This research guide summarizes the sources of Philippine tax law.

Tax law in the Philippines covers national and local taxes.  National taxes refer to
national internal revenue taxes imposed and collected by the national government
through the Bureau of Internal Revenue (BIR) and local taxes refer to those imposed
and collected by the local government. The Tax Code of 1997, Revenue Issuances and
BIR Rulings pertaining to national taxes are posted at the BIR website.

National Tax Law

I.  1987 Constitution

The 1987 Philippine Constitution sets limitations on the exercise of the power to tax.

The rule of taxation shall be uniform and equitable.  The Congress shall evolve a
progressive system of taxation.  (Article VI, Section 28, paragraph 1)

All money collected on any tax levied for a special purpose shall be treated as a special
fund and paid out for such purpose only.  If the purpose for which a special fund was
created has been fulfilled or abandoned, the balance, if any, shall be transferred to the
general funds of the Government.  (Article VI, Section 29, paragraph 3)

The Congress may, by law, authorize the President to fix within specified limits, and
subject to such limitations and restriction as it may impose, tariff rates, import and
export quotas, tonnage and wharfage dues, and other duties or imposts within the
framework of the national development program of the Government (Article VI, Section
28, paragraph 2) The President shall have the power to veto any particular item or items
in an appropriation, revenue or tariff bill, but the veto shall not affect the item or items to
which he does not object.  (Article VI, Section 27, second paragraph)

The Supreme Court shall have the power to review, revise, reverse, modify or affirm on
appeal or certiorari, as the law or the Rules of Court may provide, final judgments and
orders of lower courts in x x x all cases involving the legality of any tax, impost,
assessment, or toll or any penalty imposed in relation thereto.  (Article VIII, Section 5,
paragraph)           

Tax exemptions are limited to those granted by law.  However, no law granting any tax
exemption shall be passed without the concurrence of a majority of all the members of
the Congress.  (Article VI, Section 28, par. 4).  The Constitution expressly grants tax
exemption on certain entities/institutions such as (1) charitable institutions, churches,
parsonages or convents appurtenant thereto, mosques, and nonprofit cemeteries and
all lands, buildings and improvements actually, directly and exclusively used for
religious, charitable or educational purposes (Article VI, Section 28, paragraph 3); (2)
non-stock non-profit educational institutions used actually, directly and exclusively for
educational purposes. (Article XVI, Section 4(3))
In addition to national taxes, the Constitution provides for local government taxation.
(Article X, Section 5) (Article X, Section 6) Parenthetically, the Local Government Code
provides that all local government units are granted general tax powers, as well as other
revenue-raising powers like the imposition of service fees and charges, in addition to
those specifically granted to each of the local government units.  But no such taxes,
fees and charges shall be imposed without a public hearing having been held prior to
the enactment of the ordinance.  The levy must not be unjust excessive, oppressive,
confiscatory or contrary to a declared national economic policy (Section 186 and 187)
Further, there are common limitations to the grant of the power to tax to the local
government, such that taxes like income tax, documentary stamp tax, etc. cannot be
imposed by the local government.

II.  Laws

The basic source of Philippine tax law is the National Internal Revenue Law, which
codifies all tax provisions, the latest of which is embodied in Republic Act No. 8424
(“The Tax Reform Act of 1997”).  It amended previous national internal revenue codes,
which was approved on December 11, 1997. A copy of the Tax Reform Act of 1997,
which took effect on January 1, 1998.

Local taxation is treated separately in this Guide.  There are, however, special laws that
separately provide special tax treatment in certain situations.

III.     Administrative Material

The Secretary of Finance, upon the recommendation of the Commissioner, promulgates

needful rules and regulations for the effective enforcement of the provisions of the Tax
Code (Section 244, Tax Code of 1997). The Commissioner of Internal Revenue,
however, has the exclusive and original power to interpret the provisions of the Tax
Code, but subject to review by the Secretary of Finance.

Administrative issuances which may be relied upon in interpreting the provisions of the
Tax Code, which are signed by the Secretary of Finance, or the Commissioner of
Internal Revenue, or his duly authorized representative, come in the form of Revenue
Regulations, Revenue Memorandum Orders, Revenue Memorandum Rulings, Revenue
Memorandum Circulars, Revenue Memorandum Rulings, and BIR Rulings.

Revenue Regulations (RRs) are issuances signed by the Secretary of Finance, upon
recommendation of the Commissioner of Internal Revenue, that specify, prescribe or
define rules and regulations for the effective enforcement of the provisions of the
National Internal Revenue Code (NIRC) and related statutes.

Revenue Memorandum Orders (RMOs) are issuances that provide directives or

instructions; prescribe guidelines; and outline processes, operations, activities,
workflows, methods and procedures necessary in the implementation of stated policies,
goals, objectives, plans and programs of the Bureau in all areas of operations, except
auditing.

Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the
Commissioner of Internal Revenue with respect to the provisions of the Tax Code and
other tax laws, as applied to a specific set of facts, with or without established
precedents, and which the Commissioner may issue from time to time for the purpose of
providing taxpayers guidance on the tax consequences in specific situations. BIR
Rulings, therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null
and void ab initio.

Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and
applicable portions, as well as amplifications, of laws, rules, regulations and precedents
issued by the BIR and other agencies/offices.

BIR Rulings are the official position of the Bureau to queries raised by taxpayers and
other stakeholders relative to clarification and interpretation of tax laws.

Revenue Regulations, Revenue Memorandum Orders, Revenue Memorandum Rulings,

Revenue Memorandum Circulars, Revenue Memorandum Rulings, and BIR Rulings are
found here.

IV.  Local Government Tax Law

Local government taxation in the Philippines is based on the constitutional grant of the
power to tax to the local governments.

Local taxes may be imposed, as the Constitution grants, to each local government unit,
the power to create its own sources of revenues and to levy taxes, fees, and charges
which shall accrue to the local governments (Article X, Section 5). With respect to
national taxes, local Government units shall have a just share, as determined by law, in
the national taxes which shall be automatically released to them (Article X, Section 6).

However, certain taxes, such as the following, may not be imposed by local government
units: (Section 133, Local Government Code and Tax Law and Jurisprudence by Vitug
& Acosta, copyright 2000)

(1)  Income tax, except when levied on banks and other financial institutions;

(2)  Documentary stamp tax;

(3)  Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa,
except as otherwise provided in the Local Government Code (Code) (except taxes
levied on the transfer of real property ownership under Section 135, and Section 151 of
the Code);
(4)  Customs duties, registration fees of vessels (except license fees imposed under
Section 149, and Section 151 of the Code), wharfage on wharves, tonnage dues and all
other kinds of customs fees, charges and dues except wharfage on wharves
constructed and maintained by the local government unit concerned;

(5)  Taxes, fees, charges and other impositions upon goods carried into or out of, or
passing through, the territorial jurisdictions of local governments in the guise of charges
for wharfage, tolls for bridges or otherwise, or other taxes in any form whatever upon
such goods or merchandise;

(6)  Taxes, fees or charges on agricultural and aquatic products when sold by marginal
farmers or fishermen;

(7)  Taxes on business enterprises certified by the Board of Investments as pioneer or

non-pioneer for a period of six and four years, respectively, from the date of registration;

(8)  Excise taxes on articles enumerated under the National Internal Revenue Code and
taxes, fees, or charges on petroleum products, but not a tax on the business of
importing, manufacturing or producing said products (Patron vs. Pililla, 198 SCRA 82);

(9)  Percentage tax or value-added tax on sales, barters or exchanges of goods or

services or similar transactions thereon (but not fixed graduated taxes on gross sales or
on volume of production);

(10)  Taxes on the gross receipts of transportation contractors and persons engaged in
the transportation of passengers or freight by hire and common carriers by air, land or
water except as provided by the Code;

(11)  Taxes on premiums paid for reinsurance or retrocession;

(12)  Taxes, fees or charges for the registration of motor vehicles and for the issuance
of all kinds of licenses or permits for the driving thereof, except tricycles;

(13)  Taxes, fees, or other charges on Philippine products actually exported except as
provided by the Code (the prohibition applies to any local export tax, fee, or levy on
Philippine export products but not to any local tax, fee, or levy that may be imposed on
the business of exporting said products);

(14)  Taxes, fees or charges on duly organized and registered Countryside and
Barangay Business Enterprises (R.A. No. 6810) and on cooperatives (R.A. No. 6938);
and

(15)  Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units (Section 133, LGC)
The Local Government Code (www.comelec.gov.ph) or (www.dilg.gov.ph/) contains
provisions on the scope and limitation on the exercise of local government taxing power.

V. Cluster and Agencies

BUREAU OF INTERNAL REVENUE (BIR)

As Mandated:
1. Assessment and collection of all national internal revenue taxes, fees and charges.
2. Enforcement of all forfeitures, penalties, fines and execution of judgments in all cases
decided in its favor by the Court of Tax Appeals and the ordinary courts
3. Administer supervisory and police powers conferred by National Internal Revenue
Code as amended by R.A. 8424 or other laws.

BUREAU OF CUSTOMS (BOC)

1. As provided under Section 202 of the CMTA, the BOC is mandated to:
2. Assess and collect customs revenues from imported goods
3. Simplify and harmonize customs procedures
4. Exercise border control to prevent entry of smuggled goods
5. Prevent and suppress smuggling and other customs fraud
6. Facilitate and secure international trade
7. Supervise and control the entrance and clearance of vessels and aircraft
engaged in foreign commerce
8. Supervise and control the handling of foreign mails arriving in the Philippines
9. Supervise and control import and export cargoes
10. Conduct a compensation study to develop a competitive compensation and
remuneration system in the Bureau
11. Exercise exclusive original jurisdiction over forfeiture cases
12. Enforce the CMTA and all other laws, rules and regulations related to customs
administration

INSURANCE COMMISSION (IC)

Mandate:
1. To promote growth and financial stability of insurance companies.
2. To professionalize insurance services and develop insurance consciousness
among the general populace
 3. To establish a sound national insurance market, and
4. To safeguard the rights and interest of the insuring people.

NATIONAL TAX RESEARCH CENTER NTRC

1. Mandate:
2. To promote a tax system that will ensure a fair distribution of the tax burden
among the Filipino taxpayers.
3. To recommend necessary improvements in the tax system by conducting
continuing quality research on taxation.
4. To provide responsive staff support to fiscal policy makers.
5. To provide opportunities for professional growth and promote the well-being of
our personnel.