A. Constitutional Law: The Law Pertaining To The State and Its Relationship With Its Citizens

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THE LAW PERTAINING TO THE STATE AND ITS RELATIONSHIP WITH ITS CITIZENS
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A. CONSTITUTIONAL LAW
i. Basic principles of political law (e.g., separation of powers, sovereignty, judicial
review, fundamental powers of the State, i.e., police power, eminent domain, and
taxation)
• Separation of powers
The principle of separation of powers ordains that each of the three great branches of
government has exclusive cognizance of and is supreme in concerns falling within its own
constitutionally allocated sphere. (Defensor-Santiago v. Guingona)
There is violation of this principle when there is impermissible (a) interference with and/or
(b) assumption of another department’s functions. (Belgica v. Ochoa)
The principle of separation of powers obtains not through express provision but by actual
division in our Constitution. (Angara v. Electoral Commission)
Purposes:
1. Secure action
2. Forestall over-action
3. Prevent depotism
4. Obtain efficiency
Principle of blending powers

Instances when powers are not confined exclusively within one department but are assigned
to or shared by several departments
• Sovereignty
Sovereignty is the supreme and uncontrollable power inherent in the State by which the
state is governed.
Two kinds of sovereignty:

1. Legal Sovereignty – authority which has the power to issue final commands
2. Political Sovereignty – power behind the legal sovereign, or the sum total of all the
influences that operate upon it
Sovereignty may also be internal or external:

1. Internal Sovereignty – refers to the power of the state to control its domestic or internal
affairs
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2. External Sovereignty – the power of the State to direct its relations with other states,
also known as independence Section 1, Article II. The Philippines is a democratic and
republican State
Sovereignty resides in the people and all government authority emanates from them. (2nd
sentence, Section 1, Article II)
• Judicial review
Judicial review is the power of the SC to determine the constitutionality of a law, treaty,
ordinance, presidential issuance, and other governmental acts.
Scope
The courts have the power to pass upon the validity and the constitutionality of laws enacted
by the legislature, and other bodies of the government, under the doctrine of checks and
balances. The lower courts are likewise vested with the power of judicial review, subject
however to the appellate jurisdiction of the higher courts.
Functions:
a. Checking – invalidating a law or executive act that is found to be contrary to the
Constitution
b. Legitimizing – upholding the validity of the law that results from a mere dismissal of a
case challenging the validity of the law
c. Symbolic – to educate the bench and bar as to the controlling principles and concepts
on matters of grave public importance for the guidance of, and restraint upon the future
(Dumlao v. COMELEC)
Requisites of judicial review:

1. There must be an actual case or justiciable controversy before the court.
It must be one that is appropriate for judicial determinate. It must be definite and
concrete, touching the legal relations of parties having adverse legal interests. It must
be a real and substantial controversy admitting of specific relief through a decree that is
conclusive in character.
2. The issue of constitutionality must be raised at the earliest opportunity.

General rule: It must be raised in the pleadings.
Exception:
a. In criminal cases – at the discretion of the court
b. In civil cases – if necessary for the determination of the case itself
c. When the jurisdiction of the court is involved
3. The person challenging the act must be a proper party (locus standi).
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It must be one who has sustained or is in immediate danger of sustaining an injury as a

result of the act complained of. To have standing, one must show that:
a. He has suffered some actual or threatened injury as a result of the allegedly illegal
conduct of the government;
b. The injury is fairly traceable to the challenged action; and
c. The injury is likely to be redressed by a favorable action. (Francisco Jr. & Hizon v.
Toll Regulatory Board)
General rule: If there is no actual or porential injury, complainant has no legal personality
to raise constitutional questions.
Exception: If the question is of transcendental importance.
4. The issue is the very lis mota of the case.

The decision on the constitutional question must be determinative of the case itself. Its
constitutionality must be "the cause of the suit or action.”
The constitutionality of an act of the legislature will not be determined by the courts
unless that question is properly raised and is necessary to the determination of the case;
i.e., the issue of constitutionality must be the very lis mota presented.
• Police power
Definition
It is the inherent and plenary power of the state which enables it to prohibit all that is hurtful
to the comfort, safety and welfare of society. (Ermita-Malate Hotel and Motel Operators
Association, Inc. v. Mayor of Manila)
The police power of the state is a power coextensive with self-protection, and is not inaptly
termed the “law of the overruling necessity.” (Rubi v. Provincial Board of Mindoro)
Police power, while incapable of an exact definition, has been purposely veiled in general
terms to underscore its comprehensiveness to meet all exigencies and provide enough room
for an efficient and flexible response as the conditions warrant.” (White Light Corporation v.
City of Manila)
Scope and Limitations

“The state in order to promote the general welfare, may interfere with personal liberty, with
property, and with business and occupations. Persons may be subjected to all kinds of
restraints and burdens, in order to secure the general comfort, health and prosperity of the
state and to this fundamental aim of our Government, the rights of the individual are
subordinated.” (Ortigas and Co., Limited Partnership v. Feati Bank and Trust Co.)
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As police power derives its existence from the very existence of the State itself, it does not
need to be expressed or defined in its scope. So it is that Constitutions do not define the
scope or extent of the police power of the State; what they do is to set forth the limitations
thereof. The most important of these are the due process clause and the equal protection
clause. (Ichong v. Hernandez)
Police power has been characterized as the most essential, insistent, and the least limitable
of powers, extending as it does to all the great public needs. [Ermita-Malate Hotel and Motel
Operators Association, Inc. v. Mayor of Manila)
Taxation and Eminent Domain as Implements on Police Power

Taxation may be used as an implement of police power. (Lutz v. Araneta)
Eminent domain may be used as an implement to attain the police objective. (Association
of Small Landowners v. Secretary of Agrarian Reform)
Who may Exercise Police Power

Generally: Legislature
Delegated:
1. President
2. Administrative Bodies
3. Law-making Bodies of LGUs
Limitations on Delegation of Police Power

1. Express grant by law
2. Within the territorial jurisdiction of LGUs
3. Must not be contrary to law
Test of Valid Exercise

A. Means Purpose Test
1. Lawful Subject – the interests of the public, generally, as distinguished from those of
a particular class, require such interference and that the subject of the measure is
within the scope of the police power. (Ichong v. Hernandez)
2. Lawful Means – the means employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals
(National Development Company v. Philippine Veterans Bank)
B. Reasonability Test
The limit to police power is reasonability. The Court looks at the test of reasonability to
decide whether it encroaches on the right of an individual. So long as legitimate means
can reasonably lead to create that end, it is reasonable. (Morfe v. Mutuc)
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Exercise of Police Power is subject to judicial inquiry

Legislature’s determination as to what is a proper exercise of its police powers is not final
or conclusive, but is subject to the supervision of the court (US v. Toribio). However, courts
cannot delimit beforehand the extent or scope of the police power, since they cannot foresee
the needs and demands of public interest and welfare. So it is that Constitutions do not
define the scope or extent of the police power of the State; what they do is to set forth the
limitations thereof. The most important of these are the due process clause and the equal
protection clause. (Ichong v. Hernandez)
• Eminent domain
Definition
It is the inherent right of the State to forcibly acquire needed property upon just
compensation, in order to devote it to the intended public use.
Who may Exercise Eminent Domain

Generally: Legislature
Delegated:
1. President
2. Local legislative bodies
3. Certain public corporations, like the National Housing Authority and water districts
4. Quasi-public corporations like Philippine National Railways, PLDT, Meralco
Requisites for the Exercise of Eminent Domain

1. Genuine necessity, which must be of public character
It is inherent/presumed in legislation, but when the power is delegated, necessity must
be proven. The grant may be a:
a. Grant of special authority for special purpose, which is a political question
b. Grant of general authority, which is a justiciable question that can be resolved by the
courts
2. Private property
General rule: Generally, all private property capable of ownership may be expropriated;
it may include public utility. (Republic v. PLDT)
Exception:
a. Money
b. Choses in action – debts, shares, claims for damages
Note: Private property devoted for public use, e.g. cemetery, is also a proper subject of
expropriation. (City of Manila v. Chinese Community of Manila)
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3. Public use
Traditional concept: Any use directly available to the general public as a matter of right
and not merely of forbearance or accomodaiton
Expanded concept: Means public advantage, convenience or benefit, which tends to

contribute to the general welfare of the whole community; also covers uses which, while
not directly available to the public, redound to their indirect advantage or benefit
Note: Under the expanded concept, the fact that only few people benefit from the
expropriation does not diminish its public-use character. (Manosca v. CA)
4. Taking
Instances of taking:
a. The owner is actually deprived or dispossessed of his property
b. The owner is deprived of the ordinary use of his property
c. The owner is deprived of jurisdiction, supervision, and control of his property
Requisites of actual taking:

1. Expropriator must enter the property
2. It must not be for a momentary period only
3. Entry must be under a warrant or color of authority
4. Property must be devoted to public use or otherwise informally appropriated or
injuriously affected
5. Utilization of the property must be in such a way as to oust the owner and deprive
him of beneficial enjoyment of the property (Republic v. Vda. de Castellvi)
5. Just compensation
The property’s fair market value at the time of the filing of the complaint, or that sum of
money which a person desirous to buy but not compelled to buy, and an owner willing
but not compelled to sell, would agree on as price to be given and received therefor.
(National Power Corp. v. Baguio)
Determination of just compensation

It is judicial function that cannot be usurped by any other branch or official of the
government. (National Power Corp. v. Zabala)
6. Due process
Section 1, Article III of the Constitution requires that the act of deprivation should be
preceded by compliance with procedural due process, part and parcel of which includes
the filing of an expropriation case. This is so because by filing the action for
expropriation, the government, in effect, serves notice that it is taking title and
possession of the property. Hence, without an expropriation suit, private property is
being taken without due notice to the landowner. (Secretary of DSWD v. Spouses
Tecson)
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• Taxation
Definition
It is the power by which the State raises revenue to defray the necessary expenses of the
Government. It is the enforced proportional contributions from persons and property, levied
by the State by virtue of its sovereignty, for the support of the government and for all public
needs.
It is as broad as the purpose for which it is given.
Purposes:
1. To raise revenue
2. Tool for regulation
3. Protection/power to keep alive
Lifeblood theory and Necessity theory

Taxes are the lifeblood of the government, for without taxes, the government can neither
exist nor endure. A principal attribute of sovereignty, the exercise of taxing power derives
its source from the very existence of the state whose social contract with its citizens obliges
it to promote public interest and common good. The theory behind the exercise of the power
to tax emanates from necessity; without taxes, government cannot fulfill its mandate of
promoting the general welfare and well-being of the people. (NPC v. Cabanatuan)
Tax for special purpose

Treated as a special fund and paid out for such purpose only; when purpose is fulfilled, the
balance, if any, shall be transferred to the general funds of the Government. (Section 29[3],
Article VI)
Requisites (Section 28[1], Article VI)

1. Uniform and Equitable
Taxes should be:
a. Uniform (persons or things belonging to the same class shall be taxed at the same
rate); and
b. Equitable (taxes should be apportioned among the people according to their ability
to pay)
2. Progressive system of taxation

The rate increases as the tax base increases, with social justice as basis (Taxation here
is an instrument for a more equitable distribution of wealth).
3. Delegated tax legislation

Congress may delegate law-making authority when the Constitution itself specifically
authorizes it.
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Scope and Limitation

A. General Limitations
1. Power to tax exists for the general welfare; should be exercised only for a public
purpose
2. Might be justified as for public purpose even if the immediate beneficiaries are
private individuals
3. Tax should not be confiscatory: If a tax measure is so unconscionable as to amount
to confiscation of property, the Court will invalidate it. But invalidating a tax measure
must be exercised with utmost caution, otherwise, the State’s power to legislate for
the public welfare might be seriously curtailed.
4. Taxes should be uniform and equitable )Section 28[1], Article VI)
Judicial review for unconscionable and unjust tax amounting to confiscation of property
The legislature has discretion to determine the nature, object, extent, coverage, and situs of
taxation. But where a tax measure becomes so unconscionable and unjust as to amount to
confiscation of property, courts will not hesitate to strike it down; the power to tax cannot
override constitutional prescriptions. (Tan v. del Rosario)
B. Specific Limitations
1. Uniformity of taxation
General rule: Simply geographical uniformity, meaning it operates with the same
force and effect in every place where the subject of it is found
Exception: Rule does not prohibit classification for purposes of taxation, provided
the requisites for valid classification are met. (Ormoc Sugar v. Treasurer of Ormoc)
2. Tax Exemptions
No law granting any tax exemption shall be passed without the concurrence of a
majority of all the Members of Congress. (Section 28[4], Article VI)
There is no vested right in a tax exemption. Being a mere statutory privilege, a tax
exemption may be modified or withdrawn at will by the granting authority. (Republic
v. Caguioa)
Exemptions may either be constitutional or statutory:

1. Constitutional exemptions (Section 28[3], Article VI)
2. If statutory, it has to have been passed by majority of all the members of
Congress (Section 28[4], Article VI)
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ii. Bill of Rights (due process, equal protection, freedom of expression, rights during
expropriation, searches and seizures)
• Due process
Definition
Due process is a guaranty against arbitrariness on the part of the government, whether
committed by the legislative, the executive, or the judiciary. (Cruz)
In our jurisdiction, the constitutional guarantee of due process is also not limited to an
exact definition. It is flexible in that it depends on the circumstances and varies with the
subject matter and necessities of the situation. (Saunar v. Ermita)
Essence of Due Process

It is the opportunity to be heard or an opportunity to explain one’s side or an opportunity
to seek a reconsideration of the action or ruling complained of. (Philippine Phosphate
Fertilizer v. Torres)
Scope of Due Process Clause

Due process clause protects all persons, natural as well as artificial. The shelter of
protection under the due process and equal protection clause is given to all persons, both
aliens and citizens. (Villegas v. Hiu Chong)
Kinds of Due Process

A. Substantive Due Process
It requires the intrinsic validity of the law in interfering with the rights of the person to
his life, liberty, or property. (Secretary of Justice v. Lantion)
Requisites of Substantive Due Process:

1. There must be a valid law upon which it is based.
2. The law must have been passed or approved to accomplish a valid governmental
objective.
3. The objective must be pursued in a lawful manner.
4. The law as well as the means to accomplish the objective must be valid and not
oppressive.
B. Procedural Due Process

In essence, it refers to the method or manner by which the law is enforced. (Corona v.
United Harbor Pilots Association)
General rule: The twin requirements of notice and hearing constitute the essential
elements of procedural due process and neither of these elements can be eliminated
without running afoul of the constitutional guaranty. (Viota Maritime Co. Inc. v. NLRC)
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Exceptions:
1. Cancellation of passport of a person sought for the commission of a crime
2. Preventive suspension of a civil servant facing administrative charges
3. Distraint of properties for tax delinquency
4. Padlocking of restaurant found to be unsanitary or theatres showing obscene
movies
5. Issuance of temporary protection orders, writs of preliminary attachment or of
possession
6. Abatement of nuisance per se
Requisites of Procedural Due Process in Judicial Proceedings

1. The court or tribunal trying the case is properly clothed with judicial power to hear
and determine the matter before it.
2. Jurisdiction is lawfully acquired by it over the person of the accused.
3. The accused is given opportunity to be heard.
4. Judgment is rendered only upon lawful hearing.
Cardinal Rights in Administrative Proceedings

1. Right to hearing – it includes right to present one’s case and submit evidence to
support thereof.
2. The tribunal must consider the evidence presented.
3. Evidence presented must be substantial, which means relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.
4. The decision must have something to support itself.
5. The decision must be based on evidence presented during hearing or at least
contained in the record and disclosed by the parties.
6. The tribunal or body or any of its judges must act on its own independent
consideration of the law and facts of the controversy.
7. The decision must be rendered in a manner that the parties can know the various
issues involved and the reason for the decision rendered.
Administrative Due Process Only Applicable in Exercise of Quasi-Judicial Powers

It may be stated as a general rule that notice and hearing are not essential to the
validity of administrative action where the administrative body acts in the exercise of
executive, administrative, or legislative functions; but where a public administrative
body acts in a judicial or quasi-judicial matter, and its acts are particular and immediate
rather than general and prospective, the person whose rights or property may be
affected by the action is entitled to notice and hearing. (Philippine Communications
Satelite Corp. v. Alcuaz)
Minimum Standards in the Imposition of Disciplinary Sanctions in Acadeimc

Institutions
1. The students must be informed in writing of the nature and cause of the accusation
against them.
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2. They shall have the right to answer the charges against them with the assistance
of the counsel, if desired.
3. They shall have the right to adduce evidence in their own behalf.
4. They shall be informed of the evidence against them.
5. The evidence must be duly considered by the investigating committee or official
designated by the school authorities to hear and decide the case. (Ateneo de
Manila v. Capulong)
Constitutional and Statutory Due Process

Constitutional due process protects the individual from the government and assures
him of his rights in criminal, civil or administrative proceedings; while statutory due
process refers to the guarantee found in statutes enacted by the Congress, like the
one found in the Labor Code and Implementing Rules protecting employees from
being unjustly terminated without just cause after notice and hearing. (Agabon v.
NLRC)
• Equal protection
Elements of the Equal Protection Clause

1. Classification is substantial;
2. Classification is germane to the purpose of the law;
3. Classification does not only apply to existing conditions; and
4. The law must apply to all members of the same class
Concept
All persons or things similarly situated must be similarly treated both as to rights conferred
and responsibilities imposed. Similar subjects, in other words, should not be treated
differently, so as to give undue favor to some and unjustly discriminate against others.
The equal protection clause does not require the universal application of the laws on all
persons or things without distinction. What the clause requires is equality among equals
as determined according to a valid classification. By classification is meant the grouping
of persons or things similar to each other in certain particulars and different from all others
in these same particulars
Levels of scrutiny
a. Rational Basis Test
The classification should bear a reasonable relation to the government’s purpose or
legitimate state interest.
b. Intermediate Scrutiny Test
The Court accepts the articulated purpose of the legislation, but it closely scrutinizes
the relationship between the classification and the purpose based on a spectrum of
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standards, by gauging the extent to which constitutionally guaranteed rights depend

upon the affected individual interest.
c. Strict Scrutiny Test

Example: In Central Bank Employees Association v. BSP, the challenged proviso
operates on the basis of the salary grade or officer-employee status. It is akin to a
distinction based on economic class and status, with the higher grades as recipients
of a benefit specifically withheld from the lower grades. Officers of the BSP now
receive higher compensation packages that are competitive with the industry, while
the poorer, low-salaried employees are limited to the rates prescribed by the SSL. The
implications are quite disturbing: BSP rank-and-file employees are paid the strictly
regimented rates of the SSL while employees higher in rank — possessing higher and
better education and opportunities for career advancement — are given higher
compensation packages to entice them to stay.
Considering that majority, if not all, the rank and-file employees consist of people
whose status and rank in life are less and limited, especially in terms of job
marketability, it is they — and not the officers — who have the real economic and
financial need for the adjustment. This is in accord with the policy of the Constitution
"to free the people from poverty, provide adequate social services, extend to them a
decent standard of living, and improve the quality of life for all." Any act of Congress
that runs counter to this constitutional desideratum deserves strict scrutiny by this
Court before it can pass muster.
• Freedom of expression
No law shall be passed abridging the freedom of speech, of expression, or of the press,
or the right of the people peaceably to assemble and petition the government for redress
of grievances. (Section 4, Article III)
The primacy and high esteem accorded freedom of expression is a fundamental postulate
of our constitutional system.
The scope of freedom of expression is so broad that it extends protection to nearly all
forms of communication. It protects speech, print, and assembly regarding secular as well
as political causes, and is not confined to any particular field of human interest. The
protection covers myriad matters of public interest or concern embracing all issues, about
which information is needed or appropriate. (Chavez v. Gonzales)
Continuum of Thought, Speech, Expression and Speech Acts

Speech is not limited to vocal communication. Conduct is treated as a form of speech
sometimes referred to as ‘symbolic speech’ such that “when ‘speech’ and ‘nonspeech’
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elements are combined in the same course of conduct,” the communicative element of the
conduct may be sufficient to bring into play the right to freedom of expression.
The right to freedom of expression, thus, applies to the entire continuum of speech from
utterances made to conduct enacted, and even to inaction itself as a symbolic manner of
communication. (Diocese of Bacolod v. COMELEC)
Freedom from Prior Restraint and Subsequent Punishment

A. Freedom from Censorship or Prior Restraint It is largely freedom from government
censorship of publications, whatever the form of censorship, and regardless of
whether it is wielded by the executive, legislative, or judicial branch of the government.
(Chavez v. Gonzales)
Freedom of expression is not absolute since it is always subject to the police power of
the State. Prior restraint is permitted in cases of:
a. Pornography
b. False or misleading commercial statement
c. Advocacy of imminent lawless action
d. Danger to national security
e. Press statements made by persons, for and on behalf of the government, uttered
while in the exercise of their official functions
f. Movies, television and radio broadcast censorship in view of its access to
numerous people, including the youth who must be insulated from the prejudicial
effects of unprotected speech
g. The sub judice rule
B. Freedom from Subsequent Punishment: This is a limitation on the power of the State
to impose a punishment after publication or dissemination.
Criticism on the government, no matter how severe, is within the range of liberty of
speech, unless the intention and effect be seditious. (People v. Perez)
Content-neutral and content-based regulation

Restraint upon these freedoms may be either content-based or content neutral.
a. Content-based – refers to restrictions based on the subject matter of the utterance or

speech
b. Content-neutral – controls merely on the incidents of the speech such as time, place,
or manner of the speech
In the case of Diocese of Bacolod v. COMELEC, the regulation of the tarpaulin size is a
content-based regulation. The tarpaulin content is not easily divorced from the size of its
medium. Limiting the maximum size of the tarpaulin would render ineffective petitioners’
message and violate their right to exercise freedom of expression.
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State Regulation of Freedom of Expression

The issue in private and government speech would apply to public officers. A limited
intrusion into a person's privacy has long been regarded as permissible where that person
is a public figure and the information sought to be elicited from him or to be published
about him constitute of a public character. Succinctly put, the right of privacy cannot be
invoked to resist publication and dissemination of matters of public interest. (Ayer
Productions Pty. Ltd. v. Hon. Capulong)
Facial challenge
General rule: A party can question the validity of a statute only if, as applied to him, it is
unconstitutional. (Southern Hemisphere v. Anti-Terrorism Council)
Exception: Facial challenges
A facial challenge may be directed against a vague statute or to one which is overbroad
because of the possible “chilling effect” the statute will have on protected speech. The
theory is that “[w]hen statutes regulate or proscribe speech and no readily apparent
construction suggests itself as a vehicle for rehabilitating the statutes in a single
prosecution, the transcendent value to all society of constitutionally protected expression
is deemed to justify allowing attacks on overly broad statutes with no requirement that the
person making the attack demonstrate that his own conduct could not be regulated by a
statute drawn with narrow specificity.” (Gooding v. Wilson, US Case)
The possible harm to society in permitting some unprotected speech to go unpunished is

outweighed by the possibility that the protected speech of others may be deterred, and
perceived grievances left to fester because of possible inhibitory effects of overly broad
statutes.
This rationale does not apply to penal statutes without a free speech aspect. Criminal
statutes have general in terrorem effect resulting from their very existence and, if facial
challenges were allowed for this reason alone, the State may well be prevented from
enacting laws against socially harmful conduct. In the area of criminal law, the law cannot
take chances as in the area of free speech (Southern Hemisphere v. Anti- Terrorism
Council)
However, said doctrine applies to penal statutes when:

a. The statute is challenged as applied; or
b. The statute involves free speech (Disini v. Section of Justice)
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Overbreadth Doctrine
The statute must be carefully drawn or be authoritatively construed to punish only
unprotected speech and not be susceptible of application to protected expression
(Gooding v. Wilson)
A law may be invalidated as overbroad if asubstantial number of its applications are

unconstitutional, judged in relation to the statute’s plainly legitimate sweep. (US v.
Stevens)
A governmental purpose may not be achieved through means which sweep too broadly
and thereby invade the area of protected freedoms.
Void For Vagueness Doctrine

A statute establishing a criminal offense must define the offense with sufficient
definiteness that persons of ordinary intelligence can understand what conduct is
prohibited by the statute. It can only be invoked against that specie of legislation that is
utterly vague on its face, i.e. that which cannot be clarified either by a saving clause or by
construction.
A statute or act may be said to be vague when it lacks comprehensible standards that
men of common intelligence must necessarily guess at its meaning and differ in its
application (Estrada v. Sandiganbayan).
• Rights during expropriation
Private property shall not be taken for public use without just compensation (Section 9,
Article III)
The power of eminent domain is the inherent right of the State to forcibly acquire needed
property upon just compensation, in order to devote it to the intended public use.
Also called the power of expropriation.
Just Compensation
General rule: Computed at the time of the filing of the complaint for expropriation (Section
4, Rule 67), whether the filing takes place before or at the same time as the taking or entry
Exception: When the property is taken before filing the complaint, the assessment should
be made as of the time of taking or entry.
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Effect of delay in payment

General rule: For non-payment, the remedy is the demand of payment of the fair market
value of the property and not the recovery of possession of the expropriated lots (Republic
v. CA)
Exception: When the government fails to pay just compensation within 5 years from the
finality of the judgment in the expropriation proceedings, the owners concerned shall have
the right to recover possession of their property. (Republic v. Lim)
Abandonment of intended use and right of repurchase

If the expropriator (government) does not use the property for a public purpose, the
property reverts to the owner in fee simple.
In Mactan-Cebu International Airport Authority v. Tudtud, the Court held that the
expropriator has the obligation to reconvey property expropriated but never used, on the
condition that the landowners would return the just compensation they received, plus
interest.
Expropriation by LGUs
It is not, strictly speaking, a power of eminent domain but merely a power of inferior domain
which means that LGUs can only exercise such power which is delegated to it.
Requisites for Exercise of Inferior Domain by LGUs

1. Enactment of an ordinance, not a resolution
2. Must be for a public use, purpose orwelfare, or for the benefit of the poor and the
landless
3. Payment of just compensation
4. Must be preceded by a valid and definite offer made to the owner, who rejects the
same (Yusay v. CA)
• Searches and seizures
The right of the people to be secure in their persons, houses, papers, and effects against
unreasonable searches and seizures of whatever nature and for any purpose shall be
inviolable, and no search warrant or warrant of arrest shall issue except upon probable
cause to be determined personally by the judge after examination under oath or affirmation
of the complainant and the witnesses he may produce, and particularly describing the
place to be searched and the persons or things to be seized. (Section 2, Article III)
Requisites of a valid warrant:

1. Existence of probable cause
2. Must be issued for one (1) specific offense only
3. Determination of probable cause was done personally by the judge
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4. Personal examination under oath or affirmation of the complainant and the witnesses
he may produce
5. Personal knowledge of the complainant or his witnesses of the facts
6. Particular description of the place to be searched or things to be seized
Warrantless searches
Manibog v. People (3/20/2019, Leonen, J.) – The combination of the police asset's tip and
the arresting officers' observation of a gun-shaped object under petitioner's shirt already
suffices as a genuine reason for the arresting officers to conduct a stop and frisk search
on petitioner. Hence, the trial court correctly upheld the reasonableness of the warrantless
search on Manibog.
People v. Tudtud – To justify a warrantless arrest, it is not enough that the police officers
were armed with reliable information. Such reliable information must be combined with an
accused's overt act indicating that he or she has committed, is committing, or is about to
commit a crime.
Because a warrantless search is in derogation of a constitutional right, peace officers who

conduct it cannot invoke regularity in the performance of official functions and shift to the
accused the burden of proving that the search was unconsented.
Doctrines under unreasonable searches and seizures include the following –

1. Exclusionary rule – All evidence obtained in violation of Section 2, Article III, shall be
inadmissible for any purpose in any proceeding. (Stonehill v. Diokno)
2. Terry search – For a "stop and frisk" search to be valid, the totality of suspicious
circumstances, as personally observed by the arresting officer, must lead to a genuine
reason to suspect that a person is committing an illicit act. Consequently, a warrantless
arrest not based on this constitutes an infringement of a person's basic right to privacy.
3. Fruit of the poisonous tree – One the primary source (the “tree”) is shown to have been
unlawfully obtained, any secondary or derivative evidence (the “fruit”) derived from it
is also inadmissible. Illegally seized evidence is obtained as a direct result of the illegal
act, whereas the “fruit of the poisonous tree” is the indirect result of the same illegal
act. (Del Rosario v. People)
4. Chain of custody – The IRR of RA 9165 – which is now crystallized into statutory law
with the passage of RA 10640 – provide that the said inventory and photography may
be conducted at the nearest police station or office of the apprehending team in
instances of warrantless seizure, and that non-compliance with the requirements of
Section 21, Article II of RA 9165 – under justifiable grounds – will not render void and
invalid the seizure and custody over the seized items so long as the integrity and
evidentiary value of the seized items are properly preserved by the apprehending
officer or team. Tersely put, the failure of the apprehending team to strictly comply with
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the procedure laid out in Section 21, Article II of RA 9165 and its IRR does not ipso
facto render the seizure and custody over the items as void and invalid, provided that
the prosecution satisfactorily proves that: (a) there is justifiable ground for
noncompliance; and (b) the integrity and evidentiary value of the seized items are
properly preserved. (People v. Baptista)
5. Plain view doctrine – Objects falling in plain view of an officer who has a right to be in
a position to have that view are subject to seizure even without a search warrant and
may be introduced in evidence. (People v. Acosta)
6. Buy-bust operations – Prior surveillance is not a requisite to a valid entrapment or buy-

bust operation. Flexibility is a trait of good police work. For so long as the rights of the
accused have not been violated in the process, the arresting officers may carry out its
entrapment operations and the courts will not pass on the wisdom thereof. (People v.
Frias)
7. Knock and Announce Principle – Police officers may only break open any outer or
inner door or window of a house to execute the search warrant if, after such notice and
demand, such officers are refused entry to the place of directed search. (Section 7,
Rule 126)
8. Valid warrantless arrest must precede a warrantless search to be valid.
9. Waiver of the right must show that the person knew that the right against unreasonable
search and seizure exist.
Recognized instances of reasonable warrantless searches and seizures

1. Warrantless search incidental to a lawful arrest recognized under Section 12, Rule 126
of the Rules of Court and by prevailing jurisprudence
General rule: A valid arrest must precede the search; the process cannot be reversed.
Exception: A search substantially contemporaneous with an arrest can precede the

arrest if the police have probable cause to make the arrest at the outset of the search,
Thus, were a warrantless search preceded a warrantless arrest but was substantially
contemporaneous with it, what must be resolved is whether or not the police had
probable cause for the arrest when the search was made. (Aparente v. People)
2. Seizure of evidence in "plain view," the elements of which are:

a. A prior valid intrusion based on the valid warrantless arrest in which the police are
legally present in the pursuit of their official duties;
b. The evidence was inadvertently discovered by the police who had the right to be
where they are;
c. The evidence must be immediately apparent; and
d. "Plain view" justified mere seizure of evidence without further search.
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3. Search of a moving vehicle – highly regulated by the government, the vehicle's

inherent mobility reduces expectation of privacy especially when its transit in public
thoroughfares furnishes a highly reasonable suspicion amounting to probable cause
that the occupant committed a criminal activity
4. Consented warrantless search – when the right has been voluntarily and intelligently
waived
5. Customs search – searches made at borders or constructive borders for violation of

immigration and smuggling laws
Note: Not available in dwelling places (Papa v. Mago)
6. Stop and Frisk – when there is a genuine reason to “stop and frisk” in light of the police
officer’s experience and surrounding conditions, to warrant a belief that the person
detained has weapons concealed (Malacat v. CA)
7. Exigent and Emergency Circumstances – under such urgency and exigency of the
moment, search warrant should be lawfully dispensed with (People v. De Gracia)
iii. Composition and powers of the government organs
A. Legislative Department
Composition: Congress, which consists of
a. Senate – 24 senators elected at large
b. House of Representatives – not more than 250 members, unless otherwise provided
by law, consisting of (i) district representatives and (ii) party-list representatives
Powers:
1. Legislative power – the authority to make laws and to alter and repeal them
General rule: Only Congress (as a body) may exercise legislative power.
Exception:
a. Delegated legislative power to local governments
b. Constitutionally-grafted exceptions such as:
i. Emergency power delegated to the Executive during state of war or
national emergency (Section 23[2], Article VI)
ii. Certain taxing powers of the President (Section 28[2], Article VI)
iii. The extent reserved to the people by the provision on initiative and
referendum (Section 1, Article VI)
2. Legislative inquiries and oversight functions

a. Congressional inquiry
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Arnault v. Nazareno – In the conduct of congressional inquiry, the Senate can

exercise its inherent power of contempt.
Balag v. Senate Committee – The Senate cannot indefinitely detain a person

cited in contempt.
Neri v. Senate Committees – The scope of a congressional inquiry cannot cover

executive privilege.
Agcaoli v. Farinas – Far compelling than the question of mootness is that the
element of illegal deprivation of freedom of movement or illegal restraint is
jurisdictional in petitions for habeas corpus. Consequently, in the absence of
confinement and custody, the courts lack the power to act on the petition for
habeas corpus and the issuance of a writ thereof must be refused.
Requisites of legislative inquiries:

1. Must be in aid of legislation
2. In accordance with duly published rules of procedure
3. Right of persons appearing in or affected by such inquiries shall be respected.
(Bengson v. Senate Blue Ribbon Committee)
Additional limitation: Executive privilege – the right of the President and high-level
officials authorized by her to withhold information from Congress, from the courts,
and ultimately from the public
Since the privilege belongs to the President, only the President can invoke it. She
may also authorize the Executive Secretary to invoke the privilege on her behalf, in
which case, the Executive Secretary must state that the Act is “By order of the
President,” which means that he personally consulted with the President on such
matters of concern. (Senate v. Ermita)
b. Congressional Oversight
The power of oversight embraces all activities undertaken by Congress to
enhance its understanding of and influence over the implementation of legislation
it has enacted. Clearly, oversight concerns post-enactment measures
undertaken by Congress: (a) to monitor bureaucratic compliance with program
objectives, (b) to determine whether agencies are properly administered, (c) to
eliminate executive waste and dishonesty, (d) to prevent executive usurpation of
legislative authority, and (d) to assess executive conformity with the
congressional perception of public interest.
3. Non-legislative
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a. Informing function – via legislative inquiries: The conduct of legislative inquiries

is intended to benefit not only Congress but the citizenry, who are equally
concerned with the proceedings. (Sabio v. Gordon)
b. Power of impeachment – The House of Representatives shall have the exclusive

power to initiate all cases of impeachment. (Section 3[1], Article XI)
B. Executive Department
Composition:
a. President
b. Vice President
Powers: (specific powers of the President discussed)

Executive power – the President’s power to enforce, implement, and administer laws.
The President shall ensure that the laws be faithfully executed. (Section 17, Article VII)
Liban v. Gordon – The President exercises control over all government offices in the
Executive branch. If an office is legally not under the control of the President, then such
office is not part of the Executive branch. There can be no instance under the
Constitution where an officer of the Executive branch is outside the control of the
President. The Executive branch is unitary since there is only one President vested with
executive power exercising control over the entire Executive branch. Any office in the
Executive branch that is not under the control of the President is a lost command whose
existence is without any legal or constitutional basis.
C. Judiciary
Composition: Supreme Court, which consists of:
a. Chief Justice
b. 14 Associate Justices
Powers:
a. Judicial power – the power and duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion on the part of
any branch or instrumentality of the Government
b. Procedural rule-making – promulgate rules concerning the protection and

enforcement of constitutional rights, pleading, practice, and procedure in all courts,
the admission to the practice of law, the integrated bar, and legal assistance to the
under-privileged (Section 5, Article VIII)
c. Administrative supervision over lower courts
iv. Judicial review (see previous discussion)

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Requisites of judicial review are

1. There must be an actual case or justiciable controversy before the court;
2. The issue of constitutionality must be raised at the earliest opportunity
3. The person challenging the act must be a proper party (locus standi); and
4. The issue is the very lis mota of the case.
Doctrines:
1. There is no judicial legislation.
2. There is no judicial supremacy.
3. The Court may waive legal standing of the petitioners or take cognizance of a case at
first instance under the principle of transcendental importance.
4. The doctrine of hierarchy of courts is a constitutional imperative.
5. The operative fact doctrine provides that a law may declared unconstitutional but it may
produce legal effects.
6. Every challenged law enjoys the presumption of constitutionality.
7. The fallo of a decision is controlling over the ratio decidendi.
8. As a general rule, the Supreme Court is a trier of laws.
9. The determination of the factual basis of martial law and the suspension of the privilege
of the writ of habeas corpus is resolved in an appropriate proceeding.
10. Promulgation of S.C. decisions must be certified by the Chief Justice.
v. Supervision of courts
The Supreme Court exercises administrative supervision over all lower courts. In the
discharge of its administrative functions, the Court is assisted by the Court Administrator
and the Deputy Court Administrators (P.D. No. 828, as amended by P.D. No. 842). The
Court thus acts through the court administrators in the exercise of its administrative
functions. (See A.M. No. 343-RTJ In Re: RTC Judge of Balanga, Bataan).
vi. Powers of the Supreme Court
A. Original Jurisdiction over:

1. Cases affecting ambassadors, other public ministers and consuls;
2. Petitions for certiorari, prohibition, mandamus, quo warranto and habeas corpus
3. Review of the factual basis for the declaration of martial law or suspension of the
privilege of writ of habeas corpus
B. Appellate jurisdiction over:

1. Final judgments and orders of lower courts in all cases in which the constitutionality or
validity of any treaty, international or executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is in question
2. All cases involving the legality of any tax impost, assessment, or toll, or any penalty
imposed in relation thereto
3. All case sin which the jurisdiction of any lower court is in issue
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4. All criminal cases in which the penalty imposed is reclusion perpetua or higher
5. All cases in which only a question of law is involved
A. Judicial power – the power and duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion on the part of any branch or
instrumentality of the Government
C. Electoral Tribunal for Presidential and Vice-Presidential Contests Sitting En Banc

Over all contests relating to the election, returns, and qualifications of the President or
Vice President
D. Temporary Assignment of Judges

Judges of lower courts to other stations as public interest may require and not to exceed
6 months without the consent of the judge concerned
E. Order a Change of Venue

Change of venue or place of trial to avoid miscarriage of justice
F. Rule-Making Power
Promulgates rules concerning:
1. The protection and enforcement of constitutional rights
2. Pleading, practice and procedures in all courts
3. Admissions to the practice of law
4. Integrated Bar of the Philippines
5. Legal assistance to the underprivileged
G. Power of Appointment
Appoint all officials and employees in the Judiciary in accordance with the Civil Service
Law
H. Power of Administrative Supervision

Administrative supervision over all courts and the personnel thereof
I. Contempt Powers
The power to punish for contempt is inherent in all courts so as to preserve order in
judicial proceedings as well as to uphold the administration of justice. (Inonog v. Judge
Ibay)
Expanded Jurisdiction and Authority of the Supreme Court

Section 1, par. 2, Article VIII of the Constitution expanded the power, authority and
jurisdiction of the courts of justice, particularly the Supreme Court, to determine whether any
branch of the government has committed grave abuse of discretion amounting to lack or
excess jurisdiction.
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vii. Qualifications, disqualifications and selection of the President, Senators, Members

of the House of Representatives, Justices and Judges, The Ombudsman, and
Constitutional Commissioners
• President
Qualifications:
1. Natural-born citizen of the Philippines;
2. A registered voter;
3. Able to read and write;
4. At least 40 years of age on the day of the election; and
5. A resident of the Philippines for at least 10 years immediately preceding such election
(Section 2, Article VII)
Prohibitions/Inhibitions:
1. The President, Vice President, the Members of the Cabinet, and their deputies, or
assistants shall not hold any other office or employment during their tenure, unless
otherwise provided in the Constitution. (Section 13, Article VII)
2. The President, Vice President, the Members of the Cabinet shall not, directly, or
indirectly, practice any other profession, participate in any business, or be financially
interested in any contract with, or in any franchise or special privilege granted by the
government or any subdivision, agency, or instrumentality thereof, including GOCCs or
their subsidiaries (Id.)
3. Strictly avoid conflict of interest in the conduct of their office (Id.)
4. May not appoint spouse or relatives by consanguinity or affinity within the 4th civil degree
of the President as Members of Constitutional Commissions or Office of the
Ombudsman or as Secretaries, Under Secretaries, chairmen or heads of bureaus or
offices, including GOCCs and their subsidiaries
Election
1. Regular Election: Second Monday of May
2. National Board of Canvassers (President and Vice-President): Congress
a. Returns shall be transmitted to Congress, directed to the Senate President
b. Joint public session: not later than 30 days after election date; returns to be opened
in the presence of the Senate and HOR in joint session
3. Congress, upon determination of the authenticity and due execution, shall canvass the
votes
4. Person having the highest number of votes shall be proclaimed elected
5. In case of tie, one will be chosen by the vote of majority of all the Members of both
Houses of Congress, voting separately
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• Senators
Qualifications:
2. At least 35 years of age on the day of the election;
4. Registered voter;
5. Resident of the Philippines for not less than 2 years immediately preceding the day of
the election
Disqualifications and Inhibitions:

1. Incompatible office
General rule: No Senator or Member of the House of Representatives may hold any
other office or employment in the Government, or any subdivision, agency or
instrumentality thereof, including GOCCs or their subsidiaries during his term without
forfeiting his sear (Section 13, Article VI)
Forfeiture is automatic upon assumption of such other office incompatible with his seat
in Congress (Quinto v. COMELEC)
Exception: No forfeiture shall take place if the member of Congress holds the other
government office in an ex officio capacity, e.g., membership in the Judicial and Bar
Council (Liban v. Gordon)
2. Forbidden office
Neither shall he be appointed to any office which may have been created or the
emoluments thereof increased during the term for which he was elected.
This lasts only for the duration of the term for which the member of Congress was
elected.
3. Parliamentary inhibitions and disqualifications

a. A member of Congress shall not personally appear as counsel before any court of
justice or before the Electoral Tribunals, or quasi-judicial and other administrative
bodies. (Section 14, Article VI)
b. A member of Congress shall not, directly or indirectly, be interested financially in any

contract with, or in any franchise or special privilege granted by the Government, or
any subdivision, agency or instrumentality thereof, including any GOCC, or its
subsidiary, during his term of office. (Id.)
c. As to the members of the Congress, there is no general prohibition as to the practice

of their professions.
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Election:
1. Regular – second Monday of May, every 3 years
For the Senate, half of the membership is elected every 3 years on even date.
2. Special – in case of vacancy in Congress; no special election will be carried if vacancy

occurs
a. At least 18 months before the next regular election for members of the Senate;
b. At least 1 year before the next regular election for members of the House of
Representatives
• Members of the House of Representatives
A. District Representatives – elected from legislative districts apportioned among the

provinces, cities and the Metropolitan Manila area
Qualifications:
2. At least 25 years of age on the day of the election;
4. Except the party-list representatives, a registered voter in the district in which he
shall be elected;
5. Resident thereof for a period of not less than 1 year immediately preceding the day
of the election
B. Party-list Representatives – shall constitute 20% of the total number of the members of
the House of Representatives including those under the party-list
Qualifications:
1. Natural-born citizen of the Philippines
2. At least 25 years of age on the day of the election
3. Able to read and write
4. Resident of the Philippines for a period of not less than 1 year immediately preceding
the day of the election
5. A bona fide member of the party or organization which he seeks to represent for at
least 90 days preceding the day of the election
Requisites to be considered a member of the House of Representatives are -

1. Valid proclamation
2. Valid oath-taking
3. Assumption of office
Disqualifications and Inhibitions: (see previous discussion)

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Election: (see previous discussion)
• Justices and Judges
A. Justices of the SC and the Collegiate Courts

Qualifications:
2. At least 40 years of age;
3. Experience of 15 years or more as a judge of a lower court or has been engaged in
the practice of law in the Philippines for the same period;
4. A person of proven competence, integrity, probity, and independence
B. RTC Judges
Qualifications:
3. Has been engaged for at least 10 years in the practice of law or has held public office
in the Philippines requiring admission to the practice of law as an indispensable
requisite;
C. MTC Judges
Qualifications:
3. Has been engaged for at least 5 years in the practice of law or has held public office
in the Philippines requiring admission to the practice of law as an indispensable
requisite;
Disqualification from Other Positions or Offices

The Members of the Supreme Court and of other courts established by law shall not be
designated to any agency performing quasi-judicial or administrative functions. (Section 12,
Article VIII)
Appointment of Justices and Judges

a. Appointed by the President from among a list of at least 3 nominees prepared by the
Judicial and Bar Council for every vacancy.
b. Any vacancy in the SC shall be filled within 90 days from occurrence thereof.
c. For lower courts, President shall issue the appointment 90 days from submission of the
list. (Section 9, Article VIII)
d. Such appointments need no confirmation.
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• The Ombudsman
Composition:
a. Ombudsman/Tanodbayan
b. Overall Deputy (at least one Deputy each for Luzon, Visayas and Mindanao)
c. Deputy for military establishment may be appointed
Qualifications (Ombudsman and Deputies):

1. Natural born citizen of the Philippines;
2. At least 40 years old at time of appointment;
3. Of recognized probity and independence;
4. Member of the Philippine Bar;
5. Must not have been candidate for any elective office in the immediately preceding
election
6. For Ombudsman: He must have been for 10 years or more:
a. A judge; or
b. Engaged in the practice of law
Disqualifications and Prohibitions

1. Cannot hold any other office or employment during his tenure;
2. Cannot engage in the practice of any profession or in the active management or control
of any business which may be affected by the functions of his office;
3. Cannot be financially interested, directly or indirectly, in any contract with or in any
franchise or privilege granted by the Government, any of its subdivisions, agencies or
instrumentalities, including GOCCs or their subsidiaries.
Appointment of Ombudsman and Deputies

a. By the President from a list of at least 6 nominees prepared by the Judicial and Bar
Council. Vacancies will be filled from a list of 3 nominees.
b. Appointments do NOT require confirmation
c. All vacancies shall be filled within 3 months after they occur.
d. Appointees have 7-year terms without reappointment and are not qualified to run for any
office in the election succeeding their cessation from office.
• Constitutional Commissioners
A. Civil Service Commission – a Chairman and two (2) Commissioners

Qualifications:
2. At the time of their appointment, at least 35 years of age;
3. With proven capacity for public administration;
4. Must not have been candidates for any elective position in the election immediately
preceding their appointment
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B. Commission on Elections – a Chairman and six (6) Commissioners

Qualifications:
3. Holder of a college degree;
4. Have not been candidates in the immediately preceding election;
5. Majority, including the Chairman, must be members of the Philippine Bar who have
been engaged in the practice of law for at least 10 years
C. Commission on Audit – a Chairman and two (2) Commissioners

Qualifications:
3. CPAs with not less than 10 years of auditing experience or members of the Philippine
Bar with at least 10 years practice of law
Note: At no time shall all members belong to the same profession.
Prohibited Offices and Interests:

No member of the Constitutional Commissions shall, during their tenure:
1. Hold any other office or employment. This is similar to the prohibition against executive
officers. It applies to both public and private offices and employment;
2. Engage in the practice of any profession;
3. Engage in the active management or control of any business which in any way may be
affected by the functions of his office; or
4. Be financially interested, directly or indirectly, in any contract with, or in any franchise or
privilege granted by, the Government, its subdivisions, agencies or instrumentalities,
including GOCCs or their subsidiaries (Section 2, Article. IX-A)
viii. Immunity of the President, privileges of Senators and Members of the House of
Representatives
• Immunity of the President
Presidential Immunity
The President as such cannot be sued, enjoying as he does immunity from suit. But the
validity of his acts can be tested by an action against other executive officials. (Carillo v.
Marcos)
The privilege may be invoked only by the President.

Immunity from suit pertains to the President by virtue of the office and may be invoked only
by the holder of the office; not by any other person in the President's behalf. The President
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may waive the protection afforded by the privilege and submit to the court's jurisdiction.
(Soliven v. Makasiar)
But presidential decisions may be questioned before the courts where there is grave abuse
of discretion or that the President acted without or in excess of jurisdiction. (Gloria v. CA)
Immunity co-extensive with tenure and covers only official duties. After tenure, the Chief
Executive cannot invoke immunity from suit for civil damages arising out of acts done by
him while he was President which were not performed in the exercise of official duties.
(Estrada v. Desierto)
This presidential privilege of immunity cannot be invoked by a non-sitting president even for
acts committed during his or her tenure. (Saez v. Macapagal-Arroyo)
Exception: The president may be sued if the act is one not arising from official conduct
(Estrada v. Desierto)
• Privileges of Senators and Members of the House of Representatives
A. Salaries
The salaries of Senators and Members of the House of Representatives shall be
determined by law. No increase in said compensation shall take effect until after the
expiration of the full term of all the Members of the Senate and the House of
Representatives approving such increase. (Section 10, Article VI)
Until the Congress provides otherwise, the President shall receive an annual salary of
three hundred thousand pesos; the Vice-President, the President of the Senate, the
Speaker of the House of Representatives, and the Chief Justice of the Supreme Court,
two hundred forty thousand pesos each; the Senators, the Members of the House of
Representatives, the Associate Justices of the Supreme Court, and the Chairmen of the
Constitutional Commissions, two hundred four thousand pesos each; and the Members
of the Constitutional Commissions, one hundred eighty thousand pesos each. (Section
17, Article XVIII)
“Expiration of the full term of all Members of the Senate and the House of
Representatives” is singular and means that the increase may only take effect upon the
expiration of the terms of both houses who passed the law increasing said salary. This
means that even if the House of Representatives term has already expired but the
senate has not, the salary increase cannot yet take effect even if the increase is different
for each house. (PHILCONSA v. Mathay)
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B. Freedom from Arrest

A Senator or Member of the House of Representatives shall, in all offenses punishable
by not more than six years imprisonment, be privileged from arrest while the Congress
is in session…(Section 11, Article VI)
Regardless of the whereabouts of a Senator or Member of the House, freedom from

arrest holds, so long as Congress is in session.
Freedom from arrest applies only to offenses punishable by not more than six years
imprisonment.
Preventive suspension is not a penalty. Order of suspension under R.A. 3019 (Anti-Graft
and Corrupt Practices Act) is distinct from the power of Congress to discipline its own
members and did not exclude members of Congress from its operation (Defensor-
Santiago v. Sandiganbayan)
In People v. Jalosjos, the SC denied the request of Cong. Jalosjos that he be allowed to
attend legislative sessions. The denial was premised on the following:
a. Membership in Congress does not exempt an accused from statutes and rules which
apply to validly incarcerated persons;
b. One rationale behind confinement is public self-defense;
c. It would amount to creation of a privileged class, without justification in reason; and
d. He was provided with an office in the New Bilibid Prison.
C. Speech and Debate Clause

No Member shall be questioned nor be held liable in any other place for any speech or
debate in the Congress or in any committee thereof. (Section 11, Article VI)
This means the Senator or Member of the House can still be questioned and held liable
in Congress. To come under the guarantee, the speech or debate must be one made
"in Congress or in any committee thereof." Publication of an allegedly libelous letter is
not covered by the privilege. (Jimenez v. Cabangbang)
What is covered under this provision?

Anything a member of Congress says in line with his legislative functions (Jimenez v.
Cabangbang)
a. Speeches
b. Utterances
c. Bills signed
d. Votes passed
While the immunity of a Member of Congress is absolute and thus even the Supreme
Court cannot discipline a lawyer-senator for remarks made against the court, it does not
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shield said member from the authority of Congress to discipline its own members
[Defensor-Santiago v. Pobre, A.C. No. 7399 (2009)].
ix. Structure of government (composition, functions, powers and privileges, separation

of powers, and system of checks and balances)
• Composition
The Philippine government takes place in an organized framework of a presidential,

representative, and democratic republic whereby the president is both the head of state and
the head of government. This system revolves around three separate and sovereign yet
interdependent branches: the legislative branch (the law-making body), the executive
branch (the law-enforcing body), and the judicial branch (the law-interpreting body).
Executive power is exercised by the government under the leadership of the president.
Legislative power is vested in both the government and the two-chamber congress—the
Senate (the upper chamber) and the House of Representatives (the lower chamber).
Judicial power is vested in the courts with the Supreme Court of the Philippines as the
highest judicial body.
• Functions
Executive Branch
The executive branch is headed by the President who functions as both the head of state
and the head of government. The president is also the Commander-in-Chief of the Armed
Forces of the Philippines. The president is elected by popular vote to a term of six years.
The president, then, appoints (and may dismiss) his/her cabinet members whom he/she
presides over. The executive seat of government is administered officially from Malacañang
Palace—also the official residence of the president—in Manila. The President may no longer
run for re-election, unless he/she becomes president through constitutional succession and
has served for no more than four years as president.
The second highest official, the vice-president is first in line to succession should the
president resign, be impeached or die in office. The vice-president usually, though not
always, may be a member of the president's cabinet. If there is a vacancy in the position of
Vice President, the President will appoint any member of Congress (usually a party member)
as new Vice President. The appointment will be validated by a three-fourths vote of
Congress voting separately.
Legislative Branch
The remainder of the House seats are designated for sectoral representatives elected at
large through a complex "party list" system, hinging on the party receiving at least 2% to 6%
of the national vote total. The upper house is located in Pasay City, while the lower house
is located in Quezon City. The district and sectoral representatives are elected with a term
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of three years. They can be reelected but they are no longer eligible to run for a fourth
consecutive term. The senators are elected to a term of six years. They can be reelected
but they are no longer eligible to run for a third consecutive term. The House of
Representatives may opt to pass a resolution for a vacancy of a legislative seat that will
pave way for a special election. The winner of the special election will serve the unfinished
term of the previous district representative; this will be considered as one elective term. The
same rule applies in the Senate however it only applies if the seat is vacated before a regular
legislative election.
Judiciary Branch
The judiciary branch of the government is headed by the Supreme Court, which has a Chief
Justice as its head and 14 Associate Justices, all appointed by the president on the
recommendation of the Judicial and Bar Council. Other court types of courts, of varying
jurisdiction around the archipelago, are the:
Lower Collegiate Courts

Court of Appeals
Court of Tax Appeals
Sandiganbayan
Regular Courts
Regional Trial Courts
Metropolitan Trial Courts
Municipal Trial Courts
Municipal Trial Courts in Cities
Municipal Circuit Trial Courts
Muslim Courts
Sharia District Courts
Sharia Circuit Courts
• Powers and privileges (see previous discussion)
• Separation of powers (see previous discussion)
Application of Separation of Powers in Jurisprudence
A. Belgica v. Ochoa
The Pork Barrel System violates the separation of powers because it is a form of post-
enactment authority in the implementation or enforcement of the budget.
The system permits legislative encroachment upon the executive prerogative of

implementing the law, by giving individual legislators: (a) The power to determine
projects after the General Appropriations Act (GAA) is passed; and (b) through
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congressional committees, authority in the areas of fund release and realignment, the
system encroaches on the Executive’s power to implement the law.
Furthermore, identification of a project by a legislator being a mandatory requirement

before his PDAF can be tapped as a source of funds, his act becomes indispensable in
the entire budget execution process.
B. Ocampo v. Enriquez, G.R. No. 225973 (2016)

In the exercise of his powers under the Constitution and the Executive Order No. 292
(Administrative Code of 1987), to allow the internment of Marcos at the LNMB, which is
a land of the public domain devoted for national military cemetery and military shrine
purposes, President Duterte decided a question of policy based on his wisdom that it
shall promote national healing and forgiveness. There being no taint of grave abuse of
discretion, as discussed below, President Duterte’s decision on that political question is
outside the ambit of judicial review.
C. Forietrans Manufacturing Corporation v. Davidoff Et Cia. SA, G.R. No. 197482 (2017)
The task of determining probable cause is lodged with the public prosecutor and
ultimately, the Secretary of Justice. Under the doctrine of separation of powers, courts
have no right to directly decide matters over which full discretionary authority has been
delegated to the Executive Branch of the Government.
D. OCA v. Reyes, A.M. No. P-08- 2535 (2010)

The legislative power imposing policies through laws is subject to the substantive and
constitutional limitations. It cannot limit the Court’s power to impose disciplinary actions
against erring justices, judges and court personnel. Neither should such policy be used
to restrict the Court’s power to preserve and maintain the Judiciary’s honor, dignity and
integrity and public confidence that can only be achieved by imposing strict and rigid
standards of decency and propriety governing the conduct of justices, judges and court
employees.
• System of checks and balances
Allows one department to resist encroachments upon its prerogatives or to rectify mistakes
or excesses committed by the other departments.
However, the Supreme Court is the final arbiter to determine whether there has been an
encroachment between the branches (Angara v. The Electoral Commission)
Purpose: To secure coordination in the workings of the various departments of the

government
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Examples of Checks and Balances:

1. The President
a. His approval is required in the law-making process of the Congress; he may exercise
veto power (Section 27, Article VI)
b. He may nullify a conviction in a criminal case by pardoning the offender (Section 19,
Article VII)
2. Congress
a. May override the veto power of the President by a vote of 2/3 of all member sof each
house (Section 27, Article VI)
b. Its consent through the Commission on Appointments is necessary in the
appointment of certain officers by the President (Section 18, Article VI)
c. Congress may refuse to give its concurrence to an amnesty proclaimed by the
President (Section 19, Article VII)
d. The Senate may refuse to concur to a treaty the President has concluded (Section
21, Article VII)
e. May define, prescribe, and apportion the jurisdiction of the various courts but may
not deprive the SC of its jurisdiction over cases enumerated in Section 5, Article VIII
(Section 2, Article VIII)
3. Judiciary
In general, has the power to declare invalid an act done by the Congress, the President
and his subordinates, or the Constitutional Commissions (Section 4, Article VIII)
x. Process of legislation
A bill is signed by its author(s) and filed with the Secretary of the House. It may originate
from either the lower or upper House, except appropriation, revenue or tariff bills, bills
authorizing increase of public debt, bills of local application, and private bills, which shall
originate exclusively from the House of Representatives.
1. First reading – reading of the number and title of the bill, which is then referred to the
appropriate Committee for study and recommendation, which may include the conduct
of public hearings. The Committee will submit its report and recommendation for
Calendar for second reading.
2. Second reading – reading of the bill in full with the amendments proposed by the
Committee, if any, unless copies thereof are distributed and such reading is dispensed
with. The bill will be subject to debates, pertinent motions, and amendments. After the
amendments shall have been acted upon, the bill will be voted on second reading.
3. Third reading – submission of the bill as approved on second reading for a final vote by
yeas and nays.
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4. Conference Committee reports – transmittal of the bill approved on third reading by one
House to the other House for concurrence. The other House shall follow the same
procedure. If the other House approves the bill without amendments, the bill is passed
by Congress and the same will be transmitted to the President. If the other House
introduces amendments, with which the originating House does not agree, the
differences will be settled by the Conference Committee of both Houses. The
Conference Committee’s report will have to be approved by both Houses in order that it
will be considered passed by Congress and thereafter sent to the President.
5. Authentication of bills – signing by the Speaker and the Senate President of the printed
copy of the approved bill, followed by the certification by the respective secretaries of
both Houses, before it is sent to the President
6. President’s approval or veto – transmittal of the authenticated bill to the President. If he

approves the same, he shall sign it; otherwise, he shall veto it and return the same with
his objections to the House where it originated, which shall enter the objections at large
in its Journal and proceed to reconsider it. The President shall communicate his veto of
any bill to the House where it originated within 30 days after the date of receipt thereof,
otherwise, it shall become a law as if he had signed it.
7. Reversal of veto – if after such reconsideration, 2/3 of all the Members of such House
shall agree to pass the bill, it shall be sent, together with the objections, to the other
House, by which it shall likewise be reconsidered, and if approved by 2/3 of all the
Members of that House, it shall become a law.
How a Bill Passed Becomes a Law:

1. When it is approved by the President;
2. When the vote of the President is overridden by a 2/3 vote of all the members of both
houses;
3. Upon failure of the President to veto the bill and to return it with his objections, to the
House where it originated, within 30 days after the date of receipt
xi. Natural resources (nationalization principle for natural resources and economic
activities)
Flipinized activities as provided in Article XII of the Constitution

A. Co-production, joint venture, or production sharing agreement for exploration,
development and utilization (EDU) of natural resources.
General rule: Filipino citizens or entitles with 60% capitalization owned by Filipino
citizens.
Exception: For large-scale EDU of minerals, petroleum and other mineral oils, the
President may enter into agreements with foreign-owned corporations involving
technical or financial agreements only. (Section 2, Article XII)
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The State may also directly exploit its natural resources in either of two ways:
a. It may set up its own company to engage in the exploitation of natural resources.
b. It may enter into a financial or technical assistance agreement (FTAA) with private
companies who act as contractors of the State (La Bugan-B’laan v. DENR Section)
B. Use and enjoyment of nation’s marine wealth within the territory – exclusive for Filipino
citizens (Section 2, Article XII)
C. Alienable lands of the public domain:

1. Only Filipino citizens may acquire not more than 12 hectares by purchase,
homestead or grant, or lease not more than 500 hectares.
2. Private corporations may lease not more than 1,000 hectares for 25 years renewable
for another 25 years (Section 3, Article XII)
D. Certain areas of investment – reserved for Filipino citizens or entities with 60% owned
by Filipinos, although Congress may provide for higher percentage (Section 10, Article
XII)
E. In the grant of rights, privileges, and concessions covering the national economy and
patrimony, State shall give preference to qualified Filipinos (Section 10, Article XII)
F. Franchise, certificate or any other form of authorization for the operation of a public utility
– only to Flipino citizens or entities with 60% owned by Flipinos.
Exploration, development and utilization of natural resources

Only Filipino citizens and corporations or associations at least 60% of whose capital is
owned by Flipino citizens are qualified to take part in exploration, development and
utilization of natural resources (Section 2, Article XII)
Since natural resources, except agricultural resources that cannot be alienated, they can be
explored, developed or utilized by:
a. Direct undertaking of activities by the State;
b. Co-production, joint venture, or production sharing agreements with the State and all
under the full control and supervision of the State (Miners Association v. Factoran)
Control Test
This provides that shares belonging to corporations or partnerships at least 60% of the
capital of which is owned by Filipino citizens shall be considered of Philippine nationality. (It
is the primary test, but may be combined with the Grandfather Rule)
Grandfather Rule
The method by which the percentage of Filipino equity in a corporation is computed, in cases
where corporate shareholders are present, by attributing the nationality of the second or
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even subsequent tier of ownership to determine the nationality of the corporate shareholder.
Thus, to arrive at the actual Filipino ownership and control in a corporation, both the direct
and indirect shareholdings in the company are determined.
This applies only when the 60-40 Filipino-foreign ownership is in doubt or where there is
reason to believe that there is non-compliance with the provisions of the Constitution on the
nationality restriction.
In Narra Nickel Mining v. Redmont Consolidated Mines, the SC was compelled to use the
Grandfather rule due to the following circumstances:
1. The three mining corporations had the same 100% Canadian owned foreign investor.
2. The similar corporate structure and shareholder composition of the three corporations.
3. A major Filipino shareholder within the corporate layering did not pay any amount with
respect to its subscription.
4. The dubious act of the foreign investor in conveying its interests in the mining
corporations to another domestic corporation.
xii. Amendment and revision of the Constitution (Article XVII)
Amendment
It broadly refers to a change that adds, reduces, or deletes without altering the basic
principles involved
Revision
It broadly implies a change that alters at least one basic principle in the Constitution, like
altering the principle of separation of powers or the system of checks and balances.
Revision generally affects several provisions of the constitution, while amendment generally
affects only the specific provision being amended. (Lambino v. COMELEC)
Two-part test employed in Lambino Case to determine whether the proposal was a revision
or amendment:
1. Quantitative test – whether the proposed change is so extensive in its provisions as to

change directly the “substance entirety” of the Constitution by deletion or alteration of
numerous provisions. The Court examines only the number of provisions and not the
degree of change; and
2. Qualitative test – whether the change will accomplish such far-reaching changes in the
nature of our basic governmental plan as to amount to a revision
Three ways to amend/revise the Constitution:

1. Constituent Assembly by a vote of 3/4 of all members of Congress voting separately
2. Constitutional Convention by a vote of 2/3 of all its members or a majority vote and refer
the matter to the electorate
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3. People’s Initiative with 12% of the total electorate signing the petition represented by 3%
of the voters in each congressional district.
Note: Only one option must be undertaken to either amend or revise the constitution.
B. INTERNATIONAL LAW
i. Sources of international law
Article 38 of the International Court of Justice Statute

1. The Court, whose function is to decide in accordance with international law such
disputes as are submitted to it, shall apply:
a. international conventions, whether general or particular, establishing rules expressly
recognized by the contesting states;
b. international custom, as evidence of a general practice accepted as law;
c. the general principles of law recognized by civilized nations;
d. subject to the provisions of Article 59, judicial decisions and the teachings of the
most highly qualified publicists of the various nations, as subsidiary means for the
determination of rules of law.
2. This provision shall not prejudice the power of the Court to decide a case ex aequo et
bono, if the parties agree thereto.
A. International Conventions (Treaty Law) (Article 38[1][a])

Treaty – an international agreement concluded between states in written form and
governed by international law, whether embodied in a single instrument or in two or more
related instruments and whatever its particular designation (Article 2[1][a], VCLT)
Requisites:
1. Written Form
2. Between States
3. Governed by international Law
Basic Principles of Treaties

1. The primary body of law governing treaties is the Vienna Convention on the Law of
Treaties, which is considered binding as Customary International law.
2. It is based on consent. No state may be bound by a treaty obligation unless it has
so consented. (Article 34, VCLT)
3. Pacta Sunt Servanda – Every treaty in force is binding upon the parties to it and
must be performed by them in good faith. (Article 26, VCLT) [Note: This is considered
as customary international law and applies to all obligations contained in a treaty.]
4. Generally Not Binding on Third States, i.e. non-contracting parties.
Exceptions:
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a. When the third party accepts a provision establishing an obligation for that third
party. (Article 35, VCLT)
b. When the third party accepts a right provided for and exercises such right in
accordance with the conditions established in the treaty. (Article 36, VCLT)
5. Treaties are Non-Retroactive – Unless a different intention appears from the treaty
or is otherwise established, its provisions do not bind a party in relation to any act or
fact which took place or any situation which ceased to exist before the date of the
entry into force of the treaty with respect to that party (Article 28, VCLT)
B. International Customs (Customary Law) (Article 38[1][b])

It is a general practice accepted as law. Before a norm may become customary
international law binding on all States, there must be state practice and opinio juris sive
necessitates.
Elements:
a. State Practice – The practice must be consistent and general. Consistency requires
substantial uniformity and not necessarily complete uniformity in practice. Generality
does not require universality.
b. Opinio Juris – This refers to the belief on the part of states that a particular practice
is required by law, and not because of courtesy or political expediency. (i.e. the State
acts in such a manner because it believes it is obligated to do so)
Binding Effect of CIL

General rule: Customary International Law is binding on all states
Exception: Persistent Objector – When a State has continuously objected to a new

customary norm at the time when it is yet in the process of formation, by such persistent
objection the norm will not be applicable as against that state.
Jus Cogens
Jus cogens, or also referred to as “peremptory norm of general international law,” is a
norm accepted and recognized by the international community of States as a whole as
a norm from which no derogation is permitted and which can be modified only by a
subsequent norm of general international law having the same character. (Article 53,
VCLT)
Obligations Erga Omnes

1. An obligation under general international law that a state owes in any given case to
the international community, in view of its common values and its concerns for
compliance, so that a breach of that obligation enables all States to take action; or
2. An obligation under a multilateral treaty that a State party to the treaty owes in any
given case to all the other State parties to the same treaty, in view of their common
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values and concern for compliance, so that a breach of that obligation enables all
these States to take action (Vinuya v. Executive Secretary)
C. General Principles of Law (Article 38[1][c])

These refer to those general principles in municipal law (particularly those of private law)
that may be appropriated to apply to the relations of states.
Function: To avoid a non liquet, i.e. when a court does not have a treaty or customary
norm to decide on.
Examples:
1. Estoppel
2. Res Judicata
3. Res Inter Alios Acta
4. Prescription
5. Duty to Make Reparations
6. Abuse of Rights
7. Good Faith
8. Principle of Reciprocity
9. Circumstantial Evidence
D. Judicial Decisions and Teachings (1[d], Article 38)

The ICJ Statute directs the Court to apply judicial decisions as subsidiary means for the
determination of the rules of law. But this is made subject to Article 59 of the same
statute, which states that “The decisions of the court have no binding force except
between the parties and in respect of that particular case.”
Judicial Decisions
Includes decisions of international tribunals and those of municipal courts
Highly Qualified Publicists

Those writers whose main value depends on the extent to which their books and articles
are cited as works of scholarship, i.e., based on thorough research into what the law is
said to be (lex lata) rather than comparing the views of other writers as to what they think
the law ought to be (lex ferenda)
ii. Relationship with domestic law
Manner of Adopting International Law as Part of the Law of the State

1. Incorporation – The Philippines adopts the generally accepted principles of international
law as part of the law of the land (Section 2, Article II)
2. Transformation – requires the enactment by the legislative body of such international

law principles as are sought to be part of municipal law
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Rules in the Resolution of Conflict between International Law and National Law
General rule: Attempt to reconcile apparent contradiction and thereby give effect if possible
to both systems of law. It should be presumed that municipal law is always enacted yb each
state with due regard for and never in defiance of the generally accepted principles of
international law.
Conflict Resolved by Local Court on the Domestic Sphere

1. If the international law conflicts with the Constitution – The Philippine Constitution, as
the highest law of the land, should be upheld as against a conflicting international law.
2.
If the international law conflicts with a statute – The doctrine of incorporation decrees
that rules of international law are given equal standing with, but are not superior to
national legislative enactments. A treaty may repeal a statute and a statute may repeal
a treaty; thus, the principle of lex posterior derogat priori, that which comes last in time,
will usually be upheld by the municipal tribunal.
Conflict Resolved by International Tribunal on the International Sphere

National laws must yield to the laws of nations because international law provides the
standards by which legality of State conduct is to be determined.
It is an established principle that, before an international tribunal, a state may not plead its
own law as an excuse for failure to comply with international law.
C. LABOR LAW
i. Basic Principles
A. Basic Policy on Labor

Article. 3, Labor Code. Declaration of basic policy. – The State shall afford protection to
labor, promote full employment, ensure equal work opportunities regardless of sex, race
or creed and regulate the relations between workers and employers. The State shall
assure the rights of workers to self-organization, collective bargaining, security of tenure,
and just and humane conditions of work.
Section 3, Article XIII, Constitution. The State shall afford full protection to labor, local
and overseas, organized and unorganized, and promote full employment and equality
of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a
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living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial
peace.
The State shall regulate the relations between workers and employers, recognizing the
right of labor to its just share in the fruits of production and the right of enterprises to
reasonable returns on investments, and to expansion and growth.
B. Construction in favor of labor

Article 4, Labor Code. Construction in favor of labor. – All doubts in the implementation
and interpretation of the provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor.
Scope of the liberal interpretation of Labor Law

1. Labor Law
2. Implementing Rules Regulations
3. Labor or Employment Contract
4. Evidence in a labor proceeding
In case of doubt, all labor legislation and all labor contracts shall be construed in favor
of the safety and decent living for the laborer. (NCC, Article 1702)
In case of doubt in the interpretation or application of laws, it is presumed that the

lawmaking body intended right and justice to prevail. (NCC, Article 10) When the
conflicting interests of labor and capital are weighed on the scales of social justice, the
heavier influence of the latter must be counter-balanced by the sympathy and
compassion the law must accord the underprivileged worker. This is only fair if he is to
be given the opportunity and the right to assert and defend his cause not as a
subordinate but as a peer of management, with which he can negotiate on even plane.
Laboris not a mere employee of capital but its active and equal partner. (Eastern
Shipping Lines v. POEA, G.R. No. 76633, October 18, 1988)
It is a well-settled doctrine that if doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter. It is
a time-honored rule that in controversies between a laborer and his master, doubts
reasonably arising from the evidence, or in the interpretation of agreements and writing,
should be resolved in the former’s favor. The policy is to extend the doctrine to a greater
number of employees who can avail themselves of the benefits under the law, which is
in consonance with the avowed policy of the State to give maximum aid and protection
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to labor. (Lepanto Consolidated Mining Co. v. Moreno Dumapis, et. al., G.R. No. 163210,
August 13, 2008)
ii. Existence of employer-employee relationship; tests
Four-fold test:
1. Selection and engagement of the employee;
2. Payment of wages;
3. Power of dismissal;
4. Power to control
There has been no uniform test to determine the existence of an employer-employee

relationship. The “four-fold” test may be regarded as the traditional or conventional test of
the employment question. But it is not the sole test. There is the need to consider the existing
conditions between the parties, in addition to the right-of-control element. (Sevilla v. CA)
Control Test
This refers to the employers power to control or right to control the employee not only as to
the result of the work to be done, but also to the means and methods by which the same is
to be accomplished.
Not every form of control will have the effect of establishing the Er-Ee relationship. The line
should be drawn between:
1. Rules that merely serve as guidelines towards the achievement of mutually desired
results without dictating the means or methods to be employed in attaining it. These aim
only to promote the result. In such a case, no Er-Ee relationship exists.
2. Rules that control or fix the methodology and bind or restrict the party hired to the use
of such means. These address both the result and the means used to achieve it and
hence, Er-Ee relationship exists. (Insurance Life Assurance Co. Ltd. v. NLRC)
Economic Dependence or Economic Reality Test

This refers to whether the worker is dependent on the alleged employer for his continued
employment in that line of business. (Francisco v. NLRC)
Two-Tiered Test:
1. The putative employer’s power to control employee with respect to the means and
methods by which the work is to be accomplished; and
2. The underlying economic realities of the activity or relationship. (Id.)
The general rule is to use the Control Test. However, the Court found the two-tiered test
especially appropriate in a case where:
a. There is no written agreement or terms of reference to base the relationship on; and
b. Due to the complexity of the relationship based on the various positions and
responsibilities given to the worker over the period of the latter’s employment. (Id.)
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Circumstances of the Economic Activity Taken Into Consideration:

1. The extent to which the services performed are an integral part of the employer’s
business;
2. The extent of the worker’s investment in equipment and facilities;
3. The nature and degree of control exercised by the employer;
4. The worker’s opportunity for profit and loss;
5. The amount of initiative, skill, judgment or foresight required for the success of the
claimed independent enterprise;
6. The permanency and duration of the relationship between the worker and the employer;
and
7. The degree of dependency of the worker upon the employer for his continued
employment in that line of business
iii. Termination of employment
A. Termination by employer
Dismissal of employees requires the observance of the two-fold due process requisites:
1. Substantive aspect which means that the dismissal must be for any of the (1) just causes
provided under the Labor Code or the company rules and regulations promulgated by
the employer; or (2) authorized causes under the Labor Code; and
2. Procedural aspect which means that the employee must be accorded both STATUTORY
DUE PROCESS AND CONTRACTUAL DUE PROCESS.
Just Cause v. Authorized Cause

A dismissal based on a just cause means that the employee has committed a wrongful act
or omission; while a dismissal based on an authorized cause means that there exists a
ground which the law itself allows or authorizes to be invoked to justify the termination of an
employee even if he has not committed any wrongful act or omission, such as installation of
labor-saving devices, redundancy, retrenchment, closure or cessation of business
operations or disease.
Just Causes under Article 297 (Termination by the Employer):

a. Serious misconduct
Requisites:
1. It must be serious;
2. It must relate to the performance of the employee’s duties;
3. It must show that he has become unfit to continue working for the employer;
4. It must have been performed with wrongful intent.
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b. Insubordination or willful disobedience of lawful orders

Requisites:
1. The employee’s assailed conduct must have been willful or intentional, the
willfulness being characterized by a wrongful and perverse attitude;
2. The order violated must be based on a reasonable and lawful company rule,
regulation, or policy and made known to the employee and must pertain to the duties
for which he has been engaged to discharge.
c. Gross and habitual neglect of duties

Requisites:
1. There must be negligence which is gross and/or habitual in character;
2. It must be work-related as would make him unfit to work for his employer
d. Abandonment of work
Requisites:
1. The employee must have failed to report for work or must have been absent without
valid or justifiable reason;
2. There must have been a clear intention on the part of the employee to sever the
employer-employee relationship manifested by some overt act
e. Fraud
Requisites:
1. The employee has committed fraud, an intentional deception and used dishonest
methods for personal gain or to damage the employer;
2. The fraud is work-related and rendered him unfit to work for his employer.
f. Willful breach of the trust and confidence;

Requisites:
1. The employee holds a position of trust and confidence;
2. There exists an act justifying the loss of trust and confidence, which means that the
act that betrays the employer’s trust must be real, i.e., founded on clearly established
facts;
3. The employee’s breach of the trust must be willful, i.e., it was done intentionally,
knowingly and purely, without justifiable cause;
4. The act must be in relation to his work which would render him unfit to perform it.
g. Commission of Crime or Offense

Requisites:
1. A crime or offense was committed by the employee;
2. It was committed against any of the following persons:
a. His employer;
b. Any immediate member of his employer’s family;
c. His employer’s duly authorized representative
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h. Loss of Confidence
Requisites:
1. There must be an act, omission or concealment;
2. The act, omission or concealment justifies the loss of trust and confidence of the
employer to the employee;
3. The employee concerned must be holding a position of trust and confidence;
4. The loss of trust and confidence should not be simulated;
5. It should not be used as a subterfuge for causes which are improper, illegal or
unjustified;
6. It must be genuine and not a mere afterthought to justify an earlier action taken in
bad faith.
i. Other Analogous Causes

Requisites:
1. There must be act or omission similar to those specified just causes;
2. The act or omission must be voluntary and/or willful on the part of the employees.
Prohibited Activities under Article 279(a)

a. Union officers who knowingly participate in an illegal strike and therefore deemed to
have lost their employment status.
b. Any employee, union officer or ordinary member who knowingly participates in the
commission of illegal acts during a strike (irrespective of whether the strike is legal or
illegal), is also deemed to have lost his employment status.
Authorized causes
a. Installation of Labor-Saving Device
Requisites:
1. There is good faith in effecting the termination;
2. The termination is a matter of last resort, there being no other option available to the
employer after resorting to cost-cutting measures;
3. Two separate written notices are served on both the affected employee and the
DOLE at least 1 month prior to the intended date of termination;
4. The separation pay is paid to the affected employee, which is equivalent to 1 month
pay or at least 1 month pay for every year of service, whichever is higher, a fraction
of at least 6 months shall be considered as 1 whole year;
5. Fair and reasonable criteria in ascertaining what positions are to be affected by the
termination;
6. The purpose for such installation of labor-saving device/s must be valid
b. Redundancy
Requisites:
1. The services of an employee are in excess of what is reasonably demanded by the
actual requirements of an enterprise;
2. The position is superfluous;
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pay or at least 1 month pay for every year of service, whichever is higher, a fraction
termination
c. Retrenchment
Requisites:
1. There is proof of actual losses or possible imminent losses that would justify
termination of employment;
pay or at least 1/2 month pay for every year of service, whichever is higher, a fraction
termination;
7. Losses must not be de minimis;
8. There must be proof that the retrenchment is expected to be effective in preventing
or reducing losses
d. Closure or Cessation of Business Operations

Requisites:
1. There must be a decision to close or cease operation of the enterprise by the
management
2. The decision was made in good faith;
3. There is no other option available to the employer except to close or cease
operations.
e. Disease
Requisites:
1. An employee has been found to be suffering from any disease;
2. His continued employment is:
a. Prohibited by law;
b. Prejudicial to his health as well to the health of his co-employees;
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3. A competent public health authority issues a medical certificate that the disease is
of such nature or at such stage than it cannot be cured within a period of 5 months
even with proper medical treatment
Procedural Due Process for Just Causes

1. Service of 1st written notice – contains grounds for termination, directive that the
employee must submit his explanation within a reasonable period of 5 days, detailed
narration of the facts that serve as basis for the charge, and company rules, violated or
grounds under Article 297
2. Opportunity to be heard – a formal hearing is not required, unless:

a. Requested by the employee in qriting;
b. Substantial evidentiary disputes exist;
c. When a company rule or practice requires it;
d. When similar circumstances justify it
3. Service of 2nd written notice – indicates all circumstances involving the charge/s and
grounds have been established to justify the severance of his employment
Procedural Due Process for Authorized Causes (Business-Related Causes)

In cases of installation of labor-saving device, redundancy, retrenchment and closure of
business or establishment, there must be a separate and simultaneous service of written
notice of the intended termination to both:
1. The employee to be terminated;
2. The appropriate DOLE Regional Offices
At least 1 month before the intended date of termination specifying the ground/s therefor
and the undertaking to pay the separation pay required under Article 298
Procedural Due Process for Authorized Causes (Due to Disease)

1. Written notice to employee concerned at least 30 days prior to the intended date of
termination;
2. Written notice to DOLE at least 30 days prior to the intended date of termination;
3. Payment of separation pay
B. Termination by employee
Termination Without Just Cause

By serving a written notice on the employer at least 1 month in advance
Requisites of Resignation Without Just Cause:

1. The resigning employee should submit a written notice of termination (commonly known
as resignation letter);
2. Service of such notice to the employer at least 1 month in advance;
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3. Written acceptance by the employer of the resignation. (Shie Jie Corp. v. National
Federation of Labor)
Termination With Just Cause

An employee may put an end to his employment without serving any notice on the employer
for any of the just causes enumerated under Article 300(b), to wit:
1. Serious insult by the employer or his representative on the honor and person of the
employee;
2. Inhuman and unbearable treatment accorded the employee by the employer or his
representative;
3. Commission of a crime or offense by the employer or his representative against the
person of the employee or any of the immediate members of his family;;
4. Other causes analogous to the foregoing.
C. Constructive Dismissal
It is an involuntary resignation resorted to when continued employment becomes

impossible, unreasonable, or unlikely, due to any of the following:
a. demotion in rank or a diminution in pay; or
b. when a clear discrimination, insensibility, or disdain by an employer becomes
unbearable to an employee.
Constructive dismissal is illegal and usually occurs when an employee resigns as a result
of unfavorable work conditions instigated by the employer. It is typically resorted to by
employers who do not want to undergo the procedural due process involved in legally
terminating an employee.
Test of Constructive Dismissal

Whether a reasonable person in the employee’s position would have felt compelled to give
up his position under the circumstances
iv. Requirements for valid labor-only contracting
Labor-only contracting refers to an arrangement where the contractor, who does not have
substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, supplies workers to an employer and the workers recruited are
performing activities which are directly related to the principal business of such employer.
(Article 106, Labor Code)
Essential Elements of Labor-Only Contracting

1. The contractor or subcontractor does not have substantial capital or investment to
actually perform the job, work or service under its own account and responsibility; and
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2. The employees recruited, supplied, or placed by such contractor or subcontractor are

performing activities which are directly related to the main business of the principal.
Confirming Elements
To have labor-only contracting, the essential element of supplying workers to another is not
enough. To it must be added either one of two confirming elements:
1. Lack of substantial capital or investment and performance of activities directly related or
usually necessary or desirable to the principal’s main business; or
2. The contractor does not exercise control over the performance of the employees
Note: If any of the essential elements is absent, there can be no labor-only contracting. And
even if the essential elements are present, but the confirming element one or two is absent,
there is still no labor-only contracting.
v. Rights of employees and of labor organizations; membership in unions
• Rights of employees and of labor organizations
Right of employees
A. Right to self-organization
It is the right of workers and employees to form, join or assist unions, organizations or
associations for purposes of collective bargaining and negotiation and for mutual aid and
protection. It also refers to the right to engage in peaceful concerted activities or to
participate in policy and decision-making processes affecting their rights and benefits.
Coverage
All persons employed in commercial, industrial and agricultural enterprises and in
religious, charitable, medical, or educational institutions, whether operating for profit or
not, shall have the right to self-organization and to form, join, or assist labor
organizations of their own choosing for purposes of collective bargaining. Ambulant,
intermittent and itinerant workers, self-employed people, rural workers and those without
any definite employers may form labor organizations for their mutual aid and protection.
Any employee, whether employed for a definite period or not, shall beginning on the first
day of his/her service, be eligible for membership in any labor organization.
Ineligibility of Managerial Employees; Right of Supervisory Employees

As a general rule, only top and middle managers are not allowed to join any labor
organization. First-line managers (or supervisory employees) are allowed to join a
supervisory union but not the union of rank-and-file employees or vice-versa. In fact,
the law does not allow mixed membership of both supervisory and rank-and-file
employees in one union. A union with such mixed membership is no union at all. It
cannot exercise the rights of a legitimate labor organization.
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Effect of Inclusion as Employees Outside of the Bargaining Unit

The inclusion as union members of employees outside the bargaining unit shall not be
a ground for the cancellation of the registration of the union. Said employees are
automatically deemed removed from the list of membership of said union.
Non-Abridgement
It shall be unlawful for any person to restrain, coerce, discriminate against or unduly
interfere with employees and workers in their exercise of the right to self-organization.
Such right shall include the right to form, join, or assist labor organizations for the
purpose of collective bargaining through representatives of their own choosing and to
engage in lawful concerted activities for the same purpose or for their mutual aid and
protection
Rights of Legitimate Labor Organizations

1. To act as the representative of its members for the purpose of collective bargaining;
2. To be certified as the exclusive representative of all the employees in an appropriate
bargaining unit for purposes of collective bargaining;
3. To be furnished by the employer, upon written request, with its annual audited financial
statements, within 30 calendar days from the date of receipt of the request:
a. After the union has been duly recognized by the employer or certified as the sole
and exclusive bargaining representative of the employees in the bargaining unit; or
b. Within 60 calendar days from the expiration of the existing collective bargaining
agreement; or
c. During the collective bargaining negotiation
4. To own property, real or personal, for the use and benefit of the labor organization and
its members;
5. To sue and be sued in its registered name; and
6. To undertake all other activities designed to benefit the organization and its members
and other projects not contrary to law
• Membership in unions
The rights of union members may be summarized as follows:

1. Political right – the member’s right to vote and be voted for, subject to lawful provisions
on qualifications and disqualifications;
2. Right over money matters – the member’s right:

a. Against excessive fees;
b. Against unauthorized collection of contributions or disbursements;
c. To require adequate records of income and expenses;
d. Of access to financial records;
e. Vote on officer’s compensation;
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f. Vote on proposed special assessment and be deducted a special assessment only

with the member’s written authorization
3. Right to information – the member’s right to be informed about the:

a. Organization’s constitution and by-laws;
b. Collective-bargaining agreement;
c. Labor laws
4. Deliberative and decision-making right – the member’s right to participate in

deliberations on major policy questions and decide them by secret ballot
vi. Management prerogative
Definition
An exclusive and special right, power or privilege granted to business owners. It is also a
property right attributed to the owner of a business establishment.
Most common Management Prerogatives

1. The Right to Hire
a. The company has the exclusive right to purchase labor from any person whom it
chooses. Thus, the transferee in good faith of a business establishment has no
obligation to absorb employees of the transferor and to continue on employing them.
b. There is no law which requires the purchaser to absorb of the selling corporation. As
there is no such law, the most that the purchasing company may do, for purposes of
public policy and social justice, is to give preference to the qualified separated
employees of the selling company, who in their judgement are necessary in the
continued operation of the business establishment.
2. The Right to Dismiss (Fire/Terminate)

a. The company has the right to dismiss employees in accordance with the causes and
procedures established by law. This particular right must be exercised with caution
and without abuse of discretion because termination affects the right of the worker
to Security of Tenure.
b. In cases of Regular Employment, termination on the grounds of just and authorized
causes, subject to the requirements of due process.
c. No prior notice is required for end of contract or completion of contract phase.
d. Notice must be served on employees within a reasonable time for termination of
probationary employment.
Note: Any decision of termination shall be without prejudice to the right of the worker to
contest the same by filing a complaint with RAB of the NLRC.
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3. The Right to Transfer

a. The company has the right to transfer an employee from one office to another within
the business establishment provided that there is no demotion in rank, salary,
benefits and other privileges.
b. Its a privilege inherent in the employers right to control and conduct its business
enterprise and conduct of its business operations to achieve its purpose. It cannot
be denied to the employer.
c. It is the employers prerogative, based on its assessment on the following employee
attributes:
i. Qualifications
ii. Aptitudes
iii. Competence
Note: An employees security of tenure does not give him such a vested right in his
position as would deprive the company of it prerogative to change his assignment or
transfer him where he will be most useful.
4. The Right to Promote and Demote

a. The Company has the right to promote employees.
b. Promotion: scalar ascent of an employee to another position higher in rank or salary.
The right to promote carries with it the right to demote.
c. There is no law that compels an employee to accept a promotion as a promotion is
in the nature of a gift or reward, which a person has a right to refuse.He who uses
his own right, injures no one.
5. The Right to Discipline

a. The right of the meployer to subject his employees to disciplinary measures and the
need for discipline have been judicially noticed.
b. Success in industries and public services is the foundation in which just wages may
be paid. There can be no success without efficiency. There can be no efficiency
without discipline. Thus when they violate the rules of discipline, employees and
laborers jeopardize the interest not only of the employer but also of their own.
6. The Right to Lay Down Policies, The Right to Establish Working Hours and The Right to
Organize and Reorganize
a. In general terms, an employer is free to regulate, according to his own discretion and
judgement, all aspects of employment, including work assignments, working
methods, time, place, and the manner or work, tools to be used, processes to be
followed, supervision of workers and working regulations.
7. The Right to Reasonable return on investment and The Right to Expansion and Growth
a. Every business enterprises endeavours to increase its profit and in the process it
may adopt or devise means designed towards expansion and growth.
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Bona Fide Occupational Qualifications

Employment in particular jobs may not be limited to persons of a particular sex, religion, or
national origin unless the employer can show that sex, religion, or national origin is an actual
qualification for performing the job. The qualification is called a bona fide occupational
qualification (BFOQ). (Yrasuegui vs PAL)
To justify a bona fide occupational qualification, the employer must prove two factors: (1)
that the employment qualification is reasonably related to the essential operation of the job
involved; and, (2) that there is a factual basis for believing that all or substantially all persons
meeting the qualification would be unable to properly perform the duties of the job. (Star
Paper Corp. v. Simbol)
vii. Illegal recruitment of Overseas Filipino Workers
Definition
Illegal recruitment shall mean any act of canvassing, enlisting, contracting, transporting,
utilizing, hiring, or procuring workers and includes referring, contract services, promising or
advertising for employment abroad, whether for profit or not, when undertaken by a non-
licensee or non-holder of authority (or a document issued by DOLE authorizing engagement
in recruitment and placement activities as a private recruitment entity): Provided, that any
such non-licensee or non-holder who, in any manner, offers or promises for a fee
employment abroad to two or more persons shall be deemed so engaged.
Prohibited Acts:
1. To charge or accept directly or indirectly any amount greater than that specified in the
schedule of allowable fees prescribed by the Secretary of Labor and Employment, or to
make a worker pay or acknowledge any amount greater than that actually received by
him as a loan or advance;
2. To furnish or publish any false notice or information or document in relation to
recruitment or employment;
3. To give any false notice, testimony, information or document or commit any act of
misrepresentation for the purpose of securing a license or authority under the Labor
Code, or for the purpose of documenting hired workers with the POEA, which include
the act of reprocessing workers through a job order that pertains to non-existent work,
work different from the actual overseas work, or work with a different employer whether
registered or not with the POEA;
4. To induce or attempt to induce a worker already employed to quit his employment in
order to offer him another unless the transfer is designed to liberate a worker from
oppressive terms and conditions of employment;
5. To influence or attempt to influence any person or entity not to employ any worker who
has not applied for employment through his agency or who has formed, joined or
supported, or has contacted or is supported by any union or workers’ organization;
6. To engage in the recruitment or placement of workers in jobs harmful to public health or
morality or to the dignity of the Republic of the Philippines;
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7. To obstruct or attempt to obstruct inspection by the Secretary of Labor and Employment

or by his duly authorized representative;
8. To fail to submit reports on the status of employment, placement vacancies, remittance
of foreign exchange earnings, separation from jobs, departures and such other matters
or information as may be required by the Secretary of Labor and Employment;
9. To substitute or alter to the prejudice of the worker, employment contracts approved and
verified by the Department of Labor and Employment from the time of actual signing
thereof by the parties up to and including the period of the expiration of the same without
the approval of the Department of Labor and Employment;
10. For an officer or agent of a recruitment or placement agency to become an officer or
member of the Board of any corporation engaged in travel agency or to be engaged
directly or indirectly in the management of a travel agency;
11. To withhold or deny travel documents from applicant workers before departure for
monetary or financial considerations, or for any other reasons, other than those
authorized under the Labor Code and its implementing Rules and Regulations;
12. Failure to actually deploy a contracted worker without valid reason as determined by the
Department of Labor and Employment;
13. Failure to reimburse expenses incurred by the worker in connection with his
documentation and processing for purposes of deployment, in cases where the
deployment does not actually take place without the worker's fault; and
14. To allow a non-Filipino citizen to head or manage a licensed recruitment/manning
agency. (Section 1, Rule IV, IRR)
Other prohibited acts:

a. Grant a loan to an OFW with interest exceeding eight (8%) percent per annum, which
will be used for payment of legal and allowable placement fees and make the migrant
worker issue, either personally or through a guarantor or accommodation party,
postdated checks in relation to the said loan;
b. Impose a compulsory and exclusive arrangement whereby an OFW is required to avail
of a loan only from specifically designated institutions, entities, or persons;
c. Refuse to condone or renegotiate a loan incurred by an OFW after the latter’s
employment contract has been prematurely terminated through no fault of his/her own;
d. Impose a compulsory and exclusive arrangement whereby an OFW is required to
undergo health examinations only from specifically designated medical clinics,
institutions, entities or persons, except in the case of a seafarer whose medical
examination cost is shouldered by the principal/shipowner;
e. Impose a compulsory and exclusive arrangement whereby an OFW is required to
undergo training, seminar, instruction or schooling of any kind only from specifically
designated institutions, entities or persons, except for recommendatory training
mandated by principals/shipowners where the latter shoulder the cost of such trainings;
f. For a suspended recruitment/manning agency to engage in any kind of recruitment
activity including the processing of pending workers’ applications;
g. For a recruitment/manning agency or a foreign principal/employer to pass-on to the
OFW or deduct from his/her salary the payment of the cost of insurance fees, premium
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or other insurance related charges, as provided under the compulsory worker’s

insurance coverage. (Section 3, Rule IV)
Illegal Recruitment as Economic Sabotage

a. When committed by a syndicate – Illegal recruitment is deemed committed by a
syndicate if carried out by a group of three (3) or more persons conspiring or
confederating with one another.
b. When committed in large-scale – It is deemed committed in large scale if committed
against three (3) or more persons individually or as a group. (Section 2, Rule IV)
Who May Be Held Liable

The persons criminally liable for the above offenses are the principals, accomplices and
accessories. In case of juridical persons, the officers having ownership, control,
management or direction of their business who are responsible for the commission of the
offense and the responsible employees/agents thereof shall be liable.
Prescriptive Period
Illegal recruitment cases under this Rule shall prescribe in five (5) years: Provided, however,
that illegal recruitment cases involving economic sabotage shall prescribe in twenty (20)
years.
viii. Remedies (labor standards violations)
Jurisdiction
The DOLE Regional Directors have original and exclusive jurisdiction over labor standards
enforcement cases. (Article 128, Labor Code)
Visitorial Power
The power of the SOLE or any of his duly authorized representiatives to have access to
employer’s records and presmises at any time of the day or night whenever work is being
undertaken therein.
The purpose of the visitorial powers under Article 128 is to inquire into the employer’s
compliance with labor standards under labor laws and social legislation.
Enforcement Power
It is the power of the SOLE to compel the employer to comply with labor standards upon
finding of violations discovered in the course of the exercise of the visitorial power. Only
claims where employer-employee relations still exist can be covered.
This includes the power to:

1. Issue compliance orders based on the findings made in the course of inspection;
2. Conduct hearings within 24 hours to determine whether:
a. An order for stoppage of work/suspension of operations shall be lifted or not;
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b. The employer shall pay the employees concerned their salary in case the violation
is attributable to his fault.
3. Issue writs of execution for the enforcement of orders except in cases where the
employer contests the findings of the said labor officers and raises issues supported by
documentary proofs which were not considered in the course of inspection;
4. Order work stoppage/suspension of operations when non-compliance with the law or
implementing rules and regulations poses grave and imminent danger to the health and
safety of the workers in the workplace.
Exercise of Visitorial and Enforcement Power

Before the DOLE may exercise its powers under Article 128, two important questions must
be resolved, to wit:
1. Does the Er-Ee relationship exist?
DOLE’s prerogative to determine the existence of Er-Ee relationship is not coextensive
with the visitorial and enforcement power. Such determination is merely preliminary,
incidental and collateral to the DOLE’s primary function of enforcing labor standards
provisions. The determination of the existence of Er-Ee relationship is still primary
lodged with the NLRC. This is the meaning of the clause “in cases where the relationship
of Er-Ee still exists” in Article 128(b).
Thus, if a complaint is brought before DOLE to give effect to the labor standards
provisions of the Labor Code or other labor legislation, and there is a finding by DOLE
that there is an existing Er-Ee relationship, the DOLE exercises jurisdiction to the
exclusion of NLRC.
If DOLE finds that there is no Er-Ee relationship, the jurisdiction is properly with the
NLRC.
If a complaint is filed with DOLE, and it is accompanied by a claim for reinstatement, the
jurisdiction is properly with the Labor Arbiter, under Article 224.
If the complaint is filed with the NLRC and there is still an existing Er-Ee relationship,
the jurisdiction is properly with DOLE.
The findings of DOLE, however, may still be questioned through a petition for certiorari
under Rule 65 of the Rules of Court and not through a review by the NLRC. (People’s
Broadcasting v. DOLE Section)
2. Are there violations of the Labor Code or of any labor law?

The DOLE has quasi-judicial power at least to the extent necessary to determine
violations of labor standards provision of the Code and other labor legislation. The SOLE
or the Regional Directors can issue compliance orders and writs of execution for the
enforcement thereof. (Jethro Intelligenco & Security Corp. v. DOLE Section)
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D. TAXATION LAW
i. Basic principles of taxation in the Constitution
Constitutional Limitations on Taxation

The following are the constitutional limitations as provided by the 1987 Constitutions:
a. Due Process (Section1, Article III)

b. Equal Protection of Laws (Section 1, Article III)
c. Religious Freedom (Section 5, Article III)
d. Non-Impairment of Contracts (Section 10, Article III)
e. Prohibition against Imprisonment for Non-payment of Poll Tax (Section 20, Article III)
f. Uniformity and Equality of Taxation and Progressive System of Taxation (Section 28,
Article VI)
g. Delegated Authority to the President to Impose Tariff Rates (Section 28[2], Article VI)
h. Prohibition against Taxation of Real Property of Charitable Institutions, Churches,
Parsonages or Convents, Mosques and Non-profit Cemeteries (Section 28[3], Article VI)
i. Prohibition against Taxation on Non-stock Non-Profit Educational Institutions (Section
4[3], Article XIV)
j. Absolute Majority Vote of Congress for Grants of Tax Exemptions (Section 28[4], Article
VI)
k. Prohibition against the use of Tax Levied for Special Purpose (Section 29[3], Article VI)
l. Tax Bills should originate exclusively in the House of Representatives (Section 24,
Article VI)
m. President’s Veto Power on Appropriation, Revenue, and Tariff Bills (Section 27[2],
Article VI)
n. Judicial Power to Review Legality of Tax (Section 5, Article VIII)
o. Grant of Power to Local Government Units to Create its Own Sources of Revenue
(Section 5, Article X)
Lifeblood Theory
Taxation is the indispensable and inevitable price for civilized society; without taxes, the
government would be paralyzed for lack of motive power to activate and operate it. Thus,
the collection of taxes must be made without hindrance if the state is to maintain its orderly
existence. (CIR v. Algue)
However, such collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself. It is therefore necessary to reconcile the
apparently conflicting interests of the authorities and the taxpayers so that the real purpose
of taxation, which is the promotion of the common good, may be achieved (Id.)
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Necessity Theory
The existence of the government is a necessity. It cannot continue without a means to pay
its expenses and therefore has a right to compel all citizens and property within its power to
contribute.
Without taxes, the government cannot fulfill its mandate of promoting general welfare and
well-being of the people (NAPOCOR v. City of Cabanatuan)
The obligation to pay taxes rests upon the necessity of money for the support of the state.
For this reason, no one is allowed to object to or resist the payment of taxes solely because
no personal benefit to him can be pointed out. (Lorenzo v. Posadas)
Benefits Protection Theory

This principle serves as the basis of taxation and is founded on the reciprocal duties of
protection and support between the State and its inhabitants.
Despite the natural reluctance to surrender part of one's hard-earned income to the taxing
authorities, every person who is able to must contribute his share in the running of the
government. The government for its part is expected to respond in the form of tangible and
intangible benefits intended to improve the lives of the people and enhance their moral and
material values. This symbiotic relationship is the rationale of taxation and should dispel the
erroneous notion that it is an arbitrary method of exaction by those in the seat of power.
(CIR v. Algue)
Note: Also known as “Doctrine of Symbiotic Relationship”
Requisites of a Valid Tax

1. The person or property taxed be within the jurisdiction of the taxing authority;
2. Assessment and collection is in consonance with the due process clause;
3. The rule of taxation should be uniform;
4. The tax must not infringe on the inherent and constitutional limitations on the power of
taxation.
Situs of Taxation
No state may tax anything not within its jurisdiction without violating the due process clause
of the constitution. The taxing power of a state does not extend beyond its territorial limits,
but within such limits it may tax persons, property, income or business. (Manila Gas Corp.
v. CIR)
Tax Exemptions Protected by the Non-Impairment Clause

The tax exemptions protected by the non-impairment clause are contractual tax exemptions,
not those granted by franchises or licenses.
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Contractual tax exemptions are: (a) those entered into by the taxing authority; (b) lawfully
entered into them under enabling laws; and (c) wherein the government acts in its private
capacity and sheds its cloak of authority and immunity. (Manila Electric Co. v. Province of
Laguna)
Double Taxation
Double taxation means taxing the same property twice when it should be taxed only once;
that is, “taxing the same person twice by the same jurisdiction for the same thing.” (Swedish
Match Phil. v. Treasurer)
There is no constitutional prohibition against double taxation in the Philippines. It is

something not favored, but is permissible, provided some other constitutional requirement
is not thereby violated. (Villanueva v. City of Iloilo, 1968)
Two Kinds of Double Taxation

1. Direct double taxation – prohibited; to constitute as such, the following requisites must
be present:
a. The same property is taxed twice;
b. Both taxes are imposed –
i. On the same property or subject matter,
ii. For the same purpose,
iii. By the same State, Government or taxing authority,
iv. Within the same jurisdiction,
v. During the same taxing period, and
c. The two taxes are of the same kind or character.
Note: Imposition of penalty and tax does not amount to double taxation.
2. Indirect double taxation – not prohibited; there are two or more pecuniary impositions on
a subject matter
Illustration: Mr. Alas sells shoes in Makati through a retail store. He pays VAT on his
gross sales to the BIR and the municipal license tax based on the same gross sales to
the City of Makati. Double taxation is allowed where one tax is imposed by the national
government and the other by the local government.
The Municipality of Z has an existing ordinance that all restaurants and other establishments
selling liquor should pay a fixed annual fee of P15,000. Subsequently, the municipal board
proposed an ordinance imposing a 5% sales tax of the amount paid for the consumption or
purchase of liquor in restaurants and other establishments. However, Mr. Y, municipal
mayor, refused to sign the ordinance alleging that the ordinance will constitute double
taxation. Is the refusal of the mayor justified?
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No. The impositions are of different nature. The fixed annual fee is in the nature of a license
fee imposed through the exercise of police power, while the 5% tax on consumption or
purchase is a local tax imposed through the exercise of taxing powers. Both a license fee
and a tax may be imposed on the same business or occupation, or for selling the same
article and this is not a violation of the rule against double taxation. (Compania General de
Tabacos de Filipinas v. City of Manila)
Usual Methods of Avoiding the Occurrence of Double Taxation

The usual methods of avoiding the occurrence of double taxation are:
a. Allowing reciprocal exemption either by law or by treaty;
b. Allowance of a tax credit for foreign taxes paid;
c. Allowance of deduction for foreign taxes paid; and,
d. Reduction of the Philippine tax rate. (Dimaampao)
ii. Income tax
Define of Income Tax.

Income Tax is a tax on all yearly profits arising from property, professions, trade or offices
or as a tax on person‘s income, emolument, profits and the like (LG Electronics Philippines,
Inc. v. CIR)
Different Types of Income Tax Systems

a. Global Tax System is a system employed where the tax system views indifferently the
tax base and generally treats in common all categories of taxable income of the
individual. All items of gross income, deductions, personal and additional exemptions
are reported in one income tax return and a single tax is imposed on all income received
or earned, regardless of the activities which produces the income.
b. Schedular Tax System is a system employed where the income tax treatment varies and
is made to depend on the kind or category of taxable income of the taxpayer. The tax
rates depend on the classification of taxable income and activities which produced the
income.
c. Semi-Schedular or Semi-Global Tax System is a system of taxation wherein both global
and schedular tax system is being applied, depending on the kind of income. It is the
system being followed in the Philippines.
Basic Features of Philippine Income Taxation

1. It is comprehensive since it is imposed on practically all forms of income irrespective of
nature, whether compensation.
2. It is progressive since the tax rate increases as the tax base increases.
3. It follows semi-schedular or semi-global tax system.
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Criteria in Imposing Philippine Income Tax

1. Citizenship Principle
Resident citizens are taxable both for income from sources within and income without
the Philippines. Non-resident citizens are taxable only for income from sources within
the Philippines
2. Residence Principle
Resident aliens are taxable only for income from sources within the Philippines and
exempt from sources outside.
3. Source principle
Non-resident aliens are subject to Philippine income tax only on income from sources
within the Phil this is despite of the fact that he never set foot in the Phil.
Kinds of Taxpayers for Income Tax Purposes

1. Individuals
a. Resident Citizen
b. Nonresident Citizen
c. Resident Alien
d. Nonresident Alien not engaged in trade or business
e. Nonresident Alien engaged in trade or business
1. Corporations
a. Domestic Corporation
b. Resident Foreign Corporation
c. Nonresident Foreign Corporation
1. Others
a. Joint Venture and Consortium
b. Partnership
c. Estate
d. Trust
Different Tax Periods

The different tax periods are:
1. Calendar period pertains to the accounting period from January 1 to December 31.
Taxable income is computed based on calendar year if:
a. Accounting period is other than fiscal year;
b. Taxpayer has no accounting period;
c. Taxpayer does not keep books;
d. Taxpayer is an individual.
2. Fiscal period is the accounting period of 12 months ending on the last day of any month
other than December. (e.g., July 1, 2019-June 30, 2020)
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3. Short period is when a taxpayer may have a taxable period of less than 12 months when:
a. Taxpayer dies
b. Corporation is newly organized
c. Corporation changes its accounting period
d. Corporation is dissolved; and
e. Tax period has been terminated by the Commissioner by authority of law (Section
47, NIRC)
Definition of Income
An income is the return in money from one's business, labor, or capital invested; gains, profit
or private revenue. (Black‘s Law Dictionary)
Income is a flow of service rendered by capital by the payment of money from it or any other
benefit rendered by the fund through a period of time. (Madrigal v. Rafferty)
When is income taxable?

An income is taxable when there is an existing income, realization of income and recognition
of income.
a. As to Existence of Income, a primary consideration in income taxation is that there must
be income before there could be income taxation. (Domondon) There must be gain or
profit whether in cash or equivalent.
b. As to Realization of Income, revenue is generally recognized when both of the following
conditions are met: 1. The earning is complete or virtually complete; and 2. An exchange
has taken place. (Manila Mandarin Hotels v. CIR)
c. As to Recognition of Income, receipt of income for purposes of taxation may actual or
constructive. (CIR v. BPI) Income is received not only when it is actually handed to a
person but also when it is merely constructively received by him.
What are the tests in determining whether income is earned for tax purposes?
1. Realization Test
There is no taxable income unless income is deemed realized. Revenue is generally
recognized when both conditions are met: a. The earning process is complete or virtually
complete; and b. An exchange has taken place. (Manila Mandarin Hotels, Inc. v. CIR)
2. Claim of Right Doctrine/Doctrine of Ownership, Command, or Control

A taxable gain is conditioned upon the presence of a claim of right to the alleged gain
and the absence of a definite unconditional obligation to return or repay.
3. Economic-Benefit test/Doctrine of Proprietary Interest

Taking into consideration the pertinent provisions of law, income realized is taxable only
to the extent that the taxpayer is economically benefited.
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4. Severance test
Income is recognized when there is separation of something which is of exchangeable
value. (Eisner v. Macomber, 252 US 189)
On November 18, 2021, Mr. A, owner of a repair shop, billed Ms. B the amount of P2,000
in relation to the repair services by the former. However, Ms. B told Mr. A she that she will
pay by December 2021. On the same day, Mr. A received his electricity bill of his shop for
October 2021 amounting to P1,500 but due to be paid next month.
a. Under the accrual method, how much Mr. A should recognize as income and expense
in the month of November 2021?
Mr. A will record an income of P2,000 regardless of the fact that he has not yet received
any payment. This is because he has already the right to receive payment upon
completion of his service. Mr. A will also record the expense of P1,000 as the utility
service provider has already the right receive payment after it has provided electricity
last month.
The accrual method of accounting relies upon the taxpayer’s right to receive amounts or
its obligation to pay them. Amounts of income accrue where the right to receive them
become fixed, where there is created an enforceable liability. Similarly, liabilities are
accrued when fixed and determinable in amount, without regard to indeterminacy merely
of time of payment. (CIR v. Isabel Cultural Corporation)
Under the accrual method, it requires: (1) fixing of a right to income or liability to pay;
and (2) the availability of the reasonable accurate determination of such income or
liability. (ING Bank N.V. v. CIR)
b. Under the cash method, how much Mr. A should recognize as income and expense in
the month of November 2021?
Zero (0) for both income and expense. Mr. A will only record the income once collected
and expense once paid which will be in December 2021. The cash method of accounting
provides that income is realized upon receipt of cash or its equivalent including those
constructively received (such as deposits to taxpayer‘s account by customers) but not
including gifts or donations. (Revenue Audit Memorandum Order 1- 2000).
Situs of Income Taxation

Income Situs of Taxation
Interest Residence of the debtor or obligor
Dividends If received from a domestic corporation – income from within the
Philippines
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If received from a foreign corporation – income from within the

Philippines unless less than 50% of the gross income of such
foreign corporation for the 3-year period ending with the close of
its taxable year preceding the declaration of dividends was
derived from sources within the Philippines
Services Place of performance of the service
Rentals and Royalties Location or use of the property or interest in such property
Sale of Real Property Location of real property
Sale of Personal Place of sale
Property
Gain on Sale of Shares Income from within the Philippines regardless of where the
of Stock in a Domestic shares are sold
Corporation
Gross Income.
All income derived from whatever source, including (but not limited to) the following items:
1. Compensation for services in whatever form paid, including, but not limited to fees,
salaries, wages, commissions, and similar items;
2. Gross income derived from the conduct of trade of business or the exercise of a
profession;
3. Gains derived from dealings in property;
4. Interests;
5. Rents;
6. Royalties;
7. Dividends;
8. Annuities;
9. Prizes and winnings;
10. Pensions; and,
11. Partner‘s distributive share from the net income of the general professional partnership.
(Section 32[A], NIRC)
Basic Formula of Income Tax Computation

A. For Individuals
1. Pure Compensation Income Earner:
Gross Compensation xx
Less: Non-Taxable/Exempt Compensation Income* xx
Taxable Compensation Income xx
*This includes de minimis benefits (not in excess of the limit per items) including
salaries & other forms of compensation which are exempted from income tax. This
includes SSS/GSIS, PhilHealth, Pag-Ibig contributions and union dues.
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2. Pure Business/Professional Income Earner (Availing the Graduated Tax Rate)

Gross Receipts/Gross Sales xx
Less: Sales Returns, Allowances and Discounts xx
Net Sales/Net Revenue xx
Less: Itemized Deductions or Optional Standard Deduction (OSD) xx
Net Income xx
Add: Other Non-Operating Income xx
Total Taxable Income xx
Less: Allowed Deduction under Section 24 (A)(2)(b) P250,000.00 P250,000
Taxable Income (Loss) xx
3. Pure Business/Professional Income Earner

Add: Other Non-Operating Income xx
Less: Allowed Deduction under Section 24 (A)(2)(b) P250,000
Taxable Income (Loss) xx
A. For Corporation

Less: Cost of Sales or Cost of Services xx
Gross Income from Operation xx
Add: Other Taxable Income not Subjected to Final Tax xx
Less: Itemized Deductions & Other Special Deductions incl. NOLCO OR OSD xx
Net Taxable Income (Loss) xx
Sources of Income Subject to Tax

The sources of income subject to tax are as follows:
a. Compensation income – all renumerations for services performed by an employee under
an employer – employee relationship, unless expressly excluded by NIRC. (Section 2,
RR. No. 8- 18)
b. Fringe benefits – it means any good, service or other benefit furnished in cash or in kind
by an employer to an individual employee. (Section 33 (B), NIRC)
c. Professional income – fees derived from engaging in an endeavour requiring special
training as professional as a means of livelihood such as but limited to fees of C.P.A.s,
doctors, lawyers andengineers. (RR No. 2-98)
d. Income from business – it arises from habitual engagement in any commercial activity
involvingregular sales of goods or services by an individual or a corporation.
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e. Income from dealings in property – income on sale of properties whether ordinary or

capital asset.
Capital Asset v. Oridinary Asset

a. Capital Asset – includes all property held by the taxpayer whether or not connected with
his trade or business except those considered as ordinary asset
b. Ordinary Asset – the following are considered as ordinary asset:
1. Stock in trade of the taxpayer or other property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable year.
2. Property held by taxpayer primarily for sale to customers in the ordinary course of
trade or business.
3. Property used in the trade or business of a character which is subject to the
allowance of depreciation.
4. Real property used in trade or business of the taxpayer. (Section 39, NIRC, as
amended)
Special Rules Pertaining to Income or Loss from Dealings in Property Classified as Capital
Asset
a. The Loss Limitation Rule – is applicable when the capital losses are allowed only to the
extent of capital gains.
b. The Net Capital Loss Carry-Over Rule – is applicable if any taxpayer, other than a
corporation, sustains in any taxable year a net capital loss, such loss (in an amount not
in excess of the net income for such year) shall be treated in the succeeding taxable
year as a loss from the sale or exchange of a capital asset held for not more than 12
months. (Section 39 (D) of the NIRC)
c. The Holding Period Rule – is applicable to individual taxpayers when the capital asset
was held for more than 12 months (Long Term Gain), the net capital gain or loss is
reported at 50% of the amount realized gain or loss. If the Capital asset was held for
less than 12 months (Short Term Gain), the net capital gain or loss is reported at 100%
of realized gain or loss.
What is the rationale for the rule prohibiting the deduction of capital losses from ordinary
gains? Explain.
It is to ensure that only cost or expenses incurred in earning the income shall be deductible
for income tax purposes consonant with the requirement of the law that only necessary
expenses are allowed as deduction from gross income. The term “necessary expenses”
presupposes that in order to be allowed as deduction, the expense must be business
connected, which is not the case insofar as capital losses is concerned. (Section 36(A)(1),
NIRC)
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What type of income tax are passive income subject to?
Generally, passive incomes such as interest, dividend, royalties, prizes, and winnings are
subject to graduated tax rates of 0 - 35% if received by individuals or 30% if received by
corporations.
However, certain passive incomes are not subject to basic tax since they are already
subjected to final withholding tax such as the following:
a. Interest from bank deposits in the Philippines;
b. Royalties from sources within the Philippines except those generated in the active
pursuit and performance of the corporation’s primary purpose (BIR Ruling No. 069-2016
dated February 29, 2016);
c. Cash and/or Property dividends received by individuals from domestic corporations or
share in the business partnership; and
d. Prizes received by individual (except NRA-NETB) in the Philippines if the amount
exceeds P10,000.00.
Taxability of Pensions
Pensions, in general, are subject to income tax, except pensions and retirement benefits
exempt under the law such as:
a. Retirement benefits received under Republic Act No. 7641; and
b. Those received by officials and employees of private firms, whether individual or
corporate, in accordance with a reasonable private benefit plan maintained by the
employer.
Tax-Benefit Rule
Subsequent recovery of a bad debt previously written off in the books is a taxable income
provided that the write-off of the account resulted to a lower taxable income at the time of
write-off. This rule also applies with respect to refund or credit for taxes. Thus, tax refunds
are taxable if the tax, when paid, was deducted from the gross income.
What is the rationale behind exclusion?
There are various reasons why an income is excluded from the gross income such as when:
a. They represent return of capital or are not income, gain or profit. – (e.g., life insurance
proceeds paid to the heirs or beneficiaries upon death of insured)
b. They are subject to another kind of internal revenue tax (e.g., passive income subject to
final tax)
c. They are income, gain or profit that is expressly exempt from income tax (Mamalateo)
Exclusions, Deductions, Tax Credits

a. Exclusion – the amount received as an income or gain but does not form part of gross
income.
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b. Deductions – amounts which the law allows to be subtracted from gross income in order
to arrive at the net income.
c. Tax Credit – amount representing a tax previously paid which may be deducted from a
tax liability to arrive at the tax still due.
Under what conditions are retirement benefits received by officials and employees of private
firms excluded from gross income and exempt from taxation?
Retirement benefits received under RA 4917 and those received by officials and employees
of private firms, whether, individual or corporate, in accordance with the employer’s
reasonable private benefit plan approved by the BIR, are excluded from gross income and
exempt from income taxation if the retiring official or employees was:
a. In service of the same employer for at least 10 years;

b. Not less than 50 years old at the time of retirement;
c. Availed of the benefit of exclusion only once (Section 32 (B)(6)(a), NIRC);
d. The retiring official or employee should not have previously availed of the privilege under
the retirement plan of the same or another employer. (RR 2-98, Section 2.78 (B)(1), 1st
par.)
Under the TRAIN Law, how will the income of an individual earning income purely from
compensation, purely from self-employment and/or practice of profession, or mixed income
(compensation and self-employment and/or practice of profession) be taxed?
Amount of
Gross Sales Mixed Income
and/or Gross Purely
Income from Self-
Receipts and Compensation
Employment Income from
Other Non- Income Compensation
Operating Self-
Income
Income Employment
Graduated
Graduated Rates (o- Rates (o-25%)
25%) or 7% SEP, in or 7% SEP, in
Not more than Graduated Rates Graduated
excess of P250,000 excess of
P3 million (0-35%) Rates (0-35%)
at the option of the P250,000 at the
taxpayer option of the
taxpayer
More than Graduated Rates Graduated Rates (0-
Graduated Rates (0-35%)
P3 million (0-35%) 35%)
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Who are not qualified for the 8% flat income tax rate option based on gross sales and/or
receipts?
The 8% income tax rate applies ONLY to income from business or practice of profession
earned by individuals whose the gross sales or receipts do not exceed P3,000,000.
The above rate does not apply to the following:

a. Pure compensation income earners;
b. VAT-registered taxpayers;
c. Non-VAT taxpayers whose gross receipts/sales exceed P3,000,000.00;
d. Taxpayers subject to other percentage taxes except Section 116;
e. Partners of General Professional Partnerships; and
f. Individuals enjoying income tax exemption such as those registered with Barangay
Micro Business Enterprise since taxpayers are not allowed to avail of double or multiple
tax exemptions under different tax laws unless specifically provided by law. (RR 8-2018)
(RMC 50-2018)
C, a non-VAT taxpayer, is a freelance architect. By the end of 2018, he had gross receipts
of P1,000,000.00. May C avail of the 8% income tax rate? How much will be the taxable
income subject to the 8% tax?
Yes. If C has opted to avail the 8% flat income tax rate on the 1st quarter of the year, he
may avail of the 8% income tax regime. Section 24 of the NIRC, as amended by RA 10963
and as implemented in RR 8-2018, allows persons who are self-employed to have the option
to be taxed at 8% of his Gross Sales/Receipts in excess of P250,000.00. Provided, such
person's Gross Sales/Gross Receipts does not exceed the VAT threshold of P3 million or
has not optionally registered as a VAT taxpayer. The taxable income of C is P750,000.00
which is obtained by deducting the P250,000.00 tax exemption from his P1 million gross
receipts.
E, a non-VAT taxpayer, is a freelance engineer. His 1st to 3rd Quarter Income Tax Returns
(ITRs) for the year 2018 showed that he paid income tax based on the graduated rates. By
the end of 2018, he had gross receipts of P1,000,000.00.
a. May E opt to pay 8% income tax in his annual ITR for the year 2018?
No. E cannot opt to be taxed at 8% income tax. Taxpayer must signify his intention to avail
of the 8% income tax rate in the 1st Quarter ITR, or on the initial quarter return of the taxable
year after the commencement of a new business/practice of profession. Otherwise, taxpayer
is considered to have availed of the graduated rates. (Section 24, NIRC as amended)
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b. May E amend his quarterly ITRs and avail of the 8% income tax?
No. E cannot amend his returns to change his taxing regime from graduated tax rates to 8%
income tax rate. As per RR 8-2018, such option shall be irrevocable and cannot be subject
to any amendment for the covered taxable year.
De Minimis Benefits under the TRAIN Law

De minimis benefits are facilities or privileges furnished or offered by an employer to his
employees that are of relatively small value and are offered or furnished by the employer
merely as a means of promoting the health, goodwill, contentment or efficiency of his
employees, including:
1. Monetized unused vacation leave credits

2. Medical cash allowance to dependents, per employee
3. Rice subsidy
4. Uniform and clothing allowance
5. Actual medical assistance/allowance
6. Laundry allowance
7. Employee achievement awards
8. Gifts given during Christmas and major anniversaries
9. Daily meal allowance for overtime or night/graveyard work
10. Benefits received by an employee by virtue of a collective bargaining agreement (CBA)
and productivity incentive schemes
The benefits given in excess of the maximum amount allowed as "de minimis" benefits shall
be included as part of "other benefits" which is subject to the P90,000.00 ceiling. Any amount
in excess of the P90,000.00 shall be subject to income tax, and consequently, to the
withholding tax on compensation. (RMC 50-2018)
Regular Corporate Income Tax v. Minimum Corporate Income Tax

Regular Corporate Minimum Corporate
As to:
Income Tax (RCIT) Income Tax (MCIT)
Taxpayer All ordinary corporate taxpayers All ordinary corporate taxpayers
Rate 30% 2%
Taxbase Based on net taxable income except Based on Gross income
non-resident foreign corporation
which is based on gross income
Period of Applicable once the corporation Applicable beginning on the fourth
applicability commenced its operation taxable year immediately following
the year of commencement of
business operation
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Is the Minimum Corporate Income Tax (MCIT) an additional tax imposition?
No. MCIT is imposed in lieu of the normal net income tax, and only if the normal income tax
is suspiciously low. The MCIT merely approximates the amount of net income tax due from
a corporation, pegging the rate at a very much reduced 2% and uses as the base the
corporation’s gross income. As a tax on gross income, it prevents tax evasion and minimizes
tax avoidance schemes achieved through sophisticated and artful manipulations of
deductions and other stratagems. Since the tax base was broader, the tax rate was lowered.
(CREBA v. Romulo, G.R. No. 160756, March 9, 2010)
Concept of Withholding Tax

Withholding tax is a method of collecting income tax in advance from the taxable income of
the recipient of income. The payee is the taxpayer, the person whom the tax is imposed,
while the payor, a separate entity, acts no more than an agent of the government for the
collection of the tax in order to ensure its payment. (Bank of America and SA v. CA)
iii. Value-added tax
Is VAT a Sales Tax?
Yes. VAT is a tax on the taxable sale, barter or exchange of goods, properties or services.
A barter or exchange has the same tax consequence as a sale. A sale may be an actual
sale or a deemed sale, or an export sale or a local sale. (Mamalateo)
X Corporation is primarily engaged in the business of conversion of steam to electricity. Its

property, plant and equipment account includes a fully depreciated patrol cars used by the
Corporation. To get rid of the fully depreciated car, the Corporation decided to sell them to
a related party. Is the sale of the car subject to VAT?
Yes, the sale is subject to 12% VAT. A reading of Section 105 of the Tax Code would show
that a transaction “in the course of trade or business” includes “transactions incidental
thereto”.
In this case, since the patrol cars are part of the Corporation’s property, plant and
equipment, the sale of the patrol car is an incidental transaction made in the course of trade
or business. Thus, the transaction should be subject to VAT. (Mindanao Geothermal vs.
CIR)
Z Company, a domestic corporation, rendered services on a no mark-up and reimbursement

of cost basis to its affiliate, A Company, also a domestic corporation. Is the transaction
subject to VAT even if there is no profit element?
Yes. The sale of services on a reimbursement-on/of-cost basis is subject to VAT. Even if

such corporation was organized without any intention of realizing profit, any income or profit
BAR SYLLABUS A
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generated by the entity in the conduct of its activities was subject to income tax. Hence, it is
immaterial whether the primary purpose of a corporation indicates that it receives payments
for services rendered to its affiliates on a reimbursement-on-cost basis only, without
realizing profit, for purposes of determining liability for VAT on services rendered. (CIR vs.
CA and COMASERCO)
Mandatory VAT Registration

Any person who, in the course of trade or business, sells, barters or exchanges goods or
properties, or engages in the sale or exchange of services, shall be liable to register for
value-added tax if:
a. His gross sales or receipts for the past twelve (12) months, other than those that are
exempt under Section 109(A) to (BB), have exceeded Three million pesos (P3,000,000);
or
b. There are reasonable grounds to believe that his gross sales or receipts for the next
twelve (12) months, other than those that are exempt under Section 109(A) to (BB), will
exceed Three million pesos (P3,000,000).(Section 236(G), NIRC as amended)
Note: Any person who is required to register but failed to do so shall be liable to pay VAT
as if he were a VAT-registered person, but without the benefit of input tax credits for the
period in which he was not properly registered (Section 236 (G)(2), NIRC as amended)
VAT v. Non-VAT Registration

VAT NON-VAT
As to Rate and Basis
12% Output VAT on Sales/Gross Receipts 3% on Gross Sales/Gross Receipts
Can be applied with deduction
Yes, can be with valid deduction for sales No deduction can be applied
discounts and sales returns
Applicability of Input VAT
Input VAT can be applied as long as valid and No application of Input VAT
substantiated properly
VAT Sales of Goods v. VAT Sales of Service

VAT Sales of Goods VAT Sales of Services
Basis./Timing of Output VAT
Based on sales whether paid or unpaid Based on collection only (cash basis)
(accrual basis)
Can be applied reduction
Yes, but only for: No reduction could be applied except for
a. Sales returns and allowances receipts of security deposits
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b. Sales discounts, provided:

1. The sales discount granted is
indicated in the invoice at the
time of sale; and
2. The grant of which does not
depend upon the happening of a
future event.
Primary source document to be issued
Sales invoice Official receipt
G, a seller of goods, came to you and clarified as to who will shoulder the output VAT on his
sale of goods and his services. Discuss the difference between impact and incidence of
VAT?
G as a seller will only be liable to REMIT the output VAT collected from his buyers but the
amount shall be shouldered by his BUYERS
Destination Principle
Goods and services are taxed only in the country where these are consumed.
Cross Border Doctrine

Mandates that no VAT shall be imposed to form part of the cost of the goods destined for
consumption outside the territorial border of the taxing authority. Hence, actual export of
goods and services from the Philippines to a foreign country must be free from VAT.
Conversely, those destined for use or consumption within the Philippines shall be imposed
with the 12% VAT. (CIR v. Seagate Technology Phil.)
Automatic v. Effectively Zero-Rated Sales

Zero-rated Transactions (Automatic) Effectively Zero-rated Transactions
Generally refer to the export sale of goods Refer to the local sale of goods or supply of
and supply of services. services to persons (made by a VAT-
registered person) or entities whose
exemption under special laws or
international agreements to which the
Philippines is a signatory effectively subjects
such transactions to a zero rate.
Primarily intended to be enjoyed by the Intended to benefit the purchaser who, not
seller who is directly and legally liable for the being directly and legally liable for the
VAT, making such seller internationally payment of the VAT, will ultimately bear the
competitive by allowing the refund or credit burden of the tax shifted by the suppliers
of input taxes that are attributable to export
sales.
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Exempt Party v. Exempt Transaction

Exempt Person Exempt Transaction
Exemption is on the parties either they are: Involves goods or services which, by their
a. Exempted by Tax Code nature, are specifically listed in and
b. Exempted by a special law expressly exempted from the VAT under the
c. Exempted by international Tax Code, without regard to the tax status
agreement
Not subject to the VAT, but may be allowed Not subject to the VAT, but the seller is not
a tax refund of or credit for input taxes paid, allowed any tax refund of or credit for any
depending on its registration as a VAT or input taxes paid
non-VAT taxpayer
Additional VAT exempt transactions pursuant to TRAIN:

a. Transfer of property pursuant to Section 40(C)(2) of the NIRC, as amended; (Section
109 (1)(X), NIRC as amended by TRAIN)
b. Association dues, membership fees, and other assessments and charges collected by
homeowners associations and condominium corporations; (Section109 (1)(Y), NIRC as
amended by TRAIN)
c. Sale of drugs and medicines prescribed for diabetes, high cholesterol, and hypertension
beginning January 1, 2019; (Section109 (1)(AA), NIRC as amended by TRAIN)
d. Sale of Gold to BSP. Deleted as zero-rated transaction. Now an exempt transaction;
(Section 109(1)(Z), NIRC as amended by TRAIN)
e. Sale of goods or services, leases which gross annual sales or receipts do not exceed
P3 million. (Section109 (1)(BB), NIRC as amended by TRAIN)
The CIR issued a Letter Notice (LN) dated September 20, 2007 against M Inc., an HMO
company, for the taxable year 2006. According to the BIR, the amounts earmarked and
eventually paid to the medical service providers form part of the HMO’s gross receipts for
VAT purposes. Is the BIR’s contention correct?
No. The VAT is a tax on the value added by the performance of the service by the taxpayer.
It is, thus, this service and the value charged thereof by the taxpayer that is taxable under
the NIRC. It is notable that the term gross receipts as mentioned as the tax base under the
NIRC does not contain any specific definition. Therefore, absent a statutory definition, the
Supreme Court has construed the term gross receipts in its plain and ordinary meaning, that
is, gross receipts is understood as comprising the entire receipts without any deduction.
Thus, the amounts earmarked and actually spent for medical utilization of its members
should not be included in the computation of the gross receipts of M Inc. (MedicardPhils.,
Inc. vs CIR)
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What is the VAT rate for the sale of goods, supplies, equipment and fuel to persons engaged
in international shipping or international air transport operations?
Under Section 106(A)(2)(a)(6) of NIRC as amended by TRAIN, the transaction is zero-rated

provided that the goods, supplies, equipment and fuel shall be used exclusively for
international shipping or air transport operations.
ABC Law Office, a general professional partnership in the Philippines, received a query
through electronic mail from DEF Corporation, a corporation organized under the laws of
Delaware. DEF Corporation has no office in the Philippines and is not engaged to do
business in the Philippines. Upon ABC Law Office’s reply to the query, it billed DEF
Corporation US$1,500. Within 15 days, the latter remitted its payment through GHI Bank
which converted the amount to peso and deposited the converted amount in the account of
ABC Law Offices. What is the VAT implication of the payment to ABC Law Office by DEF
Corporation?
Payment to ABC Law Office is subject to 0% VAT. As provided for under the law, services
other than processing, manufacturing or repacking rendered in the Philippines to a person
engaged in business conducted outside the Philippines or to a non-resident person not
engaged in business who is outside the Philippines when the services are performed, the
consideration for which is paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the BSP shall be subject to 0% VAT. (Section
108(B)(2) of the Tax Code)
Mr. V owns a row of residential apartments which he puts out on lease. 3 out of his 5
apartments are being leased out for P 10,000 per month while the remaining 2 apartments
are leased out for 25,000 per month. Is Mr. Valdez’s business subject to VAT?
No. RR 16 -2005 as amended by RR No. 13-2018, prescribes the rule on VAT on leases
which are as follows:
Lease of residential units with a monthly rental per unit of not exceeding P15,000 is not
subject to VAT. In cases where a lessor has several residential units for lease, some are
leased out for a monthly rental of P15,000 or below, and some are leased out for more than
15,000 are as follows:
1. The gross receipts from rentals not exceeding P15,000.00 per month per unit shall be
exempt from VAT regardless of the aggregate annual gross receipts. It is also exempt
from the 3% percentage tax.
2. The gross receipts from rentals exceeding P15,000.00 per month per unit shall be
subject to VAT if the aggregate annual gross receipts from said units only exceeds
P3,000,000.00. Otherwise, the gross receipts will be subject to the 3% tax imposed
under Section 116 of the Tax Code.
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Here, Mr. V although having some apartments being leased out for more than the VAT
threshold of P 15,000, its business is still not subject to VAT since the annual gross receipts
coming from the two (2) apartments being rented for P 50,000 still did not exceed the VAT
threshold of more than P3,000,000 annual gross receipts.
Summary of Difference between Old NIRC and TRAIN LAW as to VAT

NIRC NIRC, as amended by TRAIN LAW
VAT Threshold
General: Gross annual receipts/ revenues General: Gross annual receipts / revenues
exceeding P 1,919,500 (Section 236(G)(1)) exceeding P 3M (Section 236(G)(1))
Exception: Exception:
a. Rental Income (RR 16-2011, Section a. Rental Income (RR 13-2018)
109(P) NIRC) b. Sale of house and lot (RR 13 -2018)
b. Sale of house and lot (RR 16 –
2011)(Section109(P))
Sale of Gold to BSP
Zero –Rated (Section 106 (A)(2)(a)(4)) VAT exempt (Sec 109(1)(z))
Sale of good, supplies, equipment, and fuel to persons engaged in international
shipping or international air transport operations
Zero –Rated (Section 106 (A)(2)(a)(6)) Retained and added proviso that the sale of
goods, supplies, equipment and fuel are to
be used for international shipping or air
transport operations (Section
106(A)(2)(a)(6))
Foreign Currency Denominated Sales
Zero –Rated (Section 106 (A)(2)(b)) Deleted
Enhanced VAT refund system
No provision Sunset provisions where certain
transactions will be subject to 12% VAT,
hence, no longer considered export sales
subject to zero rating upon satisfaction of
the following conditions:
1. The successful establishment and

implementation of an enhanced VAT
refund system that grants refunds of
creditable input tax within 90 days
from filling of the VAT refund
application.
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2. Provided that all applications filed

from January 1,2018 shall be
processed and must be decided
within the 90 days from the filing of
the VAT refund application
3. All pending VAT refund claims as of
December 31, 2017 shall be fully
paid in cash by December
31,2019.(Section 106(A)(2)(a)(6))
These transactions are:

1. 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, paid for in
acceptable foreign currency, and
accounted for in accordance with the
rules and regulations of the BSP
2. Sale of raw materials or packaging
materials to an export-oriented
enterprise whose export sales
exceed 70% of the total annual
production
3. Transactions considered export
sales under Omnibus Investments
Code of 1987 (EO No. 226) and
other special laws
4. Processing, manufacturing or
repacking goods for other persons
doing business outside the
Philippines which goods are
subsequently exported, where the
services are paid in acceptable
foreign currency and accounted for
in accordance with the rules and
regulations of the BSP
5. Services performed by
subcontractors and/or contractors in
processing, converting or
manufacturing goods for an
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enterprise whose export sales

exceed 70% of total annual
production
DOF shall establish a VAT refund center in

the BIR and in the BOC that will handle the
processing and granting of cash refunds of
creditable input tax.
5% of the total collection of BIR and BOC

from the immediately preceding year shall
be automatically appropriated annually and
shall be treated as a special account in the
general fund or as trust receipts for the
purpose of funding claims for VAT refund.
Any unused fund at the end of the year shall

revert to the general fund.
BIR and BOC shall be required to submit to

the Congressional Oversight Committee in
the Comprehensive Tax Reform Program a
quarterly report of all pending claims for
refund and any unused fund.
Threshold of Exempt Monthly Rental on Residential Units
VAT exempt if monthly rental does not VAT exempt if monthly rental does not
exceed P 12,800 (RR 16-2011) exceed P 15,000 (RR 13-2018)
Threshold on Sale of Residential Lot and House and Lot
VAT exempt if value does not exceed Staring Jan 1, 2021, sale of house & lot is
P1,919,500and P3,199,200 for residential lot VAT exempt if selling price does not exceed
and house and lot, respectively (RR 16-2011) P2,000,000
Sale of Real Properties Utilized for Low-Cost and Socialized Housing
VAT exempt (Section 109(P) Starting Jan 1, 2021 Sale of socialized
housing – exempt;
Sale of low cost housing -subject to VAT
(Section 109(P))
Other VAT exempt transactions
1. Sale of goods & services to Senior 1. Sale of goods & services to Senior
Citizens – VAT exempt but not found Citizens;
in the Tax Code; 2. Transfer of property pursuant to
Section 40(C)(2);
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2. )Association Dues, membership 3. Association Dues, membership fees,

fees, and other assessments and and other assessments and charges
charges collected by homeowners collected by homeowners
associations and condominium associations and condominium
corporation; - VATable corporation;
3. Sale of Gold to BSP – Zero Rated 4. Sale of Gold to BSP
5. Sale of Drugs and medicines
prescribed for: (a) diabetes, (b) high
cholesterol (c)hypertension
beginning Jan. 1, 2019
6. Sale of goods or services, leases
which gross annual sales or
receipts do not exceed P3M
Amortization of Input VAT on Capital Goods
Shall be spread evenly over the month of Retained but with added proviso that the
acquisition and the fifty-nine (59) amortization of the input VAT shall be only
succeeding months if the aggregate allowed until December 31, 2021 after which
acquisition cost exceeds P 1M or over its taxpayers with unutilized input VAT on
estimated useful life if such is less than 5 capital goods purchased or imported shall
years (Section 110(A)(2)) be allowed to apply the same as scheduled
until fully utilized. (Section 110(A)(2))
Refund or Tax Credit of Input Taxes
The Commissioner shall grant a refund or The Commissioner shall grant a refund for
issue the tax credit certificate for creditable creditable input taxes within ninety (90) days
input taxes within 120 days from the date of from the date of submission of the official
submission of complete receipts or invoices and other documents in
support of the application. (Section 112[C]
The option to be given a Tax Credit

Certificate is now repealed and only refund
by means of cash is allowed.
Filing of VAT Return and Payment
Filing of Quarterly Return is within 25 days Beginning January 1, 2023, the filing and
following the close of each taxable quarter, payment shall be done within 25 days after
however, payment for VAT-registered the close of each taxable quarter. (Section
persons is on a monthly basis. (Section 114[A])
114[A])
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iv. Donor’s tax
Elements of Donation for Tax Purposes

1. There must be a donor who must have the Capacity to donate at the time of making the
donation
2. There must be a donee who should Accept it
3. There must be an intent to do an act of liberality or animus donandi
4. The donation must be in writing fully executed in favor of the done
5. There must be an actual or constructive delivery of the gift to the done to someone else
for him (Abello v. CIR)
Is the provision for “strangers” in payment of donor’s tax under the old Tax Code still
applicable with the advent of RA 10963?
No. Upon the passage of the TRAIN law, the latter repealed the provision of the old Tax
Code mandating a 30% tax rates for donors and donees who are not related. As such, a flat
rate of 6% on the excess of P250,000.00 of net gifts per calendar year shall be applicable.
(Section 99, NIRC as amended)
What is the rule on political donations or contributions?
Any contribution in cash or in kind to any candidate, political party or coalition of parties for
campaign purposes shall be governed by the Election Code, as amended (Section99(b),
NIRC as amended) which provides that said contributions should be exempt from donor’s
tax provided that the recipient candidates and political parties comply with the requirements
of filing of returns contributions with the COMELEC.
Are the donations made to the National Government or any entity or agencies exempt from
donor’s tax?
Yes. Under Section 101(A)(1) of the Tax Code, as amended, donations made to or for 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 Government, are exempt from
donor’s tax. Moreover, Section 17 of RA 9167, the law creating FDCP (Film Development
Council of the Philippines), exempts from taxes any donation, contribution, subsidy or
financial aide made to FDCP, and allows these donations to be deducted in full from the
income of the donors for income tax purposes. (BIR Ruling 316-14 dated August 11, 2014)
Are all gifts made by a resident to an educational and/or charitable, religious, cultural or
social welfare corporation, institution, accredited non government organization, trust or
philanthropic organization or research institution or organization, exempted from the
payment of donor’s tax?
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No. Under Section 101(a)(2) of RA 10963, it provides that to be exempted for the payment
of donor’s tax, not more than thirty percent (30%) of such gifts shall be used by the donee
for administration purposes.
Requisites to avail the exemption of Section 101(a)(2) of the Tax Code

a. The gift is given to a:
i. School, college, or university, and/or charitable organization; or
ii. Accredited non-government organization; or
iii. Trust or philanthropic organization and/or research institution or organization;
b. b. Such organization is incorporated as a non-stock non-profit entity that:
i. Pays no dividends;
ii. Governed by trustees who receive no compensation; and
iii. It devotes all its income to the accomplishment and promotion of the purposes
enumerated in its Articles of Incorporation; and
c. Not more than thirty percent (30%) of the gifts shall be used by the donee for
administration purposes.
Does a transfer of a property, other than real property considered as capital assets, for less
than adequate and full consideration be deemed as a gift if the same was made in the
ordinary course of business?
No. Sale, exchange, or other transfer of property made in the ordinary course of business
(a transaction which is a bona fide, at arm’s length, and free from any donative intent), will
be considered as made for an adequate and full consideration in money or money’s worth.
Thus, it shall not be deemed as a gift subject to donor’s tax. (Section 100, NIRC as
amended)
Are transfers in compliance to a Supreme Court order subject to donor’s tax?
No. The donor’s tax under Section 98 of the Tax Code is generally imposed on the transfer
by any person of property by gift. There is no intention to donate as the transfer was only
made in compliance with the Supreme Court decisions. (BIR Ruling 824-18 dated May 17,
2018)
Is the renunciation or waiver subject to donor’s tax?
No. General renunciation by an heir including the surviving spouse, of his/her share in the
hereditary estate left by the decedent is NOT subject to donor’s tax, unless specifically and
categorically done in favor of identified heir/s to the exclusion or disadvantage of other co –
heirs in the hereditary estate. (Section12, RR 2- 2018)
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What is the law that governs the imposition of donor’s tax?
It is the law at the time of the perfection and/or completion that will govern the imposition of
the donor’s tax. The gift is perfected from the moment of acceptance by the donee, and it is
completed at the time of delivery. The delivery can either be constructive or actual.
A gift that is incomplete because of reserved powers become complete when either:
a. The donor renounces the power; or
b. His right to exercise ceased because of the happening of some event or contingency or
the fulfillment of some condition, other than the death of the donor.(RR No. 02-03)
What transfer may be considered as donations?
The following transfers may be treated as donations:

a. Debt condoned or remitted (in which case the amount of the debt is a gift from the
creditor to the debtor and need not be included in the latter’s gross income). (Section
50, RR No. 02-40)
b. Transfers made in trust for another person; and
c. Renunciation by the surviving spouse of his/her share in the conjugal partnership or
absolute community after the dissolution of the marriage in favor of the heirs of the
deceased spouse or any other person.
With regard to item (c) above, note that a general renunciation by an heir, including the
surviving spouse, of his/her share in the hereditary estate left by the decedent is not
subject to donor’s tax, unless the renunciation is specifically and categorically done in
favor of identified heir’s to the exclusion or disadvantage of the other co-heirs in the
hereditary estate.(RR No. 02-03)
Summary of Difference Between NIRC and TRAIN With Regard to Donor’s Tax
NIRC NIRC, as amended by TRAIN LAW
As to Rate
0-15% for relatives; 30% for strangers Flat tax rate of 6% regardless whether or not
(Section99 [B]) donation is made to a relative or stranger
(Section 99 [A])
Amount of Exempt Gifts
P100,000 (Section99 [A]) P250,000 (Section 99 [A])
Transfer less than Adequate and Full Consideration
Automatically subject to donor’s tax (Section If such transaction is made (1) in the
100) ordinary course of the business ; (2) at
arm’s length NOT subject to donor’s tax and
(3) free from donative intent (RR 13-2018,
Section16)
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Dowries
Donations on account of marriage of his/her No longer exempt. (Section 101[A])
children are exempt from donor’s tax up to
P10,000 (Section 101 [A][1])
v. Remedies (jurisdiction of courts, prescription, remedies against assessment notices)
• Jurisdiction of courts
Court of Tax Appeals

1. Civil Cases
a. Exclusive Original Jurisdiction of the Court in Divisions
The Court in Divisions shall exercise exclusive original jurisdiction in tax collection
cases involving final and executory assessments for taxes, fees, charges and
penalties, where the principal amount of taxes and fees, exclusive of charges and
penalties, claimed is one million pesos or more. [Section 3(c)(1), Rule 4, RRCTA]
b. Exclusive Appellate Jurisdiction in Civil Cases

The Court in Divisions shall exercise exclusive appellate jurisdiction over appeals from
the judgments, resolutions or orders of the RTCs in tax collection cases originally
decided by them within their respective territorial jurisdiction. [Section 3(c)(2), Rule 4,
RRCTA]
The Court in Divisions shall exercise exclusive original or appellate jurisdiction to review
by appeal the following:
1. Decisions of the CIR in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters
arising under the NIRC or other laws administered by the BIR;
2. Inaction by the CIR in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters
arising under the NIRC or other laws administered by the BIR, where the NIRC or
other applicable law provides a specific period for action: Provided, that in case of
disputed assessments, the inaction of the CIR within the one hundred eighty day-
period under Section 228 of the NIRC shall be deemed a denial for purposes of
allowing the taxpayer to appeal his case to the Court and does not necessarily
constitute a formal decision of the CIR on the tax case; Provided, further, that should
the taxpayer opt to await the final decision of the CIR on the disputed assessments
beyond the one hundred eighty day-period above mentioned, the taxpayer may
appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules;
and Provided, still further, that in the case of claims for refund of taxes erroneously
or illegally collected, the taxpayer must file a petition for review with the Court prior
to the expiration of the two-year period under Section 229 of the NIRC;
BAR SYLLABUS A
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3. Decisions, resolutions or orders of the RTC in local tax cases decided or resolved
by them in the exercise of their original jurisdiction;
4. 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 of other penalties in relation thereto, or other matters
arising under the Customs Law or other laws administered by the Bureau of
Customs;
5. Decisions of the Secretary of Finance on customs cases elevated to him
automatically for review from decisions of the Commissioner of Customs adverse to
the Government under Section 2315 of the Tariff and Customs Code; and
6. 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. [Section 3(a), Rule 4, RRCTA]
2. Criminal Cases
a. Exclusive Original Jurisdiction of the Court in Divisions
The Court in Divisions shall exercise exclusive original jurisdiction over all criminal
offenses arising from violations of the NIRC or Tariff and Customs Code and other
laws administered by the BIR or the Bureau of Customs, where the principal amount
of taxes and fees, exclusive of charges and penalties, claimed is one million pesos
or more. [Section 3(b)(1), Rule 4, RRCTA]
b. Exclusive Appellate Jurisdiction in Criminal Cases

The Court in Divisions shall exercise exclusive appellate jurisdiction over appeals
from the judgments, resolutions or orders of the RTC in their original jurisdiction in
criminal offenses arising from violations of the NIRC or Tariff and Customs Code and
other laws administered by the BIR or Bureau of Customs, where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed is less than
one million pesos or where there is no specified amount claimed. [Section 3(b)(2),
Rule 4, RRCTA]
Paras, Inc. received the Final Decision on Disputed Assessment issued by the
Commissioner of Internal Revenue (CIR) dismissing the protest of Paras, Inc. and affirming
the assessment against said corporation. Paras, Inc. filed a Petition for Review with the
Court of Tax Appeals (CTA) Division. The CTA Division dismissed Paras, Inc.’s petition.
Paras, Inc. immediately filed a Petition for Review with the CTA En Banc. Is the immediate
appeal by Paras, Inc. to the CTA En Banc of the adverse Decision of the CTA Division the
proper remedy?
BAR SYLLABUS A
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No. Paras, Inc. should have filed a Motion for Reconsideration with the CTA Division first.
The CTA Rules state that a Motion for Reconsideration is a prerequisite before elevating
the case to the CTA En Banc. (Ingles)
In criminal cases under CTA exclusive original jurisdiction, is there a right to reserve the
filing of a separate civil action for the recovery of taxes?
No. Under Section 11 Rule 9 of RRCTA, the filing of the criminal action shall necessarily
carry with it the filing of the civil action. No right to reserve the filing of such civil action
separately from the criminal action shall be allowed or recognized
In cases appealed before the CTA, what are the conditions in order that CTA may suspend
the collection of tax?
a. In the opinion of the Court the collection will jeopardize the interest of the Government
and/or the taxpayer; and
b. The taxpayer either deposit the amount claimed or file a surety bond for not more than
the amount. (Section 9, R.A. 9282 as amended)
After filing an Information for violation of Section 254 of NIRC (Attempt to Evade or Defeat
Tax) with the CTA, the Public Prosecutor manifested that the People is reserving the right
to file the corresponding civil action for the recovery of the civil liability for taxes. As counsel
for the accused, comment on the People’s manifestation.
The public prosecutor is wrong. CTA Rules states that the filing of the criminal action shall
necessarily carry with it the filing of the civil action and no right to reserve the filing of the
civil action separately shall be allowed. (Ingles, Tax Made Less Taxing, 2018, page 488)
• Prescription
Prescriptive Period Assessment Collection Legal Basis

Regular 3 years from filing of 3 years Section 203 of the
return or last day NIRC. Note that
prescribed for filing, NIRC is silent as to
whichever comes the period for
later collection.
Exceptional (with prior 3 years 5 years As to the period of
assessment) collection, the
applicable legal basis
is Sections 222 (C)
and (D) of NIRC.
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Exceptional (without Tax may be assessed Proceeding in court Section 222 (A) of
prior assessment) at any time within 10 (judicial proceeding) NIRC.
years from for the collection of
discovery of falsity, such tax may be filed
fraud or omission. without assessment
at any time within 10
years from
discovery of falsity,
fraud or omission.
Instances Where the Running of Statute of Limitations on Assessment May be Suspended

1. When taxpayer cannot be located in the address given by him in the return, unless he
informs the CIR of any change in his address or the BIR became aware of his new
address;
2. When the taxpayer is out of the Philippines (Section 223, NIRC);
3. Where the CIR is prohibited from making the assessment or levy or a proceeding in
court for 60 days thereafter, such as where there is a pending petition for review in the
CTA from the decision on the protested assessment (Republic vs. Ker & Co.);
4. Where CIR and the taxpayer agreed in writing for the extension of the assessment, the
tax may be assessed within the period so agreed upon (Section 222 [b], NIRC);
5. When the taxpayer requests for reinvestigation which is granted by the Commissioner.
(Collector vs. Suyoc Consolidated Mining Co.)
Note: A request for reconsideration alone does not suspend the period to assess/collect.
G Company changed its address but failed to notify the BIR. It continued filing its returns
with the BIR with the new address despite lack of notice. The BIR issued an assessment
against G Company beyond the prescriptive period claiming that the period of assessment
has been suspended for failure of G Company to inform the BIR of its new address. Is the
BIR correct?
No. The suspension of the three-year period to assess applies only if the BIR Commissioner
is not aware of the whereabouts of the taxpayer. Hence, despite the absence of a formal
written notice of G Company's change of address, the fact remains that BIR became aware
of its new address as shown by documents replete in its records. As a consequence, the
running of the three-year period to assess G Company was not suspended and has already
prescribed. (CIR vs. BASF Coating + Inks Phil.)
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• Remedies against assessment notices
Effect of inaction of
Stage of Action to be taken
Description taxpayer or action
Assessment by the taxpayer
by TP is denied
Norice of Informal Discussion shall be Should the TP If it is found that
Conference (NIC) made between the disagree with the the taxpayer is still
taxpayer (TP) and the findings. The TP shall liable for deficiency
(RR 7-2018, revenue officer (RO) within 30 days tax or taxes after
RR 12-99) handling the audit to present presenting his
show his findings to reconciliations and side, and the
which will be the present documentary taxpayer is not
amount assessed as evidence in order for amenable, the
deficiency tax or the TP to present his Revenue District
taxes. In no case that case. Officer or the
the NIC extend Chief of the Special
beyond 30 days. Investigation Division
of the Revenue
Regional Office,
or the Chief of
Division in the
National Office, as
the case may be,
shall endorse the
case within seven (7)
days from the
conclusion of the NIC
to the Assessment
Division of the
Revenue Regional
Office or to the
Commissioner or his
duly authorized
representative for
issuance of a
deficiency tax
assessment.
Preliminary A PAN* will be issued If TP accepts the A Formal Letter of
Assessment Notice if after review and deficiency TP shall Demand/ Formal
(PAN) evaluation of the pay the amount Assessment Notice
Commissioner or its assessed which will shall be issued 15
(RMO 26-2016, duly authorized terminate the audit days from the date of
RR 18-2013, representative that receipt PAN whether
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RMC 11-2014, there exists sufficient If the TP disagrees the same is protested
RR 12-99) basis to assess the with the findings, TP or not.
TP PAN shall show in may at his option
detail the facts and make a reply within
law, jurisprudence, 15 days from date of
revenue issuance receipt of PAN to
such assessment refute the findings
was based made by the RO by
presenting
reconciliations,
jurisprudence, laws to
present his case.
Protest/Reply is not
mandatory (RMO 26-
2016)
Final Assessment The Formal Letter of If TP agrees it shall The assessment shall
Notice (FAN)/ Formal Demand and Final pay the amount become final and
Letter of Demand Assessment assessed and which executory when:
Notice(FLD/FAN) shall cause the 1. Failure to file a
(RMO 26-2016, RR shall be issued by the termination of the Protest 30 days from
18-2013, RMC 11- Commissioner or his audit. receipt of FAN/FLD.
2014, RR 12-99,) duly authorized
representative. The If the TP disagrees 2. Failure to submit
FLD/FAN calling for with the amount supporting
payment of the assessed, it can documents within the
taxpayer's deficiency within 30 days from 60-day period given if
tax or taxes shall receipt of FAN/FLD request for
state the facts, the file a PROTEST reinvestigation is
law, rules and LETTER either ask made.
regulations, or for:
jurisprudence 1. Request for 3. Failure of the
on which the Reconsideration – no taxpayer to receive
assessment is based; need to present any assessment
otherwise, the supporting notice because it was
assessment shall be documents served in the address
void indicated in the BIR’s
2. Request for registration database
Reinvestigation – not updated through
need to present BIR Form 1905 -
supporting Application for
documents 60 days registration
from filing of protest
letter
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All protest shall be

considered as
request for
RECONSIDERATION
unless TP clearly
indicates the request
for reinvestigation
Final Decision on The If TP agrees it shall The assessment shall
Disputed Assessment decision of the pay the amount become final and
(FDDA) Commissioner or his assessed and which executory when:
duly authorized shall cause the 1. Failure to appeal to
(RMO 26-2016, representative shall termination of the the Commissioner or
RR 18-2013, state audit. to CTA within 30 days
RMC 11-2014, the (i) facts, the from receipt of FDDA
RR 12-99) applicable law, rules In case of denial: issued by the duly
and regulations, or a. Denial made by the authorized
jurisprudence on Commissioner representative of the
which himself – appeal to Commissioner
such decision is the Court of Tax
based, and that it is Appeals (CTA) within 2. Failure to appeal to
the final decision, 30 days from the the CTA within 30
otherwise, the receipt of the denial. days from receipt of
decision shall be FDDA issued by the
void. b. Denial made by Commissioner
duly authorized
representative of the 3. Failure to TP to
Commissioner timely file a motion for
(i) appeal to the Court reconsideration or
of Tax Appeals (CTA) new trial before the
within thirty (30) days CTA Division or CTA
from date of receipt of En Banc and
the said decision; or Supreme Court
(ii) elevate his protest
through request for
reconsideration to the
Commissioner within
thirty (30) days from
date of receipt of the
said decision.
If the BIR does not

render a decision
within the 180-day
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period, the taxpayer

has two options,
either:
a. File a petition for
review with the CTA
within 30 days after
the expiration of the
180-day period; or
b. Await the final

decision of the
Commissioner on the
disputed assessment
and appeal such final
decision to the CTA
within 30 days after
the receipt of a copy
of such decision,
these options are
mutually exclusive
and resort to one
bars the application
of the other. (Lascona
Land vs. CIR; RCBC
vs. CIR)
G was issued a FAN/FLD. However in the said FAN/FLD no legal basis in the assessment
given. Is the FAN/FLD void?
No. The formal letter of demand and assessment notice shall state the facts, jurisprudence,
and law on which the assessment was based; otherwise, these shall be void. The word
"shall" in Section 228 of the National Internal Revenue Code and Revenue Regulations No.
12-99 means the act of informing the taxpayer of both the legal and factual bases of the
assessment is mandatory. The law requires that the bases be reflected in the formal letter
of demand and assessment notice. This cannot be presumed. (Commissioner vs. Fitness
by Design)
H was able to timely submit his reply to the NIC and PAN to the BIR. However upon receipt
of the FAN, the BIR did not consider his arguments much less did not provide any legal
basis for denying it. Should be the FAN/FLD be voided?
BAR SYLLABUS A
93
Yes. The Commissioner's inaction and omission to give due consideration to the arguments
and evidence submitted before her by H are deplorable transgressions of H's right to due
process. The right to be heard, which includes the right to present evidence, is meaningless
if the Commissioner can simply ignore the evidence without reason. (CIR vs. Avon Products
Manufacturing,
F Corporation, in March 2017, received a Letter of Authority (LOA) covering the taxable year
2015. On July 25, 2017, the BIR issued a Preliminary Assessment Notice (PAN) and sent it
the same day thru registered mail. The BIR then after 15 days even without waiting for the
reply of F Corporation, it sent a Final Assessment Notice (FAN) dated August 9, 2017 again
through registered mail. F Corporation received the PAN and FAN on the same day, August
15, 2017. Is the assessment valid ?
No. In issuing the FAN when the taxpayer has not yet received the PAN, the CIR effectively
disregarded ABC’s right to be notified as well as the right to respond to the PAN. Thus, the
assessment is void. (CIR vs. Yumex Philippines Corporation)
What are the options of the taxpayer in case of inaction of by the Commissioner on the
protest?
In case the CIR failed to act on a disputed assessment within the 180-day period, the
taxpayer can either:
1. File petition for review with CTA within 30 days, or
2. Await the final decision of the CIR on disputed assessments and appeal such final
decision to CTA within 30 days after receipt of the copy of the decision.
These options are mutually exclusive. (CIR vs. Avon Products Manufacturing)
When will a Final Decision on Disputed Assessment (FDDA) be declared void? And in the
event that the FDDA is found void, what would be its effect on the tax assessment?
An FDDA that does not inform the taxpayer in writing of the facts and law, the rules and
regulations and jurisprudence, if there is any, on which the FDDA is based renders the
decision void. It should also state that it is the final decision of the CIR. Therefore, it is as if
there was no decision rendered by the CIR. It is tantamount to a denial by inaction by the
CIR, which may still be appealed before the CTA and the assessment evaluated on the
basis of the available evidence and documents. The assessment remains valid
notwithstanding the nullity of the FDDA because the assessment itself differs from a decision

A. Constitutional Law: The Law Pertaining To The State and Its Relationship With Its Citizens

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A. Constitutional Law: The Law Pertaining To The State and Its Relationship With Its Citizens

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BAR SYLLABUS A

Principle of blending powers

Two kinds of sovereignty:

Sovereignty may also be internal or external:

Requisites of judicial review:

2. The issue of constitutionality must be raised at the earliest opportunity.

It must be one who has sustained or is in immediate danger of sustaining an injury as a

Exception: If the question is of transcendental importance.

4. The issue is the very lis mota of the case.

Scope and Limitations

Taxation and Eminent Domain as Implements on Police Power

Who may Exercise Police Power

Limitations on Delegation of Police Power

Test of Valid Exercise

Exercise of Police Power is subject to judicial inquiry

Who may Exercise Eminent Domain

Requisites for the Exercise of Eminent Domain

Expanded concept: Means public advantage, convenience or benefit, which tends to

Requisites of actual taking:

Determination of just compensation

It is as broad as the purpose for which it is given.

Lifeblood theory and Necessity theory

Tax for special purpose

Requisites (Section 28[1], Article VI)

2. Progressive system of taxation

3. Delegated tax legislation

Scope and Limitation

Exemptions may either be constitutional or statutory:

Essence of Due Process

Scope of Due Process Clause

Kinds of Due Process

Requisites of Substantive Due Process:

B. Procedural Due Process

Requisites of Procedural Due Process in Judicial Proceedings

Cardinal Rights in Administrative Proceedings

Administrative Due Process Only Applicable in Exercise of Quasi-Judicial Powers

Minimum Standards in the Imposition of Disciplinary Sanctions in Acadeimc

Constitutional and Statutory Due Process

Elements of the Equal Protection Clause

standards, by gauging the extent to which constitutionally guaranteed rights depend

c. Strict Scrutiny Test

Continuum of Thought, Speech, Expression and Speech Acts

Freedom from Prior Restraint and Subsequent Punishment

Content-neutral and content-based regulation

a. Content-based – refers to restrictions based on the subject matter of the utterance or

State Regulation of Freedom of Expression

Exception: Facial challenges

The possible harm to society in permitting some unprotected speech to go unpunished is

However, said doctrine applies to penal statutes when:

A law may be invalidated as overbroad if asubstantial number of its applications are

Void For Vagueness Doctrine

• Rights during expropriation

Also called the power of expropriation.

Effect of delay in payment

Abandonment of intended use and right of repurchase

Requisites for Exercise of Inferior Domain by LGUs

• Searches and seizures

Requisites of a valid warrant:

Because a warrantless search is in derogation of a constitutional right, peace officers who

Doctrines under unreasonable searches and seizures include the following –

6. Buy-bust operations – Prior surveillance is not a requisite to a valid entrapment or buy-

8. Valid warrantless arrest must precede a warrantless search to be valid.