GENERAL PRINCIPLES AND CONCEPTS OF TAXATION

INHERENT POWER OF SOVEREIGN STATE:

1. POLICE POWER - POWER TO PROTECT AND PROVIDE FOR SAFETYND WELFARE OF THE SOCIETY.

2. EMINENT DOMAIN POWER- THE POWER TO TAKE PRIVATE PROPERTY (WITH JUST COMPENSATION FOR PUBLIC U

3. TAXATION POWER- POWER TO ENFORCE CONTRIBUTIONS TO SUPPORT GOVERNMENT; AND OTHER INHERENT P

NATURE OF TAXATION POWER:

1. INHERENT POWER OF SOVEREIGNTY

2. ESSENTIALLY A LEGISLATIVE (CONGRESS) FUNCTION

3.FOR PUBLIC PURPOSES

4.TERRITORIAL IN OPERATION

5. TAX EXEMPTION OF GOVERNMENT

6.THE STRONGEST AMONG THE INHERENT POWERS OF GOVERNMENT;

7.SUBJECT TO CONSTITUTIONAL AND INHERENT LIMITATIONS.

1.INHRENT POWER OF SOVEREIGNTY

FOUR ELEMENTS OF A STATE:

A. PEOPLE
B.TERRITORY
C.SOVEREIGNTY
D.GOVERNMENT

NOTE: ONLY THE NATIONAL GOVERNMENT EXERCISES THE INHERENT POWER OF TAXATION OF THE STATE.
LOCAL GOVERNMENT UNITS DO NOT POSSESS THE INHERENT POWER.

2.ESSENTIALLY LEGISLATIVE FUNCTION

CONGRESS -HAS THE POWER TO ENACT LAWS AND ORDINANCES , AND TO IMPOSE AND TO COLLECTTAXES.
 NON DELEGATION OF LEGISLATIVE POWER TO TAX -THE POWER TO MAKE LAWS CANNOT BE DELEGATED
OF THE GOVERNMENT.

EXAMPLES OF TAXATION THAT CANNOT BE DELEGATED ARE THE FF:

A. POWER TO SELECT THE COVERAGE, OBJECT OR PROPERTY TO BE TAXED

B. DETERMINING THE NATURE AND PURPOSES FOR WHICH TAXES SHALL BE COLLECTED
C. DETERMINING THE PLACE OR SITUS OF TAX IMPOSITION
D. FIXING THE AMOUNT TO BE IMPOSED AND TAX RATES
E. GRANTING TAX EXEMPTIONS OR CONDONATIONS;
F. SETTING DOWN THE RULES OF TAATION IN GENERAL.

IT'S VALID TO DELEGATE ADMINISTRATIVE IN NATURE BUT NOT LEGISLATIVE.

3. FOR PUBLIC PURPOSES

APPROPRIATION OF TAXES IS VALID IF IT IS FOR THE COMMON GOOD OF PEOPLE.

4. TERRITORIAL IN OPERATION
TAX CAN BE EXERCISED WITHIN THE TERRITORIAL JURISDICTION.

PRIVITY OF RELATIONSHIP- STATE CAN STILL EXERCISE ITS TAXING POWERS OVER ITS CITIZEN OUTSIDE ITS TERRITO
FUNDAMENTAL BASIS OF THE RIGHT TO TAX, IS THE CAPACITY OF THE GOVERNMENT TO PROVIDE BENEFITS AND
TO THE OBJECT OF THE TAX.

TAX SITUS- TAX LAWS ARE EFFECTIVE AND ENFORCEABLE ONLY WITHIN ITS TERRITORIAL LIMITS

TAXATION IS BOUND TO OBSERVE INTERNATIONAL COMITY. THE TAX LAWS ARE NOT APPLICABLE
TO THE PROPERTY OF FOREIGN GOVERNMENT.

INTERNATIONAL COMITY -IS THE COURTEOUS RECOGNITION, FRIENDLY AGREEMENT, INTERACTION AND RESPECT

5.TAX EXEMPTION OF THE GOVERNMENT

EXEMPTION FROM TAXATION - IS A GRANT OF IMMUNITY TO PARTICULAR PERSONS OR CORPORATIONS OF A PART

FROM A TAX.

6. THE STRONGEST AMONG THE INHERENT POWERS

TAXATION- IS THE STONGEST OF ALL INHERENT POWERS

7. SCOPE OF TAXATION POWER

IN THE ABSENCE OF LIMITATIONS PROVIDED BY THE CONSTITUTION, "THE POWER TO TAX IS UNLIMITED",
COMPLETE (PLENARY), WITH WIDE EXTENT OF APPLICATION (COMPREHENSIVE) AND WITH HIGHEST DEGREE (SUPR

SUBJECT TO INHERENT AND CONSTITUTIONAL LIMITATIONS

TAXATION POWER IS NOT ABSOLUTE BECAUSE IT IS SUBJECT TO INHERENT AND CONSTITUTIONAL RESTRICTIONS.

SIMILARITIES AMONG THE THREE POWERS OF THE STATE ARE AS FOLLOWS:

1. THEY ARE INHERENT (ESSENTIAL) POWERS OF THE STATE.
2. THEY CONSTITUTE THE THREE WAYS BY WHICH THE STATE INTERFERES WTH THE PRIVATE RIGHTS AND PROPERT
3.THEY ARE LEGISLATIVE IN NATURE AND CHARACTER.
4. THEY PRESUPPOSE AN EQUIVALENT COMPENSATION.
5. THEY ALL UNDERLIE AND EXIST INDEPENDENTLY OF THE CONSTITUTION.
6. THEY ARE ALL NECESSARY ATTRIBUTES TO SOVEREIGNTY (FREEDOM)
7. THE PROVISIONS IN THE CONSTITUTION ARE JUST LIMITATIONS ON THE EXERCISE OF THESE POWERS.

DISTINCTION OF TAXATION, POLICE POWER AND EMINENT DOMAIN

TAXATION POLICE POWER

1. AS TO CONCEPT POWER TO ENFORCE POWER TO MAKE
CONTRIBUTION AND AND IMPLEMENT LAWS
RAISE GOV. FUNDS FOR THE GENERAL WELFARE

2. AS TO SCOPE PLENARY, BROADER IN APPLICATIO

COMPREHENSIVE GENERAL POWER TO MA
AND SUPREME LAWS

3. AS TO AUTHORITY EXERCISED ONLY BY GEXERCISED ONLY BY GOV.

OR ITS POLITICAL SUBOR ITS POLITICAL SUBDIV

4.AS TO PURPOSE MONEY IS TAKEN TO PROPERTY IS TAKEN OR

SUPPORT THE GOVERDESTROYED TO PROMOT
GENERAL WELFARE

5.AS TO NECESSITY OF DELEG THE POEWER TO MAKCAN BE EXPRESSLY DELE

BE DELEGATED TO THE LOCAL GOVERNM
BY THE LAW MAKING BO

6.AS TO PERSON AFFECTED OPERATES ON A COMM

OPERATES ON A COMMUNI

7. AS TO BENEFITS CONTINUOUS PROTECHEALTHY ECONOMIC STA

AND ORGANIZED SOCIETY

8. AS TO AMOUNT OF IMPOSI GENERALLY NO LIMIT COST OF REGULATION,

LICENSES AND OTHER
NECESSARY EXPENSES
9. AS TO IMPORTANCE INSEPARABLE FOR THEPROTECTION, SAFETY
IT SUPPORTS POLICE AND WELFARE OF SOCIET
EMINENT DOMAIN

10.AS TO RELATIONSHIP SUBJECT TO CONSTIT RELATIVELY FREE FROM

TO CONSTITUTION AND INHERENT LIMIT CONSTITUTIONAL
LIMITATIONS
INFERIOR TO NON
IMPAIRMENT CLAUSESUPERIOR TO NON IMPAIRMENT CLAUSE

11.AS TO LIMITATION CONSTRAINTS BY CONLIMITED BY THE DEMAN

LIMITATIONS FOR PUBLIC INTEREST A

INHERENT LIMITATIONS
ARE THE NATURAL RESTRICTIONS TO SAFEGUARD AND ENSURE THAT THE POWER OF TAXATION SHALL B
OF PEOPLE.
HERE ARE THE INHERENT LIMITATIONS:
1. TAXES MAY BE LEVIED ONLY FOR PUBLIC PURPOSES
2.BEING INHERENTLY LEGISLATIVE, TAXATION MAY NOT BE DELEGATED
3.TAX POWER IS LIMITED TO TERRITORIAL JUSRISDICTION OF THE STATE.
4. TAXATION IS SUBJECT TO INTERNATIONAL COMITY
5. GOVERNMENT ENTITIES ARE GENERALLY TA EXEMPT.

CONSTITUTIONAL LIMITATIONS
ARE PROVISIONS OF THE FUNDAMENTAL LAW OF THE LAND THAT RESTRICT THE SUPREME, PLENARY, U
COMPREHENSIVE EXERCISE BY THE STATE OF ITS INHERENT POWER TO TAX.

IT MUST BE REMEMBERED THAT TAX LAW IS NO LEGAL FORCE WHEN IT VIOLATES THE CONSTITUTION.

CONSTITUTIONAL LIMITATIONS ARE AS FOLLOWS:

1. DUE PROCESS OF LAW
2. EQUAL PROTECTION OF LAW
3. RULE OF UNIFORMITY AND EQUITY
4.PRESIDENT'S POWER TO VETO SEPARATE ITEMS IN REVENUE OR TARIFF BILLS
5.EXEMPTION FROM PROPERTY TAXATION OF RELIGIOUS, CHARITBLE OR EDUCATIONAL ENTITIES,
NON PROFIT CEMETERIES, CHURCHES, AND CONVENTS
6. NO PUBLIC MONEY SHALL BE APPROPRIATED FOR RELIGIOUS PURPOSES;
7. MAJORITY OF ALL MEMEBERS OF THE CONGRESS GRANTING TAX EXEMPTION
8.THE CONGRESS MAY NOT DEPRIVE THE SUPREME COURT OF ITS JURISDICTION IN ALL CASES INVOLVIN
OF ANY TAX, IMPOST OR ASSESSMENT OR TOLL OR ANY PENALTY IMPOSED IN RELATION TO TAX.
9.NO IMPRISONMENT FOR NONPAYMENT OF POLL TAX
10.TAX COLLECTION SHALL GENERALLY BE TREATED AS GENERAL FUNDS OF GOVERNMENT.
DUE PROCESS OF LAW
ARTICLE SECTION 1 OF THE CONSTITUTION PROVIDES THAT
"NO PERSON SHALL BE DEPRIVED OF LIFE, LIBERTY, OR PROPERTY WITHOUT DUE PROCESS OF LAW
NOR SHALL ANY PERSON BE DENAIED THE EQUAL PROTECTION OF THE LAWS.

EQUAL PROTECTION OF LAW

MEANS THAT ALL PERSONS SUBJECT TO LEGISLATION SHALL BE TREATED ALIKE UNDER SIMILAR CIRCUM
CONDITIONS BOTH IN THE PRIVILEGES CONFERRED AND LIABILITIES IMPOSED.

RULE OF UNIFORMITY AND EQUITY IN TAXATION

"THE RULE OF TAXATION SHALL BE UNIFORM AND EQUITABLE.
CONGRESS SHALL EVOLVE A PROGRESSIVE SYSTEM OF TAXATION.

PROGRESSIVE SYSTEM OF TAXATION

MEANS THAT TAX LAWS SHALL GIVE EMPHASIS ON DIRECT RATHER THAN INDIRECT TAXES OR ON
THE ABILITY TO PAY PRINCIPLE OF TAXATION.

PRESIDENT'S VETO POWER

ART. VI, SECTION 27 OF THE CONSTITUTION PROVIDES THAT, EVERY BILL PASSED BY CONGRESS SHALL, B
BE PRESENTED TO THE PRESIDENT. IF HE APPROVES THE SAME, HE SHALL SIGN IT; OTHERWISE, HE SHAL
AT LARGE IN ITS JOURNAL AND PROCEED TO RECONSIDER IT.

VETO POWER- REFERS TO THE XECUTIVE'S POWER TO REFUSE TO SIGN INTO LAW A BILL THAT HAS BEEN
IT CAN BE CLASSIFIED INTO:
A. ITEM VETO- THE POWER TO VETO IN APPROPRIATION BILLS WITHOUT AFFECTING ANY OTHER PROVIS
B. POCKET VETO- THE POWER TO DISAPPROVELEGISLATIVE ACT BY THE PRESIDENT WITH THE RESULT TH

THE PRESIDENT SHALL COMMUNICATE HIS VETO OF ANY BILL TO THE HOUSE WHERE IT ORIGINATED WI
THEREOF; OTHERWISE, IT SHALL BECOME A LAW AS IF HE HAD SIGNED IT.

IF THE PRESIDENT VETOED THE BILL, TWO -THIRDS OR 2/3 OR THE HOUSE ARE REQUIRED TO MAKE SUC

EXEMPTION FROM PROPERTY TAXATION

ART. VI SECTION 28, PAR 3 OF THE CONSTITUTION PROVIDES THAT
"CHARITABLE INSTITUTIONS, CHURCHES, PARSONAGES OR CONVENTS,MOSQUES,NONPROFIT CEMETER
AND EXCLUSIVELY USED FOR RELIGIOUS, CHARITABLE OR EDUCTIONAL PURPOSES SHALL BE EXEMPT FRO

ART. XIV SEC. 4, OF THE PHILIPPINE CONSTITUTION STATES THAT

"ALL REVENUES AND ASSETS OF NON-STOCK, NON-PROFIT EDUCATIONAL INSTITUTIONS USED ACTUALL
FOR EDUCATIONAL PURPOSES SHALL BE EXEMPTED FROM TAXES AND DUTIES.

PUBLIC MONEY NOT RELIGIOUS PURPOSES

ART. VI SECTION 29 PROVIDES THAT, NO PUBLIC MONEY OR PROPERTY SHALL BE APPROPRIATED FOR RE

CONGRESS GRANTING TAX EXEMPTION

ART. VI, SECTION 28 PAR. 4 OF THE CONSTITUTION PROVIDES THAT
"NO LAW GRANTING ANY TAX EXEMPTION SHALL BE PASSED WITHOUT CONCURRENCE OF A MAJORITY

IT SHALL BE OBSERVED THAT THE ABOVE CONSTITUTIONAL PROVISION REQUIRES THE CONCURRENCE O
BUT OF ALL MEMEBERS OF THE CONGRESS.

ART. VI, SECTION 24 OF THE CONSTITUTION PROVIDES THAT

"ALL APPROPRITION, REVENUE OR TARIFF BILLS, BILLS AUTHORIZING INCREASE OF THE PUBLIC DEBT,
BILLS OF LOCAL APPLICATION AND PRIVATE BILLS SHALL ORIGINATE EXCLUSIVELY IN THE HOUSE OF REP
OR CONCUR WITH AMENDMENTS.

NO IMPRISONMENT FOR NON PAYMENT OF POLL TAX

ART. III, SECTION 20 OF THE PHILIPPINE CONSTITUTION PROVIDES THAT
"NO PERSON SHALL BE IMPRISONED FOR DEBT OR NON PAYMENT OF A POLL TAX"

POLL TAX- MEANS A TAX IMPOSED ON A PERSON AS A RESIDENT WITHIN A TERRITORY OF THE TAXING A
PROPERTY, BUSINESS OR OCCUPATION. A GOOD EXAMPLE IS COMMUNITY TAX.

IMPORTANCE OF TAXATION
WITHOUT REVENUE, THERE CAN BE NO CONTINUING GOVERNMENT, WITHOUT GOVERNMENT THERE C

BASIS OF TAXATION
A.PRINCIPLE OF NECESSITY
B.RECIPROCAL DUTIES OF PROTECTION

A.PRINCIPLE OF NECESSITY

TAXATION -IS THE LIFEBLOOD OR THE BREAD AND BUTTER OF THE GOVERNMENT.

B.RECIPROCAL DURIES OF PROTECTION

IT IS UNDER THE BENEFITS-RECEIVED PRINCIPLE- THE GOVERNMENT COLLECTS TAXES FROM THE SUBJEC

PURPOSES OF TAXATION
1. REVENUE PURPOSE- THE PRIMARY PURPOSE OF TAXATION IS TO RAISE REVENUE
2. REGULATORY PURPOSE- IS ALSO KNOWN AS SUMPTUARY -THE SECONDARY OBJECTIVE OF IMPOSING
THIS IS ACCOMPLISHED TO
A. REGULATE INFLATION
B. ACHIEVE ECONOMIC AND SOCIAL STABILITY
C. SERVE AS KEY INSTRUMENT FOR SOCIAL CONTROL
TAXES MAY BE USED AS A TOOL AND WEAPON IN INTERNATIONAL RELATIONS.
IT IS AN INSTRUMENT TO ENCOURAGE FOREIGN TRADE BY PROVIDING TAX INCENTIVES OR PROTECT LO
IMPOSING ADDITIONAL TAXES ON IMPORTED GOODS.

AS A TOOLS TO PROTECT TRADE RELATION, SPECIAL DUTIES MAYBE CREATED TO PROTECT NEW CONDIT
1.DISCRIMINATORY DUTY - THIS SPECIAL DUTY IS DESIGNED TO OFFSET ANY FOREIGN DISCRIMINATION

2.COUNTERVAILING DUTY -IT MAY BE IMPOSED TO OFFSET ANY FOREIGN SUBSIDY GRANTED TO IMPORT

3. MARKING DUTY - IT IS GENERALLY IMPOSED AS ADDITIONAL DUTY TAX ON IMPORTED ARTICLES AND/

4.DUMPING DUTIES- IT REFERS TO THE ADDITIONAL DUTY TAXES IMPOSED ON IMPORTED GOODS WITH
LOCAL INDUSTRIES.

COMPENSATORY PURPOSE
TAXATION- IS A WAY OF GIVING BACK THE EXPECTED ECONOMIC AND SOCIAL BENEFITS DUE TO THE IN

TAXES MAY BE IMPOSED FOR THE "EQUITABLE DISTRIBUTION OF WEALTH AND INCOME" IN SOCIETY.
IN INCOME TAXATON, THE HIGHER TAXES ARE COLLECTED FROM THOSE WHO EARN MORE AND USE TH
OF THE PEOPLE IN GENERAL.

OBJECTS OF TAXATION
1. PERSONS, WHETHER NATURAL OR JURIDICAL
A.NATURAL PERSON- REFERS TO INDIVIDUAL TAXPAYER
B.JURIDICAL PERSON - INCLUDES CORPORATIONS, PARTNERSHIPS, AND ANY ASSOCIATIONS

2. PROPERTIES- WHETHER REAL, PERSONAL, TANGIBLE AND INTANGIBLE PROPERTIES

A.REAL PROPERTIES - IMMOVABLE PROPERTIESSUCH AS LAND,HOSE AND LOT
B.PERSONAL PROPERTIES - INCLUDES MOVABLE PROPERTIES SUCH AS CAR AND OTHER PERSONAL BELO
C.TANGIBLE PROPERTIES- THAT WHICH MAY BE FELT OR TOUCHED AND ARE NECESSARILY CORPOREAL,
D. INTANGIBLE PROPERTIES- PROPERTIES THAT ARE RIGHTS RATHER THAN PHYSICAL OBJECTS.
EX. PATENTS, STOCKS, GOODWILL, TRADEMARKS, FRANCHISES AND COPYRIGHTS.

3.EXCISE OBJECTS, SUCH AS:

A. TRANSACTION- THE ACT OF CONDUCTING ACTIVITIES RELATED TO ANY BUSINESS OR PROFESSION.
IT MAY INVOLVE SELLING, SERVICING,LEASING, BORROWING,MORTGAGING OR LENDING

B. PRIVILEGE- A BENEFIT DERIVED THROUGH GRATUITOUS TRANSFER BY FACT OF DEATH OR DONATION

C. RIGHT- POWER, FACULTY OR DEMAND INHERENT IN ONE PERSON AND INCIDENTAL IN ONE ANOTHER

D. INTEREST- AN ADVANTAGE ACCRUING FROM ANYTHING

CERTAIN DOCTRINES IN TAXATION
1.PROSPECTIVITY OF TAX LAWS
2.IMPRESCRIPTIBILITY OF TAXES
3.DOUBLE TAXATION
4.ESCAPE FROM TAXATION
5.EXEMPTION FROM TAXATION
6.EQUIATABLE RECOUPMENT
7.SET OFF TAXES
8.TAXPAYER SUIT
9.COMPROMISES
10.POWER TO DESTROY

1.PROSPECTIVITY OF TAX LAWS

MEANS THAT THE TAX BILL MUST ONLY BE APPLICABLE AND OPERATIVE AFTER BECOMING A LAW.
ITS SCOPE MUST ONLY COVER THE PRESENT AND THE FUTURE TRANSACTIONS.

2.IMPRESCRIPTIBILITY OF TAXES
TAXES IN GENERAL ARE NOT CANCELABLE.

3.DOUBLE TAXATION
TAXING TWICE
A.THE SAME PURPOSE
B.THE SAME YEAR
C.THE SAME PROPERTY OR THE SAME ACTIVITY OF THE SAME PERSON

3.ESCAPE FROM TAXATION

TAX EVASION- BREAKING THE LAW
TAX AVOIDANCE OR TAX MINIMIZATION- SIDE STEPS THE LAW

FORMS OF TAX AVOIDANCE

1.TAX OPTION- LOWERING TAX RATE-EX. SELLING STOCKS THRU STOCK EXCHANGE (1/2 OF 1%) RATHER
2. SHIFTING- EX. VAT
3.TRANSFORMATION- PRODUCER ABSORBS THE PAYMENT OF TAX TO REDUCE PRICES AND RECOVERS IT
4.EXEMPTION FROM TAXATION- IT MUST BE CONSTRUED AGAINST THE TAXPAYER

EQUITABLE RECOUPMENT
TAX CLAIM FOR REFUNDMAY BE ALLOWED TO BE USED AS PAYMENT FOR UNSETTLED LIABILITIES IF BOT
SAME TRANSACTION IN WHICH OVERPAYMENT IS MADE AND UNDERPAYMENT IS DUE.

SET-OFF TAXES
TAXES ARE NOT SUBJECT TO SET-OFF OR LEGAL COMPESATION BECAUSE THE GOVERNMENT AND TAXPA
AND DEBTOR OF EACH OTHER.
 TAXPAYER SUIT
EFFECTED THROUGH COURT PROCEEDINGS AND COULD ONLY BE ALLOWED IF THE ACT INVOLVES A DIR
OF PUBLIC FUNDS DERIVED FROM TAXATION.

COMPROMISES
PERSONS ALLOWED BY LAW TO DO COMPROMISE ON BEHALF OF THE GOVERNMENT ARE THE FF:
1.ONLY THE BIR COMMISSIONER,AS EXPRESSLY AUTHORIZED BY THE TAX CODE
2.COLLECTOR OF CUSTOMS- WITH RESCPECT TO CUSTOM DUTIES
3. CUSTOMS COMMISSIONER- SUBJECT TO THE APPROVAL OF SECRETARY OF FINANCE (INVOLVING IMP

POWER TO DESTROY
IN THE SENSE THAT LAWFUL TAX CANNOT BE DEFEATED JUST BECAUSE ITS EXERCISE WOULD BE DESTRU

POWER TO BUILD
IT IS PRIMARILY A TOOL THAT CREATES, BUILDS, AND SUSTAINS THE UPLIFTMENT OF SOCIAL CONDITION
TO OTHER INHERENT POWERS OF THE STATE THAT PRESERVE THE FUNDAMENTAL RIGHTS OF THE PEOP

SITUS OF TAXATION
REFERS TO THE PLACE OF TAXATION, OR THE STATE OR POLITICAL UNIT WHICH HS JURISDICTION TO IMP

THE FOLLOWING FACTORS ARE DETERMINANTS TO THE SITUS OF TAXATION.

1.NATURE, KIND OR CLASSIFICATION OF TAX
2.SUBJECT MATTER OR OBJECT OF THE TAX
3.SOURCE OF THE INCOME BEING TAXED
4.PLACE OF THE EXERCISE, PRIVILEGE,BUSINESS OR OCCUPATION BEING TAXED
5.CITIZENSHIP OF THE TAXPAYER
6.RESIDENCE OF THE TAXPAYER

AS A GENERAL RULE, THE STATE HAS THE POWER TO IMPSE TAX ONLY WITHIN ITS TERRITORIAL JURISDIC

GENERAL RULES OF TAX SITUS

NATURE OF TAX CITIZENSHIP RESIDENCY

I. INCOME TAX FILIPINO RESIDENT
FILIPINO NON RESIDENT
ALIENS RESIDENT
ALIENS NON RESIDENT

II. TRANSFER TAX FILIPINO RESIDENT

FILIPINO NON RESIDENT
ALIENS RESIDENT
 ALIENS NON RESIDENT

III. BUSINESS TAX

FARE OF THE SOCIETY.

TH JUST COMPENSATION FOR PUBLIC USE)

OVERNMENT; AND OTHER INHERENT POWER OF THE STATE.

R OF TAXATION OF THE STATE.

MPOSE AND TO COLLECTTAXES.

TO MAKE LAWS CANNOT BE DELEGATED TO OTHER BRANCHES

COLLECTED

OVER ITS CITIZEN OUTSIDE ITS TERRITORY.

RNMENT TO PROVIDE BENEFITS AND PROTECTION

TERRITORIAL LIMITS

ARE NOT APPLICABLE

EEMENT, INTERACTION AND RESPECT ACCORDED BY ONE NATION AND INSTITUTIONS OF ONE ANOTHER.

ERSONS OR CORPORATIONS OF A PARTICULAR CLASS

OWER TO TAX IS UNLIMITED",

IVE) AND WITH HIGHEST DEGREE (SUPREME)
AND CONSTITUTIONAL RESTRICTIONS.

TH THE PRIVATE RIGHTS AND PROPERTY.

XERCISE OF THESE POWERS.

EMINENT DOMAIN
POWER TO TAKE PRIVATE PROPERTY
FOR PUBLIC USE WITH JUST COMPENSATION
ERAL WELFARE

MERELY A POWER TO TAKE

PRIVATE PROPERTY FOR PUBLIC USE

MAY BE GRANTED TO PUBLIC SERVICE

OR PUBLIC UTILITY COMPANIES

PRIVATE PROPERTY IS TAKEN

FOR PUBLIC USE

CAN BE EXPRESSLY DELEGATED

TO THE LOCAL GOVERNMENT UNITS
BY THE LAW MAKING BODY

OPERATES ON THE PARTICULAR PRIVATE

PROPERTY OF AN INDIVIDUAL

MARKET VALUE OF PROPERTY EXPROPRIATED

NO IMPOSITION
 COMMON NECESSITIES AND INTEREST
OF THE COMMUNITY TRANSCEND INDIVIDUAL
TIGHTS IN PROPERTY

SUPERIOR TO AND MAY OVERRIDE

CONSTITUTIONAL IMPAIRMENT RPOVISION
BECAUSE THE WELFARE OF THE STATE IS SUPERIOR TO
ANY PRIVATE CONTRACT
NON IMPAIRMENT CLAUSE

BOUNDED BY PUBLIC PURPOSE

AND JUST COMPENSATION

HAT THE POWER OF TAXATION SHALL BE EXERCISED BY THE GOVERNMENT ONLY FOR THE BETTERMENT

T RESTRICT THE SUPREME, PLENARY, UNLIMITED AND

HEN IT VIOLATES THE CONSTITUTION.

R TARIFF BILLS
TBLE OR EDUCATIONAL ENTITIES,

AX EXEMPTION
S JURISDICTION IN ALL CASES INVOLVING THE LEGALITY
IMPOSED IN RELATION TO TAX.

FUNDS OF GOVERNMENT.
 WITHOUT DUE PROCESS OF LAW
F THE LAWS.

REATED ALIKE UNDER SIMILAR CIRCUMSTANCES AND

ES IMPOSED.

ER THAN INDIRECT TAXES OR ON

RY BILL PASSED BY CONGRESS SHALL, BEFORE IT BECOME A LAW

E SHALL SIGN IT; OTHERWISE, HE SHALL VETO IT AND RETURN THE SAME WITH HIS OBJECTIONS

SIGN INTO LAW A BILL THAT HAS BEEN PASSED BY LEGISLATURE.

THOUT AFFECTING ANY OTHER PROVISIONSOF SUCH BILLS

Y THE PRESIDENT WITH THE RESULT THAT BILLS SHALL FAIL TO BECOME LAWS.

THE HOUSE WHERE IT ORIGINATED WITHIN THIRTY DAYS AFTER THE DATE OF RECEIPT

E HOUSE ARE REQUIRED TO MAKE SUCH BILL TO BECOME LAW.

ENTS,MOSQUES,NONPROFIT CEMETERIES AND LANDS, BUILDINGS AND IMPROVEMENTS ACTUALLY, DIRECTLY

ONAL PURPOSES SHALL BE EXEMPT FROM TAXATION.

ATIONAL INSTITUTIONS USED ACTUALLY, DIRECTLY, AND EXCLUSIVELY

AND DUTIES.
PERTY SHALL BE APPROPRIATED FOR RELIGIOUS PURPOSES.

HOUT CONCURRENCE OF A MAJORITY OF ALL THE MEMBERS OF THE CONGRESS.

ISION REQUIRES THE CONCURRENCE OF A MAJORITY NOT OF THE ATTENDEED CONSTITUTING A QUORUM

NG INCREASE OF THE PUBLIC DEBT,

TE EXCLUSIVELY IN THE HOUSE OF REPRESENTATIVES, BUT THE SENATE MAY PROPOSE

T OF A POLL TAX"

WITHIN A TERRITORY OF THE TAXING AUTHORITY WITHOUT REGARD TO HIS

MMUNITY TAX.

ENT, WITHOUT GOVERNMENT THERE CAN BE NO CIVILIZATION.

E GOVERNMENT.

NT COLLECTS TAXES FROM THE SUBJECTS OF TAXATION IN ORDER THAT IT MAY BE ABLE TO PERFORM ITS FUNCTONS.

O RAISE REVENUE
SECONDARY OBJECTIVE OF IMPOSING TAC.

L RELATIONS.
DING TAX INCENTIVES OR PROTECT LOCAL INDUSTRIES AGAINS FOREIGN COMPETITION BY

BE CREATED TO PROTECT NEW CONDITIONS, SUCH AS:

FFSET ANY FOREIGN DISCRIMINATION AGAINST OUR LOCAL COMMERCE.

OREIGN SUBSIDY GRANTED TO IMPORTED GOODS TO THE PREJUDICE OF OUR LOCAL INDUSTRIES.

UTY TAX ON IMPORTED ARTICLES AND/ OR CONTAINERS WITH IMPROPER3 CLASSIFICATIONS.

IMPOSED ON IMPORTED GOODS WITH PRICES LESSER THAN THEIR FAIR MARKET VALUES TO PROTECT

AND SOCIAL BENEFITS DUE TO THE INHABITANTS.

WEALTH AND INCOME" IN SOCIETY.

THOSE WHO EARN MORE AND USE THE FUNDS COLLECTED FOR THE WELFARE

S, AND ANY ASSOCIATIONS

NGIBLE PROPERTIES
OSE AND LOT
H AS CAR AND OTHER PERSONAL BELONGINGS
D AND ARE NECESSARILY CORPOREAL, EITHER REAL OR PERSONAL PROPERTIES
ER THAN PHYSICAL OBJECTS.
ND COPYRIGHTS.

TO ANY BUSINESS OR PROFESSION.

RTGAGING OR LENDING

SFER BY FACT OF DEATH OR DONATION.

ON AND INCIDENTAL IN ONE ANOTHER.

RATIVE AFTER BECOMING A LAW.
ANSACTIONS.

TOCK EXCHANGE (1/2 OF 1%) RATHER THAN SELLING TO DIRECT BUYER (5% TO 10%)

X TO REDUCE PRICES AND RECOVERS IT BY IMPROVING PRODUCTION PROCESSES

ST THE TAXPAYER

ENT FOR UNSETTLED LIABILITIES IF BOTH TAXES ARISE FROM THE

DERPAYMENT IS DUE.

ECAUSE THE GOVERNMENT AND TAXPAYER ARE NOT MUTUAL CREDITOR

 ALLOWED IF THE ACT INVOLVES A DIRECT AND ILLEGAL DISBURSEMENT

F THE GOVERNMENT ARE THE FF:

THE TAX CODE

CRETARY OF FINANCE (INVOLVING IMPOSITION OF FINESSURCHARGES AND FORFEITURES)

CAUSE ITS EXERCISE WOULD BE DESTRUCTIVE OR WOULD BRING ABOUT INSOLVENCY TO A TAXPAYER.

HE UPLIFTMENT OF SOCIAL CONDITION OF THE PEOPLE IN GENERAL AS IT CONTINUOUSLY SUPPORTS

E FUNDAMENTAL RIGHTS OF THE PEOPLE.

L UNIT WHICH HS JURISDICTION TO IMPOSE TAX OVER ITS INHABITANTS.

TAXATION.

BEING TAXED

ONLY WITHIN ITS TERRITORIAL JURISDICTION.

WITHIN THE PHILS. OUTSIDE THE PHILS.

YES YES
YES NO
YES NO
YES NO

YES YES
YES YES
YES YES
YES NO

YES NO
TS FUNCTONS.
TAX ADMINISTRATION
IS A SYSTEM INVOLVING ENFORCEMENT OF TAXES THROUGH THE FOLLOWING ASPECTS OF TAXATION.

STAGES OR PROCESS OF TAXATION

1.LEVY
2.ASSESSMENT
3.TAX PAYMENT/COLLECTION

LEVY
IMPOSITION OF TAXES THE PASSAGE OF TAX LAWS OR ORDINANCES THROUGH THE LEGISLATURE.

ASSESSMENT
INVOLVES THE ACT OF ADMINISTRATION AND IMPLEMENTATION OF THE TAX LAWS BY THE EXECUTIVE THROUGH
GENERALLY TAXES ARE SELF ASSESSING. IT MEANS THAT TAXPAYER CAN COMPUTE HIS TAXES BY HIMSELF.

PYMENT OF TAX
INVOVING THE ACT OF COMPLIANCE BY THE TAXPAYER IN CONTRIBUTING HIS SHARE TO DEFRAY THE EXPENSES OF

LEVY AND ASSESSMENT ARE "IMPACT OF TAXATION"

PAYMENT OF TAX/COLLECTION- "INCIDENCE OF TAXATION"

ASSESSMENT AND COLLECTION CAN BE DELEGATED BECAUSE THEY ARE ADMINISTRATIVE IN NATURE.

PRINCIPLES OF SOUND TAX SYSTEM

1.FISCAL ADEQUACY
2.EQUALITY OR THEORETICAL JUSTICE
3.ADMINISTRATIVE FEASIBILITY

1.FISCAL ADEQUACY
STATES THAT THE SOURCES OF REVENUE OF THE GOVERNMENT SHOULD BE SUFFICIENT TO MEET THE DEMAND O

2.EQUALITY OR THEORETICAL JUSTICE

STATES THAT THE TAX BURDEN MUST BE PROPORTIONATE TO THE TAXPAYERS ABILITY TO PAY.
IT IS BASED ON THE PHILOSOPHY THAT "HE WHO RECEIVED MORE SHOULD GIVE MORE".

3.ADMINISTRATIVE FEASIBILITY
TAX LAWS MUST BE CONVENIENT, JUST, UNIFORM AND EFFECTIVE IN THEIR ADMINISTRATION- FREE FROM CONFU
APPLICATIONS OF THESE ARE THE FOLLOWING:
A.COLLECTION OF TAXES AT SOURCE (WITHHOKDING TAX)
B.ASSIGNING OF DULY AUTHORIZED BANKS TO COLLECT TAXES
CQUARTERLY FILING AND PAYMENT OF INCOME TAXES.
TAX ADMINISTRATIVE AGENCIES
DEPARTMENT OF FINANCE (DOF)- IS THE PRINCIPAL ADMINISTRATIVE AGENCY OF THE GOVERNMENT FOR TAX ADM
IT HAS EXECUTIVE SUPERVISION AND CONTROL OVER OTHER AGENCIES SUCH AS:

1.BUREAU OF INTERNAL REVENUE -THE ADMINISTRATIVE AGENCY OF THE GOVERNMENT IN CHARGE OF THE PRIM
THE RXECUTION OF NIRC AND OTHER TAX LAWS AND REGULATIONS.

2.BUREAU OF CUSTOMS (BC) AND TARIFF COMMISSION

3.LAND TRANSPORTATION OFFICE (LTO)- THE OFFICE RESPONSIBLE TO COLLECT REGISTRATION FEES AND MOTOR V

4.DULY AND LAWFULLY AUTHORIZED COLLECTORS.

5.LOCAL OFFICES IN CHARGE TO ENFORCE LOCAL TAXATION, SUCH AS:

A.PROVINCIAL, CITY, MUNICIPAL AND BARANGY TREASURERS
B.PROVINCIAL AND CITY ASSESSORS
C.PROVINCIAL AND CITY BOARD OF ASSESSMENT APPEALS
D.CENTRAL BOARD OF ASSESSMENT APPEALS

THE SECRETARY OF JUSTICE

AS THE LEGAL OFFICER OF THE GOVERNMENT, HAS THE AUTHORITY TO RENDER ADMINISTRATIVE INTERPRETATIO
AND ASCERTAIN THE VALIDITY OF TAX LAWS SUBJECT TO REVIEW BY THE COURTS OF JUSTICE.

POWERS OF THE INTERNAL REVENUE COMMISSIONER

1.INTERPRET TAX LAWS
2.DECIDE TAX CASES
3.SUMMON, AND OBTAIN INFORATION OR TESTIMONY OF PERSONS
4.MAKE ASSESSMENTS AND PRESCRIBE ADDITIONAL TAX REQUIREMENTS
5. DELEGATE POWERS

REGISTRATION PERIOD
EVERY PERSON SUBJECT TO INTERNAL REVENUE TAX SHALL REGISTER ONCE WITH THE APPROPRIATE REVENUE DIS
1.WITHIN 10 DAYS FROM DATE OF EMPLOYMENT
2.ON OR BEFORE THE COMMENCEMENT OF BUSINESS.
3.BEFORE PAYMENT OF TAX DUE
4.UPON FILING OF A RETURN

BIR FORMS
1. 1901- FOR REGSTRATION OF SELF EMPLOYED, MIXED INCOME INDIVDUALS, ESTATES AND TRUST.

2.1902 -FOR INDIVIDUALS EARNING PURELY COMPENSATION INCOME.

3. 1903 -FOR REGISTRATION OF CORPORATIONS AND PARTNERSHIPS

4. 1904 -FOR REGISTRATION OF ONE TIME TAXPEAYER

1905- FOR UPDATING/CANCELLATION OF REGISTRATION, CANCELLATION OF TIN, NEW COPY OF CERTIFICATE OF RE

BIR FORM 0605 SHALL BE ACCOMPLISHED IN THE FOLLOWING INSTANCES:

1. UPON PAYMENT OF ANNUAL REGISTRATION FEE FOR NEW BUSINESS AND FOR RENEWALS ON OR BEFORE JANU
2. UPON RECEIPT OF A DEMAND LETTER/ ASSESSMENT NOTICE AND/ COLLECTION LETTER FROM BIR
3. EVERY TIME A TAXPAYER OR PENALTY IS DUE OR AN ADVANCE PAYMENT IS MADE.

PRINTING RECEIPTS AND SALES INVOICES

THE FOLLOWING ARE REQUIREMENTS FOR PRINTING INVOICES AND RECEIPTS:
1. BIR'S AUTHORITY TO PRINT
BIR FORM 1906 SHOULD BE ACCOMPLISHED BY A TAXPAYER

2. OTHER REQUIREMENTS
A.SERIALLY NUMBERED
B.CONTAIN THE NAME , BUSINESS STYLE, TIN AND BUSINESS ADDRESS

BUSINESS OF DECEASED PERSON

WHEN THE BUSINESS OF A DECEASED PERSON IS CONTINUED BY A CERTAIN PERSON, THE FOLLOWING RULES SHAL
1. NO ADDITIONAL PAYMENT SHALL BE REQUIRED FOR THE REMAINING PERIOD WITHIN WHICH THE TAX WAS PAID
2. THE PERSON WHO WILL CONTINUE THE BUSINESS SHOULD SUBMIT THE INVENTORIES OF GOODS OR STOCKS TO
30 DAYS FROM THE DEATH OF THE DECEDENT.
3.THE SAME REQUIREMENTS 1 AND 2 SHALL BE APPLIED IN CASE OF TRANSFER OF OWNERSHIP OR CHANGE OF NA

TAX ASSESSMENT
BASICALLY REFERS TO THE PROCESS OF DETERMINING THE CORRECT AMOUNT OF TAX DUE IN ACCORDANCE WITH

TAX RETURN -REFERS TO A FORMAL REPORT PREPARED Y THE TAXPAYER OR HIS AGENT IN A PRESCRIBED FORM SH

EXAMPLES OF TAX RETURNS:

1700/1701 - ANNUAL ITR FOR INDIVIDUAL
1702 - ANNUAL ITR FOR PARTNERSHIP AND CORPORATION
1800- DONOR'S TAX RETURN
1801 - ESTATE TAX RETURN

ASSESSMENT PERIOD
REFERS TO THE PERIOD IN PROCESSING, APPRAISING AND DETERMINING THE VALUE OF THE SUBJECT OF TAXATION
INCLUDING THE COMPUTATION OF TAX PRESCRIPTION, SURCHARGES AND INTERESTS TO ARRIVE AT SPECIFIC SUM

TAX ASSESSMENT PERIOD

A. WITHIN THE 3 YEAR PRESCRIPTION PERIOD, WHEN THE TAXPAYER FILED AN ACCURATE TAX RETURN.
B. WITHIN THE 10 YEAR PRESCRIPTION PERIOD, WHEN THE BIR DISCOVERS THAT THE TAX RETURN FILED WAS FRAU
C.BEFORE THE EXPIRATION OF THE 3 YEAR PERIOD, THE BIRE AND TAXPAYER MAY AGREE ON THE PERIOD OF ASSES
D.JEOPERDY ASSESSMENT, IF THE TAXPAYER
1. RETIRES FROM BUSINESS
2.LEAVES THE COUNTRY

PRE-ASSESSMENT NOTICE
IS A DUE PROCESS REQUIREMENT IN THE ISSUANCE OF DEFICIENCY TAX ASSESSMENT. IT MAY BE CLASSIFIED AS FO

1. NOTICE FOR INFORMAL CONFERENCE -TO BE SENT BY THE REVENUE OFFICER

THE TAXPAYER IS GIVEN 15 DAYS TO RESPOND FROM DATE OF RECECIPT. FAIURE TO RESPOND
WILL WARRANT THE ENDORSEMENT OF THE CASE TO ASSESSMENT DIVISION.

1. PRELIMINARY ASSESSMENT NOTICEC - IF THE RESULT OF THE REVIEW CONDUCTED BY THE ASSESSMENT DIVISIO
SUFFICIENT BASIS TO ASSESS THE TAXPAYER DOR ANY DEFICIENCY TAX.
THE TAXPAYER IS GIVEN 15 DAYS FROM RECEIPT TO CONTEST THE AMOUNT BEING ASSESSED.
FAILURE TO RESPOND WILL WARRANT THE ISSUANCE OF FORMAL LETTER OF DEMAND OF PAYMENT TOGETHER W
THE COMPUTATION INCLUSIVE OF APPLICABLE PENALTIES.

TAX ASSESSMENT PROCEDURE

1.BIR SENDS WRITTEN NOTICE TO TAXPAYER

2.TAXPAYER RESPONDS TO BIR
IF FAILS TO RESPOND, BIR ISSUES ASSESSMENT
TAXPAYER MAY FILE A PROTEST WITHIN 30 DAYS FROM RECEIPT OF ASSESSMENT
TAXPAYER SHOULD SUBMIT PROOFS WITHIN 60 DAYS FROM FILING OF PROTEST
IF THE BIR DENIES THE TAXPAYER'S PROTEST, OR IGNORES SUPPORTING DOCUMENTS WITHIN 180 DAYS UPON SUB
THE TAXPAYER MAY APPEAL TO THE CTA WITHIN 30 DAYS FROM RECEIPT OF DENIAL OR FROM LAPSE OF 180 DAY P
IF NO APPEAL WAS MADE, BIR DECISION ON TAX ASSESSMENT BECOMES FINAL, EXECUTORY AND DEMANDABLE.

REMEDIES FOR THE COLLECTION OF THE DELINQUENT TAXES ARE:

1.DISTRAINT OF PERSONAL PROPERTY
2. LEVY OF REAL PROPERTY
3.OTHER CIVIL OR CRIMINAL ACTION

1.DISTRAINT OF PERSONAL PROPERTY

IS THE SEIZURE BY THE GOVERNMENT OF PERSONAL PROPERTY- TANGIBLE OR INTANGIBLE - TO ENFORCE THE PAY
TO BE FOLLOWED BY ITS PUBLIC SALE IF TAXES ACCRING THERETO ARE NOT VOLUNTARILY PAID.
ANY EXCESS OR RESIDUE MUST BE RETURNED TO THE OWNER OF THE PROPERTY.

OFFICERS SHOULD TAKE EFFECT THE DESTRAINT:

A.BIR COMMISSIONER OR HIS DULY AUTHORIZED REPRESENTATIVE, IF THE AMOUNT INVOLVED IS IN EXCESS OF 1,O
B. THE REVENUE DISTRICT OFFICER, IF THE AMOUNT INVOLVED IS 1,000,000.00 OR LESS.

THE REVENUE OFFICER LEVYING THE DISTRAINT SHALL ACCOUNT THE GOODS DISTRAINED WITHIN 10 DAYS FROM
REPORT OF SALE TO BIR- WITHIN 2 DAYS AFTER THE SALE, THE OOFICER MAKING THE SAME SHALL MAKE A REPOR

PURCHASE BY GOVERNMENT AT SALE UPON DISTRAINT

WHEN THE AMOUNT BID FOR THE PROPERTY IS NOT EQUAL TO THE AMOUNT PF TAX OR WHEN SUBSTANTIALLY LE

FURTHER DISTRAINT
THE REMEDY OF DISTRAINT OF PERSONAL PROPERTY AY BE REPEATEDE IF NECESSARY UNTIL THE FULL AMOUNT D
AND ALL EXPENSES ARE COLLECTED.

LEVY OF REAL PROPERTY

SEIZURE BY THE GOVERNMENT OF REAL PROPERTY IN ORDER TO ENFORCE THE PAYMENT OF TAXES.
THE REMEDY SHALL NOT BE AVAILED IF THE MOUNT OF TAX INVOLVED IS NOT MORE THAN 100.00.

PROCEDURES OF LEVY
1.SUMMARY REMEDIES
LEVY SHALL BE EFFECTED IN WRITING UPON THE CERTIFICATE DETAILING A DESCRIPTION OF THE PROPERTY UPON

THE COMMISSIONER OR HIS DULY AUTHORIZED REPRESENTATIVE SHALL WITHIN 30 DAYS AFTER EXECUTION OF TH

2.ADVERTISEMENT AND SALE- WITHIN 20 DAYS AFTER LEVY, THE OFFICER CONDUCTING THE LEVY SHALL PROCEED

3.REDEMPTION OF PROPERTY SOLD -WITHIN ONE YEAR FROM THE DATE OF SALE, THE DELINQUENT TAXPAYER, OR
RIGHT OF PAYING TO THE RDO THE MOUNT OF PUBLIC TAXES, TOGETHER WITH THE INTEREST AT THE RATE OF 15%

FURTHER LEVY
THE REMEDY OF LEVY OF PERSONAL PROPERTY AY BE REPEATEDE IF NECESSARY UNTIL THE FULL AMOUNT DUE
AND ALL EXPENSES ARE COLLECTED.

TAX LIEN
IS A LEGAL CLAIM GRANTED TO THE GOVERNMENT TO SECURE PROPER PAYMENT OF THE TAX, SURCHARGES, INTE
LEVY OR DISTRAINT.

TAX LIEN IS ENFORCED BY THE FF:

A.SEIZURE OF THE PROPERTY -ANY EXCESS IS TURNED OVER TO THE OWNER OF THE PROPERTY
B.FORFEITURE OF THE PROPERTY -EXCESS IS NOT TURNED OVER TO THE OWNER

COMPROMISE
IS A CONTRACT WHEREBY THE PARTIES, BY RECIPROCAL CONCESSIONS, AVOID LITIGATION OR PUT AN END TO ONE

SECTION 204 OF THE TAX CODE PROVIDES THAT THE COMMISSIONER MAY COMPROMISEE THE PAYMENT OF ANY
1. A REASONABLE DOUBT AS TO THE VALIDITY OF THE CLAIM AGAINST TAXPAYER EXIST.
1. THE FINANCIAL POSITION OF THE TAXPAYER DEMONSTRATES A CLEAR INABILITY TO PAY THE ASSESSED TAX.

CASES WHICH MAY BE COMPROMISED:

1.DELINQUENT ACCOUNTS
2.CASES UNDER ADMINISTRATIVE PROTEST
3.CIVIL TAX CASES DIPUTED BEFORE THE COURTS
4.COLLECTION CASES FILED IN COURTS
5.CRIMINAL VIOLATIONS , OTHER THAN THOSE FILED IN THE COURTS OR THOSE INVOLVING CRIMINAL TAX FRAUD.

MINIMUM COMPROMISE PERCENTAGE

A. 10% OF BASIC TAX ASSESSED DUE TO FINANCIAL INCAPABILITY
INDIVIDUAL,SINGLE- MONTHLY SALARY IS 10,500 OR LESS
IF MARRIED,SALARY TOGETHER IS 21,000 OR LESS.
INDIVIDUAL WITHOUT INCOME
ZERO NETWORTH OR NEGATIVE
NON OPERATING COMPANIESFOR A PERIOD OF 3 YEARS OR MORE

B.20% OF BASIC TAX ASSESSED DUE TO FINANCIAL INCAPABILITY FOR

A.DISSOLVED CORPORATION
B.NON OPERATING COMPANIES FOR A PERIOD OF LESS THAN 3 YEARS
C.CORPORATIONS DECLARED INSOLVENT OR BANKRUPT

C.40% OF ASSESSED TAXDUE TO FINANCIAL INCAPABILITY FOR SURPLUS OR EARNINGS DEFICIT RESULTING TO IMPA
ORIGINAL CAPITALBY AT LEAST 50%.

D.40% FOR DOUBTFUL VALIDITY OF ASSESSMENT.

REQUIRING FOR FILING OF BONDS

THIS IS MOSTLY APPLICABLE TO CUSTOM DUTIES AND EXCISE TAX.

IN CASES WHERE THE COMPUTATON OF REQUIRED ACTUAL TAX PAYMENT IS NOT READILY DONE AND WILL CAUSE

MANUFACTURER'S AND IMPORTER'S BOND

MANUFACTURER'S AND IMPORTERS OF ARTICLES (ALCOHOL AND TOBACCO PRODUCTS) SUBJECT TO EXCISE TAX
1.INITIAL BOND- 100,000.00
IF AFTER 6 MONTHS OF OPERATION THE AMOUNT OF INITIAL BOND IS LESS THAN THE TOTAL EXCISE TAX PAID DUR
SHALL BE ADJUSTED TO TWICE TO TAX PAID DURING THE PERIOD, THE AMOUNT OF THE BOND SHALL BE ADJUSTED

2. BOND OF SUCCEEDING YEARS OF OPERATION- THE BOND FOR SUCCEEDING YEARS OF OPERATION SHALL BE BAS
IMMEDIATELY PRECEDING THE YEAR OF OPERATION.
INFORMER'S REWARD
FOR VOLUNTARY SWORN INFORMATION GIVEN TO THE BIR WHICH LEADS TO THE DISCOVERY OF FRAUDS THEREBY
10% OF SUCH AMOUNT RECOVERED MAY BE REWARDED TO THE INFORMER OR 1,000,000 WHICHEVER IS LOWER.

LETTER OF AUTHORITY
IS A REQUEST TO THE TAXPAYER TO PERMIT THE BEARER THEREOF TO CONDUCT THE NECESSARY EXAMINATION O
AUTHORIZED OFFICER OF BIR.

SURCHARGE
IS A CIVIL PENALTY IMPOSED BY LAW AS ADDITION TO THE MAIN TAX REQUIRED TO BE PAID DUE TO DELINQUENC

SURCHARGES ARE CLASSIFIED AS SIMPLE NEGLECT AND WILLFUL NEGLECT

A.SIMPLE NEGLECT- 25% SURCHARGE

1. FAILS TO FILE ANY RETURN AND PAY THE TAX DUE THEREON.
2.FILES INCOME TAX RETURNS WITH AN INTERNAL REVENUE OFFICER OTHER THAN WITH WHOM THE RETURN IS R
3.FAILS TO PAY THE DEFICIENCY TAX WITHIN THE TIME PRESCRIBED FOR ITS PAYMENT IN THE NOTICE OF ASSESSM
4.FAILS TO PAY THE FULL OR AMOUNT OF TAX SHOWN ONANY RETURN REQUIRED TO BE FILED.

B.WILLFUL NEGLECT-50% OF THE TAX OR OF THE DEFICIENCY TAX.

1.WILLFULLY OR INTENTIONALLY NEGLECTS TO FILE THE RETURN WITH THE PERIOD PRESCRIBED BY THE TAX CODE

2. PRESENTS FALSE OR FRAUDULENT RETURN TO THE BIR.

INTEREST
IN GENERAL, RULES AND REGULATIONS REQUIRE THAT FROM THE DATE PRESCRIBED FOR PAYMENT UNTIL THE AM
OF 20% PER ANNUM.
A 20% INTEREST PER ANNUM SHALL BE IMPOSED ON THE BASIC TAX UNPAID AFTER DUE DATE.

PENALTY FOR A CONVICTED TAX EVADER

PUNISHED BY A FINE NOT LESS THAN 30,000 BUT NOT MORE THAN 100,000AND AN IMPRISONMENT OF NOT LESS
BUT NOT MORE THA 4 YEARS

ANY PERSON WHO WILLFULLY FAILS TO COMPLY WITH THE REQUIRED RECORDS, ACCURATE INFORMATION REMIT
BE PUNISHED BY A FINE NOT LESS THAN 10,000 AND BE IMPRISONED FOR NOT LESS THAN ONE YEAR BUT NOT MO

ANY CORPORATION, ASSOCIATION, OR GENERAL CO-PARTNERSHIP LIABLE FOR ANY OF ACTS OR OMISSION
FINE OF NOT LESS THAN 50,000 BUT NOT MORE THAN 100,000
VIOLATION OF PRINTING AND ISSUANCE OF RECEIPTS, SALES OR COMMERCIAL INVOICES
UPON CONVICTION, A FINE OF NOT LESS THAN 1,000 AND NOT MORE THAN 50,000 AND SUFFER IMPRISONMENT O
MORE THAN 4 YEARS.

OTHER PENALTIES
1.FAILURE TO FILE CERTAIN INFORMATION RETURN DUE TO SIMPLE NEGLECT.

2. FAILURES OF A WITHHOLDING AGENT TO COLLECT AND REMIT TAXES OR REFUND EXCESS WITHHOLDING TAX
PENALTY: 1,000.00 FOR EACH FAILURE. THE AGGREGATE AMOUNT TO BE IMPOSED FOR ALL SUCH FAILURES DURIN
NOT EXCEED 25,000.00

APPLYING FOR NO AUDITING PROGRAM

A.INCOME TAX PAYMENT FOR THE CURRENT TAXABLE YEAR MUST EXCEED THE INCOME TAX PAYMENT FOR THE BA
B.RATIO OF INCOME TAX PAYMENT TO GROSS SALES/RECEIPTS FOR THE CURRENT TAXABLE YEAR MUST BE AT LEA

TAXPAYERS WHO ARE REPORTING NET LOSS OR HAVE A NET OPERATING LOSS CARRIED OVER WITHOUT MCIT DUE
FOR PARTICIPATING IN THE NO AUDIT PROGRAM.
CTS OF TAXATION.

EGISLATURE.

BY THE EXECUTIVE THROUGH ITS ADMINISTRATIVE AGENCIES.

IS TAXES BY HIMSELF.

TO DEFRAY THE EXPENSES OF THE GOVERNMENT.

TIVE IN NATURE.

ENT TO MEET THE DEMAND OF PUBLIC EXPENDITURES.

STRATION- FREE FROM CONFUSION AND UNCERTAINTY.

 E GOVERNMENT FOR TAX ADMINISTRATION.

MENT IN CHARGE OF THE PRIMARY FUNCTION REGARDING

STRATION FEES AND MOTOR VEHICLE TAX.

MINISTRATIVE INTERPRETATION

E APPROPRIATE REVENUE DISTRICT OFFICER (RDO)

ES AND TRUST.
W COPY OF CERTIFICATE OF REGISTRATION.

NEWALS ON OR BEFORE JANUARY 31, EVERY YEAR

TTER FROM BIR

THE FOLLOWING RULES SHALL BE OBSERVED:

HIN WHICH THE TAX WAS PAID.
RIES OF GOODS OR STOCKS TO THE BIR WITHIN

WNERSHIP OR CHANGE OF NAME OF THE BUSINESS ESTABLISHMENT.

X DUE IN ACCORDANCE WITH THE PREVAILING TAX LAWS.

NT IN A PRESCRIBED FORM SHOWING AN ENUMERATION OF TAXABLE AMOUNTS AND OTHER DETAILS.

OF THE SUBJECT OF TAXATION,

S TO ARRIVE AT SPECIFIC SUM OF TX CHARGED ON A PERSON OR PROPERTY.

RATE TAX RETURN.

TAX RETURN FILED WAS FRAUDULENT.
GREE ON THE PERIOD OF ASSESSMENT.

T. IT MAY BE CLASSIFIED AS FOLLOWS:

BY THE ASSESSMENT DIVISION HAS ESTABLISHED

ND OF PAYMENT TOGETHER WITH THE ASSESSMENT SHOWING

S WITHIN 180 DAYS UPON SUBMISSION

OR FROM LAPSE OF 180 DAY PERIOD.
CUTORY AND DEMANDABLE.

NGIBLE - TO ENFORCE THE PAYMENT OF TAXES,

ARILY PAID.

INVOLVED IS IN EXCESS OF 1,OOO,OOO.OO

INED WITHIN 10 DAYS FROM RECEIPT OF WARRANT.

E SAME SHALL MAKE A REPORT OF HIS PROCEEDINGS

X OR WHEN SUBSTANTIALLY LESSER THAN THE ACTUAL MARKET VALUE OF THE ARTICLES OFFERED FOR SALE, THE BIR COMMISSIONER OF

Y UNTIL THE FULL AMOUNT DUE

MENT OF TAXES.
THAN 100.00.

ION OF THE PROPERTY UPON WHICH LEVY IS MADE.

DAYS AFTER EXECUTION OF THE WARRANT, PROCEED WITH THE LEVY.

NG THE LEVY SHALL PROCEED TO ADVERTISE.

E DELINQUENT TAXPAYER, OR ANYONE FOR HIM, SHALL HAVE THE

INTEREST AT THE RATE OF 15% PER ANNUM FOR THE DATE OF PURCHASE TO THE DATE OF REDEMPTION.

IL THE FULL AMOUNT DUE

THE TAX, SURCHARGES, INTEREST AND COST ON ALL PROPERTY SUBJECT TO

ATION OR PUT AN END TO ONE ALREADY COMMENCED.

MISEE THE PAYMENT OF ANY REVENUE TAX WHEN:

O PAY THE ASSESSED TAX.

OLVING CRIMINAL TAX FRAUD.

S DEFICIT RESULTING TO IMPAIRMENT IN THE

ADILY DONE AND WILL CAUSE DELAYS, A BOND IS SECURED INSTEAD.

TS) SUBJECT TO EXCISE TAX

E TOTAL EXCISE TAX PAID DURING THE PERIOD, THE AMOUNT OF THE BOND
THE BOND SHALL BE ADJUSTED TO TWICE THE TAX ACTUALLY PAID FOR THE PERIOD.

OF OPERATION SHALL BE BASED ON THE ACTUAL TOTAL EXCISE TAX PAID DURING
SCOVERY OF FRAUDS THEREBY RESULTING IN REVENUE RECOVERIES,
0,000 WHICHEVER IS LOWER.

NECESSARY EXAMINATION OF SAID BOOKS AND RECORDS, SIGNED BY THE BIR COMMISSIONER OR HIS DEPUTY OR

BE PAID DUE TO DELINQUENCY OR MISINTERPRETATION OF TAXES.

WITH WHOM THE RETURN IS REQUIRED TO BE FILED.

T IN THE NOTICE OF ASSESSMENT
O BE FILED.

RESCRIBED BY THE TAX CODE

FOR PAYMENT UNTIL THE AMOUNT IS FULLY PAID MAY PRESCRIBE AN INTEREST

MPRISONMENT OF NOT LESS THAN 2 YEARS

CURATE INFORMATION REMIT, UPON CONVICTION, SHALL

THAN ONE YEAR BUT NOT MORE THAN 10 YEARS.

OF ACTS OR OMISSION
AND SUFFER IMPRISONMENT OF NOT LESS THAN 2 YEARS BUT NOT

EXCESS WITHHOLDING TAX

OR ALL SUCH FAILURES DURING THE CALENDAR YEAR SHALL

ME TAX PAYMENT FOR THE BASE YEAR BY AT LEAST 20%

AXABLE YEAR MUST BE AT LEAST EQUAL TO THAT BASE YEAR.

ED OVER WITHOUT MCIT DUE SHALL BE DISQUALIFIED

E, THE BIR COMMISSIONER OF HIS DEPUTY MAY PURCHASE THE SAME IN BEHALF OF THE GOVERNMENT.
EXAMPLE

BEG. CAPITAL 200000

ENDING CAPITAL 190000
ADDITIONAL INVESTMENT 30000
PERSONAL WITHDRAWAL 100000

COMPUTATION OF INCOME:

ENDING CAPITAL 190000

ADD:PERSONAL WITHDRAWAL 100000
290000
LESS:BEG. CAPITAL 200000
ADDIT'L INVESTMENT 30000 230000
INCOME-INCREASE IN NET WOR 60,000

ANOTHER ILLUATRATION

INCREASE IN CASH 20000

DECREASE IN AR 80000
DECREASE IN INVENTORY 150000
DECREASE IN AP 60000
INCREASE IN NOTES PAYABLE 30000

DURING THE YEAR, BANAWE SOLD 1000 SHARES AT 100 TO SEVERAL STOCKHOLDERS AND PAID DIVIDEND
AMOUNTING TO 80000.
EFFECT TO NET ASSET
INCREASE DECREASE
INCREASE IN CASH 20000
DECREASE IN AR 80000
DECREASE IN INVENTORY 150000
DECREASE IN AP 60000
INCREASE IN NOTES PAYABLE 30000
TOTAL 230,000 110000
NET INCREASE OF ASSET 120,000
ADD:DIVIDEND PAID 80000
TOTAL 200,000
LESS: PROCEED FROM SALE OF CAPITAL STOC 100000
NET INCOME-INCREASE IN NET WORTH 100,000

RETURN ON CAPITAL
TO BE CONSIDERED INCOME, THE SALE MUST EXCEED ITS RELATED COST.
CAPITAL
DENOTES THE ORIGINAL INVESTMENT OR FUND USED IN ORDER TO GENERATE EARBIBGS WHICH IS CALLED INC
CAPITAL IS A WEALTH WHILE
INCOME IS THE SERVICE OF WEALTH.

REVENUE- PERTAINS TO ALL FUNDS ACCRUING TO THE TREASURY OF THE GOVERNMENT DERIVED FROM TAX, D
INCOME - REFERS TO EARNINGS OF INDIVIDUAL PERSONS OR JURIDICAL SUBJECT TO TAX.

RECEIPTA ARRE CONSIDERED CASH COLLECTED OVER A BUSINESS PERIOD.

INCOME-REFERS TO THE AMOUNT AFTER EXCLUDING CAPITAL INVESTED, COST OF GOODS SOLD AND OTHER D

TAXABLE INCOME IS SYNONYMOUS TO NET INCOME.

INCOME CONSTRUCTIVELY RECEIVED

INCOME IS CONSIDERED CONSTRUCTIVELY RECEIVED WHEN IT IS CREDITED TO THE ACCOUNT OF, OR
SEGREGATED IN FAVOR OF A PERSON.

AS IF THEORY OF CONSTRUCTIVE INCOME IS DESIGNED TO PREVENT A CASH BASIS TAX PAYER TO DELAY REPOR

RC-RESIDENT CITIZEN
DC- DOMESTIC CORPORATION
NRC-NON RESIDENT CITIZEN
FC-FOREIGN CORPORATION
SOURCES OF INCOME
WITHIN OUTSIDE PARTLY WITHIN AND WITHOUT
RC/DC TAXABLE TAXABLE TAXABLE
RC/ALIENS/FC TAXABLE NON TAXABLPARTLY TAXABLE

CLASSIFICATIONS OF INCOME
1.COMPENSATION INCOME- LABOR, ESPECIALLY EMPLOYMENT
2.PROFESSION OR BUSINESS INCOME -EXERCISE OF PROFESSION OR BUSINESS OPERATION
3.PASSIVE INCOME -TAXPAYER MERELY WAITS FOR THE AMOUNT TO COME.
GENERALLY, IT SUBJECT TO FINAL TAX.
4.CAPITAL GAIN- DERIVED FROM SALE OF ASSETS NOT USED IN TRADE OR BUSINESS.
EX. SALE OF FAMILY HOME OR PERSONAL PROPERTY.

FORMS AND VALUATION OF INCOME

IN GENERAL, TAXABLE INCOME IS VALUED AS FOLLOWS:
1.CASH RECEIVED FOR INCOME EARNED
2. FAIR VALUE OF PROPERTY RECEIVED AS PAYMENT FOR INCOME EARNED.
3.FAIR VALUE (AT THE DATE THE INCOME WAS EARNED ) OF THE SHARE OF STOCKS RECEIVED AS PAYMENT OF
4.FAIR VALUE OF THE SERVICE RECEIVED (IN THE ABSENCE OF STIPULATED PRICE)
5.FAIR VALUE OF THE PROMISSORY NOTES RECEIVED AS PAYMENT OF INCOME:
A.FACE VALUE OF THE NOTE, IF INTEREST BEARING
B.DISCOUNTED VALUE OF THE NOTE, IF NON INTEREST BEARING.
METHODS OF REPORTING INCOME AND EXPENSES:
1. CASH METHOD
2.ACCRUAL METHOD

SPECIAL METHODS
1.INSTALLMENT
2.DEFERRED PAYMENT
3.LONG TERM CONSTRUCTION CONTRACT CLASSIFIED INTO:
A.COMPLETED CONRACT METHOD
B.PERCENTAGE OF COMPLETION METHOD
4.FARMING CATEGORIZED AS FOLLOWS:
A.CASH BASIS
B.ACCRUAL BASIS
C.CROP BASIS

1.INSTALLMENT
REPORTABLE INCOME = INSTALLMENT COLLECTION X( GROSS PROFIT/CONTRACT PRICE)
A. PERSONAL PEROPERTY IS REGULARLY SOLD ON INSTALLMENT BASIS BY A DEALER
B. CASUAL SALE OF PERSONAL PROPERTY ON INSTALLMENT BASIS WHERE THE SELLING PRICE EXCEEDS 1,000
AND THE INITIAL PAYMENTS DO NOT EXCEED 25% OF THE SELLING PRICE.

AS A RULE IN THE CASUAL SALE OF PERSONAL PROPERTY, IF THE INITIAL PAYMENT EXCEEDS THE 25% OF SELLIN
THE TRANSACTION IS CONSIDERED AS CASH SALES.

INSTALLMENT SALE OF REAL PROPERTY

A.SALE OF REALTY (INVENTORY) WHERE INITIAL PAYMENTS DO NOT EXCEED 25% OF THE SELLING PRICE.
THE SALE IS SUBJECT TO CREDITABLE WITHHOLDING TAX AND NORMAL INCOME TAX.

B.SALE BY INDIVIDUALS OF REAL PROPERTY CONSIDERED AS CAPITAL ASSET, IF INITIAL PAYMENTS DO NOT EXC

THE SALE IS SUBJECT TO A CAPITAL GAINS TAX OF 6% BASED ON SELLING PRICE OR ZONAL VALUE WHICHEVER I

DEFERRED PAYMENT METHOD

WHERE INITIAL PAYMENTS ON INSTALLMENT SALE EXCEED 25% OF THE SELLING PRICE BUT TEY MAY ONLY BE R
IN THE SUBSEQUENT YEAR, IT IS ALLOWED TO BE DEFERRED.

INCOME FROM LONG TERM CONSTRUCTION CONTRACTS

COMPLETED CONTRACT METHOD- REVENUE IS RECOGNIZED ONLY WHEN CONTRACT IS FINALLY COMPLETED.
PERCENTAGE OF COMPLETION - IS BASED ON THE PROGRESS OF WORK

EXAMPLE OF PERCENTAGE OF COMPLETION

2009 2010 2011
CONTRACT PRICE 30,000,000 30,000,000 30,000,000
PERCENTAGE OF COMPLETION 35% 75% 100%
VALUE OF CONTRACT EARNED 10500000 22500000 30000000
LESS:COST INCURRED TO DATE 10000000 21500000 28000000
GROSS INCOME TO DATE 500000 1000000 2000000
LESS: PRIOR YEARS GROSS INCO 0 500000 1000000
ANNUAL REALIZED REVENUE 500000 500000 1000000

GROSS INCOME FROM FARMING

FARMING COULD DERIVE INCOME FROM THE FF:
1.FARM PRODUCT RAISED
2.TRADING OF FARM PRODUCT PURCHASED
3.OTHER FARM INCOME

1.FARM PRODUCT RAISED

INCOME FROM PRODUCTS HARVESTED OR RAISED.
THESE ARE GENERALLY VALUED AT THEIR SELLING PRICE.

HARVEST OR PRODUCT RAISED AT SELLING PRICE XXX

LESS:UNSOLD AT SELLING PRICE XXX
GROSS INCOME XXX

2.TRADING OF FARM PRODUCT PURCHASED

PRODUCT SOLD XXX

LESS:COST OF SALE XXX
GAIN FROM SALE XXX

OTHER FARM INCOME

ORDINARY FARM ASSETS - ASSTES USED IN THE FARM SUCH AS EQUIPMENT, IMPLEMENTS AND WORK ANIMAL
CAPITAL ASSETS -ASSTES NOT USED IN THE FARM.
MISCCELLANEOUS INCOME -MEY CONSIST OF RENT RECEIVED FROM CROP SHARES, PROCEEDS OF INSURANCE

METHODS OF COMPUTING GROSS INCOME DERIVED FROM FARMING

1.CASH BASIS
2. ACCRUAL BASIS -CONSIDERS THE PRESENCE OF INVENTORY
3. CROP BASIS -THE ENTIRE COST OF PRODUCING THE CROP IS DEDUCTIBLE ONLY FROM GROSS INCOME IN THE
IN WHICH CROP WAS REALIZED.

ASSUME THE FF. DATA:

SALES:
PALAY HARVESTED AND SOLD 100000
PALAY PURCHASED AND SOLD 50000
FARM IMPLEMENT SOLD 5000
COST OF PALAY PURCHASED 45000
CARRYING COST OF FARM IMPLEMENT SOLD 4500
PALAY INVENTORY AT THE END OF YEAR AT SELLING PRICE 6000

CASH METHOD ACCRUAL METHOD

HARVESTED AND SOLD 100000 100000
 HARVESTED AND SOLD 6000
GAIN FROM PALAY PURCHASED 5000 5000
50000 - 45000
GAIN FROM SALE OF FARM IMPLEMENT
5000-4500 500 500
GROSS INOCME FROM FARM 105500 105500

CROP BASIS - THIOS METHOD IS EMPLOYED BY FARMERS WHOSE CROPS SHALL BE HARVESTED FOR MORE THA
EX. IN YEAR 7 HE SOLD THE TREES FOR 2,000,000
INCURRED THE FF. COST
YEAR:
3 200,000
4 100,000
5 50,000
6 30,000
7 20,000
400,000

SALES YEAR 7 2,000,000

LESS: 400,000
GROSS INCOME IN YEAR 7 1,600,000
AND PAID DIVIDEND
BGS WHICH IS CALLED INCOME.

ENT DERIVED FROM TAX, DONATION, GRANTS AND ANY OTHER SOURCE, WHILE

OODS SOLD AND OTHER DEDUCTIONS ALLOWED BY LAW.

CCOUNT OF, OR

X PAYER TO DELAY REPORTING OF INCOME.

ECEIVED AS PAYMENT OF INCOME EARNED.

 G PRICE EXCEEDS 1,000

CEEDS THE 25% OF SELLING PRICE

THE SELLING PRICE.

L PAYMENTS DO NOT EXCEED 255 OF THE SELLING PRICE.

ONAL VALUE WHICHEVER IS HIGHER.

E BUT TEY MAY ONLY BE REALIZED

IS FINALLY COMPLETED.
 ENTS AND WORK ANIMALS.

ROCEEDS OF INSURANCE ON GROWING CROPS, ETC…

OM GROSS INCOME IN THE YEAR

RVESTED FOR MORE THAN A YEAR FROM THE TIME OF PLANTING