue separate invoices or
receipts for the taxable, exempt, and zero-rated
components of the sale.
(3) The date of transaction, quantity, unit cost and
description of the goods or properties or nature of the
service; and
(4) In the case of sales in the amount of one thousand
pesos (P1,000) or more where the sale or transfer is made
to a VAT-registered person, the name, business style, if
any, address and taxpayer identification number (TIN) of
the purchaser, customer or client.
(C) Accounting Requirements. - Notwithstanding the
provisions of Section 233, all persons subject to the value-
added tax under Sections 106 and 108 shall, in addition to
the regular accounting records required, maintain a
subsidiary sales journal and subsidiary purchase journal
on which the daily sales and purchases are recorded. The
subsidiary journals shall contain such information as may
be required by the Secretary of Finance.
(D) Consequence of Issuing Erroneous Vat Invoice or Vat
Official Receipt. -
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(1) If a person who is not a VAT-registered person issues
an invoice or receipt showing his Taxpayer Identification
Number (TIN), followed by the word "VAT":
(a) The issuer shall, in addition to any liability to other
percentage taxes, be liable to:
(i) The tax imposed in Section 106 or 108 without the
benefit of any input tax credit; and
(ii) A 50% surcharge under Section 248 (B) of this code;
(b) The VAT shall, if the other requisite information
required under Subsection (B) hereof is shown on the
invoice or receipt, be recognized as an input tax credit to
the purchaser under Section 110 of this Code.
(2) If a VAT-registered person issues a VAT invoice or VAT
official receipt for a VAT-exempt transaction, but fails to
display prominently on the invoice or receipt the term
VAT-exempt Sale", the issuer shall be liable to account for
the tax imposed in Section 106 or 108 as if Section 109 did
not apply.
(E) Transitional Period. - Notwithstanding Subsection (B)
hereof, taxpayers may continue to issue VAT invoices and
VAT official receipts for the period July 1, 2005 to
December 31, 2005, in accordance with Bureau of
Internal Revenue administrative practices that existed as
of December 31, 2004."
When you go over decisions made by the Supreme Court
on VAT requirements, specifically invoicing and
accounting requirements, it is required in the invoice that
you imprint whether you are VAT registered or non-VAT
registered, and whether you are subject to 12 % or 0 %. If
taxpayer is both non-VAT and VAT, he may maintain two
set of invoices one for VAT and one for non-VAT. For VAT
activity, that may either be 12% or zero rated. You have
to maintain the invoices because you are not allowed to
issue an invoice on your non-VAT activity to a sale you
made on a VATable sale or to you use a VAT invoice to a
non-VAT sale.
Whether it is an invoice or an OR, it is still the same. The
selling price should be the price appearing in the invoice.
The amount of the tax shall be shown as a separate item.
So you have to unbundle the price: what constitute the
gross, the VAT and the total price.
In the supermarket, the receipt is very long. In the bottom,
you will see the breakdown which is VATable,
nonVATable and zero rated.
If the sale you made is 1000 or more, you ask the name of
the customer and put his name in the invoice. Lower than
that you can indicate ‘pay to cash’.
SEC. 114. Return and Payment of Value-Added Tax. -
(A) In General. - Every person liable to pay the value-
added tax imposed under this Title shall file a quarterly
return of the amount of his gross sales or receipts within
twenty-five (25) days following the close of each taxable
quarter prescribed for each taxpayer: Provided,
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however, That VAT-registered persons shall pay the
value-added tax on a monthly basis.
Any person, whose registration has been cancelled in
accordance with Section 236, shall file a return and pay
the tax due thereon within twenty-five (25) days from the
date of cancellation of registration: Provided, That only
one consolidated return shall be filed by the taxpayer for
his principal place of business or head office and all
branches.
(B) Where to File the Return and Pay the Tax. - Except as
the Commissioner otherwise permits, the return shall be
filed with and the tax paid to an authorized agent bank,
Reveenue Collection Officer or duly authorized city or
municipal Treasurer in the Philippines located within the
revenue district where the taxpayer is registered or
required to register.
(C) Withholding of Value-Added Tax. - The Government
or any of its political subdivisions, instrumentalities or
agencies, including government-owned or -controlled
corporations (GOCCs) shall, before making payment on
account of each purchase of goods and services which
are subject to the value-added tax imposed in Sections
106 and 108 of this Code, deduct and withhold a final
value-added tax at the rate of five percent (5%) of the
gross payment thereof: Provided, That the payment for
lease or use of properties or property rights to nonresident
owners shall be subject to ten percent (10%) withholding
tax at the time of payment. For purposes of this Section,
the payor or person in control of the payment shall be
considered as the withholding agent.
The value-added tax withheld under this Section shall be
remitted within ten (10) days following the end of the
month the withholding was made.
The monthly VAT, you have to file within 20 days following
the end of each month. For the quarterly, you have to
pay 25 days after the close of each taxable quarter. For
the first two months, monthly retren. In the third month,
quarterly return.
If you are a contractor of the government, on account of
the government’s purchase of goods and services, the
government will withhold a VAT for 5% and 12% for lease.
If it is a final withholding of the VAT, there is no need to
make a declaration. So whatever you supply to the
government the 5% is independent because the
government will withhold.
SEC. 115. Power of the Commissioner to Suspend the
Business Operations of a Taxpayer. - The Commissioner or
his authorized representative is hereby empowered to
suspend the business operations and temporarily close
the business establishment of any person for any of the
following violations:
(a) In the case of a VAT-registered Person. -
(1) Failure to issue receipts or invoices;
(2) Failure to file a value-added tax return as required
under Section 114; or
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(3) Understatement of taxable sales or receipts by thirty
percent (30%) or more of his correct taxable sales or
receipts for the taxable quarter.
(b) Failure of any Person to Register as Required under
Section 236. - The temporary closure of the establishment
shall be for the duration of not less than five (5) days and
shall be lifted only upon compliance with whatever
requirements prescribed by the Commissioner in the
closure order.
To lift, you will make an undertaking stating that you will
fix whatever you did wrong.
CASES:
CIR vs. San Roque power corporation, 690 SCRA 331
Mindao 2 Geothermal vs. CIR 693 SCRA 49
The San Roque case is the first decided case en banc
which clarified the proper way to file a claim for refund.
Q: What is the difference between a claim for refund
under 229, and under section 112 in the VAT provisions?
A: When you would file a claim for refund for excess tax
credits in the case of VAT, you go to the VAT provisions.
Section 229 is not the applicable law for purposes of filing
a claim for refund in the case of the excess input VAT.
In the case of the 12% VAT, the formula in claiming the
VAT is determined on the output VAT – input VAT to arrive
to the amount payable.If during the quarter, the input
VAT is greater than the output VAT, you will have an
excess input VAT. For zero-ratedd, you have 0 output VAT
and you have an input VAT. You will also end up on an
excess input VAT.
Section 112 gives you the procedure. The cases will help
you understand.
For those subject to 12% VAT, the excess input will not be
subject for refund claim because the rule is carry over the
excess credits in the next taxable months or quarters. This
is answered in Section 100b. If at the end of every
quarter, the output tax exceeds the input tax, you will
pay the tax. If the input tax exceeds the output tax, the
excess shall be carried over to the succeeding quarter or
quarters. So there is no refund,
But for zero-rated, the excess can be refunded or
credited against other internal revenue taxes.
Under Section 112a, when you have an excess input VAT
by reason that you have zero-rated sales, the filing for
refund is within 2 years after the close of the taxable
quarter. At every end of the taxable quarter, you should
file a claim for refund. The filing of the VAT is monthly for
the first two months, and quarterly for the third month. The
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prescriptive period is two years to file the claim from the
end of the taxable quarter. If at the end of every taxable
quarter, there is an excess input VAT, file a claim for
refund.
After filing a claim for refund within two years from the
end of the taxable quarter, BIR has 120 days within which
to decide. Decision will either to grant or deny. If there is
a denial, you are given 30 days from the denial to go to
the CTA by division, then you go to CTA en banc, and
then you go to the Supreme Court. If there is inaction, you
have 30 days from expiration of the 120 day period, to go
to the CTA. If there is a decision within the 120 days, you
have 30 days after denial to go to the CTA. No Motion for
Reconsideration is allowed.
The other provision that would come in is Section 229
which is also for filing a claim for refund. This applies to
taxes erroneously or illegally collected. Section 112 is not
for erroneously collected VAT. It just so happens that
there is an excess. But Section 229 is for erroneously
collected internal revenue taxes.
Under Section 229, the claim or refund shall be filed within
2 years from payment. At any time between the 2 year
period, you file an administrative claim for refund with the
BIR. If denied, go to the CTA within the same 2 years.
The law requires that when you file an administrative
claim before the BIR, it shall also be within the 2 year
period. When you bring the matter to CTA, it must also be
within 2 years. When you file an administrative claim for
refund, it should be filed within 2 years. While waiting for
the decision, do not wait for the two year period to lapse.
Prior to the expiration, go to the CTA. Otherwise, if you will
wait and then BIR will deny after 2 years, you are already
precluded to go to the CTA. This is provided under the
law creating the CTA.
In case of inaction by the BIR on your claim for refund,
you should bring the case to the CTA. That is a
mandatory requirement.
In case of income tax, the deadline is April 15 for annual
filing in case of an individual taxpayer. If you paid the tax
on April 1, the two year period is counted from date of
payment. Once you discovered that the tax is
erroneously collected, you file for refund. If you have
excess income tax credits, because you have overpaid,
that is considered erroneous, so you are given 2 years
from the filing of the annual return, to file a claim for
refund administratively. If the two years is about to
prescribe, do not wait for the decision, file directly to the
CTA.
The two year period in the case of Section 112 is different
from Section 229 because what has been the perception
prior to this rulings is that when the two year period is
about to prescribe, you must go to the CTA. The SC in San
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Roque said that the 2 year period from the end of the
taxable year, is the period within which to file a claim.
Even if you file on the last day of the two year period, it
will not expire because the BIR is given 120 days to
decide. Which is different in Section 229 because if you
file on the last day, the following day, the action has
already prescribed. What is required in Section 229 is that
the administrative and judicial actions are filed within the
two year period. But in the case of Section 112, the filing
of the claim or refund is at any time, even on the last day
of the two year period. Then you count 120 days. If there
is inaction, you have 30 days to file the claim with the
CTA.
Summary: A VAT registered person whose sale is zero
rated may apply for a refund or credit within 2 years after
the close of the taxable quarter when the sale was
made. The CIR has 120 days from the submission of
complete documents in support of an application within
which to act on the claim. After CIR decision or inaction,
taxpayer may appeal to the CTA within 30 days from
receipt of the decision or after the expiration of the 120
day period. The 120 plus 30 rule is mandatatory and
jurisdictional in case of inaction. The CTA does not
acquire jurisdiction over a judicial claim that is filed
before the 120 period expires. Failure of the taxpayer to
elevate his claim within 30 days will bar any subsequent
judicial claim for refund.
Excess input tax is not an erroneously collected tax. A
claim for refund is in the nature of a tax exemption which
is based on the specific provision of law which allows the
VAT registered person to recover the excess input taxes
paid in relation to his sales hence the claim for refund for
excess input tax is governed by section 112 and not
section 229 of the NIRC.
Those who are non zero rated, according to Section
100b, the excess input can only be carried over and
applied against future output tax.
Section 229 apply only to erroneous payment of internal
revenue taxes. But if you have a claim for an erroneously
collected VAT, you can now apply 229,
OTHER PERCENTAGE TAXES
These taxes under Title V are among those enumerated in
Section 109 on exempted transactions. These are the
transactions which are not subject to the VAT because
they are subject to a different tax.
SEC. 116. Tax on Persons Exempt From Value-Added Tax
(VAT). - Any person whose sales or receipts are exempt
under Section 109(z) of this Code from the payment of
value-added tax and who is not a VAT-registered person
shall pay a tax equivalent to three percent (3%) of his
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gross quarterly sales or receipts: Provided, That
cooperatives shall be exempt from the three percent
(3%)gross receipts tax herein imposed.
When you are exempted from the VAT, it does not follow
that you no longer have business tax. You will be subject
to the 3% percentage tax. These are the taxpayers whose
transactions did not reach the maximum annual
threshold, then it has the option whether to register as
VAT or non-VAT. If he opted to register as non-VAT
because it had not reached the threshold of its annual
sales, where it should have been subject to the VAT, in
that case, the business will be subject to the 3% tax under
Section 116 as a percentage tax. If he opted to register
as VAT even though his sales did not reach the threshold,
then he follows the VAT remittance: output-input.
In the case of percentage taxes under Title V, it does not
follow the same format of paying. Id does not have
creditable input percentage. So you directly multiply the
gross receipt to 3%. Cooperatives are exempted.
SEC. 117. Percentage Tax on Domestic Carriers and
Keepers of Garages.- Cars for rent or hire driven by the
lessee, transportation contractors, including persons who
transport passengers for hire, and other domestic carriers
by land, air or water, for the transport of passengers,
except owners of bancas and owner of animal-drawn
two wheeled vehicle, and keepers of garages shall pay a
tax equivalent to three percent (3%) of their quarterly
gross receipts.
The gross receipts of common carriers derived from their
incoming and outgoing freight shall not be subjected to
the local taxes imposed under Republic Act No. 7160,
otherwise known as the Local Government Code of 1991.
In computing the percentage tax provided in this Section,
the following shall be considered the minimum quarterly
gross receipts in each particular case:
Jeepney for hire -
1. Manila and other cities P 2,400
2. Provincial 1,200
Public utility bus -
Not exceeding 30 passengers 3,600
Exceeding 30 but not exceeding 50 passengers 6,000
Exceeding 50 passengers 7,200
Taxis -
1. Manila and other cities P 3,600
2. Provincial 2,400
Car for hire (with chauffer) 3,000
Car for hire (without chauffer) 1,800
This is the common carriers tax by land. Those by sea and
air fall within the VAT system. The carriers referred to here
are the domestic land carriers.
Since there are minimum values provided for in the
provisions for gross receipts, even if your actual gross
receipt is lower than that, you will have to use the
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
minimum amount as provided in the provision in
computing your percentage tax.
SEC. 118. Percentage Tax on International Carriers. —
(A) International air carriers doing; business in the
Philippines on their gross receipts derived from transport
of cargo from the Philippines to another country shall pay
a tax of three percent (3%) of their quarterly gross
receipts.
(B) International shipping carriers doing business in the
Philippines on their gross receipts derived from transport
of cargo from the Philippines to another country shall pay
a tax equivalent to three percent (3%) of their quarterly
gross receipts."
This section has been amended by RA 10378. The
international carriers doing business in the Philippines will
pay a tax of 3% of their gross quarterly receipts, which
includes the transport of cargo from the Philippines to
another country. So when you talk about international
carriers, this does not only include the passage of
passengers but it includes the transport of cargo from the
Philippines to another country. The air carriers whether for
cargo or for passenger will be subject to percentage tax.
The same rate applies to shipping carriers.
In the case of domestic carriers, whether by air or by sea,
with foreign destination, they fall under zero rated
transactions under Section 108b.
SEC. 119. Tax on Franchises. - Any provision of general or
special law to the contrary notwithstanding, there shall be
levied, assessed and collected in respect to all franchises
on radio and/or television broadcasting companies
whose annual gross receipts of the preceding year does
not exceed Ten million pesos (P10,000,000), subject to
Section 236 of this Code, a tax of three percent (3%) and
on gas and water utilities, a tax of two percent (2%) on
the gross receipts derived from the business covered by
the law granting the franchise: Provided, however, That
radio and television broadcasting companies referred to
in this Section shall have an option to be registered as a
value-added taxpayer and pay the tax due
thereon:Provided, further, That once the option is
exercised, said option shall be irrevocable.
"The grantee shall file the return with, and pay the tax due
thereon to the Commissioner or his duly authorized
representative, in accordance with the provisions of
Section 128 of this Code, and the return shall be subject
to audit by the Bureau of Internal Revenue, any provision
of any existing law to the contrary notwithstanding.
The radio and television broadcasting companies with
10,000,000 or less gross annual receipts will be under
franchise tax. But the radio or television broadcasting
companies whose annual gross receipts is more than
10,000,000, they are covered by VAT under Section 108.
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However, whether their sales is less than or greater than
10,000,000, they have the option to register as VAT or non-
VAT. If they register as VAT, he will be covered by VAT
law.
SEC. 120. Tax on Overseas Dispatch, Message or
Conversation Originating from the Philippines. -
(A) Persons Liable. - There shall be collected upon every
overseas dispatch, message or conversation transmitted
from the Philippines by telephone, telegraph, telewriter
exchange, wireless and other communication equipment
service, a tax of ten percent (10%) on the amount paid for
such services.
The tax imposed in this Section shall be payable by the
person paying for the services rendered and shall be
paid to the person rendering the services who is required
to collect and pay the tax within twenty (20) days after
the end of each quarter.
(B) Exemptions. - The tax imposed by this Section shall not
apply to:
(1) Government. - Amounts paid for messages
transmitted by the Government of the Republic of the
Philippines or any of its political subdivisions or
instrumentalities; (2) Diplomatic Services. - Amounts paid
for messages transmitted by any embassy and consular
offices of a foreign government; (3)International
Organizations. - Amounts paid for messages transmitted
by a public international organization or any of its
agencies based in the Philippines enjoying privileges,
exemptions and immunities which the Government of the
Philippines is committed to recognize pursuant to an
international agreement; and (4) News Services. -
Amounts paid for messages from any newspaper, press
association, radio or television newspaper, broadcasting
agency, or newstickers services, to any other newspaper,
press association, radio or television newspaper
broadcasting agency, or newsticker service or to a bona
fide correspondent, which messages deal exclusively
with the collection of news items for, or the dissemination
of news item through, public press, radio or television
broadcasting or a newsticker service furnishing a general
news service similar to that of the public press.
These are overseas dispatch operators originating from
the Philippines. The rate is 10%.
Exempted are those dispatches with the government,
diplomatic services and international organization and
news services. They are exempted from these charges.
SEC. 121. Tax on Banks and Non-Bank Financial
Intermediaries Performing Quasi-Banking Functions. -
There shall be collected a tax on gross receipts derived
from sources within the Philippines by all banks and non-
bank financial intermediaries in accordance with the
following schedule:
(a) On interest, commissions and discounts from lending
activities as well as income from financial leasing, on the
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
basis of remaining maturities of instruments from which
such receipts are derived:
Maturity period is five years or less 5%
Maturity period is more than five years 1%
(b) On dividends and equity shares and net income of
subsidiaries 0%
(c) On royalties, rentals of property, real or personal,
profits, from exchange and all other items treated as
gross income under Section 32 of this Code 7%
(d) On net trading gains within the taxable year on
foreign currency, debt securities, derivatives, and other
similar financial instruments 7%
Provided, however, That in case the maturity period
referred to in paragraph (a) is shortened thru pre-
termination, then the maturity period shall be reckoned to
end as of the date of pre-termination for purposes of
classifying the transaction and the correct rate of tax shall
be applied accordingly.
Provided, finally, That the generally accepted accounting
principles as may be prescribed by the Bangko Sentral
ng Pilipinas for the bank or non-bank financial
intermediary performing quasi-banking functions shall
likewise be the basis for the calculation of gross receipts.
Nothing in this Code shall preclude the Commissioner
from imposing the same tax herein provided on persons
performing similar banking activities."
Banks and financial intermediaries make money through
lending. You have here a range of rates depending on
the activity. Familiarize yourself with the rates.
The taxes under the percentage taxes, even in the VAT
are taxes different from income. If you engage in a
business subject to the VAT, you pay VAT as well as the
income tax. They are two different taxes. There is no
double-taxation there.
SEC. 122. Tax on Finance Companies. - There shall be
collected a tax of five percent (5%) on the gross receipts
derived by all finance companies, as well as by other
financial intermediaries not performing quasi-banking
functions dong business in the Philippines, from interest,
discounts and all other items treated as gross income
under this Code: Provided, That interests, commissions
and discounts from lending activities, as well as income
from financial leasing, shall be taxed on the basis of the
remaining maturities of the instruments from which such
receipts are derived, in accordance with the following
schedule:
Short-term maturity (non in excess of two (2) years) 5%
Medium-term maturity (over two (2) years but not
exceeding four (4) years) 3% Long-term maturity -
(1) Over four (4) years but not exceeding seven (7) 1%
(2) Over seven (7) years 0%
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Provided, however, That in case the maturity period is
shortened thru pretermination, then the maturity period
shall be reckoned to end as of the date of pretermination
for purposes of classifying the transaction as short,
medium or long-term and the correct rate of tax shall be
applied accordingly.
Nothing in this Code shall preclude the Commissioner
from imposing the same tax herein provided on persons
performing similar financing activities.
You also have different rates here depending on the
lending activity.
SEC. 123. Tax on Life Insurance Premiums. - There shall be
collected from every person, company or corporation
(except purely cooperative companies or associations)
doing life insurance business of any sort in the Philippines
a tax of two percent (2%) of the total premium collected,
whether such premiums are paid in money, notes, credits
or any substitute for money; but premiums refunded within
six (6) months after payment on account of rejection of
risk or returned for other reason to a person insured shall
not be included in the taxable receipts; nor shall any tax
be paid upon reinsurance by a company that has
already paid the tax; nor upon doing business outside the
Philippines on account of any life insurance of the insured
who is a nonresident, if any tax on such premium is
imposed by the foreign country where the branch is
established nor upon premiums collected or received on
account of any reinsurance , if the insured, in case of
personal insurance, resides outside the Philippines, if any
tax on such premiums is imposed by the foreign country
where the original insurance has been issued or
perfected; nor upon that portion of the premiums
collected or received by the insurance companies on
variable contracts (as defined in section 232(2) of
Presidential Decree No. 612), in excess of the amounts
necessary to insure the lives of the variable contract
workers.
Cooperative companies or associations are such as are
conducted by the members thereof with the money
collected from among themselves and solely for their
own protection and not for profit.
Those in the life insurance business, the premiums that you
whether monthly or annually, the tax is already charged.
These are indirect taxes which are passed on to the
buyer, already bult in on the purchase price.
SEC. 124. Tax on Agents of Foreign Insurance
Companies. - Every fire, marine or miscellaneous
insurance agent authorized under the Insurance Code to
procure policies of insurance as he may have previously
been legally authorized to transact on risks located in the
Philippines for companies not authorized to transact
business in the Philippines shall pay a tax equal to twice
the tax imposed in Section 123: Provided, That the
provision of this Section shall not apply to
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
reinsurance: Provided, however, That the provisions of this
Section shall not affect the right of an owner of property to
apply for and obtain for himself policies in foreign
companies in cases where said owner does not make
use of the services of any agent, company or corporation
residing or doing business in the Philippines.
In all cases where owners of property obtain insurance
directly with foreign companies, it shall be the duty of
said owners to report to the Insurance Commissioner and
to the Commissioner each case where insurance has
been so effected, and shall pay the tax of five percent
(5%) on premiums paid, in the manner required by
Section 123.
You pay twice the tax imposed in Section 123. So you pay
4%.
These are foreign insurance companies which have no
license to do business in the Philippines, but they have
agents. So the agents are the ones liable.
SEC. 125. Amusement Taxes. - There shall be collected
from the proprietor, lessee or operator of cockpits,
cabarets, night or day clubs, boxing exhibitions,
professional basketball games, Jai-Alai and racetracks, a
tax equivalent to:
(a) Eighteen percent (18%) in the case of cockpits;(b)
Eighteen percent (18%) in the case of cabarets, night or
day clubs;(c) Ten percent (10%) in the case of boxing
exhibitions: Provided, however, That boxing exhibitions
wherein World or Oriental Championships in any division
is at stake shall be exempt from amusement tax:
Provided, further, That at least one of the contenders for
World or Oriental Championship is a citizen of the
Philippines and said exhibitions are promoted by a
citizen/s of the Philippines or by a corporation or
association at least sixty percent (60%) of the capital of
which is owned by such citizens;(d) Fifteen percent (15%)
in the case of professional basketball games as
envisioned in Presidential Decree No. 871:Provided,
however, That the tax herein shall be in lieu of all other
percentage taxes of whatever nature and description;
and(e) Thirty percent (30%) in the case of Jai-Alai and
racetracks of their gross receipts, irrespective, of whether
or not any amount is charged for admission.
For the purpose of the amusement tax, the term "gross
receipts" embraces all the receipts of the proprietor,
lessee or operator of the amusement place.
Said gross receipts also include income from television,
radio and motion picture rights, if any.
A person or entity or association conducting any activity
subject to the tax herein imposed shall be similarly liable
for said tax with respect to such portion of the receipts
derived by him or it.
The taxes imposed herein shall be payable at the end of
each quarter and it shall be the duty of the proprietor,
lessee or operator concerned, as well as any party liable,
within twenty (20) days after the end of each quarter, to
make a true and complete return of the amount of the
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gross receipts derived during the preceding quarter and
pay the tax due thereon.
There is a corresponding amusement tax in the local
government code (LGC). But predominantly the
amusement tax under the LGC is imposed on movie
houses, concerts, etc. The amusement tax under the
NIRCs covers cockpits, night and day clubs, etc.
The taxes are most of the time made part of the tickets
sales. So the buyer carries the burden of the tax.
In one case, when the PBA was held in Pasay, The City of
Pasay charged amusement tax under the local
government code. The PBA contested the assessment
claiming that they are not subject to the amusement tax
under the LGC. The City of Pasay contended that they
are covered because the provision under the LGC is that
in the enumeration of the amusements that will be
covered by the local amusement tax, under Section 140,
there included is the term ‘other places of amusement’.
SC said that Pasay is wrong because under the rules of
ejusdem generis, you construe the last item based on
what has been enumerated previously. Therefore,
professional basketball games does fall under the power
of the local government to charge amusement taxes.
SEC. 126. Tax on Winnings. - Every person who wins in
horse races shall pay a tax equivalent to ten percent
(10%) of his winnings or 'dividends', the tax to be based
on the actual amount paid to him for every winning ticket
after deducting the cost of the ticket: Provided, That in the
case of winnings from double, forecast/quinella and
trifecta bets, the tax shall be four percent (4%).
In the case of owners of winning race horses, the tax shall
be ten percent (10%) of the prizes.
The tax herein prescribed shall be deducted from the
'dividends' corresponding to each winning ticket or
the "prize" of each winning race horse owner and
withheld by the operator, manager or person in charge of
the horse races before paying the dividends or prizes to
the persons entitled thereto.
The operator, manager or person in charge of horse races
shall, within twenty (20) days from the date the tax was
deducted and withheld in accordance with the second
paragraph hereof, file a true and correct return with the
Commissioner in the manner or form to be prescribed by
the Secretary of Finance, and pay within the same period
the total amount of tax so deducted and withheld.
The winnings are supposedly covered by income tax, but
the winnings here come from horse races. Before the
price is given to you, the tax is already deducted. Owners
of the winning race horses, they will also be taxed.
SEC. 127. Tax on Sale, Barter or Exchange of Shares of
Stock Listed and Traded Through the Local Stock
Exchange or Through Initial Public Offering. -
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(A) Tax on Sale, Barter or Exchange of Shares of Stock
Listed and Traded Through the Local Stock Exchange. -
There shall be levied, assessed and collected on every
sale, barter, exchange, or other disposition of shares of
stock listed and traded through the local stock exchange
other than the sale by a dealer in securities, a tax at the
rate of one-half of one percent (1/2 of 1%) of the gross
selling price or gross value in money of the shares of
stock sold, bartered, exchanged or otherwise disposed
which shall be paid by the seller or transferor.
(B) Tax on Shares of Stock Sold or Exchanged Through
Initial Public Offering. - There shall be levied, assessed
and collected on every sale, barter, exchange or other
disposition through initial public offering of shares of stock
in closely held corporations, as defined herein, a tax at
the rates provided hereunder based on the gross selling
price or gross value in money of the shares of stock sold,
bartered, exchanged or otherwise disposed in
accordance with the proportion of shares of stock sold,
bartered, exchanged or otherwise disposed to the total
outstanding shares of stock after the listing in the local
stock exchange:
Up to twenty-five percent (25%)& 4%
Over twenty-five percent (25%) but not over thirty-three
and one third percent (33 1/3%) 2%
Over thirty-three and one third percent (33 1/3%) 1%
The tax herein imposed shall be paid by the issuing
corporation in primary offering or by the seller in
secondary offering.
For purposes of this Section, the term "closely held
corporation" means any corporation at least fifty percent
(50%) in value of outstanding capital stock or at least fifty
percent (505) of the total combined voting power of all
classes of stock entitled to vote is owned directly or
indirectly by or for not more than twenty (20) individuals.
For purposes of determining whether the corporation is a
closely held corporation, insofar as such determination is
based on stock ownership, the following rules shall be
applied:
(1) Stock Not Owned by Individuals. - Stock owned
directly or indirectly by or for a corporation, partnership,
estate or trust shall be considered as being owned
proportionately by its shareholders, partners or
beneficiaries.
(2) Family and Partnership Ownerships. - An individual
shall be considered as owning the stock owned, directly
or indirectly, by or for his family, or by or for his partner.
For purposes of the paragraph, the 'family of an
individual' includes only his brothers and sisters (whether
by whole or half-blood), spouse, ancestors and lineal
descendants.
(3) Option. - If any person has an option acquire stock,
such stock shall be considered as owned by such person.
For purposes of this paragraph, an option to acquire such
an option and each one of a series of options shall be
considered as an option to acquire such stock.
(4) Constructive Ownership as Actual Ownership. - Stock
constructively owned by reason of the application of
paragraph (1) or (3) hereof shall, for purposes of applying
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paragraph (1) or (2), be treated as actually owned by
such person; but stock constructively owned by the
individual by reason of the application of paragraph (2)
hereof shall not be treated as owned by him for purposes
of again applying such paragraph in order to make
another the constructive owner of such stock.
(C) Return on Capital Gains Realized from Sale of Shares
of Stocks. - (1)Return on Capital Gains Realized from Sale
of Shares of Stock Listed and Traded in the Local Stock
Exchange. - It shall be the duty of every stock broker who
effected the sale subject to the tax imposed herein to
collect the tax and remit the same to the Bureau of
Internal Revenue within five (5) banking days from the
date of collection thereof and to submit on Mondays of
each week to the secretary of the stock exchange, of
which he is a member, a true and complete return which
shall contain a declaration of all the transactions effected
through him during the preceding week and of taxes
collected by him and turned over to the Bureau Of
Internal Revenue.
(2) Return on Public Offerings of Share Stock. - In case of
primary offering, the corporate issuer shall file the return
and pay the corresponding tax within thirty (30) days from
the date of listing of the shares of stock in the local stock
exchange.
In the case of secondary offering, the provision of
Subsection (C)(1) of this Section shall apply as to the time
and manner of the payment of the tax.
(D) Common Provisions. - Any gain derived from the sale,
barter, exchange or other disposition of shares of stock
under this Section shall be exempt from the tax imposed
in Sections 24(C), 27(D)(2), 28(A)(8)(c), and 28(B)(5)(c) of
this Code and from the regular individual or corporate
income tax.
Tax paid under this Section shall not be deductible for
income tax purposes.
This is formerly under Income Tax. Congress removed
them from the income tax provisions and relocated in title
V.
Taxes on Initial Public Offering or IPO shares depend on
the shares offered to the public. The greater the share
offered to the public, the lesser the tax is. The reason why
the rates reduce is that no group of persons will have so
much control in the corporation. If you offer more shares
to the public, an outsider may sit in the board. But if you
offer only 25%, it will be controlled by the major
stockholders. Since a third party not related to the
majority owners would come in, the law would give a
lesser tax rate to the issuing corporation who would sell
shares of stocks to the public.
SEC. 128. Returns and Payment of Percentage Taxes. -
(A) Returns of Gross Sales, Receipts or Earnings and
Payment of Tax. -
(1) Persons Liable to Pay Percentage Taxes. - Every
person subject to the percentage taxes imposed under
this Title shall file a quarterly return of the amount of his
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
gross sales, receipts or earnings and pay the tax due
thereon within twenty-five (25) days after the end of each
taxable quarter: Provided,That in the case of a person
whose VAT registration is cancelled and who becomes
liable to the tax imposed in Section 116 of this Code, the
tax shall accrue from the date of cancellation and shall
be paid in accordance with the provisions of this Section.
(2) Person Retiring from Business. - Any person retiring
from a business subject to percentage tax shall notify the
nearest internal revenue officer, file his return and pay the
tax due thereon within twenty (20) days after closing his
business.
(3) Exceptions. - The Commissioner may, by rules and
regulations, prescribe:
(a) The time for filing the return at intervals other than the
time prescribed in the preceding paragraphs for a
particular class or classes of taxpayers after considering
such factors as volume of sales, financial condition,
adequate measures of security, and such other relevant
information required to be submitted under the pertinent
provisions of this Code; and
(b) The manner and time of payment of percentage taxes
other than as hereinabove prescribed, including a
scheme of tax prepayment.
(4) Determination of Correct Sales or Receipts. - When it is
found that a person has failed to issue receipts or
invoices, or when no return is filed, or when there is
reason to believe that the books of accounts or other
records do not correctly reflect the declarations made or
to be made in a return required to be filed under the
provisions of this Code, the Commissioner, after taking
into account the sales, receipts or other taxable base of
other persons engaged in similar businesses under similar
situations or circumstances, or after considering other
relevant information may prescribe a minimum amount of
such gross receipts, sales and taxable base and such
amount so prescribed shall be prima facie correct for
purposes of determining the internal revenue tax liabilities
of such person.
(B) Where to File. - Except as the Commissioner otherwise
permits, every person liable to the percentage tax under
this Title may, at his option, file a separate return for each
branch or place of business, or a consolidated return for
all branches or places of business with the authorized
agent bank, Revenue District Officer, Collection Agent or
duly authorized Treasurer of the city or municipality where
said business or principal place of business is located, as
the case may be.
Within 25 days after the end of the taxable quarter you
have to pay percentage tax. You pay percentage tax
monthly, on the 20th day from the end of each month. So
instead of paying quarterly, under RR 4-2002, the
percentage tax is paid within 20 days following the end
of each month.
If you have a set of transactions, the determination is
usually done through the process of elimination. If this
transaction is not subject to percentage tax, you will go
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to the VAT. Chances are they are covered by the VAT.
Know what are the exclusions. That is why it is important
to familiarize section 109. As to whether they are zero-
rated or not, you remember the rule on destination and
consumption.
EXCISE TAXES ON CERTAIN GOODS
Introduction
These are what we commonly call as Sin Taxes because
this covers vices. The bulk of the revenue collection is
taken from the collection of excise taxes; taxation of
cigarettes, alcohol and petroleum products.
You have cases between the BIR and the cigarette
manufacturers, lead by Lucio Tan in behalf of fortune
tobacco. We also have cases against San Miguel Beer,
on the excise tax on fermented liquors or beer. Most of
these cases are tax refund claims, where the
manufacturers of these products are claiming over a
hundred million worth of refund. Of recent, Lucio Tan has
been awarded almost over a billion for refunds of excise
tax on cigarettes.
There is a new law on the excise tax where they
increased the rates for cigarettes and alcohol products.
A portion of the revenue collected from cigarettes will be
used to treat victims of cigarette-induced diseases. We
have medical warnings on cigarettes packs that smoking
is dangerous to your health. Anti-tobacco advocates
wanted to have picture warnings to see the effects of
these diseases. In some of the Asian countries, they
already have picture warnings. Here in the Philippines,
because of the lobbying from cigarette manufactures,
we only have word warnings.
The original sin taxes were provided under RA 9334. The
provisions that you are having now are taken from RA
9334. Sometime last year, RA 10351 amended the sin
taxes and provided a new set of rates for alcohol and
cigarettes. So beginning January 1, 2014, there are
already new rates for sin taxes.
RA 10351 intends to correct the flaws of the previous tax
regime, specifically on alcohol and tobacco products.
(for the new rates, please refer to the handout distributed
in class, RA 10352 and Revenue Regulation 11-2012)
SEC. 129. Goods Subject to Excise Taxes. - Excise taxes
apply to goods manufactured or produced in the
Philippines for domestic sales or consumption or for any
other disposition and to things imported.
The excise tax imposed herein shall be in addition to the
value-added tax imposed under Title IV.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
For purposes of this Title, excise taxes herein imposed and
based on weight or volume capacity or any other
physical unit or measurement shall be referred to
as "specific tax" and an excise tax herein imposed and
based on selling price or other specified value of the
good shall be referred to as "ad valorem tax".
These excise taxes are imposed on goods manufactured
or produced in the Philippines or to things imported. In
other words when you produce or manufacture products,
it is the manufacturing or production which is the taxable
transaction. Over it, an excise tax will be imposed. Or
when you would instead of producing or manufacturing
the product, you will instead import them, the importation
will be covered by the excise tax.
VAT is different from the excise tax, because the vat is on
the sale as well as the importation of good. Excise is on
the goods manufactured and produced or to those
which are imported.
Excise taxes may either be specific or ad valorem.
Specific tax is the tax imposed on basis of weight or other
physical unit of measurement. The ad valorem tax is
based on the selling price or other specified value of the
goods. This is on the basis of producing or importing the
product.
On account of production and importation, you may levy
a specific or ad valorem tax. These goods, whether they
are produced or manufactured or imported, in the event
of sale, the sale is subject to VAT. The VAT is on the
production or manufacture. Importation is also subject to
VAT.
When you import cigarettes or wines, on account of
importation, you will pay an excise tax. If the importer will
now sell the goods, the sale will be subject to the VAT. If
you import, you pay excise, and you pay VAT on account
of importation. Practically, on account of importation,
you do not only pay excise tax but you also pay the VAT.
If you produce the articles, you pay the excise tax, and
when you sell the articles as well, the same is subject to
the VAT.
Again, when you import an article, you pay an excise tax
on that. On account of the same importation, you also
pay the VAT. And when you sell the same imported
articles as well, the sale will be subject to VAT.
On account of importation, you pay two taxes. Is there
double taxation? None. These are two different taxes.
SEC. 130. Filing of Return and Payment of Excise Tax on
Domestic Products. -
(A) Persons Liable to File a Return, Filing of Return on
Removal and Payment of Tax. -
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(1) Persons Liable to File a Return. - Every person liable to
pay excise tax imposed under this Title shall file a
separate return for each place of production setting forth,
among others, the description and quantity or volume of
products to be removed, the applicable tax base and the
amount of tax due thereon: Provided, however, That in
the case of indigenous petroleum, natural gas or liquefied
natural gas, the excise tax shall be paid by the first buyer,
purchaser or transferee for local sale, barter or transfer,
while the excise tax on exported products shall be paid
by the owner, lessee, concessionaire or operator of the
mining claim.Should domestic products be removed from
the place of production without the payment of the tax,
the owner or person having possession thereof shall be
liable for the tax due thereon.
(2) Time for Filing of Return and Payment of the Tax. -
Unless otherwise specifically allowed, the return shall be
filed and the excise tax paid by the manufacturer or
producer before removal of domestic products form
place of production: Provided, That the excise tax on
locally manufactured petroleum products and
indigenous petroleum levied under Sections 148 and
151(A)(4), respectively, of this Title shall be paid within ten
(10) days from the date of removal of such products for
the period from January 1, 1998 to June 30, 1998; within
five (5) days from the date of removal of such products
for the period from July 1, 1998 to December 31, 1998;
and, before removal from the place of production of such
products from January 1, 1999 and thereafter:Provided,
further, That the excise tax on nonmetallic mineral or
mineral products, or quarry resources shall be due and
payable upon removal of such products from the locality
where mined or extracted, but with respect to the excise
tax on locally produced or extracted metallic mineral or
mineral products, the person liable shall file a return and
pay the tax within fifteen (15) days after the end of the
calendar quarter when such products were removed
subject to such conditions as may be prescribed by rules
and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner.
For this purpose, the taxpayer shall file a bond in an
amount which approximates the amount of excise tax
due on the removals for the said quarter.
The foregoing rules notwithstanding, for imported mineral
or mineral products, whether metallic or nonmetallic, the
excise tax due thereon shall be paid before their removal
from customs custody.
(3) Place of Filing of Return and Payment of the Tax. -
Except as the Commissioner otherwise permits, the return
shall be filed with and the tax paid to any authorized
agent bank or Revenue Collection Officer, or duly
authorized City or Municipal Treasurer in the Philippines.
(4) Exceptions. - The Secretary of Finance, upon
recommendation of the Commissioner may, by rules and
regulations, prescribe:
(a) The time for filing the return at intervals other than the
time prescribed in the preceding paragraphs for a
particular class or classes of taxpayers after considering
factors such as volume of removals, adequate measures
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
of security and such other relevant information required
to be submitted under the pertinent provisions of this
Code; and (b) The manner and time of payment of excise
taxes other than as herein prescribed, under a tax
prepayment, advance deposit or similar schemes.
In the case of locally produced of extracted minerals and
mineral products or quarry resources where the mine site
or place of extraction is not the same as the place of
processing or production, the return shall be filed with
and the tax paid to the Revenue District Office having
jurisdiction over the locality where the same are mined,
extracted or quarried: Provided, however, That for
metallic minerals processed abroad, the return shall be
filed and the tax due thereon paid to the Revenue District
Office having jurisdiction over the locality where the
same are mined, extracted or quarried.
(B) Determination of Gross Selling Price of Goods Subject
to Ad Valorem Tax. - Unless otherwise provided, the price,
excluding the value-added tax, at which the goods are
sold at wholesale in the place of production or through
their sales agents to the public shall constitute the gross
selling price.
If the manufacturer also sells or allows such goods to be
sold at wholesale in another establishment of which he is
the owner or in the profits of which he has an interest, the
wholesale price in such establishment shall constitute the
gross selling price.
Should such price be less than the cost of manufacture
plus expenses incurred until the goods are finally sold,
then a proportionate margin of profit, not less than ten
percent (10%) of such manufacturing cost and expenses,
shall be added to constitute the gross selling price.
(C) Manufacturer's or Producer's Sworn Statement. - Every
manufacturer or producer of goods or products subject to
excise taxes shall file with the Commissioner on the date
or dates designated by the latter, and as often as may be
required, a sworn statement showing, among other
information, the different goods or products
manufactured or produced and their corresponding gross
selling price or market value, together with the cost of
manufacture or production plus expenses incurred or to
be incurred until the goods or products are finally sold.
(D) Credit for Excise Tax on Goods Actually Exported.-
When goods locally produced or manufactured are
removed and actually exported without returning to the
Philippines, whether so exported in their original state or
as ingredients or parts of any manufactured goods or
products, any excise tax paid thereon shall be credited
or refunded upon submission of the proof of actual
exportation and upon receipt of the corresponding
foreign exchange payment: Provided, That the excise tax
on mineral products, except coal and coke, imposed
under Section 151 shall not be creditable or refundable
even if the mineral products are actually exported.
To the goods manufactured or produced in the
Philippines, the excise tax is imposed whether the goods
will be sold or not. In Section 129, excise taxes are said to
apply to goods manufactured or produced in the
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Philippines. So whether those goods will be sold here in
the Philippines or for consumption of the producer or
manufacturer, or for any other disposition, such
production will be subject to excise tax.
If you are a wine producer, before you sell such item, you
will first conduct a taste test. But before doing a taste test,
such product must first be produced. Is excise tax be
levied, even if your purpose is just for free tasting? Under
Section 129, that is still taxable. Because excise can be
imposed for whatever kind of disposition.
When does excise tax accrue?
Excise tax shall accrue when the product comes into
existence. It goes through a process. But excise tax will
only accrue when you already have the finished product.
The excise tax must be paid before removal of the goods
from the place of production. Normally, when the
products come into existence, these products will be
transferred to a warehouse for storage. But before
transferring the goods to the warehouse, the excise tax
must already be paid.
In the subsequent provisions, you will observe that there
are BIR personnel assigned to every place of production
to check and safeguard the interest of government.
When the products come into existence, the excise must
be paid.
The specific tax stamp found in the goods is actually the
evidence that excise tax has been paid. These stamps
are accountable stamps acquired by the manufacturers,
under the supervision of the BIR representative in charge
in their manufacturing place.
SEC. 131. Payment of Excise Taxes on Importer Articles. -
(A) Persons Liable.- Excise taxes on imported articles shall
be paid by the owner or importer to the Customs Officers,
conformably with the regulations of the Department of
Finance and before the release of such articles from the
customs house, or by the person who is found in
possession of articles which are exempt from excise taxes
other than those legally entitled to exemption.In the case
of tax-free articles brought or imported into the
Philippines by persons, entitles, or agencies exempt from
tax which are subsequently sold, transferred or
exchanged in the Philippines to non-exempt persons or
entitles, the purchasers or recipients shall be considered
the importers thereof, and shall be liable for the duty and
internal revenue tax due on such importation.The
provision of any special or general law to the contrary
notwithstanding, the importation of cigars and cigarettes,
distilled spirits and wines into the Philippines, even if
destined for tax and duty free shops, shall be subject to
all applicable taxes, duties, charges, including excise
taxes due thereon: Provided, however, That this shall not
apply to cigars and cigarettes, distilled spirits and wines
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
brought directly into the duly chartered or legislated
freeports of the Subic Special Economic and Freeport
Zone, crated under Republic Act No. 7227; the Cagayan
Special Economic Zone and Freeport, created under
Republic Act No. 7922; and the Zamboanga City Special
Economic Zone, created under Republic Act No. 7903,
and are not transshipped to any other port in the
Philippines: Provided, further, That importations of cigars
and cigarettes, distilled spirits and wines by a
government-owned and operated duty-free shop, like
the Duty-Free Philippines (DFP), shall be exempted from
all applicable taxes, duties, charges, including excise tax
due thereon: Provided, still further, That if such articles
directly imported by a government-owned and operated
duty-free shop like the Duty-Free Philippines, shall be
labeled "tax and duty-free" and"not for resale": Provided,
still further, That is such articles brought into the duly
chartered or legislated freeports under Republic Acts No.
7227, 7922 and 7903 are subsequently introduced into the
Philippine customs territory, then such articles shall, upon
such introduction, be deemed imported into the
Philippines and shall be subject to all imposts and excise
taxes provided herein and other statutes: Provided,
finally, That the removal and transfer of tax and duty-free
goods, products, machinery, equipment and other similar
articles, from one freeport to another freeport, shall not be
deemed an introduction into the Philippine customs
territory.Articles confiscated shall be disposed of in
accordance with the rules and regulations to be
promulgated by the Secretary of Finance, upon
recommendation of the Commissioner of Customs and
Internal Revenue, upon consultation with the Secretary of
Tourism and the General manager of the Philippine
Tourism Authority.The tax due on any such goods,
products, machinery, equipment or other similar articles
shall constitute a lien on the article itself, and such lien
shall be superior to all other charges or liens, irrespective
of the possessor thereof.
(B) Rate and Basis of the Excise Tax on Imported Articles.-
Unless otherwise specified imported articles shall be
subject to the same rates and basis of excise taxes
applicable to locally manufactured articles.
The window within which they could bring in duty-free
products or tax-free products, is by entering them thru the
economic zones where there are free ports.
But due to the provisions of the third paragraph of Article
131, even if the products are destined to duty-free and
tax-free shops, they are still subject to all applicable taxes
including excise tax.
Exemption will come in only if the goods imported are
made directly by the Philippine duty-free shop and such
goods are labeled duty-free and not for resale.
SEC. 132. Mode of Computing Contents of Cask or
Package. - Every fractional part of a proof liter equal to or
greater than a half liter in a cask or package containing
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more than one liter shall be taxed as a liter, and any
smaller fractional part shall be exempt; but any package
of spirits, the total content of which are less than a proof
liter, shall be taxed as one liter.
The excise tax accrues when the products are removed
from the place of production. However, by way of
exception, the articles may be removed, tax-free, under
the following provisions:
SEC. 133. Removal of Wines and Distilled Spirits for
Treatment of Tobacco Leaf. - Upon issuance of a permit
from the Commissioner and subject to the rules and
regulations prescribed by the Secretary of Finance,
manufacturers of cigars and cigarettes may withdraw
from bond, free of excise local and imported wines and
distilled spirits in specific quantities and grades for use in
the treatment of tobacco leaf to be used in the
manufacture of cigars and cigarettes; but such wines and
distilled spirits must first be suitably denatured.
When the removal would be used for the treatment of
tobacco leaf, the goods can be removed tax-free. But
the alcoholic drink must first be denatured.
SEC. 134. Domestic Denatured Alcohol. - Domestic
alcohol of not less than one hundred eighty degrees
(180O) proof (ninety percent [90%] absolute alcohol) shall,
when suitably denatured and rendered unfit for oral
intake, be exempt from the excise tax prescribed in
Section 141: Provided, however,That such denatured
alcohol shall be subject to tax under Section 106(A) of
this Code: Provided, further, That if such alcohol is to be
used for automotive power, it shall be taxed under
Section 148(d) of this Code: Provided, finally,That any
alcohol, previously rendered unfit for oral intake after
denaturing but subsequently rendered fit for oral intake
after undergoing fermentation, dilution, purification,
mixture or any other similar process shall be taxed under
Section 141 of this Code and such tax shall be paid by
the person in possession of such reprocessed spirits.
This item will not be subject to excise, but will be
subjected to VAT. If such alcohol will be used for
automotive power, it will be taxed under the excise tax
on petroleum. If rendered fit again for consumption, the
product will be taxed under Section 141.
SEC. 135. Petroleum Products Sold to International Carriers
and Exempt Entities or Agencies. - Petroleum products
sold to the following are exempt from excise tax: (a)
International carriers of Philippine or foreign registry on
their use or consumption outside the
Philippines: Provided, That the petroleum products sold to
these international carriers shall be stored in a bonded
storage tank and may be disposed of only in
accordance with the rules and regulations to be
prescribed by the Secretary of Finance, upon
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
recommendation of the Commissioner; (b) Exempt
entities or agencies covered by tax treaties, conventions
and other international agreements for their use or
consumption: Provided, however, That the country of said
foreign international carrier or exempt entities or
agencies exempts from similar taxes petroleum products
sold to Philippine carriers, entities or agencies; and (c)
Entities which are by law exempt from direct and indirect
taxes.
International air carrier is entitled to a tax free purchase
of petroleum products from the local sellers. In one case,
because of that exemption, they applied for a refund.
Part of the purchase price being claimed for refund is an
excise tax. The claim for refund is allowed to the statutory
taxpayers, but in the case of this carrier, it is not the direct
taxpayer since they are only the buyer. So the statutory
taxpayer is the local seller.
SEC. 136. Denaturation, Withdrawal and Use of Denatured
Alcohol. - Any person who produces, withdraws, sells,
transports or knowingly uses, or is in possession of
denatured alcohol, or articles containing denatured
alcohol in violation of laws or regulations now or hereafter
in force pertaining thereto shall be required to pay the
corresponding tax, in addition to the penalties provided
for under Title X of this Code.
SEC. 137. Removal of Spirits Under Bond for Rectification. -
Spirits requiring rectification may be removed from the
place of production to another establishment for the
purpose of rectification without prepayment of the excise
tax: Provided, That the distiller removing such spirits and
the rectifier receiving them shall file with the
Commissioner their joint bond conditioned upon the
payment by the rectifier of the excise tax due on the
rectified alcohol: Provided, further, That in cases where
alcohol has already been rectified either by original and
continuous distillation or by redistillation, no loss for
rectification and handling shall be allowed and the
rectifier thereof shall pay the excise tax due on such
losses: Provided, finally, That where a rectifier makes use
of spirits upon which the excise tax has not been paid, he
shall be liable for the payment of the tax otherwise due
thereon.
During the process, there will be evaporation. Even if in
the course of distillation there will be evaporation, you will
still pay the excise tax. When you remove the spirits and
transfer to another establishment, they can be removed
without paying excise tax. The removal could not be
done without putting up a bond. It is the bond which will
answer to the excise tax due.
SEC. 138. Removal of Fermented Liquors to Bonded
Warehouse. - Any brewer may remove or transport from
his brewery or other place of manufacture to a bonded
warehouse used by him exclusively for the storage or sale
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in bulk of fermented liquors of his own manufacture, any
quantity of such fermented liquors, not less than one
thousand (1,000) liters at one removal, without
prepayment of the tax thereon under a permit which shall
be granted by the Commissioner.
Such permit shall be affixed to every package so
removed and shall be cancelled or destroyed in such
manner as the Commissioner may prescribe.
Thereafter, the manufacturer of such fermented liquors
shall pay the tax in the same manner and under the same
penalty and liability as when paid at the brewery.
In this provision, the rule is when the products come into
existence, you must pay the excise. But you may remove
the articles without payment when they are brought to a
bonded warehouse. The bond will secure the payment of
the excise tax.
SEC. 139. Removal of Damaged Liquors Free of Tax. -
When any fermented liquor has become sour or otherwise
damaged so as to be unfit for use as such, brewers may
sell and after securing a special permit from the
Commissioner, under such conditions as may be
prescribed in the rules and regulations prescribed by the
Secretary of Finance, remove the same without the
payment of tax thereon in cask or other packages,
distinct from those ordinarily used for fermented liquors,
each containing not less than one hundred seventy-five
(175) liters with a note of their contents permanently
affixed thereon.
If you have damaged liquors, you can remove that free
of tax.
SEC. 140. Removal of Tobacco Products Without
Prepayment of Tax. - Products of tobacco entirely unfit for
chewing or smoking may be removed free of tax for
agricultural or industrial use, under such conditions as
may be prescribed in the rules and regulations
prescribed by the Secretary of Finance.
Stemmed leaf tobacco, fine-cut shorts, the refuse of fine-
cut chewing tobacco, scraps, cuttings, clippings, stems,
or midribs, and sweepings of tobacco may be sold in
bulk as raw material by one manufacturer directly to
another without payment of the tax, under such
conditions as may be prescribed in the rules and
regulations prescribed by the Secretary of Finance.
"Stemmed leaf tobacco", as herein used, means leaf
tobacco which has had the stem or midrib removed.
The term does not include broken leaf tobacco.
They are not removed without payment. But they can be
removed if they will be used for agriculture and industrial
purposes.
Not all manufactured or produced products are subject
to excise tax.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Products subject to excise tax
EXCISE TAX ON ALCOHOL PRODUCTS
SEC. 141. Distilled Spirits. - On distilled spirits, there shall be
collected, subject to the provisions of Section 133 of this
Code, excise taxes as follows:
(a) If produced from the sap of nipa, coconut, cassava,
camote, or buri palm or from the juice,syrup or sugar of
the cane, provided such materials are produced
commercially in the country where they are processed
into distilled spirits, per proof liter, Eight pesos
(P8.00): Provided, That if produced in a pot still or other
similar primary distilling apparatus by a distiller producing
not more than one hundred (100) liters a day, containing
not more than fifty percent (50%) of alcohol by volume,
per proof liter, Four pesos (P4.00);
(b) If produced from raw materials other than those
enumerated in the preceding paragraph, the tax shall be
in accordance with the net retail price per bottle of seven
hundred fifty milliliter (750 ml.) volume capacity
(excluding the excise tax and the value-added tax) as
follows:
(1) Less than Two hundred and fifty pesos (P250) -
Seventy-five pesos (P75), per proof liter;
(2) Two hundred and fifty pesos (P250) up to Six hundred
and Seventy-Five pesos (P675) - One hundred and fifty
pesos (P150), per proof liter; and
(3) More than Six hundred and seventy-five pesos (P675) -
Three hundred pesos (P300), per proof liter.
(c) Medicinal preparations, flavoring extracts, and all
other preparations, except toilet preparations, of which,
excluding water, distilled spirits for the chief ingredient,
shall be subject to the same tax as such chief ingredient.
This tax shall be proportionally increased for any strength
of the spirits taxed over proof spirits, and the tax shall
attach to this substance as soon as it is in existence as
such, whether it be subsequently separated as pure or
impure spirits, or transformed into any other substance
either in the process of original production or by any
subsequent process"Spirits or distilled spirits" is the
substance known as ethyl alcohol, ethanol or spirits of
wine, including all dilutions, purifications and mixtures
thereof, from whatever source, by whatever process
produced, and shall include whisky, brandy, rum, gin and
vodka, and other similar products or mixtures.
"Proof spirits" is liquor containing one-half (1/2) of its
volume of alcohol of a specific gravity of seven thousand
nine hundred and thirty-nine thousandths (0.7939) at
fifteen degrees centigrade (15O C).
A "proof liter" means a liter of proof spirits.
The rates of tax imposed under this Section shall be
increased by twelve percent (12%) on January 1, 2000.
New brands shall be classified according to their
current "net retail price".
For the above purpose, "net retail price" shall mean the
price at which the distilled spirit is sold on retail in ten (10)
major supermarkets in Metro Manila, excluding the
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amount intended to cover the applicable excise tax and
the value-added tax as of October 1, 1996.
The classification of each brand of distilled spirits based
on the average net retail price as of October 1, 1996, as
set forth in Annex "A", shall remain in force until revised by
Congress.
When we talk about distilled spirits, these are substances
known as ethyl alcohol, ethanol or spirits of wine. It shall
include whiskey, brandy, rum, gin and vodka, and other
similar products.
Medicinal Preparation
While it is titled distilled spirits, there are other products
there like the medicinal preparations.
When you talk about medicinal preparations they are for
prescriptions for substances used in medicine and
prepared for the use of physicians as a remedy for
diseases. To be classified as medicinal preparations, it
shall have the following characteristics:
1) Product is prepared for a particular purpose
2) Product is of use in curing, alleviating or
preventing some disease
Rubbing alcohol is a medicinal preparation. The chief
ingredient is denatured alcohol which is subject to the
excise tax under Section 141.
Baby Cologne is also subject to excise tax.
But when the excise tax has already been paid, no other
excise tax may be due such product.
When we talk about chief ingredient, the term means
more than 50% of the preparation.
Medicinal preparation is different from toilet preparations.
The latter is taxed under Section 150.
Acetone is not subject to any specific tax. It is not
classified as distilled spirits or manufactured under
petroleum products. So it is not subject to any excise or
specific tax. According to a BIR ruling, acetone is a
volatile, flammable, fragrant liquid compound used in
making other chemical compounds be as solvent.
Individual solvents are used to dissolve ink. It is not subject
to any specific tax.
SEC. 142. Wines. - On wines, there shall be collected per
liter of volume capacity, the following taxes:
(a) Sparkling wines/champagnes regardless of proof, if
the net retail price per bottle (excluding the excise tax
and value-added tax) is:
(1) Five hundred pesos (P500) or less - One hundred
pesos (P100); and
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(2) More than Five hundred pesos (P500) - Three hundred
pesos (P300).
(b) Still wines containing fourteen percent (14%) of
alcohol by volume or less, Twelve pesos (P12.00); and
(c) Still wines containing more than fourteen percent
(14%) but not more than twenty-five percent (25%) of
alcohol by volume, Twenty-four pesos (P24.00).
Fortified wines containing more than twenty-five percent
of alcohol by volume shall be taxed as distilled
spirits. "Fortified wines" shall mean natural wines to which
distilled spirits are added to increase their alcoholic
strength.
The rates of tax imposed under this Section shall be
increased by twelve percent (12%) on January 1, 2000.
New brands shall be classified according to their current
net retail price.
For the above purpose, "net retail price" shall mean the
price at which wine is sold on retail in ten (10) major
supermarkets in Metro Manila, excluding the amount
intended to cover the applicable excise tax and the
value-added tax as of October 1, 1996.
The classification of each brand of wines based on its
average net retail price as of October 1, 1996, as set forth
in Annex "B", shall remain in force until revised by
Congress.
These are produced by fermentation without distillation.
In the case of wines, you have sparkling wine, white wine,
red wine, etc. This is also determined based on the
alcohol content. But remember that fortified wines,
containing more than 25% of alcohol, shall be taxed as
distilled spirit. Fortified wines shall mean natural mines to
which distilled spirits are added, to increase their alcohol
strength.
They are more or less taxed on the basis of those
belonging in the alcohol strength of below 25%.
SEC. 143. Fermented Liquor. - There shall be levied,
assessed and collected an excise tax on beer, lager
beer, ale, porter and other fermented liquors except tuba,
basi, tapuy and similar domestic fermented liquors in
accordance with the following schedule:
(a) If the net retail price (excluding the excise tax and
value-added tax) per liter of volume capacity is less than
Fourteen pesos and fifty centavos (P14.50), the tax shall
be Six pesos and fifteen centavos (P6.15) per liter;
(b) If the net retail price (excluding the excise tax and the
value-added tax) the per liter of volume capacity is
Fourteen pesos and fifty centavos (P14.50) up to Twenty-
two pesos (P22.00), the tax shall be Nine pesos and fifteen
centavos (P9.15) per liter;
(c) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is more
than Twenty-two pesos (P22.00), the tax shall be Twelve
pesos and fifteen centavos (P12.15) per liter.
Variants of existing brands which are introduced in the
domestic market after the effectivity of Republic Act No.
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8240 shall be taxed under the highest classification of any
variant of that brand.
Fermented liquor which are brewed and sold at micro-
breweries or small establishments such as pubs and
restaurants shall be subject to the rate in paragraph (c)
hereof.
The excise tax from any brand of fermented liquor within
the next three (3) years from the effectivity of Republic
Act No. 8240 shall not be lower than the tax which was
due from each brand on October 1, 1996.
The rates of excise tax on fermented liquor under
paragraphs (a), (b) and (c) hereof shall be increased by
twelve percent (12%) on January 1, 2000.
New brands shall be classified according to their current
net retail price.
For the above purpose, "net retail price" shall mean the
price at which the fermented liquor is sold on retail in
twenty (20) major supermarkets in Metro Manila (for
brands of fermented liquor marketed nationally)
excluding the amount intended to cover the applicable
excise tax and the value-added tax.
For brands which are marketed only outside Metro
Manila, the "net retail price" shall mean the price at the
which the fermented liquor is sold in five (5) major
supermarkets in the region excluding the amount
intended to cover the applicable excise tax and the
value-added tax.
The classification of each brand of fermented liquor
based on its average net retail price as of October 1,
1996, as set forth in Annex "C", shall remain in force until
revised by Congress.
"A variant of brand" shall refer to a brand on which a
modifier is prefixed and/or suffixed to the root name of
the brand and/or a different brand which carries the
same logo or design of the existing brand.
Every brewer or importer of fermented liquor shall, within
thirty (30) days from the effectivity of R. A. No. 8240, and
within the first five (5) days of every month thereafter,
submit to the Commissioner a sworn statement of the
volume of sales for each particular brand of fermented
liquor sold at his establishment for the three-month period
immediately preceding.
Any brewer or importer who, in violation of this Section,
knowingly misdeclares or misrepresents in his or its sworn
statement herein required any pertinent data or
information shall be penalized by a summary
cancellation or withdrawal of his or its permit to engage
in business as brewer or importer of fermented liquor.
Any corporation, association or partnership liable for any
of the acts or omissions in violation of this Section shall be
fined treble the amount of deficiency taxes, surcharge,
and interest which may be assessed pursuant to this
Section.
Any person liable for any of the acts or omissions
prohibited under this Section shall be criminally liable and
penalized under Section 254 of this Code.
Any person who willfully aids or abets in the commission
of any such act or omission shall be criminally liable in
the same manner as the principal.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
If the offender is not a citizen of the Philippines, he shall
be deported immediately after serving the sentence,
without further proceedings for deportation.
Under this includes beer, ale and porter except tuba.
So we only have three items under alcoholic drinks.
EXCISE TAX ON TOBACCO PRODUCTS
SEC. 144. Tobacco Products. - There shall be collected a
tax of seventy-five centavos (P0.75) on each kilogram of
the following products of tobacco:
(a) Tobacco twisted by hand or reduced into a condition
to be consumed in any manner other than the ordinary
mode of drying and curing;
(b) Tobacco prepared or partially prepared with or
without the use of any machine or instruments or without
being pressed or sweetened; and
(c) Fine-cut shorts and refuse, scraps, clippings, cuttings,
stems and sweepings of tobacco.
Fine-cut shorts and refuse, scraps, clippings, cuttings,
stems and sweepings of tobacco resulting from the
handling or stripping of whole leaf tobacco may be
transferred, disposed of, or otherwise sold, without
prepayment of the excise tax herein provided for under
such conditions as may be prescribed in the rules and
regulations promulgated by the Secretary of Finance,
upon recommendation of the Commissioner, if the same
are to be exported or to be used in the manufacture of
other tobacco products on which the excise tax will
eventually be paid on the finished product.
On tobacco specially prepared for chewing so as to be
unsuitable for use in any other manner, on each kilogram,
Sixty centavos (P0.60).
SEC. 145. Cigars and Cigarettes. -
(A) Cigars.- There shall be levied, assessed and collected
on cigars a tax of One peso (P1.00) per cigar.
(B) Cigarettes Packed by Hand.- There shall be levied,
assessed and collected on cigarettes packed by hand a
tax of Forty centavos (P0.40) per pack.
(C) Cigarettes Packed by Machine. - There shall be
levied, assessed and collected on cigarettes packed by
machine a tax at the rates prescribed below:
(1) If the net retail price (excluding the excise tax and the
value-added tax) is above Ten pesos (P10.00) per pack,
the tax shall be Twelve pesos (P12.00) per pack;
(2) If the net retail price (excluding the excise tax and the
value-added tax) exceeds Six pesos and fifty centavos
(P6.50) but does not exceed Ten pesos (P10.00) per pack,
the tax shall be Eight pesos (8.00) per pack;
(3) If the net retail price (excluding the excise tax and the
value-added tax) is Five pesos (P5.00) but does not
exceed Six pesos and fifty centavos (P6.50) per pack, the
tax shall be Five pesos (P5.00) per pack;
(4) If the net retail price (excluding the excise tax and the
value-added tax is below Five pesos (P5.00) per pack,
the tax shall be One peso (P1.00) per pack;
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Variants of existing brands of cigarettes which are
introduced in the domestic market after the effectivity of
R.A. No. 8240 shall be taxed under the highest
classification of any variant of that brand.
The excise tax from any brand of cigarettes within the
next three (3) years from the effectivity of R. A. No. 8240
shall not be lower than the tax, which is due from each
brand on October 1, 1996: Provided, however, That in
cases where the excise tax rates imposed in paragraphs
(1), (2), (3) and (4) hereinabove will result in an increase
in excise tax of more than seventy percent (70%); for a
brand of cigarette, the increase shall take effect in two
tranches: fifty percent (50%) of the increase shall be
effective in 1997 and one hundred percent (100%) of the
increase shall be effective in 1998.
Duly registered or existing brands of cigarettes or new
brands thereof packed by machine shall only be packed
in twenties.
The rates of excise tax on cigars and cigarettes under
paragraphs (1), (2), (3) and (4) hereof, shall be increased
by twelve percent (12%) on January 1, 2000.
New brands shall be classified according to their current
net retail price.
For the above purpose, "net retail price" shall mean the
price at which the cigarette is sold on retail in twenty (20)
major supermarkets in Metro Manila (for brands of
cigarettes marketed nationally), excluding the amount
intended to cover the applicable excise tax and the
value-added tax.
For brands which are marketed only outside Metro
Manila, the "net retail price" shall mean the price at which
the cigarette is sold in five (5) major supermarkets in the
region excluding the amount intended to cover the
applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its
average net retail price as of October 1, 1996, as set forth
in Annex "D", shall remain in force until revised by
Congress.
"Variant of a brand" shall refer to a brand on which a
modifier is prefixed and/or suffixed to the root name of
the brand and/or a different brand which carries the
same logo or design of the existing brand.
Manufactures and importers of cigars and cigarettes
shall, within thirty (30) days from the effectivity of R. A. No.
8240 and within the first five (5) days of every month
thereafter submit to the Commissioner a sworn statement
of the volume of sales for each particular brand of cigars
and/or cigarettes sold at his establishment for the three-
month period immediately preceding.
Any manufacturer or importer who, in violation of this
Section, knowingly misdeclares or misrepresents in his or
its sworn statement herein required any pertinent data or
information shall, upon discovery, be penalized by a
summary cancellation or withdrawal of his or its permit to
engage in business as manufacturer or importer of cigars
or cigarettes.
Any corporation, association or partnership liable for any
of the acts or omissions in violation of this Section shall be
fined treble the amount of deficiency taxes, surcharges
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
and interest which may be assessed pursuant to this
Section.
Any person liable for any of the acts or omissions
prohibited under this Section shall be criminally liable and
penalized under Section 254 of this Code.
Any person who willfully aids or abets in the commission
of any such act or omission shall be criminally liable in
the same manner as the principal.
If the offender is not a citizen of the Philippines, he shall
be deported immediately after serving the sentence
without further proceedings for deportation.
SEC. 146. Inspection Fee. - For inspection made in
accordance with this Chapter, there shall be collected a
fee of Fifty centavos (P0.50) for each thousand cigars or
fraction thereof; Ten centavos (P0.10) for each thousand
cigarettes of fraction thereof; Two centavos (P0.02) for
each kilogram of leaf tobacco or fraction thereof; and
Three centavos (P0.03) for each kilogram or fraction
thereof, of scrap and other manufactured tobacco.
The inspection fee on leaf tobacco, scrap, cigars,
cigarettes and other tobacco products as defined in
Section 147 of this Code shall be paid by the wholesaler,
manufacturer, producer, owner or operator of redrying
plant, as the case may be, immediately before removal
there of from the establishment of the wholesaler,
manufacturer, owner or operator of the redrying plant.
In case of imported leaf tobacco and products thereof,
the inspection fee shall be paid by the importer before
removal from customs' custody.
Fifty percent (50%) of the tobacco inspection fee shall
accrue to the Tobacco Inspection Fund created by
Section 12 of Act No. 2613, as amended by Act No. 3179,
and fifty percent (50%) shall accrue to the Cultural Center
of the Philippines.
50% will acrrue to the tobacco inspection fund. 50& will
go to the cultural center of the Philippines.
SEC. 147. Definition of Terms. - When used herein and in
statements or official forms prescribed hereunder, the
following terms shall have the meaning indicated:
(a) "Cigars" mean all rolls of tobacco or any substitute
thereof, wrapped in leaf tobacco.
(b) "Cigarettes" mean all rolls of finely-cut leaf tobacco,
or any substitute therefor, wrapped in paper or in any
other material.
(c) "Wholesale price" shall mean the amount of money or
price paid for cigars or cigarettes purchased for the
purpose of resale, regardless of quantity.
(d) "Retail price" shall mean the amount of money or
price which an ultimate consumer or end-user pays for
cigars or cigarettes purchased.
*not much discussion on the above sections because
Dean just read the provisions and the amendments
made by the new law. Just read the new law and the
Revenue Regulation cited above*
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EXCISE TAX ON PETROLEUM
SEC. 148. Manufactured Oils and Other Fuels. - There shall
be collected on refined and manufactured mineral oils
and motor fuels, the following excise taxes which shall
attach to the goods hereunder enumerated as soon as
they are in existence as such:
(a) Lubricating oils and greases, including but not limited
to, base stock for lube oils and greases, high vacuum
distillates, aromatic extracts, and other similar
preparations, and additives for lubricating oils and
greases, whether such additives are petroleum based or
not, per liter and kilogram respectively, of volume
capacity or weight, Four pesos and fifty centavos
(P4.50): Provided, however, That the excise taxes paid on
the purchased feedstock (bunker) used in the
manufacture of excisable articles and forming part
thereof shall be credited against the excise tax due
therefrom: Provided, further, That lubricating oils and
greases produced from base stocks and additives on
which the excise tax has already been paid shall no
longer be subject to excise tax:Provided, finally, That
locally produced or imported oils previously taxed as
such but are subsequently reprocessed, rerefined or
recycled shall likewise be subject to the tax imposed
under this Section.
(b) Processed gas, per liter of volume capacity, Five
centavos (P0.05);(c) Waxes and petrolatum, per kilogram,
Three pesos and fifty centavos (P3.50);(d) On denatured
alcohol to be used for motive power, per liter of volume
capacity, Five centavos (P0.05): Provided, That unless
otherwise provided by special laws, if the denatured
alcohol is mixed with gasoline, the excise tax on which
has already been paid, only the alcohol content shall be
subject to the tax herein prescribed.
For purposes of this Subsection, the removal of denatured
alcohol of not less than one hundred eighty degrees
(180o ) proof (ninety percent (90%) absolute alcohol) shall
be deemed to have been removed for motive power,
unless shown otherwise;(e) Naphtha, regular gasoline and
other similar products of distillation, per liter of volume
capacity, Four pesos and eighty centavos
(P4.80): Provided, however, That naphtha, when used as a
raw material in the production of petrochemical products
or as replacement fuel for natural-gas-fired-combined
cycle power plant, in lieu of locally-extracted natural gas
during the non-availability thereof, subject to the rules
and regulations to be promulgated by the Secretary of
Energy, in consultation with the Secretary of Finance, per
liter of volume capacity, Zero (P0.00): Provided, further,
That the by-product including fuel oil, diesel fuel,
kerosene, pyrolysis gasoline, liquefied petroleum gases
and similar oils having more or less the same generating
power, which are produced in the processing of naphtha
into petrochemical products shall be subject to the
applicable excise tax specified in this Section, except
when such by-products are transferred to any of the local
oil refineries through sale, barter or exchange, for the
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
purpose of further processing or blending into finished
products which are subject to excise tax under this
Section;(f) Leaded premium gasoline, per liter of volume
capacity, Five pesos and thirty-five centavos (P5.35);
unleaded premium gasoline, per liter of volume capacity,
Four pesos and thirty-five centavos (P4.35);(g) Aviation
turbo jet fuel, per liter of volume capacity, Three pesos
and sixty-seven centavos (P3.67);(h) Kerosene, per liter of
volume capacity, Sixty centavos (0.60): Provided, That
kerosene, when used as aviation fuel, shall be subject to
the same tax on aviation turbo jet fuel under the
preceding paragraph (g), such tax to be assessed on the
user thereof;(i) Diesel fuel oil, an on similar fuel oils having
more or less the same generating power, per liter of
volume capacity, One peso and sixty-three centavos
(P1.63);(j) Liquefied petroleum gas, per liter, Zero
(P0.00): Provided, That liquefied petroleum gas used for
motive power shall be taxed at the equivalent rate as the
excise tax on diesel fuel oil;(k) Asphalts, per kilogram,
Fifty-six centavos (P0.56); and(l) Bunker fuel oil, and on
similar fuel oils having more or less the same generating
power, per liter of volume capacity, Thirty centavos
(P0.30).
No amendments in the Section. The rates are still the
same. You just familiarize yourself with the long list in the
section, from A-N.
EXCISE TAX ON MISCELLANEOUS ARTICLES
SEC. 149. Automobiles. - There shall be levied, assessed
and collected an ad valorem tax on automobiles based
on the manufacturer’s or importer’s selling price, net of
excise and value-added tax, in accordance with the
following schedule:
ENGINE DISPLACEMENT [in cc.]
GASOLINE DIESEL TAX
RATE
Up to 1600 Up to 1800 15%
1601 to 2000 1801 to 2300 35%
2001 to 2700 2301 to 3000 50%
2701 or over 3001 to over 100%
Provided, That in the case of imported automobiles not for
sale, the tax imposed herein shall be based on the total
value used by the Bureau of Customs in determining tariff
and customs duties, including customs duty and all other
charges, plus ten percent (10%) of the total thereof.
Automobiles acquired for use by persons or entities
operating within the freeport zone shall be exempt from
excise tax: Provided, That utility vehicles of registered
zone enterprises, which are indispensable in the conduct
and operations of their business, such as delivery trucks
and cargo vans with gross vehicle weight above three (3)
metric tons may be allowed unrestricted use outside the
freeport zone: Provided, further, That vehicles owned by
tourist-oriented enterprises, such as tourist buses and cars
with yellow plates, color-coded, and utilized exclusively
for the purpose of transporting tourists in tourism-related
activities, and service vehicles of freeport registered
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enterprises and executives, such as company service
cars and expatriates’ and investors’ automobiles brought
in the name of such enterprises, may be used outside the
freeport zone for such periods as may be prescribed by
the Departments of Finance, and Trade and Industry, the
Bureau of Customs and the Freeport authorities
concerned, which in no case shall exceed fourteen (14)
days per month.
In case such tourist buses and cars, service vehicles of
registered freeport enterprises and company service cars
are used for more than an aggregate period of fourteen
(14) days per month outside of the freeport zone, the
owner or importer shall pay the corresponding customs
duties, taxes and charges.
In the case of personally-owned vehicles of residents,
including leaseholders of residences inside the freeport
zone, the use of such vehicles outside of the freeport zone
shall be deemed an introduction into the Philippine
customs territory, and such introduction shall be deemed
an importation into the Philippines and shall subject such
vehicles to Customs duties taxes and charges, including
excise tax due on such vehicle.
The Secretaries of Finance, and Trade and Industry,
together with the Commissioner of Customs and the
administrators of the freeports concerned, shall
promulgate rules and regulations for the proper
identification and control of said automobiles.
Be careful of what is covered by the term automobiles.
The rate is placed on the selling price.
These are taxes on account of manufacture and
importation. When they are sold, that is a different
taxable transaction. You have to remember that.
SEC. 150. Non-Essential Goods. - There shall be levied,
assessed and collected a tax equivalent to twenty
percent (20%) based on the wholesale price or the value
of importation used by the Bureau of Customs in
determining tariff and customs duties, net of excise tax
and value-added tax, of the following goods:
(a) All goods commonly or commercially known as
jewelry, whether real or imitation, pearls, precious and
semi-precious stones and imitations thereof; goods made
of, or ornamented, mounted or fitted with, precious
metals or imitations thereof or ivory (not including surgical
and dental instruments, silver-plated wares, frames or
mountings for spectacles or eyeglasses, and dental gold
or gold alloys and other precious metals used in filling,
mounting or fitting the teeth); opera glasses and
lorgnettes.
The term "precious metals" shall include platinum, gold,
silver and other metals of similar or greater value.
The term ‘imitations thereof shall include platings and
alloys of such metals;
(b) Perfumes and toilet waters;
(c) Yachts and other vessels intended for pleasure or
sports.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Non-essential goods are also known as luxury products.
This item includes toilet preparations. This is one which is
intended to improve the bodily appearance such as
lotion intended to contribute to the health and
appearance of the skin; a product that is publicly
represented as good for cleansing, moisturizing,
lubricating or oiling the skin or one of the functions to
improve the bodily appearance of the skin, making it soft,
smooth and fragrant.
EXCISE TAX ON MINERAL PRODUCTS
SEC. 151. Mineral Products. -
(A) Rates of Tax. - There shall be levied, assessed and
collected on minerals, mineral products and quarry
resources, excise tax as follows:
(1) On coal and coke, a tax of Ten pesos (P10.00) per
metric ton;(2) On all nonmetallic minerals and quarry
resources, a tax of two percent (2%) based on the actual
market value of the gross output thereof at the time of
removal, in the case of those locally extracted or
produced; or the value used by the Bureau of Customs in
determining tariff and customs duties, net of excise tax
and value-added tax, in the case of importation.
Notwithstanding the provision of paragraph (4) of
Subsection (A) of Section 151, locally extracted natural
gas and liquefied natural gas shall be taxed at the rate of
two percent (2%);
(3) On all metallic minerals, a tax based on the actual
market value of the gross output thereof at the time of
removal, in the case of those locally extracted or
produced; or the value used by the Bureau of Customs in
determining tariff and customs duties, net of excise tax
and value-added tax, in the case of importation, in
accordance with the following schedule:
(a) Copper and other metallic minerals; (i) On the first
three (3) years upon the effectivity of Republic Act No.
7729,
one percent (1%); (ii) On the fourth and the fifth years,
one and a half percent (1 ½%); and (iii) On the sixth year
and thereafter, two percent (2%); (b) Gold and chromite,
two percent (2%).
(4) On indigenous petroleum, a tax of three percent (3%)
of the fair international market price thereof, on the first
taxable sale, barter, exchange or such similar
transaction, such tax to be paid by the buyer or
purchaser before removal from the place of production.
The phrase "first taxable sale, barter, exchange or similar
transaction" means the transfer of indigenous petroleum
in its original state to a first taxable transferee.
The fair international market price shall be determined in
consultation with an appropriate government agency.For
the purpose of this Subsection,"indigenous
petroleum" shall include locally-extracted mineral oil,
hydrocarbon gas, bitumen, crude asphalt, mineral gas
and all other similar or naturally associated substances
with the exception of coal, peat, bituminous shale and/or
stratified mineral deposits.
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(B) For Purposes of This Section, the Term: (1) "Gross
output" shall be interpreted as the actual market value of
minerals or mineral products or of bullion from each mine
or mineral land operated as a separate entity, without
any deduction from mining, milling, refining (including all
expenses incurred to prepare the said minerals or mineral
products in a marketable state), as well as transporting,
handling, marketing or any other expenses: Provided,That
if the minerals or mineral products are sold or consigned
abroad by the lessee or owner of the mine under C.I.F.
terms, the actual cost of ocean freight and insurance
shall be deducted:Provided, however, That in the case of
mineral concentrate, not traded in commodity
exchanges in the Philippines or abroad, such as copper
concentrate, the actual market value shall be the world
price quotations of the refined mineral products content
thereof prevailing in the said commodity exchanges,
after deducting the smelting, refining and other charges
incurred in the process of converting the mineral
concentrates into refined metal traded in those
commodity exchanges.
(2) "Minerals" shall mean all naturally occurring inorganic
substances (found in nature) whether in solid, liquid,
gaseous or any intermediate state.
(3) "Mineral products" shall mean things produced and
prepared in a marketable state by simple treatment
processes such as washing or drying, but without
undergoing any chemical change or process or
manufacturing by the lessee, concessionaire or owner of
mineral lands.
(4) "Quarry resources" shall mean any common stone or
other common mineral substances as the Director of the
Bureau of Mines and Geo-Sciences may declare to be
quarry resources such as, but not restricted to, marl,
marble, granite, volcanic cinders, basalt, tuff and rock
phosphate: Provided, That they contain no metal or other
valuable minerals in economically workable quantities.
When the products are now brought out of the mine site,
there is already a BIR representative to make an
assessment of the tax to be imposed on the extracted
products.
When you now process the ore and produce the gold,
the small scale miners are required to sell their gold to
BSP. In the VAT, the sale of Gold is zero-rated. That is to
encourage the selling of gold to BSP. Most of the small
scale miners are cooperatives. Under the Cooperative
Code of the Philippines, when you set up a cooperative,
it is tax-free.
SUMMARY: These are the products subject of the excise
tax. Whether they are manufactured or sold in the
Philippines, or imported they are still subject to excise tax.
The bulk of revenue collection is from this kind of tax. The
excise taxes are already part of the price. When the
producers would produce or import, they pay the excise
tax. But the excise tax being an indirect tax, is added to
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
the selling price, plus the VAT. So the taxes there are
virtually shouldered by the consumer.
Products not included in this list cannot be subject to
excise tax. But when you import them, they will be subject
to VAT. When you sell them, another VAT rate will apply to
them. Except under Section 109, where you have the list
of exempted transactions. So only these products will be
subject to the excise tax.
This has similar regime with the Philippine Mining Act. The
share of the government will only be in the case of taxes.
The government does not get a share as owner. That was
questioned because of the the Regalian Doctrine. But
according to the mining act, government really just gets
the tax. And the courts has already declared the
constitutionality of the Mining Act. There is a pending
case right now with the Supreme Court, questioning
again the constitutionality of the Mining Act.
If you quarry on public lands or public waters, it is the LGU
that will collect the tax. If you quarry on private lands,
such transaction is taxed in Section 151.
The amendment for this provision is still pending in the
Senate: the Mineral Management Act.
SEC. 152. Extent of Supervision Over Establishments
Producing Taxable Output. - The Bureau of Internal
Revenue has authority to supervise establishments where
articles subject to excise tax are made or kept.
The Secretary of Finance shall prescribe rules and
regulations as to the mode in which the process of
production shall be conducted insofar as may be
necessary to secure a sanitary output and to safeguard
the revenue.
SEC. 153. Records to be Kept by Manufacturers;
Assessment Based Thereon.- Manufacturers of articles
subject to excise tax shall keep such records as required
by rules and regulations recommended by the
Commissioner and approved by the Secretary of Finance,
and such records, whether of raw materials received into
the factory or of articles produced therein, shall be
deemed public and official documents for all purposes.
The records of raw materials kept by such manufacturers
may be used as evidence by which to determine the
amount of excise taxes due from them, and whenever
the amounts of raw material received into any factory
exceeds the amount of manufactured or partially
manufactured products on hand and lawfully removed
from the factory, plus waste removed or destroyed, and a
reasonable allowance for unavoidable loss in
manufacture, the Commissioner may assess and collect
the tax due on the products which should have been
produced from the excess.
The excise tax due on the products as determined and
assessed in accordance with this Section shall be
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payable upon demand or within the period specified
therein.
SEC. 154. Premises Subject to Approval by
Commissioner. - No person shall engage in business as a
manufacturer of or dealer in articles subject to excise tax
unless the premises upon which the business is to
conducted shall have been approved by the
Commissioner.
SEC. 155. Manufacturers to Provide Themselves with
Counting or Metering Devices to Determine Production. -
Manufacturers of cigarettes, alcoholic products, oil
products and other articles subject to excise tax that can
be similarly measured shall provide themselves with such
necessary number of suitable counting or metering
devices to determine as accurately as possible the
volume, quantity or number of the articles produced by
them under rules and regulations promulgated by the
Secretary of Finance, upon recommendation of the
Commissioner.
This requirement shall be complied with before
commencement of operations.
SEC. 156. Labels and Form of Packages. - All articles of
domestic manufacture subject to excise tax and all leaf
tobacco shall be put up and prepared by the
manufacturer or producer, when removed for sale or
consumption, in such packages only and bearing such
marks or brand as shall be prescribed in the rules and
regulations promulgated by the Secretary of Finance; and
goods of similar character imported into the Philippines
shall likewise be packed and marked in such a manner
as may be required.
SEC. 157. Removal of Articles After the Payment of Tax. -
When the tax has been paid on articles or products
subject to excise tax, the same shall not thereafter be
stored or permitted to remain in the distillery, distillery
warehouse, bonded warehouse, or other factory or place
where produced.
However, upon prior permit from the Commissioner, oil
refineries and/or companies may store or deposit tax-
paid petroleum products and commingle the same with
its own manufactured products not yet subjected to
excise tax.
Imported petroleum products may be allowed to be
withdrawn from customs custody without the prepayment
of excise tax, which products may be commingled with
the tax-paid or bonded products of the importer himself
after securing a prior permit from the
Commissioner: Provided, That withdrawals shall be taxed
and accounted for on a "first-in, first-out" basis.
SEC. 158. Storage of Goods in Internal-Revenue Bonded
Warehouses. - An internal-revenue bonded warehouse
may be maintained in any port of entry for the storing of
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
imported or manufactured goods which are subject to
excise tax.
The taxes on such goods shall be payable only upon
removal from such warehouse and a reasonable charge
shall be made for their storage therein.
The Commissioner, may, in his discretion, exact a bond to
secure the payment of the tax on any goods so stored.
When you remove them from the place of production,
you can transfer them to a bonded warehouse so that
you do not have to pay excise tax.
SEC. 159. Proof of Exportation; Exporter's Bond. - Exporters
of goods that would be subject to excise tax, if sold or
removed for consumption in the Philippines, shall submit
proof of exportation satisfactory to the Commissioner
and, when the same is deemed necessary, shall be
required to give a bond prior to the removal of the goods
for shipment, conditioned upon the exportation of the
same in good faith.
SEC. 160. Manufacturers' and Importers' Bond. -
Manufacturers and importers of articles subject to excise
tax shall post a bond subject to the following conditions:
(A) Initial Bond. - In case of initial bond, the amount shall
be equal to One Hundred thousand pesos
(P100,000): Provided, That if after six (6) months of
operation, the amount of initial bond is less than the
amount of the total excise tax paid during the period, the
amount of the bond shall be adjusted to twice the tax
actually paid for the period.
(B) Bond for the Succeeding Years of Operation. - The
bonds for the succeeding years of operation shall be
based on the actual total excise tax paid during the
period the year immediately preceding the year of
operation.
Such bond shall be conditioned upon faithful
compliance, during the time such business is followed,
with laws and rules and regulations relating to such
business and for the satisfaction of all fines and penalties
imposed by this Code.
SEC. 161. Records to be Kept by Wholesale Dealers. -
Wholesale dealers shall keep records of their purchases
and sales or deliveries of articles subject to excise tax, in
such form as shall be prescribed in the rules and
regulations by the Secretary of Finance.
These records and the entire stock of goods subject to tax
shall be subject at all times to inspection of internal
revenue officers.
SEC. 162. Records to be Kept by Dealers in Leaf
Tobacco. - Dealers in leaf tobacco shall keep records of
the products sold or delivered by them to other persons in
such manner as may be prescribed in the rules and
regulations by the Secretary of Finance, such records to
be at all times subject to inspection of internal revenue
officers.
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SEC. 163. Preservation of Invoices and Stamps. - All
dealers whosoever shall preserve, for the period
prescribed in Section 235, all official invoices received by
them from other dealers or from manufacturers, together
with the fractional parts of stamps affixed thereto, if any,
and upon demand, shall deliver or transmit the same to
any interval revenue officer.
SEC. 164. Information to be Given by Manufacturers,
Importers, Indentors, and Wholesalers of any Apparatus or
Mechanical Contrivance Specially for the Manufacture of
Articles Subject to Excise Tax and Importers, Indentors,
Manufacturers or Sellers of Cigarette Paper in Bobbins,
Cigarette Tipping Paper or Cigarette Filter Tips. -
Manufacturers, indentors, wholesalers and importers of
any apparatus or mechanical contrivance specially for
the manufacture of articles subject to tax shall, before
any such apparatus or mechanical contrivance is
removed from the place of manufacture or from the
customs house, give written information to the
Commissioner as to the nature and capacity of the same,
the time when it is to be removed, and the place for
which it is destined, as well as the name of the person by
whom it is to be used; and such apparatus or mechanical
contrivance shall not be set up nor dismantled or
transferred without a permit in writing from the
Commissioner.
A written permit from the Commissioner for importing,
manufacturing or selling of cigarette paper in bobbins or
rolls, cigarette tipping paper or cigarette filter tips is
required before any person shall engage in the
importation, manufacture or sale of the said articles.
No permit to sell said articles shall be granted unless the
name and address of the prospective buyer is first
submitted to the Commissioner and approved by him.
Records, showing the stock of the said articles and the
disposal thereof by sale of persons with their respective
addresses as approved by the Commissioner, shall be
kept by the seller, and records, showing stock of said
articles and consumption thereof, shall be kept by the
buyer, subject to inspection by internal revenue officers.
SEC. 165. Establishment of Distillery Warehouse. - Every
distiller, when so required by the Commissioner, shall
provide at his own expense a warehouse, and shall be
situated in and constitute a part of his distillery premises
and to be used only for the storage of distilled spirits of his
own manufacture until the tax thereon shall have been
paid; but no dwelling house shall be used for such
purpose.
Such warehouse, when approved by the Commissioner, is
declared to be a bonded warehouse, and shall be known
as a distillery warehouse.
SEC. 166. Custody of Distillery or Distillery Warehouse. -
Every distillery or distillery warehouse shall be in the joint
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
custody of the revenue inspector, if one is assigned
thereto, and of the proprietor thereof.
It shall be kept securely locked, and shall at no time be
unlocked or opened or remain unlocked or opened
unless in the presence of such revenue inspector or other
person who may be designated to act for him as
provided by law.
The revenue personnel do not stay there as long as he
wants. There is a limited period of time during which he
can be in the premises.
SEC. 167. Limitation on Quantity of Spirits Removed from
Warehouse. -No distilled spirits shall be removed from any
distillery, distillery warehouse, or bonded warehouse in
quantities of less than fifteen (15) gauge liters at any one
time, except bottled goods, which may be removed by
the case of not less than twelve (12) bottles.
SEC. 168. Denaturing Within Premises. - For purposes of
this Title, the process of denaturing alcohol shall be
effected only within the distillery premises where the
alcohol to be denatured is produced in accordance with
formulas duly approved by the Bureau of Internal
Revenue and only in the presence of duly designated
representatives of said Bureau.
SEC. 169. Recovery of Alcohol for Use in Arts and
Industries. -Manufacturers employing processes in which
denatured alcohol used in arts and industries is expressed
or evaporated from the articles manufactured may,
under rules and regulations to be prescribed by the
Secretary of Finance, upon recommendation of the
Commissioner, be permitted to recover the alcohol so
used and restore it again to a condition suitable solely for
use in manufacturing processes.
SEC. 170. Requirements Governing Rectification and
Compounding of Liquors. - Persons engaged in the
rectification or compounding of liquors shall, as to the
mode of conducting their business and supervision over
the same, be subject to all the requirements of law
applicable to distilleries:Provided, That where a rectifier
makes use of spirits upon which the excise tax has been
paid, no further tax shall be collected on any rectified
spirits produced exclusively therefrom: Provided, further,
That compounders in the manufacture of any intoxicating
beverage whatever, shall not be allowed to make use of
spirits upon which the excise tax has not been previously
paid.
We no longer tax compounded liquors.
SEC. 171. Authority of Internal Revenue Officer in
Searching for Taxable Articles. - Any internal revenue
officer may, in the discharge of his official duties, enter
any house, building or place where articles subject to tax
under this Title are produced or kept, or are believed by
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him upon reasonable grounds to be produced or kept, so
far as may be necessary to examine, discover or seize
the same.
He may also stop and search any vehicle or other means
of transportation when upon reasonable grounds he
believes that the same carries any article on which the
excise tax has not been paid.
The BIR can conduct search and seizure. In earlier
provisions, BIR was given the right to search and arrest
(Section 15). For purposes of the NIRC, you have to
secure a search warrant. You still follow the due process
requirements.
In the tariff and customs code, it is different. You need
not have a search warrant. You can enter the premises
without a search warrant.
SEC. 172. Detention of Package Containing Taxable
Articles.- Any revenue officer may detain any package
containing or supposed to contain articles subject to
excise tax when he has good reason to believe that the
lawful tax has not been paid or that the package has
been or is being removed in violation of law, and every
such package shall be held by such officer in a safe
place until it shall be determined whether the property so
detained is liable by law to be proceeded against for
forfeiture; but such summary detention shall not continue
in any case longer than seven (7) days without due
process of law or intervention of the officer to whom such
detention is to be reported.
DOCUMENTARY STAMP TAX
This is the last internal revenue tax in the NIRC.
The important provisions are 173, 199, 200 & 201. Other
provisions deal about the rates.
SEC. 173. Stamp Taxes Upon Documents, Loan
Agreements, Instruments and Papers. - Upon documents,
instruments, loan agreements and papers, and upon
acceptances, assignments, sales and transfers of the
obligation, right or property incident thereto, there shall
be levied, collected and paid for, and in respect of the
transaction so had or accomplished, the corresponding
documentary stamp taxes prescribed in the following
Sections of this Title, by the person making, signing,
issuing, accepting, or transferring the same wherever the
document is made, signed, issued, accepted or
transferred when the obligation or right arises from
Philippine sources or the property is situated in the
Philippines, and the same time such act is done or
transaction had: Provided, That whenever one party to
the taxable document enjoys exemption from the tax
herein imposed, the other party who is not exempt shall
be the one directly liable for the tax.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Q: Is DST a tax on the document or a tax on the
transaction?
A: It is a tax on the document and a tax on the
transaction as well, as expressly worded in Section 173.
The liability is upon the person making, signing or issuing
the document. But it does not mean that all of them will
pay. For as long as payment has been made by any of
these persons, then they have complied with the tax
obligation.
So in a contract of sale, the seller and the buyer need not
individually pay. Payment by one of them is sufficient. But
most of the time, it is the seller who pays, unless there is a
different arrangement for that.
In loan agreements, the borrower usually pays the DST,
not the lender. The lender may advance the payment
but he can charge that to the borrower.
Not all documents are subject to DST.
SEC. 174. Stamp Tax on Original Issue of Shares of Stock. -
On every original issue, whether on organization,
reorganization or for any lawful purpose, of shares of
stock by any association, company or corporation, there
shall be collected a documentary stamp tax of Two pesos
(P2.00) on each Two hundred pesos (P200), or fractional
part thereof, of the par value, of such shares of
stock: Provided, That in the case of the original issue of
shares of stock without par value the amount of the
documentary stamp tax herein prescribed shall be based
upon the actual consideration for the issuance of such
shares of stock: Provided, further, That in the case of stock
dividends, on the actual value represented by each
share.
This applies to new corporations beings formed. The
corporation will issue the original shares of stock. The
same needs Documentary Stamp Tax
SEC. 175. Stamp Tax on Sales, Agreements to Sell,
Memoranda of Sales, Deliveries or Transfer of Due-bills,
Certificates of Obligation, or Shares of Certificates of
Stock. - On all sales, or agreements to sell, or
memoranda of sale, or deliveries, or transfer of due-bills,
certificates of obligation, or shares of certificates of stock
in any association, company, or corporation, or transfer
of such securities by assignment in blank, or by delivery,
or by any paper or agreement, or memorandum or other
evidences of transfer or sale whether entitling the holder
in any manner to the benefit of such due-bills, certificates
of obligation or stock, or to secure the future payment of
money, or for the future transfer of any due-bill, certificate
of obligation or stock, there shall be collected a
documentary stamp tax of One peso and fifty centavos
(P1.50) on each Two hundred pesos (P200) or fractional
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part thereof, of the par value of such due-bill, certificate
of obligation or stock; Provided, That only one tax shall be
collected on each sale or transfer of stock or securities
from one person to another, regardless of whether or not
a certificate of stock or obligation is issued, indorsed, or
delivered in pursuance of such sale or transfer:
and, Provided, further, That in the case of stock without
par value the amount of documentary stamp tax herein
prescribed shall be equivalent to twenty-five percent
(25%) of the documentary stamp tax paid upon the
original issue of said stock.
SEC. 176. Stamp Tax on Bonds, Debentures, Certificate of
Stock or Indebtedness Issued in Foreign Countries. - On
all bonds, debentures, certificates of stock, or certificates
of indebtedness issued in any foreign country, there shall
be collected from the person selling or transferring the
same in the Philippines, such as tax as is required by law
on similar instruments when issued, sold or transferred in
the Philippines.
SEC. 177. Stamp Tax on Certificates of Profits or Interest in
Property or Accumulations. - On all certificates of profits,
or any certificate or memorandum showing interest in the
property or accumulations of any association, company
or corporation, and on all transfers of such certificates or
memoranda, there shall be collected a documentary
stamp tax of Fifty centavos (P0.50) on each Two hundred
pesos (P200), or fractional part thereof, of the face value
of such certificate or memorandum.
SEC. 178. Stamp Tax on Bank Checks, Drafts, Certificates
of Deposit not Bearing Interest, and Other Instruments. -
On each bank check, draft, or certificate of deposit not
drawing interest, or order for the payment of any sum of
money drawn upon or issued by any bank, trust
company, or any person or persons, companies or
corporations, at sight or on demand, there shall be
collected a documentary stamp tax of One peso and fifty
centavos (P1.50).
SEC. 179. Stamp Tax on All Bonds, Loan Agreements,
promissory Notes, Bills of Exchange, Drafts, Instruments
and Securities Issued by the Government or Any of its
Instrumentalities, Deposit Substitute Debt Instruments,
Certificates of Deposits Bearing Interest and Others Not
Payable on Sight or Demand. - On all bonds, loan
agreements, including those signed abroad, wherein the
object of the contract is located or used in the
Philippines, bills of exchange (between points within the
Philippines), drafts, instruments and securities issued by
the Government or any of its instrumentalities, deposit
substitute debt instruments, certificates of deposits
drawing interest, orders for the payment of any sum of
money otherwise than at sight or on demand, on all
promissory notes, whether negotiable or non-negotiable,
except bank notes issued for circulation, and on each
renewal of any such note, there shall be collected a
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
documentary stamp tax of Thirty centavos (P0.30) on
each Two hundred pesos (P200), or fractional part thereof,
of the face value of any such agreement, bill of
exchange, draft, certificate of deposit, or
note: Provided, That only one documentary stamp tax
shall be imposed on either loan agreement, or promissory
notes issued to secure such loan, whichever will yield a
higher tax: Provided, however, That loan agreements or
promissory notes the aggregate of which does not
exceed Two hundred fifty thousand pesos (P250,000)
executed by an individual for his purchase on installment
for his personal use or that of his family and not for
business, resale, barter or hire of a house, lot, motor
vehicle, appliance or furniture shall be exempt from the
payment of the documentary stamp tax provided under
this Section.
Banks usually prepare all papers needed for you to get a
loan. They will have you sign a loan agreement and a
promissory note. But because that only involves one
transaction, you do not have to get DST for each of the
documents. One stamp is sufficient.
SEC. 180. Stamp Tax on Bills of Exchange or Drafts. – On all
bills of exchange (between points within the Philippines)
or drafts, there shall be collected a documentary stamp
tax of Thirty Centavos (P0.30) on each Two hundred pesos
(P200.00), or fractional part thereof, of the face value of
any such bill of exchange or draft.
SEC. 181. Stamp Tax Upon Acceptance of Bills of
Exchange and Others. -Upon any acceptance or
payment of any bill of exchange or order for the payment
of money purporting to be drawn in a foreign country but
payable in the Philippines, there shall be collected a
documentary stamp tax of Thirty centavos (P0.30) on
each Two hundred pesos (P200), or fractional part thereof,
of the face value of any such bill of exchange, or order,
or the Philippine equivalent to such value, if expressed in
foreign currency.
SEC. 182. Stamp Tax on Foreign Bills of Exchange and
Letters of Credit. -On all foreign bills of exchange and
letters of credit (including orders, by telegraph or
otherwise, for the payment of money issued by express or
steamship companies or by any person or persons)
drawn in but payable out of the Philippines in a set of
three (3) or more according to the custom of merchants
and bankers, there shall be collected a documentary
stamp tax of Thirty centavos (P0.30) on each Two hundred
pesos (P200), or fractional part thereof, of the face value
of any such bill of exchange or letter of credit, or the
Philippine equivalent of such face value, if expressed in
foreign currency.
SEC. 183. Stamp Tax on Life Insurance Policies. - On all
policies of insurance or other instruments by whatever
name the same may be called, whereby any insurance
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shall be made or renewed upon any life or lives, there
shall be collected a documentary stamp tax of Fifty
centavos (P0.50) on each Two hundred pesos (P200), or
fractional part thereof, of the amount insured by any such
policy.
If premium is less than 100,000 – exempt
If more than 100,000 but less then 300,000 – P10 DST
If more then 300,000 but less then 500,000 – P25
and so on…
SEC. 184. Stamp Tax on Policies of Insurance Upon
Property. - On all policies of insurance or other
instruments by whatever name the same may be called,
by which insurance shall be made or renewed upon
property of any description, including rents or profits,
against peril by sea or on inland waters, or by fire or
lightning, there shall be collected a documentary stamp
tax of Fifty centavos (P0.50) on each Four pesos (P4.00),
or fractional part thereof, of the amount of premium
charged: Provided, however, That no documentary stamp
tax shall be collected on reinsurance contracts or on any
instrument by which cession or acceptance of insurance
risks under any reinsurance agreement is effected or
recorded.
SEC. 185. Stamp Tax on Fidelity Bonds and Other
Insurance Policies. - On all policies of insurance or bonds
or obligations of the nature of indemnity for loss, damage
or liability made or renewed by any person, association,
company or corporation transacting the business of
accident, fidelity, employer’s liability, plate, glass, steam,
boiler, burglar, elevator, automatic sprinkler, or other
branch of insurance (except life, marine, inland, and fire
insurance), and all bonds, undertakings, or
recognizances, conditioned for the performance of the
duties of any office or position, for the doing or not doing
of anything therein specified, and on all obligations
guaranteeing the validity or legality of any bond or other
obligations issued by any province, city, municipality, or
other public body or organization, and on all obligations
guaranteeing the title to any real estate, or guaranteeing
any mercantile credits, which may be made or renewed
by any such person, company or corporation, there shall
be collected a documentary stamp tax of Fifty centavos
(P0.50) on each Four pesos (P4.00), or fractional part
thereof, of the premium charged.
SEC. 186. Stamp Tax on Policies of Annuities and Pre-
Need Plans. - On all policies of annuities, or other
instruments by whatever name the same may be called,
whereby an annuity may be made, transferred or
redeemed, there shall be collected a documentary
stamp tax of One peso and fifty centavos (P1.50) on each
Two hundred pesos (P200) or fractional part thereof, of the
capital of the annuity, or should this be unknown, then on
each Two hundred (P200) pesos, or fractional part thereof,
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
of thirty-three and one-third (33 1/3) times the annual
income.
On pre-need plans, the documentary stamp tax shall be
Fifty centavos (P0.50) on each Five hundred pesos (P500),
or fractional part thereof, of the value or amount of the
plan.
Pre-need plans include health care and educational
plans.
SEC. 187. Stamp Tax on Indemnity Bonds. - On all bonds
for indemnifying any person, firm or corporation who shall
become bound or engaged as surety for the payment of
any sum of money or for the due execution or
performance of the duties of any office or position or to
account for money received by virtue thereof, and on all
other bonds of any description, except such as may be
required in legal proceedings, or are otherwise provided
for herein, there shall be collected a documentary stamp
tax of Thirty centavos (P0.30) on each Four pesos (P4.00),
or fractional part thereof, of the premium charged.
SEC. 188. Stamp Tax on Certificates. - On each certificate
of damages or otherwise, and on every certificate or
document issued by any customs officer, marine
surveyor, or other person acting as such, and on each
certificate issued by a notary public, and on each
certificate of any description required by law or by rules
or regulations of a public office, or which is issued for the
purpose of giving information, or establishing proof of a
fact, and not otherwise specified herein, there shall be
collected a documentary stamp tax of Fifteen pesos
(P15.00).
This covers all kinds of certification. This is a shotgun
provision. This even covers Transcript of Records from
schools. When you apply to take the Bar Exams, you also
need Documentary stamps in your attachment.
SEC. 189. Stamp Tax on Warehouse Receipts. - On each
warehouse receipt for property held in storage in a public
or private warehouse or yard for any person other than
the proprietor of such warehouse or yard, there shall be
collected a documentary stamp tax of Fifteen pesos
(P15.00): Provided, That no tax shall be collected on each
warehouse receipt issued to any one person in any one
calendar month covering property the value of which
does not exceed Two hundred pesos (P200).
SEC. 190. Stamp Tax on Jai-Alai, Horse Racing Tickets,
lotto or Other Authorized Numbers Games. - On each jai-
alai, horse race ticket, lotto, or other authorized number
games, there shall be collected a documentary stamp
tax of Ten centavos (P0.10): Provided, That if the cost of
the ticket exceeds One peso (P1.00), an additional tax of
Ten centavos (P0.10) on every One peso (P1.00, or
fractional part thereof, shall be collected.
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SEC. 191. Stamp Tax on Bills of Lading or Receipts. - On
each set of bills of lading or receipts (except charter
party) for any goods, merchandise or effects shipped
from one port or place in the Philippines to another port or
place in the Philippines (except on ferries across rivers),
or to any foreign port, there shall be collected
documentary stamp tax of One peso (P1.00), if the value
of such goods exceeds One hundred pesos (P100) and
does not exceed One Thousand pesos (P1,000); Ten
pesos (P10), if the value exceeds One thousand pesos
(P1,000): Provided, however, That freight tickets covering
goods, merchandise or effects carried as accompanied
baggage of passengers on land and water carriers
primarily engaged in the transportation of passengers are
hereby exempt.
SEC. 192. Stamp Tax on Proxies. - On each proxy for
voting at any election for officers of any company or
association, or for any other purpose, except proxies
issued affecting the affairs of associations or corporations
organized for religious, charitable or literary purposes,
there shall be collected a documentary stamp tax of
Fifteen pesos (P15.00).
SEC. 193. Stamp Tax on Powers of Attorney. - On each
power of attorney to perform any act whatsoever, except
acts connected with the collection of claims due from or
accruing to the Government of the Republic of the
Philippines, or the government of any province, city or
municipality, there shall be collected a documentary
stamp tax of Five pesos (P5.00).
SEC. 194. Stamp Tax on Leases and Other Hiring
Agreements. - On each lease, agreement,
memorandum, or contract for hire, use or rent of any
lands or tenements, or portions thereof, there shall be
collected a documentary stamp tax of Three pesos
(P3.00) for the first Two thousand pesos (P2,000), or
fractional part thereof, and an additional One peso
(P1.00) for every One Thousand pesos (P1,000) or
fractional part thereof, in excess of the first Two thousand
pesos (P2,000) for each year of the term of said contract
or agreement.
SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of
Trust. - On every mortgage or pledge of lands, estate, or
property, real or personal, heritable or movable,
whatsoever, where the same shall be made as a security
for the payment of any definite and certain sum of money
lent at the time or previously due and owing of forborne
to be paid, being payable and on any conveyance of
land, estate, or property whatsoever, in trust or to be sold,
or otherwise converted into money which shall be and
intended only as security, either by express stipulation or
otherwise, there shall be collected a documentary stamp
tax at the following rates:
(a) When the amount secured does not exceed Five
thousand pesos (P5,000), Twenty pesos (P20.00).
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(b) On each Five thousand pesos (P5,000), or fractional
part thereof in excess of Five thousand pesos (P5,000), an
additional tax of Ten pesos (P10.00).
On any mortgage, pledge, or deed of trust, where the
same shall be made as a security for the payment of a
fluctuating account or future advances without fixed limit,
the documentary stamp tax on such mortgage, pledge or
deed of trust shall be computed on the amount actually
loaned or given at the time of the execution of the
mortgage, pledge or deed of trust, additional
documentary stamp tax shall be paid which shall be
computed on the basis of the amount advanced or
loaned at the rates specified above: Provided, however,
That if the full amount of the loan or credit, granted under
the mortgage, pledge or deed of trust shall be computed
on the amount actually loaned or given at the time of the
execution of the mortgage, pledge or deed of trust.
However, if subsequent advances are made on such
mortgage, pledge or deed of trust, additional
documentary stamp tax shall be paid which shall be
computed on the basis of the amount advanced or
loaned at the rates specified above: Provided, however,
That if the full amount of the loan or credit, granted under
the mortgage, pledge or deed of trust is specified in such
mortgage, pledge or deed of trust, the documentary
stamp tax prescribed in this Section shall be paid and
computed on the full amount of the loan or credit
granted.
SEC. 196. Stamp tax on Deeds of Sale and Conveyances
of Real Property.- On all conveyances, deeds,
instruments, or writings, other than grants, patents or
original certificates of adjudication issued by the
Government, whereby any land, tenement, or other realty
sold shall be granted, assigned, transferred or otherwise
conveyed to the purchaser, or purchasers, or to any other
person or persons designated by such purchaser or
purchasers, there shall be collected a documentary
stamp tax, at the rates herein below prescribed, based on
the consideration contracted to be paid for such realty or
on its fair market value determined in accordance with
Section 6(E) of this Code, whichever is higher: Provided,
That when one of the contracting parties is the
Government the tax herein imposed shall be based on
the actual consideration.
(a) When the consideration, or value received or
contracted to be paid for such realty after making proper
allowance of any encumbrance, does not exceed One
thousand pesos (P1,000) fifteen pesos (P15.00).
(b) For each additional One thousand Pesos (P1,000), or
fractional part thereof in excess of One thousand pesos
(P1,000) of such consideration or value, Fifteen pesos
(P15.00).
When it appears that the amount of the documentary
stamp tax payable hereunder has been reduced by an
incorrect statement of the consideration in any
conveyance, deed, instrument or writing subject to such
tax the Commissioner, provincial or city Treasurer, or
other revenue officer shall, from the assessment rolls or
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other reliable source of information, assess the property of
its true market value and collect the proper tax thereon.
SEC. 197. Stamp Tax on Charter Parties and Similar
Instruments. - On every charter party, contract or
agreement for the charter of any ship, vessel or steamer,
or any letter or memorandum or other writing between
the captain, master or owner, or other person acting as
agent of any ship, vessel or steamer, and any other
person or persons for or relating to the charter of any such
ship, vessel or steamer, and on any renewal or transfer of
such charter, contract, agreement, letter or
memorandum, there shall be collected a documentary
stamp tax at the following rates: (a) If the registered gross
tonnage of the ship, vessel or steamer does not exceed
one thousand (1,000) tons, and the duration of the charter
or contract does not exceed six (6) months, Five hundred
pesos (P500); and for each month or fraction of a month
in excess of six (6) months, an additional tax of Fifty pesos
(P50.00) shall be paid.
(b) If the registered gross tonnage exceeds one thousand
(1,000) tons and does not exceed ten thousand (10,000)
tons, and the duration of the charter or contract does not
exceed six (6) months, One thousand pesos (P1,000); and
for each month or fraction of a month in excess of six (6)
months, an additional tax of One hundred pesos (P100)
shall be paid.
(c) If the registered gross tonnage exceeds ten thousand
(10,000) tons and the duration of the charter or contract
does not exceed six (6) months, One thousand five
hundred pesos (P1,500); and for each month or fraction of
a month in excess of six (6) months, an additional tax of
One hundred fifty pesos (P150) shall be paid.
SEC. 198. Stamp Tax on Assignments and Renewals of
Certain Instruments. - Upon each and every assignment
or transfer of any mortgage, lease or policy of insurance,
or the renewal or continuance of any agreement,
contract, charter, or any evidence of obligation or
indebtedness by altering or otherwise, there shall be
levied, collected and paid a documentary stamp tax, at
the same rate as that imposed on the original instrument.
SEC. 199. Documents and Papers Not Subject to Stamp
Tax. - The provisions of Section 173 to the contrary
notwithstanding, the following instruments, documents
and papers shall be exempt from the documentary
stamp tax:
(a) Policies of insurance or annuities made or granted by
a fraternal or beneficiary society, order, association or
cooperative company, operated on the lodge system or
local cooperation plan and organized and conducted
solely by the members thereof for the exclusive benefit of
each member and not for profit.
(b) Certificates of oaths administered to any government
official in his official capacity or of acknowledgment by
any government official in the performance of his official
duties, written appearance in any court by any
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
government official, in his official capacity; certificates of
the administration of oaths to any person as to the
authenticity of any paper required to be filed in court by
any person or party thereto, whether the proceedings be
civil or criminal; papers and documents filed in courts by
or for the national, provincial, city or municipal
governments; affidavits of poor persons for the purpose of
proving poverty; statements and other compulsory
information required of persons or corporations by the
rules and regulations of the national, provincial, city or
municipal governments exclusively for statistical
purposes and which are wholly for the use of the bureau
or office in which they are filed, and not at the instance or
for the use or benefit of the person filing them; certified
copies and other certificates placed upon documents,
instruments and papers for the national, provincial, city or
municipal governments, made at the instance and for the
sole use of some other branch of the national, provincial,
city or municipal governments; and certificates of the
assessed value of lands, not exceeding Two hundred
pesos (P200) in value assessed, furnished by the
provincial, city or municipal Treasurer to applicants for
registration of title to land.
(c) Borrowing and lending of securities executed under
the Securities Borrowing and lending Program of a
registered exchange, or in accordance with regulations
prescribed by the appropriate regulatory authority:
Provided, however, That any borrowing or lending of
securities agreement as contemplated hereof shall be
duly covered by a master securities borrowing and
lending agreement acceptable to the appropriate
regulatory authority, and which agreements is duly
registered and approved by the Bureau of Internal
Revenue. (BIR).
(d) Loan agreements or promissory notes, the aggregate
of which does not exceed Two hundred fifty thousand
pesos (P250,000), or any such amount as may be
determined by he Secretary of Finance, executed by an
individual for his purchase on installment for his personal
use or that of his family and not for business or resale,
barter or hire of a house, lot, motor vehicle, appliance or
furniture: Provided,however, That the amount to be set by
the Secretary of Finance shall be in accordance with a
relevant price index but not to exceed ten percent (10%)
of the current amount and shall remain in force at least
for three (3) years.
(e) Sale, barter or exchange of shares of stock listed and
traded through the local stock exchange for a period of
five (5) years from the effectivity of this Act.
(f) Assignment or transfer of any mortgage, lease or
policy of insurance, or the renewal or continuance of any
agreement, contract, charter, or any evidence of
obligation or indebtedness, if there is no change in the
maturity date or remaining period of coverage from that
of the original instrument.
(g) Fixed income and other securities traded in the
secondary market or through an exchange.
(h) Derivatives: Provided, That for purposes of this
exemption, repurchase agreements and reverse
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Dean Manuel Quibod
repurchase agreements shall be treated similarly as
derivatives.
(i) Interbranch or interdepartmental advances within the
same legal entity.
(j) All forebearances arising from sales or service
contracts including credit card and trade
receivables:Provided, That the exemption be limited to
those executed by the seller or service provider itself.
(k) Bank deposit accounts without a fixed term or
maturity.
(l) All contracts, deeds, documents and transactions
related to the conduct of business of the Banko Sentral ng
Pilipinas.
(m) Transfer of property pursuant to Section 40(c)(2) of the
National Internal Revenue Code of 1997, as amended.
(n) Interbank call loans with maturity of not more than
seven (7) days to cover deficiency in reserves against
deposit liabilities, including those between or among
banks and quasibanks."
Typical in this provision is the assumption for mortgage.
They would sell their obligation to someone who would
assume the indebtedness. If there is no change in the
terms and conditions of that assignment, you don’t need
to pay DST. But if there is a change on the maturity date,
or other materials term or condition therein, then you
have to pay another set of DST.
NB. Section 40(c)(2) is in Income Tax. This requires a no-
gain-for-loss-transaction. When you exchange property
for shares of stocks, that is a no gain for loss transaction.
But the exemption is not automatic. You have to secure
authority from the BIR exempting the transaction.
SEC. 200. Payment of Documentary Stamp Tax. -
(A) In General.- The provisions of Presidential Decree No.
1045 notwithstanding, any person liable to pay
documentary stamp tax upon any document subject to
tax under Title VII of this Code shall file a tax return and
pay the tax in accordance with the rules and regulations
to be prescribed by the Secretary of Finance, upon
recommendation of the Commissioner.
(B) Time for Filing and Payment of the Tax.- Except as
provided by rules and regulations promulgated by the
Secretary of Finance, upon recommendation of the
Commissioner, the tax return prescribed in this Section
shall be filed within ten (10) days after the close of the
month when the taxable document was made, signed,
issued, accepted, or transferred, and the tax thereon shall
be paid at the same time the aforesaid return is filed.
(C) Where to File.- Except in cases where the
Commissioner otherwise permits, the aforesaid tax return
shall be filed with and the tax due shall be paid through
the authorized agent bank within the territorial jurisdiction
of the Revenue District Office which has jurisdiction over
the residence or principal place of business of the
taxpayer.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
In places where there is no authorized agent bank, the
return shall be filed with the Revenue District Officer,
collection agent, or duly authorized Treasurer of the city
or municipality in which the taxpayer has his legal
residence or principal place of business.
(D) Exception.- In lieu of the foregoing provisions of this
Section, the tax may be paid either through purchase
and actual affixture; or by imprinting the stamps through
a documentary stamp metering machine, on the taxable
document, in the manner as may be prescribed by rules
and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner.
This tells you how is payment made.
This validated that our internal revenue taxes under the
NIRC are what we call self-assessing taxes because it is
the taxpayer that is tasked to file a return and pay the tax
on the basis of that return.
Under Revenue Regulation 6-2001, DST returns shall be
filed within 5 days after the close of the month when the
taxable document was made. The tax shall be paid at
the same time the return is filed.
Under the Capital Gains Tax, you have 30 days to pay. At
the same time, apart from the Capital Gains Tax, DST
must also be paid. But take note that they have different
deadlines. Therefore, you do not have to pay them at the
same time.
Ordinarily, the simple documents need only 15.00
Documentary Stamps. But if the value is big, it would be
inconvenient to attach all the documentary stamp. So
what you do is you file a return.
SEC. 201. Effect of Failure to Stamp Taxable Document. -
An instrument, document or paper which is required by
law to be stamped and which has been signed, issued,
accepted or transferred without being duly stamped,
shall not be recorded, nor shall it or any copy thereof or
any record of transfer of the same be admitted or used in
evidence in any court until the requisite stamp or stamps
are affixed thereto and cancelled.
No Notary Public or other officer authorized to administer
oaths shall add his jurat or acknowledgement to any
document subject to documentary stmp tax unless the
proper documentary stamps are affixed thereto and
cancelled
This tells us the effect of failing to stamp tax in the
document.
It will not invalidate the document. It will just affect its
admissibility as evidence in court.
Notaries Public do not normally follow the second
paragraph of this Section. What they do is they notarize
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Dean Manuel Quibod III-Manresa (2013)

and they advice the client to pay for documentary REMEDIES

stamp. (Dean decided to have recitations, so Miss Universe and
peg nito. Q&A portion)
The purpose of cancellation is to avoid recycling the
stamp. You can cancel by writing two lines across the
Q: If you earned P 1,000,000.00 in a year, and you want to
stamps.
file the tax on that income, what do file?
In deeds of sale, you do not affix the stamps in the
A: An income tax return.
document because it involves a large amount of money.
What you will do is to file a return.
Q: How often do you file an income tax return?

A: Quarterly and Annually.

Q: When you are subject to a donor’s tax, prior to the

payment of the donor’s tax, what do you usually do for
purposes of paying the donor’s tax?

A: You file a Donor’s Tax Return.

Q: When do you file the donor’s tax return.

A: You file 30 days after making the donation,

Q: If you are an administrator of the estate, and there is a

tax due on the estate of the decedent, what will you do
for purposes of paying the estate tax due?

A: You will first inform the BIR of the death of the

decedent, then file the Estate Tax Return.

Q: For VAT, if you are also subject to an output VAT, how

do you pay the tax?

A: There is a separate tax return for VAT. You file the VAT
return, and pay the VAT on the basis of the return.

Q: What about percentage tax, like if you are a common

carrier, and you have to pay the percentage tax on that
business?

A: You file a percentage tax return.

Q: If you are a manufacturer, and you have to pay an

excise tax, what do you have to do?

A: You file an excise tax return.

Q: When you are subject to the DST, and the amount is

very large, what do you do to pay the DST?

A: You file a DST return.

You have noticed that all internal revenue taxes require

the filing of tax returns, prior to its payment. This brings us
to the principle that taxes in the NIRC are self-assessing
taxes. The BIR will not accept payment for taxes without
proper filing of the return. Together with the filing of the
return, you pay the tax due based on the return filed.

Transcribed by: Althea Mae P. Casador Page 60 of 131

Taxation Law II
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Q: After the filing of the return, does that mean that you
have no obligation anymore to the Government in so far
as your income tax, since you have already complied
with the filing of the return and the payment of the
annual tax?
A: The tax will still be assessed by the BIR to know if you
paid the correct tax or if you have a deficiency.
Q: What will the BIR do after you have filed you return?
A: Upon the submission of the return, the BIR will examine
the return.
Read Section 203.
SEC. 203. Period of Limitation Upon Assessment and
Collection. - Except as provided in Section 222, internal
revenue taxes shall be assessed within three (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
three (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.
Q: So what is the period within which the BIR is mandated
to make the assessment?
A: Three years after the last day prescribed by law for the
filing of the return.
Q: In income tax return, the deadline is April 15. If you file
your return on April 1, how will you count the three year
period?
A: The period will begin to run on April 16.
Q: If you file the return on May 1, when will you start
counting?
A: It will start on May 2, since in counting periods, we do
not include the first day.
The general prescriptive period within which the
government is given time to make assessments is three
years. No proceeding in court without assessment for the
collection of said taxes shall be begun after the
expiration of the period.
Q: Can the BIR collect the deficiency tax without an
assessment? When the BIR is given three years to assess,
can it collect the deficiency tax collect without an
assessment?
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
A: The BIR cannot collect.
Q: Can the BIR collect after the expiration of the three
year period?
A: The BIR can no longer collect. That is precisely the
reason of the law. You cannot go to court to collect the
taxes if there is no prior assessment. In other words, you
can only collect the deficiency tax against the tax payer
if there is an assessment.
After the return has been filed and the three year period
lapses, the government can no longer run after the
taxpayers. If the taxed year is 2012, the income tax
deadline is April 15, 2013. The BIR is given from April 16,
2013 to April 15, 2016 to collect any deficiency tax. If the
BIR informs you of a deficiency finding on April 16, 2016,
that is already barred because it has already prescribed,
So if the BIR would like to assess you of the deficiency, it
should be made within the three year period. Within the
three year period, the BIR cannot start running after you
without any assessment. The taxpayer must first be
notified of the deficiency.
The word assessment does not contemplate only the
period but also the finding of the BIR of the deficiency
after examining the return. The examination, audit and
inspection, will require the taxpayer to surrender not only
the financial statements, but also the books of accounts
and business records. They will also ask the suppliers to
cross-match the purchases that the taxpayer made is the
same figure that you indicated in the return. If there will
be variance, a deficiency will result.
This is what happens to gasoline dealers. The BIR will ask
the dealers how much gasoline they supply to a certain
entity. If the figures will not match, that would be a
source of a deficiency. You will now be assessed of a
deficiency income tax.
Let’s read Section 222.
SEC. 222. Exceptions as to Period of Limitation of
Assessment and Collection of Taxes. –
(a) In the case of a false or fraudulent return with intent to
evade tax or of failure to file a return, the tax may be
assessed, or a proceeding in court for the collection of
such tax may be filed without assessment, at any time
within ten (10) years after the discovery of the falsity,
fraud or omission: Provided, That in a fraud assessment
which has become final and executory, the fact of fraud
shall be judicially taken cognizance of in the civil or
criminal action for the collection thereof.
Q: Relate this provision with Section 203.
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A: In case of deficiency, the BIR has 3 years to assess the
return. However, in case of false or fraudulent return with
intent to evade tax or of failure to file a return, the BIR
may assess, or a proceeding in court be filed without an
assessment, within 10 years after the discovery of the
fraud.
Q: What do you understand of the provision that allows
the BIR to file an action in court without an assessment?
A: This means that if there is fraud, falsity or an omission to
pay tax, the BIR can file a criminal case against the
taxpayer even without prior assessment. So even if you
have not received an assessment notice yet, the BIR can
proceed to file a case against you.
In this provision, remember that the general prescriptive
period within which to make an assessment is three years.
But in case of false or fraudulent return or failure to file a
return, the assessment will be longer. The BIR is given 10
years. However, in case the BIR omits to make an
assessment during the 3 year period, and still continue on
assessing a taxpayer by merely saying that there is fraud
or falsity in the return filed, that is improper. The BIR
cannot just do that because they have to show that the
false and fraudulent return was done with intent to evade
paying the tax. Again, the BIR could not just say that
there is fraud in order for them not to be affected of the
prescriptive period. The burden now is with the BIR that
there is falsity and fraud and that there is intent to evade
the tax.
It is not at all times that the government will have the
period of 10 years. Only in the cases stated in Section 222.
Read Section 222 (b).
(b) If before the expiration of the time prescribed in
Section 203 for the assessment of the tax, both the
Commissioner and the taxpayer have agreed in writing to
its assessment after such time, the tax may be assessed
within the period agreed upon.
The period so agreed upon may be extended by
subsequent written agreement made before the
expiration of the period previously agreed upon.
So the three year period can be extended so long as the
taxpayer and the commissioner agreed in writing for such
extension. The period so agreed upon can further be
extended by subsequent written agreements, so long as
such agreement was made before the expiration of the
period previously agreed upon.
Q: If the BIR sends an extension notice to the taxpayer
and the taxpayer agrees to and signs the agreement
approving the extension, is that extension valid?
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
A: Yes. The extension notice signed by both the taxpayer
and the commissioner complies with the requirement of
the law for a valid extension.
Q: Would the extension be valid even if the extension
notice has no signature of the commissioner, as long as
the taxpayer agreed to it?
A: In an extension, you have the statutory provision that
both the commissioner and the taxpayer have agreed in
writing. The operative act is their signatures. If the
extension agreement was signed only by the taxpayer, it
is not valid (Johnson case).
Johnson case
When the BIR noticed that the period is not enough to
finish the assessment, they sent an extension notice to the
taxpayer. The taxpayer agreed by signing the notice. BIR
again sent another notice of extension, to which the
taxpayer agreed again. A third extension was again sent.
Taxpayer again agreed. After the assessment, BIR sent
the taxpayer a deficiency notice. The taxpayers now
protested saying that the assessment is already barred by
prescription. The BIR contended that there is no need for
the commissioner to sign because the notice is already in
writing.
Supreme Court said no. The provision is not a unilateral
agreement. It is a bilateral agreement. This is a
mandatory provision. So the agreement to extend must
be in writing and signed both by the commissioner and
the taxpayer.
Therefore, the assessment is already barred by
prescription.
Q: How many extensions are allowed?
A: As many as you can. But it is not wise to agree to the
extension, if you are the taxpayer.
Another matter is that if you agree for an extension, the
period must be definite. In one case, the extension was
worded as waiver of the prescriptive period. That is not
allowed. The waiver of the statutory period is not allowed
because for the purposes of the extension, the period
must be definite. It must be clear when the extension
period starts and ends.
Read letter c.
(c) Any internal revenue tax which has been assessed
within the period of limitation as prescribed in paragraph
(a) hereof may be collected by distraint or levy or by a
proceeding in court within five (5) years following the
assessment of the tax.
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Q: What is the period within which to assess any
deficiency tax?
A: Within 3 years, as a general rule, or within 10 years if
there is fraud and falsity.
Q: What is the period to collect?
A: 5 years.
So you have to remember these periods: 3,10,5. 3 years to
make an assessment, 10 years if there is falsity or fraud,
and 5 years to collect the deficiency tax.
Q: Can the government and the taxpayer agree to
extend the period of collection?
A: Yes, as provided in paragraph (d).
(d) Any internal revenue tax, which has been assessed
within the period agreed upon as provided in paragraph
(b) hereinabove, may be collected by distraint or levy or
by a proceeding in court within the period agreed upon
in writing before the expiration of the five (5) -year period.
The period so agreed upon may be extended by
subsequent written agreements made before the
expiration of the period previously agreed upon.
Let’s read the last paragraph.
(e) Provided, however, That nothing in the immediately
preceding section and paragraph (a) hereof shall be
construed to authorize the examination and investigation
or inquiry into any tax return filed in accordance with the
provisions of any tax amnesty law or decree.
Remember the principle of tax amnesty. It operates as an
absolute forgiveness on the part of the taxpayer. Tax
amnesty are usually legislated.
Q: If the taxpayer is under investigation, and during the
pendency of the three year period, congress came up
with a tax amnesty, can the taxpayer avail of the
amnesty despite the fact that he is under investigation?
A: Even if you are under investigation, if the government
legislates a tax amnesty, you are given the opportunity to
avail of such amnesty. If there is an amnesty, the
investigations are suspended, to give way to taxpayers
who likes to relent and avail of the tax amnesty and pay
the deficiency taxes.
If you avail of a tax amnesty, the government cannot run
after you anymore.
Q: Are taxes imprescriptible?
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
A: Yes, as an exception. The general rule is that it can be
assessed up to three years. Therefore, as a general rule,
taxes prescribe.
Q: What are the instances that taxes are imprescriptible.
A:
SEC. 223. Suspension of Running of Statute of Limitations. -
The running of the Statute of Limitations provided in
Sections 203 and 222 on the making of assessment and
the beginning of distraint or levy a proceeding in court for
collection, in respect of any deficiency, shall be
suspended for the period during which the Commissioner
is prohibited from making the assessment or beginning
distraint or levy or a proceeding in court and for sixty (60)
days thereafter; when the taxpayer requests for a
reinvestigation which is granted by the Commissioner;
when the taxpayer cannot be located in the address
given by him in the return filed upon which a tax is being
assessed or collected: Provided, that, if the taxpayer
informs the Commissioner of any change in address, the
running of the Statute of Limitations will not be suspended;
when the warrant of distraint or levy is duly served upon
the taxpayer, his authorized representative, or a member
of his household with sufficient discretion, and no property
could be located; and when the taxpayer is out of the
Philippines.
Q: How many instances are there?
A: *Dean is really confusing in this part, but according to
him, the following are the instances when the statute of
limitations is suspended:
1. Shall be suspended for the period during
which the Commissioner is prohibited from
making the assessment or beginning distraint
or levy or a proceeding in court and for sixty
(60) days;
2. When the taxpayer requests for a
reinvestigation which is granted by the
commissioner;
3. When the taxpayer cannot be located in the
address given by him in the return filed.
However, if you notify the BIR of your change
of address, but despite the notice, the BIR still
sent the assessments to your previous
address, it will not toll the running of the
prescriptive period;
4. When the warrant of distraint or levy is duly
served upon the taxpayer and property can
be located;
5. When the taxpayer is out of the Philippines.
The suspension covers both assessment and collection.
This list is exclusive. Only in these grounds and instances
that the assessment and collection of deficiency taxes
are imprescriptible.
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NB: Read Revenue Regulation 12-99 and 18-2013.
The assessment contemplates Section 228.
SEC. 228. Protesting of Assessment. - When the
Commissioner or his duly authorized representative finds
that proper taxes should be assessed, he shall first notify
the taxpayer of his findings: Provided, however, That a
preassessment notice shall not be required in the
following cases:
(a) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax as
appearing on the face of the return; or(b) When a
discrepancy has been determined between the tax
withheld and the amount actually remitted by the
withholding agent; or(c) When a taxpayer who opted to
claim a refund or tax credit of excess creditable
withholding tax 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 or quarters of the succeeding taxable
year; or(d) When the excise tax due on exciseable
articles has not been paid; or(e) When the 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.
The taxpayers shall be informed in writing of the law and
the facts on which the assessment is made; otherwise, the
assessment shall be void.
Within a period to be prescribed by implementing rules
and regulations, the taxpayer shall be required to
respond to said notice.
If the taxpayer fails to respond, the Commissioner or his
duly authorized representative shall issue an assessment
based on his findings.
Such assessment may be protested administratively by
filing a request for reconsideration or reinvestigation
within thirty (30) days from receipt of the assessment in
such form and manner as may be prescribed by
implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant
supporting documents shall have been submitted;
otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted
upon within one hundred eighty (180) days from
submission of documents, the taxpayer adversely
affected by the decision or inaction may appeal to the
Court of Tax Appeals within thirty (30) days from receipt of
the said decision, or from the lapse of one hundred eighty
(180)-day period; otherwise, the decision shall become
final, executory and demandable.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
If the assessment pertains to a notice informing the
taxpayer of the finding of the deficiency and determining
that facts and the law to which the assessment is based,
you have Section 228.
Q: In Revenue Regulation 12-99, what is this preliminary
assessment notice?
A:
Q: Which comes first, the notice of informal conference
or the pre-assessment notice?
A: The notice of the informal conference
Q: In Revenue Regulation 12-99, what happens when the
taxpayer is under investigation, and there’s now an initial
finding of deficiency?
A: There will be a notice of informal conference. This is
what is initially sent.
Q: What is the option given to the taxpayers upon receipt
of the notice for informal conference?
A: The taxpayer may attend the informal conference or
he may not attend.
Q: When he attends the informal conference, what will
happen?
A: They may enter into a compromise agreement. He will
admit liability in this case, but they will enter into a
compromise agreement for the payment of the
deficiency. He may also refute the findings of the
examiner.
Q: If they won’t arrive into an agreement, what will
happen?
A: *Dean did not allow the student to continue
answering* Just read Revenue Regulation 12-99 for the
process.
We go now to RR 18-2013.
Q: What do you understand of this revenue regulation?
A: This is an amendment of the prior revenue regulation.
Q: How is the process done in this revenue regulation?
A: *Not clear if Dean agreed with the student, so let’s
read nalang the regulation*
Q: What was eliminated in this amendment?
A: The notice of informal conference.
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Q: Does this violate due process?
A: No. the taxpayer is still given the opportunity to
question the assessment.
Q: In Section 228, is there a mention of the informal
conference?
A: None. It only mentions of a pre-assessment notice and
a subsequent notice of assessment.
In RR 18-2013, the BIR removed the notice of informal
conference, but they reiterated that there is no violation
of due process because in the revised rules, the taxpayer
is still given the opportunity to question the validity of the
assessment. Now, once there is a finding of a deficiency,
the BIR will initially send a pre-assessment notice.
Q: What does that assessment notice contain?
A: It should contain in detail the facts and law, rules and
regulations, to which the assessment is based.
Q: When that pre-assessment notice is sent to the
taxpayer, containing the facts and the law, in the hands
of the taxpayers, what will the taxpayers do?
A: The taxpayer has 15 days within which to respond. He
will be considered in default if he does not respond, and
therefore a formal letter of demand shall be issued,
calling for the payment of the tax.
Q: When the taxpayer receives the final letter of
demand, what will he do?
A: The taxpayer can file a protest.
Q: In the hands of the Commissioner, what will he do with
the protest?
A: The Commissioner would act on the protest. He may
either deny or grant the protest.
Q: If the protest is denied, where will the taxpayer go?
A: The taxpayer may either appeal to the CTA within 30
days from the day of receipt of the decision, or elevate
his protest through request for reconsideration to the
Commissioner within 30 days.
So from the denial of the protest, the protest will be
brought to the CTA. In the CTA, the case will be
processed on twio levels. It will be heard by CTA by
division and when there is an adverse decision, the case
will be appealed to the CTA en banc. From the CTA en
banc, you now go to the Supreme Court. That is where
the assessment will become final.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Q: If the taxpayer fails to respond to the pre-assessment
notice, what is the consequence?
A: When the taxpayer fails to respond, he will be
considered in default.
Q: Will that make the assessment final?
A: No.
Q: What will happen since the assessment will not be final
on the ground of the taxpayer’s failure to respond?
A: A formal letter of demand and final assessment notice
will be issued. So when a pre-assessment notice is
ignored, it does not make the assessment final. What the
BIR will do is send a final assessment notice.
Q: What will the taxpayer do with that final assessment
notice?
A: The taxpayer may file a protest.
Q: If he fails to protest, what will happen?
A: If the taxpayer fails to protest, the assessment shall
become final and demandable.
Q: When the assessment becomes final, what will the
government do?
A: The BIR will now collect the taxes.
Q: In what cases is the pre-assessment no longer
required?
A: 1) When the filing for a deficiency tax is the result of a
mathematical error in the computation of the tax.
*Dean asked for examples rather than have the student
enumerate each item. Let’s just read the revenue
regulation*
The taxpayer will be sent, in these cases, a final
assessment notice.
Only in these five cases that no pre-assessment will be
issued. In all other cases of a finding of a deficiency, it is
required that there is a pre-assessment notice that will be
sent to the taxpayer.
Q: When a final assessment notice is received by the
taxpayer and he contested the assessment, what is the
period within which the commissioner must decide on the
protest?
A: The commissioner is given 180 days to decide on the
protest.
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Q: If there is no decision within 180 days, what will the
taxpayer do?
A: The taxpayer may appeal to the CTA within 30 days
from the lapse of the 180 days.
Q: Is he given the option to wait for the decision even if
the 180 day period has already expired?
A: The taxpayer is given the option to go to the CTA or
wait for the decision.
That is the reason why there is a defect in the law when it
states “otherwise, the decision will become final and
executor”, because since there is an inaction in this case,
there is no such decision to become final to begin with.
In 2004, the CTA came out with the internal rules of
procedure in the CTA saying that the taxpayers could
wait for the decision because there is no decision that will
become final, under Section 228. That is a defect in the
law.
So the taxpayer is allowed to wait pursuant to the rules of
procedure issued by the CTA.
Once you go to the CTA because of the inaction, you
cannot anymore withdraw the petition. Once the
taxpayer avail of the remedy of going to the CTA by
reason of the inaction, he cannot withdraw that
anymore. The remedies are exclusive.
From the CTA division, you appeal to the CTA en banc,
and then to the Supreme Court. No appeals to the CA
anymore because under the new law, RA 9282, the CTA is
now equivalent of the CA. So no tax cases are now
appealed to the CA. But in the CTA, the case shall go
two processed, by division and en banc, before it can
proceed to the Supreme Court.
Once the Supreme Court decides on the protest, the
assessment will become final and collection proceeding
will follow.
For the collection proceedings, you have Section 205.
SEC. 205. Remedies for the Collection of Delinquent Taxes.
- The civil remedies for the collection of internal revenue
taxes, fees or charges, and any increment thereto
resulting from delinquency shall be:
(a) By distraint of goods, chattels, or effects, and other
personal property of whatever character, including
stocks and other securities, debts, credits, bank accounts
and interest in and rights to personal property, and by
levy upon real property and interest in rights to real
property; and
(b) By civil or criminal action.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Either of these remedies or both simultaneously may be
pursued in the discretion of the authorities charged with
the collection of such taxes:Provided, however, That the
remedies of distraint and levy shall not be availed of
where the amount of tax involve is not more than One
hundred pesos (P100).
The judgment in the criminal case shall not only impose
the penalty but shall also order payment of the taxes
subject of the criminal case as finally decided by the
Commissioner.
The Bureau of Internal Revenue shall advance the
amounts needed to defray costs of collection by means
of civil or criminal action, including the preservation or
transportation of personal property distrained and the
advertisement and sale thereof, as well as of real
property and improvements thereon.
So you have these remedies for the collection of
delinquent taxes. The civil remedies for the collection
resulting from delinquencies consist of administrative and
judicial remedies.
Administrative remedies for collection include destraint
on personal property in Section 206 – 212; and levy of real
property covered by Section 207 (b), 213, 214, 202 and
215. Section 202 is misplaced in your codal. It must follow
Section 214 because that is the procedure on levy.
Do not be confused of these proceeding, the distraint
and levy, because these are the same proceedings that
you will encounter in the rules of execution (Rule 39).
When the judgment creditor will now collect the award,
the sheriff will run after the debtor, either after the
personal or real properties of the debtor. That is also the
process in collecting taxes when there is deficiency.
In the distraint of personal property, the proceeding may
either be constructive or actual distraint. Section 206 tells
us about constructive distraint. Constructive distraint is
similar to your rules on preliminary attachment. In
constructive distaint, during the assessment proceedings,
to protect the interest of the government, the taxpayer
will be served a warrant of distraint, ordering him to
preserve his properties during the pendency of the
assessment.
In the event that assessment becomes final and
collection proceedings are now pursued against the
taxpayers, actual distraint will follow. In actual distraint,
the personal properties are ceased and sold at public
auction. The proceeds will be applied to the deficient
taxes plus penalties interests and surcharges. Any excess
will be returned to the taxpayer. But if there will still be a
balance, further distraint or levy will be done.
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In levy or real properties, this is similar to extra-judicial
foreclosure of real estate mortgage. They have the same
process. The sheriff will annotate the claim before the
ROD. The ROD will annotate the claim. There will be the
issuance of notice of sale and publication of that notice
of sale setting the auction day. During the auction, the
property will be sold to the highest bidder. The certificate
of sale will be issued to the highest bidder and will be
annotated with the ROD for purposes of counting the one
year redemption period. If there will be no redemption
you will issue a final deed to the purchaser. If there is
redemption, the property will be returned to the
taxpayer. The proceeds of the auction will be applied to
the delinquency. If there be an excess, the excess will be
given back to the taxpayer. If there will still be a balance,
further levy or distraint will be done.
The other remedies include forfeiture under Section 224-
225; the enforcement of a tax lien in Section 119; entering
into compromise in Section 204 – these are the remedies
under the NIRC to collect the taxes. You also have the
informer’s reward under Section 282. You also have the
remedy under Section 5 and 6 of NIRC. The remedies are
not only found in Title VIII, but also in other parts of the tax
code.
NB: You may read the book of de Leon. The aspect of tax
administration is discussed in the book of de Leon. You
have a list there of the administrative remedies.
The other group of collection remedies is judicial actions,
by way of a civil or criminal action.
Q: How do you proceed with a civil action to collect
taxes?
A: File a case of collection of sum of money.
Q: In what court will you file?
A: In depends on the value of the tax to be collected. So
you have to remember the jurisdictional amount.
Q: Can you file a collection case in the CTA?
A: No.
Q: How do you proceed with the filing of a criminal
action to collect the tax?
A: It will start through filing an affidavit-complaint filed by
the BIR in the fiscal’s office, not in the Department of
Justice. The fiscal will now determine if there is probable
cause through a Preliminary Investigation, to which the
taxpayer will be notified. A copy of the complaint will be
given to the taxpayer for the purpose of filing a counter-
affidavit.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Q: When you file a criminal action to collect the tax, does
this require a prior assessment?
A: Yes. The BIR cannot collect the tax if there was no
assessment against the taxpayer.
Read Section 220.
SEC. 220. Form and Mode of Proceeding in Actions Arising
under this Code. - Civil and criminal actions and
proceedings instituted in behalf of the Government under
the authority of this Code or other law enforced by the
Bureau of Internal Revenue shall be brought in the name
of the Government of the Philippines and shall be
conducted by legal officers of the Bureau of Internal
Revenue but no civil or criminal action for the recovery of
taxes or the enforcement of any fine, penalty or forfeiture
under this Code shall be filed in court without the
approval of the Commissioner.
Q: In pursuit of the collection remedies on the part of the
government, when the BIR proceeds with administrative
of collecting the tax, is the BIR precluded from
proceeding civilly or criminally against the tax payer?
A: No. Either of the remedies and both simultaneously
can be availed of by the government to collect the
taxes. This means that the government has in its discretion
to pursue either or both of the remedies.
Q: What does this tell us?
A: This tells us that the BIR can proceed on those actions
so that there will be more efficient collection of taxes,
pursuant to the principle that taxes are the lifeblood of
the country.
So, all these remedies, administrative, civil or criminal,
may be pursued at the same time. The government is not
precluded to resort to only one of these remedies.
In the case of a criminal action to collect the tax, there is
no need of a prior assessment. In Section 205, the
judgment in the criminal case shall not only impose the
penalty but shall also order the payment of taxes, subject
of the criminal case. In filing the criminal action, you still
follow the ordinary rules of procedure.
The BIR will file a complaint before the fiscal’s office, or
they may file it to the Department of Justice. The
taxpayer will be notified so he may file his counter-
affidavit. The preliminary investigation will be conducted
to determine if there is probable cause. If there is a
finding of probable cause, the formal complaint
information will be filed. The proceedings that will later on
take place, will be the same in your criminal procedure.
Even if there is a finding of acquittal, the court shall still
make a determination of the civil liability, since the filing
of the criminal action carried with it the civil aspect.
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One of the principles applicable in collection remedies is
that Taxes are the lifeblood of the government. The
government is allowed to resort to all of these remedies
to collect the taxes. Aside from that, you also have
another principle involving Injunction.
SEC. 218. Injunction not Available to Restrain Collection of
Tax. - No court shall have the authority to grant an
injunction to restrain the collection of any national
internal revenue tax, fee or charge imposed by this Code.
As a rule, the collection of the taxes cannot be subject to
any injunction because of the same principle that taxes
are the lifeblood of the government.
Another remedy aside from distraint and levy, is the
enforcement of a tax lien in Section 219.
SEC. 219. Nature and Extent of Tax Lien. - If any person,
corporation, partnership, joint-account (cuentas en
participacion), association or insurance company liable
to pay an internal revenue tax, neglects or refuses to pay
the same after demand, the amount shall be a lien in
favor of the Government of the Philippines from the time
when the assessment was made by the Commissioner
until paid, with interests, penalties, and costs that may
accrue in addition thereto upon all property and rights to
property belonging to the taxpayer: Provided, That this
lien shall not be valid against any mortgagee purchaser
or judgment creditor until notice of such lien shall be filed
by the Commissioner in the office of the Register of Deeds
of the province or city where the property of the taxpayer
is situated or located.
Q: What is a Tax Lien?
A: A claim against the property of the taxpayer.
Q: How is the tax lien enforced?
A: *Student reads Section 219*
Q: When does the claim arises?
A: When the taxpayer refuses to pay the tax or neglects
to pay the tax, after demand, the government will now
enforce the tax lien.
Q: When the government enforce the tax lien against his
properties, what will the government do?
A: The ROD will annotate the lien.
Q: The ROD told the BIR that they cannot annotate
because this property is already mortgaged with a bank.
What will happen?
A: *Student reads last part of the provision*. So if the title is
clean, the lien can be annotated. But if there Is an
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
existing mortgage or encumbrance, the lien will be
annotated but will not be valid against the first mortgage
of judgment-debtor. The lien will be secondary to the first
mortgagee’s claim. So your claim has the possibility of not
being enforced.
Later, when we go to local tax, take note of what is the
consequence of a tax lien in local taxation. In Real
Property Taxation, the tax lien is superior to all other liens.
So even if there is an existing mortgage on the title,. But if
the lien involves the claim of the LGU for unpaid Real
Property Taxes, such lien will be superior. This is not so in
internal revenue taxes.
Another remedy is the remedy of forfeiture under Section
224 and 225.
SEC. 224. Remedy for Enforcement of Forfeitures. - The
forfeiture of chattels and removable fixtures of any sort
shall be enforced by the seizure and sale, or destruction,
of the specific forfeited property.
The forfeiture of real property shall be enforced by a
judgment of condemnation and sale in a legal action or
proceeding, civil or criminal, as the case may require.
SEC. 225. When Property to be Sold or Destroyed. - Sales
of forfeited chattels and removable fixtures shall be
effected, so far as practicable, in the same manner and
under the same conditions as the public notice and the
time and manner of sale as are prescribed for sales of
personal property distrained for the non-payment of
taxes.
Distilled spirits, liquors, cigars, cigarettes, other
manufactured products of tobacco, and all apparatus
used I or about the illicit production of such articles may,
upon forfeiture, be destroyed by order of the
Commissioner, when the sale of the same for
consumption or use would be injurious to public health or
prejudicial to the enforcement of the law.
All other articles subject to excise tax, which have been
manufactured or removed in violation of this Code, as
well as dies for the printing or making of internal revenue
stamps and labels which are in imitation of or purport to
be lawful stamps, or labels may, upon forfeiture, be sold
or destroyed in the discretion of the Commissioner.
Forfeited property shall not be destroyed until at least
twenty (20) days after seizure.
Q: How is this remedy of forfeiture enforced?
A: The remedy of forfeiture shall be enforced by seizure of
the immovable things that are forfeited and the sale
thereof. In case of real property, there must be a
judgment of condemnation and its subsequent sale.
Q: What is forfeiture?
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A:
Q: So in case of chattels and immovable properties, what
will you do?
A: You either seize, sale or destroy the property.
Q: What will be done first?
A: You first seize the property. The BIR will then classify the
condition of the properties seized. If it is still fit for sale,
then the properties will be sold. If it cannot anymore be
sold of are already unfit for consumption, the properties
will be destroyed.
Q: In case of real properties, what will you do?
A: First, you should obtain a judgment of condemnation.
Q: What is a judgment of condemnation?
A:
Another remedy is compromise under Section 204.
SEC. 204. Authority of the Commissioner to Compromise,
Abate and Refund or Credit Taxes. - The Commissioner
may -
(A) Compromise the Payment of any Internal Revenue
Tax, when:
(1) A reasonable doubt as to the validity of the claim
against the taxpayer exists; or(2) The financial position of
the taxpayer demonstrates a clear inability to pay the
assessed tax.
The compromise settlement of any tax liability shall be
subject to the following minimum amounts:
For cases of financial incapacity, a minimum
compromise rate equivalent to ten percent (10%) of the
basic assessed tax; and
For other cases, a minimum compromise rate equivalent
to forty percent (40%) of the basic assessed tax.
Where the basic tax involved exceeds One million pesos
(P1,000.000) or where the settlement offered is less than
the prescribed minimum rates, the compromise shall be
subject to the approval of the Evaluation Board which
shall be composed of the Commissioner and the four (4)
Deputy Commissioners.
(B) Abate or Cancel a Tax Liability, when:
(1) The tax or any portion thereof appears to be unjustly
or excessively assessed; or(2) The administration and
collection costs involved do not justify the collection of
the amount due.
All criminal violations may be compromised except: (a)
those already filed in court, or (b) those involving fraud.
(C) Credit or refund taxes erroneously or illegally
received or penalties imposed without authority, refund
the value of internal revenue stamps when they are
returned in good condition by the purchaser, and, in his
discretion, redeem or change unused stamps that have
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
been rendered unfit for use and refund their value upon
proof of destruction.
No credit or refund of taxes or penalties shall be allowed
unless the taxpayer files in writing with the Commissioner
a claim for credit or refund within two (2) years after the
payment of the tax or penalty: Provided, however, That a
return filed showing an overpayment shall be considered
as a written claim for credit or refund.
A Tax Credit Certificate validly issued under the provisions
of this Code may be applied against any internal revenue
tax, excluding withholding taxes, for which the taxpayer
is directly liable.
Any request for conversion into refund of unutilized tax
credits may be allowed, subject to the provisions of
Section 230 of this Code: Provided, That the original copy
of the Tax Credit Certificate showing a creditable
balance is surrendered to the appropriate revenue officer
for verification and cancellation: Provided, further, That in
no case shall a tax refund be given resulting from
availment of incentives granted pursuant to special laws
for which no actual payment was made.
The Commissioner shall submit to the Chairmen of the
Committee on Ways and Means of both the Senate and
House of Representatives, every six (6) months, a report
on the exercise of his powers under this Section, stating
therein the following facts and information, among others:
names and addresses of taxpayers whose cases have
been the subject of abatement or compromise; amount
involved; amount compromised or abated; and reasons
for the exercise of power: Provided, That the said report
shall be presented to the Oversight Committee in
Congress that shall be constituted to determine that said
powers are reasonably exercised and that the
government is not unduly deprived of revenues.
Q: In what instances can the Commissioner enter into a
compromise?
A: When there is (1) A reasonable doubt as to the validity
of the claim against the taxpayer exists; or (2) The
financial position of the taxpayer demonstrates a clear
inability to pay the assessed tax.
There are only two instances where the BIR can inquire
into your bank accounts:
1) In the case of estate taxation
2) When the taxpayer will enter into a compromise
on the ground of financial incapacity.
In these cases, the taxpayer must first execute a waiver.
CF: Section 6 of NIRC.
The compromise is still a negotiation, and not an
obligation on the part of the government. However, to
speed up collection the government may enter into a
compromise. In the event of a compromise, there are
limitations. For cases of financial incapacity, a minimum
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compromise rate equivalent to ten percent (10%) of the
basic assessed tax. For other cases, a minimum
compromise rate equivalent to forty percent (40%) of the
basic assessed tax. Where the basic tax involved exceeds
One million pesos (P1,000.000) or where the settlement
offered is less than the prescribed minimum rates, the
compromise shall be subject to the approval of the
Evaluation Board which shall be composed of the
Commissioner and the four (4) Deputy Commissioners.
Q: When do you abate and cancel tax liability?
A: When the tax or any portion thereof appears to be
unjustly or excessively assessed or when the
administration and collection costs involved do not justify
the collection of the amount due.
Take note that even criminal violations may be
compromised except those already filed in court and
those involving fraud.
The other remedies are found in Section 5 and 6. You also
have Section 15.
In the case of the criminal action, there is no need of a
prior assessment for purposes of pursuing the remedy of
filing the criminal action. But if you proceed with the
remedy of the civil action, it requires prior assessment. To
collect taxes by way of civil action in court, this would
require a prior assessment.
Let’s go to Section 281.
SEC. 281. Prescription for Violations of any Provision of this
Code. - All violations of any provision of this Code shall
prescribe after Five (5) years.
Prescription shall begin to run from the day of the
commission of the violation of the law, and if the same be
not known at the time, from the discovery thereof and the
institution of judicial proceedings for its investigation and
punishment.
The prescription shall be interrupted when proceedings
are instituted against the guilty persons and shall begin to
run again if the proceedings are dismissed for reasons not
constituting jeopardy.
The term of prescription shall not run when the offender is
absent from the Philippines.
This provides for the period within which the criminal
action should be pursued.
In Section 222, the assessment is 3 years, and 10 years as
an exception. To collect the tax, you have 5 years,
whether you proceed with administrative remedies or
judicial remedies. Do not be confused of the periods.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
The running of the prescriptive period is tolled when the
offender is out of the country.
Let’s now go to informer’s reward.
SEC. 282. Informer's Reward to Persons Instrumental in the
Discovery of Violations of the National Internal Revenue
Code and in the Discovery and Seizure of Smuggled
Goods. -
(A) For Violations of the National Internal Revenue Code.
- Any person, except an internal revenue official or
employee, or other public official or employee, or his
relative within the sixth degree of consanguinity, who
voluntarily gives definite and sworn information, not yet in
the possession of the Bureau of Internal Revenue, leading
to the discovery of frauds upon the internal revenue laws
or violations of any of the provisions thereof, thereby
resulting in the recovery of revenues, surcharges and fees
and/or the conviction of the guilty party and/or the
imposition of any of the fine or penalty, shall be rewarded
in a sum equivalent to ten percent (10%) of the revenues,
surcharges or fees recovered and/or fine or penalty
imposed and collected or One Million Pesos (P1,000,000)
per case, whichever is lower.
The same amount of reward shall also be given to an
informer where the offender has offered to compromise
the violation of law committed by him and his offer has
been accepted by the Commissioner and collected from
the offender: Provided, That should no revenue,
surcharges or fees be actually recovered or collected,
such person shall not be entitled to a reward:Provided,
further, That the information mentioned herein shall not
refer to a case already pending or previously
investigated or examined by the Commissioner or any of
his deputies, agents or examiners, or the Secretary of
Finance or any of his deputies or agents: Provided,
finally, That the reward provided herein shall be paid
under rules and regulations issued by the Secretary of
Finance, upon recommendation of the Commissioner.
(B) For Discovery and Seizure of Smuggled Goods. - To
encourage the public to extend full cooperation in
eradicating smuggling, a cash reward equivalent to ten
percent (10%) of the fair market value of the smuggled
and confiscated goods or One Million Pesos (P1,000,000)
per case, whichever is lower, shall be given to persons
instrumental in the discovery and seizure of such
smuggled goods.
The cash rewards of informers shall be subject to income
tax, collected as a final withholding tax, at a rate of ten
percent (10%).
The provisions of the foregoing Subsections
notwithstanding, all public officials, whether incumbent or
retired, who acquired the information in the course of the
performance of their duties during their incumbency, are
prohibited from claiming informer's reward.
The informer’s reward is of two kinds; one for violation of
the NIRC and one for discovery of smuggled goods. The
discovery adnd seizure of smuggled goods is not involved
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liability for internal revenue taxes like VAT or other excise
taxes on account of importation.
An informer who gives a sworn information not yet known
to the BIR will be given a reward. He shall be rewarded to
a sum equivalent to 10% of the revenue recovered or
1,000,000 whichever is lower. So the information must lead
to collection of the tax in order for the informer to be
rewarded. The reward will still be given even if the
offender will offer to compromise. The reward in this case
will be based in the compromised amount.
For discovery and seizure of smuggled goods, there is no
more exclusion as to who can be an informer. You will
receive 10% of the fair value of the goods, or 1,000,000,
whichever is lower. The cash reward will be subjected to
a withholding tax. Before 1998, this reward is tax free. But
not it is already subject to tax.
Title IX talks about compliance requirements.
SEC. 232. Keeping of Books of Accounts. -
(A) Corporations, Companies, Partnerships or Persons
Required to Keep Books of Accounts. - All corporations,
companies, partnerships or persons required by law to
pay internal revenue taxes shall keep a journal and a
ledger or their equivalents: Provided, however, That those
whose quarterly sales, earnings, receipts, or output do not
exceed Fifty thousand pesos (P50,000) shall keep and use
simplified set of bookkeeping records duly authorized by
the Secretary of Finance where in all transactions and
results of operations are shown and from which all taxes
due the Government may readily and accurately be
ascertained and determined any time of the
year:Provided, further, That corporations, companies,
partnerships or persons whose gross quarterly sales,
earnings, receipts or output exceed One hundred fifty
thousand pesos (P150,000) shall have their books of
accounts audited and examined yearly by independent
Certified Public Accountants and their income tax returns
accompanied with a duly accomplished Account
Information Form (AIF) which shall contain, among others,
information lifted from certified balance sheets, profit and
loss statements, schedules listing income-producing
properties and the corresponding income therefrom and
other relevant statements.
(B) Independent Certified Public Accountant Defined. -
The term"Independent Certified Public Accountant", as
used in the preceding paragraph, means an accountant
who possesses the independence as defined in the rules
and regulations of the Board of Accountancy
promulgated pursuant to Presidential Decree No. 692,
otherwise known as the Revised Accountancy Law.
This talks about the keeping of books of accounts. The
books required are the journals and ledgers or their
equivalent.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
SEC. 233. Subsidiary Books. - All corporations, companies,
partnerships or persons keeping the books of accounts
mentioned in the preceding Section may, at their option,
keep subsidiary books as the needs of their business may
require: Provided, That were such subsidiaries are kept,
they shall form part of the accounting system of the
taxpayer and shall be subject to the same rules and
regulations as to their keeping, translation, production
and inspection as are applicable to the journal and the
ledger.
SEC. 234. Language in which Books are to be Kept;
Translation. - All suchcorporations, companies,
partnerships or persons shall keep the books or records
mentioned in Section 232 hereof in native language,
English or Spanish: Provided, however, That if in addition
to said books or records the taxpayer keeps other books
or records in a language other than a native language,
English or Spanish, he shall make a true and complete
translation of all the entries in suck other books or records
into a native language; English or Spanish, and the said
translation must be made by the bookkeeper, or such
taxpayer, or in his absence, by his manager and must be
certified under oath as to its correctness by the said
bookkeeper or manager, and shall form an integral part
of the aforesaid books of accounts.
The keeping of such books or records in any language
other than a native language, English or Spanish, is
hereby prohibited.
If you will be asked in what language shall the books are
to be kept, Section 234 will give you an answer. They can
be in English, Spanish or in the native language.
If it will be in a language other than this three, you must
keep a separate book that will provide translations.
SEC. 235. Preservation of Books and Accounts and Other
Accounting Records. - All the books of accounts,
including the subsidiary books and other accounting
records of corporations, partnerships, or persons, shall be
preserved by them for a period beginning from the last
entry in each book until the last day prescribed by
Section 203 within which the Commissioner is authorized
to make an assessment.
The said books and records shall be subject to
examination and inspection by internal revenue
officers: Provided, That for income tax purposes, such
examination and inspection shall be made only once in a
taxable year, except in the following cases:
(a) Fraud, irregularity or mistakes, as determined by the
Commissioner;(b) The taxpayer requests
reinvestigation;(c) Verification of compliance with
withholding tax laws and regulations;(d) Verification of
capital gains tax liabilities; and(e) In the exercise of the
Commissioner's power under Section 5(B) to obtain
information from other persons in which case, another or
separate examination and inspection may be made.
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Examination and inspection of books of accounts and
other accounting records shall be done in the taxpayer's
office or place of business or in the office of the Bureau of
Internal Revenue.
All corporations, partnerships or persons that retire from
business shall, within ten (10) days from the date of
retirement or within such period of time as may be
allowed by the Commissioner in special cases, submit
their books of accounts, including the subsidiary books
and other accounting records to the Commissioner or
any of his deputies for examination, after which they shall
be returned.
Corporations and partnerships contemplating dissolution
must notify the Commissioner and shall not be dissolved
until cleared of any tax liability.
Any provision of existing general or special law to the
contrary notwithstanding, the books of accounts and
other pertinent records of tax-exempt organizations or
grantees of tax incentives shall be subject to examination
by the Bureau of Internal Revenue for purposes of
ascertaining compliance with the conditions under which
they have been granted tax exemptions or tax
incentives, and their tax liability, if any.
The keeping of the books must be in the same period
within which the action for assessment can be pursued.
So after three years, you are free to throw away the
books.
Ordinarily, you can only be investigated and be
subjected to assessment only once in a taxable year.
When you are under assessment, what generates that
notice informing you that you are under assessment is the
letter of authority (LOA). The LOA is the document of the
examiner served to the taxpayer informing him of the
assessment. The LOA will define the tax period involved.
You cannot be examined for an indefinite tax period. The
period must be definite and must be stated in the LOA.
You can be made to keep the books for more than three
years in the cases enumerated in Section 235. These are
the exception to the general rule.
SEC. 236. Registration Requirements. -
(A) Requirements. - Every person subject to any internal
revenue tax shall register once with the appropriate
Revenue District Officer:
(1) Within ten (10) days from date of employment, or
(2) On or before the commencement of business,or
(3) Before payment of any tax due, or
(4) Upon filing of a return, statement or declaration as
required in this Code.
The registration shall contain the taxpayer's name, style,
place of residence, business and such other information
as may be required by the Commissioner in the form
prescribed therefor.
A person maintaining a head office, branch or facility
shall register with the Revenue District Officer having
jurisdiction over the head office, brand or facility.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
For purposes of this Section, the term "facility" may
include but not be limited to sales outlets, places of
production, warehouses or storage places.
(B) Annual Registration Fee. - An annual registration fee in
the amount of Five hundred pesos (P500) for every
separate or distinct establishment or place of business,
including facility types where sales transactions occur,
shall be paid upon registration and every year thereafter
on or before the last day of January: Provided,
however, That cooperatives, individuals earning purely
compensation income, whether locally or abroad, and
overseas workers are not liable to the registration fee
herein imposed.
The registration fee shall be paid to an authorized agent
bank located within the revenue district, or to the
Revenue Collection Officer, or duly authorized Treasurer
of the city of municipality where each place of business
or branch is registered.
(C) Registration of Each Type of Internal Revenue Tax. -
Every person who is required to register with the Bureau
of Internal Revenue under Subsection (A) hereof, shall
register each type of internal revenue tax for which he is
obligated, shall file a return and shall pay such taxes, and
shall updates such registration of any changes in
accordance with Subsection (E) hereof.
(D) Transfer of Registration. - In case a registered person
decides to transfer his place of business or his head office
or branches, it shall be his duty to update his registration
status by filing an application for registration information
update in the form prescribed therefor.
(E) Other Updates. - Any person registered in accordance
with this Section shall, whenever applicable, update his
registration information with the Revenue District Office
where he is registered, specifying therein any change in
type and other taxpayer details.
(F) Cancellation of Registration. - The registration of any
person who ceases to be liable to a tax type shall be
cancelled upon filing with the Revenue District Office
where he is registered an application for registration
information update in a form prescribed therefor.
(G) Persons Commencing Business. - Any person, who
expects to realize gross sales or receipts subject to value-
added tax in excess of the amount prescribed under
Section 109(z) of this Code for the next 12-month period
from the commencement of the business, shall register
with the Revenue District Office which has jurisdiction over
the head office or branch and shall pay the annual
registration fee prescribed in Subsection (B) hereof.
(H) Persons Becoming Liable to the Value-added Tax. -
Any person, whose gross sales or receipts in any 12-
month period exceeds the amount prescribed under
Subsection 109(z) of this Code for exemption from the
value-added tax shall register in accordance with
Subsection (A) hereof, and shall pay the annual
registration fee prescribed within ten (10) days after the
end of the last month of that period, and shall be liable to
the value-added tax commencing from the first day of
the month following his registration.
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(I) Optional Registration of Exempt Person. - Any person
whose transactions are exempt from value-added tax
under Section 109(z) of this Code; or any person whose
transactions are exempt from the value-added tax under
Section 109(a), (b), (c), and (d) of this Code, who opts to
register as a VAT taxpayer with respect to his export sales
only, may update his registration information in
accordance with Subsection (E) hereof, not later than ten
(10) days before the beginning of the taxable quarter and
shall pay the annual registration fee prescribed in
Subsection (B) hereof.
In any case, the Commissioner may, for administrative
reasons, deny any application for registration including
updates prescribed under Subsection (E) hereof.
For purposes of Title IV of this Code, any person who has
registered value-added tax as a tax type in accordance
with the provisions of Subsection (C) hereof shall be
referred to as VAT-registered person who shall be
assigned only one Taxpayer Identification Number.
(J) Supplying of Taxpayer Identification Number (TIN). -
Any person required under the authority of this Code to
make, render or file a return, statement or other
document shall be supplied with or assigned a Taxpayer
Identification Number (TIN) which he shall indicate in
such return, statement or document filed with the Bureau
of Internal Revenue for his proper identification for tax
purposes, and which he shall indicate in certain
documents, such as, but not limited to the following:
(1) Sugar quedans, refined sugar release order or similar
instruments;(2) Domestic bills of lading;(3) Documents to
be registered with the Register of Deeds of Assessor's
Office;(4) Registration certificate of transportation
equipment by land, sea or air;(5) Documents to be
registered with the Securities and Exchange
Commission;(6) Building construction permits;(7)
Application for loan with banks, financial institutions, or
other financial intermediaries;(8) Application for mayor's
permit;(9) Application for business license with the
Department of Trade & Industry; and(10) Such other
documents which may hereafter be required under rules
and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner.
In cases where a registered taxpayer dies, the
administrator or executor shall register the estate of the
decedent in accordance with Subsection (A) hereof and
a new Taxpayer Identification Number (TIN) shall be
supplied in accordance with the provisions of this Section.
In the case of a nonresident decedent, the executor or
administrator of the estate shall register the estate with
the Revenue District Office where he
registered: Provided, however, That in case such executor
or administrator is not registered, registration of the estate
shall be made with the Taxpayer Identification Number
(TIN) supplied by the Revenue District Office having
jurisdiction over his legal residence.
Only one Taxpayer identification Number (TIN) shall be
assigned to a taxpayer.
Any person who shall secure more than one Taxpayer
Identification Number shall be criminally liable under the
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
provision of Section 275 on 'Violation of Other Provisions of
this Code or Regulations in General'.
All taxpayers are required to register and pay the annual
registration fee of P500.00. You also have to get a Tax
Identification Number (TIN).
SEC. 237. Issuance of Receipts or Sales or Commercial
Invoices. -All persons subject to an internal revenue tax
shall, for each sale or transfer of merchandise or for
services rendered valued at Twenty-five pesos (P25.00) or
more, issue duly registered receipts or sales or
commercial invoices, prepared at least in duplicate,
showing the date of transaction, quantity, unit cost and
description of merchandise or nature of service: Provided,
however, That in the case of sales, receipts or transfers in
the amount of One hundred pesos (P100.00) or more, or
regardless of the amount, where the sale or transfer is
made by a person liable to value-added tax to another
person also liable to value-added tax; or where the
receipt is issued to cover payment made as rentals,
commissions, compensations or fees, receipts or invoices
shall be issued which shall show the name, business style,
if any, and address of the purchaser, customer or
client: Provided, further, That where the purchaser is a
VAT-registered person, in addition to the information
herein required, the invoice or receipt shall further show
the Taxpayer Identification Number (TIN) of the
purchaser.
The original of each receipt or invoice shall be issued to
the purchaser, customer or client at the time the
transaction is effected, who, if engaged in business or in
the exercise of profession, shall keep and preserve the
same in his place of business for a period of three (3)
years from the close of the taxable year in which such
invoice or receipt was issued, while the duplicate shall be
kept and preserved by the issuer, also in his place of
business, for a like period.
The Commissioner may, in meritorious cases, exempt any
person subject to internal revenue tax from compliance
with the provisions of this Section.
This will guide you in determining the minimum value to
which you have to issue a receipt.
SEC. 238. Printing of Receipts or Sales or Commercial
Invoices. - All persons who are engaged in business shall
secure from the Bureau of Internal Revenue an authority
to print receipts or sales or commercial invoices before a
is
printer can print the same.
No authority to print receipts or sales or commercial
invoices shall be granted unless the receipts or invoices
to be printed are serially numbered and shall show,
among other things, the name, business style, Taxpayer
Identification Number (TIN) and business address of the
person or entity to use the same, and such other
information that may be required by rules and regulations
to be promulgated by the Secretary of Finance, upon
recommendation of the Commissioner.
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All persons who print receipt or sales or commercial
invoices shall maintain a logbook/register of taxpayers
who availed of their printing services.
The logbook/register shall contain the following
information:
(1) Names, Taxpayer Identification Numbers of the
persons or entities for whom the receipts or sales or
commercial invoices were printed; and
(2) Number of booklets, number of sets per booklet,
number of copies per set and the serial numbers of the
receipts or invoices in each booklet.
This tells you about the requirement on printing receipts.
Let’s now go to Section 245.
SEC. 245. Specific Provisions to be Contained in Rules and
Regulations. -The rules and regulations of the Bureau of
Internal Revenue shall, among other thins, contain
provisions specifying, prescribing or defining:
(a) The time and manner in which Revenue Regional
Director shall canvass their respective Revenue Regions
for the purpose of discovering persons and property liable
to national internal revenue taxes, and the manner in
which their lists and records of taxable persons and
taxable objects shall be made and kept;(b) The forms of
labels, brands or marks to be required on goods subject
to an excise tax, and the manner in which the labelling,
branding or marking shall be effected;(c) The conditions
under which and the manner in which goods intended for
export, which if not exported would be subject to an
excise tax, shall be labelled, branded or marked;(d) The
conditions to be observed by revenue officers respecting
the institutions and conduct of legal actions and
proceedings;(e) The conditions under which goods
intended for storage in bonded warehouses shall be
conveyed thither, their manner of storage and the
method of keeping the entries and records in connection
therewith, also the books to be kept by Revenue
Inspectors and the reports to be made by them in
connection with their supervision of such houses;(f) The
conditions under which denatured alcohol may be
removed and dealt in, the character and quantity of the
denaturing material to be used, the manner in which the
process of denaturing shall be effected, so as to render
the alcohol suitably denatured and unfit for oral intake,
the bonds to be given, the books and records to be kept,
the entries to be made therein, the reports to be made to
the Commissioner, and the signs to be displayed in the
business or by the person for whom such denaturing is
done or by whom, such alcohol is dealt in;(g) The manner
in which revenue shall be collected and paid, the
instrument, document or object to which revenue stamps
shall be affixed, the mode of cancellation of the same,
the manner in which the proper books, records, invoices
and other papers shall be kept and entries therein made
by the person subject to the tax, as well as the manner in
which licenses and stamps shall be gathered up and
returned after serving their purposes;(h) The conditions to
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
be observed by revenue officers respecting the
enforcement of Title III imposing a tax on estate of a
decedent, and other transfers mortis causa, as well as on
gifts and such other rules and regulations which the
Commissioner may consider suitable for the enforcement
of the said Title III;(i) The manner in which tax returns,
information and reports shall be prepared and reported
and the tax collected and paid, as well as the conditions
under which evidence of payment shall be furnished the
taxpayer, and the preparation and publication of tax
statistics;(j) The manner in which internal revenue taxes,
such as income tax, including withholding tax, estate and
donor's taxes, value-added tax, other percentage taxes,
excise taxes and documentary stamp taxes shall be paid
through the collection officers of the Bureau of Internal
Revenue or through duly authorized agent banks which
are hereby deputized to receive payments of such taxes
and the returns, papers and statements that may be filed
by the taxpayers in connection with the payment of the
tax: Provided, however, That notwithstanding the other
provisions of this Code prescribing the place of filing of
returns and payment of taxes, the Commissioner may, by
rules and regulations, require that the tax returns, papers
and statements that may be filed by the taxpayers in
connection with the payment of the tax. Provided,
however, That notwithstanding the other provisions of this
Code prescribing the place of filing of returns and
payment of taxes, the Commissioner may, by rules and
regulations require that the tax returns, papers and
statements and taxes of large taxpayers be filed and
paid, respectively, through collection officers or through
duly authorized agent banks: Provided, further, That the
Commissioner can exercise this power within six (6) years
from the approval of Republic Act No. 7646 or the
completion of its comprehensive computerization
program, whichever comes earlier: Provided, finally, That
separate venues for the Luzon, Visayas and Mindanao
areas may be designated for the filing of tax returns and
payment of taxes by said large taxpayers.
For the purpose of this Section, "large taxpayer" means a
taxpayer who satisfies any of the following criteria;
(1) Value-Added Tax (VAT). - Business establishment with
VAT paid or payable of at least One hundred thousand
pesos (P100,000) for any quarter of the preceding taxable
year;
(2) Excise Tax. - Business establishment with excise tax
paid or payable of at least One million pesos (P1,000,000)
for the preceding taxable year;
(3) Corporate Income Tax. - Business establishment with
annual income tax paid or payable of at least One
million pesos (P1,000,000) for the preceding taxable year;
and
(4) Withholding Tax. - Business establishment with
withholding tax payment or remittance of at least One
million pesos (P1,000,000) for the preceding taxable year.
Provided, however, That the Secretary of Finance, upon
recommendation of the Commissioner, may modify or
add to the above criteria for determining a large
taxpayer after considering such factors as inflation,
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volume of business, wage and employment levels, and
similar economic factors.
The penalties prescribed under Section 248 of this Code
shall be imposed on any violation of the rules and
regulations issued by the Secretary of Finance, upon
recommendation of the Commissioner, prescribing the
place of filing of returns and payments of taxes by large
taxpayers.
What you have to remember here is the definition of a
large taxpayer.
SEC. 244. Authority of Secretary of Finance to Promulgate
Rules and Regulations. - The Secretary of Finance, upon
recommendation of the Commissioner, shall promulgate
all needful rules and regulations for the effective
enforcement of the provisions of this Code.
The authority to make rules and regulations is upon the
Secretary of Finance, not on the Commissioner. The
commissioner only recommends.
SEC. 246. Non-Retroactivity of Rulings. - Any revocation,
modification or reversal of any of the rules and
regulations promulgated in accordance with the
preceding Sections or any of the rulings or circulars
promulgated by the Commissioner shall not be given
retroactive application if the revocation, modification or
reversal will be prejudicial to the taxpayers, except in the
following cases:
(a) Where the taxpayer deliberately misstates or omits
material facts from his return or any document required of
him by the Bureau of Internal Revenue;(b) Where the facts
subsequently gathered by the Bureau of Internal Revenue
are materially different from the facts on which the ruling
is based; or(c) Where the taxpayer acted in bad faith.
Tax laws and other regulations are prospective in
application. Retroactive application only happens in the
instances enumerated in Section 246.
From Section 250 to Section 280, you have the penalties
for statutory offenses under the NIRC.
In the imposition of the deficiency tax on account of
delinquency and on account of violation of the NIRC, we
have discussed in the collection proceedings, that the
filing of the criminal case does not require a prior
assessment. (Ungab vs. Cusi)
On top of the basic tax that you are made to pay, on
account of delinquency, there will be surcharges and
penalties.
In Section 248, you have there the penalties that will be
paid.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
SEC. 248. Civil Penalties. - (A) There shall be imposed, in
addition to the tax required to be paid, a penalty
equivalent to twenty-five percent (25%) of the amount
due, in the following cases: (1) Failure to file any return
and pay the tax due thereon as required under the
provisions of this Code or rules and regulations on the
date prescribed; or (2) Unless otherwise authorized by the
Commissioner, filing a return with an internal revenue
officer other than those with whom the return is required
to be filed; or (3) Failure to pay the deficiency tax within
the time prescribed for its payment in the notice of
assessment; or (4) Failure to pay the full or part of the
amount of tax shown on any return required to be filed
under the provisions of this Code or rules and regulations,
or the full amount of tax due for which no return is
required to be filed, on or before the date prescribed for
its payment.
(B) In case of willful neglect to file the return within the
period prescribed by this Code or by rules and
regulations, or in case a false or fraudulent return is
willfully made, the penalty to be imposed shall be fifty
percent (50%) of the tax or of the deficiency tax, in case,
any payment has been made on the basis of such return
before the discovery of the falsity or fraud: Provided,That
a substantial underdeclaration of taxable sales, receipts
or income, or a substantial overstatement of deductions,
as determined by the Commissioner pursuant to the rules
and regulations to be promulgated by the Secretary of
Finance, shall constitute prima facie evidence of a false
or fraudulent return:Provided, further, That failure to report
sales, receipts or income in an amount exceeding thirty
percent (30%) of that declared per return, and a claim of
deductions in an amount exceeding (30%) of actual
deductions, shall render the taxpayer liable for substantial
underdeclaration of sales, receipts or income or for
overstatement of deductions, as mentioned herein.
On top of these surcharges, there will still be interests
under Section 249.
SEC. 249. Interest. -
(A) In General. - There shall be assessed and collected
on any unpaid amount of tax, interest at the rate of
twenty percent (20%) per annum, or such higher rate as
may be prescribed by rules and regulations, from the
date prescribed for payment until the amount is fully
paid.
(B) Deficiency Interest. - Any deficiency in the tax due, as
the term is defined in this Code, shall be subject to the
interest prescribed in Subsection (A) hereof, which
interest shall be assessed and collected from the date
prescribed for its payment until the full payment thereof.
(C) Delinquency Interest. - In case of failure to pay:
(1) The amount of the tax due on any return to be filed, or
(2) The amount of the tax due for which no return is
required, or
(3) A deficiency tax, or any surcharge or interest thereon
on the due date appearing in the notice and demand of
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the Commissioner, there shall be assessed and collected
on the unpaid amount, interest at the rate prescribed in
Subsection (A) hereof until the amount is fully paid, which
interest shall form part of the tax.
(D) Interest on Extended Payment. - If any person
required to pay the tax is qualified and elects to pay the
tax on installment under the provisions of this Code, but
fails to pay the tax or any installment hereof, or any part
of such amount or installment on or before the date
prescribed for its payment, or where the Commissioner
has authorized an extension of time within which to pay a
tax or a deficiency tax or any part thereof, there shall be
assessed and collected interest at the rate hereinabove
prescribed on the tax or deficiency tax or any part
thereof unpaid from the date of notice and demand until
it is paid.
In relation to Paragraph (D), remember that in income
taxation, you are allowed to pay your tax on two
installments if the tax due is over P2,000.
From Section 250 are the offenses.
SEC. 250. Failure to File Certain Information Returns. - In
the case of each failure to file an information return,
statement or list, or keep any record, or supply any
information required by this Code or by the Commissioner
on the date prescribed therefor, unless it is shown that
such failure is due to reasonable cause and not to willful
neglect, there shall, upon notice and demand by the
Commissioner, be paid by the person failing to file, keep
or supply the same, One thousand pesos (1,000) for each
failure: Provided, however, That the aggregate amount to
be imposed for all such failures during a calendar year
shall not exceed Twenty-five thousand pesos (P25,000).
SEC. 251. Failure of a Withholding Agent to Collect and
Remit Tax. - Any person required to withhold, account for,
and remit any tax imposed by this Code or who willfully
fails to withhold such tax, or account for and remit such
tax, or aids or abets in any manner to evade any such tax
or the payment thereof, shall, in addition to other
penalties provided for under this Chapter, be liable upon
conviction to a penalty equal to the total amount of the
tax not withheld, or not accounted for and remitted.
SEC. 252. Failure of a Withholding Agent to refund Excess
Withholding Tax. - Any employer/withholding agent who
fails or refuses to refund excess withholding tax shall, in
addition to the penalties provided in this Title, be liable to
a penalty to the total amount of refunds which was not
refunded to the employee resulting from any excess of
the amount withheld over the tax actually due on their
return.
In Chapter II we have crimes, other offenses and
forfeitures.
*Dean enumerates the titles of all Sections in Chapter II*
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
*Dean enumerates the titles of all Sections in Chapter III*
SEC. 281. Prescription for Violations of any Provision of this
Code. - All violations of any provision of this Code shall
prescribe after Five (5) years.
Prescription shall begin to run from the day of the
commission of the violation of the law, and if the same be
not known at the time, from the discovery thereof and the
institution of judicial proceedings for its investigation and
punishment.
The prescription shall be interrupted when proceedings
are instituted against the guilty persons and shall begin to
run again if the proceedings are dismissed for reasons not
constituting jeopardy.
The term of prescription shall not run when the offender is
absent from the Philippines.
So you are given five years to file the proper actions. Very
important to remember is the last paragraph.
Now let’s go to Title XI.
The collection of our taxes will go to the National Treasury.
There are certain amounts that will be allotted to certain
purposes.
SEC. 283. Disposition of National Internal Revenue. -
National Internal revenue collected and not applied as
herein above provided or otherwise specially disposed of
by law shall accrue to the National Treasury and shall be
available for the general purposes of the Government,
with the exception of the amounts set apart by way of
allotment as provided for under Republic Act No. 7160,
otherwise known as the Local Government Code of 1991.
In addition to the internal revenue allotment as provided
for in the preceding paragraph, fifty percent (50%) of the
national taxes collected under Sections 106, 108 and 116
of this Code in excess of the increase in collections for
the immediately preceding year shall be distributed as
follows:
(a) Twenty percent (20%) shall accrue to the city or
municipality where such taxes are collected and shall be
allocated in accordance with Section 150 of Republic Act
No. 7160, otherwise known as the Local Government
Code of 1991; and(b) Eighty percent (80%) shall accrue
to the National Government.
So their disposal will be through the General
Appropriations Act.
SEC. 284. Allotment for the Commission on Audit. - One-
half of one percent (1/2 of 1%) of the collections from the
national internal revenue taxes not otherwise accruing to
special accounts in the general fund of the national
government shall accrue to the Commission on Audit as
a fee for auditing services rendered to local government
units, excluding maintenance, equipment, and other
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operating expenses as provided for in Section 21 of
Presidential Decree No. 898.
The Secretary of Finance is hereby authorized to deduct
from the monthly internal revenue tax collections an
amount equivalent to the percentage as herein fixed,
and to remit the same directly to the Commission on
Audit under such rules and regulations as may be
promulgated by the Secretary of Finance and the
Chairman of the Commission on Audit.
SEC. 285. Allotment for the Bureau of Internal Revenue. -
An amount equivalent to five percent (5%) of the excess
of actual collections of national internal revenue taxes
over the collection goal shall accrue to the special fund
of the Bureau of Internal Revenue and shall be treated as
receipts automatically appropriated.
Said amount shall be utilized as incentive bonus for
revenue personnel, purchase of necessary equipment
and facilities for the improvement of tax administration, as
approved by the Commissioner: Provided, That the
President may, upon recommendation of the
Commissioner, direct that the excess be credited to a
Special Account in the National Treasury to be held in the
reserve available for distribution as incentive bonus in the
subsequent years.
The Secretary of Finance is hereby authorized to transfer
from the Treasury an amount equivalent to the
percentage as herein fixed and to remit the same directly
to the Bureau of Internal Revenue under such rules and
regulations as may be promulgated by the Secretary of
Finance.
In line with these provisions on Title Xi, you have what we
call the carrot and stick rule or the Atrition Law. When the
BIR and the Bureau of Customs would be able to exceed
their collection targets, they will be given incentives. If
they would fail to reach their collection targets, there will
also be disincentive and sanctions. That is provided in the
Attrition law.
This law has been challenged because of violation of
equal protection. The Supreme Court ruled that there is
no violation because Congress has the discretion in
determining who will be given incentives.
Chapter II talks about special dispositions.
SEC. 287. Shares of Local Government Units in the
Proceeds from the Development and Utilization of the
National Wealth. - Local Government units shall have an
equitable share in the proceeds derived from the
utilization and development of the national wealth, within
their respective areas, including sharing the same with
the inhabitants by way of direct benefits.
(A) Amount of Share of Local Government Units. - Local
government units shall, in addition to the internal revenue
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
allotment, have a share of forty percent (40%) of the gross
collection derived by the national government from the
preceding fiscal year from excise taxes on mineral
products, royalties, and such other taxes, fees or charges,
including related surcharges, interests or fines, and from
its share in any co-production, joint venture or production
sharing agreement in the utilization and development of
the national wealth within their territorial jurisdiction.
(B) Share of the Local Governments from Any
Government Agency or Government-Owned or
Controlled Corporation. - Local Government Units shall
have a share, based on the preceding fiscal year, from
the proceeds derived by any government agency or
government-owned or controlled corporation engaged in
the utilization and development of the national wealth
based on the following formula, whichever will produce a
higher share for the local government unit:
(1) One percent (1%) of the gross sales or receipts of the
preceding calendar year, or(2) Forty percent (40%) of the
excise taxes on mineral products, royalties, and such
other taxes, fees or charges, including related
surcharges, interests or fines the government agency or
government-owned or -controlled corporations would
have paid if it were not otherwise exempt.
(C) Allocation of Shares. - The share in the preceding
Section shall be distributed in the following manner: (1)
Where the natural resources are located in the province:
(a) Province - twenty percent (20%) (b) Component
city/municipality - forty-five percent (45%); and (c)
Barangay - thirty-five percent (35%)
Provided, however, That where the natural resources are
located in two (2) or more cities, the allocation of shares
shall be based on the formula on population and land
area as specified in subsection (C)(1) hereof.
(2) Where the natural resources are located in a highly
urbanized or independent component city: (a) City - sixty
- five percent (65%); and (b) Barangay - thirty - five
percent (35%)
Provided, however, That where the natural resources are
located in two (2) or more cities, the allocation of shares
shall be based on the formula on population and land
area as specified in subsection (c)(1) hereof.
These are the collections derived from excise taxes on
mineral products. The LGU will have a share on that.
Another special disposition is in the case of the Tobacco
Industry, where a proportion of the excise taxes
generated from cigar and cigarettes will be for the befit
of the Tobacco industry in the North. One of the major
source of the revenue of the government is taken from
cigarettes. This is in a form of incentives for the farmers.
SEC. 289. Special Financial Support to Beneficiary
Provinces Producing Virginia Tobacco. - The financial
support given by the National Government for the
beneficiary provinces shall be constituted and collected
from the proceeds of fifteen percent (15%) of the excise
taxes on locally manufactured Virginia-type of cigarettes.
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The funds allotted shall be divided among the beneficiary
provinces pro-rataaccording to the volume of Virginia
tobacco production.
Production producing Virginia tobacco shall be the
beneficiary provinces under Republic Act No.
7171. Provided, however, that to qualify as beneficiary
under R. A. No. 7171, a province must have an average
annual production of Virginia leaf tobacco in an amount
not less than one million kilos: Provided, further,that the
Department of Budget and Management (DBM) shall
each year determine the beneficiary provinces and their
computed share of the funds under R. A. No. 7171,
referring to the National Tobacco Administration (NTA)
records of tobacco acceptances, at the tobacco trading
centers for the immediate past year.
The Secretary of Budget and Management is hereby
directed to retain annually the said funds equivalent to
fifteen percent (15%) of excise taxes on locally
manufactured Virginia type cigarettes to be remitted to
the beneficiary provinces qualified under R. A. No. 7171.
The provision of existing laws to the contrary
notwithstanding, the fifteen percent (15%) share from
government revenues mentioned in R. A. No. 7171 and
due to the Virginia tobacco-producing provinces shall be
directly remitted to the provinces concerned.
Provided, That this Section shall be implemented in
accordance with the guidelines of Memorandum Circular
No. 61-A dated November 28, 1993, which amended
Memorandum Circular No. 61, entitled "Prescribing
Guidelines for Implementing Republic Act No. 7171",
dated January 1, 1992.
Provided, further, That in addition to the local government
units mentioned in the above circular, the concerned
officials in the province shall be consulted as regards the
identification of projects to be financed.
Loopholes in NIRC shall be brought to the Congressional
Oversight Committee for possible legislation. The
committee is instituted pursuant to this code.
SEC. 290. Congressional Oversight Committee. - A
Congressional Oversight Committee, hereinafter referred
to as the Committee, is hereby constituted in accordance
with the provisions of this Code.
The Committee shall be composed of the Chairmen of
the Committee on Ways and Means of the Senate and
House Representatives and four (4) additional members
from each house, to be designated by the Speaker of the
House of Representatives and the Senate President,
respectively.
The Committee shall, among others, in aid of legislation:
(1) Monitor and ensure the proper implementation of
Republic Act No. 8240;(2) Determine that the power of the
Commissioner to compromise and abate is reasonably
exercised;(3) Review the collection performance of the
Bureau of Internal Revenue; and(4) Review the
implementation of the programs of the Bureau of Internal
Revenue.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
In furtherance of the hereinabove cited objectives, the
Committee is empowered to require of the Bureau of
Internal Revenue, submission of all pertinent information,
including but not limited to: industry audits; collection
performance data; status report on criminal actions
initiated against persons; and submission of taxpayer
returns: Provided, however, That any return or return
information which can be associated with, or otherwise
identify, directly or indirectly, a particular taxpayer shall
be furnished the Committee only when sitting in Executive
Session unless such taxpayer otherwise consents in
writing to such disclosure.
NOTE: This comes after Section 137 in page 20; and right
before Real Property Taxation.
When assessment is issued, you follow the proceedings in
Section 195.
Section 195. Protest of Assessment. - When the local
treasurer or his duly authorized representative finds that
correct taxes, fees, or charges have not been paid, he
shall issue a notice of assessment stating the nature of the
tax, fee, or charge, the amount of deficiency, the
surcharges, interests and penalties. Within sixty (60) days
from the receipt of the notice of assessment, the taxpayer
may file a written protest with the local treasurer
contesting the assessment; otherwise, the assessment
shall become final and executory. The local treasurer
shall decide the protest within sixty (60) days from the
time of its filing. If the local treasurer finds the protest to be
wholly or partly meritorious, he shall issue a notice
cancelling wholly or partially the assessment. However, if
the local treasurer finds the assessment to be wholly or
partly correct, he shall deny the protest wholly or partly
with notice to the taxpayer. The taxpayer shall have thirty
(30) days from the receipt of the denial of the protest or
from the lapse of the sixty (60) day period prescribed
herein within which to appeal with the court of competent
jurisdiction otherwise the assessment becomes
conclusive and unappealable.
It is less formal than the requirements in the NIRC. In the
NIRC, assessment must state the facts and the law. That is
not the requirement in local taxation. It may state only
the nature of the tax. It just operates like a demand letter.
So the local treasurer will send a notice of assessment to
the taxpayer. The taxpayer has 60 days to file his protest
from receipt of the assessment. The local treasurer has 60
dys to decide. The decision may either grant or deny the
protest. There may also be inaction.
30 days after the denial, you may now appeal to any
court of competent jurisdiction. If there is inaction, you
also have 30 days after the lapse of the 60 days to
appeal to the court of competent jurisdiction. The court
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that we are talking about here is either the MTC or the LOCAL GOVERNMENT TAXATION
RTC, depending on the amount of tax subject of the
assessment.
Q: What is the basis of the local government’s power of
taxation.
Unlike in questioning the validity of the ordinance, the
taxpayer will protest or appeal to the DOJ. The DOJ may A: Section 129
either grant or deny. There might also be inaction. In case
of denial or inaction, you may now go to the regular
Section 129. Power to Create Sources of Revenue. - Each
court, which is the RTC, because the subject matter is
local government unit shall exercise its power to create
incapable of pecuniary estimation.
its own sources of revenue and to levy taxes, fees, and
charges subject to the provisions herein, consistent with
Section 196. Claim for Refund of Tax Credit. - No case or the basic policy of local autonomy. Such taxes, fees, and
proceeding shall be maintained in any court for the charges shall accrue exclusively to the local government
recovery of any tax, fee, or charge erroneously or units.
illegally collected until a written claim for refund or credit
has been filed with the local treasurer. No case or
Q: Is the power of taxation of LGUs inherent?
proceeding shall be entertained in any court after the
expiration of two (2) years from the date of the payment
A: No.
of such tax, fee, or charge, or from the date the taxpayer
is entitled to a refund or credit.
Q: How is the power granted?

Your claim for refund is filed in the local treasurer. A:

In the NIRC the claim for refund in Section 229 proceeds
this way: You file a claim with the commissioner and you
are given two years to file that. No proceedings in court
shall be filed after the 2 year period. When the CIR
denies, you go to the CTA. The institution of the claim with
the CTA must also be within the two-year period. So when
you file your administrative claim with the commissioner,
and the two year period is about to expire, do not wait
for the decision and proceed directly to the CTA. If you
would wait for the decision and the decision comes out
after the two year period has already expired, you can
no longer appeal to the CTA because the proceedings in
the CTA must also be initiated within the same two-year
period.
Q: What is the role of the LGC in LGUs power of taxation?
A: The LGC provides the scope of the power. But the
power is granted by the constitution. The LGC
Q: What are these Local Government Units?
A: Section 128.
Section 128. Scope. - The provisions herein shall govern
the exercise by provinces, cities, municipalities, and
barangays of their taxing and other revenue-raising
powers.

Read Section 130.

Similarly, this is also the case in local tax. The claim for
refund in Section 196 must be filed with the local
treasurer. In case of a denial, you bring it to the RTC or Section 130. Fundamental Principles. - The following
the MTC depending on the jurisdictional amount. The fundamental principles shall govern the exercise of the
action must also be within two years. So again, do not taxing and other revenue-raising powers of local
wait for the decision if the two year period is about to government units:
expire. Proceed immediately to the competent court.
(a) Taxation shall be uniform in each local government
Now let’s go back to Section 120-127. This talks about unit;
local initiative and referendum. This is the local
counterpart of people’s initiative and referendum under (b) Taxes, fees, charges and other impositions shall:
RA 6745.
(1) be equitable and based as far as practicable
Section 120 gives you the definition. Section 121 tells you on the taxpayer's ability to pay;
who may exercise the power. Section 122 tells you the
procedure. Section 123 tells you when it will take effect. (2) be levied and collected only for public
purposes;
Section 126 defines local referendum for you. Section 127
talks about the authority of the local courts.

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(3) not be unjust, excessive, oppressive, or
confiscatory;
(4) not be contrary to law, public policy, national
economic policy, or in the restraint of trade;
(c) The collection of local taxes, fees, charges and other
impositions shall in no case be let to any private person;
(d) The revenue collected pursuant to the provisions of
this Code shall inure solely to the benefit of, and be
subject to the disposition by, the local government unit
levying the tax, fee, charge or other imposition unless
otherwise specifically provided herein; and,
(e) Each local government unit shall, as far as
practicable, evolve a progressive system of taxation.
Q: Are these principles of taxation on the LGUs the same
principles in the state’s inherent power of taxation?
A: Yes because in our constitution the policy of the state
is that which is mirrored in the provisions herein provided.
Q: What provisions?
A: The principle that the state will promote progressive
system of taxation is also provided in the Constitution.
Q: How about the principle of due process?
A: The levying of taxes must only be for public purposes
and must not be excessive and confiscatory.
Q: What about equal protection?
A: Taxation shall be uniform in each local government
unit and that it shall be equitable and based on the
taxpayer’s ability to pay.
The principles that you have learned in the state’s
inherent power of taxation is the same principles as
provided in Section 130. They also apply in local taxation.
These principles are the same but are more defined.
Q: Who is given the authority to exercise local taxation so
far as taxes are concerned?
A: Section 132.
Section 132. Local Taxing Authority. - The power to
impose a tax, fee, or charge or to generate revenue
under this Code shall be exercised by the sanggunian of
the local government unit concerned through an
appropriate ordinance.
Q: What do you mean by Sanggunian?
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
A: Sangguniang panlalawigan, Sangguniang panlungsod
and Sangguniang bayan.
Q: What do they enact?
A: They pass an ordinance for the imposition of the tax,
fee or charge.
Q: What does Section 133 tell us?
A:
Section 133. Common Limitations on the Taxing Powers of
Local Government Units. - Unless otherwise provided
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to
the levy of the following:
(a) Income tax, except when levied on banks and other
financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and other
acquisitions mortis causa, except as otherwise provided
herein;
(d) Customs duties, registration fees of vessel and
wharfage on wharves, tonnage dues, and all other kinds
of customs fees, charges and dues except wharfage on
wharves constructed and maintained by the local
government unit concerned;
(e) Taxes, fees, and charges and other impositions upon
goods carried into or out of, or passing through, the
territorial jurisdictions of local government units in the
guise of charges for wharfage, tolls for bridges or
otherwise, or other taxes, fees, or charges in any form
whatsoever upon such goods or merchandise;
(f) Taxes, fees or charges on agricultural and aquatic
products when sold by marginal farmers or fishermen;
(g) Taxes on business enterprises certified to by the Board
of Investments as pioneer or non-pioneer for a period of
six (6) and four (4) years, respectively from the date of
registration;
(h) Excise taxes on articles enumerated under the
national Internal Revenue Code, as amended, and taxes,
fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters
or exchanges or similar transactions on goods or services
except as otherwise provided herein;
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(j) Taxes on the gross receipts of transportation
contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by air,
land or water, except as provided in this Code;
(k) Taxes on premiums paid by way or reinsurance or
retrocession;
(l) Taxes, fees or charges for the registration of motor
vehicles and for the issuance of all kinds of licenses or
permits for the driving thereof, except tricycles;
(m) Taxes, fees, or other charges on Philippine products
actually exported, except as otherwise provided herein;
(n) Taxes, fees, or charges, on Countryside and Barangay
Business Enterprises and cooperatives duly registered
under R.A. No. 6810 and Republic Act Numbered Sixty-
nine hundred thirty-eight (R.A. No. 6938) otherwise known
as the "Cooperative Code of the Philippines" respectively;
and
(o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities, and local
government units.
Q: Why are these limitations provided?
A: So that the LGU may not exercise the power arbitrarily.
Q: What does this provision tell us?
A: This enumeration includes all taxes that cannot be
imposed by LGUs.
Q: Why are LGUs prohibited from imposing these taxes?
A: Because these are national taxes and thus are already
collected by the national government. They cannot
impose taxes already provided or given to the national
government. These taxes are already provided for in the
NIRC.
Read Section 133 (e).
(e) Taxes, fees, and charges and other impositions upon
goods carried into or out of, or passing through, the
territorial jurisdictions of local government units in the
guise of charges for wharfage, tolls for bridges or
otherwise, or other taxes, fees, or charges in any form
whatsoever upon such goods or merchandise;
Q: What is the reason behind this provision?
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
A: Because if the imposition will be allowed, that will
constitute restraint of trade which is expressly prohibited
in Section 130 (b)(4).
Just imagine if LGUs will have this ordinance, no business
or trade will flourish because the cost of trade is so high
that there will be no expected profit anymore.
So in Section 133, most of these taxes are already
imposed by the national government, either under the
NIRC or the Tariffs and Customs Code.
Q: In the case of provinces, what are the taxes allowed
to be imposed?
A: Sections 135-141.
Q: What are the taxes allowed to be imposed by
Municipalities?
A: Sections 143, 147, 148 and 149.
Q: What are taxes fees and charges allowed to be
imposed by Cities?
A: Section 151.
Section 151. Scope of Taxing Powers. - Except as
otherwise provided in this Code, the city, may levy the
taxes, fees, and charges which the province or
municipality may impose: Provided, however, That the
taxes, fees and charges levied and collected by highly
urbanized and independent component cities shall
accrue to them and distributed in accordance with the
provisions of this Code.
The rates of taxes that the city may levy may exceed the
maximum rates allowed for the province or municipality
by not more than fifty percent (50%) except the rates of
professional and amusement taxes.
Q: What does this provision mean?
A: The taxing powers of provinces and municipalities
combined constitute the taxing power of cities.
Q: Is there a limit to such exercise of taxing powers?
A: Section 151, second paragraph.
Q: provinces are authorized to imposed professional tax.
How much is the rate?
A:
Section 139. Professional Tax. –
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(a) The province may levy an annual professional tax on
each person engaged in the exercise or practice of his
profession requiring government examination at such
amount and reasonable classification as the
sangguniang panlalawigan may determine but shall in no
case exceed Three hundred pesos (P300.00).
(b) Every person legally authorized to practice his
profession shall pay the professional tax to the province
where he practices his profession or where he maintains
his principal office in case he practices his profession in
several places: Provided, however, That such person who
has paid the corresponding professional tax shall be
entitled to practice his profession in any part of the
Philippines without being subjected to any other national
or local tax, license, or fee for the practice of such
profession.
(c) Any individual or corporation employing a person
subject to professional tax shall require payment by that
person of the tax on his profession before employment
and annually thereafter.
(d) The professional tax shall be payable annually, on or
before the thirty-first (31st) day of January. Any person first
beginning to practice a profession after the month of
January must, however, pay the full tax before engaging
therein. A line of profession does not become exempt
even if conducted with some other profession for which
the tax has been paid. Professionals exclusively
employed in the government shall be exempt from the
payment of this tax.
(e) Any person subject to the professional tax shall write
in deeds, receipts, prescriptions, reports, books of
account, plans and designs, surveys and maps, as the
case may be, the number of the official receipt issued to
him.
Q: So in view of Section 139, how much professional tax
can the city impose?
A: The City shall impose the same rate as in the province,
which is P300.00.
Q: How about amusement tax?
A:
Section 140. Amusement Tax. –
(a) The province may levy an amusement tax to be
collected from the proprietors, lessees, or operators of
theaters, cinemas, concert halls, circuses, boxing stadia,
and other places of amusement at a rate of not more
than thirty percent (30%) of the gross receipts from
admission fees.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(b) In the case of theaters or cinemas, the tax shall first be
deducted and withheld by their proprietors, lessees, or
operators and paid to the provincial treasurer before the
gross receipts are divided between said proprietors,
lessees, or operators and the distributors of the
cinematographic films.
(c) The holding of operas, concerts, dramas, recitals,
painting and art exhibitions, flower shows, musical
programs, literary and oratorical presentations, except
pop, rock, or similar concerts shall be exempt from the
payment of the tax hereon imposed.
(d) The sangguniang panlalawigan may prescribe the
time, manner, terms and conditions for the payment of
tax. In case of fraud or failure to pay the tax, the
sangguniang panlalawigan may impose such
surcharges, interest and penalties as it may deem
appropriate.
(e) The proceeds from the amusement tax shall be
shared equally by the province and the municipality
where such amusement places are located.
Q: So how much can the Cities impose as amusement
tax?
A: The cities must impose the same rate for amusement
tax as well. So they can only impose 30% of the gross
receipts as amusement tax.
Q: How about in the other taxes?
A: For other taxes, Cities can impose higher than those
imposed by provinces, but such increase shall be limited
to 50% of the amount imposed by provinces.
So except in professional and amusement taxes, cities
can impose higher taxes.
Q: in the case of provinces, what is the rate for the
transfer of real property ownership?
A: Section 135.
Section 135. Tax on Transfer of Real Property Ownership.
(a) The province may impose a tax on the sale ,
donation, barter, or on any other mode of transferring
ownership or title of real property at the rate of not more
than fifty percent (50%) of the one percent (1%) of the
total consideration involved in the acquisition of the
property or of the fair market value in case the monetary
consideration involved in the transfer is not substantial,
whichever is higher. The sale, transfer or other disposition
of real property pursuant to R.A. No. 6657 shall be exempt
from this tax.
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(b) For this purpose, the Register of Deeds of the province
concerned shall, before registering any deed, require the
presentation of the evidence of payment of this tax. The
provincial assessor shall likewise make the same
requirement before cancelling an old tax declaration
and issuing a new one in place thereof, Notaries public
shall furnish the provincial treasurer with a copy of any
deed transferring ownership or title to any real property
within thirty (30) days from the date of notarization.
It shall be the duty of the seller, donor, transferor,
executor or administrator to pay the tax herein imposed
within sixty (60) days from the date of the execution of the
deed or from the date of the decedent's death.
Q: If you are the provincial councilor, and you are going
to impose an ordinance under Section 135, what rate will
you impose?
A: .5% of the total amount of the consideration of the
sale.
Q: Can the province impose a rate lesser than that rate?
A: Yes, since the only limitation is that it must not exceed
the rate provided in the LGC.
Q: What about taxes on the business of printing and
publication?
A: Section 136.
Section 136. Tax on Business of Printing and Publication. -
The province may impose a tax on the business of
persons engaged in the printing and/or publication of
books, cards, posters, leaflets, handbills, certificates,
receipts, pamphlets, and others of similar nature, at a rate
not exceeding fifty percent (50%) of one percent (1%) of
the gross annual receipts for the preceding calendar
year.
In the case of a newly started business, the tax shall not
exceed one-twentieth (1/20) of one percent (1%) of the
capital investment. In the succeeding calendar year,
regardless of when the business started to operate, the
tax shall be based on the gross receipts for the preceding
calendar year, or any fraction thereof, as provided
herein.
The receipts from the printing and/or publishing of books
or other reading materials prescribed by the Department
of Education, Culture and Sports as school texts or
references shall be exempt from the tax herein imposed.
Q: How about franchise tax?
A: Section 137.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Section 137. Franchise Tax. - Notwithstanding any
exemption granted by any law or other special law, the
province may impose a tax on businesses enjoying a
franchise, at the rate not exceeding fifty percent (50%) of
one percent (1%) of the gross annual receipts for the
preceding calendar year based on the incoming receipt,
or realized, within its territorial jurisdiction.
In the case of a newly started business, the tax shall not
exceed one-twentieth (1/20) of one percent (1%) of the
capital investment. In the succeeding calendar year,
regardless of when the business started to operate, the
tax shall be based on the gross receipts for the preceding
calendar year, or any fraction thereon, as provided
herein.
Q: Does the province have the authority to immediately
enforce the provisions of the LGC?
A: They first have to enact an ordinance. These powers
given by the LGC are just limitations to the taxing power
of the LGUs. Therefore, the Sanggunian, through an
ordinance will fix the rate. Not all LGUs have inhabitants
who can afford the rates in the LGC. So some LGUs
impose lesser taxes. The rates that they will impose will
depend in the capability of their taxpayers.
January 29 (parehong sira ang recordings namin ni ate
jen sa day na ito, so to follow nalang to ha?
Maghahanap pa ako ng recording na maayos)
REAL PROPERTY TAXATION
Section 197. Scope. - This Title shall govern the
administration, appraisal, assessment, levy and collection
of real property tax.
In the case of Real Property Taxation (RPT), the subjects of
the tax are real properties. When you talk about real
properties, these are the real properties as defined under
you Civil Code. They are movables, which include lands,
buildings, and all other improvement, including those
attached to the land.
For RPT you have appraisal and assessment, levy and
collection.
What is appraised and assessed are the real properties.
What is levied and collected is the tax.
Similar to local taxation, wherein you have the LGUs
having its own taxing powers, wherein the LGC provides
the extent of the power to the kind of taxes they are
allowed to impose, and the imposition of these charges
cannot be done without the passage of a tax ordinance.
In RPT, LGUs also have to enact an ordinance to impose
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the taxes authorized to them, principally the provinces
and the cities, under the LGC.
In the case of Metro Manila, the way they enact tax
ordinance, including RPT, since it is composed of different
cities, the different cities are clustered into several
groupings. There are about four clusters. One LGU in a
cluster cannot impose or amend or introduce new taxes
unless with the approval of the other LGUs in the cluster.
So when an LGU gets an approval from the other LGUs
within the cluster, they can now go to the Sanggunian to
propose the ordinance. Without that conformity,
whatever ordinance they enact will be null and void.
The RPT are what we call non-self assessing taxes, unlike
internal revenue taxes and some local taxes. The tariff
and customs duties are also non-self assessing. The
collector of customs is the one who will compute the
dutiable value and the corresponding duties.
RPT are non-self assessing because the property owner
himself cannot determine the fair market value of his
property. The real property is still subject to appraisal and
assessment to determine the fair market value. It is the
local assessor, whose function is to make the appraisal
and assessment of real properties. The end product is
what we call as the Tax Declaration. This is the document
that will contain the the fair market value of the property,
and the assessed value of the property. These are the
two figures that will be found in your Tax declaration.
What is collected by the LGU through the Local Treasurer,
is the RPT, which is based on the assessed value multiplied
by the rate.
RPT = Assessed Value x rate
The property owner may know the fair market value but
he would not know the assessed value, because there is
a formula for that.
Assessed Value = Fair Market Value x Assessment Level
The law in your RPT provides the percentages, which is
called the assessment level for each kind of real property.
Your tax is based on the assessed value, not the fair
market value.
In sum, your RPT simply involves assessment in determining
the assessed value, and the collection of the tax, except
those properties which are exempted. In the principles,
you have tax exemptions on RPT on the basis of actual
use (religious, charitable, educational).
Section 198. Fundamental Principles. - The appraisal,
assessment, levy and collection of real property tax shall
be guided by the following fundamental principles:
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(a) Real property shall be appraised at its current and fair
market value;
(b) Real property shall be classified for assessment
purposes on the basis of its actual use;
(c) Real property shall be assessed on the basis of a
uniform classification within each local government unit;
(d) The appraisal, assessment, levy and collection of real
property tax shall not be let to any private person; and
(e) The appraisal and assessment of real property shall be
equitable.
The principles here are the same as the state’s and local
government’s power of taxation. The subjects here
however are real properties. Let’s go over them one by
one.
a) Real property shall be appraised at its current and fair
market value;
The word appraisal is defined in Section 199(e).
(e) "Appraisal" is the act or process of
determining the value of property as of a
specified date for a specific purpose;
There is an appraisal for purposes of coming up with a fair
market value of the property. The property owner may
himself provide the fair market value. The LGUs may
come up with its own fair market value on the basis of its
zoning. The LGU will be zonified whether they are within
commercial, residential and industrial zones, through an
ordinance. The real properties found in a specific zone
will have their corresponding fair market values.
Q: What is fair market value?
(l) "Fair Market Value" is the price at which a
property may be sold by a seller who is not
compelled to sell and bought by a buyer who is
not compelled to buy;
The fair market value may be arrived through three types
of valuation:
1) Sales approach (Section 199 (l)) – this is the
common valuation. This is usually determined
depending on the location.
2) Income Approach (Reyes vs. Omanson (?)) – the
property of JBL Reyes was appraised by the City
of Manila, which consist of apartment dwellings.
When it was assessed for RPT purposes, the
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assessors made a valuation on the basis of the
sales approach. Reyes questioned that appraisal
claiming that sales approach is not applicable
because the value of the property is being
restricted by the rent control law. It can only earn
so much because of the restrictions imposed by
the law. So you have this income approach.
Under this approach, your property may be
valued on the basis of the income that could be
generated or earned by such property.
3) Replacement/Reproduction Cost (Section 199
(t))
(t) "Replacement or Reproduction Cost" is the
cost that would be incurred on the basis of
current prices, in acquiring an equally desirable
substitute property, or the cost of reproducing a
new replica of the property on the basis of
current prices with the same or closely similar
material
The property, under this approach, will be valued on the
basis of replacement/reproduction cost.
The most common approach is the Sales approach.
(b) Real property shall be classified for assessment
purposes on the basis of its actual use;
In the NIRC the taxpayer himself determines the tax
liability. The Commissioner may also come up with an
assessment of a tax deficiency. In local taxation,
assessment is made by the local treasurer. In RPT, you
have Section 199 (f).
(f) "Assessment" is the act or process of
determining the value of a property, or proportion
thereof subject to tax, including the discovery,
listing, classification, and appraisal of properties;
Basically, this is the determination of the value of the
property subject to tax, or what we call the ‘assessed
value’
Assessed Value = Fair Market Value x Assessment Level
The Assessment level is the percentage applied to the fair
market value to determine the taxable value of the
property. That taxable value is the assessed value.
Under Section 199 (h), assessed value is defined as:
(h) "Assessed Value" is the fair market value of
the real property multiplied by the assessment
level. It is synonymous to taxable value;
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
The taxable value of the property is not the fair market
value but the assessed value of the property. The person
doing the assessment and appraisal is the local assessor.
The person who determines the tax to be paid is the local
treasurer, who makes the levy and the collection.
Now let us define actual use.
(b) "Actual Use" refers to the purpose for which
the property is principally or predominantly
utilized by the person in possession thereof;
Whether the real property is exempted from taxation
purposes, the exemption will always be guided by its
actual use. If it is commercial and residential, it will be
taxable. But if it is used for religious, charitable and
educational purposes, it will be exempted. It is not the
ownership that will determine exemption but its actual
use.
(c) Real property shall be assessed on the basis of a
uniform classification within each local government unit;
In assessing the tax, the LGU shall provide a uniform
classification. They have to enact an ordinance for
purposes of not violating the equal protection clause.
Even if it is zoned as residential, it does not mean that you
cannot put there a commercial building, or have in a
commercial area the residence of the owners. In these
cases, be guided by the actual use of the property. So
you apportion your assessment vis-à-vis the portion of the
property used as residential and that which is used as
commercial.
(d) The appraisal, assessment, levy and collection of real
property tax shall not be let to any private person; and
Assessment and appraisal must be done by the local
assessor, and the levy and collection must be done by
the local treasurer.
(e) The appraisal and assessment of real property shall be
equitable.
Remember here the principle of ability to pay.
Section 200. Administration of the Real Property Tax. - The
provinces and cities, including the municipalities within
the Metropolitan Manila Area, shall be primarily
responsible for the proper, efficient and effective
administration of the real property tax.
Municipalities outside Metro Manila do not enact
ordinance for RPT. It will be the provinces or the cities.
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Section 201. Appraisal of Real Property. - All real property,
whether taxable or exempt, shall be appraised at the
current and fair market value prevailing in the locality
where the property is situated. The Department of Finance
shall promulgate the necessary rules and regulations for
the classification, appraisal, and assessment of real
property pursuant to the provisions of this Code.
This is the basic rule in the appraisal and assessment of
property. This means that all real properties, whether
taxable or exempt, shall be declared for RPT purposes. All
properties must have a real property tax declaration.
Section 202. Declaration of real Property by the Owner or
Administrator. - It shall be the duty of all persons, natural
or juridical, owning or administering real property,
including the improvements therein, within a city or
municipality, or their duly authorized representative, to
prepare, or cause to be prepared, and file with the
provincial, city or municipal assessor, a sworn statement
declaring the true value of their property, whether
previously declared or undeclared, taxable or exempt,
which shall be the current and fair market value of the
property, as determined by the declarant. Such
declaration shall contain a description of the property
sufficient in detail to enable the assessor or his deputy to
identify the same for assessment purposes. The sworn
declaration of real property herein referred to shall be
filed with the assessor concerned once every three (3)
years during the period from January first (1st) to June
thirtieth (30th) commencing with the calendar year 1992.
It is the owner who will make the declaration. He will go
to the assessor to declare the value of the property,
whether previously declared or undeclared, whether
taxable or exempt. The declaration must have a
description of the property.
Section 203. Duty of Person Acquiring Real Property or
Making Improvement Thereon. - It shall also be the duty
of any person, or his authorized representative, acquiring
at any time real property in any municipality or city or
making any improvement on real property, to prepare, or
cause to be prepared, and file with the provincial, city or
municipal assessor, a sworn statement declaring the true
value of subject property, within sixty (60) days after the
acquisition of such property or upon completion or
occupancy of the improvement, whichever comes
earlier.
A real property was sold. When the ROD will issue a new
title, the buyer must declare said title to the Assessor so
that the name of the seller in the tax declaration will be
cancelled, and the new owner will be substituted therein.
If the new owner is not aware of the taxes payable for
the property, he will not know that the property has
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
already been subject of an auction as a result of the
unpaid taxes.
This also covers making an improvement to the property.
Before constructing the house, you need to get a
building permit. After the construction, you have to get
an occupancy permit. This permit you will present to the
local assessor to declare the newly constructed building.
So if you have a house and lot, you have to make a
separate declaration for the lot and the house.
In agricultural lots, if it is vacant, then you have to declare
that it is vacant. But if you start planting corn on the lot,
you have to declare such an improvement as well.
Section 204. Declaration of Real Property by the
Assessor. - When any person, natural or juridical, by
whom real property is required to be declared under
Section 202 hereof, refuses or fails for any reason to make
such declaration within the time prescribed, the
provincial, city or municipal assessor shall himself declare
the property in the name of the defaulting owner, if
known, or against an unknown owner, as the case may
be, and shall assess the property for taxation in
accordance with the provision of this Title. No oath shall
be required of a declaration thus made by the provincial,
city or municipal assessor.
If the owner fails to make the declaration, the assessor will
do the declaration for the owner.
Section 205. Listing of Real Property in the Assessment
Rolls. –
(a) In every province and city, including the
municipalities within the Metropolitan Manila Area, there
shall be prepared and maintained by the provincial, city
or municipal assessor an assessment roll wherein shall be
listed all real property, whether taxable or exempt,
located within the territorial jurisdiction of the local
government unit concerned. Real property shall be listed,
valued and assessed in the name of the owner or
administrator, or anyone having legal interest in the
property.
(b) The undivided real property of a deceased person
may be listed, valued and assessed in the name of the
estate or of the heirs and devisees without designating
them individually; and undivided real property other than
that owned by a deceased may be listed, valued and
assessed in the name of one or more co-owners:
Provided, however, That such heir, devisee, or co-owner
shall be liable severally and proportionately for all
obligations imposed by this Title and the payment of the
real property tax with respect to the undivided property.
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(c) The real property of a corporation, partnership, or
association shall be listed, valued and assessed in the
same manner as that of an individual.
(d) Real property owned by the Republic of the
Philippines, its instrumentalities and political subdivisions,
the beneficial use of which has been granted, for
consideration or otherwise, to a taxable person, shall be
listed, valued and assessed in the name of the possessor,
grantee or of the public entity if such property has been
acquired or held for resale or lease.
The assessment roll is the list of the real properties in the
territory of the assessor, and their classifications and their
assessed values. Whether it is owned by a corporation or
by the republic, all these must be declared. The
government is also required to make a tax declaration.
Section 206. Proof of Exemption of Real Property from
Taxation. - Every person by or for whom real property is
declared, who shall claim tax exemption for such
property under this Title shall file with the provincial, city
or municipal assessor within thirty (30) days from the date
of the declaration of real property sufficient documentary
evidence in support of such claim including corporate
charters, title of ownership, articles of incorporation, by-
laws, contracts, affidavits, certifications and mortgage
deeds, and similar documents.
If the required evidence is not submitted within the period
herein prescribed, the property shall be listed as taxable
in the assessment roll. However, if the property shall be
proven to be tax exempt, the same shall be dropped
from the assessment roll.
In the case of property tax exemption for religious,
charitable and educational use, the grant is in the
constitution, but it is not automatic. You have to present
proof that you are covered by that exemption.
Read with Section 234.
Section 234. Exemptions from Real Property Tax. - The
following are exempted from payment of the real
property tax:
(a) Real property owned by the Republic of the
Philippines or any of its political subdivisions except when
the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, non-profit or
religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for
religious, charitable or educational purposes;
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(c) All machineries and equipment that are actually,
directly and exclusively used by local water districts and
government owned or controlled corporations engaged
in the supply and distribution of water and/or generation
and transmission of electric power;
(d) All real property owned by duly registered
cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control
and environmental protection.
Except as provided herein, any exemption from payment
of real property tax previously granted to, or presently
enjoyed by, all persons, whether natural or juridical,
including all government-owned or controlled
corporations are hereby withdrawn upon the effectivity of
this Code.
CASE: Philippine Association of Rural Electric
Cooperatives is a cooperative registered with the
National Electric Administration (NEA). They questioned
the constitutionality of Section 234 (d), as a violation of
the equal protection clause as the exemption only covers
cooperatives registered with Cooperative Development
Authority (CDA). The Supreme Court ruled that there is no
violation of equal protection because there is a
distinction between those cooperative registered with
the NEA and those registered with the CDA. What they
could have done is to lobby in the Congress to include
them in the exemption.
This provision operated to the effect that all RPT
exemption granted prior to the LGC was withdrawn.
However, Congress later on passed a law reinstating the
exemptions. This involved SSS and GSIS.
Section 207. Real Property Identification System. - All
declarations of real property made under the provisions
of this Title shall be kept and filed under a uniform
classification system to be established by the provincial,
city or municipal assessor.
Section 208. Notification of Transfer of Real Property
Ownership. - Any person who shall transfer real property
ownership to another shall notify the provincial, city or
municipal assessor concerned within sixty (60) days from
the date of such transfer. The notification shall include the
mode of transfer, the description of the property
alienated, the name and address of the transferee.
Section 209. Duty of Registrar of Deeds to Appraise
Assessor of Real Property Listed in Registry. –
(a) To ascertain whether or not any real property entered
in the Registry of Property has escaped discovery and
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listing for the purpose of taxation, the Registrar of Deeds
shall prepare and submit to the provincial, city or
municipal assessor, within six (6) months from the date of
effectivity of this Code and every year thereafter, an
abstract of his registry, which shall include brief but
sufficient description of the real properties entered
therein, their present owners, and the dates of their most
recent transfer or alienation accompanied by copies of
corresponding deeds of sale, donation, or partition or
other forms of alienation.
(b) It shall also be the duty of the Registrar of Deeds to
require every person who shall present for registration a
document of transfer, alienation, or encumbrance of real
property to accompany the same with a certificate to the
effect that the real property subject of the transfer,
alienation, or encumbrance, as the case may be, has
been fully paid of all real property taxes due thereon.
Failure to provide such certificate shall be a valid cause
for the Registrar of Deeds to refuse the registration of the
document.
This is for the purpose of updating both the records of the
ROD and the local assessor. In reality, the records of the
ROD are more updated than the records of the local
assessor.
Paragraph b talks about the Real Property Tax clearance.
The ROD will not issue a new title to the new owner
without this clearance, which would show that you have
paid all taxes on the property.
surveys executed by them within thirty (30) days from
receipt of such plans from the Lands Management
Bureau, the Land Registration Authority, or the Housing
and Land Use Regulatory Board, as the case may be.
So the geodetic engineers shall always furnish the
assessor with blueprints of all surveys they did.
Section 212. Preparation of Schedule of Fair Market
Values. - Before any general revision of property
assessment is made pursuant to the provisions of this Title,
there shall be prepared a schedule of fair market values
by the provincial, city and municipal assessor of the
municipalities within the Metropolitan Manila Area for the
different classes of real property situated in their
respective local government units for enactment by
ordinance of the sanggunian concerned. The schedule of
fair market values shall be published in a newspaper of
general circulation in the province, city or municipality
concerned or in the absence thereof, shall be posted in
the provincial capitol, city or municipal hall and in two
other conspicuous public places therein.
This is the role also of the assessor, to prepare a schedule
of fair market values. If the owner fails to make a
declaration, it will be the assessor who will make a
declaration in behalf of the owner, and make the
determination of the fair market value. There are times
where the fair market value of the assessor and that of
the owner vary. The owner will always declare a lower
amount.

Section 210. Duty of Official Issuing Building Permit or The schedule so made by the assessor must be approved
Certificate of Registration of Machinery to Transmit Copy by the Sanggunian through the enactment of an
to Assessor. - Any public official or employee who may ordinance, after holding public hearings on such subject.
now or hereafter be required by law or regulation to issue
to any person a permit for the construction, addition,
Section 213. Authority of Assessor to Take Evidence. - For
repair, or renovation of a building, or permanent
the purpose of obtaining information on which to base the
improvement on land, or a certificate of registration for
market value of any real property, the assessor of the
any machinery, including machines, mechanical
province, city or municipality or his deputy may summon
contrivances, and apparatus attached or affixed on land
the owners of the properties to be affected or persons
or to another real property, shall transmit a copy of such
having legal interest therein and witnesses, administer
permit or certificate within thirty (30) days of its issuance,
oaths, and take deposition concerning the property, its
to the assessor of the province, city or municipality where
ownership, amount, nature, and value.
the property is situated.

This is on account of disputes on the valuation of real

The building officer must send copies of the buildings
properties.
permits it issued to the assessor in order for the latter to
determine whether the construction was completed or
not. Section 214. Amendment of Schedule of Fair Market
Values. - The provincial, city or municipal assessor may
recommend to the sanggunian concerned amendments
Section 211. Duty of Geodetic Engineers to Furnish Copy
to correct errors in valuation in the schedule of fair market
of Plans to Assessor. - It shall be the duty of all geodetic
values. The sanggunian concerned shall, by ordinance,
engineers, public or private, to furnish free of charge to
act upon the recommendation within ninety (90) days
the assessor of the province, city or municipality where
from receipt thereof.
the land is located with a white or blue print copy of each
of all approved original or subdivision plans or maps of

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Section 215. Classes of Real Property for Assessment Section 217. Actual Use of Real Property as Basis for
Purposes. - For purposes of assessment, real property shall Assessment. - Real property shall be classified, valued
be classified as residential, agricultural, commercial, and assessed on the basis of its actual use regardless of
industrial, mineral, timberland or special. where located, whoever owns it, and whoever uses it.

The city or municipality within the Metropolitan Manila Section 218. Assessment Levels. - The assessment levels to
Area, through their respective sanggunian, shall have the be applied to the fair market value of real property to
power to classify lands as residential, agricultural, determine its assessed value shall be fixed by ordinances
commercial, industrial, mineral, timberland, or special in of the sangguniang panlalawigan, sangguniang
accordance with their zoning ordinances. panlungsod or sangguniang bayan of a municipality
within the Metropolitan Manila Area, at the rates not
The definition of the classes of lands enumerated in the exceeding the following:
provision is found in Section 199.
(a) On Lands:
(d) "Agricultural Land" is land devoted principally
to the planting of trees, raising of crops, livestock CLASS ASSESSMENT LEVELS
and poultry, dairying, salt making, inland fishing
and similar aquacultural activities, and other Residential 20%
agricultural activities, and is not classified as
Agricultural 40%
mineral, timber, residential, commercial or
industrial land; Commercial 50%

(i) "Commercial Land" is land devoted principally Industrial 50%

for the object of profit and is not classified as Mineral 50%
agricultural, industrial, mineral, timber, or
residential land; Timberland 20%

(n) "Industrial Land" is land devoted principally to (b) On Buildings and Other Structures:
industrial activity as capital investment and is not
classified as agricultural, commercial, timber,
mineral or residential land;
<td
</td
(p) "Mineral Lands" are lands in which minerals,
metallic or non-metallic, exist in sufficient (1) Residential
quantity or grade to justify the necessary Fair market Value
expenditures to extract and utilize such materials; Over Not Over Assessment Levels

(u) "Residential Land" is land principally devoted P175,000.00 0%

to habitation.
P175,000.00 300,000.00 10%

Special land is defined in the next Section. 300,000.00 500,000.00 20%

500,000.00 750,000.00 25%

Section 216. Special Classes of Real Property. - All lands,
buildings, and other improvements thereon actually, 750,000.00 1,000,000.00 30%
directly and exclusively used for hospitals, cultural, or 1,000,000.00 2,000,000.00 35%
scientific purposes, and those owned and used by local
water districts, and government-owned or controlled 2,000,000.00 5,000,000.00 40%
corporations rendering essential public services in the
supply and distribution of water and/or generation and 5,000,000.00 10,000,000.00 50%
transmission of electric power shall be classified as
10,000,000.00 60%
special.
(2) Agricultural
In classifying lands among these spcial classes, an Fair Market Value
ordinance must be enacted. This ordinance is called as Over Not Over Assessment Levels
the Zoning Ordinance.

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P300,000.00 25% Actual Use Assessment

Level
P300,000.00 500,000.00 30%
Cultural 15%
500,000.00 750,000.00 35%
Scientific 15%
750,000.00 1,000,000.00 40%
Hospital 15%
1,000,000.00 2,000,000.00 45%
Local water districts 10%
2,000,000.00 50%
Government-owned or 10%
(3) Commercial / Industrial controlled corporations
Fair Market Value engaged in the supply and
Over Not Over Assessment Levels distribution of water and/or
generation and transmission of
P300,000.00 30% electric power

P300,000.00 500,000.00 35%

You must also have these assessment levels adopted
500,000.00 750,000.00 40% through an ordinance. The application of this provision is
not therefore automatic.
750,000.00 1,000,000.00 50%

1,000,000.00 2,000,000.00 60% *Dean proceeded to read the values*

2,000,000.00 5,000,000.00 70%
Remember the formula for assessed value and RPT
5,000,000.00 10,000,000.00 75%

10,000,000.00 80% Assessed Value = Fair Market Value x Assessment Level

(4) Timberland RPT = Assessed Value x rate

Fair Market Value

Over Not Over Assessment Levels The rate is fixed by law, which shall also be embodied in
an ordinance. What is constant here are the rate and the
P300,000.00 45% assessment level. The variable is the Assessed value and
the fair market value.
P300,000.00 500,000.00 50%

500,000.00 750,000.00 55% Example:

750,000.00 1,000,000.00 60% Year 1

Assessment level = 20%
5,000,000.00 2,000,000.00 65% FMV=1,000,000
2,000,000.00 70% Rate=2%

Assessed value = 1,000,000 x 30%

(c) On Machineries Assessed value = 200,000

RPT = 200,000 x 2%
Class Assessment Levels
RPT = 4,000
Agricultural 40%
Year 5
Residential 50% FMV=1,500,000
Commercial 80%
Assessed value = 1,500,000 x 30%
Industrial 80% Assessed value = 450,000

RPT = 450,000 x 2%
(d) On Special Classes: The assessment levels for RPT = 9,000
all lands buildings, machineries and other
improvements;

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Section 219. General Revision of Assessment and Property
Classification. - The provincial, city or municipal assessor
shall undertake a general revision of real property
assessments within two (2) years after the effectivity of this
Code and every three (3) years thereafter.
Section 220. Valuation of Real Property. - In cases where
(a) real property is declared and listed for taxation
purposes for the first time; (b) there is an ongoing general
revision of property classification and assessment; or (c) a
request is made by the person in whose name the
property is declared, the provincial, city or municipal
assessor or his duly authorized deputy shall, in
accordance with the provisions of this Chapter, make a
classification, appraisal and assessment or taxpayer's
valuation thereon: Provided, however, That the
assessment of real property shall not be increased oftener
than once every three (3) years except in case of new
improvements substantially increasing the value of said
property or of any change in its actual use.
Section 221. Date of Effectivity of Assessment or
Reassessment. - All assessments or reassessments made
after the first (1st) day of January of any year shall take
effect on the first (1st) day of January of the succeeding
year: Provided, however, That the reassessment of real
property due to its partial or total destruction, or to a
major change in its actual use, or to any great and
sudden inflation or deflation of real property values, or to
the gross illegality of the assessment when made or to
any other abnormal cause, shall be made within ninety
(90) days from the date any such cause or causes
occurred, and shall take effect at the beginning of the
quarter next following the reassessment.
New assessments/valuations/appraisals takes effect on
the beginning of the next year.
If the ordinance on RPT adjusting the rates, the effectivity
will always be on January 1 of the following year, even if it
was approved in the middle of the year.
In local taxation, the ordinance will take effect on the first
day of the quarter following the effectivity of such
ordinance.
Section 222. Assessment of Property Subject to Back
Taxes. - Real property declared for the first time shall be
assessed for taxes for the period during which it would
have been liable but in no case of more than ten (10)
years prior to the date of initial assessment: Provided,
however, That such taxes shall be computed on the basis
of the applicable schedule of values in force during the
corresponding period.
If such taxes are paid on or before the end of the quarter
following the date the notice of assessment was received
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
by the owner or his representative, no interest for
delinquency shall be imposed thereon; otherwise, such
taxes shall be subject to an interest at the rate of two
percent (2%) per month or a fraction thereof from the
date of the receipt of the assessment until such taxes are
fully paid.
Section 223. Notification of New or Revised Assessment. -
When real property is assessed for the first time or when
an existing assessment is increased or decreased, the
provincial, city or municipal assessor shall within thirty
(30) days give written notice of such new or revised
assessment to the person in whose name the property is
declared. The notice may be delivered personally or by
registered mail or through the assistance of the punong
barangay to the last known address of the person to be
served.
Section 224. Appraisal and Assessment of Machinery. –
(a) The fair market value of a brand-new machinery shall
be the acquisition cost. In all other cases, the fair market
value shall be determined by dividing the remaining
economic life of the machinery by its estimated
economic life and multiplied by the replacement or
reproduction cost.
(b) If the machinery is imported, the acquisition cost
includes freight, insurance, bank and other charges,
brokerage, arrastre and handling, duties and taxes, plus
charges at the present site. The cost in foreign currency of
imported machinery shall be converted to peso cost on
the basis of foreign currency exchange rates as fixed by
the Central Bank.
Section 225. Depreciation Allowance for Machinery. - For
purposes of assessment, a depreciation allowance shall
be made for machinery at a rate not exceeding five
percent (5%) of its original cost or its replacement or
reproduction cost, as the case may be, for each year of
use: Provided, however, That the remaining value for all
kinds of machinery shall be fixed at not less than twenty
percent (20%) of such original, replacement, or
reproduction cost for so long as the machinery is useful
and in operation.
ASSESSMENT APPEALS
The usual controversy before the assessor’s office involves
the valuation of the fair market value of the property. The
owner and the assessor will oftentimes disagree on the
value.
Section 226. Local Board of Assessment Appeals. - Any
owner or person having legal interest in the property who
is not satisfied with the action of the provincial, city or
municipal assessor in the assessment of his property may,
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within sixty (60) days from the date of receipt of the
written notice of assessment, appeal to the Board of
Assessment Appeals of the provincial or city by filing a
petition under oath in the form prescribed for the purpose,
together with copies of the tax declarations and such
affidavits or documents submitted in support of the
appeal.
This is what will happen if there will be no agreement.
The assessor will issue an assessment notice. This is
different from the assessment in the NIRC. In NIRC, the
assessment pertains to deficient taxes. Here, the
assessment contains the decision of the assessor
regarding the valuation of the property. From that notice
of assessment, the taxpayer is given 60 days to appeal
file before the Local board of Assessment Appeals.
Section 227. Organization, Powers, Duties, and Functions
of the Local Board of Assessment Appeals. –
(a) The Board of Assessment Appeals of the province or
city shall be composed of the Registrar of Deeds, as
Chairman, the provincial or city prosecutor and the
provincial, or city engineer as members, who shall serve
as such in an ex officio capacity without additional
compensation.
(b) The chairman of the Board shall have the power to
designate any employee of the province or city to serve
as secretary to the Board also without additional
compensation.
(c) The chairman and members of the Board of
Assessment Appeals of the province or city shall assume
their respective positions without need of further
appointment or special designations immediately upon
effectivity of this Code. They shall take oath or affirmation
of office in the prescribed form.
(d) In provinces and cities without a provincial or city
engineer, the district engineer shall serve as member of
the Board. In the absence of the Registrar of Deeds, or the
provincial or city prosecutor, or the provincial or city
engineer, or the district engineer, the persons performing
their duties, whether in an acting capacity or as a duly
designated officer-in-charge, shall automatically
become the chairman or member, respectively, of the
said Board, as the case may be.
This composes the Local Board of Assessment Appeals.
Section 228. Meetings and Expenses of the Local Board of
Assessment Appeals. –
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(a) The Board of Assessment Appeals of the province or
city shall meet once a month and as often as may be
necessary for the prompt disposition of appealed cases.
No member of the Board shall be entitled to per diems or
traveling expenses for his attendance in Board meetings,
except when conducting an ocular inspection in
connection with a case under appeal.
(b) All expenses of the Board shall be charged against
the general fund of the province or city, as the case may
be. The sanggunian concerned shall appropriate the
necessary funds to enable the Board in their respective
localities to operate effectively.
Section 229. Action by the Local Board of Assessment
Appeals. –
(a) The Board shall decide the appeal within one hundred
twenty (120) days from the date of receipt of such
appeal. The Board, after hearing, shall render its decision
based on substantial evidence or such relevant evidence
on record as a reasonable mind might accept as
adequate to support the conclusion.
(b) In the exercise of its appellate jurisdiction, the Board
shall have the power to summon witnesses, administer
oaths, conduct ocular inspection, take depositions, and
issue subpoena and subpoena duces tecum. The
proceedings of the Board shall be conducted solely for
the purpose of ascertaining the facts without necessarily
adhering to technical rules applicable in judicial
proceedings.
(c) The secretary of the Board shall furnish the owner of
the property or the person having legal interest therein
and the provincial or city assessor with a copy of the
decision of the Board. In case the provincial or city
assessor concurs in the revision or the assessment, it shall
be his duty to notify the owner of the property or the
person having legal interest therein of such fact using the
form prescribed for the purpose. The owner of the
property or the person having legal interest therein or the
assessor who is not satisfied with the decision of the
Board, may, within thirty (30) days after receipt of the
decision of said Board, appeal to the Central Board of
Assessment Appeals, as herein provided. The decision of
the Central Board shall be final and executory.
The decision of the board will either grant or deny the
appeal made by the taxpayers.
In case of a denial, the property owner, or the assessor
will go to the Central Board of Assessment Appeals.
Section 230. Central Board of Assessment Appeals. - The
Central Board of Assessment Appeals shall be composed
of a chairman, and two (2) members to be appointed by
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the President, who shall serve for a term of seven (7)
years, without reappointment. Of those first appointed,
the chairman shall hold office for seven (7) years, one
member for five (5) years, and the other member for three
(3) years. Appointment to any vacancy shall be only for
the unexpired portion of the term of the predecessor. In
no case shall any member be appointed or designated in
a temporary or acting capacity. The chairman and the
members of the Board shall be Filipino citizens, at least
forty (40) years old at the time of their appointment, and
members of the Bar or Certified Public Accountants for at
least ten (10) years immediately preceding their
appointment. The chairman of the Board of Assessment
Appeals shall have the salary grade equivalent to the
rank of Director III under the Salary Standardization Law
exclusive of allowances and other emoluments. The
members of the Board shall have the salary grade
equivalent to the rank of Director II under the Salary
Standardization Law exclusive of allowances and other
emoluments. The Board shall have appellate jurisdiction
over all assessment cases decided by the Local Board of
Assessment Appeals.
There shall be Hearing Officers to be appointed by the
Central Board of Assessment Appeals pursuant to civil
service laws, rules and regulations, one each for Luzon,
Visayas and Mindanao, who shall hold office in Manila,
Cebu City and Cagayan de Oro City, respectively, and
who shall serve for a term of six (6) years, without
reappointment until their successors have been
appointed and qualified. The Hearing Officers shall have
the same qualifications as that of the Judges of the
Municipal Trial Courts.
The Central Board Assessment Appeals, in the
performance of its powers and duties, may establish and
organize staffs, offices, units, prescribe the titles, functions
and duties of their members and adopt its own rules and
regulations.
Unless otherwise provided by law, the annual
appropriations for the Central Board of Assessment
Appeals shall be included in the budget of the
Department of Finance in the corresponding General
Appropriations Act.
Under RA 9504, the decision of the Central Board is
brought to the Court of Tax Appeals. This is where the
action is converted to a judicial action. From the CTA,
you go to the Supreme Court.
Section 231. Effect of Appeal on the Payment of Real
Property Tax. - Appeal on assessments of real property
made under the provisions of this Code shall, in no case,
suspend the collection of the corresponding realty taxes
on the property involved as assessed by the provincial or
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
city assessor, without prejudice to subsequent adjustment
depending upon the final outcome of the appeal.
Pending appeal before the local board or the central
board, the collection of the real property tax is not
suspended. But if at the end of all the proceedings the
court will decide in favor of the taxpayer, any excess in
the payments made by him during the pendency of the
action will be considered as tax credits, to be applied to
future tax liabilities.
LEVY AND COLLECTION
Section 232. Power to Levy Real Property Tax. - A province
or city or a municipality within the Metropolitan Manila
Area my levy an annual ad valorem tax on real property
such as land, building, machinery, and other
improvement not hereinafter specifically exempted.
Section 233. Rates of Levy. - A province or city or a
municipality within the Metropolitan Manila Area shall fix
a uniform rate of basic real property tax applicable to
their respective localities as follows:
(a) In the case of a province, at the rate not exceeding
one percent (1%) of the assessed value of real property;
and
(b) In the case of a city or a municipality within the
Metropolitan Manila Area, at the rate not exceeding two
percent (2%) of the assessed value of real property.
There is no flexibility provision here. Once you have
reached the maximum value, you cannot go any further.
Section 234. Exemptions from Real Property Tax. - The
following are exempted from payment of the real
property tax:
(a) Real property owned by the Republic of the
Philippines or any of its political subdivisions except when
the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, non-profit or
religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for
religious, charitable or educational purposes;
(c) All machineries and equipment that are actually,
directly and exclusively used by local water districts and
government owned or controlled corporations engaged
in the supply and distribution of water and/or generation
and transmission of electric power;
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(d) All real property owned by duly registered
cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control
and environmental protection.
Except as provided herein, any exemption from payment
of real property tax previously granted to, or presently
enjoyed by, all persons, whether natural or juridical,
including all government-owned or controlled
corporations are hereby withdrawn upon the effectivity of
this Code.
In RPT, what is collected is the basic RPT and the special
levies. Special levies are provided in Section 235, 236 and
240.
What is regularly collected is the basic RPT and the 1%
SEF. The special levy on idle lands is applied only if the
land is found to be idle.
Section 235. Additional Levy on Real Property for the
Special Education Fund. - A province or city, or a
municipality within the Metropolitan Manila Area, may
levy and collect an annual tax of one percent (1%) on
the assessed value of real property which shall be in
addition to the basic real property tax. The proceeds
thereof shall exclusively accrue to the Special Education
Fund (SEF).
This is for the benefit of the Local School Board, for the
upkeep of the public schools.
Section 236. Additional Ad Valorem Tax on Idle Lands. - A
province or city, or a municipality within the Metropolitan
Manila Area, may levy an annual tax on idle lands at the
rate not exceeding five percent (5%) of the assessed
value of the property which shall be in addition to the
basic real property tax.
Section 237. Idle Lands, Coverage. - For purposes of real
property taxation, idle lands shall include the following:
(a) Agricultural lands, more than one (1) hectare in area,
suitable for cultivation, dairying, inland fishery, and other
agricultural uses, one-half (1/2) of which remain
uncultivated or unimproved by the owner of the property
or person having legal interest therein. Agricultural lands
planted to permanent or perennial crops with at least fifty
(50) trees to a hectare shall not be considered idle lands.
Lands actually used for grazing purposes shall likewise
not be considered idle lands.
(b) Lands, other than agricultural, located in a city or
municipality, more than one thousand (1,000) square
meters in area one-half (1/2) of which remain unutilized
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
or unimproved by the owner of the property or person
having legal interest therein.
Regardless of land area, this Section shall likewise apply
to residential lots in subdivisions duly approved by proper
authorities, the ownership of which has been transferred
to individual owners, who shall be liable for the additional
tax: Provided, however, That individual lots of such
subdivisions, the ownership of which has not been
transferred to the buyer shall be considered as part of the
subdivision, and shall be subject to the additional tax
payable by subdivision owner or operator.
Section 238. Idle Lands Exempt from Tax. - A province or
city or a municipality within the Metropolitan Manila Area
may exempt idle lands from the additional levy by reason
of force majeure, civil disturbance, natural calamity or
any cause or circumstance which physically or legally
prevents the owner of the property or person having legal
interest therein from improving, utilizing or cultivating the
same.
So even if your land is idle, you can be exempted from
tax for valid reasons enumerated in the provision above.
Section 239. Listing of Idle Lands by the Assessor. - The
provincial, city or municipal assessor shall make and
keep an updated record of all idle lands located within
his area of jurisdiction. For purposes of collection, the
provincial, city or municipal assessor shall furnish a copy
thereof to the provincial or city treasurer who shall notify,
on the basis of such record, the owner of the property or
person having legal interest therein of the imposition of
the additional tax.
Section 240. Special Levy by Local Government Units. - A
province, city or municipality may impose a special levy
on the lands comprised within its territorial jurisdiction
specially benefited by public works projects or
improvements funded by the local government unit
concerned: Provided, however, That the special levy shall
not exceed sixty percent (60%) of the actual cost of such
projects and improvements, including the costs of
acquiring land and such other real property in
connection therewith: Provided, further, That the special
levy shall not apply to lands exempt from basic real
property tax and the remainder of the land portions of
which have been donated to the local government unit
concerned for the construction of such projects or
improvements.
Special levies operate as a form of reimbursement to the
LGU for introducing development. Because they
invested, they have the right to recover through this
special assessment. So this special levy is not a tax.
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If the development was made in front of your property,
you will be assessed more than those whose property are
father away from the development.
Section 241. Ordinance Imposing a Special Levy. - A tax
ordinance imposing a special levy shall describe with
reasonable accuracy the nature, extent, and location of
the public works projects or improvements to be
undertaken, state the estimated cost thereof, specify the
metes and bounds by monuments and lines and the
number of annual installments for the payment of the
special levy which in no case shall be less than five (5)
nor more than ten (10) years. The sanggunian concerned
shall not be obliged, in the apportionment and
computation of the special levy, to establish a uniform
percentage of all lands subject to the payment of the tax
for the entire district, but it may fix different rates for
different parts or sections thereof, depending on whether
such land is more or less benefited by proposed work.
So again, you have to enact an ordinance for this special
levy.
Section 242. Publication of Proposed Ordinance Imposing
a Special Levy. - Before the enactment of an ordinance
imposing a special levy, the sanggunian concerned shall
conduct a public hearing thereon; notify in writing the
owners of the real property to be affected or the persons
having legal interest therein as to the date and place
thereof and afford the latter the opportunity to express
their positions or objections relative to the proposed
ordinance.
Section 243. Fixing the Amount of Special Levy. - The
special levy authorized herein shall be apportioned,
computed, and assessed according to the assessed
valuation of the lands affected as shown by the books of
the assessor concerned, or its current assessed value as
fixed by said assessor if the property does not appear of
record in his books. Upon the effectivity of the ordinance
imposing special levy, the assessor concerned shall
forthwith proceed to determine the annual amount of
special levy assessed against each parcel of land
comprised within the area especially benefited and shall
send to each landowner a written notice thereof by mail,
personal service or publication in appropriate cases.
Section 244. Taxpayer's Remedies Against Special Levy. -
Any owner of real property affected by a special levy or
any person having a legal interest therein may, upon
receipt of the written notice of assessment of the special
levy, avail of the remedies provided for in Chapter 3, Title
Two, Book II of this Code.
Section 245. Accrual of Special Levy. - The special levy
shall accrue on the first day of the quarter next following
the effectivity of the ordinance imposing such levy.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
So you just follow the procedure in Chapter 3 of Title two
for your remedies as a taxpayer against special levies.
In the case of local taxes, any amendment or revisions on
local tax ordinances, the accrual of the tax under the
new ordinance takes effect on the first day of the quarter
following the effectivity of the ordinance. In RPT, if an
ordinance is enacted, the accrual of the tax will begin on
the first day of January of the following year. But in the
case of a special levy, it shall accrue on the first day of
the quarter following the date of the enactment of the
ordinance.
Section 246. Date of Accrual of Tax. - The real property
tax for any year shall accrue on the first day of January
and from that date it shall constitute a lien on the property
which shall be superior to any other lien, mortgage, or
encumbrance of any kind whatsoever, and shall be
extinguished only upon the payment of the delinquent
tax.
Section 247. Collection of Tax. - The collection of the real
property tax with interest thereon and related expenses,
and the enforcement of the remedies provided for in this
Title or any applicable laws, shall be the responsibility of
the city or municipal treasurer concerned.
The city or municipal treasurer may deputize the
barangay treasurer to collect all taxes on real property
located in the barangay: Provided, That the barangay
treasurer is properly bonded for the purpose: Provided,
further, That the premium on the bond shall be paid by
the city or municipal government concerned.
RPT will be collected by the local treasurer. As a rule, the
RPT collected by the LGU is the basic RPT and the SEF.
These are the two RPT that will be collected. The other
special levies, involving idle lands, is a special imposition
to lands which has been declared as idle; and the other
is for reimbursement for development introduced by
LGUs.
Payment of these taxes could be done annually or
quarterly installments, pursuant to Section 250.
The LGC only provides the limits of the power. The LGUs
have to enact an ordinance so that the provisions
allowed to them under the LGC may be imposed.
So the payment of installments and the granting of
discounts shall be embodied in an ordinance.
Section 248. Assessor to Furnish Local Treasurer with
Assessment Roll. - The provincial, city or municipal
assessor shall prepare and submit to the treasurer of the
local government unit, on or before the thirty-first (31st)
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day of December each year, an assessment roll
containing a list of all persons whose real properties have
been newly assessed or reassessed and the values of
such properties.
Section 249. Notice of Time for Collection of Tax. - The city
or municipal treasurer shall, on or before the thirty-first
(31st) day of January each year, in the case of the basic
real property tax and the additional tax for the Special
Education Fund (SEF) or any other date to be prescribed
by the sanggunian concerned in the case of any other
tax levied under this title, post the notice of the dates
when the tax may be paid without interest at a
conspicuous and publicly accessible place at the city or
municipal hall. Said notice shall likewise be published in
a newspaper of general circulation in the locality once a
week for two (2) consecutive weeks.
Section 250. Payment of Real Property Taxes in
Installments. - The owner of the real property or the
person having legal interest therein may pay the basic
real property tax and the additional tax for Special
Education Fund (SEF) due thereon without interest in four
(4) equal installments; the first installment to be due and
payable on or before March Thirty-first (31st); the second
installment, on or before June Thirty (30); the third
installment, on or before September Thirty (30); and the
last installment on or before December Thirty-first (31st),
except the special levy the payment of which shall be
governed by ordinance of the sanggunian concerned.
The date for the payment of any other tax imposed under
this Title without interest shall be prescribed by the
sanggunian concerned.
Payments of real property taxes shall first be applied to
prior years delinquencies, interests, and penalties, if any,
and only after said delinquencies are settled may tax
payments be credited for the current period.
Section 251. Tax Discount for Advanced Prompt
Payment. - If the basic real property tax and the
additional tax accruing to the Special Education Fund
(SEF) are paid in advance in accordance with the
prescribed schedule of payment as provided under
Section 250, the sanggunian concerned may grant a
discount not exceeding twenty percent (20%) of the
annual tax due.
Section 252. Payment Under Protest. –
(a) No protest shall be entertained unless the taxpayer
first pays the tax. There shall be annotated on the tax
receipts the words "paid under protest". The protest in
writing must be filed within thirty (30) days from payment
of the tax to the provincial, city treasurer or municipal
treasurer, in the case of a municipality within Metropolitan
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Manila Area, who shall decide the protest within sixty (60)
days from receipt.
(b) The tax or a portion thereof paid under protest, shall
be held in trust by the treasurer concerned.
(c) In the event that the protest is finally decided in favor
of the taxpayer, the amount or portion of the tax
protested shall be refunded to the protestant, or applied
as tax credit against his existing or future tax liability.
(d) In the event that the protest is denied or upon the
lapse of the sixty day period prescribed in subparagraph
(a), the taxpayer may avail of the remedies as provided
for in Chapter 3, Title II, Book II of this Code.
When the property owner is engaged in a controversy
with the local treasurer involving RPT assessment in
connection with the amount, Section 252 has to be
complied with. You are first made to pay the tax and pay
it under protest. No protest will be entertained unless the
taxpayer pays the tax.
In the RPT involving appeals, you have encountered
protests against the assessment of the local assessor. Your
remedy is to file a petition with the local board of
assessment appeals. From there, you appeal to the
central board of assessment appeals. And then you bring
it to the CTA and to the Supreme Court.
This procedure is the same as those involving special
levies.
In matters involving the payment of the RPT, the venue is
the Office is the Local Treasurer. What is required is you
have to pay under protest and indicate in the receipts
that you are paying under protest. And then you file the
protest with the local treasurer. The local treasurer may
either grant or deny your appeal. In the event the protest
is decided in favor of the taxpayer, the tax paid must be
refunded or applied as tax credit. In the event the protest
is denied or lapse of the 60 day period prescribed, you
now proceed to the local board of assessment appeals.
You would notice that all matters involving RPT will all pass
through the local board, whether the controversy
originated in the assessor or the treasurer.
Section 253. Repayment of Excessive Collections. - When
an assessment of basic real property tax, or any other tax
levied under this Title, is found to be illegal or erroneous
and the tax is accordingly reduced or adjusted, the
taxpayer may file a written claim for refund or credit for
taxes and interests with the provincial or city treasurer
within two (2) years from the date the taxpayer is entitled
to such reduction or adjustment.
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The provincial or city treasurer shall decide the claim for
tax refund or credit within sixty (60) days from receipt
thereof. In case the claim for tax refund or credit is
denied, the taxpayer may avail of the remedies as
provided in Chapter 3, Title II, Book II of this Code.
This involves erroneously collected RPT. In the case of a
refund, file the claim with the local treasurer. The treasurer
may either grant the refund or deny it. In case of a
denial, you appeal to the local board of assessment
appeals. The taxpayers may claim a refund within two
years from the date the taxpayer becomes entitled to
such adjustment.
It is also required that the local treasurer decide within
that period. After which, the taxpayer will bring the
action to the local board of assessment appeals.
There are therefore four types of cases that you bring to
the local board.
Section 254. Notice of Delinquency in the Payment of the
Real Property Tax. –
(a) When the real property tax or any other tax imposed
under this Title becomes delinquent, the provincial, city or
municipal treasurer shall immediately cause a notice of
the delinquency to be posted at the main hall and in a
publicly accessible and conspicuous place in each
barangay of the local government unit concerned. The
notice of delinquency shall also be published once a
week for two (2) consecutive weeks, in a newspaper of
general circulation in the province, city, or municipality.
(b) Such notice shall specify the date upon which the tax
became delinquent and shall state that personal property
may be distrained to effect payment. It shall likewise
state that any time before the distraint of personal
property, payment of the tax with surcharges, interests
and penalties may be made in accordance with the next
following Section, and unless the tax, surcharges and
penalties are paid before the expiration of the year for
which the tax is due except when the notice of
assessment or special levy is contested administratively
or judicially pursuant to the provisions of Chapter 3, Title II,
Book II of this Code, the delinquent real property will be
sold at public auction, and the title to the property will be
vested in the purchaser, subject, however, to the right of
the delinquent owner of the property or any person
having legal interest therein to redeem the property
within one (1) year from the date of sale.
This involves delinquency in paying RPT. In the event the
taxpayer fails to pay the RPT, he will be notified. The LGU
will publish in a newspaper the list of delinquent
taxpayers.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
It is in this aspect that the RPT will become a lien. That lien
of the LGU is superior to any other liens on that property.
Even if there is an existing encumbrance, in the event of
a delinquency in RPT, the claim of the government will be
superior.
It is also in this manner where if you are a new owner of a
real property, you must have that real property declared
so that you will have a new tax declaration. If you fail to
make a new declaration in the records of the assessor, it
will still be the former owner that will be written there. The
notices will still be sent to the previous owner. The new
owner will not be aware therefore that his property has
already been sold at public auction. And without such
knowledge, the new owner will also not be able to
redeem the property in case the property has already
been sold.
Section 255. Interests on Unpaid Real Property Tax. - In
case of failure to pay the basic real property tax or any
other tax levied under this Title upon the expiration of the
periods as provided in Section 250, or when due, as the
case may be, shall subject the taxpayer to the payment
of interest at the rate of two percent (2%) per month on
the unpaid amount or a fraction thereof, until the
delinquent tax shall have been fully paid: Provided,
however, That in no case shall the total interest on the
unpaid tax or portion thereof exceed thirty-six (36)
months.
Section 256. Remedies For The Collection Of Real Property
Tax. - For the collection of the basic real property tax and
any other tax levied under this Title, the local government
unit concerned may avail of the remedies by
administrative action thru levy on real property or by
judicial action.
Section 257. Local Governments Lien. - The basic real
property tax and any other tax levied under this Title
constitutes a lien on the property subject to tax, superior
to all liens, charges or encumbrances in favor of any
person, irrespective of the owner or possessor thereof,
enforceable by administrative or judicial action, and may
only be extinguished upon payment of the tax and the
related interests and expenses.
Section 258. Levy on Real Property. - After the expiration
of the time required to pay the basic real property tax or
any other tax levied under this Title, real property subject
to such tax may be levied upon through the issuance of a
warrant on or before, or simultaneously with, the institution
of the civil action for the collection of the delinquent tax.
The provincial or city treasurer, or a treasurer of a
municipality within the Metropolitan Manila Area, as the
case may be, when issuing a warrant of levy shall
prepare a duly authenticated certificate showing the
name of the delinquent owner of the property or person
having legal interest therein, the description of the
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property, the amount of the tax due and the interest
thereon. The warrant shall operate with the force of a
legal execution throughout the province, city or a
municipality, within the Metropolitan Manila Area. The
warrant shall be mailed to or served upon the delinquent
owner of the real property or person having legal interest
therein, or in case he is out of the country or cannot be
located, the administrator or occupant of the property. At
the same time, written notice of the levy with the
attached warrant shall be mailed to or served upon the
assessor and the Registrar of Deeds of the province, city
or municipality within the Metropolitan Manila Area where
the property is located, who shall annotate the levy on
the tax declaration and certificate of title of the property,
respectively.
The levying officer shall submit a report on the levy to the
sanggunian concerned within ten (10) days after receipt
of the warrant by the owner of the property or person
having legal interest therein.
If the property is not enough, you can further levy other
properties.
Section 259. Penalty for Failure to Issue and Execute
Warrant. - Without prejudice to criminal prosecution
under the Revised Penal Code and other applicable laws,
any local treasurer or his deputy who fails to issue or
execute the warrant of levy within one (1) year from the
time the tax becomes delinquent or within thirty (30) days
from the date of the issuance thereof, or who is found
guilty of abusing the exercise thereof in an administrative
or judicial proceeding shall be dismissed from the
service.
Section 260. Advertisement and Sale. - Within thirty (30)
days after service of the warrant of levy, the local
treasurer shall proceed to publicly advertise for sale or
auction the property or a usable portion thereof as may
be necessary to satisfy the tax delinquency and
expenses of sale. The advertisement shall be effected by
posting a notice at the main entrance of the provincial,
city or municipal building, and in a publicly accessible
and conspicuous place in the barangay where the real
property is located, and by publication once a week for
two (2) weeks in a newspaper of general circulation in
the province, city or municipality where the property is
located. The advertisement shall specify the amount of
the delinquent tax, the interest due thereon and expenses
of sale, the date and place of sale, the name of the
owner of the real property or person having legal interest
therein, and a description of the property to be sold. At
any time before the date fixed for the sale, the owner of
the real property or person having legal interest therein
may stay the proceedings by paying the delinquent tax,
the interest due thereon and the expenses of sale. The
sale shall be held either at the main entrance of the
provincial, city or municipal building, or on the property
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
to be sold, or at any other place as specified in the notice
of the sale.
Within thirty (30) days after the sale, the local treasurer or
his deputy shall make a report of the sale to the
sanggunian concerned, and which shall form part of his
records. The local treasurer shall likewise prepare and
deliver to the purchaser a certificate of sale which shall
contain the name of the purchaser, a description of the
property sold, the amount of the delinquent tax, the
interest due thereon, the expenses of sale and a brief
description of the proceedings: Provided, however, That
proceeds of the sale in excess of the delinquent tax, the
interest due thereon, and the expenses of sale shall be
remitted to the owner of the real property or person
having legal interest therein.
The local treasurer may, by ordinance duly approved,
advance an amount sufficient to defray the costs of
collection thru the remedies provided for in this Title,
including the expenses of advertisement and sale.
Section 261. Redemption of Property Sold. - Within one (1)
year from the date of sale, the owner of the delinquent
real property or person having legal interest therein, or his
representative, shall have the right to redeem the
property upon payment to the local treasurer of the
amount of the delinquent tax, including the interest due
thereon, and the expenses of sale from the date of
delinquency to the date of sale, plus interest of not more
than two percent (2%) per month on the purchase price
from the date of sale to the date of redemption. Such
payment shall invalidate the certificate of sale issued to
the purchaser and the owner of the delinquent real
property or person having legal interest therein shall be
entitled to a certificate of redemption which shall be
issued by the local treasurer or his deputy.
From the date of sale until the expiration of the period of
redemption, the delinquent real property shall remain in
possession of the owner or person having legal interest
therein who shall be entitled to the income and other
fruits thereof.
The local treasurer or his deputy, upon receipt from the
purchaser of the certificate of sale, shall forthwith return to
the latter the entire amount paid by him plus interest of
not more than two percent (2%) per month. Thereafter,
the property shall be free from lien of such delinquent tax,
interest due thereon and expenses of sale.
Section 262. Final Deed to Purchaser. - In case the owner
or person having legal interest fails to redeem the
delinquent property as provided herein, the local
treasurer shall execute a deed conveying to the
purchaser said property, free from lien of the delinquent
tax, interest due thereon and expenses of sale. The deed
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shall briefly state the proceedings upon which the validity
of the sale rests.
Section 263. Purchase of Property By the Local
Government Units for Want of Bidder. - In case there is no
bidder for the real property advertised for sale as
provided herein, the real property tax and the related
interest and costs of sale the local treasurer conducting
the sale shall purchase the property in behalf of the local
government unit concerned to satisfy the claim and
within two (2) days thereafter shall make a report of his
proceedings which shall be reflected upon the records of
his office. It shall be the duty of the Registrar of Deeds
concerned upon registration with his office of any such
declaration of forfeiture to transfer the title of the forfeited
property to the local government unit concerned without
the necessity of an order from a competent court.
Within one (1) year from the date of such forfeiture, the
taxpayer or any of his representative, may redeem the
property by paying to the local treasurer the full amount
of the real property tax and the related interest and the
costs of sale. If the property is not redeemed as provided
herein, the ownership thereof shall be vested on the local
government unit concerned.
Section 264. Resale of Real Estate Taken for Taxes, Fees,
or Charges. - The sanggunian concerned may, by
ordinance duly approved, and upon notice of not less
than twenty (20) days, sell and dispose of the real
property acquired under the preceding section at public
auction. The proceeds of the sale shall accrue to the
general fund of the local government unit concerned.
Section 265. Further Distraint or Levy. - Levy may be
repeated if necessary until the full amount due, including
all expenses, is collected.
Section 266. Collection of Real Property Tax Through the
Courts. - The local government unit concerned may
enforce the collection of the basic real property tax or
any other tax levied under this Title by civil action in any
court of competent jurisdiction. The civil action shall be
filed by the local treasurer within the period prescribed in
Section 270 of this Code.
Section 267. Action Assailing Validity of Tax Sale. - No
court shall entertain any action assailing the validity or
any sale at public auction of real property or rights
therein under this Title until the taxpayer shall have
deposited with the court the amount for which the real
property was sold, together with interest of two percent
(2%) per month from the date of sale to the time of the
institution of the action. The amount so deposited shall be
paid to the purchaser at the auction sale if the deed is
declared invalid but it shall be returned to the depositor if
the action fails.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Neither shall any court declare a sale at public auction
invalid by reason or irregularities or informalities in the
proceedings unless the substantive rights of the
delinquent owner of the real property or the person
having legal interest therein have been impaired.
This contemplates a property already sold at public
auction. You can question the validity of that sale,
subject to some conditions. One of these conditions is for
you to make a deposit. Such amount will be given to the
purchaser is the deed is declared invalid.
Failure to make the deposit will result to the dismissal of
the action. That is a mandatory provision. If the entity is
exempted from the RPT, and it is questioning the validity
of the sale, the requisite of making a deposit is not
applicable.
Section 268. Payment of Delinquent Taxes on Property
Subject of Controversy. - In any action involving the
ownership or possession of, or succession to, real
property, the court may, motu propio or upon
representation of the provincial, city, or municipal
treasurer or his deputy, award such ownership,
possession, or succession to any party to the action upon
payment to the court of the taxes with interest due on the
property and all other costs that may have accrued,
subject to the final outcome of the action.
Section 269. Treasurer to Certify Delinquencies Remaining
Uncollected. - The provincial, city or municipal treasurer
or their deputies shall prepare a certified list of all real
property tax delinquencies which remained uncollected
or unpaid for at least one (1) year in his jurisdiction, and a
statement of the reason or reasons for such non-
collection or non-payment, and shall submit the same to
the sanggunian concerned on or before December thirty-
first (31st) of the year immediately succeeding the year in
which the delinquencies were incurred, with a request for
assistance in the enforcement of the remedies for
collection provided herein.
Section 270. Periods Within Which To Collect Real Property
Taxes. - The basic real property tax and any other tax
levied under this Title shall be collected within five (5)
years from the date they become due. No action for the
collection of the tax, whether administrative or judicial,
shall be instituted after the expiration of such period. In
case of fraud or intent to evade payment of the tax, such
action may be instituted for the collection of the same
within ten (10) years from the discovery of such fraud or
intent to evade payment.
The period of prescription within which to collect shall be
suspended for the time during which:
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(1) The local treasurer is legally prevented from collecting
the tax;
(2) The owner of the property or the person having legal
interest therein requests for reinvestigation and executes
a waiver in writing before the expiration of the period
within which to collect; and
(3) The owner of the property or the person having legal
interest therein is out of the country or otherwise cannot
be located.
Take note that in the NIRC the period to collect is also 5
years. In local taxation you also have 5 years. Here, the
period is also 5 years.
Section 271. Distribution of Proceeds. - The proceeds of
the basic real property tax, including interest thereon,
and proceeds from the use, lease or disposition, sale or
redemption of property acquired at a public auction in
accordance with the provisions of this Title by the
province or city or a municipality within the Metropolitan
Manila Area shall be distributed as follows:
(a) In the case of provinces:
(1) Province - Thirty-five percent (35%) shall accrue to the
general fund;
(2) Municipality - Forty percent (40%) to the general fund
of the municipality where the property is located; and
(3) Barangay - Twenty-five percent (25%) shall accrue to
the barangay where the property is located.
(b) In the case of cities:
(1) City - Seventy percent (70%) shall accrue to the
general fund of the city; and
(2) Thirty percent (30%) shall be distributed among the
component barangays of the cities where the property is
located in the following manner:
(i) Fifty percent (50%) shall accrue to the barangay where
the property is located;
(ii) Fifty percent (50%) shall accrue equally to all
component barangays of the city; and
(c) In the case of a municipality within the Metropolitan
Manila Area:
(1) Metropolitan Manila Authority - Thirty-five percent
(35%) shall accrue to the general fund of the authority;
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(2) Municipality - Thirty-five percent (35% shall accrue to
the general fund of the municipality where the property is
located;
(3) Barangays - Thirty percent (30%) shall be distributed
among the component barangays of the municipality
where the property is located in the following manner:
(i) Fifty percent (50%) shall accrue to the barangay where
the property is located;
(ii) Fifty percent (50%) shall accrue equally to all
component barangays of the municipality.
(d) The share of each barangay shall be released, without
need of any further action, directly to the barangay
treasurer on a quarterly basis within five (5) days after the
end of each quarter and shall not be subject to any lien
or holdback for whatever purpose.
Section 272. Application of Proceeds of the Additional
One Percent SEF Tax. - The proceeds from the additional
one percent (1%) tax on real property accruing to the
Special Education Fund (SEF) shall be automatically
released to the local school boards: Provided, That, in
case of provinces, the proceeds shall be divided equally
between the provincial and municipal school boards:
Provided, however, That the proceeds shall be allocated
for the operation and maintenance of public schools,
construction and repair of school buildings, facilities and
equipment, educational research, purchase of books
and periodicals, and sports development as determined
and approved by the Local School Board.
Prior to the LGC, SEF is used to address salary adjustments
of public school teachers.
Section 273. Proceeds of the Tax on Idle Lands. - The
proceeds of the additional real property tax on idle lands
shall accrue to the respective general fund of the
province or city where the land is located. In the case of
a municipality within the Metropolitan Manila Area, the
proceeds shall accrue equally to the Metropolitan Manila
Authority and the municipality where the land is located.
Section 274. Proceeds of the Special Levy. - The proceeds
of the special levy on lands benefited by public works,
projects and other improvements shall accrue to the
general fund of the local government unit which financed
such public works, projects or other improvements.
Section 275. General Assessment Revision; Expenses
Incident Thereto. - The sanggunian of provinces, cities
and municipalities within the Metropolitan Manila Area
shall provide the necessary appropriations to defray the
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expenses incident to the general revision of real property
assessment.
All expenses incident to a general revision of real
property assessment shall, by ordinance of the
sangguniang panlalawigan, be apportioned between the
province and the municipality on the basis of the taxable
area of the municipality concerned.
Section 276. Condonation or Reduction of Real Property
Tax and Interest. - In case of a general failure of crops or
substantial decrease in the price of agricultural or
agribased products, or calamity in any province, city or
municipality, the sanggunian concerned, by ordinance
passed prior to the first (1st) day of January of any year
and upon recommendation of the Local Disaster
Coordinating Council, may condone or reduce, wholly or
partially, the taxes and interest thereon for the
succeeding year or years in the city or municipality
affected by the calamity.
Section 281. Fees in Registration of Papers or Documents
on Sale of Delinquent Real Property to Province, City or
Municipality. - All certificates, documents, and papers
covering the sale of delinquent property to the province,
city or municipality, if registered in the Registry of
Property, shall be exempt from the documentary stamp
tax and registration fees.
Section 282. Real Property Assessment Notices or Owner's
Copies of Tax Declarations to be Exempt from Postal
Charges or Fees. - All real property assessment notices or
owner's copies of tax declaration sent through the mails
by the assessor shall be exempt from the payment of
postal charges or fees.
Section 283. Sale and Forfeiture Before Effectivity of
Code. - Tax delinquencies incurred, and sales and
forfeitures of delinquent real property effected, before the
effectivity of this Code shall be governed by the
provisions of applicable laws then in force.

Section 277. Condonation or Reduction of Tax by the

President of the Philippines. - The President of the
Philippines may, when public interest so requires,
condone or reduce the real property tax and interest for
any year in any province or city or a municipality within
the Metropolitan Manila Area.

This power is shared by the LGU with the President. In case

if a calamity, the Sanggunian can condone RPT through
an ordinance. This can also be done by the President. The
President has broader scope than that of the
Sanggunian.

Section 278. Duty of Registrar of Deeds and Notaries

Public to Assist the Provincial, City or Municipal Assessor. -
It shall be the duty of the Registrar of Deeds and notaries
public to furnish the provincial, city or municipal assessor
with copies of all contracts selling, transferring, or
otherwise conveying, leasing, or mortgaging real
property received by, or acknowledged before them.

Section 279. Insurance Companies to Furnish

Information. - Insurance companies are hereby required
to furnish the provincial, city or municipal assessor copies
of any contract or policy insurance on buildings,
structures, and improvements insured by them or such
other documents which may be necessary for the proper
assessment thereof.

Section 280. Fees in Court Actions. - All court actions,

criminal or civil, instituted at the instance of the
provincial, city or municipal treasurer or assessor under
the provisions of this Code, shall be exempt from the
payment of court and sheriff's fees.

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TARIFF AND CUSTOMS CODE
OF THE PHILIPPINES
Introduction
The Tariff and Customs Code has its roots way back in
1978 under PD 1464. Subsequent amendments were
introduced due to the Philippines’ membership to the
World Trade Organization and the enactment of the
General Agreement of Tariff and Trade in 1995. The
current code that we are using is the 1978 version.
The tariff and customs code consists of:
Book 1: Tariff law
Book 2: Customs law
The earliest tariff code in the Philippines is the Spanish
Tariff Code of 1891, which later became the Philippine
Tariff Act of 1901.
The Tariff and Customs Code of the Philippines was only
enacted after the war through the enactment of RA 1937
which took effect in 1957. This tariff and customs code
was based on the 1950 Brussels Tariff nomenclature.
You will be surprised that the term tariff on local parlance
is ‘taripa’. Taripa was a certain place in Spain where ships
would pass and someone in the island will collect fee for
any vessel that will pass through that island. That is how
the term ‘taripa’ came about.
The pronouncements of the fare rates by the LTFRB are
also called ‘taripa’. That is how the word became part of
the local language.
After 1957, the subsequent amendment came under PD
34 which was promulgated in 1973, after Martial Law. This
simplified the tariff structure. From 1973, you have now PD
1464 which was passed in 1978. This consolidated and
codified all tariff and customs laws into a single law.
Amendments were made in 1995 when the Philippines
joined the WTO. This harmonized our law with the laws of
other countries to remove trade barriers. Before, it was
common practice for a country to protect its local
products by disallowing or discouraging entry of foreign
products into the market by providing higher duties and
tariffs.
The amendments that were introduced were embodied
in RA 7650 in connection with the examination of articles.
After that, RA 7651 was passed, which is the law that
strengthened the Bureau of Customs. Also, RA 7843 was
passed which is the Anti-dumping law. RA 8181 was
passed which became the basis of the dutiable value of
imported articles. The dutiable value of imported articles
based on the ad valorem rate used to be home-
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consumption value. With RA 8181 we shifted to
transactions value. You also have RA 8751 which made
way to the imposition of countervailing duties.
Joining the WTO, we have to provide safety nets. So we
came up with countervailing duties and anti-dumping
law, and we enacted RA 8800 which we call the
Safeguard Measure Act. When there is a surging
importation of articles not in the nature of dumping, to
protect local products, we may impose safeguard
measures. Subsequently, RA 9135 amended the
transactions value under RA 8181. The latest amendment
is RA 9280. This is the law professionalizing the duties of
customs brokers. Customs brokers are engaged by the
importers to process the importation of articles.
As a preview, in Book 1, you will have the list of imported
articles, the dutiable values, prohibited articles, duty-free
articles and assessment of duties based on dutiable value
or weight of the articles. In book 2, you will have the
powers of the Bureau of Customs. The Bureau of Customs
is the agency in charge for the collection of duties. The
importer does not only pay internal revenue taxes but
also customs duties.
Customs Terminologies
 Tariff – book of rates for the duties that are
payable on account of importation or
exportation. When we talk about tariff and
customs duties, they mean the same thing.
 Taxes – does not refer only to internal revenue
taxes. It may also refer to customs duties.
 Articles – the goods, wares or merchandise
brought for importation or exportation.
 Cargo – goods, wares or merchandise on board
a vessel or aircraft for import or export. The goods
that will be imported or exported on board a
vessel or aircraft are cargos. Cargo on board a
vessel or aircraft is different from the supplies that
will be used by the crew of the vessel of aircraft.
This provisions that will be used by the crew are
not considered cargo.
 Transit Cargo – articles that are brought from a
foreign port and then brought to another port
but such port is only for transshipment. It is not the
point of destination. The cargo brought to the
transshipment port is called transit cargo.
 Bulk Cargo – products of one commodity not
packaged, not bundled or otherwise packed.
(eg: bunker fuel brought for refining on board a
tanker; one shipload of rice or sugar)
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 Port of Entry – Domestic Port open to foreign
vessel or aircraft. This is important because for
purposes of foreign vessels or aircraft, they are
only allowed to enter in the port of entry.
 Invoices – may either be the commercial invoice
or the consular invoice. These are documents
submitted to the Bureau of Customs to support
the importation of articles. These are issued from
the foreign country where the products were
purchased.
 Commercial Invoice – a record or statement of
goods transacted between the buyer and the
seller.
 Consular Invoice – certified invoice. In the
absence of a commercial invoice a consular
invoice will be used which will contain items
similar to commercial invoice. This is filed and
prepared by the Philippine Consular officials
where the products came from.
 Pro forma invoice – one made for the sake of
form. This is not allowed or accepted.
 Derelicts/ Castaways/ Adrifts/ Thrown overboard
– things recovered from abandonments at sea. If
these derelicts are imported articles, they are
dutiable. When you are able to get something
recovered from abandonments at sea, that
doesn’t mean that you can own them free of
charge. The articles will still be dutiable. Derelicts
can be retained by the collector at the port
where these articles arrived.
 Cargo Manifests – written list of all the cargo on
board the vessel or aircraft
 Passenger Manifests - list of passengers on board
the vessel or aircraft
 Store list – the list of food, supplies, provisions,
arms and ammunitions, equipment and other
materials on board the vessel or aircraft which is
different from the term cargo.
 Drawbacks – the technical term for refunds for
tax credits under the tariff and customs code. In
NIRC, this is what we call tax refunds or tax
credits. Paybacks or refunds for tax credits.
 Abatement – a reduction or allowance in the
assessment of duties. When articles arrive from
foreign countries, you will have to surrender the
bill of lading. After that, an examination will be
made. For example, the bill of lading states that
100 boxes of canned goods are being imported.
After examination, the collector only found 95
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boxes. The importer will still be assessed of the 100
items but less the five missing items. That
reduction is what we call abatement. Allowance
or reduction of duties brought about by missing
items.
 Smuggling – this can be committed two ways.
Smuggling is the fraudulent importation or
bringing into the country or assist in so doing any
article contrary to law. When you would
fraudulently import an article in violation of
customs law, that is considered smuggling. Or
you bring into the country any articles contrary to
the tariff and customs code, smuggling is
committed. The second form of smuggling is
when the person receives the articles and
conceals the article and sells or in any manner
facilitates the transportation, concealment or
sale of the articles after transportation, knowing
the same have been imported contrary to law.
What is important in the second form of
smuggling is the knowledge of the person that
the articles have been imported contrary to law.
The more common form of smuggling is under-
declaration or mis-declaration of goods
imported. For example, the importer declared
assorted motor vehicles spare parts, but when
they opened the container, they saw surplus
vehicles. Now, the manner of examining the
articles is through physical examination. The ports
also have x-ray facilities.
What is done today, when you import, the containers will
be brought down from the vessel then they will be
examined. You may engage a customs broker or the
importer himself will process the importation. The
document that is facilitated is what you call as the import
entry. It is a declaration made by the importer or the
customs broker or the attorney-in-fact of the importer.
You then pay the duties and taxes. The articles will then
be subject to examination and appraisal. The
corresponding duties will be paid.
In every district port, you have a collector assigned. The
collector is the alter ego of the commissioner. The
collector will make the assessment of the duties that will
be due on the importation. After payment, there will be
the subsequent release of the articles.
 Contrabands – these are articles prohibited to be
imported. These articles will be seized and
forfeited.
Classification of Imported Articles
1. Dutiable Articles – those which are subject to
duties.
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2. Prohibited Articles – articles, the importation of
which is absolutely prohibited which includes
explosive, firearms, weapons of war, dangerous
drugs, lottery tickets, gambling outfits, subversive
literature, all other articles the importation of
which is prohibited by law. When they are
absolutely prohibited, they are subject to seizure
and forfeiture and will not be released and
cannot redeemed by the importer.
3. Qualifiedly prohibited articles - there importation
is allowed, but the manner of bringing them to
the country was made in violation of the tariff
and customs code.
4. Duty-free Articles – these are articles which are
not subject to duties like medals, badges or
trophies which you have received from abroad;
personal or household effects; coffins and urns
containing human remains or bones or ashes;
Classification of Customs Duties
1. Ordinary or Regular duties – based on ad
valorem rate or a specific rate.
2. Special customs duties
a. Dumping duty – the keyword here is
under-pricing. When an imported article
is brought into the country at a price less
than its normal value and then these
articles would cause injury to locally
produced products, then a dumping
duty will be recommended against the
articles.
b. Countervailing duty – the keyword here is
when an article enjoys a subsidy or
bounty in the country of production or
origin. In the foreign country, the
imported article is granted a subsidy.
Because of that subsidy, this article when
brought to the Philippines will injure
locally produced products. To offset the
subsidy or bounty, we impose a
countervailing duty.
c. vess Duty – this is for failure to mark the
article from the country of origin. When
an imported article is not properly
marked it means that it does not contain
the name of the country of origin. There
is a penalty imposed on this.
d. Retaliatory duty – otherwise known as the
discriminatory duty. The keyword here is
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the discrimination of Philippine products.
In the country of origin of the imported
articles, the foreign country discriminate
Filipino products. When that imported
article is brought to the Philippines, we
retaliate by imposing a retaliatory duty. If
despite the retaliatory duty, the foreign
country continues to discriminate against
our products, we could now totally ban
the imported article.
e. Safeguard measure – imposed when
there is a surging importation of an
article. This means that there is a heavy
importation of an article which will injure
locally produced products. There is no
subsidy and there is no discrimination,
but there is just a heavy importation of
the article. An example of this is cement.
Most of our cement producers here in
the country are owned by multinational
corporations. They import the cement
they sell from factories in other countries.
They will oftentimes be subject to
safeguard measure.
The recommendation to impose a special duty is done
either by the DTI for non-agricultural products and DA for
agricultural products.
Aside from the duties, there are also charges based on
vessels or charges based on the cargo.
a. Harbor Fees – are charged on the vessel.
It is paid by the owner of the vessel for
entrance or departures from the port of
entry.
b. Birthing Fees – assessed against the
vessel for mooring or birthing at the pier.
c. Warfage dues – assessed against the
cargo of a vessel engaged in foreign
trade, based on quantity or discharge of
the vessel.
d. Storage charges – imposed for the
storage of the articles at customs
premises.
Flexible Tariff Laws
In our study of our tax principles, it is the legislature which
is given the power and authority to tax. By way of
exception are the following:
1. Powers given to the local government units
2. Power given to the President to increase or
decrease import and tariffs dues.
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The constitution grants the President this taxing power.
However, the Tariff and Customs Code provides for the
limitations or to what extent the President can exercise
this power. That is provided under the flexible tariff laws.
Under the flexible tariff laws, the president may increase,
reduce or remove existing protective rates of import duty,
including changes in the classification. He is also
empowered to increase or decrease the rates of import
duty expressly fixed by statute or to modify the form of
duty. The president may establish import quota or ban
import of a commodity, or may impose additional duty
on imports not exceeding 10%. The president may do this,
whenever it is necessary in the interest of national
economy or general welfare.
You have the case of that Zambales Congressman vs,
Executive Secretary where the president increased the
import duty. Such was challenged to be unconstitutional.
When it reached the Supreme Court, the petition was
dismissed stating that the president has taxing power
under the constitution.
Added to that is the power of the president to enter into
trade agreements. Tax agreements do not require the
senate’s ratification because these are mere executive
agreements. Under the tariff and customs code, the
president may also enter into trade agreements with
other countries. In these agreements, no senate
ratification is needed.
Statutory Customs Rules and Requirements
1. All articles imported to the Philippines, whether
dutiable or not shall be entered through a
customs house at the port of entry. When we talk
about port of entry, we do not mean only the
ports. It includes also international airports.
Section 1201. Articles to Be Imported Only Through
Customhouse. — All articles imported into the Philippines,
whether subject to duty or not, shall be entered through a
customhouse at a port of entry.
2. All imported goods must be marked with a
statement of its origin in a language and manner
understandable by the ultimate consumer.
Section 303. Marking of Imported Articles and Containers.
— a. Marking of Articles. — Except as hereinafter
provided, every article of foreign origin (or its container,
as provided in subsection "b" hereof) imported into the
Philippines shall be marked in any official language of the
Philippines and in a conspicuous place as legibly,
indelibly and permanently as the nature of the article (or
container) will permit in such manner as to indicate to an
ultimate purchaser in the Philippines the name of the
country of origin of the article. The Commissioner of
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Customs shall, with the approval of the department head,
issue rules and regulations to —
(1) Determine the character of words and phrases or
abbreviations thereof which shall be acceptable as
indicating the country of origin and prescribe any
reasonable method of marking, whether by printing,
stenciling, stamping, branding, labeling or by any other
reasonable method, and a conspicuous place on the
article or container where the marking shall appear;
(2) Require the addition of any other words or symbols
which may be appropriate to prevent deception or
mistake as to the origin of the article or as to the origin of
any other article with which such imported article is
usually combined subsequent to importation but before
delivery to an ultimate purchaser; and
(3) Authorize the exception of any article from the
requirements of marking if —
(a) Such article is incapable of being marked;
(b) Such article cannot be marked prior to shipment to
the Philippines without injury;
(c) Such article cannot be marked prior to shipment to
the Philippines, except at an expense economically
prohibitive of its importation;
(d) The marking of a container of such article will
reasonably indicate the origin of such article;
(e) Such article is a crude substance;
(f) Such article is imported for use by the importer and not
intended for sale in its imported or any other form;
(g) Such article is to be processed in the Philippines by
the importer or for his account otherwise than for the
purpose of concealing the origin of such article and in
such manner that any mark contemplated by this section
would necessarily be obliterated, destroyed or
permanently concealed;
(h) An ultimate purchaser, by reason of the character of
such article or by reason of the circumstance of its
importation, must necessarily know the country of origin
of such article even though it is not marked to indicate its
origin;
(i) Such article was produced more than twenty years
prior to its importation into the Philippines; or
(j) Such article cannot be marked after importation
except at an expense which is economically prohibitive,
and the failure to mark the article before importation was
not due to any purpose of the importer, producer, seller
or shipper to avoid compliance with this section.
b. Marking of Containers. — Whenever an article is
excepted under subdivision (3) of subsection "a" of this
section from the requirements of marking, the immediate
container, if any, of such article, or such other container
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or containers of such article as may be prescribed by the
Commissioner of Customs with the approval of the
department head, shall be marked in such manner as to
indicate to an ultimate purchaser in the Philippines the
name of the country of origin of such article in any official
language of the Philippines, subject to all provisions of this
section, including the same exceptions as are applicable
to articles under subdivision (3) of subsection "a".
c. Marking Duty for Failure to Mark. — If at the time of
importation any article (or its container, as provided in
subsection "b" hereof), is not marked in accordance with
the requirements of this section, there shall be levied,
collected and paid upon such article a marking duty of 5
per cent ad valorem, which shall be deemed to have
accrued at the time of importation, except when such
article is exported or destroyed under customs
supervision and prior to the final liquidation of the
corresponding entry.
d. Delivery Withheld until Marked. — No imported article
held in customs custody for inspection, examination or
appraisement shall be delivered until such articles and/or
their containers, whether released or not from customs
custody, shall have been marked in accordance with the
requirements of this section and until the amount of duty
estimated to be payable under subsection "c" of this
section shall have been deposited. Nothing in this section
shall be construed as excepting any article or its
container from the particular requirements of marking
provided for in any provisions of law.
e. The failure or refusal of the owner or importer to mark
the articles as herein required within a period of thirty
days after due notice shall constitute as an act of
abandonment of said articles and their disposition shall
be governed by the provisions of this Code relative to
abandonment of imported articles.
3. Vessels engaged in foreign trade shall touch only
at ports of entry only.
4. For aircraft arriving from foreign countries must
land first at an international airport of entry.
5. Vessels and aircrafts must, upon arrival and
before departure, present to the collector,
passenger and baggage manifest, cargo
manifest, export cargo manifest and store list.
Principle of Importation
The subject of taxation are imported articles. Therefore,
we must know the meaning of importation.
Q: If the vessel is already in Philippine waters, is there
importation? Or should you wait for the imported articles
to be unloaded from the vessel to be considered as
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importation? Or should there be payment of importation
taxes and duties before importation is consummated?
A:
Sec. 1202. When Importation Begins and Deemed
Terminated. — Importation begins when the carrying
vessel or aircraft enters the jurisdiction of the Philippines
with intention to unlade therein. Importation is deemed
terminated upon payment of the duties, taxes and other
charges due upon the articles, or secured to be paid, at a
port of entry and the legal permit for withdrawal shall
have been granted, or in case said articles are free of
duties, taxes and other charges, until they have legally
left the jurisdiction of the customs.
Even if the vessel enters the Philippines, it does not mean
that importation has begun. There must be an intention to
unload. So there are two elements for purposes of
determining whether importation has begun:
1. Vessel enters the jurisdiction of the Philippines
2. There is an intention to unload
If the carrying vessel enters the jurisdiction of the
Philippines but the articles are not unloaded, there is no
importation. Philippines is just a transshipment port in this
case.
When importation has already begun, it will be
considered terminated upon:
1. Payment of duties, taxes and other charges due
or secured to be paid at the port of entry
2. Legal permit for withdrawal shall have been
granted
In the case of tax-free articles, it is terminated when they
have left the jurisdiction of the customs.
There are times where the imported articles would arrive
then they would be spirited out from customs without
payment of duties and taxes, and be stored in a
warehouse somewhere else. If the customs learned that
the articles are kept in that warehouse, the customs can
still seize the articles because importation has not yet
terminated. Even if the articles were able to escape from
customs custody, for as long as the taxes have not been
paid and the legal permit for the withdrawal has not yet
been granted, then importation has not yet terminated.
Customs can still run after them and seize the articles.
Q: Who is considered as the owner of imported articles?
A:
Sec. 1203. Owner of Imported Articles. — All articles
imported into the Philippines shall be held to be the
property of the person to whom the same are consigned;
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and the holder of a bill of lading duly indorsed by the
consignee therein named, or, if consigned to order, by
the consignor, shall be deemed the consignee thereof.
The underwriters of abandoned articles and the salvors of
articles saved from a wreck at sea, along a coast or in
any area of the Philippine may be regarded as the
consignees.
1. Person to whom the same are consigned
a. The holder of the bill of lading duly
endorsed by the consignee
b. The consignor, if consigned to order
2. In case of derelicts
a. The underwriters of abandoned articles
b. The salvors of articles saved from a wreck
at sea
Q: Who will be liable for the duties?
A:
Sec. 1204. Liability of Importer for Duties. — Unless
relieved by laws or regulations, the liability for duties,
taxes, fees and other charges attaching on importation
constitutes a personal debt due from the importer to the
government which can be discharged only by payment
in full of all duties, taxes, fees and other charges legally
accruing. It also constitutes a lien upon the articles
imported which may be enforced while such articles are
in custody or subject to the control of the government.
The liability of importer is personal in nature and can be
discharged only by payment in full of such taxes and
duties. Aside from that personal liability, the liability also
constitutes a lien upon the articles imported.
Q: What if it is the Government who imports?
A:
Sec. 1205. Importations by the Government. — Except as
otherwise specifically provided, all importations by the
government for its own use or that of its subordinate
branches on instrumentalities, or corporations, agencies
or instrumentalities owned or controlled by the
government, shall be subject to the duties, taxes, fees
and other charges provided for in this Code: Provided,
however, That upon certification of the head of the
department or political subdivision concerned, with the
approval of the Auditor General, that the imported article
is actually being used by the government or any of its
political subdivision concerned, the amount of duty, tax,
fee or charge shall be refunded to the government or the
political subdivision which paid it.
Sec. 1206. Jurisdiction of Collector Over Importation of
Articles. — The Collector shall cause all articles entering
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the jurisdiction of his district and destined for importation
through his port to be entered at the customhouse, shall
cause all such articles to be appraised and classified,
and shall assess and collect the duties, taxes and other
charges thereon, and shall hold possession of all
imported articles upon which duties, taxes, and other
charges have not been paid or secured to be paid,
disposing of the same according to law.
All articles would pass through customs. In every port,
there will be a collector of customs assigned. Section
1206 provides for the extent of the jurisdiction of such
collector.
Sec. 1207. Jurisdiction of Collector Over Articles of
Prohibited Importation. — Where articles are of prohibited
importation or subject to importation only upon
conditions prescribed by law, it shall be the duty of the
Collector to exercise such jurisdiction in respect thereto
as will prevent importation or otherwise secure
compliance with all legal requirements.
This talks about the jurisdiction of the collector in relation
to prohibited importations.
Ascertainment and Collection of duties
Upon the arrival of the articles and before they are
eventually released, it passes through certain stages. It
basically will pass through four stages.
1. The articles should be entered at customs house
at the port of entry. The importer may engage a
customs broker to make an import entry.
2. The articles will be subject to examination and
classification and appraisal.
3. There will be an assessment.
4. Delivery and liquidation
At the customs house, the articles are subjected to an
import entry. The import entry will either be a formal or an
informal entry. This is a document which is a declaration
made by the importer which contains the name of the
vessel, origin, date of departure and arrival, the contents,
the description, etc. All articles imported are subject to a
formal or informal entry.
A formal entry is made out by the importer or his customs
broker or agent. If the one filling up the entry is the
importer or his customs broker or his attorney in fact or
agent, that is considered a formal entry.
An informal entry is made out by the customs examiner or
customs appraiser.
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This import entry is a sworn declaration of the articles that
has been brought in the Philippines.
After making an import entry, the articles will now be
subject to an examination, classification and appraisal. In
the case of examination, this will be done by the customs
examiner. Prior to the advent of x-ray machines, the
examination is done physically by the examiner. The
examiner will check if the bill of lading and import entry is
consistent with the actual contents of the cargoes. If
there is an inconsistency, he is required by law to make a
report of the actual contents of the cargoes.
The classification and appraisal is done by the customs
appraiser. He will appraise the dutiable value of the
articles. The customs appraiser will determine tariff
classification, the unit in which the articles are usually
bought and sold, and ascertain the dutiable value. After
this is done, the next stage is the assessment of the duties.
They will have a preliminary assessment of how much will
be paid by the importer. The last stage would be the
delivery and liquidation of duties.
No collector shall deliver or release the articles to any
person without the surrender of the bill of lading covering
the said articles. The collector will be personally liable in
case of misdelivery.
When we talk about liquidation of duties, this means the
final computation or determination of the customs duties,
taxes and other charges due. Liquidation is the final step
in the assessment process
Two kinds of liquidation
1. Tentative liquidation – when some future action is
still required to determine the exact amount due
under the law. The tentative liquidation would
arise when there are unavailable required
documents or when the documents are
defective or when further investigation is
necessary. This will be subject to a final re-
adjustment and settlement
Sec. 1602. Tentative Liquidation. — If to determine the
exact amount due under the law in whole or in part some
future action is required, the liquidation shall be deemed
to be tentative as to the item or items affected and shall
to that extent be subject to future and final readjustment
and settlement. The entry in such case shall be stamped
"Tentative liquidation”
2. Final liquidation – when all the requirements as to
procedures covering the entry up to assessment
of duties have been accomplished and
approved by the collector. This is different from
finality of liquidation. Finality of liquidation means
that the liquidation is now conclusive.
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III-Manresa (2013)
Sec. 1603. Finality of Liquidation. — When articles have
been entered and passed free of duty or final adjustment
of duties made, with subsequent delivery, such entry and
passage free of duty or settlement of duties will, after the
expiration of one year, from the date of the final payment
of duties, in the absence of fraud or protest, be final and
conclusive upon all parties, unless the liquidation of the
import entry was merely tentative.
Finality of liquidation therefore pertains to the prescriptive
period when liquidation becomes final and conclusive.
The finality sets in after the expiration of three years from
the date of final payment of duties. Thus, it does not
mean that after final liquidation, you are already free
from any liability. The customs still has three years to
determine whether you paid the correct payment or not.
NOTE: Dean particularly said to familiarize bar questions
on tariff and customs code. I dunno what he meant but
let’s just read to be safe. ;-)
The Bureau of Customs
This is the counterpart of the BIR for internal revenue
taxes. This is the principal office in charge of enforcing the
Tariff and Customs Code, the entry and clearance of
vessels, aircraft and goods, the assessment of collection
of duties, and the enforcement of fines and forfeitures.
Section 601. Chief Officials of Bureau of Customs. — The
Bureau of Customs shall have one chief and one assistant
chief, to be known respectively at the Commissioner
(hereinafter known as the "Commissioner") and Assistant
Commissioner of Customs, who shall each receive an
annual compensation in accordance with the rates
prescribed by existing laws. The Assistant Commissioner
of Customs shall be appointed by the proper department
head.
So it shall have one chief and four assistant chiefs and
five Deputy Commissioners
Sec. 602. Functions of the Bureau. — The general duties,
powers and jurisdiction of the bureau shall include:
a. The assessment and collection of the lawful revenues
from imported articles and all other dues, fees, charges,
fines and penalties accruing under the tariff and customs
laws.
The counterpart provision in the NIRC is Section 2.
b. The prevention and suppression of smuggling and
other frauds upon the customs.
c. The supervision and control over the entrance and
clearance of vessels and aircraft engaged in foreign
commerce.
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Under the Tariff and Customs Law the statutory rules
require that all imported articles must be done through
the customs at the port of entry. So upon arrival or
departure of a vessel, the customs must clear them.
d. The general supervision, control and regulation of
vessels engaged in the carrying of passengers and freight
or in towage in coastwise trade and in the bays and rivers
of the Philippines.
e. The prohibition and suppression of unnecessary noises,
such as explosion of gasoline engines, the excessive
blowing of whistles or sirens, and other needless and
disturbing sounds made by water craft in the ports of the
Philippines or in parts of rivers included in such ports.
f. The exclusion, if the conditions of traffic should at any
time so require, of vessels of more than one hundred and
fifty tons from entering, berthing or mooring in the Pasig
River.
g. The measurement, registration, documenting and
licensing of vessels built or owned in the Philippines, the
recording of sales, transfers and encumbrances of such
vessels, and the performance of all the duties pertaining
to marine registry.
h. The inspection of Philippine vessels, and supervision
over the safety and sanitation of such vessels.
i. The enforcement of the lawful quarantine regulations for
vessels entering Philippine ports.
Container yards must be bonded. When the articles are
brought, the importer still has to follow the process before
the goods may be released to him. While still unreleased
the goods will be stored in these container yards. The
Bureau still has supervisions over that.
j. The enforcement of the tariff and customs laws and all
other laws, rules and regulations relating to the tariff and
customs administration.
This is a usual question in the Bar. The Commissioner has
exclusive jurisdiction over forfeiture cases. So when goods
arrive and brought in contrary to the Tariff and Customs
Code, these articles will be subject to forfeiture. As
importer, to protect yourself, you go to the RTC and seek
relief like replevin or injunction. But because of letter j, the
regular courts are divested of the jurisdiction to interfere
with the jurisdiction of the Bureau.
A recent case is that of rice smuggling. The Bureau seized
the articles. The importer went to the RTC to have the
articles released to them. RTC granted. But under Section
602, the RTC does not have the jurisdiction to do that. The
Solicitor General went to the Supreme Court. The
Supreme Court ordered to restrain the RTC from enforcing
that ruling.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Seizure and Forfeiture cases are proceedings in rem.
Therefore the title of these cases is “Republic of the
Philippines vs. 600 sacks of rice” because it is directed
against the articles; or “Republic of the Philippines vs. MV
Dona Luisa” if against the vessel. The purpose of seizure
and forfeiture is to give the government custody and
control over these articles and even the vessel that
brought the articles itself. So you cannot go to the regular
courts to ask relief in these cases against the Bureau.
If the seized property is Rice, the same will be sold on
public auction. The proceeds will go to the government.
But if the seized property is not consumable, the same will
be destroyed.
k. The licensing of marine officers who have qualified in
the examination required by law to be carried on
Philippine vessels, the determination of the qualifications
of pilots, the regulation of this service, and the fixing of the
fees which they may charge.
l. The supervision and control over the handling of foreign
mails arriving in the Philippines, for the purpose of the
collection of the lawful duty on dutiable articles thus
imported and the prevention of smuggling through the
medium of such mails.
Even parcels that arrive from abroad, customs also have
supervision over these items which are coursed through
our postal service including private couriers. So the mail
man will not deliver the package directly to you but to
customs. The package will be opened to determine
whether or not the contents are dutiable.
Sec. 603. Territorial Jurisdiction. — For the due and
effective exercise of the powers conferred by law and to
the extent requisite therefor, said bureau shall have the
right of supervision and police authority over all seas
within the jurisdiction of the Philippines and over all
coasts, ports, airports, harbors, bays, rivers and inland
waters navigable from the sea.
When a vessel becomes subject to seizure by reason of
an act done in Philippine waters in violation of the tariff
and customs laws, a pursuit of such vessel begun within
the jurisdictional waters may continue beyond the
maritime zone, and the vessel may be seized on the high
sea. Imported articles which may be subject to seizure for
violation of the tariff and customs laws may be pursued in
their transportation in the Philippines by land, water or air
and such jurisdiction exerted over it at any place therein
as may be necessary for the due enforcement of the law.
Aside from the functions in Section 602, you also have
territorial jurisdiction under Section 603.
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The second paragraph is known as the Doctrine of Hot
Pursuit or the Doctrine of Extra Territorial Jurisdiction. So
when contrabands arrive and unloaded and released
from the port area, customs may still run after them and
seize the articles. That is still within their territorial
jurisdiction. For as long as the duties are not paid,
importation has not yet terminated, therefore customs
can still run after them.
Sec. 604. Jurisdiction over Premises Used for Customs
Purposes. — The Bureau of Customs shall, for customs
purposes, have exclusive control, direction and
management of custom-houses, warehouses, offices,
wharves, and other premises in the respective ports of
entry, in all cases without prejudice to the general police
powers of the city or municipality wherein such premises
are situated.
Sec. 606. Power of the President to Subject Premises to
Jurisdiction of Bureau of Customs. — When any public
wharf, landing place, street or land, not previously under
the jurisdiction of the Bureau of Customs, in any port of
entry, is necessary or desirable for any proper customs
purpose, the President of the Philippines may, by
executive order, declare such premises to be under the
jurisdiction of the Bureau of Customs, and thereafter the
authority of such Bureau in respect thereto shall be fully
effective.
Sec. 701. Collection Districts and Ports of Entry thereof—
For administrative purposes, the Philippines shall be
divided into as many collection districts as there are at
present existing, the respective limits of which may be
changed from time to time by the Commissioner, upon
the approval of the department head. The principal ports
of entry for the respective collection districts shall be
Manila, Sual, Tabaco, Cebu, Pulupandan, Sia-in, Iloilo,
Davao, Legaspi, Zamboanga, Jolo, Aparri, Jose
Panganiban, Cagayan, Cagayan, Tacloban, San
Fernando, Hinigaran, Dumaguete City and Batangas.
Currently, we have 15 collection districts with the addition
of Clark (Diosdado Macapagal International Airport).
Under the statutory rules, vessels and aircrafts engaged in
foreign trade must enter only through the ports of entry
provided under the law, without prejudice to the power
of the Commissioner, upon approval of Secretary to add
new ports of entry.
Sec. 702. Power of the President to Open and Close
Subports. — Subports of entry may be opened or closed
by executive order, in the discretion of the President of
the Philippines. When a subport is closed, its existing
personnel shall be reassigned to other duties by the
Commissioner subject to the approval of the department
head.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
In BIR, we also have regional offices and revenue district
offices. In customs, we also have district ports and each
district port shall have a collector.
The Tariff Commission
A staff and information office, furnishing information, data
and results of its continuing studies to the President,
Congress, Secretary of Finance, Commissioner, Bangko
Sentral, NEDA, and other offices as basis of the
formulation of rules, regulations and policies.
Sec. 505. Functions of the Commission. — The
Commission shall investigate — (a) the administration of
and the fiscal and industrial effects of the tariff and
customs laws of this country now in force or which may
hereafter be enacted;
.
(b) the relations between the rates of duty on raw
materials and the finished or partly finished products;
(c) the effects of ad valorem and specific duties and of
compound specific and ad valorem duties;
(d) all questions relative to the arrangement of schedules
and classification of articles in the several schedules of
the tariff law;
(e) the tariff relations between the Philippines and foreign
countries, commercial treaties, preferential provisions,
economic alliances, the effect of export bounties and
preferential transportation rates;
(f) the volume of importations compared with domestic
production and consumption;
(g) conditions, causes, and effects relating to competition
of foreign industries with those of the Philippines, including
dumping and cost of production; and
(h) in general, to investigate the operation of customs
and tariff laws, including their relation to the national
revenues, their effect upon the industries and labor of the
country, and to submit reports of its investigations as
hereinafter provided.
Special Police Powers
Section 2201. Obstruction of Customs Premises. — No
person shall obstruct a customhouse, warehouse, office,
wharf, street or other premises under the control of the
Bureau of Customs, or any of the approaches to such
house or premises.
Sec. 2202. Special Surveillance for Protection of Customs
Revenue and Prevention of Smuggling. — In order to
prevent smuggling and to secure the collection of the
legal duties, taxes and other charges, the customs
service shall exercise surveillance over the coast,
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beginning when a vessel or aircraft enters Philippine
territory and concluding when the article imported
therein has been legally passed through the
customhouse.
Sec. 2203. Persons Having Police Authority. — For the
enforcement of the customs and tariff laws, the following
persons are authorized to effect searches, seizures and
arrests conformably with the provisions of said laws:
a. Officials of the Bureau of Customs, collectors, assistant
collectors, deputy collectors, surveyors, security and
secret-service agents, inspectors, port patrol officers and
guards of the Bureau of Customs.
b. Officers of the Philippine Navy when authorized by the
Commissioner.
c. Any person especially authorized in writing by the
Commissioner.
d. Officers generally empowered by law to effect arrests
and execute processes of courts, when acting under
direction of the Collector.
e. Any person especially authorized by a Collector,
subject to the restrictions stated in the next succeeding
section.
Persons exercising the powers hereinabove conferred
shall, in the exercise thereof, have the same authority, be
entitled to the proper protection, and shall be governed
by the same law, not inconsistent with the provisions of
this section, as other officers exercising police authority in
general.
Sec. 2204. Place Where Authority May Be Exercised. —
Persons acting under authority conferred pursuant to
subsection (e) of the preceding section may exercise
their authority within the limits of the collection district
only and in or upon the particular vessel or aircraft, or in
the particular place, or in respect to the particular article
specified in the appointment. All such appointments shall
be in writing, and the original shall be filed in the
customhouse of the district where made.
All other persons exercising the powers hereinabove
conferred may exercise the same at any place within the
jurisdiction of the Bureau of Customs.
Sec. 2205. Exercise of Power of Seizure and Arrest. — It
shall be within the power of a customs official or person
authorized as aforesaid, and it shall be his duty, to make
seizure of any vessel, aircraft, cargo, articles, animal or
other movable property when the same is subject to
forfeiture or liable for any fine imposed under customs
and tariff laws, and also to arrest any person subject to
arrest for violation of any customs and tariff laws, such
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
power to be exercised in conformity with the law and the
provisions of this Code.
Sec. 2206. Duty of Officer or Official to Disclose Official
Character. — It shall be the duty of any person exercising
authority as aforesaid, upon being questioned at the time
of the exercise thereof, to make known his official
character as an officer or official of the Government, and
if his authority is derived from special authorization in
writing to exhibit the same for inspection, if demanded.
Sec. 2207. Authority to Require Assistance. — Any person
exercising police authority under the customs and tariff
laws may demand assistance of any police officer when
such assistance shall be necessary to effect any search,
seizure or arrest which may be lawfully made or
attempted by him. It shall be the duty of any police
officer upon whom such requisition is made to give such
lawful assistance in the matter as may be required.
Sec. 2208. Right of Police Officer to Enter Inclosure. — For
the more effective discharge of his official duties, any
person exercising the powers herein conferred, may at
anytime enter, pass through, or search any land or
inclosure or any warehouse, store or other building, not
being a dwelling house.
A warehouse, store or other building or inclosure used for
the keeping of storage of articles does not become a
dwelling house within the meaning hereof merely by
reason of the fact that a person employed as watchman
lives in the place, nor will the fact that his family stays
there with him alter the case.
This is a favorite question in the BAR.
In the NIRC, a search warrant is required, unless the
doctrine of plain view is applicable. Under the Tariff and
Customs Code, there is no need for a search warrant if
you enter on business premises. The premises defined are
dwelling premises. If the watchman lives there, the
bodega will still not be considered as a dwelling place.
Sec. 2209. Search of Dwelling House. — A dwelling house
may be entered and searched only upon warrant issued
by a judge or justice of the peace, upon sworn
application showing probable case and particularly
describing the place to be searched and person or thing
to be seized.
In this case, you have to secure a search warrant before
the regular courts.
So you have to be able to distinguish when search
warrant is required or not.
Sec. 2210. Right to Search Vessels or Aircrafts and Persons
or Articles Conveyed Therein. — It shall be lawful for any
official or person exercising police authority under the
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provisions of this Code to go abroad any vessel or aircraft
within the limits of any collection to go aboard any vessel
or aircraft within the limits of any collection district, and to
inspect, search and examine said vessel or aircraft and
any trunk, package, box or envelope on board, and to
search any person on board the said vessel or aircraft
and to this end to hail and stop such vessel or aircraft if
under way, to use all necessary force to compel
compliance; and if it shall appear that any breach or
violation of the customs and tariff laws of the Philippines
has been committed, whereby or in consequence of
which such vessels or aircrafts, or the article, or any part
thereof, on board of or imported by such vessel or
aircraft, is liable to forfeiture, to make seizure of the same
or any part thereof.
The power of search hereinabove given shall extend to
the removal of any false bottom, partition, bulkhead or
other obstruction, so far as may be necessary to enable
the officer to discover whether any dutiable or forfeitable
articles may be concealed therein.
No proceeding herein shall give rise to any claim for the
damage thereby caused to article or vessel or aircraft.
Sec. 2211. Right to Search Vehicles, Beasts and Persons.
— It shall also be lawful for a person exercising authority
as aforesaid to open and examine any box, trunk,
envelope or other container, wherever found where he
has reasonable cause to suspect the presence therein of
dutiable or prohibited article or articles introduced into
the Philippines contrary to law, and likewise to stop,
search and examine any vehicle, beast or person
reasonably suspected of holding or conveying such
article as aforesaid.
Sec. 2212. Search of Persons Arriving From Foreign
Countries. — All persons coming into the Philippines from
foreign countries shall be liable to detention and search
by the customs authorities under such regulations as may
be prescribed relative thereto.
Female inspectors may be employed for the examination
and search of persons of their own sex.
Administrative Proceedings
There are four administrative cases that are later on
converted to judicial proceedings.
1) Refund Cases – this involves abatement cases
and drawbacks. Abatement refers to rebate of
duties and charges which are improperly laid
against the importer. The importer is entitled to
abatement which means adjustment in the
computation of duties or charges in following
cases:
a. Missing packages
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Sec. 1702. Abatement or Refund of Duty on Missing
Package. — When any package or packages appearing
on the manifest or bill of lading are missing, a remission or
refund of the duty thereon shall be made if it is shown by
proof satisfactory to the Collector that the package or
packages in question have not been imported into the
Philippines.
b. Deficiency in Contents
Sec. 1703. Abatement or Refund for Deficiency in
Contents of Package. — If, upon opening any package,
a deficiency or absence of any article, or of part of the
contents thereof, as called for by the invoice shall be
found to exist, such deficiency shall be certified to the
Collector by the appraiser; and upon the production of
proof satisfactory to the Collector showing that the
shortage occurred before the arrival of the article in the
Philippines, the proper abatement or refund of the duty
shall be made.
c. Lost or Destroyed Articles
Sec. 1704. Abatement or Refund of Duties on Articles Lost
or Destroyed after Arrival. — A Collector may abate or
refund the amount of duties accruing or paid, and may
likewise make a corresponding allowance or credit on
the entry bond, or other document, upon satisfactory
proof of the injury, destruction, or loss by theft, fire or other
causes of any article as follows:
a. While within the limits of any port of entry prior to
unlading under customs supervision.
b. While remaining in customs custody after unlading.
c. While in transit under bond from the port of entry to any
port in the Philippines.
d. While released under bond to export, except in case of
loss by theft.
d. Dead or Injured Animals
Sec. 1705. Abatement of Duty on Dead or Injured
Animals. — Where it is satisfactorily shown to the Collector
that an animal which is the subject of importation dies or
suffers injury before arrival, or while in customs custody,
the duty shall be correspondingly abated by him,
provided the carcass of any dead animal remaining on
board or in customs custody be removed in the manner
required by the Collector and at the expense of the
importer.
Sec. 1706. Investigation Required in case of Abatements
and Refunds. — The Collector shall in all cases of
allowances, abatements or refunds of duties, cause an
examination and report in writing to be made as to any
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fact discovered during such examination which tends to
account for the discrepancy or difference and cause the
corresponding adjustment to be made on the import
entry.
Drawbacks are duties or taxes levied on articles which
are paid back to the importer when the goods are used
in the following cases:
1. Drawbacks
Sec. 106. Drawbacks: a. On Fuel Used for Propulsion of
Vessels. — On all fuel imported into the Philippines which
is afterwards used for the propulsion of vessels of
Philippine registry engaged in trade with foreign
countries, or in the coastwise trade, a refund shall be
allowed equal to the duty imposed by law upon such
fuel, less one per cent thereof, which shall be paid under
such rules and regulations as may be prescribed by the
Commissioner of Customs with the approval of the
department head.
b. On Articles Made from Imported Materials or Similar
Domestic Materials and Wastes Thereof— Upon the
exportation of articles manufactured or produced in the
Philippines, including the packing, covering, putting up,
marking or labeling thereof, either in whole or in part of
imported materials, or from similar domestic materials of
equal quantity and productive manufacturing quality and
value, such question to be determined by the Collector of
Customs, there shall be allowed a drawback equal in
amount to the duties paid on the imported materials so
used, or where similar domestic materials are used, to the
duties paid on the equivalent imported similar materials,
less one per cent thereof:Provided, That the exportation
shall be made within three years after the importation of
the foreign material used or constituting the basis for
drawback: And Provided, further, That when the articles
exported or coverings thereof are in part of materials
grown or produced in the Philippines not entitled to
drawback under this section, the imported materials, or
the similar domestic materials of equal quantity and
productive manufacturing quality and value entitled to
drawback, shall so appear in the completed articles or
packages that the quantity or measure thereof may be
ascertained: AndProvided, finally, That the imported
materials, or the similar domestic materials entitled to
drawback under this section for which drawback is
claimed, shall be identified; that the quantity of such
materials used and the amount of duty paid thereon or, if
the domestic materials, paid upon its equivalent, shall be
ascertained; and that the fact of their exportation shall be
established; and the refund if made shall be paid to the
manufacturer, producer, or exporter, or to the duly
authorized agent of any of them, under and in
accordance with such rules and regulations as the
Commissioner of Customs shall prescribe with the
approval of the department head.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
So if you import textiles, duties must be paid. If these
textiles are brought to an export oriented enterprise to be
made into products to be sold abroad, you will be
refunded because the duties you have paid upon the
entry, since the finished products are not sold locally but
will be sent back to the importing country, you will be
refunded of the duties. The refund is called drawbacks
While both are forms of refunds, there are technical
difference between refunds and drawbacks.
2) Protest Cases
The question at issue in these cases pertains to the
correctness of the classification, appraisal and
assessment made by customs officers of the duties of
imported goods that pass through customs as required by
law. Any importer who is dissatisfied with the findings of
the collector must file a protest.
The protest is lodged first before the collector. All cases
under customs law are filed with the office of the
collector of customs first. In protest cases, payment
should be made before your protest. But there is no
requirement that you should indicate that you are paying
under protest. The annotation that you are paying under
protest for purposes that the protest will be entertained is
only required in Real Property Taxation. In customs, if you
are protesting the assessment of duties, you are still
required to pay, then you pursue the protest. But you
don’t need to annotate that you are paying under
protest. In NIRC, when you receive an assessment, your
remedy is to protest but you are not required to pay. So
take note of the distinctions.
From the collector, if the taxpayer will have an adverse
decision, he will now go to the Commissioner of Customs.
From the Commissioner, he will go to the CTA.
Sec. 2308. Protest and Payment upon Protest in Civil
Matters. — When a ruling or decision of the Collector is
made whereby liability for duties, fees, or other money
charge is determined, except the fixing of fines in seizure
cases, the party adversely affected may protest such
ruling or decision by presenting to the Collector at the
time when payment of the amount claimed to be due the
Government is made, or within thirty days thereafter, a
written protest setting forth his objections to the ruling or
decision in question, together with the reasons therefor.
No protest shall be considered unless payment of the
amount due after final liquidation has first been made.
Sec. 2309. Protest Exclusive Remedy in Protestable Case.
— In all cases subject to protest, the interested party who
desires to have the action of the Collector reviewed, shall
make a protest, otherwise, the action of the Collector
shall be final and conclusive against him, except as to
matters correctible for manifest error in the manner
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prescribed in section one thousand seven hundred and
seven hereof.
Sec. 2310. Form and Scope of Protest. — Every protest
shall be filed in accordance with the prescribed rules and
regulations promulgated under this section and shall
point out the particular decision or ruling of the Collector
to which exception is taken or objection made, and shall
indicate with reasonable precision the particular ground
or grounds upon which the protesting party bases his
claim for relief.
The scope of a protest shall be limited to the subject
matter of a single adjustment or other independent
transaction; but any number of issue may be raised in a
protest with reference to the particular item or items
constituting the subject matter of the protest.
"Single adjustment", as hereinabove used, refers to the
entire content of one liquidation, including all duties, fees,
surcharges or fines incident thereto.
Sec. 2311. Samples to be Furnished by Protesting Parties.
— If the nature of the articles permit, importers filing
protests involving questions of fact must, upon demand,
supply the Collector with samples of the articles which
are the subject matter of the protests. Such samples shall
be verified by the custom official who made the
classification against which the protest are filed.
Sec. 2312. Decision or Action by Collector in Protest and
Seizure Cases. — When a protest in proper form is
presented in a case where protest in required, the
Collector shall reexamine the matter thus presented, and
if the protest is sustained, in whole or in part, he shall enter
the appropriate order, the entry reliquidated if necessary.
In seizure cases, the Collector, after a hearing, shall in
writing make a declaration of forfeiture or fix the amount
of the fine or take such other action as may be proper.
Sec. 2313. Review by Commissioner. — The person
aggrieved by the decision or action of the Collector in
any matter presented upon protest or by his action in any
case of seizure may, within fifteen days after notification
in writing by the Collector of his action or decision, give
written notice to the Collector of his desire to have the
matter reviewed by the Commissioner. Thereupon the
Collector shall forthwith transmit all the records of the
proceedings to the Commissioner, who shall approve,
modify or reverse the action or decision of the Collector
and take such steps and make such orders as may be
necessary to give effect to his decision.
Sec. 2314. Notice of Decision of Commissioner. — Notice
of the decision of the Commissioner shall be given to the
party by whom the case was brought before him for
review, and in seizure cases such notice shall be effected
by personal service if practicable.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Sec. 2315. Supervisory Authority of Commissioner And of
Department Head in Certain Cases. — If in any case
involving the assessment of duties the importer shall fail to
protest the ruling of the Collector, and the Commissioner
shall be of the opinion that the ruling was erroneous and
unfavorable to the Government, the latter may order a
reliquidation; and if the ruling of the Commissioner in any
unprotested case should, in the opinion of the
department head, be erroneous and unfavorable to the
Government, the department head may require the
Commissioner to order a reliquidation.
Except as in the preceding paragraph provided, the
supervisory authority of the department head over the
Bureau of Customs shall not extend to the administrative
review of the ruling of the Commissioner in matters
appealed to the Court of Tax Appeals.
CF: Section 2324
3) Seizure and Forfeiture Cases
The issue is not anymore the correctness of the
assessment of the duties but the legality of the
importation itself or the unlawful manner of its
importation.
This is also lodged before the collector first. From the
collector you go to the Commissioner and then to the
CTA.
Sec. 2301. Warrant for Detention of Property — Bond. —
Upon making any seizure, the Collector shall issue a
warrant for the detention of the property; and if the owner
or importer desires to secure the release of the property
for legitimate use, the Collector may surrender it upon the
filing of a sufficient bond, in an amount to be fixed by
him, conditioned for the payment of the appraised value
of the article and/or any fine, expenses and costs which
may be adjudged in the case: Provided, That articles the
importation of which is prohibited by law shall not be
released under bond.
Sec. 2302. Report of Seizure To Commissioner and Auditor.
— When a seizure is made for any cause, the Collector of
the district wherein the seizure is effected shall
immediately make report thereof to the Commissioner
and to the Auditor General.
Sec. 2303. Notification to Owner or Importer. — The
Collector shall give the owner or importer of the property
or his agent a written notice of the seizure and shall give
him an opportunity to be heard in reference to the
delinquency which was the occasion of such seizure.
For the purpose of giving such notice and of all other
proceedings in the matter of such seizure, the importer,
consignee or person holding the bill of lading shall be
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deemed to be the "owner" of the article included in the
bill.
For the same purpose, "agent" shall be deemed to
include not only any agent in fact of the owner of the
seized property but also any person having responsible
possession of the property at the (missing) of the seizure, if
the owner or his agent in fact is unknown or cannot be
reached.
Sec. 2304. Notification to Unknown Owner. — Notice to an
unknown owner shall be effected by posting a notice for
fifteen days in the public corridor of the customhouse of
the district in which the seizure was made, and, in the
discretion of the Commissioner, by publication in a
newspaper or by such other means as he shall consider
desirable.
Sec. 2305. Description and Appraisal and Classification of
Seized Property. — The Collector shall also cause a list
and particular description of the property seized to be
prepared and an appraisement or classification of the
same at its wholesale value in the local market in the
usual wholesale quantities to be made by at least two
appraising officials, if there are such officials at or near
the place of seizure; in the absence of such officials, then
by two competent and disinterested citizens of the
Philippines, to be selected by him for that purpose,
residing at or near the place of seizure, which list and
appraisement shall be properly attested to by such
Collector and the persons making the appraisal.
Sec. 2306. Proceedings in Case of Property Belonging to
Unknown Parties. — If, within fifteen days after the
notification prescribed in section twenty-three hundred
and four of this Code, no owner or agent can be found or
appears before the Collector, the latter shall declare the
property forfeited to the government to be sold at auction
in accordance with law.
Sec. 2307. Settlement of Case by Payment of Fine or
Redemption of Forfeited Property. — If, in any seizure
case, the owner or agent shall, while the case is yet
before the Collector of the district of seizure, pay to such
Collector the fine imposed by him or, in case of forfeiture,
shall pay the appraised value of the property, or, if after
appeal of the case, he shall pay to the Commissioner the
amount of the fine as finally determined by him, or, in
case of forfeiture, shall pay the appraised value of the
property, such property shall be forthwith surrendered,
and all liability which may or might attach to the property
by virtue of the offense which was the occasion of the
seizure and all liability which might have been incurred
under any bond given by the owner or agent in respect
to such property shall thereupon be deemed to be
discharged.
Redemption of forfeited property shall not be allowed in
any case where the importation is absolutely prohibited
Transcribed by: Althea Mae P. Casador
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or where the surrender of the property to the person
offering to redeem the same would be contrary to law.
4) Abandonment Cases
Sec. 1801. Abandonment, Kinds and Effect of—
Abandonment is express when it is made direct to the
Collector by the interested party in writing, and it is
implied when, from the action or omission of the
interested party, an intention to abandon can be clearly
inferred. The failure of any interested party to file the
import entry within fifteen days or any extension thereof
from the discharge of the vessel or aircraft, shall be
implied abandonment. An implied abandonment shall
not be effective until the article is declared by the
Collector to have been abandoned after notice thereof is
given to the interested party as in seizure cases.
Any person who abandons an imported article renounces
all his interests and property rights therein.
So you can have an express abandonment or an implied
abandonment.
Sec. 1802. Abandonment of Imported Articles. — The
owner or importer of any articles may, within ten days
after filing of the import entry, abandon to the
Government all or a part of the articles included in an
invoice, and, thereupon, he shall be relieved from the
payment of duties, taxes and all other charges and
expenses due thereon: Provided, That the portion so
abandoned is not less than ten per cent of the total
invoice and is not less than one package, except in
cases of articles imported for personal or family use. The
article so abandoned shall be delivered by the owner or
importer at such place within the port of arrival as the
Collector shall designate, and upon his failure to so
comply, the owner or importer shall be liable for all
expenses that may be incurred in connection with the
disposition of the articles.
Nothing in this section shall be construed as relieving
such owner or importer from any criminal liability which
may arise from any violation of law committed in
connection with the importation of the abandoned
article.
So if you abandon the goods you imported, they will be
sold at public auction. The proceeds will go to the
government.
Both Abandonment and Seizure does not relieve the
importer from any criminal liability which may arise in
violation of the provisions of this code.
Section 1803 is already repealed. This gave importer the
right to reclaim articles abandoned by them. They can
no longer do that now.
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Now let’s have a run-through of some pertinent provisions
in Tariff law. (Dean just practically enumerated these
provisions.)
Section 101. Imported Articles Subject to Duty. — All
articles, when imported from any foreign country into the
Philippines, shall be subject to duty upon each
importation, even though previously exported from the
Philippines, except as otherwise specifically provided for
in this Code or in other laws.
Sec. 105. Conditionally Free Importations. — The following
articles shall be exempt from the payment of import
duties upon compliance with the formalities prescribed in,
or with the regulations which shall be promulgated by the
Commissioner of Customs with the approval of the
department head:
a. Animals and plants for scientific, experimental,
propagation, botanical, breeding, zoological and
national defense purposes: Provided, That no live trees,
shoots, plants and moss, and bulbs, tubers and seeds for
propagation purposes may be imported under this
section, except by order of the Government of the
Philippines or other duly authorized institutions: Provided,
further, That the free entry of animals for breeding
purposes shall be restricted to animals of a recognized
breed, duly registered in the book of record established
for that breed: And Provided, finally, That certificate of
such record, and pedigree of such animal duly
authenticated by the proper custodian of such book of
record, shall be produced and submitted to the Collector
of Customs, together with affidavit of the owner or
importer, that such animal is the identical animal
described in said certificate of record and pedigree.
b. Aquatic products (e.g., fish, crustaceans, mollusks,
marine animals, seaweed, fish oil, roe), including
preparations or manufactures thereof, caught or
gathered by vessels of Philippine registry: Provided, That
they are imported in such vessels or in crafts attached
thereto: And Provided, further, That they have not been
landed in any foreign territory or, if so landed, they have
been landed solely for transshipment without having
been advanced in condition.
c. Samples of the kind, in such quantity and of such
dimensions or construction as to render them unsalable or
of no appreciable commercial value, models not
adapted for practical use and samples of medicine
properly marked "physicians' samples not for sale".
Commercial samples, except those that are not readily
and easily identifiable (e.g., precious and semi-precious
stones, cut or uncut, and jewelry set with precious or
semi-precious stones), the value of any single importation
of which does not exceed ten thousand pesos, upon the
giving of a bond in an amount equal to one and one-half
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times the ascertained duties, taxes and other charges
thereon, conditioned for the exportation of said samples
within six months from the date of the acceptance of the
import entry, or in default thereof, the payment of the
corresponding duties, taxes and other charges. If the
value of any single consignment of such commercial
samples exceeds ten thousand pesos, the importer
thereof may select any portion of same not exceeding in
value ten thousand pesos for entry under the provisions of
this subsection, and the excess of the consignment may
be entered in bond, or for consumption, as the importer
may elect.
d. Articles, including binnacles, propellers, and the like,
the character of which, as imported, prevents their use for
other purposes than the construction, equipment, or
repair of vessels and aircraft, and life-preservers and life
buoys, related equipment and parts and accessories
thereof, which are necessary for the take-off and landing
and for the safe navigation of vessels and aircraft.
e. Equipment for use in the salvage of vessels or aircraft,
upon identification and the giving of a bond in an amount
equal to one and one-half times the ascertained duties,
taxes and other charges thereon, conditioned for the
exportation thereof or payment of the corresponding
duties, taxes and other charges within six months from the
date of acceptance of the import entry: Provided, That
the Collector of Customs may extend the time for
exportation or payment of duties, taxes and other
charges for a term not exceeding six months from the
expiration of the original period.
f Cost of repairs made in foreign countries upon vessels or
aircraft documented, registered or licensed in the
Philippines, upon proof satisfactory to the Collector of
Customs (1) that adequate facilities for such repairs are
not afforded in the Philippines, or (2) that such vessels or
aircraft, while in the regular course of her voyage or flight
was compelled by stress of weather or other casualty to
put into a foreign port to make such repairs in order to
secure the safety seaworthiness or airworthiness of the
vessel or aircraft to enable her to reach her port of
destination.
.
g. Articles brought into the Philippines for repair,
processing or reconditioning to be re-exported upon
completion of the repair, processing or
reconditioning: Provided, That the Collector of Customs
may, in his discretion, require the giving of a bond in an
amount equal to one and one-half times the ascertained
duties, taxes and other charges thereon, conditioned for
the exportation thereof or payment of the corresponding
duties, taxes and other charges within six months from the
date of acceptance of the import entry.
h. Medals, badges, cups and other small articles
bestowed as trophies or prizes, or those received or
accepted as honorary distinctions.
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i. Wearing apparel and household effects, including those
articles provided for under subsections "j" and "k", and
belonging to residents of the Philippines returning from
abroad, which were exported from the Philippines by
such returning residents upon their departure therefrom or
during their absence abroad, upon the identity of such
articles being established to the satisfaction of the
Collector of Customs; personal and household effects
brought into the Philippines by returning residents, the
export value of which does not exceed five hundred
pesos, solely for personal or household use but not
imported for the account of any other person nor
intended for barter, sale or hire:Provided, That such
returning residents have not received the benefit of any
exemption hereunder within one hundred and eighty
days from and after the date of the last exemption
granted: And Provided, further, That in the event the total
export value of the imported article or articles exceeds
the amount of five hundred pesos, such article or articles
shall be subject to duty only on the amount in excess of
five hundred pesos; articles of the same kind and class
purchased in foreign countries by residents of the
Philippines during their absence abroad and
accompanying them upon their return to the Philippines,
or arriving within a reasonable time which in no case shall
exceed ninety (90) days before or after the owner's
return, upon proof satisfactory to the Collector of Customs
that same have been in their use abroad for more than
one year; articles in any single shipment consigned to
any single person when the total export value of such
shipment does not exceed one hundred
pesos: Provided, finally, That when the export value
exceeds the amount of one hundred pesos, only the
amount in excess of one hundred pesos shall be subject
to duty.
j. Wearing apparel, articles of personal adornment, toilet
articles, portable tolls and instruments, theatrical
costumes, and similar personal effects, accompanying
travelers or tourists in their baggage or arriving within a
reasonable time, in the discretion of the Collector of
Customs, before or after the owners, in use of and
necessary and appropriate for the wear or use of such
persons according to their profession or position for the
immediate purposes of their journey and their present
comfort and convenience:Provided, That this exemption
shall not be held to apply to articles intended for other
persons or for barter, sale or hire: Provided, further, That
the Collector of Customs may, in his discretion, require a
bond in an amount equal to one and one-half times the
ascertained duties, taxes and other charges upon articles
classified under this subsection, conditioned for the
exportation thereof or payment of the corresponding
duties, taxes and other charges, within six months from
the date of acceptance of the import entry:
And Provided, finally, That the Collector of Customs may
extend the time for exportation or payment of duties,
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taxes and other charges for a term not exceeding six
months from the expiration of the original period.
k. Vehicles, horses, harness, bed and table linen, table
service, furniture, musical instruments and personal
effects of like character, owned and imported by
travelers or tourists for their convenience and comfort,
upon identification and the giving of a bond in an amount
equal to one and one-half times the ascertained duties,
taxes and other charges thereon, conditioned for the
exportation thereof or payment of the corresponding
duties, taxes and other charges within six months from the
date of acceptance of the import entry: Provided, That
the Collector of Customs may extend the time for
exportation or payment of duties, taxes and other
charges for a term not exceeding six months from the
expiration of the original period.
l. Professional instruments and implements, tools of trade,
occupation or employment, wearing apparel, domestic
animals, and personal and household effects, including
those of the kind and class provided for under
subsections "j" and "k" and belonging to persons coming
to settle in the Philippines, in quantities and of the class
suitable to the profession, rank or position of the person
importing them, for their own use and not for barter or
sale, accompanying such persons, or arriving within a
reasonable time, in the discretion of the Collector of
Customs, before or after the arrival of their owners, upon
the production of evidence satisfactory to the Collector of
Customs that such persons are actually coming to settle
in the Philippines, that the articles are brought from their
former place of abode, that change of residence is bona
fide, and that the privilege of free entry under this
subsection has never been previously granted to them:
Provided, That neither merchandise of any kind, nor
machinery or other articles for use in manufacture, shall
be classified under this subsection.
m. Animals, vehicles, portable theaters, circus and
theatrical equipment, including musical instruments,
sceneries, panoramas, properties, saddlery, wax figures
and similar objects for public entertainment, and other
articles for display in public expositions, or for exhibition
or competition for prizes, and devices for projecting
pictures and parts and appurtenances therefor, upon
identification and the giving of a bond in an amount
equal to one and one-half times the ascertained duties,
taxes and other charges thereon, conditioned for
exportation thereof or payment of the corresponding
duties, taxes and other charges within six months from the
date of acceptance of the import entry: Provided, That
the Collector of Customs may extend the time for
exportation or payment of duties, taxes and other
charges for a term not exceeding six months from the
expiration of the original period; and technical and
scientific films when imported by technical, cultural and
scientific institutions, and not to be exhibited for
profit: Provided, That if any of the said films is exhibited for
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profit, the proceeds therefrom shall be subject to
confiscation, in addition to the penalty provided under
section three thousand six hundred and ten of this Code.
n. Articles (e.g., photographic, sound recording,
electrical and other equipment, vehicles, animals,
costumes, apparel, properties, supplies, unexposed
motion picture films) brought by foreign producers for
making or recording motion pictures on location in the
Philippines, upon identification and the giving of a bond
in an amount equal to one and one-half times the
ascertained duties, taxes and other charges thereon,
conditioned for exportation thereof or payment of the
corresponding duties, taxes and charges within six
months from the date of acceptance of the import entry.
Unexposed motion picture films allowed free entry under
bond for exportation falling within this subsection and
subsequently exposed, whether or not developed, may
be reexported free of import duties, taxes and other
charges.
Negative films, undeveloped, exposed outside the
Philippines by resident Filipino citizens or by producing
companies of Philippine registry where the principal
actors and artists employed for the production are
Filipinos, upon affidavit by the importer that such exposed
films are the same films previously exported from the
Philippines. As used in this paragraph, the
terms "actors" and "artists" include the persons working
the photographic camera or other photographic and
sound recording apparatus by means of which the film is
made.
o. Costumes, regalia and other articles, including office
supplies and equipment, imported for the official use of
members and attaches of foreign embassies, legations,
consular officers and other representatives of foreign
government: Provided, That the country which any such
person represents accords like privileges to
corresponding officials of the Philippines.
Articles imported for the personal or family use of the
members and attaches of foreign embassies, legations,
consular officers and other representatives of foreign
governments: Provided, That such privilege shall be
accorded under special agreements between the
Philippines and the countries which they represent:
And Provided, further, That the privilege may be granted
only upon specific instructions of the Department of
Finance in each instance which will be issued only upon
request of the Department of Foreign Affairs.
p. Regalia, gems, statuary, specimens or casts of
sculptures imported for the bona fide use and by the
order of any society incorporated or established solely for
religious, philosophical, educational, scientific or literary
purposes, or for the encouragement of the fine arts, or for
the use and by the order of any institution of learning,
public library, museum, orphan asylum or hospital, and
Transcribed by: Althea Mae P. Casador
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not for barter, sale or hire: Provided, That the
term "regalia" shall be held to embrace only such insignia
of rank or office or emblems as may be worn upon the
person or borne in the hand during public exercises or
ceremonies of the society or institution, and shall not
include articles of furniture or fixtures, or ordinary wearing
apparel, nor personal property of individuals.
q. Musical organs imported for the bona fide use and by
the owner of any society incorporated or established for
religious or educational purposes, or, expressly for
presentation thereto.
r. Scientific apparatus, instruments and utensils specially
imported for the bona fide use and by the order of any
society or institution incorporated or established solely for
educational, scientific, or charitable purposes, or for the
encouragement of the fine arts, or for the bona fide use
and by the order of any institution of learning in the
Philippines, and not for barter, sale or hire.
s. Philosophical, historical, economic, scientific, technical
and vocational books specially imported for the bona
fide use and by the order of any society or institution,
incorporated or established solely for philosophical,
educational, scientific, charitable or literary purposes, or
for the encouragement of the fine arts, or for the bona
fide use of and by the order of any institution of learning
in the Philippines: Provided, That the provisions of this
subsection shall apply to books not exceeding two
copies of any one work when imported by any individual
for his own use, and not for barter, sale or hire.
Bibles, missals, prayerbooks, koran, ahadith and other
religious books of similar nature and extracts therefrom,
hymnal and hymns for religious uses, specially prepared
books, music and other instrumental aids for the deaf,
mute or blind, and textbooks prescribed for use in any
school in the Philippines: Provided, That complete books
published in parts in periodical form shall not be classified
herein.
t. Newsprint, whenever imported by or for publishers for
the exclusive use in the publication of newspapers.
u. Articles donated to public or private institutions
established solely for educational, scientific, cultural,
charitable, health, relief, philanthropic or religious
purposes, for free distribution among, or exclusive use of,
the needy.
v. Food, clothing, house-building and sanitary-
construction materials, and medical, surgical and other
supplies for use in emergency relief work, when imported
by or directly for the account of any victim, sufferer,
refugee, survivor or any other person affected thereby, or
by or for the account of any relief organization, not
operated for profit, for distribution among the distressed
individuals, whenever the President shall, by
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proclamation, declare an emergency to exist by reason
of a state of war, pestilence, cholera, plague, famine,
drought, typhoon, earthquake, fire, flood and similar
conditions:Provided, That the importation free of duty of
articles described in this herein subsection shall continue
only during the existence of such emergency, or within
such limits and subject to such conditions as the President
may, by his proclamation, deem necessary to meet the
emergency.
w. Philippine articles previously exported from the
Philippines and returned without having been advanced
in value or improved in condition by any process of
manufacture or other means, and upon which no
drawback or bounty has been allowed, and foreign
articles when returned after having been loaned and
exported for use temporarily abroad solely for exhibition,
examination or experimentation, for scientific or
educational purposes, and foreign containers packed
with exported Philippine articles and returned empty if
imported by or for the account of the person or institution
who exported them from the Philippines and not for sale,
subject to identification: Provided, That any Philippine
article falling under this subsection upon which drawback
or bounty has been allowed shall, upon re-importation
thereof, be subject to a duty under this subsection equal
to the amount of such drawback or bounty.
x. Large containers (e.g., demijohns, cylinders, drums,
casks and other similar receptacles of metal, glass or
other material) which are, in the opinion of the Collector
of Customs, of such a character as to be readily
identifiable may be delivered to the importer thereof
upon identification and the giving of a bond in an amount
equal to one and one-half times the ascertained duties,
taxes and other charges thereon, conditioned for the
exportation thereof on payment of the corresponding
duties, taxes and other charges within one year from the
date of acceptance of the import entry.
y. Supplies or ship stores listed as such for the use of the
vessel; supplies which are intended for the reasonable
requirements of the vessel in her voyage outside the
Philippines, including such articles transferred from a
bonded warehouse in any collection district to any vessel
engaged in foreign trade, for use or consumption of the
passengers or its crew on board such vessel as sea stores;
or articles purchased abroad for sale on board a vessel
as saloon stores or supplies: Provided, That any surplus or
excess of such ship, sea or saloon stores arriving from
foreign ports shall be dutiable according to the
corresponding heading or subheading.
z. Articles and salvage from vessels recovered after the
period of two years from the date of filing the marine
protest or the time when the vessel was wrecked or
abandoned as determined by the Collector of Customs,
or such part of Philippine vessel or her equipment,
wrecked or abandoned in Philippine waters or
Transcribed by: Althea Mae P. Casador
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elsewhere: Provided, That articles and salvage recovered
within the said period of two years shall be dutiable
according to the corresponding heading or subheading.
aa. Articles of easy identification exported from the
Philippines for repairs abroad and subsequently
reimported: Provided, That the cost of the repairs made to
any such article shall pay a rate of duty of twenty-five per
cent ad valorem.
bb. Coffins or urns containing human remains, bones or
ashes, and all articles for ornamenting said coffins or urns
and accompanying same; used personal and household
effects, not merchandise, of deceased persons, upon
identification as such, satisfactory to the Collector of
Customs.
Sec. 201. Basis of Dutiable Value. — Whenever an
imported article is subject to an ad valorem rate of duty,
the duty shall be assessed upon the market value or price
at which, at the time of exportation, the same, like or
similar article is freely offered for sale in the principal
markets of the exporting country for exportation to the
Philippines, in the usual wholesale quantities and in the
ordinary course of trade (excluding internal excise taxes
to be remitted or rebated), plus ordinary expenses prior
and incidental to the lading of such article on board the
vessel or aircraft at the port of export (including taxes or
duties, if any) and freight paid as well as insurance
premium paid covering the transportation of such article
to the port of entry in the Philippines.
When the value of the article cannot be ascertained in
accordance with the preceding paragraph, the value
shall be the domestic wholesale market value or selling
price of the same, like or similar imported article in the
principal market of the Philippines on the date of
exportation of the article under appraisement, in the
usual wholesale quantities and in the ordinary course of
trade, minus the import duty and other taxes as well as a
commission not exceeding six per centum if any has
been paid or contracted to be paid on goods secured
otherwise than by purchase, and profits not to exceed
eight per centum and a reasonable allowance for
general expenses not to exceed eight per centum on
purchased goods, and all other expenses incidental to
the delivery from the port of importation to the principal
market in the Philippines.
Dutiable value is based on transactions value. The other
variation is transaction value of identical goods, or of
similar goods or deductive value, or computed value or
fallback value.
Sec. 202. Bases of Dutiable Weight. — On articles that are
subject to specific rate of duty, based on weight, the duty
shall be ascertained as follows:
a. When articles are dutiable by the gross weight, the
dutiable weight thereof shall be the weight of same,
together with the weight of all containers, packages,
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holders and packings, of any kind, in which said articles
are contained, held or packed at the time of
importation.
b. When articles are dutiable by the legal weight, the
dutiable weight thereof shall be the weight of same,
together with the weight of the immediate containers,
holders and/or packing in which such articles are usually
contained, held or packed at the time of importation
and/or, when imported in retail packages, at the time of
their sale to the public in usual retail quantities: Provided,
That when articles are packed in single container, the
weight of the latter shall be included in the legal weight.
c. When articles are dutiable by the net weight, the
dutiable weight thereof shall be only the actual weight of
the articles at the time of importation, excluding the
weight of the immediate and all other containers, holders
or packing in which such articles are contained, held or
packed.
d. Articles affixed to cardboard, cards, paper, wood or
similar common material shall be dutiable together with
the weight of such holders.
e. When a single package contains imported articles
dutiable according to different weights, or to weight and
value, the common exterior receptacles shall be
prorated and the different proportions thereof treated in
accordance with the provisions of this Code as to the
dutiability or non-dutiability of such packing.
Sec. 301. Dumping Duty. — a. Whenever the Secretary of
Finance (hereinafter called the Secretary") has reason to
believe, from invoices or other papers or from information
made available to him by any government agency or
interested party, that a specific kind or class of foreign
article, whether dutiable or duty-free, is being sold or is
likely to be sold for exportation to, or in, the Philippines, at
a price less than its fair value, as hereinafter defined, the
importation or sale of which might injure, or prevent the
establishment of, or is likely to injure an industry in the
Philippines, he shall so advise the Tariff Commission
(hereinafter called the "Commission").
b. The Commission, upon receipt of such advice from the
Secretary, shall conduct an investigation to —
1. Verify if the kind or class of articles in question is being
sold or is likely to be sold for exportation to, or in, the
Philippines at a price less than its fair value;
2. Determine if, as a result thereof, an industry in the
Philippines is being injured or is likely to be injured or is
prevented from being established by reason of the
importation or sale of such kind or class of article into the
Philippines; and
3. Ascertain the difference, if any, between the purchase
price or, in the absence thereof, the exporter's sales
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price, and the fair value of the article. The Commission
shall submit its findings to the Secretary within one month
after receipt of the aforesaid advice.
c. The Secretary shall, within fifteen days from the report
of the Commission, decide whether the article in question
is being imported in violation of this section and shall give
due notice of such finding and shall direct the
Commissioner of Customs to cause the dumping duty, to
be levied, collected and paid, as prescribed in this
section, in addition to any other duties, taxes and
charges imposed by law on such article.
d. The "dumping duty" as provided for in
subsection "e" hereof shall be equal to the difference
between the purchase price or, in the absence thereof,
the exporter's sales price, and the fair value of the article.
e. For the purpose of this section —
1. The "fair value" of an article shall be its foreign market
value, or, in the absence of such value, its cost of
production.
2. The "purchase price" of an imported article shall be the
price at which such article has been purchased or
agreed to be purchased, prior to the time of exportation,
by the person by whom or for whose account the article
is imported, plus, when not included in such price —
(a) The cost of all containers and coverings and all other
costs, charges and expenses incident to placing the
article in condition, packed ready for shipment to the
Philippines;
(b) The amount of any export tax paid in the country of
exportation on the exportation of the article to the
Philippines;
(c) The amount of any import duties imposed by the
country of exportation which have been rebated, or
which have not been collected, by reason of the
exportation of the article to the Philippines; and
(d) The amount of any taxes imposed in the country of
exportation upon the manufacturer, producer or seller, in
respect to the manufacture, production or sale of the
article, which have been rebated, or which have not
been collected, be reason of the exportation of the
article of the Philippines.
Any additional costs, charges and expenses incident to
bringing the article from the place of shipment in the
country of exportation to the place of delivery in the
Philippines and Philippine customs duties imposed
thereon shall not be included.
3. The "exporter's sale price" of an imported article shall
be the price at which such article is sold or agreed to be
sold in the Philippines, before or after the time of
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exportation, by or for the account of the exporter,
including —
(a) The cost of all containers and coverings and all other
costs, charges and expenses incident to placing the
article in condition, packed ready for shipment to the
Philippines;
(b) The amount of any import duties imposed by the
country of exportation which have been rebated, or
which have not been collected, by reason of the
exportation of the article to the Philippines; and
(c) The amount of any taxes imposed in the country of
exportation upon the manufacturer, producer or seller in
respect to the manufacture, production or sale of the
article, which have been rebated, or which have not
been collected, by reason of its exportation to the
Philippines. The following amount, if included, shall be
deducted —
(1) The amount of costs, charges and expenses, and
Philippine customs duties, incident to bringing the article
from the place of shipment in the country of exportation
to the place of delivery in the Philippines;
(2) The amount of commissions, if any, for selling in the
Philippines the particular article under consideration;
(3)An amount equal to the expenses, if any, generally
incurred by or for the account of the exporter in the
Philippines in selling identical or substantially identical
article; and
(4) The amount of any export tax paid in the country of
exportation on the exportation of the article to the
Philippines.
4. The "foreign market value" of an imported article shall
be the price, at the time of exportation of such article to
the Philippines, at which such or similar article is sold or
freely offered for sale to all purchasers in the principal
markets of the country from which exported, in the usual
wholesale quantities and in the ordinary course of trade
for home consumption (or, if not sold or offered for sale for
home consumption, then for exportation to countries
other than the Philippines), including the cost of all
containers and coverings and all other costs, charges
and expenses incident to placing the article in condition
packed ready for shipment to the Philippines, except that
in the case of articles purchased or agreed to be
purchased by the person by whom or for whose account
the article is imported, prior to the time of exportation, the
foreign market value shall be ascertained as of the date
of such purchase or agreement to purchase. In the
ascertainment of foreign market value for the purpose of
this section, no pretended sale or offer for sale, and no
sale or offer for sale intended to establish a fictitious
market, shall be taken into account.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
5. The "cost of production" of an imported article shall be
the sum of —
(a) The cost of materials of, and of fabrication,
manipulation or other process employed in
manufacturing or producing, identical or substantially
identical article, at a time preceding the date of shipment
of the particular article under consideration which would
ordinarily permit the manufacture or production of the
particular article under consideration in the usual course
of business;
(b) The usual general expenses not less than 10 per cent
of such cost, in the case of identical or substantially
identical articles;
(c) The cost of all containers and coverings, and all other
costs, charges and expenses incident to placing the
particular article under consideration in condition,
packed ready for shipment to the Philippines; and
(d) An addition for profit not less than 8 per cent of the
sum of the amounts determined under subparagraphs (a)
and (b) hereof, equal to the profit which is originally
added, in the case of articles of the same general
character as the particular article under consideration,
by manufacturers or producers in the country of
manufacture or production who are engaged in the same
general trade as the manufacturer or producer of the
particular article under consideration.
f. For the purposes of this section the "exporter" of an
imported article shall be the person by whom or for
whose account the article is imported into the Philippines
—
1. If such person is the agent or principal of the exporter,
manufacturer or producer; or
2. If such person owns or controls, directly or indirectly,
through stock ownership or control or otherwise, any
interest in the business of the exporter, manufacturer or
producer; or
3. If the exporter, manufacturer or producer owns or
controls, directly or indirectly, through stock ownership or
control or otherwise, any interest in any business
conducted by such persons; or
4. If any person or persons, jointly or severally, directly or
indirectly, through stock ownership or control or
otherwise, own or control in the aggregate 20 per cent or
more of the voting power or control in the business
carried on by the person by whom or for whose account
the article is imported into the Philippines, and also 20 per
cent or more of such power or control in the business of
the exporter, manufacturer or producer.
g. Pending investigation and final decision of the case,
the article in question, and articles of the same specific
kind or class subsequently imported under similar
circumstances, shall be released to the owner, importer,
consignee or agent upon the giving of a bond in an
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amount equal to the double the estimated value thereof.
Articles which may have been delivered under the
provision of section fifteen hundred and three of this Code
prior to the institution of the investigation provided in this
section shall, pending final decision, be ordered returned
to the custody of the collectors of customs unless
released under bond in accordance with this section.
h. Any aggrieved party may only appeal the amount of
dumping duty that is levied and collected by the
Commissioner of Customs to the Court of Tax Appeals in
the same manner and within the same period provided
for by law in the case of appeals from decisions of the
Commissioner of Customs.
i. (1) The article, if it has not been previously released
under bond as provided in subsection "g" hereof, shall be
released after payment by the party concerned of the
corresponding dumping duty in addition to any other
duties, taxes and charges, if any, or re-exported by the
owner, importer, consignee or agent, at his option and
expense, upon the filing of a bond in an amount equal to
double the estimated value of the article, conditioned
upon the presentation of a landing certificate issued by a
consular officer of the Philippines at the country of
destination; or
(2) If the article has been previously released under
bond, as provided in subsection "g" hereof, the party
concerned shall be required to pay the corresponding
dumping done in addition to any other duties, taxes and
charges, if any.
j. Any investigation to be conducted by the Commission
under this section shall include a hearing or hearings
where the owner, importer, consignee or agent of the
imported article, the local producers of a like article,
other parties directly affected, and such other parties as
in the judgment of the Commission are entitled to appear,
shall be given an opportunity to be heard and to present
evidence bearing on the subject matter.
. Sec. 303. Marking of Imported Articles and Containers. —
k. It shall be the duty of collectors of customs at all ports
of entry to levy and collect the dumping duty in
accordance with subsection "d" hereof on the specific
kind or class of article as to which the Secretary has
made a decision of dumping.
. indelibly and permanently as the nature of the article (or
It shall also be their duty to bring to the attention of the
Secretary, thru the Commissioner of Customs, any case
coming within their notice which may, in their opinion,
require action as provided in this section.
. issue rules and regulations to —
l. The Secretary shall promulgate all rules and regulations
necessary to carry out the provisions of this section.
Just remember that the keyword here is when the article
is sold less than its normal value.
Sec. 302. Countervailing Duty. — a. On articles dutiable
under this Code, upon the production, manufacture or
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
export of which any bounty, subsidy or subvention is
directly or indirectly granted in the country of origin
and/or exportation, and the importation of which has
been determined by the Secretary, after investigation
and report of the Commission, as likely to materially injure
an established industry, or prevent or considerably retard
the establishment of an industry in the Philippines, there
shall be levied a countervailing duty equal to the
ascertained or estimated amount of such bounty, subsidy
or subvention: Provided, That the exception of any
exported article from a duty or tax imposed on like
articles when destined for consumption in the country of
origin and/or exportation or the refunding of such duty or
tax, shall not be deemed to constitute a grant of a
bounty, subsidy or subvention within the meaning of this
section; however, should an article be allowed drawback
by the country of origin and/or exportation, only the
ascertained or estimated excess of the amount of the
drawback over the total amount of the duties and/or
internal taxes, if any, shall constitute a bounty, subsidy or
subvention.
.
b. The Commission, on its own motion or upon application
of any interested party, when in its judgment there is
good and sufficient reason therefor, shall ascertain,
determine or estimate the net amount of such bounty,
subsidy or subvention and shall transmit to the Secretary
the amounts so ascertained, determined or estimated, if
any. Wherever it is ascertained that the conditions which
necessitated the imposition of the countervailing duty
have ceased to exist, and the Commission shall so certify
to the Secretary, the latter shall take the necessary steps
to suspend or discontinue the imposition of such duty.
c. The Secretary shall make all rules and regulations
necessary to carry out the provisions of this section.
The keyword here is the article enjoys subsidy or bounty
a. Marking of Articles. — Except as hereinafter
provided, every article of foreign origin (or its container,
as provided in subsection "b" hereof) imported into the
Philippines shall be marked in any official language of the
Philippines and in a conspicuous place as legibly,
container) will permit in such manner as to indicate to an
ultimate purchaser in the Philippines the name of the
country of origin of the article. The Commissioner of
Customs shall, with the approval of the department head,
(1) Determine the character of words and phrases or
abbreviations thereof which shall be acceptable as
indicating the country of origin and prescribe any
reasonable method of marking, whether by printing,
stenciling, stamping, branding, labeling or by any other
reasonable method, and a conspicuous place on the
article or container where the marking shall appear;
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(2) Require the addition of any other words or symbols
which may be appropriate to prevent deception or
mistake as to the origin of the article or as to the origin of
any other article with which such imported article is
usually combined subsequent to importation but before
delivery to an ultimate purchaser; and
(3) Authorize the exception of any article from the
requirements of marking if —
(a) Such article is incapable of being marked;
(b) Such article cannot be marked prior to shipment to
the Philippines without injury;
(c) Such article cannot be marked prior to shipment to
the Philippines, except at an expense economically
prohibitive of its importation;
(d) The marking of a container of such article will
reasonably indicate the origin of such article;
(e) Such article is a crude substance;
(f) Such article is imported for use by the importer and not
intended for sale in its imported or any other form;
(g) Such article is to be processed in the Philippines by
the importer or for his account otherwise than for the
purpose of concealing the origin of such article and in
such manner that any mark contemplated by this section
would necessarily be obliterated, destroyed or
permanently concealed;
(h) An ultimate purchaser, by reason of the character of
such article or by reason of the circumstance of its
importation, must necessarily know the country of origin
of such article even though it is not marked to indicate its
origin;
(i) Such article was produced more than twenty years
prior to its importation into the Philippines; or
(j) Such article cannot be marked after importation
except at an expense which is economically prohibitive,
and the failure to mark the article before importation was
not due to any purpose of the importer, producer, seller
or shipper to avoid compliance with this section.
b. Marking of Containers. — Whenever an article is
excepted under subdivision (3) of subsection "a" of this
section from the requirements of marking, the immediate
container, if any, of such article, or such other container
or containers of such article as may be prescribed by the
Commissioner of Customs with the approval of the
department head, shall be marked in such manner as to
indicate to an ultimate purchaser in the Philippines the
name of the country of origin of such article in any official
language of the Philippines, subject to all provisions of this
section, including the same exceptions as are applicable
to articles under subdivision (3) of subsection "a".
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
c. Marking Duty for Failure to Mark. — If at the time of
importation any article (or its container, as provided in
subsection "b" hereof), is not marked in accordance with
the requirements of this section, there shall be levied,
collected and paid upon such article a marking duty of 5
per cent ad valorem, which shall be deemed to have
accrued at the time of importation, except when such
article is exported or destroyed under customs
supervision and prior to the final liquidation of the
corresponding entry.
d. Delivery Withheld until Marked. — No imported article
held in customs custody for inspection, examination or
appraisement shall be delivered until such articles and/or
their containers, whether released or not from customs
custody, shall have been marked in accordance with the
requirements of this section and until the amount of duty
estimated to be payable under subsection "c" of this
section shall have been deposited. Nothing in this section
shall be construed as excepting any article or its
container from the particular requirements of marking
provided for in any provisions of law.
e. The failure or refusal of the owner or importer to mark
the articles as herein required within a period of thirty
days after due notice shall constitute as an act of
abandonment of said articles and their disposition shall
be governed by the provisions of this Code relative to
abandonment of imported articles.
Sec. 304. Discrimination by Foreign Countries. — a. The
President, when he finds that the public interest will be
served thereby, shall by proclamation specify and
declare new or additional duties in an amount not
exceeding 50 per cent of the existing rates as hereinafter
provided upon articles wholly or in part the growth or
product of, or imported in a vessel of, any foreign country
whenever he shall find as a fact that such country —
(1) Imposes, directly or indirectly, upon the disposition in,
or transportation in transit through or re-exportation from
such country of any article wholly or in part the growth or
product of the Philippines any unreasonable charge,
exaction, regulation or limitation which is not equally
enforced upon the like articles of every foreign country;
or
(2) Discriminates in fact against the commerce of the
Philippines, directly or indirectly, by law or administrative
regulation or practice, by or in respect to any customs,
tonnage, or port duty, fee, charge, exaction,
classification, regulation, condition, restriction or
prohibition, in such manner as to place the commerce of
the Philippines at a disadvantage compared with the
commerce of any foreign country.
b. If at any time the President shall find it to be a fact that
any foreign country has not only discriminated against
the commerce of the Philippines, as aforesaid but has,
after the issuance of a proclamation as authorized in
subsection "a" of this section, maintained or increased its
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said discriminations against the commerce of the
Philippines, the President is hereby authorized, if he
deems it consistent with the interests of the Philippines, to
issue a further proclamation directing that such product
of said country or such articles imported in its vessels as
he shall deem consistent with the public interests, shall be
excluded from importation into the Philippines.
c. Any proclamation issued by the President under the
authority of this section shall, if he deems it consistent with
the interests of the Philippines, extend to the whole of any
foreign country or may be confined to any subdivision or
subdivisions thereof; and the President shall, whenever he
deems the public interests require, suspend, revoke,
supplement or amend any such proclamation.
d. All articles imported contrary to the provisions of this
section shall be forfeited to the Government of the
Philippines and shall be liable to be seized, prosecuted
and condemned in like manner and under the same
regulations, restrictions and provisions as may from time
to time be established for the recovery, collection,
distribution and remission of forfeiture to the government
by the tariff and customs laws. Whenever the provision of
this section shall be applicable to importations into the
Philippines of articles wholly or in part the growth or
product of any foreign country, they shall be applicable
thereto whether such articles are imported directly or
indirectly.
e. It shall be the duty of the Commission to ascertain and
at all times to be informed whether any of the
discriminations against the commerce of the Philippines
enumerated in subsections "a" and "b" of this section are
practiced by any country; and if and when such
discriminatory acts are disclosed, it shall be the duty of
the Commission to bring the matter to the attention of the
President, together with recommendation.
f. The Secretary shall make such rules and regulations as
are necessary for the execution of such proclamation as
the President may issue in accordance with the provisions
of this section.
g. The authority granted herein to the President shall be
exercised only when Congress is not in session.
Sec. 401. Flexible Clause. — a. The President, upon
investigation by the Commission and recommendation of
the National Economic Council, is hereby empowered to
reduce by not more than fifty per cent or to increase by
not more than five times the rates of import duty expressly
fixed by statute (including any necessary change in
classification) when in his judgment such modification in
the rates of import duty is necessary in the interest of
national economy, general welfare and/or national
defense.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
b. Before any recommendation is submitted to the
President by the Council pursuant to the provisions of this
section, the Commission shall conduct an investigation in
the course of which it shall hold public hearings wherein
interested parties shall be afforded reasonable
opportunity to be present, to produce evidence and to
be heard. The Commission may also request the views
and recommendations of any government office, agency
or instrumentality, and such office, agency or
instrumentality shall cooperate fully with the Commission.
c. The President shall have no authority to transfer articles
from the duty-free list to the dutiable list nor from the
dutiable list to the duty-free list of the tariff.
d. The power of the President to increase or decrease
rates of import duty within the limits fixed in subsection "a"
shall include the authority to modify the form of duty. In
modifying the form of duty the corresponding ad valorem
or specific equivalents of the duty with respect to imports
from the principal concerning foreign country for the most
recent representation period shall be used as basis.
e. The Commissioner of Customs shall regularly furnish to
the Commission a copy each of all customs import
entries containing every pertinent information appearing
in the collectors' liquidated duplicates, including the
consular invoice and/or the commercial invoice. The
Commission or its duly authorized agents shall have
access to and the right to copy all the customs import
entries and other documents appended thereto as finally
in the General Auditing Office.
f. The Commission is authorized to adopt such reasonable
procedure, rules and regulations as it may deem
necessary to carry out the provisions of this section.
g. Any order issued by the President pursuant to the
provisions of this section shall take effect thirty days after
its issuance.
h. The provisions of this section shall not apply to any
article the importation of which into the Philippines is or
may be governed by Section 402 of this Code.
i. The authority herein granted to the President shall be
exercised only when Congress is not in session.
Sec. 402. Promotion of Foreign Trade. — a. For the
purpose of expanding foreign markets for Philippine
products as a means of assisting in the economic
development of the country, in overcoming domestic
unemployment, in increasing the purchasing power of the
Philippine peso, and in establishing and maintaining
better relationship between the Philippines and other
countries, the President, upon investigation by the
Commission and recommendation of the National
Economic Council, is authorized from time to time:
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(1) To enter into trade agreements with foreign
governments or instrumentalities thereof; and
(2) To modify import duties (including any necessary
change in classification) and other import restrictions, as
are required or appropriate to carry out and promote
foreign trade with other countries: Provided, however,
That in modifying import duties no increase shall exceed
by five times or the decrease be more than fifty per cent
of the rate of duty expressly fixed by this Code.
b. The proclaimed duties and other import restrictions
shall apply to articles the growth, produce or
manufacture of all foreign countries, whether imported
directly or indirectly:Provided, That the President may
suspend the application of any concession to articles the
growth, produce or manufacture of any country because
of its discriminatory treatment of Philippine commerce or
because of other acts (including the operations of
international cartels) or policies which in his opinion tend
to defeat the purposes set in this section; and the
proclaimed duties and other import restrictions shall be in
force and effect from and after such time as is specified
in the proclamation. The President may at any time
terminate any such proclamation in whole or in part.
c. Every trade agreement concluded pursuant to this
section shall be subject to termination upon due notice to
the foreign government concerned at the end of not
more than five years from the date on which the
agreement comes into force and, if not then terminated,
shall be subject to termination thereafter upon not more
than six months' notice.
d. The authority of the President to enter into trade
agreements under this section shall terminate on the
expiration of five years from the date of enactment of this
Code:Provided, That trade agreements concluded
pursuant to the provisions of this section and subsisting as
of the date of the expiration of this authority shall remain
in force for the period fixed in the agreement in and may
not be extended but he may be sooner terminated in
accordance with the preceding subsection.
e. Nothing in this section shall be construed to give any
authority to cancel or reduce in any manner any of the
indebtedness of any foreign country to the Philippines or
any claim of the Philippines against any foreign country.
f. Before any trade agreement is conducted with any
foreign government or instrumentality thereof, reasonable
public notice of the intention to negotiate an agreement
with such a government or instrumentality shall be given
in order that any interested person may have an
opportunity to present his views to the Commission which
shall seek information and advice from the Department of
Agriculture and Natural Resources, the Department of
Commerce and Industry, the Central Bank of the
Philippines and from such other sources as it may deem
appropriate. chan robles virtual
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
g. (1) The Commission, upon its own motion, or in
pursuance of a request of the President or a resolution of
either house of Congress, or upon application of any
interested party when in the judgment of the Commission
there is good and sufficient reason therefor, shall conduct
an investigation to determine whether any product, as a
result of any concession granted under a trade
agreement, is being imported into the Philippines in such
increased quantities as to cause or threaten serious injury
to the domestic industry producing like or directly
competitive products. The Commission shall render a
report thereof to the President, through the National
Economic Council, within three months after the motion,
request, resolution or application was received.
Should the Commission find that the representations
made in accordance with the preceding paragraph are
justified, it shall recommend to the President, through the
National Economic Council the withdrawal or
modification of the concession, its suspension in whole or
in part, or the establishment of import quota which shall
not be less than ten per centum or more than one
hundred per centum of the average annual quantity
imported or, in the absence thereof, the average annual
value of such importation, during the three calendar
years immediately preceding the date such quota is
fixed, to the extent and for the time necessary to prevent
or remedy such injury.
2) Upon receipt of the report of the findings and
recommendation of the Commission, the President may
prescribe such adjustments in the rates of import duties,
or such other modifications as are recommended by the
Commission to be necessary to prevent or remedy
serious injury to the respective domestic industry.
h. Nothing in this section shall be construed to preclude
giving effect to any executive agreement or any future
preferential trade agreement with the United States, or to
extend to any other country the preferential treatment
accorded by the Philippines to the products of the United
States of America.
i. The Commission is authorized to adopt such reasonable
procedure, rules and regulations as it may deem
necessary to execute its functions under this section.
Now let us go to the pertinent provision on Customs Law.
(Again, Dean just enumerated these provisions.)
Section 1201. Articles to Be Imported Only Through
Customhouse. — All articles imported into the Philippines,
whether subject to duty or not, shall be entered through a
customhouse at a port of entry.
Sec. 1202. When Importation Begins and Deemed
Terminated. — Importation begins when the carrying
vessel or aircraft enters the jurisdiction of the Philippines
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with intention to unlade therein. Importation is deemed
terminated upon payment of the duties, taxes and other
charges due upon the articles, or secured to be paid, at a
port of entry and the legal permit for withdrawal shall
have been granted, or in case said articles are free of
duties, taxes and other charges, until they have legally
left the jurisdiction of the customs.
Sec. 1203. Owner of Imported Articles. — All articles
imported into the Philippines shall be held to be the
property of the person to whom the same are consigned;
and the holder of a bill of lading duly indorsed by the
consignee therein named, or, if consigned to order, by
the consignor, shall be deemed the consignee thereof.
The underwriters of abandoned articles and the salvors of
articles saved from a wreck at sea, along a coast or in
any area of the Philippine may be regarded as the
consignees.
Sec. 1204. Liability of Importer for Duties. — Unless
relieved by laws or regulations, the liability for duties,
taxes, fees and other charges attaching on importation
constitutes a personal debt due from the importer to the
government which can be discharged only by payment
in full of all duties, taxes, fees and other charges legally
accruing. It also constitutes a lien upon the articles
imported which may be enforced while such articles are
in custody or subject to the control of the government.
Sec. 1205. Importations by the Government. — Except as
otherwise specifically provided, all importations by the
government for its own use or that of its subordinate
branches on instrumentalities, or corporations, agencies
or instrumentalities owned or controlled by the
government, shall be subject to the duties, taxes, fees
and other charges provided for in this Code: Provided,
however, That upon certification of the head of the
department or political subdivision concerned, with the
approval of the Auditor General, that the imported article
is actually being used by the government or any of its
political subdivision concerned, the amount of duty, tax,
fee or charge shall be refunded to the government or the
political subdivision which paid it.
Sec. 1206. Jurisdiction of Collector Over Importation of
Articles. — The Collector shall cause all articles entering
the jurisdiction of his district and destined for importation
through his port to be entered at the customhouse, shall
cause all such articles to be appraised and classified,
and shall assess and collect the duties, taxes and other
charges thereon, and shall hold possession of all
imported articles upon which duties, taxes, and other
charges have not been paid or secured to be paid,
disposing of the same according to law.
Sec. 1207. Jurisdiction of Collector Over Articles of
Prohibited Importation. — Where articles are of prohibited
importation or subject to importation only upon
conditions prescribed by law, it shall be the duty of the
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Collector to exercise such jurisdiction in respect thereto
as will prevent importation or otherwise secure
compliance with all legal requirements.
Sec. 1301. Persons Authorized to Make Import Entry. —
Imported articles must be entered in the customhouse at
the port of entry within fifteen days from date of discharge
of the last package from the vessel either (a) by the
importer, being holder of the bill of lading, (b) by any
other holder of the bill of lading in due course, (c) by a
customs broker acting under authority from a holder of
the bill, or (d) by a person duly empowered to act as
agent or attorney-in-fact for such holder: Provided, That
the Collector may grant an extension of not more than
fifteen days.
Sec. 1403. Return of Examining Official. — The examining
official shall compare the packages designated for
examination and their contents with the invoice and shall
make return of the description of the articles covered
thereby in such a manner as to indicate whether the
articles have been truly and correctly measured and
declared and not imported contrary to law, whether or
not the quantities are correct, and, in case of articles
dutiable ad valorem, whether the prices indicated show
the correct value of the articles. Examining officials shall
submit samples to the laboratory for analysis when
feasible to do so and when such analysis is necessary to
the proper classification, appraisal and/or admission into
the Philippines of imported articles.
Sec. 1501. Delivery of Articles to Holder of Bill of Lading. —
A Collector who makes a delivery of a shipment, upon
the surrender of the bill of lading, to a person who by the
terms thereof appears to be the consignee or lawful
holder of the bill shall not be liable on account of any
defect in the bill or irregularity in its negotiation, unless he
has notice of the same.
Sec. 1601. Liquidation and Record of Entries. — If the
Collector shall approve the returns of the appraiser and
the report of the weights, gauge or quantity, the
liquidation shall be made on the face of the entry
showing the particulars thereof, initiated by the
liquidating clerk, approved by the chief liquidator, and
recorded in the record of liquidations.
A daily record of all entries liquidated shall be posted in
the public corridor of the customhouse, stating the name
of the vessel or aircraft, the port from which she arrived,
the date of her arrival, the name of the importer, and the
serial number and date of the entry. A daily record must
also be kept by the Collector of all additional duties,
taxes and other charges found upon liquidation, and
notice shall promptly be sent to the interested parties.
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Sec. 1602. Tentative Liquidation. — If to determine the
exact amount due under the law in whole or in part some
future action is required, the liquidation shall be deemed
to be tentative as to the item or items affected and shall
to that extent be subject to future and final readjustment
and settlement. The entry in such case shall be stamped
"Tentative liquidation".
Sec. 1603. Finality of Liquidation. — When articles have
been entered and passed free of duty or final adjustment
of duties made, with subsequent delivery, such entry and
passage free of duty or settlement of duties will, after the
expiration of one year, from the date of the final payment
of duties, in the absence of fraud or protest, be final and
conclusive upon all parties, unless the liquidation of the
import entry was merely tentative.
NB: Dean briefly mentioned about Administrative
proceedings and Judicial proceedings, but he didn’t
mention any provisions, so I think it’s up to us to look them
out.
COURT OF TAX APPEALS
Introduction
The CTA was originally created under RA 1125. This was
way back in 1954. Our CTA then was similar to the RTC.
The objective of the court is to entrust tax cases to a
specialized court composed of judges technically
qualified in the field of taxation and to develop expertise
in this subject. The second objective is to expedite the
disposition of tax cases, hasten collection of taxes and
provide adequate remedy for tax payers.
The CTA under its original creation only had exclusive
appellate jurisdiction. From the administrative, it is now
converted into judicial action which must be bought to
the CTA. Under its original creation, it functions like the
RTC. Decision made by the CTA was appealed to the CA,
and from the CA, it is brought to the SC.
The subsequent amendment was in 1962 for the
configuration of its appellate jurisdiction. The substantial
amendment came only in 2004.
In 2004, RA 9282 took effect. This law reconfigured the
jurisdiction of the CTA. The CTA was no longer considered
as equivalent to RTC but to CA. There are two significant
amendments in this new law wherein the CTA, aside from
becoming a court similar to the CA, it also has two major
jurisdiction:
1. Exclusive Appellate Jurisdiction
2. Exclusive Original Jurisdiction
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
After 2004, in 2008, the RA 9503 took effect. RA 9503 just
restructured the composition of the CTA. It was not a
significant amendment, but only enlarged the CTA to
handle the rising volume of tax cases. In RA 9282, all tax
cases pass through the CTA. The CTA then only had six
judges. To accommodate all the cases, RA 9503 was
enacted to increase the number of justices, from 6 to 9,
with three divisions, each division consisting of 3 justices,
and 5 justices to constitute en banc. The CTA may sit by
division or en banc.
Aside from RA 9282, and 9503, you also have the revised
rules of the CTA as amended. (Internal rules of the CTA)
CTA Jurisdiction
Section 7 of the law provides the amended jurisdiction of
the CTA.
Exclusive Appellate Jurisdiction
Decisions of the Commissioner of Internal Revenue in
cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National
Internal Revenue or other laws administered by the
Bureau of Internal Revenue;
a. Disputed Assessment (Section 228, NIRC)
You start with the filing of the tax return. After the filing of
the tax return, the government will review the return. The
BIR will assess the return and will send a PAN. After the
PAN, the taxpayer will be sent a FAN. Upon receiving the
FAN, the taxpayer’s remedy is to protest, he will dispute
the assessment. The jurisdiction of the Commissioner is not
the assessment itself, but the disputed assessment. The
taxpayer will bring this protest to the CIR. The CIR will then
make a decision, either to grant the protest or deny the
protest. If there will be denial, the taxpayer’s remedy is to
appeal to the CTA. The period is 30 days. You appeal to
the CTA by division. After the division, it is brought to the
CTA en banc. And then finally to the SC. Whatever
decision made by the CTA, whether in division or en
banc, this is without prejudice to the party’s right to move
for a Motion for Consideration.
b. Refunds (Section 229, NIRC)
The taxpayer files a claim for refund with the
commissioner on the ground that the taxpayer
erroneously paid tax including penalties and charges. He
must file the claim within within two years from payment.
So you file an administrative claim for refund with the
commissioner, and he will issue a decision. In case it is
denied, you bring it to the CTA. It is required that when
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the claim for refund is filed and up to the time it reaches
the CTA, it should be within the two year period.
In counting the two year period, if you filed the return
and paid the tax in April 1, the counting of the two year
period begins after the payment of the tax so the
counting will begin in April 2. In assessment cases, the
period to assess of three years is reckoned after the last
day of filing the return prescribed by law. If the return was
filed in April 1, and the deadline of filing is April 15, the
counting will begin in April 16.
If the Commissioner denied a claim for refund, you may
now appeal that to the CTA by division and then to the
CTA en banc. If the two year period is about to prescribe
and there is yet no decision, then the taxpayer must bring
it to the CTA.
c. Other Matters Decided by the Commissioner
For example, you are asking for a tax ruling. You go to the
Commissioner about your tax problem, and you want a
ruling on whether you are taxable or not. The
Commissioner replies and rules that you are taxable in
that transaction. That ruling may be appealed to the
CTA. All decisions of the Commissioner under the NIRC
may be appealed to the CTA.
Inaction by the Commissioner of Internal Revenue in
cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in
relations thereto, or other matters arising under the
National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue, where
the National Internal Revenue Code provides a specific
period of action, in which case the inaction shall be
deemed a denial;
So you file the tax return. You will be assessed within 3
years. BIR will send the PAN and the FAN. Then you will
protest the assessment with the Commissioner. The
Commissioner has 180 days to decide on the protest. If
the protest is not acted upon within 180 days, the
taxpayer may appeal to the CTA. The taxpayer has 30
days from the lapse of the 180 day period to appeal to
the CTA by division and to the CTA en banc after that.
The taxpayer has the option to wait for the decision even
after the lapse of the 180 days. In case there will be
denial, you can go to the CTA for appeal. When you
bring it now to the CTA by reason of the inaction, you are
not allowed to withdraw. The remedies are exclusive. You
cannot change your mind.
The same thing happens in case of refunds. The period
here is two years. Inaction on the part of the
commissioner within that period will entitle the taxpayer
to appeal to the CTA. The appeal to the CTA must be
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
within the two year period. If the period is about to expire
but your claim is still pending, you must not wait for the
period to lapse. You do not have the option to wait
beyond the period. Before the expiration of the two year
period, you must bring the case to the CTA by reason of
inaction.
Decisions, orders or resolutions of the Regional Trial Courts
in local tax cases originally decided or resolved by them
in the exercise of their original or appellate jurisdiction;
The RTC in local tax cases would have original and
appellate jurisdiction.
In questioning the legality of a tax ordinance, you first go
to the DOJ. The DOJ have 60 days to rule on that
question. DOJ’s decision or inaction can be appealed to
the RTC. The administrative action is now a judicial action
that is why it is considered as an original jurisdiction of the
RTC. After that, the case will be brought to the CTA.
Another case is protest. In protest cases, wherein there is
a finding of a deficiency, the local treasurer will now
assess against the taxpayer. The taxpayer will protest,
then there will be a decision of the local treasurer. Such
decision, in case of denial, is brought to the RTC if the
amount involved is within the jurisdiction of the RTC. After
that, the case will be brought to the CTA by division, and
then to the CTA en banc.
If the jurisdictional amount is within the jurisdiction of the
MTC, the latter’s decision will be brought to the RTC on
appeal. From the RTC, the case is brought to the CTA en
banc directly.
In case of refund cases, the same thing applies. When
you overpay your local tax, you file a claim for refund
with the local treasurer. In case of denial, you file with the
RTC or MTC, depending on the jurisdictional amount. If
brought to the RTC, you appeal the decision to the CTA
by division, and then to the CTA en banc. If brought first
to the MTC, you appeal to the RTC and then to the CTA
en banc.
Decisions of the Commissioner of Customs 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 Bureau of Customs;
This is the same with No. 1 on decision of the
Commissioner of the Internal Revenue.
a. Protest cases in connection with the assessment
of duties – the protest is brought first to the
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collector. When the collector decides, such
decision is appealed to the Commissioner of
Customs. After that, it is appealed to the CTA by
division, and then to the CTA en banc.
There was a case where the collector decided
on a protest. Before deciding, he sought the
opinion of the Commissioner. The commissioner
said that the importer is liable to the duty. The
collector ruled, citing the opinion of the
Commissioner, that the importer is liable. The
importer now proceeds to the CTA. Is that
correct? No. The CTA’s jurisdiction covers the
Commissioner’s decision, not that of the
collector. The commissioner in this case just made
an opinion.
b. Seizure and forfeiture cases – this cases are
brought first to the collector, it is appealed to the
commissioner, and then to the CTA by division,
and then CTA en banc.
Decisions of the Central Board of Assessment Appeals 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;
Under the RPT provisions, we have four cases where the
Central Board comes in to make a decision on matters or
controversies under the RPT
1) Matters Involving Assessments – not the
assessment of a finding of a deficiency but
assessments involving valuations on real
properties wherein there is a controversy
between the assessor and property owner over
the fair market value or the assessed value. In the
event that the assessor and the property owner
do not agree on the value, the protest is brought
to the local board of assessment appeals. When
there is such controversy, the remedy is not to file
a motion for reconsideration. The proper remedy
is to file a case with the local board. From the
local board, it is brought to the central board of
assessment appeals. From the central board, you
bring it to the CTA en banc.
2) Special Levies – it is brought to the local board of
assessment appeals. From the local board, you
go to the central board, and then to the CTA en
banc.
3) Protesting payment- the controversy is between
the land owner and the local treasurer over the
assessment of the RPT. The taxpayer must first pay
the tax under protest. You file your protest with
the local treasurer. The local treasurer makes a
decision either to grant your protest or deny it. In
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
case it is denied, you bring it to the local board,
and then to the central board, and then to the
CTA en banc.
4) Claims for refund – take note the distinction in
local tax and in real property tax involving
refunds. Both are brought to the local treasurer,
but in local tax, the decision of the treasurer is
appealed to regular courts. But in RPT, the local
treasurer’s decision is appealed to the local
board of tax appeals. Then, the same is brought
to the central board, and then to the CTA en
banc.
Decisions of the Secretary of Finance on customs cases
elevated to him automatically for review from decisions
of the Commissioner of Customs which are adverse to the
Government under Section 2315 of the Tariff and Customs
Code;
Sec. 2315. Supervisory Authority of
Commissioner And of Department Head
in Certain Cases. — If in any case
involving the assessment of duties the
importer shall fail to protest the ruling of
the Collector, and the Commissioner
shall be of the opinion that the ruling was
erroneous and unfavorable to the
Government, the latter may order a
reliquidation; and if the ruling of the
Commissioner in any unprotested case
should, in the opinion of the department
head, be erroneous and unfavorable to
the Government, the department head
may require the Commissioner to order a
reliquidation.
Except as in the preceding paragraph
provided, the supervisory authority of the
department head over the Bureau of
Customs shall not extend to the
administrative review of the ruling of the
Commissioner in matters appealed to the
Court of Tax Appeals.
These are decisions of the secretary of finance under
Section 2315 of the tariff and customs code. In cases
involving assessment of duties, and there is a controversy
over the liability of the duties before the collector. Before
your protest is heard by the collector, you are required to
pay, but there is no requirement to indicate that you are
paying under protest. The protest is filed with the
collector. However, if the decision is against the
government, there will be an automatic review of the
commissioner of customs. If the commissioner decides
against the taxpayer, the appeal is with the CTA. If the
commissioner decides against the government, there will
be an automatic review before the secretary of finance.
The decision of the secretary is appealed to the CTA. The
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proceedings in 2315 is peculiar only if the collector and
commissioner decides against the government.
Decisions of the Secretary of Trade and Industry, in the
case of nonagricultural product, commodity or article,
and the Secretary of Agriculture in the case of agricultural
product, commodity or article, involving dumping and
countervailing duties under Section 301 and 302,
respectively, of the Tariff and Customs Code, and
safeguard measures under Republic Act No. 8800, where
either party may appeal the decision to impose or not to
impose said duties.
At the outset, when imported articles are brought into the
country, in case of dumping, meaning the articles are
sold at less than their normal value. This is underpricing. It
competes and injures locally produced products. In that
situation, DTI or the DA, may recommend the imposition
of anti-dumping duty. Whatever the decision of the DTI or
DA is, the decision will be appealed to the CTA, whether
the decision is to impose or not to impose, CTA by
division, and then to the CTA en banc.
The other case involves countervailing. The imported
articles enjoys subsidy or bounty in the country of origin.
As a result, the DTI or DA may recommend the imposition
of a countervailing duty. Whatever will be the decision,
that decision will be appealed to the CTA. The procedure
for both are the same.
The other case involves safeguard measures. There is a
surging importation of an article, which has no subsidy.
The DTI or DA may recommend the imposition of a
safeguard measure to protect local produce. Whatever
will be the decision of the DTI or the DA, the aggrieved
party may appeal to the CTA.
Exclusive original jurisdiction
Exclusive original jurisdiction in tax collection cases
involving final and executory assessments for taxes, fees,
charges and penalties: Provided, however, That
collection cases where the principal amount of taxes and
fees, exclusive of charges and penalties, claimed is less
than One million pesos (P1,000,000.00) shall be tried by
the proper Municipal Trial Court, Metropolitan Trial Court
and Regional Trial Court.
Exclusive appellate jurisdiction in tax collection cases:
a. Over appeals from the judgments, resolutions or orders
of the Regional Trial Courts in tax collection cases
originally decided by them, in their respective territorial
jurisdiction.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
b. Over petitions for review of the judgments, resolutions
or orders of the Regional Trial Courts in the Exercise of
their appellate jurisdiction over tax collection cases
originally decided by the Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts, in
their respective jurisdiction."
This involves tax collection cases involving final and
executory assessments. The collection remedies may
ether be administrative or judicial. Once the assessment
becomes final and executory, the proceedings now will
be to collect the tax. It is brought to the CTA by division if
the amount is 1,000,000.00 or more. It is appealed to the
CTA en banc and then to the SC.
If the amount is less than 1,000,000.00, then you go to the
regular court; MTC or RTC depending on the jurisdictional
amount. From RTC, you go to the CTA by division, then
CTA en banc. From MTC, you appeal to the RTC and then
to the CTA en banc. This is now number 8 in the list of the
appellate jurisdictions of the CTA.
Exclusive original jurisdiction over all criminal offenses
arising from violations of the National Internal Revenue
Code or Tariff and Customs Code and other laws
administered by the Bureau of Internal Revenue or the
Bureau of Customs: Provided, however, That offenses or
felonies mentioned in this paragraph where the principal
amount o taxes and fees, exclusive of charges and
penalties, claimed is less than One million pesos
(P1,000,000.00) or where there is no specified amount
claimed shall be tried by the regular Courts and the
jurisdiction of the CTA shall be appellate. Any provision of
law or the Rules of Court to the contrary notwithstanding,
the criminal action and the corresponding civil action for
the recovery of civil liability for taxes and penalties shall
at all times be simultaneously instituted with, and jointly
determined in the same proceeding by the CTA, the filing
of the criminal action being deemed to necessarily carry
with it the filing of the civil action, and no right to reserve
the filling of such civil action separately from the criminal
action will be recognized.
Exclusive appellate jurisdiction in criminal offenses:
a. Over appeals from the judgments, resolutions or orders
of the Regional Trial Courts in tax cases originally decided
by them, in their respected territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions
or orders of the Regional Trial Courts in the exercise of
their appellate jurisdiction over tax cases originally
decided by the Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in their
respective jurisdiction.
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c. Jurisdiction over tax collection cases as herein

provided:

In tax collection case, the collection may be enforced by

judicial action. It may be made through a civil action to
collect the tax, or through a criminal action. If the
criminal case involved has a tax, the amount of taxes
and fees to be collected is 1,000,000.00 or more, then it is
brought to the CTA in its original jurisdiction, by division
and then en banc.

However, if the criminal case, the amount of taxes and

fess is less than 1,000,000.00, then it depends now whether
you bring it to the MTC or the RTC based on the penalty.
If grave, you bring it to the RTC, if less serious, you bring
with the MTC. For as long as the amount is less than
1,000,000.00. This is no. 9 in the list of exclusive appellate
jurisdictions of the CTA.

When you bring it to CTA by division, your petition will be

a petition for review under Rule ? (hindi talaga klaro).
When you bring to CTA en banc, it is petition for review
under Rule 43. When you bring it to the SC, it is petition for
review on certiorari.

That is the expanded jurisdiction of the CTA.

-the end-

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