PART ONE: COMMERCIAL LAW

I. BUSINESS ORGANIZATIONS
1. What are the liabilities in case of partnership by estoppel?
Partnership is liable When all the members of the existing partnership consented to the representation

When there is no existing partnership and all those represented as partners consented to
Pro rata liability
the representation

When there is no existing partnership and not all but only some of those represented as
Separate liability partners consented to the representation, or none of the partnership in an existing
partnership consented to such representation
(Art. 1825, Civil Code)

2. Distinguish partnership from joint venture.

Partnership Joint Venture

A partnership may be particular or A joint venture is an agreement between two

universal, and a particular partnership parties to enter into a commercial undertaking,
As to definition
may have for its object a specific and may be considered as a form of a
undertaking. partnership.

As to firm name and Has firm name and legal personality Without firm name and legal personality
legal personality

Usually a continuing business of various Limited or for a single transaction

As to transactions transactions of a certain kind

As to capacity of A corporation cannot enter into a Corporations may engage in a joint venture with
corporations partnership contract others
(Art. 1783, Civil Code; Aurbach v. Sanitary Wares Manufacturing Corp, G.R. No. 75875, Dec. 15, 1989)

3. Distinguish general professional partnership from an ordinary business partnership.

The income tax is imposed not on the professional partnership, which is tax exempt, but on the
General professional
partners themselves in their individual capacity computed on their distributive shares of
partnership
partnership profits.

Ordinary business Treated as a corporation for income tax purposes and so subject to the corporate income tax
partnership
(Tan v. Del Rosario, G.R. No. 109289, October 3, 1994)

4. What are the considerations in establishing a limited partnership?

a. To establish a limited partnership there must be at least one general partner and the name of at least one of the
general partners must appear in the firm name. If these requirements are not complied with, the partnership,
notwithstanding the fact that the articles of association are entitled "limited partnership;"
b. A limited partnership that has not complied with the law of its creation is not considered a limited partnership at all,
but a general partnership in which all the members are liable; and
c. A limited partnership cannot perform any act in the management of the partner interests and cannot even examine
the condition and state of partnership administration except at stated times. (Collector of Internal Rev. vs. Isasi, et al.,
G.R. No. L-9186 April 29, 1957)

5. Distinguish the control test from the grandfather rule.

Control test Grandfather rule
It determines the nationality of a corporation using the It is a stricter method which traces the nationality of the
nationality of the majority of the stockholders on whom stockholders of investor corporations so as to ascertain the
equity control is vested nationality of the corporation where the investment is made.

To be considered Filipino-owned under Sec. 2, Art. II of the If there is doubt, based on the attendant facts and
1987 Constitution, the legal and beneficial ownership of circumstances of the case, in the 60-40 Filipino equity
60% of the outstanding capital stock must rest in the hands ownership in the corporation, the Grandfather Rule will apply.
of Filipino nationals in accordance with the constitutional
mandate.
(Narra Nickel Mining vs. Redmont, G.R. No. 195580, 2014)

6. What is capital in Section 11, Article XII of the Constitution?

The term capital in Section 11, Article XII of the Constitution refers to shares with voting rights, as well as with full beneficial
ownership. (Heirs of Gamboa v. Teves, as cited in Roy v. Herbosa, G.R. No. 207246, November 22, 2016)

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7. The following is the composition of AAA Company, a public utility company:
Outstanding Number of shares
Kind of Stock
Stock owned by Filipinos
100 Common Shares 60
100 Class A Preferred Shares (with right to elect directors) 60
100 Class B Preferred Shares (no right to elect directors) 50
Is the company compliant with the 60-40 requirement under the Constitution?
No, AAA Company is not compliant with the 60-40 requirement because it must have full beneficial ownership of the share.
To determine if a corporation is a “Philippine National,” the Voting Control Test and the Beneficial Ownership Test must be
applied, as follows:

a. Under the Voting Control Test, there should be at least 60% voting shares owned by Filipinos. For AAA Company,
there should be at least a total of 120 of common shares and Class A preferred shares (in any combination) owned
and controlled by Filipinos for it to be compliant with the 60% of the voting rights in favor of Filipinos requirement. Here,
it has 60 common shares and 60 Class A preferred shares (with right to elect directors). Thus, AAA Company passed
the Voting Control Test.
b. Under the Beneficial Ownership Test, at least 60% of all the outstanding capital stock should be owned by Filipinos.
For AAA Company, there should be at least a total of 180 shares of all the outstanding capital stock owned and
controlled by Filipinos (provided that among those 180 shares, a total of 120 of the common shares and Class A
preferred shares [in any combination] are owned and controlled by Filipinos). Here, there are only 170 shares owned
by Filipinos out of all the outstanding capital stock. (Roy III vs. Herbosa, G.R. No. 207246, November 22, 2016)

8. What are the three (3) instances when the court allows the piercing of the corporate veil?
These are: 1) defeat of public convenience, as when the corporate fiction is used as vehicle for the evasion of an existing
obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter
ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency,
conduit or adjunct of another corporation. (Gesolgon vs. Cyberone Ph., Inc., [G.R. No. 210741. October 14, 2020.J. Hernando])

9. For existing corporations whose certificate of incorporation was issued prior to the effectivity of the Revised
Corporation Code, is an amendment by the Board of Directors needed to effect perpetual existence to their
corporation?
No, corporations with certificates of incorporation issued prior to the effectivity of the Revised Corporation Code, and which
continue to exist, shall have perpetual existence, unless the corporation, upon a vote of its stockholders representing a
majority of its outstanding capital stock, notifies the Commission that it elects to retain its specific corporate term pursuant
to its articles of incorporation. (Sec. 11, RCC)

10. Explain each classification of shares of a corporation in the Philippines.

Entitled to receive dividends and participate in the company's growth and profitability. Also
Common Shares
known as "voting shares."

Usually come with certain preferences and rights that are not granted to common
shareholders. Preferred shareholders often have a fixed dividend rate, which means they
Preferred Shares
receive dividends before common shareholders do. However, preferred shareholders might
not have the same voting rights as common shareholders.

Non-Voting Shares Allow investors to invest in the company without having a say in corporate decisions.

May be purchased by the corporation from the holders of such shares upon the expiration of
a fixed period, regardless of the existence of unrestricted retained earnings in the books of the
Redeemable Shares corporation, and upon such other terms and conditions stated in the articles of incorporation
and the certificate of stock representing the shares, subject to rules and regulations issued by
the Commission.

Typically issued to the initial founders of a corporation, and maybe given certain rights and
Founders’ Shares
privileges not enjoyed by the owners of other stocks.

Shares that the corporation has bought back from shareholders. These shares are not
Treasury Shares
considered outstanding and do not carry voting rights or entitlement to dividends.
(Secs. 6,7,8,9 RCC)

11. What are corporations vested with public interest?

a. Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as “The Securities Regulation Code”,
namely those whose securities are registered with the Commission, corporations listed with an exchange or with assets
of at least Fifty million pesos (P50,000,000.00) and having two hundred (200) or more holders of shares, each holding
at least one hundred (100) shares of a class of its equity shares;
b. Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service business, pre-need, trust and
insurance companies, and other financial intermediaries; and
c. Other corporations engaged in business vested with public interest similar to the above, as may be determined by the
Commission, after taking into account relevant factors which are germane to the objective and purpose of requiring the
election of an independent director, such as the extent of minority ownership, type of financial products or securities
issued or offered to investors, public interest involved in the nature of business operations, and other analogous factors.
(Sec 22, RCC)

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12. What are the requirements for the increase or decrease of authorized capital stock?
a. It must be approved by a majority vote of the board of directors and by two-thirds (2/3) of the outstanding capital stock
at a stockholders’ meeting duly called for the purpose.
b. Written notice of the time and place of the stockholders’ meeting and the purpose for said meeting must be sent to the
stockholders at their places of residence as shown in the books of the corporation and served on the stockholders
personally, or through electronic means recognized in the corporation’s bylaws and/or the Commission’s rules as a
valid mode for service of notices. (Sec. 37, RCC)

13. What is an ultra-vires act?

An ultra vires act may be classified as either illegal or merely ultra vires. The former contemplates the doing of an act which
is contrary to law, morals, or public order, or one that contravenes some rules of public policy or public duty, and is, like
similar transactions between individuals, void. It cannot serve as a basis of a court action, nor acquire validity by
performance, ratification, or estoppel. On the other hand, a mere ultra vires act is that which is not illegal and void ab initio,
but is merely outside of the scope of the articles of incorporation, and is thus, merely voidable and may become binding and
enforceable when ratified by the stockholders. (Waterfront Philippines, Inc. v. SSS, G.R. No. 249337, July 06, 2021)

14. What are the fundamental rights of a stockholder in a corporation?

Proprietary Rights Management Rights Remedial Rights

Refers to certain economic Refers to the right to participate in the Refers to the various remedies
Definition benefits which accrues to a conduct of the business of the that a stockholder may seek
stockholder’s shares. corporation. depending on the issues at hand.

(a) To transfer stock in the

(a) To inspect corporate books;
corporate book; (a) To attend and vote in person or by
(b) To recover stock unlawfully
(b) To receive dividends proxy at a stockholders’ meetings;
sold for delinquent payment of
when declared; (b) To elect and remove directors;
subscription;
(c) To the issuance of (c) To approve certain corporate acts;
(c) To be furnished with most
certificate of stock or other (d) To adopt and amend or repeal the
recent financial statements or
Rights evidence of stock by-laws of adopt new by-laws;
reports of the corporation’s
covered ownership; (e) To compel the calling of the
operation;
(d) To participate in the meetings;
(d) To bring suits (derivative suit,
distribution of corporate (f) To enter into a voting trust
individual suit, and representative
assets upon dissolution; agreement; and
suit); and
and (g) To have the corporation voluntarily
(e) To demand payment in the
(e) To pre-emption in the dissolved.
exercise of appraisal right.
issue of shares.

(Secs. 23, 27, 38, 40, 42, 45, 47 49, 57, 58, 62, 63, 68, 73, 74, 80, 117, 118, 134, and 135, RCC)

15. What is a proxy, its requirements, and can we add to the requirements of proxy forms?
It depends. A proxy is a form of agency created in instances when a person is unable to personally cast his or her vote;
hence, the act of voting is delegated to another person. Section 58 then provides that a proxy shall be in writing, signed by
the member, and filed with the corporate secretary before the scheduled meeting. However, the Corporation Code also
empowers the members to provide for their own proxy requirements in their by-laws. Nonetheless, in the absence of
additional formal requirements for proxies in the by-laws, the basic requirements for a written proxy submitted prior to the
scheduled meeting under Section 58 govern. (Cezar Yatco Real Estate Services, Inc., et al. v. Bel-Air Village Association, Inc, G.R.
No. 211780, 2018)

16. What are the manners of voting by stockholders or members?

Stockholders or members may attend meetings and exercise their right to vote:
a. In person;
b. by proxy; or
c. through remote communication or in absentia;
Provided that the same is either authorized under the By-Laws of the Corporation or through the majority vote of the
Board of Directors or Trustees. (Sec. 23, RCC)

17. When does a corporation have the power to acquire its own shares?
A corporation shall have the power to acquire its own shares only when it has unrestricted retained earnings in its books to
cover the shares to be purchased or acquired (Sec. 40, RCC)

18. Explain the concepts of pre-emptive right and appraisal right.

Pre-emptive It is the preferential right of shareholders to subscribe to all issues or disposition of shares of any
right class, in proportion to their respective shareholdings.

It refers to the right of the stockholder to demand payment of the fair value of his shares, after
Appraisal right dissenting from a proposed corporate action involving a fundamental change in the charter or articles
of incorporation in the cases provided by law.
(Sec. 38, RCC; De Leon, 2010)

19. Can the corporation deny the exercise of a stockholder’s pre-emptive right?
Yes if the articles of incorporation or its amendment denies such right. The stockholder must be given a reasonable time
within which to exercise their preemptive rights. Upon the expiration of said period, any stockholder who has not exercised

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 such right is deemed to have waived it. (Majority Stockholders of Ruby Industrial Corp. vs. Lim and the Minority Stockholders of Ruby
Industrial Corp., G.R. Nos. 165887 & 165929, June 6, 2011)

20. What are the instances when non-voting shares are entitled to vote?
Non-voting shares are still entitled to vote in the following matters:
a. Amendment of the articles of incorporation;
b. Adoption and amendment of by-laws;
c. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property;
d. Incurring, creating or increasing bonded indebtedness;
e. Increase or decrease of capital stock;
f. Merger or consolidation of the corporation with another corporation or other corporations;
g. Investment of corporate funds in another corporation or business in accordance with the corporation code; and
h. Dissolution of the corporation. (Sec. 6, RCC)

21. What are the remedies available to stockholders in case of wrongful or fraudulent corporate actions?
Representative/
Individual Suit Derivative Suit or Minority Stockholder’s Suit
Class Suit

It is filed when the cause of action It is filed when the It is an action filed by a stockholder or stockholders
belongs to the individual stockholder cause of action (nominal party) to enforce a corporate action. This is
personally, and not to the belongs to a group available even to a stockholder who owns only one share
stockholders as a group or to the of stockholders. in the corporation. This suit concerns a wrong to the
corporation. corporation itself (real party in interest).
(Ago Realty & Development Corp. v. Ago, G.R. Nos. 210906 & 211203, October 16, 2019; Pascual v. Del Saz Orozco, 19 Phil. 82
(1911).

22. The Board of Directors of ABC Corp. passed a resolution approving the sale of their real property. AAA, a
stockholder commenced a derivative suit to enjoin the Board of Directors and the Stockholders from approving
the sale. Will the suit prosper?
No. In order that a stockholder may show a right to sue on behalf of the corporation, he must allege with some particularity
in his complaint that he has exhausted his remedies within the corporation by making a sufficient demand upon the directors
or other officers for appropriate relief with the expressed intent to sue if relief is denied. (Reyes vs. RTC Makati, G.R. No. 165744,
August 11, 2008)

23. What is the term of office of the Board of Directors and Board of Trustees?
The general rule is that a regular director shall hold office for 1 year. A trustee may be elected for a period not exceeding 3
years.The exception is if no election is held, the directors and officers will continue to occupy position even after the lapse
of 1 year under a hold-over capacity until their successors are elected and qualified. (Sec 22, RCC)

24. What are common qualifications and disqualifications of a director and trustee?
Qualifications Disqualifications

a. 1. Majority of the directors/trustees must be residents A person shall be disqualified from being a director, trustee or
of the Philippines; officer of any corporation if, within 5 years prior to election or
b. 2. He must not have been convicted by final judgment appointment of such, the person was:
of an offense punishable by imprisonment for period a. Convicted by final judgment:
exceeding 6 years or a violation of the Corporation 1. of an offense punishable by imprisonment for a period
Code, committed within 5 years prior to the date of his exceeding 6 years;
election; 2. of violation of the Corporation Code;
c. 3. He must be of legal age; 3. of violation of RA 8799 (SRC)
d. 4. Other qualifications as may be prescribed in special b. Found administratively liable for any offense involving
laws or regulations or in the by-laws of the corporation fraudulent acts; and
c. By a foreign court or equivalent foreign regulatory authority for
acts, violations or misconduct similar to those enumerated in
paragraphs (a) and (b) above.
(Secs. 22, 26 & 27, RCC)

25. Discuss how vacancies in the board are filled.

In case of vacancies occurring in the board of directors or trustees other than by removal or by expiration of term, the
vacancy may be filled by the vote of at least a majority of the remaining directors or trustees, if still constituting a quorum,
otherwise, said vacancies must be filled by the stockholders or members in a regular or special meeting called for that
purpose. (Sec. 28, RCC)

26. May corporate officers be held personally liable for the obligations of the corporation?
Personal liability of a corporate director, trustee or officer along (although not necessarily) with the corporation may so
validly attach, as a rule, only when:
1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence in directing its affairs,
or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or other persons;
2. He consents to the issuance of watered stocks or who, having knowledge thereof, does not forthwith file with the corporate
secretary his written objection thereto;
3. He agrees to hold himself personally and solidarily liable with the corporation; or 4. He is made, by a specific provision of
law, to personally answer for his corporate action.
(Atienza vs. Golden Ram Engineering Supplies & Equipment Corporation, [G.R. No. 205405. June 28, 2021.J. Hernando])

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27. Can the court interfere with the decisions of corporations?
No, the courts are barred from intruding into business judgments of corporations, when the same are made in good faith
except: a. when contracts are unconscionable and oppressive as to amount to wanton destruction to the rights of the
minority; or b. when there is bad faith or gross negligence by the directors. (Republic Communications Inc v CA, G.R. No. 141667,
July 17, 2006)

28. When will the officers, directors, and shareholders be criminally liable for the acts of the corporation?
There must be showing that its officers, directors, and shareholders actively participated in or had the power to prevent the
wrongful act. (SEC v. Price Richardson Corporation, G.R. No. 197032, 2017)

29. When does the director have the duty to disclose all material facts to the stockholders?
As an exception to the majority rule doctrine, the special fact doctrine states that where special circumstances or facts are
present which make it inequitable for the director to withhold information from the stockholder, the duty to disclose arises,
and concealment is fraud. (American T. Co. v. California etc. Ins. Co., 15 Cal.2d 42, 1940)

30. What are the instances when contracts between corporations and interlocking directors can be upheld?
1. Contract is not fraudulent;
2. Contract is fair and reasonable under the circumstances; and
3. If the interest of the interlocking director in one corporation or corporations is merely nominal (not exceeding 20% of
the outstanding capital stock), he shall be subject to the provisions of Sec. 31 insofar as the latter corporation or corporations
are concerned. (Sec. 32, RCC)

31. Distinguish self-dealing directors and interlocking directors.

Self-dealing directors Interlocking directors

Directors who transact business with their own corporations Directors of a corporation who
Relationship transact business with another
with the corporation wherein he also
corporations sits in that corporation also as
a director

Generally voidable by the corporation, unless all the following For contracts between two
conditions are present: corporations involving
(a) The presence of such director or trustee in the board meeting in interlocking directors, they
which the contract was approved was not necessary to constitute a cannot be invalidated by that
quorum for such meeting; ground alone, except in the
(b) The vote of such director or trustee was not necessary for the following circumstances:
approval of the contract; 1. In cases of fraud;
(c) The contract is fair and reasonable under the circumstances; 2. Contract is unfair and not
(d) In case of corporations vested with public interest, material reasonable under the
contracts are approved by at least two-thirds (2/3) of the entire circumstances; and
Validity of membership of the board, with at least a majority of the independent
contracts directors voting to approve the material contract; and Moreover, If the interest of the
(e) In case of an officer, the contract has been previously interlocking director in one
authorized by the board of directors. corporation or corporations is
substantial (exceeding 20% of
Where any of the first three (3) conditions set forth in the preceding the outstanding capital stock),
paragraph is absent, such contract may be ratified by the vote of the the contract will be subject to
stockholders representing at least two-thirds (2/3) of the outstanding the same conditions required
capital stock or of at least two-thirds (2/3) of the members in a meeting for the contract validity of a
called for the purpose: Provided, That full disclosure of the adverse self-dealing director in Sec.
interest of the directors or trustees involved is made at such meeting 31.
and the contract is fair and reasonable under the circumstances.
(Secs. 31 and 32, RCC)

32. What is the Trust Fund Doctrine and its scope?

The Trust Fund Doctrine provides that the capital stock, property and other assets of a corporation are regarded as equity
in trust for the payment of corporate creditors. The subscription to the capital of a corporation constitutes a fund to which
creditors have a right to look for satisfaction of their claims. The scope of the doctrine when the corporation is insolvent
encompasses not only the capital stock but also other property and assets generally regarded in equity as a trust fund for
the payment of corporate debts. (Turner v. Lorenzo Shipping Corp., G.R. No. 157479, November 24, 2010; itemHalley v. Printwell,
G.R. No. 157549, May 30, 2011)

33. When may a creditor invoke the trust fund doctrine?

A creditor may invoke the trust fund doctrine in the following instances:
a. The corporation has distributed its capital among the stockholders without providing for the payment of creditors;
b. It released the subscribers to the capital stock from their unpaid subscriptions;
c. It transferred corporate property in fraud of its creditors;
d. It distributed properties to stockholders except by way of dissolution and liquidation, the redemption of redeemable
shares, and reduction of capital stock;
e. When it declared dividends without unrestricted retained earnings;
f. When it acquired its shares without unrestricted retained earnings; and

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 g. When it pays dissenting stockholders exercising appraisal right without unrestricted retained earnings. (Section 42 and 43,
RCC; Ong v. Tiu, G.R. Nos. 144476 and 144629)
Note: A corporate creditor cannot immediately invoke the trust fund doctrine to proceed against unpaid subscriptions of
stockholders of the debtor corporation without alleging and proving the corporation's insolvency or any of the other
acceptable grounds where the trust fund doctrine, theory or principle has been applied. (Enano-Bote, V. Alvarez, G.R. No.
223572, November 10, 2020)

34. What are the exceptions to the Trust Fund Doctrine?

The exceptions to the Trust Fund Doctrine are:
1. Amendment of the AOI to reduce the authorized capital stock,
2. Purchase of redeemable shares by the corporation, regardless of the existence of unrestricted retained earnings, and
3. Dissolution and eventual liquidation of the corporation. (Ong vs. Tiu, G.R. No. 144476, 8 April 2003)

35. Who are Corporate Officers?

The following are Corporate Officers:
(a) President, who must be a director;
(b) Treasurer, who must be a resident;
(c) Secretary, who must be a citizen and resident of the Philippines;
(d) such other officers as may be provided in the bylaws; and
(e) Compliance Officer, if the corporation is vested with public interest.
The same person may hold two (2) or more positions concurrently, except that no one shall act as president and secretary
or as president and treasurer at the same time, unless otherwise allowed in this Code. (Section 24, RCC)

36. Can certain officials or employees of a corporation sign the verification and certification on its behalf without
need of a board resolution?
Yes. Certain officials, such as but not limited to, the chairperson of the board of directors, the president of a corporation, the
general manager or acting general manager, personnel officer, and an employment specialist in a labor case, may sign the
verification and certification without need of board resolution. Moreover, lack of authority of a corporate officer to undertake
an action on behalf of the corporation may be cured by ratification through the subsequent issuance of a board resolution.
(Jorgenetics Swine Improvement Corporation vs. Thick & Thin Agri-Products, Inc., G.R. Nos. 201044 & 222691. May 5, 2021)

37. Discuss the right to inspect corporate records of directors, trustees, stockholders or members of the corporation.
Corporate records, regardless of the form in which they are stored, shall be open to inspection by any director, trustee,
stockholder or member of the corporation in person or by a representative at reasonable hours on business days, and a
demand in writing may be made by such director, trustee or stockholder at their expense, for copies of such records or
excerpts from said records. (Sec. 73, RCC)

38. Can the corporation file an injunction to prevent the stockholder from exercising his right to inspection?
An action for injunction filed by a corporation generally does not lie to prevent the enforcement by a stockholder of his or
her right to inspection. The stockholder's right of inspection of the corporation's books and records is based upon their
ownership of the assets and property of the corporation. It is, therefore, an incident of ownership of the corporate property,
whether this ownership or interest be termed an equitable ownership, a beneficial ownership, or a quasi-ownership.
(Philippine Associated Smelting and Refining Corporation vs. Lim, G.R. No. 172948, 2016)

39. Can the stockholder’s right to inspection be denied on ground of confidentiality of business transactions?
No. The confidentiality of business transactions is not a magical incantation that will defeat the request of a stockholder to
inspect the records. (Philippine Associated Smelting and Refining Corporation vs. Lim, G.R. No. 172948, 2016)

40. When may a corporation be considered as a close corporation?

For a corporation to be considered as a close corporation, its articles of incorporation should provide that:
(1) All the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by not more than a
specified number of persons, not exceeding twenty (20);
(2) all the issued stock of all classes shall be subject to one or more specified restrictions on transfer permitted by this Title;
and
(3) The corporation shall not list in any stock exchange or make any public offering of any of its stock of any class.
Notwithstanding the foregoing, a corporation shall not be deemed a close corporation when at least two-thirds (2/3) of its
voting stock or voting rights is owned or controlled by another corporation which is not a close corporation under the RCC.

Note: Any corporation may be incorporated as a close corporation, except mining or oil companies, stock exchanges, banks,
insurance companies, public utilities, educational institutions and corporations declared to be vested with public interest in
accordance with the provisions of this Code. (Sec. 96, RCC)

41. What is a corporation sole?

A corporation sole may be formed by the chief archbishop, bishop, priest, minister, rabbi, or other presiding elder of such
religious denomination, sect, or church for the purpose of administering and managing, as trustee, the affairs, property and
temporalities of any religious denomination, sect or church. (Sec. 108, RCC)

42. Can a religious society incorporate?

Yes. Unless it is forbidden by competent authority, the Constitution, pertinent rules, regulations, or discipline of the religious
denomination, sect or church of which it is a part, any religious society, religious order, diocese, synod, or district
organization of any religious denomination, sect or church, may, upon written consent and/or by an affirmative vote at a
meeting called for the purpose of at least two-thirds (2/3) of its membership, incorporate for the administration of its
temporalities or for the management of its affairs, properties, and estate by filing with the Commission, articles of
incorporation verified by the affidavit of the presiding elder, secretary, or clerk or other member of such religious society or
religious order, or diocese, synod, or district organization of the religious denomination, sect or church. (Sec. 114 RCC)

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43. Who are the corporate officers in a One person Corporation (OPC)?
1. The sole director and president who is the single stockholder
2. The officers to be appointed by the OPC within 15 days from issuance of certificate of incorporation such as the:
a. treasurer,
b. corporate secretary, and
c. Other officers as it may deem necessary (Secs. 121-122, RCC)

44. Who are nominees in an OPC?

A nominee and alternate nominee are required to be designated by the single stockholder of an OPC in its Articles of
Incorporation. In the event of the single stockholder’s death or incapacity, the nominee takes the place of the single
stockholder as director and shall manage the corporation’s affairs. (Sec. 124, RCC)

45. What are the rules as to the conversion from an Ordinary Stock Corporation (OSC) to an OPC?
When a single stockholder acquires all the stocks of an ordinary stock corporation, the latter may apply for conversion into
a One Person Corporation, subject to the submission of such documents as the Commission may require. The One Person
Corporation converted from an ordinary stock corporation shall succeed the latter and be legally responsible for all the
latter’s outstanding liabilities as of the date of conversion. (Sec. 131, RCC)

46. Can the SEC still certify the conversion of an OPC into an OSC if a month has already passed before the Board
informed SEC of such conversion?
Yes, the SEC can still certify the conversion because it still falls within the sixty (60) day notice period. The RCC provides
that notice of conversion shall be filed with the SEC within sixty (60) days from the occurrence of the circumstances leading
to the conversion into an ordinary stock corporation. (Sec. 132, RCC)

47. Distinguish constituent corporations from consolidated corporations.

Two (2) or more corporations may merge into a single corporation which shall be
Constituent corporation
one of the constituent corporations.

When two (2) or more corporations consolidate into a new single corporation, the
Consolidated corporation
new single corporation shall be the consolidated corporation.
(Sec. 75 RCC)

48. Enumerate List A and List B of the Foreign Investment Negative List.
List B: Foreign Ownership is
Limited for Reason of Security,
List A: Foreign Ownership is Limited By Mandate of the Constitution and
Defense, Risk to Health and
Specific Laws
Morals, and Protection of Small
and Medium Scale Enterprises

No Foreign Equity Up to 40% Foreign Equity

● Mass media, except recording and internet business ● The manufacture, repair, storage,
● Practice of professions, except in cases specifically allowed by the law and/or distribution of products or
following the prescribed conditions therein ingredients requiring a Philippine
● Professions where foreigners are not allowed to practice in the Philippines, National Police clearance
except if the subject to reciprocity as provided in pertinent laws. ● Firearms (handguns to shotguns)
● Corporate practice of professions with foreign equity restrictions under and their parts, ammunition
pertinent laws. therefore, instruments or
● Retail trade enterprises with paid-up capital of less than ₱25,000,000.00 implements used or intended for
● Cooperatives, except investments of former natural-born citizens of the use in the manufacture of
Philippines firearms
● Organization and operation of private detective, watchmen or security guards ● Gunpowder
agencies ● Dynamite
● Small-scale mining ● Blasting supplies
● Utilization of marine resources in archipelagic waters, territorial sea, and ● Ingredients used in making
exclusive economic zone as well as small-scale utilization of natural resources explosives
in rivers, lakes, bays, and lagoons ● Chlorates of potassium and
● Ownership, operation, and management of cockpits sodium
● Manufacture, repair, stockpiling, and/or distribution of nuclear weapons ● Nitrates of ammonium,
● Manufacture, repair, stockpiling, and/or distribution of biological, chemical, potassium, sodium barium,
and radiological weapons and anti-personnel mines copper (11), lead (11), calcium,
● Manufacture of firecrackers and other pyrotechnic devices and cuprite
● Nitric acid
Up to 25% Foreign Equity ● Nitrocellulose
● Private recruitment, whether for local or overseas employment ● Perchlorates of ammonium,
● Contracts for the construction of defense-related structures potassium, and sodium
● Dinitrocellulose
Up to 30% Foreign Equity ● Glycerol
● Advertising ● Amorphous phosphorus
● Hydrogen peroxide
Up to 40% Foreign Equity ● Strontium nitrate powder
● Procurement of infrastructure projects in accordance with Section 23.4.2.1(b), ● Toluene; and telescopic sights,
(c), and (e) of the Implementing Rules and Regulations (IRR) of RA. 9184 sniper scopes, and other similar
● Exploration, development, and utilization of natural resources devices.

8
 ● Ownership of private lands, except for a natural-born citizen who has lost his ● The manufacture or repair of
Philippine citizenship and has the legal capacity to enter into a contract under these items, however, may be
Philippine laws. authorized by the Chief of the
● Operation of public utilities PNP to non-Philippine nationals;
● Educational institutions other than those established by religious groups and provided that a substantial
mission boards, for foreign diplomatic personnel and their dependents and percentage as determined by the
other foreign temporary residents, or for short-term high-level skills said agency of output (product
development that do not form part of the formal education system as defined produced) is exported. The extent
in Section 20 of Batas Pambansa (BP) No. 232 (1982) of foreign equity ownership
● Culture, production, milling, processing, trading except retailing, of rice and allowed shall be specified in the
corn and acquiring, by barter, purchase or otherwise, rice and corn and the relevant authority/clearance.
by-products thereof, subject to a period of divestment.
● Contracts for the supply of materials, goods, and commodities to Government-
Owned and Controlled Corporation (GOCC), company, agency or municipal
corporation
● Operation of deep-sea commercial fishing vessels
● Ownership of condominium units
● Private radio communications network
(Executive Order No. 175, s. 2022)

49. What are the two tests to determine whether a foreign corporation is doing business in the Philippines?
Substance test Continuity test
Whether the foreign corporation is continuing The term [doing business] implies a continuity of commercial dealings
the body of the business or enterprise for which and arrangements, and contemplates, to that extent, the performance
it was organized or whether it has substantially of acts or works or the exercise of some of the functions normally
retired from it and turned it over to another. incident to, and in the progressive prosecution of, the purpose and
object of its organization.
(Magna Ready Mix Concrete Corporation vs. Andersen Bjornstad Kane Jacobs, Inc., G.R. No. 196158. January 20, 2021.J. Hernando)

50. What are the rules governing a foreign corporation’s right to sue in local courts?
The principles regarding the right of a foreign corporation to bring suit in Philippine courts may thus be condensed in four
statements:
a. If a foreign corporation does business in the Philippines without a license, it cannot sue before the Philippine courts;
b. If a foreign corporation is not doing business in the Philippines, it needs no license to sue before Philippine courts on an
isolated transaction or on a cause of action entirely independent of any business transaction;
c. If a foreign corporation does business in the Philippines without a license, a Philippine citizen or entity which has
contracted with said corporation may be estopped from challenging the foreign corporation’s corporate personality in a suit
brought before Philippine courts; and
d. If a foreign corporation does business in the Philippines with the required license, it can sue before Philippine courts on
any transaction.
(Agilent Technologies Singapore (PTE) LTD vs. Integrated Silicon Technology Phil. Corp, GR No. 154618, April 14, 2004)

51. AAA, a corporation organized and existing under the laws of the Philippines, and BBB, a corporation organized
and existing under the laws of the State of Washington, USA, which has no license in doing business in the
Philippines, entered into a contract. Can AAA challenge BBB’s legal capacity to sue?
No, BBB has no legal capacity to sue for doing business in the Philippines without procuring the necessary license. A
corporation has legal status only in the state that granted it personality. Hence, a foreign corporation has no personality in
the Philippines, much less legal capacity to file a case, unless it procures a license as provided by law. However, AAA was
already estopped from challenging BBB's legal capacity when it entered into a contract with it. The doctrine of estoppel
states that the other contracting party may no longer challenge the foreign corporation's personality after acknowledging
the same by entering into a contract with it. (Magna Ready Mix Concrete Corporation vs. Andersen Bjornstad Kane Jacobs, Inc.,
[G.R. No. 196158. January 20, 2021.J. Hernando])

52. Discuss the concept of isolated transaction where a foreign corporation may sue without license.
The phrase "isolated transaction" is a transaction or series of transactions set apart from the common business of a foreign
enterprise in the sense that there is no intention to engage in a progressive pursuit of the purpose and object of the business
organization. Whether a foreign corporation is "doing business" does not necessarily depend upon the frequency of its
transactions, but more upon the nature and character of the transactions. A single act may be considered as either doing
business or an isolated transaction depending on its nature. It may be considered as doing business if it implies a continuity
of commercial dealings and contemplates the performance of acts or the exercise of functions normally incidental to and in
the progressive pursuit of its purpose. Contrarily, it may be considered as an isolated transaction if it is different from or not
related to the common business of the foreign corporation in the sense that there is no objective to increasingly pursue its
purpose or object. And as stated, a license is not required if the foreign corporation is suing on an isolated transaction.
(Magna Ready Mix Concrete Corporation vs. Andersen Bjornstad Kane Jacobs, Inc., [G.R. No. 196158. January 20, 2021.J. Hernando])

53. What are the grounds for revocation of license of a foreign corporation?
Without prejudice to other grounds provided by special laws, the license of a foreign corporation to transact business in the
Philippines may be revoked or suspended by the SEC upon any of the following grounds:
a. Failure to file its annual report or pay any fees as required by the Code;
b. Failure to appoint and maintain a resident agent in the Philippines;
c. Failure, after change of its resident agent or of his address, to submit to the Securities and Exchange Commission a
statement of such change;
d. Failure to submit to the SEC an authenticated copy of any amendment to its articles of incorporation or by-laws or of
any articles of merger or consolidation within the time prescribed by the Corporation Code;

9
 e. A misrepresentation of any material matter in any application, report, affidavit or other document submitted by such
corporation pursuant to this Title;
f. Failure to pay any and all taxes, imposts, assessments or penalties, if any, lawfully due to the Philippine Government
or any of its agencies or political subdivisions;
g. Transacting business in the Philippines outside of the purpose or purposes for which such corporation is authorized
under its license;
h. Transacting business in the Philippines as agent of or acting for and in behalf of any foreign corporation or entity not
duly licensed to do business in the Philippines; or
i. Any other ground as would render it unfit to transact business in the Philippines. (Sec. 151, RCC)

54. BBB, a corporation organized and existing under the laws of the State of Washington, USA, sued AAA, a
corporation organized and existing under the laws of the Philippines, for breach of their contract which shows that
BBB was to render professional services to AAA for a fee. These professional services included the following: (1)
providing master plant site layout and plant design; (2) providing plant operation procedures and organization
matrix; (3) providing plant management and production staff training; (4) providing plant construction and
operation start-up services; and (5) providing consultation services for developing a precast plant program. BBB
alleged in its Complaint that it was suing on an isolated transaction based on its contract with AAA but admitting
at the same time that it did not have a license to do business in the Philippines. Was BBB indeed suing on an
isolated transaction?
No, BBB was not suing on an isolated transaction. BBB's act of entering into a contract with AAA does not fall into the
category of isolated transactions. BBB was performing acts that were in progressive pursuit of its business purpose, which
involved consultation and design services. Though it was a single transaction, BBB's act of entering into a contract with
AAA constitutes doing business in the Philippines. It cannot be considered as an isolated transaction because the act is
related to BBB's specific business purpose. Thus, in doing business without a license, BBB had no legal capacity to sue in
the Philippines. (Magna Ready Mix Concrete Corporation vs. Andersen Bjornstad Kane Jacobs, Inc., [G.R. No. 196158. January 20,
2021.J. Hernando])

55. Distinguish merger from consolidation.

Merger Consolidation

It is a union where one corporation absorbs one or more

It is The union of two or more existing corporations
existing corporations, and the absorbing corporation to form a new corporation – the
Definition survives and continues the combined businesses. consolidated corporation.

The parties to a merger or consolidation are called constituent corporations. But the surviving or
Parties consolidated corporation automatically assumes the liabilities of the dissolved corporations, regardless
of whether the creditors have consented or not to such merger or consolidation.

In both cases, however, there is no liquidation of the assets of the dissolved corporations, and the
surviving or consolidated corporation acquires all their properties, rights and franchises and their
Liquidation stockholders usually become its stockholders. The surviving or consolidated corporation automatically
assumes the liabilities of the dissolved corporations, regardless of whether the creditors have consented
or not to such merger or consolidation.
(John F. McLeod v. National Labor Relations SEC First Division, et al., G.R. No. 146667, January 23, 2007.)

56. Discuss the Nell Doctrine, and its exceptions, if any.

The Nell Doctrine states that where one corporation sells or otherwise transfers all of its assets to another corporation, the
latter is not liable for the debts and liabilities of the transferor, except:
(1) Where the purchaser expressly or impliedly agrees to assume such debts;
(2) Where the transaction amounts to a consolidation or merger of the corporations
(3) Where the purchasing corporation is merely a continuation of the selling corporation; and
(4) Where the transaction is entered into fraudulently in order to escape liability for such debts. (Nell v. Pacific Farms, Inc., G.R.
No. L-20850, November 29, 1965)

II. BANKING LAWS

57. What is the nature and function of Bangko Sentral ng Pilipinas?

Bangko Sentral ng Pilipinas is a central monetary authority that functions and operates as an independent and accountable
body corporate in the discharge of its mandated responsibilities concerning money, banking and credit. In line with this, and
considering its unique functions and responsibilities, it shall enjoy fiscal and administrative autonomy. (Sec 1, RA No. 7653)

58. What is a “bank” under The General Banking Law of 2000 and what are its classifications?
Banks shall refer to entities engaged in the lending of funds obtained in the form of deposits, and shall be classified into:
a. Universal banks;
b. Commercial banks;
c. Thrift banks, composed of: (i) Savings and mortgage banks, (ii) Stock savings and loan associations, and (iii) Private
development banks, as defined in the Republic Act No. 7906 (hereafter the "Thrift Banks Act");
d. Rural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural Banks Act");
e. Cooperative banks, as defined in Republic Act No 6938 (hereafter the "Cooperative Code");
f. Islamic banks as defined in Republic Act No. 6848, otherwise known as the "Charter of Al Amanah Islamic Investment
Bank of the Philippines"; and

10
 g. Other classifications of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas. (Section 3,
Republic Act No. 8791)

59. Discuss Conservatorship, Closure, Receivership, and Liquidation.

It is applicable whenever, on the basis of a report submitted by the appropriate supervising or
examining department, the Monetary Board finds that a bank or a quasi-bank is in a state of
continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect
the interest of depositors and creditors. In such a case, the Monetary Board may appoint a
Conservatorship
conservator with such powers as the Monetary Board shall deem necessary to take charge of the
assets, liabilities, and the management thereof, reorganize the management, collect all monies
and debts due said institution, and exercise all powers necessary to restore its viability. The
conservatorship shall not exceed one (1) year.

Closure Refers to closure of the bank.

The Monetary Board may summarily and without need for prior hearing forbid the institution from
doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as
receiver of the banking institution when a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of business:
Provided, That this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities; or
Receivership
(c) cannot continue in business without involving probable losses to its depositors or
creditors; or
(d) has willfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution.

The powers and functions of the directors, officers, and stockholders of a closed bank under
receivership are deemed suspended upon takeover by the PDIC.

If the receiver determines that the institution cannot be rehabilitated or permitted to resume
Liquidation business, the Monetary Board shall notify in writing the board of directors of its findings and direct
the receiver to proceed with the liquidation of the institution.
(Sec. 29 and 30, RA No. 7652, as amended by RA No 11211; Banco Filipino Savings and Mortgage Bank vs. Bangko Sentral ng Pilipinas,
G.R. No. 200642. April 26, 2021)

60. Is Allied Bank liable for unilaterally debiting and closing the deposit account of Spouses AAA?
Yes. The General Banking Law of 2000 enshrines the fiduciary nature of banking that requires high standards of integrity
and performance. The statute now reflects jurisprudential holdings that the banking industry is impressed with public interest
requiring banks to assume a degree of diligence higher than that of a good father of a family. Thus, all banks are charged
with extraordinary diligence in the handling and care of its deposits as well as the highest degree of diligence in the selection
and supervision of its employees. The foregoing obligation of banks is absolute and deemed written into every deposit
agreement with its depositors. The savings deposit agreement between the bank and the depositor is the contract that
determines the rights and obligations of the parties as in simple loan. In contemplation of the fiduciary nature of a bank-
depositor relationship, the law imposes on the bank a higher standard of integrity and performance in complying with its
obligations under the contract of simple loan, beyond those required of non-bank debtors under a similar contract of simple
loan. The bank cannot belatedly claim ignorance of its performance of a core banking function, i.e. accepting or creating
demand deposits. Allied Bank’s unilateral closure of the Spouses AAA’s deposit account violated their savings deposit
agreement. (Allied Banking Corporation vs. Spouses Macam, G.R. No. 200635. February 1, 2021.J. Hernando)

61. What are the deposits covered by Republic Act No. 1405, otherwise known as the Bank Secrecy Law? Are there
any exceptions?
The Bank Secrecy Law covers all deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities. Such
deposits are considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any
person, government official, bureau or office except upon the following instances:
1. Written permission of the depositor;
2. In cases of impeachment;
3. Upon order of a competent court in cases of bribery or dereliction of duty of public officials;
4. In cases where the money deposited or invested is the subject matter of the litigation;
5. Upon inquiry by the Commissioner of Internal Revenue for the purpose of determining the net estate of a deceased
depositor for tax purposes;
6. Report of banks to Anti-Money Laundering Council of covered and/or suspicious transactions;
7. Upon order of the competent court or tribunal in cases involving unexplained wealth under the Anti-Graft and Corrupt
Practices Act or Republic Act No. 3019; and
8. In cases of terrorism.
(RA No. 1405; RA No. 9194; RA No. 3019; RA No. 9372; Sec. 6, National Internal Revenue Code [NIRC])

62. Can the court authorize the Special Prosecutor to look into the savings and trust accounts of AAA in ABC Bank in
the course of the proceedings of graft and corruption filed against AAA before the Sandiganbayan?
Yes. Trust accounts are considered as deposits under the Secrecy of Bank Deposits Law. The Special Prosecutor may still
look into the said savings and trust accounts because this is a criminal case concerning graft and corruption and those
charged should be properly investigated. (Estrada v. Sandiganbayan, G.R. Nos. 157294-95, November 30, 2006)

11
63. May creditors garnish the bank deposits of their depositors?
Garnishment of bank deposits to insure satisfaction of a judgment is allowed and does not violate the Bank Secrecy Law
because disclosure of the existence of the deposit is only purely incidental to the execution process. It was not the intention
of Congress to enable debtors to evade payment of their just debts, even if ordered by the Court, through the expedient of
converting their assets into cash and depositing the same in a bank (China Banking Corporation v. Ortega, G.R. No. L-34964,
January 31, 1973)

64. What is the difference between covered transactions and suspicious transactions under the Anti-Money
Laundering Act?
Covered Transactions Suspicious Transactions

It refers to "a single, series, or combination
of transactions involving a total amount in
excess of [P4,000,000.00 or an equivalent
amount in foreign currency" which has no
credible purpose, origin, or underlying trade
obligation or contract. It also includes:
1. transactions in cash or other equivalent
monetary instrument exceeding
P500,000.00;
2. transaction with or involving jewelry or
precious stone dealers in cash or other
equivalent monetary instrument
exceeding P1,000,000.00; and
3. casino cash transaction exceeding
P5,000,000.00 or its equivalent are also
deemed covered transactions.
(Republic v. Sandiganbayan, G.R. Nos. 232724-27 [Landmark Case Q&A])
These are transactions with covered institutions, regardless of the
amounts involved, where any of the following circumstances exists:
1. there is no underlying legal or trade obligation, purpose or
economic justification;
2. the client is not properly identified;
3. the amount involved is not commensurate with the business or
financial capacity of the client;
4. taking into account all known circumstances, it may be perceived
that the client's transaction is structured in order to avoid being the
subject of reporting requirements under the Act;
5. any circumstance relating to the transaction which is observed to
deviate from the profile of the client and/or the client's past
transactions with the covered institution;
6. the transaction is in any way related to an unlawful activity or
offense under this Act that is about to be, is being or has been
committed; or
7. any transaction that is similar or analogous to any of the foregoing.

65. Section 9(c) of the Anti-Money Laundering Act details how covered and suspicious transactions will be reported.
Under this provision, covered institutions and their officers and employees are prohibited from communicating
that a covered or suspicious transaction report was made, its contents, or any information related to the reports.
By virtue of the said provision, can the Anti-Money Laundering Council claim that it is a covered institution and
cannot be forced to disclose prohibited information?
No. First, as the text of the Anti-Money Laundering Act reveals, Anti-Money Laundering Council is not one of the covered
institutions prohibited from disclosing information on covered and suspicious transactions. Section 3(a) enumerates those
that are prohibited from disclosing such information, and the Anti-Money Laundering Council is not one of them. Second,
covered institutions are precluded from disclosing the reports or the fact they are reported to the Anti-Money Laundering
Council, because it will impede the possible investigation on the covered and suspicious transactions. Unlike covered
institutions, the Anti-Money Laundering Council is mandated to investigate and use the information it has to institute cases
against violators.Third, the prohibition and confidentiality provisions cannot apply to the Anti-Money Laundering Council;
otherwise, it would contravene its direct mandate under Section 7 of the Anti-Money Laundering Act.
The Anti-Money Laundering Council is not merely a repository of reports and information on covered and suspicious
transactions. It is created precisely to investigate and institute charges against the offenders. Section 7 clearly states that it
is tasked to institute civil forfeiture proceedings and other remedial proceedings, and to file complaints with the Department
of Justice or the Office of the Ombudsman for anti-money laundering offenses. In addition, the criminal prosecution of anti-
money laundering offenses would be unduly hampered if the Anti-Money Laundering Council were prohibited from disclosing
information regarding covered and suspicious transactions. It would be antithetical to its own functions if the Anti-Money
Laundering Council were to refuse to participate in prosecuting anti-money laundering offenses by taking shelter in the
confidentiality provisions of the Anti-Money Laundering Act. (Republic v. Sandiganbayan, G.R. Nos. 232724-27 [Landmark Case
Q&A])

66. When may the AMLC be allowed to inquire into bank deposits without any court order?
The authority need not be upon a court order in any of the following instances:
a. Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended;
b. Sections 4, 5, 6, 8, 9, 10. 12, 13, 14, 15 AND 16 of Republic Act No. 9165, otherwise known as the Comprehensive
Dangerous Drugs Act of 2002;
c. Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined under the
Revised Penal Code, as amended, including those perpetrated by terrorists against noncombatant persons and similar
targets. (Section 11, R.A. No. 9160)

67. When may a freeze order be issued?

Upon a verified ex parte petition by the AMLC and after determination that probable cause exists that any monetary
instrument or property is in any way related to an unlawful activity as defined in Section 3(i) of the AMLA, the Court of
Appeals may issue a freeze order which shall be effective immediately. (Section 10, R.A. No. 9160, as amended by R.A. No.
10365)

12
 III. INSURANCE LAW
68. Define each class of insurance.
Class of Insurance Subject matter of the insurance

Risks connected with navigation, to which a ship, cargo, freightage, profits or other
Marine insurable interest in movable property, may be expressed during a certain voyage or a
fixed period of time.

Loss of, or damage to, property by hostile fire, including loss by lightning, windstorm,
Fire tornado or earthquake and other allied risks, when such risks are covered by extension
to fire insurance policies or under separate policies.

Loss or liability arising from accident or mishap, excluding those falling under other types
Casualty
of insurance such as fire or marine.

Loss or liability arising from the non-performance of an obligation.

Suretyship

Human lives and insurance appertaining thereto or connected therewith.

Life

Meets the risk protection needs of the poor where:

(a) The amount of contributions, premiums, fees or charges, computed on a daily basis,
does not exceed seven and a half percent (7.5%) of the current daily minimum wage rate
Microinsurance
for nonagricultural workers in Metro Manila; and
(b) The maximum sum of guaranteed benefits is not more than one thousand (1,000)
times of the current daily minimum wage rate for nonagricultural workers in Metro Manila.

Compulsory motor vehicle Casualty against passenger and third-party liability for death or bodily injuries and
liability damage to property arising from motor vehicle accidents.
insurance (CMVLI)

Compulsory Insurance Migrant workers to be deployed by a recruitment/manning agency and shall be secured
Coverage for Agency-Hired at no cost to the said worker.
Workers
(Secs. 101, 169, 175, 176, 179, 187, 373(f), ICP; Insurance Guidelines on Rule XVI – RA8042)

69. Define insurable interest.

An insurable interest is that interest which a person is deemed to have in the subject matter insured, where he has a relation
or connection with or concern in it, such that the person will derive pecuniary benefit or advantage from the preservation of
the subject matter insured and will suffer pecuniary loss or damage from its destruction, termination, or injury by the
happening of the event insured against. (Lalican v. Insular Life Insurance Co, G.R. No. 183526, August 25, 2009)

70. Distinguish the insurable interest in life and property insurance.

Life Insurance Property Insurance

Unlimited except if effected by a creditor on the life of the Limited to the actual value of the interest in property.
debtor.

Only at the time the policy takes effect but need not exist Both at the time policy takes effect and at the time of the
thereafter or when the loss occurs occurrence of the loss but need not exist in the meantime

a. Of himself, of his spouse and of his children; a. An existing interest;

b. Of any person on whom he depends wholly or in part for b. An inchoate interest founded on an existing interest; or
education or support, or in whom he has a pecuniary c. An expectancy, coupled with an existing interest in that
interest; out of which the expectancy arises
c. Of any person under a legal obligation to him for the
payment of money, or respecting property or services, of
which death or illness might delay or prevent the
performance; and
d. Of any person upon whose life any estate or interest
vested in him depends

It is not necessary that the transferee has insurable interest. It is necessary that the transferee has insurable interest
over the thing insured.
(Secs. 10, 14, 17, 19, and 184, ICP)

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71. Distinguish Perils of the Sea from Perils of the Ship.
Perils of the Sea Perils of the Ship

Include ordinary course of events which results from:

Include casualties arising
1. ordinary, natural, and inevitable action of the sea;
from unusual violence or
Coverage 2. ordinary wear and tear of the ship; and
extraordinary causes
3. negligent failure of the ship’s owner to provide the vessel with the
connected with navigation.
proper equipment to convey the cargo under ordinary conditions.

Not included unless the insurance is an “all risk policy”. In such cases,
Absence of Insured even in the absence
the burden lies on the insurer to prove that the loss is caused by a risk
Stipulation of a stipulation.
that is excluded.
(Filipino Merchants Ins. Co. v. CA, G.R. No. 85141(1989)]

72. Distinguish Double Insurance from Overinsurance.

Double Insurance Overinsurance

It exists where the same person is insured by
several insurers separately in respect to the
When applicable
same subject and interest. (Sec. 95, Insurance
Code)
It exists when the amount of the insurance
is beyond the value of the insured’s
insurable interest.

Number of insurers It involves several insurers. It may involve one or more insurers.
(Sec. 95, ICP)

73. Is the insured entitled to the proceeds of the fire insurance policy from two different insurers who insured the same
property under the same peril despite the former’s non-disclosure of co-insurance under their insurance
contracts?
No. Where the insurance policy specifies as a condition the disclosure of existing co-insurers, non-disclosure thereof is a
violation that entitles the insurer to avoid the policy. This condition is common in fire insurance policies and is known as the
"other insurance clause." (Multi-Ware Manufacturing Corporation vs. Cibeles Insurance Corporation, [G.R. No. 230528. February 1,
2021.J. Hernando])

81. What is the purpose of Compulsory Motor Vehicle Liability Insurance (CMVLI)?
The purpose of CMVLI is to provide compensation for the death or bodily injuries suffered by innocent third parties or
passengers as a result of the negligent operation and use of motor vehicles. The victims or their dependents are assured
of immediate financial assistance, regardless of the financial capacity of motor vehicle owners. (Malayan Insurance v.
Stronghold Insurance G.R. No. 203060. June 28, 2021.J. Hernando)

82. What is the No Fault Indemnity Clause?

Any claim for death or injury to any passenger or third-party pursuant to the provisions of this chapter shall be paid without
the necessity of proving fault or negligence of any kind. (Sec. 391, ICP)

83. What are the rules on claims under the "no fault indemnity" provision?
1. A claim may be made against one motor vehicle only.
2. If the victim is an occupant of a vehicle, the claim shall lie against the insurer of the vehicle. in which he is riding, mounting
or dismounting from.
3. In any other case (i.e. if the victim is not an occupant of a vehicle), the claim shall lie against the insurer of the directly
offending vehicle.
4. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident
shall be maintained. (Perla Compania de Seguros, Inc. vs. Hon. Ancheta, G.R. No. L-49699 August 8, 1988)

84. In a life insurance, is the insurer liable in case of suicide by the insured committed within two (2) years from the
issuance or reinstatement of the policy?
No. The insurer will only be liable for suicide in the following cases:
After the policy has been in force for a period of two (2) years from the date of its issue or of
State of Sanity its last reinstatement
XPN: Unless the policy provides a shorter period

Regardless of the date of commission

State of Insanity
XPN: If the risk is an excepted risk in the policy
(Sec. 183, ICP; Dela Fuente v. Fortune Life, G.R. No. 224863, December 02, 2020)

78. Where the parties to an insurance contract stipulates that the insurance claim must be brought within 12 months
from receipt of notice of such rejection. Does the 12-month period refer to 360 days?
No, it is 365 days. A condition, stipulation or agreement in any policy of insurance, limiting the time for commencing an
action thereunder to a period of less than one year from the time when the cause of action accrues, is void. This is also
consistent with Article 13 of the Civil Code which provides that when the law speaks of a year, it is understood to be
equivalent to 365 days. (Alpha Plus International Enterprises Corp., vs. Philippine Charter Insurance Corp., [G.R. No. 203756. February
10, 2021.])

79. When does the one-year prescription commence in bringing an insurance claim from the insurance company?

14
 Prescriptive period for the insured's action for indemnity should be reckoned from the "final rejection" of the claim. The "final
rejection" simply means denial by the insurer of the claims of the insured and not the rejection or denial by the insurer of
the insured's motion or request for reconsideration. Hence, the rejection referred to should be construed as the rejection in
the first instance. (Alpha Plus International Enterprises Corp., vs. Philippine Charter Insurance Corp., [G.R. No. 203756. February 10,
2021.])

80. When can the insurer cancel a policy of insurance?

For policy of insurance other than life, the insurer may cancel the policy upon prior notice thereof to the insured, and no
notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or
more of the following:
a. Nonpayment of premium;
b. Conviction of a crime arising out of acts increasing the hazard insured against;
c. Discovery of fraud or material misrepresentation;
d. Discovery of willful or reckless acts or omissions increasing the hazard insured against;
e. Physical changes in the property insured which result in the property becoming uninsurable;
f. Discovery of other insurance coverage that makes the total insurance in excess of the value of the property insured; or
g. A determination by the Commissioner that the continuation of the policy would violate or would place the insurer in
violation of this Code. (Sec. 64, Insurance Code)

81. What is the cash and carry rule under the Insurance Code?
Under the cash and carry rule, an insurance policy is generally not binding unless the premium thereof has been paid. An
insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against.
Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been paid. This rule, however, admits of exceptions, such as when:
a. The grace period applies in the case of a life or an industrial life policy.
b. Under the broker and agency agreements with duly licensed intermediaries, a 90-day credit extension is given. No credit
extension to a duly licensed intermediary should exceed 90 days from date of issuance of the policy.
C. An acknowledgment in a policy or contract of insurance or the receipt of premium is conclusive evidence of its payment,
so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is
actually paid.
d. In a contract of suretyship, the suretyship or bond shall not be valid and binding unless and until the premium therefor
has been paid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable
irrespective of whether or not the premium has been paid by the obligor to the surety.
e. There is an agreement allowing the insured to pay the premium in instalments and partial payment has been made at the
time of the loss.
f. In case of estoppel as when there is a long-standing business practice of allowing the insured to pay the premiums after
issuance of the policy and was relied upon in good faith by the insured.
g. If a cover note issued is issued to temporarily bind the insurance pending issuance of the policy. (Secs. 52, 77 & 79, ICP)

82. Discuss the Right of Insured to Change Beneficiary in Life Insurance.

As a general rule, the insured shall have the right to change the beneficiary he designated in the policy.
The exception would be if the insured expressly waived his right to change the beneficiary, this makes the latter an
irrevocable beneficiary. But despite the waiver, he can still change the beneficiary, provided that he obtains the beneficiary’s
consent. (Sec. 11, ICP)

83. Define Concealment and Misrepresentation.

Concealment Misrepresentation

Concealment is a neglect to communicate that which a party knows and
ought to communicate.
Requisites of Concealment:
1. A party knows a fact which he neglects to communicate or disclose
to the other party;
2. Such party concealing is duty bound to disclose such fact to the other;
3. Such party concealing makes no warranty as to the fact concealed;
4. The other party has no means of ascertaining the fact concealed; and
5. The fact must be material.
On the other hand, misrepresentation occurs
when the facts fail to correspond with its
assertions or stipulations. Misrepresentation
is an affirmative defense. To avoid liability,
the insurer has the duty to establish such a
defense by satisfactory and convincing
evidence.

Proof of fraudulent intent is not necessary in case of rescission. Proof of fraudulent intent is necessary.

(Sec. 26, 44, Insurance Code; Ng Gan Zee v. Asian Crusader Life Assn. Corp., G.R. No. L- 30685, 1983; The Insular Assurance Co., LTD.
v. Heirs of Alvarez, G.R. No. 207526, 2018)

IV. TRANSPORTATION LAW

84. Distinguish a common carrier from a private carrier.

Private/Special Carrier Common/Public Carrier

One who, without making the activity a Common carriers are persons, corporations,
Definition / As to vocation, or without holding himself or itself out firms or associations engaged in the business of
availability to the public as ready to act for all who may carrying or transporting passengers or goods or
desire his or its services, undertakes, by

15
 special agreement in a particular instance both, by land, water, or air, for compensation,
only, to transport goods or persons from one offering their services to the public.
place to another either gratuitously or for hire.

Provisions on ordinary contracts of the Civil Provisions on common carriers of the Civil Code,
Governing law Code the Public Service Act, and other special laws
relating to transportation

Ordinary diligence (diligence of a good father Extraordinary diligence

Diligence required
of the family)

There is no presumption that the private carrier If the goods are lost, destroyed or deteriorated,
acted negligently. common carriers are presumed to have been at
fault or to have acted negligently, unless they
prove that they observed extraordinary diligence
as required in article 1733.
Presumption of
Exception: If the goods are lost, destroyed or
negligence n case
deteriorated by the following causes:
of loss,
(1) Flood, storm, earthquake, lightning, or other
destruction, or
natural disaster or calamity;
deterioration of
(2) Act of the public enemy in war, whether
goods
international or civil;
(3) Act or omission of the shipper or owner of the
goods;
(4) The character of the goods or defects in the
packing or in the containers;
(5) Order or act of competent public authority;

There is no presumption that the private carrier Common carriers are presumed to have been at
Presumption of
acted negligently. fault or to have acted
negligence in case
negligently, unless they prove that they
of death or injury to
observed extraordinary diligence as prescribed
passengers
in articles 1733 and 1755

Parties may limit the carrier’s liability, provided Parties may not agree on limiting the carrier’s
As to Stipulation
it is not contrary to law, morals or good liability except when provided by law.
Limiting Liabilit
customs.
(Aquino & Hernando, 2020, Arts. 1732, 1733, 1734, 1735, Civil Code)

85. What is contributory negligence?

Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered,
which falls below the standard to which he is required to conform for his own protection. (PNCC v. CA, G.R. No. 159270, August
22, 2005)

86. Is an airline liable for breach of contract for the lost luggage of its passenger?
Yes. Considering that a contract of carriage is vested with public interest, a common carrier is presumed to have been at
fault or to have acted negligently in case of lost or damaged goods unless they prove that they observed extraordinary
diligence. Hence, in an action based on a breach of contract of carriage, the aggrieved party does not need to prove that
the common carrier was at fault or was negligent. He or she is only required to prove the existence of the contract and its
non-performance by the carrier. (KLM Royal Dutch Airlines vs. Tiongco, G.R. No. 212136. October 4, 2021, J. Hernando)

V. INTELLECTUAL PROPERTY CODE

87. Distinguish patent, trademark and copyright.

Patent Trademark Copyright

It is a product, a process or a
combination which is: (a) new or
novel; (b) involves an inventive step;
and (c) industrial application.
It is any visible sign capable of
distinguishing the goods (trademark)
or services (service mark) of an
enterprise and shall include a stamped
or marked container of goods.
It is the right over literary and artistic
works which are original intellectual
creations in the literary and artistic
domain protected from the moment of
creation.

Granted to an inventor by the State,
or by the regional office acting for
several States, which allows the
inventor to exclude anyone else from
commercially exploiting his invention
for a limited period.
Acquired through registration and Copyright, in the strict sense of the
actual use. term, is purely a statutory right. Being
a mere statutory grant, the rights are
limited to what the statute confers.

Upon issuance of letters of patent by Upon registration. Upon creation but registration needed
IPO. only to recover damages in cases of
infringement.

16
 20 years from the filing date of the 10 years and may be renewed for Generally up to 50 years after the
application. periods of 10 years at its expiration death of the author.
upon payment of the prescribed fee
and upon filing of a request.

The making, using, offering for sale,
selling, or importing a patented
product or a product obtained directly
or indirectly from a patented process,
or the use of a patented process
without the authorization of the
patentee: provided, that, this shall not
apply to instances covered by
Sections 72.1 and 72.4 (Limitations
of Patent Rights) Section 74 (Use of
Invention by Government); Section
93.6 (Compulsory Licensing); and
Section 93-A (Procedures on
Issuance of a Special Compulsory
License under the TRIPS
Agreement) of the IPC.
(Sec. 54, Sec. 76.1, Sec. 122, Secs. 145-146, Sec. 213, Sec. 216, IPC; Zuneca Pharmaceutical Natrapharm, Inc., G.R. No 211850,
September 8, 2020; Diaz v. People, G.R. No. 180677, February 18, 2013; WIPO, Understanding Industrial Property, p. 5)
a. The trademark being infringed is A person infringes a right protected
registered in the Intellectual Property under this act when one: a) Directly
Office; b. The trademark is commits an infringement; b) Benefits
reproduced, counterfeited, copied, or from the infringing activity of another
colorably imitated by the infringer; c. person who commits an infringement if
The infringing mark is used in the person benefiting has been given
connection with the sale, offering for notice of the infringing activity and has
sale, or advertising of any goods, the right and ability to control the
business or services; or the infringing activities of the other person (mall
mark is applied to labels, signs, prints, owner liability); c) With knowledge of
packages, wrappers, receptacles or infringing activity, induces, causes or
advertisements intended to be used materially contributes to the infringing
upon or in connection with such goods, conduct of another.
business or services; d. The use or
application of the infringing mark is
likely to cause confusion or mistake or
to deceive purchasers or others as to
the goods or services themselves or
as to the source or origin of such
goods or services or the identity of
such business; and e. The use or
application of the infringing mark is
without the consent of the trademark
owner or the assignee thereof.

88. What are the remedies of the true and actual inventor?
If a person, who was deprived of the patent without his consent or through fraud is declared by final court order or decision
to be the true and actual inventor, the court shall order for his substitution as patentee, or at the option of the true inventor,
cancel the patent, and award actual and other damages in his favor if warranted by the circumstances. (Sec. 68, IPC)

89. Explain the limitation of Prior User.

Any prior user who in good faith was using the invention in his enterprise or business; or has undertaken serious
preparations to use the same before the filing date or priority date of the application, shall have the right to continue the
use thereof but his right may only be transferred or assigned further with his enterprise or business. (Sec. 73.1, IPC)

90. When may the government use a patent without the authority of the patent owner?
The government or a third person authorized by it may use the patent without authority of the patent owner if:
a. Public interest so requires;
b. The manner of exploitation by the owner of the patent is anti-competitive;
c. In case of drugs and medicines, there is a national emergency or other circumstance of extreme urgency requiring the
use of the invention;
d. In case of drugs and medicines, there is a public non-commercial use of the patent by the patentee, without satisfactory
reason; and
e. In case of drugs and medicines, the demand for the patented article in the Philippines is not being met to an adequate,
extent and under reasonable terms. (Sec. 74.1, IPC)

91. What are the tests to determine patent infringement?

Literal Exists when one makes, uses, or sells an item that contains all elements recited in a patent claim.
infringement

Provides that an infringement also takes place when a device appropriates a prior invention by
Doctrine of incorporating its innovative concept and, although with some modification and change, performs
equivalents substantially the same function in substantially the same way to achieve substantially the same
result.
(Pascua Godines v. Court of Appeals and SV-Agro Enterprises, Inc., G.R. No. 97343, September 13, 1993; Smith Kline v. CA, G.R. no.
126627, August 14, 2003)

92. Is the ability to grant additional licenses to third persons included in the license granted to the licensor?
Yes. In the absence of any provision to the contrary in the technology transfer arrangement, the grant of a license shall
not prevent the licensor from granting further licenses to third person nor from exploiting the subject matter of the
technology transfer arrangement himself. (Sec. 89, IPC)

93. What are the mandatory provisions that should be included in voluntary license contracts?
The following provisions shall be included in voluntary license contracts:
a. That the laws of the Philippines shall govern the interpretation of the same and in the event of litigation, the venue shall
be the proper court in the place where the licensee has its principal office;
b. Continued access to improvements in techniques and processes related to the technology shall be made available

17
 during the period of the technology transfer arrangement;
c. In the event the technology transfer arrangement shall provide for arbitration, the Procedure of Arbitration of the
Arbitration Law of the Philippines or the Arbitration Rules of the United Nations Commission on International Trade Law
(UNCITRAL) or the Rules of Conciliation and Arbitration of the International Chamber of Commerce (ICC) shall apply
and the venue of arbitration shall be the Philippines or any neutral country; and
d. The Philippine taxes on all payments relating to the technology transfer arrangement shall be borne by the licensor.
(Sec. 88, IPC)

94. What are the grounds for compulsory licensing?

The Director General of the Intellectual Property Office may grant a license to exploit a patented invention, even without
the agreement of the patent owner, in favor of any person who has shown his capability to exploit the invention, under any
of the following circumstances:
a. National emergency or other circumstances of extreme urgency;
b. Where the public interest, in particular, national security, nutrition, health or the development of other vital sectors of
the national economy as determined by the appropriate agency of the Government, so requires; or
c. Where a judicial or administrative body has determined that the manner of exploitation by the owner of the patent or
his licensee is anti- competitive; or
d. In case of public non-commercial use of the patent by the patentee, without satisfactory reason;
e. If the patented invention is not being worked in the Philippines on a commercial scale, although capable of being
worked, without satisfactory reason: Provided, That the importation of the patented article shall constitute working or
using the patent; and
f. Where the demand for patented drugs and medicines is not being met to an adequate extent and on reasonable terms,
as determined by the Secretary of the Department of Health. (Sec. 93, IPC)

95. Discuss transmission of rights and assignment of invention under the IPC.
Inventions and any right, title or interest in and to patents and inventions covered thereby, may be
Transmission of assigned or transmitted by inheritance or bequest or may be the subject of a license contract.
rights NOTE: Patents or applications for patents and invention to which they relate, shall be protected in
the same way as the rights of other property under the Civil Code.

An assignment may be of the entire right, title or interest in and to the patent and the invention
Assignment of
covered thereby, or of an undivided share of the entire patent and invention, in which event the
invention
parties become joint owners thereof. An assignment may be limited to a specified territory.
(Secs. 103 and 104, IPC)

96. How is registration and first-to-file rule reconciled?

Reading together Sections 122 and 123 l(d) of the IP Code, therefore, a registered mark or a mark with an earlier filing or
priority date generally bars the future registration of – and the future acquisition of rights in – an identical or a confusingly
similar mark, in respect of the same or closely related goods or services, if the resemblance will likely deceive or cause
confusion. (Zuneca Pharmaceutical Natrapharm, Inc., G.R. No 211850, September 8, 2020)

97. What is the Dominancy Test?

It focuses on the similarity of the prevalent features of the competing marks. If the competing trademark contains the main,
essential or dominant features of another, and confusion and deception are likely to result, infringement takes place.
Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. (C.
Neilman Brewing Co. v. Independent Brewing Co., 191 F. 489, 495, citing Eagle White Lead Co. vs. Pflugh [CC] 180 FED. 579)

98. KPII filed a trademark application for the “kolin” mark under Class 9 covering "Televisions and DVD players". This
was opposed by KECI arguing that it is the registered owner of the “KOLIN” mark pursuant to a previous ruling
of the Court granting ownership of KOLIN trademark to KECi and that the registration of KPII's kolin mark will
cause confusion among consumers. In its defense, KPII claims that its kolin mark is different from KECI’s. Should
the trademark application of KPII be granted?
No. Using the Dominancy Test, there is no doubt that the minor differences between kolin and KOLIN mark should be
completely disregarded. The fact that KPII's trademark application possesses special characteristics (e.g., the italicized
orange letter "i") not present in KECI's KOLIN word mark makes no difference in terms of appearance, sound, connotation,
or overall impression because the "KOLIN" word itself is the subject of KECI's registration. (Kolin Electronics Co. Inc. vs Kolin
Phils. International Inc., G.R. No. 228165, Feb. 9, 2021 [Landmark Case Q&A])

99. Using the Dominancy Test, should the registration of the mark AGENT BOND for hair products be denied on the
ground that there’s already a previous mark registered as JAMES BOND, a fictional character also known as Agent
007?
Yes. There is a large degree of similarity between JAMES BOND and AGENT BOND not because both words merely
contain the word "bond." The Dominancy Test does not solely rely on the visual and aural aspects of the mark but also the
connotative comparisons and overall impressions between them. In other words, it is not the fact that a particular set of
words was used but the manner in which they were utilized. The terms "agent" and "bond" - when put together in that
particular order - inevitably suggests a connection with James Bond as he was also known by his spy name, Agent 007.
Conversely, the use of the word "Bond" to the hair presupposes that the hair should be bound to something other than
itself. In fact, the registered trademarks containing the word "bond," (with the exception of Bond Street) all refer to
adhesives. (Suyen Corporation vs. Danjaq LLC, G.R. No. 250800, July 6, 2021 [Landmark Case Q&A])

100. The only similar feature between the mark of Citystate Savings Bank, Inc. and the collection of marks of Citigroup,
Inc. is the word “CITY” in the former, and the ‘CITI” prefix found in the latter. Is there likelihood of confusion?
No. This similarity alone is not enough to create a likelihood of confusion. (Citigroup, Inc. v. Citystate Savings Bank, Inc., G.R.
No. 205409, June 13, 2018)
Note: In the Kolin cases, there is actual confusion.

18
101. What is the effect of a certificate of registration of a mark?
A certificate of registration of a mark is prima facie evidence of the validity of the registration, the registrant's ownership of
the mark, and of the registrant's exclusive right to use the same in connection with the goods or services and those that
are related thereto specified in the certificate. (Kolin Electronics Co., Inc. vs. Taiwan Kolin Corp. LTD, [G.R. No. 221347. December
1, 2021.J. Hernando])

102. When can the presumption of validity of the certificate of registration of a mark be challenged?
The presumption may be challenged and rebutted when an adverse party, in the appropriate action, can show that the
certificate of registration is not reflective of ownership of the holder, such as when: (1) the first registrant has acquired
ownership of the mark through registration but subsequently lost the same due to non-use or abandonment (e.g., failure
to file the Declaration of Actual Use); (2) the registration was done in bad faith; (3) the mark itself becomes generic; (4) the
mark was registered contrary to the IPC (e.g., when a generic mark was successfully registered for some reason); or (5)
the registered mark is being used by, or with the permission of, the registrant so as to misrepresent the source of the goods
or services on or in connection with which the mark is used. (Kolin Electronics Co., Inc. vs. Taiwan Kolin Corp. LTD, [G.R. No.
221347. December 1, 2021.J. Hernando])

103. Does AAA’s right to exclusively use the "KOLIN" mark under Class 35 for the business of manufacturing,
importing, assembling, or selling electronic equipment or apparatus necessarily include the right to register its
domain name containing KOLIN as the dominant feature?
Yes. Having been granted the right to exclusively use the "KOLIN" mark for the business of manufacturing, importing,
assembling, or selling electronic equipment or apparatus, AAA’s application for registration of its domain name containing
the "KOLIN" mark for the same goods and services as its Class 35 registration for "KOLIN" is merely an exercise of its
right under its Class 35 registration. In today's internet-wired market, selling electronic equipment or apparatus will ideally
involve the registration of a domain name to establish an online presence. Information on the products sold by an enterprise
must necessarily be provided in all avenues, whether through print, media, or online. (Kolin Electronics Co., Inc. vs. Taiwan
Kolin Corp. LTD, [G.R. No. 221347. December 1, 2021.J. Hernando])

104. What are the elements of Unfair Competition?

The essential elements of an action for unfair competition are: (1) confusing similarity in the general appearance of the
goods, and (2) intent to deceive the public and defraud a competitor. The confusing similarity may or may not result from
similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. Likelihood
of confusion of goods or business is a relative concept, to be determined only according to peculiar circumstances of each
case.53 The element of intent to deceive and to defraud may be inferred from the similarity of the appearance of the goods
as offered for sale to the public. (Kho vs. Summerville General Merchandising & Co., Inc., [G.R. No. 213400. August 4, 2021.J.
Hernando])

105. Enumerate copyrightable and non-copyrightable works.

Copyrightable Works Non-Copyrightable Works

a) Books, pamphlets, articles and other writings;
b) Periodicals and newspapers;
c) Lectures, sermons, addresses, dissertations
prepared for oral delivery, whether or not reduced
in writing or other material form;
d) Letters;
e) Dramatic or dramatico-musical compositions;
choreographic works or entertainment in dumb
shows;
f) Musical compositions, with or without words;
g) Works of drawing, painting, architecture,
sculpture, engraving, lithography or other works of
art; models or designs for works of art;
h) Original ornamental designs or models for articles
of manufacture, whether or not registrable as an
industrial design, and other works of applied art;
i) Illustrations, maps, plans, sketches, charts and
three-dimensional works relative to geography,
topography, architecture or science;
j) Drawings or plastic works of a scientific or
technical character;
k) Photographic works including works produced by
a process analogous to photography; lantern
slides;
l) Audiovisual works and cinematographic works and
works produced by a process analogous to
cinematography or any process for making audio-
visual recordings;
m) Pictorial illustrations and advertisements;
n) Computer programs; and
o) Other literary, scholarly, scientific and artistic
works.
(ABS-CBN Corp. v. Gozon, G.R. No. 195956, 2015, Joaquin v. Drilon, G.R. No. 108946, 1999, Secs. 172, 175 and 176, IPC)
a) Idea, procedure, system, method or operation,
concept, principle, discovery or mere data as such;
b) News of the day and other items of press information.
However, IPC does not state that expression of the
news of the day such as television news footage,
particularly when it underwent a creative process, is not
entitled to protection;
c) Any official text of a legislative, administrative or legal
nature, as well as any official translation thereof;
d) Pleadings;
e) Decisions of courts and tribunals – this refers to original
decisions and not to annotated decisions such as the
SCRA or SCAD as these already fall under the
classification of derivative works, hence copyrightable;
f) Any work of the Government of the Philippines;
GR: Conditions imposed prior to the approval of
the government agency or office wherein the work
is created shall be necessary for exploitation of
such work for profit. Such agency or office, may,
among other things, impose as condition the
payment of royalties.
XPN: No prior approval or conditions shall be
required for the use of any purpose of statutes,
rules and regulations, and speeches, lectures,
sermons, addresses, and dissertations,
pronounced, read, or rendered in courts of justice,
before administration agencies, in deliberative
assemblies and in meetings of public character
(Sec. 176, IPC).
g) TV programs, format of tv programs;
h) Systems of bookkeeping; and
i) Statutes.

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106. What is the Doctrine of Fair Use?
It is a privilege to use the copyrighted material in a reasonable manner without the consent of the copyright owner or as
copying the theme or ideas rather than their expression. Four factors to determine if there was fair use of a copyrighted
work:
a. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit
educational purposes;
b. The nature of the copyrighted work;
c. The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
d. The effect of the use upon the potential market for or value of the copyrighted work. (ABS-CBN Corp. v. Gozon, et. al.,
GR No. 195956, 2015; Sec. 185.1, IPC)

VI. FOREIGN INVESTMENT ACT

107. What constitutes “doing business”?
“Doing Business” under The Foreign Investment Act and IRR includes:
a. Soliciting orders, service contracts, opening offices, whether called “liaison” offices or branches;
b. Appointing representatives or distributors domiciled in the Philippines;
c. Participating in the management, supervision, or control of any domestic business, firm, entity, or corporation in the
Philippines; and
d. Any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent
the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the business organization. (Sec. 3, RA 7024, as amended)

108. Differentiate export enterprise from domestic market enterprise.

Export Enterprise Domestic Market Enterprise

An enterprise wherein a manufacturer, processor or service
(including tourism) enterprise exports sixty percent (60%) or
more of its output, or wherein a trader purchases products
domestically and exports sixty percent (60%) or more of
such purchases.
(R.A. No. 7042, Sec. 3 (e) & (f))
An enterprise which produces goods for sale, or renders
services to the domestic market entirely or if exporting a
portion of its output fails to consistently export at least
sixty percent (60%) thereof.

109. May non-Philippine nationals do business or invest in a domestic enterprise up to one hundred percent (100%) of
its capital?
Yes. Without need of prior approval, a non-Philippine national, as defined in Section 3(a) of Foreign Investments Act of
1991, and not otherwise disqualified by law, may upon registration with the Securities and Exchange Commission (SEC),
or with the Bureau of Trade Regulation and Consumer Protection (BTRCP) of the Department of Trade and Industry in the
case of single proprietorships, do business as defined in Section 3(d) of the same Act or invest in a domestic enterprise
up to one hundred percent (100%) of its capital, unless participation of non-Philippine nationals in the enterprise is
prohibited or limited to a smaller percentage by existing law and/or limited to a smaller percentage by existing law and/or
under the provisions of this Act. (Sec 5 of Foreign Investments Act of 1991)

VII. PUBLIC SERVICE ACT (COMMONWEALTH ACT NO. (CA) 146, AS AMENDED BY RA
11659)

110. How is “Public Utility” defined under the Amended Public Service Act?
Public Utility refers to a public service that operates, manages or controls for public use any of the following:
(1) Distribution of Electricity;
(2) Transmission of Electricity;
(3) Petroleum and Petroleum Products Pipeline Transmission Systems;
(4) Water Pipeline Distribution Systems and Wastewater Pipeline Systems, including sewerage pipeline systems;
(5) Seaports; and
(6) Public Utility Vehicles.
All concessionaires, joint ventures and other similar entities that wholly operate, manage or control for public use the
sectors above are public utilities.(Section 4, RA No. 11659)

111. Define critical infrastructure.

Critical Infrastructure refers to any public service which owns, uses, or operates systems and assets, whether physical or
virtual, so vital to the Republic of the Philippines that the incapacity or destruction of such systems or assets would have
a detrimental impact on national security, including telecommunications and other such vital services as may be declared
by the President of the Philippines (Sec 2(c) RA 11659)

112. Can foreign nationals own more than 50% of capital of an entity engaged in the operation and management of
critical infrastructure?
Yes, as long as the Reciprocity Clause of the Public Service Act is complied with. This clause mandates that foreign
nationals shall not be allowed to own more than fifty percent (50%) of the capital of entities engaged in the operation and
management of critical infrastructure, unless the country of such foreign national accords reciprocity to Philippine Nationals
as may be provided by foreign law, treaty or international agreement. Reciprocity may be satisfied by according rights of
similar value in other economic sectors. (Sec 25 RA 11659)

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 PART TWO: TAXATION LAW
I. GENERAL PRINCIPLES

113. What are the inherent limitations on taxation?

1. Public Purpose;
2. Inherently Legislative;
3. Territorial;
4. International Comity; and
5. Exemption of government entities, agencies and instrumentalities. (Lutz v. Araneta, 98 Phil. 48)

114. What are the constitutional limitations of the power to tax?

1. Due process clause
2. Equal protection clause
3. Rule of Taxation shall be Uniform and Equitable
4. Non-Impairment of Contracts
5. Non-Imprisonment for Non-Payment of Poll Tax
6. Prohibition Against Taxation of Religious and Charitable Institutions
7. Prohibition Against Taxation of Non-Stock Non-Profit Educational Institutions
8. Freedom of Religious Worship
9. Passage of Tax Bills/Granting of Tax Exemption
10. Veto Power of the President
11. Non-Impairment of SC Jurisdiction (Arts. III, VI, XIV)

115. Distinguish Direct tax and Indirect tax.

Direct tax
One which is demanded from the very person intended
to be the payor, although it may ultimately be shifted to
another. Example: Personal income tax
(Maceda v. Macaraig, Jr., G.R. No. 88291 (1991)
Indirect tax
Those which are demanded from one person in the
expectation and intention that he shall indemnify himself at
the expense of another. Example: Value-Added Tax

116. Define Double taxation.

It 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 Phils., Inc. v. Treasurer, G.R. No. 181277 (2013))

117. Differentiate the different forms of escape from taxation.

Shifting Tax avoidance
The burden of payment is transferred Tax saving device within the
from the statutory taxpayer to another means sanctioned by law. This
without violating the law. (e.g. VAT) method should be used by the
taxpayer in good faith and at
arms length.
(CIR v. Estate of Benigno Toda, G.R. No. 147188, September 14, 2004)
Tax evasion
A scheme used outside of those
lawful means and when availed of, it
usually subjects the taxpayer to
further or additional civil or criminal
liabilities.

118. What are the principles governing tax exemptions?

1. Relinquishment is never presumed and any reduction or diminution thereof with respect to its mode or its rate, must
be strictly construed, and the same must be couched in clear and unmistakable terms in order that it may be applied.
2. Any claim for exemption from the tax statute should be strictly construed against the taxpayer.
3. Exemptions from taxation are highly disfavored in law, and he who claims exemption must be able to justify his claim
by the clearest grant of organic or statute law.
4. “The exception contained in the tax statutes must be strictly construed against the one claiming the exemption"
because the law "does not look with favor on tax exemptions and that he who would seek to be thus privileged must
justify it by words too plain to be mistaken and too categorical to be misinterpreted.” (Floro Cement Corporation v. Gorospe,
G.R. No. L-46787, (1991)

119. What is tax amnesty? How is it construed? Does it cover withholding taxes?
Tax amnesty refers to the absolute waiver by a sovereign of its right to collect taxes and power to impose penalties on
persons or entities guilty of violating a tax law. Tax amnesty aims to grant a general reprieve to tax evaders who wish to
come clean by giving them an opportunity to straighten out their records. A tax amnesty, much like a tax exemption, is
never favored or presumed in law. The grant of a tax amnesty, similar to a tax exemption, must be construed strictly against
the taxpayer and liberally in favor of the taxing authority. (Bureau of Internal Revenue vs. Cagang, G.R. No. 230104. March 16,
2022, J. Hernando)

120. Is the filing of compromise agreement for Expanded Withholding Tax (EWT) and Withholding Tax on
Compensation (WTC) subsequent to the filing for Tax Amnesty under RA 9480 considered an abandonment of the
availment of Tax Amnesty requested?
No, it is not considered as an abandonment of its availment of the tax amnesty under Section 2 of RA 9480. This is
especially when the Tax Amnesty Program does not include its assessed EWT and WTC deficiencies. (La Flor Dela Isabela,
Inc. vs. CIR, G.R. No. 202105. April 28, 2021,J. Hernando)

21
 II. NATIONAL TAXATION

121. Distinguish the authority of the Secretary of Finance and the CIR covering tax rules and regulations.
It is the Secretary of Finance who is authorized by the Tax Code to promulgate all needful rules and regulations for the
effective enforcement of the Code, upon the recommendation of the CIR. On the other hand, the power to interpret the
provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the CIR, subject to review
by the Secretary of Finance. [SEC. 244, SEC. 4. NIRC, as amended]

122. What are the exceptions to the retroactive application of any revocation, modification, or reversal of rules,
regulations, rulings, or circulars issued by the CIR?
a. Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by
the BIR;
b. Where the facts subsequently gathered by the BIR are materially different from the facts on which the ruling is based;
or
c. Where the taxpayer acted in bad faith. [SEC. 246. NIRC, As amended]

123. What are the types of income taxes and the corresponding tax rates in the Philippines?
Income Tax Tax Rate and Tax Base
Regular income tax on Graduated Rate 15% to 35% on Net income. First Php250,000 is exempt.
individuals

a. Final tax on certain passive income- 15% to 20% on various income

b. Capital Gains Tax
Special income tax on
i. Domestic Shares- 15% on Net Capital Gains
individuals
ii. Real Property- 6% on Gross Selling Price or Fair Market Value,
whichever is higher.

Fringe Benefit Tax for 35% on the grossed-up monetary value of the benefits
Employed Individuals

a. In general- 25% on net income

Regular corporate
b. Domestic Corporation with total assets not exceeding P100 million and total
income tax
net taxable income not exceeding P5 million -20% net income

a. Final tax on certain passive income- 15% to 20% on the income earned
b. Capital Gains Tax
Special income tax on
a. Domestic Shares- 15% on Net Capital Gains
corporations
b. Real Property- 6% on Gross Selling Price or Fair Market Value,
whichever is higher.

Minimum Corporate 2% Minimum corporate income tax (MCIT) on gross income

Income Tax

Branch Profit 15% on the total profits applied or earmarked for remittance, without any deduction for
Remittance Tax the tax component

124. Who are the taxpayers and what are their sources of income taxable in the Philippines?
Taxable Income
Inside Philippines Outside Philippines
Resident Citizen Yes Yes
Nonresident Citizen Yes No
Overseas Contract Worker Yes No
Resident Alien Yes No
Nonresident Alien Yes No
Domestic Corporation Yes Yes
Foreign Corporation Yes No
(Ingles, Tax Made Less Taxing, 2021)

125. When is a gain or income taxable?

It is taxable when it is realized. Realization occurs when the taxpayer is placed in a position to enjoy the benefit of an
economic gain. Final enjoyment generally occurs when the taxpayer receives it and has command and control over it that,
as a practical matter, derives readily realizable economic value. (James v. US, 366 US 213, May 15, 1961)

126. What are the covered transactions by the tax-free exchanges on properties?
This pertains to the usual corporate transactions involving merger or consolidation and other
Reorganization transactions involving sale or exchange of voting shares of a corporation resulting in the acquisition
of control of the buying corporation as well as recapitalization.
This pertains to the transfer of property to a corporation by a person, alone or together with others,
Transfer to a not exceeding four (4) persons, in exchange for stock or unit of participation in such a corporation
controlled of which as a result of such change, the transferor or transferors, collectively, gains or maintains
corporation control of said corporation.
[Section 40(C)(2), NIRC, as amended]

22
127. What are the tests in determining whether income is earned for tax purposes?
Severance Test Theory Separation from capital of something which is of exchangeable value.
Treats stock options, shares of stock, or other assets transferred by an
Economic benefit test/Doctrine employer to an employee to secure better services as taxable.
of Proprietary Interest
Revenue is generally recognized when the earning process is complete or
virtually complete and an exchange has taken place.

Realization occurs when the taxpayer is placed in a position to enjoy the

Realization test benefit of an economic gain. Final enjoyment generally occurs when the
taxpayer receives it and has command and control over it that, as a practical
matter, derives readily realizable economic value.

128. What are the situs of taxation for the following types of income?
Income Situs
Interest Income Residence of debtor
Dividend Income:
a. From domestic corporation Income within
b. From foreign corporation
Income within, if 50% or more of the gross income of the foreign
company (for the past 3 years) was derived from sources within
the Philippines

Income without, if less than 50% of the gross income of the

foreign company (for the past 3 years) was derived from sources
within the Philippines
Service Income Place of performance
Rent Income Location of property
Royalty Income Place of use of intangible
Gain on sale of real property Location of property
Gain on sale of domestic shares of stock Income within
(Ingles, Tax Made Less Taxing, 2021)

129. Distinguish tax exclusions from tax deductions and tax credits.
Exclusions Deductions Tax Credits
A situation that causes a A subtraction from income for tax An amount that is subtracted directly
taxpayer to not need to pay tax purposes, or an amount that is allowed from one’s total tax liability. It is an
on income that would otherwise by law to reduce income prior to the allowance against the tax itself or a
be taxable. application of the tax rate to compute the deduction from what is owed by a
amount of tax which is due. taxpayer to the government.

130. Who can avail of the optional standard deduction (OSD)?

An individual subject to tax under the graduated rates of 15%-35% may elect a standard deduction of 40% based on gross
sales/receipts except a nonresident alien. In the case of a domestic corporation and a resident foreign corporation, it may
elect a standard deduction of 40% based on gross income. Provided that the intention to elect OSD must be made in the
return, otherwise the taxpayer will be considered to have elected to claim itemized deductions. [Section 24. NIRC, as
amended)

131. Who cannot avail of the Optional 8% Tax available to individual taxpayers?
1. Individuals who are purely compensation income earners.
2. A VAT-registered taxpayer regardless of amount of gross sales/receipts.
3. A taxpayer who is subject to Other Percentage Taxes, except those subject to the 3% percentage tax.
4. Partners of a General Professional Partnership (GPP) by virtue of their distributive share from the GPP which is
already net of costs and expenses. [Sec. 116, 26, NIRC, as amended)]

132. What are the conditions for the tax exemption of prizes and awards?
1. Prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or
civic achievement;
2. The recipient was selected without any action on his part to enter the contest or proceedings; and
3. The recipient is not required to render substantial future services as a condition to receiving the prize or reward. [Sec
32(B)(7), NIRC]

134. What are the transactions subject to Capital Gains Tax (CGT)?
Sale/exchange/other disposition of Shares of 15% on Net Capital Gains, which is the excess of the selling
Stock of a Domestic Corporation not listed price/fair market value over the cost of the shares.
and traded through the local stock exchange
This pertains to the transfer of property to a corporation by a person,
Sale/exchange/other disposition of Real alone or together with others, not exceeding four (4) persons, in
Property located in the Philippines held as exchange for stock or unit of participation in such a corporation of
capital asset which as a result of such change, the transferor or transferors,
collectively, gains or maintains control of said corporation.
[Sec 24(c) & 24(d), NIRC]

23
135. What are considered ordinary assets for income tax purposes?
1. Stock in trade;
2. Property included in the inventory of the taxpayer;
3. Property held for sale in the ordinary course of business;
4. Property used in the trade or business, of a character which is subject to the allowance for depreciation;
5. Real property used in trade or business. [Sec 39 (A) (1), NIRC].
136. Differentiate the taxability of individual taxpayers in general.
Individual Definition Tax Base Tax Rate

A citizen of the Philippines residing therein.

A citizen is one:
a. who are Philippine Citizens at the time of the adoption of Ordinary
the Constitution; Income Income
Resident Citizens b. whose fathers or mothers are citizens of Ph; within or Tax under
c. who is born before January 17, 1973, of Filipino Mothers, outside the
who elect Philippine Citizenship upon reaching the age of Philippines Graduated
majority; or Tax Rate.
d. those naturalized in accordance with law. [Sec. 1, Art. IV,
1987 Constitution]

A citizen of the Philippines who:

a. establishes the fact of his physical presence abroad with a
definite intention to reside therein;
b. leaves the Philippines to reside abroad, either as an
immigrant or for employment on a permanent basis;
c. works and derives income from abroad and whose
Non-Resident
employment thereat requires him to be physically present
Citizens
abroad most of the time during the taxable year; or
d. has been previously considered as nonresident citizen
and who arrives in the Philippines at any time during the
taxable year to reside permanently in the Philippines, with
respect to his income derived from sources abroad until
the date of his arrival in the Philippines. [Sec. 22, NIRC] Income
within
a. An alien who lives in the Philippines with no definite Philippines
intention as to his stay (floating intention);
b. One who comes to the Philippines for a definite purpose
which in its nature would require an extended stay and to
Resident Alien
that end makes his home temporarily in Ph; or
c. An alien who has acquired residence in Ph and retains his
status as such until he abandons the same and actually
departs from Ph. [Sec. 22, NIRC]

An alien who comes to the Philippines for a definite purpose which

Non-Resident
in its nature may be promptly accomplished, and who shall come to
Aliens Engaged in
the Philippines and stay for an aggregate of more than 180 days.
Trade or Business
[Sec. 25, NIRC]

Non-Resident An alien who comes to the Philippines for a definite purpose which 25% Final
Aliens Not in its nature may be promptly accomplished, and who shall come to withholding
Engaged in Trade the Philippines and stay for an aggregate of NOT more than 180 Tax
or Business days. [Sec. 25, NIRC]

137. What are the exceptions to the 25% general tax treatment for non-resident aliens not engaged in trade or
business?
1. Sale of capital assets i.e. shares of stock and real property. These items are not covered by the 25% general taxability
but are subject to CGT;
2. Interest income earned from a foreign currency deposit unit (exempt) [Sec. 24 (C) and (D), NIRC as amended]
138. Is a senior citizen generally exempt from regular income tax, final tax on passive income and CGT?
No. They are subject to income tax on income earned from the practice of profession, for doing business and/or on their
compensation income. They are also subject to final taxes on passive income like interest income from bank deposits, as
well as capital gains tax on the sale of domestic shares and real property, not otherwise qualified as exempt. [Sec. 3 of RR
No. 7-2010]

139. What are the exempt income of a Minimum Wage Earner (MWE)?
(1) The Statutory Minimum Wage; (2) Holiday Pay; (3) Overtime Pay; (4) Night Shift Differential Pay; (5) Hazard Pay; (6)
Non-taxable benefits up to a maximum amount of Php90k. [Revenue Regulations (RR) No. 11-2018]

140. Is the additional compensation of MWE such as commissions and honoria exempt from income tax?
No. Commissions, honoraria, fringe benefits, benefits in excess of the allowable statutory amount of Php90k, taxable
allowances and other taxable income given to MWE as additional compensation by the same employer which are not

24
 otherwise exempt shall be subject to income tax and consequently, withholding tax on compensation. [Revenue Regulations
(RR) No. 11-2018]

141. Explain the different classifications of Corporations for income tax purposes.
Corporation Definition Tax Base

Domestic Created and organized under the laws of the Taxable income from sources within and
Corporation Philippines. outside the Philippines.

Resident Having a permanent establishment or branch in the Taxable income from sources within the
Foreign Philippines; acquiring residency for tax purposes; or Philippines.
Corporation doing business in the Philippines.

Non-resident No permanent establishment in the Philippines; not Gross sales/receipts from sources within the
Foreign regularly engaged in trade or business in the Philippines.
Corporation Philippines.
[Sec. 27(A), 28(A), 22, 28(B), NIRC]

142. What are the exempt Government Owned or Controlled Corporations (GOCCS) from income tax?
1. Government Service Insurance System (GSIS)
2. Social Security System (SSS)
3. Philippine Health Insurance Corporation (PHIC)
4. Local Water Districts
5. Home Development Mutual Fund (HDMF) [Sec. 27(C) of the Tax Code, as amended by CREATE Law]

143. The NIRC enumerates the organizations exempt from corporate income tax. What is the exception?
The income of whatever kind and character of the exempt corporations specified under Section 30 of the Tax Code, from
any of their properties, real or personal, or from any of their activities conducted for profit regardless of the disposition
made of such income, shall be subject to income tax. [Sec. 30, NIRC]

144. AAA is a non-stock, non-profit educational institution. For the taxable year 2023, it derived income from renting
some of its vacant building for commercial spaces. The rent income is used to purchase supplies and equipment
for its smart laboratory used by Senior High School students. Is the rental income exempt from income tax?
Yes. The exception in the last paragraph of Sec. 30 of the Tax Code which provides that “the income of whatever kind and
character of the exempt corporations specified, from any of their properties, real or personal, or from any of their activities
conducted for profit regardless of the disposition made of such income, shall be subject to income tax” is not applicable
to a Non-Stock, Non-Profit Educational Institution. Thus, the rental income from commercial spaces, though earned from
commercial activity, is still exempt as long as it is used actually, directly, and exclusively for educational purposes,
regardless of the source. [CIR vs. De La Salle University, Inc., GR. No. 196596, November 9, 2016.]

145. When is Value Added Tax (VAT) imposed??

VAT is a tax imposed on every 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.
[Sections 105 to 115, NIRC, as amended]

146. What are the transactions deemed sale subject to VAT?

(1) Transfer, use or consumption not in the course of business of goods or properties originally intended for sale or for use
in the course of business;
(2) Distribution or transfer to:
(a) Shareholders or investors as share in the profits of the VAT-registered persons; or
(b) Creditors in payment of debt;
(3) Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned; and
(4) Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or
cessation. (Section 106 (B), NIRC as amended)

147. Differentiate zero-rated and effectively zero-rated sale transactions

Zero-rated Effectively zero-rated

Generally refers to the export sale of Refers to the sale of goods or supply of services to persons or entities whose
goods and supply of services. exemption under special laws or international agreements to which the
Philippines is a signatory effectively subjects such transactions to a zero rate.

The tax rate is set at zero and when applied to the tax base, such rate results in no tax chargeable against the purchaser.

The seller of such transactions charges no output tax, but can claim a refund of or a tax credit certificate for the VAT
previously charged by suppliers.
(CIR v. Seagate Technology Phils., G.R. No. 153866, February 11, 2005, )

148. Is lease of residential units with a monthly rental per unit amounting to PhP12,000.00 VAT-exempt?
Yes. Lease of residential units with a monthly rental per unit not exceeding PhP15,000.00 is exempted from payment of
VAT. If the aggregate of such rentals of the lessor during the year do not exceed PhP3,000,000.00, it is still VAT-exempt,
however, the same shall be subject to 3% percentage tax under Section 116 of Tax Code, as amended. (Section 4.109-1q
of RR No. 13-2018)

25
149. What are the drugs and medicines exempt from VAT?
(i) Diabetes, high cholesterol, and hypertension beginning January 1, 2020; and
(ii) Cancer, mental illness, tuberculosis, and kidney diseases beginning January 1, 2021.
Provided, that the Department of Health (DOH) shall issue a list of approved drugs and medicines for this purpose within
sixty (60) days from the effectivity of RA 11467. (Section 109 (1) (AA), NIRC as amended)

150. Differentiate input and output tax.

Input Tax Output Tax

Input VAT is paid by a VAT-registered person in the course The VAT is passed on the sale or lease of taxable
of his trade or business on importation of goods or local goods or properties or services.
purchase of goods or services, including lease or use of
property from a VAT-registered person.

As to the point of view of the buyer, the input VAT is shifted The seller is statutorily liable to pay such but
by the seller to the buyer. nevertheless can shift the amount to the buyer.
(Section 110 of NIRC)

151. What are the rules on the prescriptive period for filing a tax refund or credit of unutilized input VAT under Section
112 of the Tax Code?
1. An administrative claim must be filed with the CIR within two years after the close of the taxable quarter when the
zero-rated or effectively zero rated sales were made.
2. The CIR has 90 days (as amended by TRAIN) from the date of submission of complete documents in support of the
administrative claim within which to decide whether to grant a refund or issue a tax credit certificate. The 90-day period
may extend beyond the two-year period from the filing of the administrative claim if the claim is filed in the later part
of the two-year period.
3. A judicial claim must be filed, with the CTA within 30 days from the receipt of the CIR's decision denying the
administrative claim.
4. All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up
to its reversal by this Court in Aichi on 6 October 2010, as an exception to the mandatory and jurisdictional 90+30 day
periods. It expressly provides that a taxpayer-claimant may seek judicial relief with the CTA by filing a petition for
review without waiting for the 90-day period to lapse. Harte-Hanks Philippines, Inc. v. CIR, G.R. No. 205189. March 7, 2022,
J. Hernando)
Note: TRAIN law amended Section 112, reducing the period for the CIR to decide to 90 days. Also, denial by inaction is
also removed since the BIR is required to render its decision within 90 days. Failure on the part of any official, agent, or
employee of the BIR to act on the application within 90 days period shall be punishable under Section 269 of this Code.

152. Is the submission of the subsidiary sales journal and subsidiary purchase journal indispensable to support a
claim for tax refund?
No. Section 112(A) of the NIRC, which enumerates the requisites for a taxpayer to be entitled to a tax refund or credit,
does not require subsidiary journals as part of the substantiation requirements. The particulars recorded in the subsidiary
journals do not affect the character of an invoice or receipt as a "VAT invoice/official receipt." The law does not require that
subsidiary journals where the sales and purchases (and the output taxes and their corresponding input taxes) were
recorded, are also kept. Indeed, courts may not, in the guise of interpretation, enlarge the scope of a statute and include
therein situations not provided nor intended by the lawmakers. (Commissioner of Internal Revenue vs. Philex Mining Corporation,
G.R. No. 218057. January 18, 2021, J. Hernando)

153. Procedural Due Process in Tax Assessments

After the filing of the return of the taxpayer together with the payment of taxes. It is the duty of the government to ascertain
the correctness of the returns filed and if there exists any deficiency or fraud in the said returns. The process by the
government is as follows:
1. Issuance of a valid Letter of Authority (LOA), Letter Notice (LN), Tax Verification Notice;
2. Examination of books, paper and records;
3. Issuance of the Notice of Discrepancy (NOD);
4. Issuance of the Preliminary Assessment Notice (PAN);
5. Issuance of the Formal Assessment Notice (FAN) and letter of demand;
6. Filing of an administrative protest (either request for reconsideration or request for reinvestigation) within 30 days
from receipt thereof by the taxpayer against the assessment;
7. Submission of documentary evidence within 60 days of filing of protest (for requests for reinvestigation);
8. Upon the submission of documentary evidence or memorandum, the CIR is given 180 days to act upon the protest;
9. Issuance of a revised assessment (possibility);
10. Denial of the Protest; and
11. Within 30 days from the denial of the Protest, the taxpayer is given 30 days to appeal to the Court of Tax Appeals.
(RA 9282 Expanded jurisdiction of the CTA) (RR 7-2018 amending RR 18-2013)

154. What are the requisites for a valid tax assessment?

1. Letter of Authority issued to the Revenue Officers authorizing them to conduct an assessment and audit of taxpayer’s
books and other relevant documents;
2. Conduct of Notice of Discrepancy (NOD);
3. Issuance of the Preliminary Assessment Notice (PAN) by the authorized Revenue District Officer, which shall state
the facts, law, rules and regulations or jurisprudence on which the assessment is based;
4. Issuance of the Formal Letter of Demand and Final Assessment Notice (FLD/FAN) by the Commissioner or his duly
authorized representative, which shall state the facts, law, rules and regulations or jurisprudence on which the
assessment is based; and

26
 5. The Letter of Demand calling for the payment of the deficiency tax. The letter shall state the facts, law, rules and
regulations or jurisprudence on which the assessment is based.

155. Can a LN substitute a LOA as authority of the BIR to conduct tax investigation?
No, the LN cannot replace the LOA requirement. A LOA is the authority given to the appropriate revenue officer assigned
to perform assessment functions. In the absence of such an authority, the assessment or examination is a nullity. The LN
cannot replace the LOA required under the law even if the same was issued by the CIR himself. Under RR No. 12-2002,
LN is issued to a person found to have underreported sales/receipts. Since the law specifically requires an LOA and RMO
No. 32-2005 requires the conversion of the previously issued LN to an LOA, the absence thereof cannot be simply swept
under the rug, as the CIR would have it. (Medicard Philippines inc. Vs CIR GR 222743 April 5, 2017)

156. Is an assessment without a PAN valid?

No. It is clear that the sending of a PAN to the taxpayer to inform him of the assessment made is but part of the "due
process requirement in the issuance of a deficiency tax assessment," the absence of which renders nugatory any
assessment made by the tax authorities. Its failure to send the PAN stating the facts and the law on which the assessment
was made, the assessment made by the CIR is void. (CIR vs. Metro Star Superama inc, GR 185371 Dec. 8, 2010; CIR vs. Unioil
Corporation, G.R. No. 204405, August 4, 2021, J. Hernando)

157. What are the most common presumptions in tax assessments?

a. Tax Assessments made by the BIR shall be prima facie presumed correct and made in good faith. The taxpayer has
the burden of proof of showing the incorrectness of such assessment.
b. An assessment is deemed made and the period to collect the assessed tax begins to run on the date the FAN/FLD
had been released, mailed or sent to the taxpayer. (CIR v. Traders Royal Bank, GR No. L-167134, 18 March 2015; CIR v.
GJM Phils. MFG., Inc., GR No. 202695, 29 February 2016, J. Hernando)

158. Differentiate Tax Delinquency vs. Tax Deficiency

Delinquency
a. The self-assessed tax per return
filed by the taxpayer on the
prescribed date was not paid or
partially paid; or
b. The deficiency tax assessed by the
BIR became final and executory.
(NIRC OF 1997, As amended)
Deficiency
a. The amount by which the tax imposed by law, as determined by
the CIR or his duly authorized representative exceeds the amount
shown on his return; or
b. If no amount is shown on his return or no tax return was filed, then
the amount by which the tax was determined by the CIR or his duly
authorized representative exceeds the amount previously
assessed (or collected without assessment) as a deficiency.

159. What is the prescriptive period for assessment of taxes?

Under Ordinary Circumstances
Internal revenue taxes shall be assessed within three (3)
years
a. after the last day prescribed by law for the filing of the
return, and no proceeding in court without
assessment for the collection of such taxes shall be
begun after the expiration of such period; or
b. from the day the return was filed, in a case where a
return is filed beyond the period prescribed by law.
Under Extraordinary Circumstances
In the case of a false or fraudulent return with intent to
evade tax or of failure to file a return, the prescriptive
period shall be within ten (10) years
a. from date of discovery of the falsity of the
fraud; or,
b. after the discovery of the omission of the
return, where there is a failure to file a return.

A return filed before the last day prescribed by law for the filing
thereof shall be considered as filed on such last day.
(Section 203, 222(a) of the NIRC, as amended)

160. False Returns vs. Fraudulent Returns vs. Non-Filing of Returns

False Returns Fraudulent Returns Non-Filing of Returns
There is a deviation from the truth, whether There is an intention or The taxpayer did not file a return
intentional or not. It may be due to mistake, deceitful entry with intent to which is required to be filed with
ignorance, or carelessness. evade the taxes due. the BIR.
(CIR v. Philippine Daily Inquirer, Inc. GR No. 213943. 22 March 2017)

161. Can the government still collect deficiency taxes when the assessment is issued to the taxpayer beyond the
prescriptive period?
No. Section 222(b) of the NIRC provides that any internal revenue tax which has been assessed within the period of
limitation may be collected by distraint or levy or by a proceeding in court within five years from the assessment. The law
is clear that for a collection to be valid, the assessment must be within the period of limitation. Essentially, when the
assessment is issued beyond the prescriptive period, the government's right to collect deficiency taxes also prescribes.
Hence, there is no more basis for its collection save for certain exceptions. (La Flor Dela Isabela, Inc. vs. CIR, G.R. No. 202105.
April 28, 2021, J. Hernando)

162. What are the grounds for suspension of the running of the statute of limitations for assessments?
1. For the period during which the CIR is prohibited from making the assessment or beginning distraint or levy or a
proceeding in court and for sixty (60) days thereafter;
2. When the taxpayer requests for a reinvestigation which is granted by the CIR;
Note: A request for reconsideration alone does not suspend the period to assess/collect.
3. When the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being
assessed or collected; except if the taxpayer informs the CIR of any change in address;

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 4. When the warrant of distraint or levy is duly served upon the taxpayer, his authorized representative, or a member
or his household with sufficient discretion, and no property could be located;
5. When the taxpayer is out of the Philippines;
6. 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; and
7. When there is an answer filed by the BIR to the petition for review in the CTA where the court justified this by saying
that in the answer filed by the BIR, it prayed for the collection of taxes. (NIRC, as amended)

163. What are the requisites of a valid waiver of the statute of limitations executed by the taxpayer and the BIR agreeing
to extend the prescriptive period of assessment?
1. The waiver shall be executed before the expiration of the period to assess or to collect taxes. The date of execution
must be specifically indicated in the waiver;
2. The waiver shall be signed by the taxpayer himself or his duly authorized representative. In the case of a corporation,
the waiver must be signed by any of its responsible officials; and
3. The expiry date of the period agreed upon to assess/collect the tax after the regular three-year period of prescription
should be indicated. (RMC No. 141-2019 dated 20 December 2019)

164. Will estoppel apply as an exception to the statute of limitations on assessment of taxes?
No, the doctrine of estoppel cannot be applied as an exception to the statute of limitations on assessment of taxes
considering that the BIR provides a detailed procedure for the proper execution of waiver which must be strictly followed.
The BIR cannot simply invoke the doctrine of estoppel to conceal its failure to comply with its own issuances. It cannot just
collect taxes based on an already prescribed assessment, even when taxes are considered the lifeblood of the government.
A waiver of the statute of limitations is a derogation of a taxpayer's right to security against prolonged and unscrupulous
investigations. Thus, it must be carefully and strictly construed. Hence, both the assessment and collection "should be
made in accordance with law as any arbitrariness will negate the very reason for government itself." (La Flor Dela Isabela,
Inc. v. CIR, G.R. No. 202105. April 28, 2021, J. Hernando)

165. What are written requests that taxpayers may file in a protest?.
Request for Reconsideration Request for Reinvestigation
A plea for re-evaluation of an assessment on A plea for re- evaluation of an assessment on the basis of newly
the basis of existing records without need of discovered or additional evidence that a taxpayer intends to
additional evidence and it may involve both present in the reinvestigation and it may also involve a question
a question of fact or of law or both. of factor of law or both.
No additional supporting documents may be Taxpayers are afforded an additional 60 days from filing of the
submitted. protest letter to submit additional supporting documents.
(Sec. 228, NIRC as amended)

166. What is the effect of failure to file protest?

If the taxpayer fails to file a valid protest against the FLD/FAN within thirty (30) days from date of receipt thereof, the
assessment shall become final, executory and demandable. No request for reconsideration or reinvestigation shall be
granted on tax assessments that have already become final, executory and demandable. (Sec. 228, NIRC as amended)

167. What are the grounds for an application for compromise and abatement under the Tax Code?
Compromise Abatement
(1) A reasonable doubt as to the validity of the claim (1) The tax or any portion thereof appears to be
against the taxpayer exists; or unjustly or excessively assessed; or
(2) The financial position of the taxpayer demonstrates (2) The administration and collection costs involved do
a clear inability to pay the assessed tax. not justify the collection of the amount due.
(Sec. 204, NIRC as amended)

168. What the requirements for the refund of tax erroneously or illegally collected
1. A written claim for refund or tax credit must be filed by the taxpayer with the CIR;
2. The claim for refund must be a categorical demand for reimbursement; and
3. The claim for refund or tax credit must be filed, or the suit or proceeding therefor must be commenced in court
within two (2) years from date of payment of the tax or penalty regardless of any supervening cause.
To successfully claim a refund for creditable withholding tax, a taxpayer must do two things:
1. declare the income payments it received as part of its gross income; and
2. establish the fact of withholding. (CIR v Acosta, G.R. No. 154068, August 3, 2007)

169. The CIR issued a BIR ruling to the effect that the transaction is liable to income tax and value added tax. Upon
receipt of the ruling, a taxpayer does not agree thereto. What is his proper remedy?
He should file an appeal to the Secretary of Finance within thirty (30) days from receipt thereof. (Section 228 of the NIRC
as amended)

170. What are the requisites for claiming a tax credit or a refund of Credited Withholding Taxes (CWT)?
The requisites for claiming a tax credit or a refund of CWT are as follows: 1) The claim must be filed with the CIR within
the two (2)-year period from the date of payment of the tax; 2) It must be shown on the return that the income received
was declared as part of the gross income; and 3) The fact of withholding must be established by a copy of a statement
duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld. (CIR v. Philippine Bank
of Communications, G.R. No. 211348. February 23, 2022, J. Hernando)

171. When should a judicial claim for refund of final withholding tax be made?
The judicial claim must be filed before the expiration of the 2-year prescriptive period, without having to wait for the BIR’s
decision on the administrative claim for refund. (Sec. 229, NIRC, As Amended)

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172. What are the prescriptive periods for collection taxes?
Under Ordinary Circumstances Under Extraordinary Circumstances
Internal revenue taxes shall be collected within In the case of a false or fraudulent return with intent to evade tax
three (3) years from the date the assessment or of failure to file a return, the prescriptive period shall be within:
notice has been released, mailed or sent to the a. ten (10) years from the date of discovery of the falsity of
taxpayer. the fraud, if there was no assessment made; or
b. five (5) years from assessment, if the assessment was
made within the extraordinary period of 10 years.
(Sec. 203, 222(a), CIR v. CTA and QL Development, Inc. G.R. No. 258947. March 29, 2022)

173. Distinguish delinquency interest and deficiency interest.

Delinquency Interest Deficiency Interest
12% interest on unpaid amount (from the date due 12% interest on deficiency (from the date prescribed for its
until the amount is fully paid, which interest shall payment until full payment or issuance of notice and
form part of the tax). demand by Commissioner, whichever comes first).

174. What are the different grounds for surcharge and their surcharge rates?
Rate 25% Surcharge on the amount due
a. Failure to file any return and pay the tax due;
b. Filing return with an internal revenue officer other
than those with whom the return is required to be
Grounds filed;
c. Failure to pay the deficiency tax within the time
prescribed in notice of assessment;
d. Failure to pay the full or part of the amount of tax
stated in the return (or full amount when not return
is required) on or before the date prescribed for its
payment.
(Section 248, 249, NIRC as amended).
50% Surcharge of deficiency tax
a. Amount by which the tax imposed
by law as determined by CIR or his
representative exceeds the amount
shown as tax by taxpayer in his
return;
b. If no amount shown or no return,
amount by which the tax exceeds
amounts previously assessed (or
collected without assessment) as
deficiency.

III. LOCAL TAXATION

175. What are the Fundamental principles that govern the exercise of the taxing and other revenue raising powers of
a local government unit (LGU)?
1. Taxation shall be uniform in each LGU;
2. Taxes, fees, charges and other impositions shall be equitable and based as far as practicable on the taxpayer's
ability to pay;
3. Shall be levied and collected only for public purposes;
4. Shall not be unjust, excessive, oppressive, or confiscatory;
5. Shall not be contrary to law, public policy, national economic policy, or in the restraint of trade;
6. The collection of local taxes, fees, charges and other impositions shall in no case be left to any private person;
7. The revenue collected shall inure solely to the benefit of, and be subject to the disposition by, the LGU levying the
tax, fee, charge or other imposition unless otherwise specifically provided herein; and
8. Each LGU shall, as far as practicable, evolve a progressive system of taxation. (Section 130, Local Government Code
(LGC))

176. What are the taxing powers of LGU?

1. Pursuant to the LGC, an LGU shall exercise the power to create its own sources of revenue and to levy taxes,fees
and charges consistent with the basic policy of local autonomy. Necessarily, this includes the authority to issue local
tax ordinances, prescribe exemptions and penalties;
2. An LGU may exercise this power to tax through a local sanggunian and an appropriate and duly approved ordinance;
3. For penalties, surcharge may not exceed 25% of the amount of taxes, fees and charges due and unpaid, Interest
may not exceed 2% per month of the above unpaid items until full. (Section 130, LGC)

177. When is local tax required to be paid?

All local taxes, fees, and charges shall be paid within the first 20 days of January or of each subsequent quarter, as the
case may be. For a justifiable reason or cause, time of payment may be extended without surcharges or penalties for a
period up to but not exceeding 6 months. (Section 165, LGC)

178. What is the period for protesting an assessment for local taxes?
Within 60 days from the receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer
contesting the assessment; otherwise, the assessment shall become final and executory. The local treasurer shall decide
the protest within 60 days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious,
he shall issue a notice canceling wholly or partially the assessment. However, if the local treasurer finds the assessment
to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have
30 days from the receipt of the denial of the protest or from the lapse of the 60 day period prescribed herein within which
to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable.
(Section 195, LGC)

179. When should a claim for local tax refund be made?

Within 2 years from the date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund
or credit. No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or
illegally collected until a written claim for refund or credit has been filed with the local treasurer within the two-year period.
(Section 196, LGC)

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180. What are the properties exempt from Real Property Taxes (RPT)?
1. Real property owned by the Republic of the Philippines or any of its political subdivisions, except when the beneficial
use thereof has been granted, for consideration or otherwise to a taxable person;
2. Charitable institutions, churches, parsonages, or convents appurtenant thereto, mosques, non-profit or religious
cemeteries, and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable
or educational purposes;
3. All machineries and equipment that are actually, directly and exclusively used by local water districts and GOCCs
engaged in the supply and distribution of water and/or generation and transmission of electric power.
4. All real property owned by duly registered cooperatives as provided for under RA 6938; and
5. Machinery and equipment used for pollution control and environment protection. (Section 234, LGC)

181. Are the properties, consisting of lands, buildings, machineries, carriageways, and passenger terminal stations,
owned by Light Rail Transit Authority (LRTA) exempt from RPT?
Yes. The properties of LRTA are properties of public dominion and therefore owned by the State or the Republic of the
Philippines. Railroads are of a similar nature with roads, as both are man-made constructions on land to facilitate the
passage of certain vehicles. In fact, the LRT's railroads and terminals are anchored at certain points, on public roads,
similar with elevated highways. The mere fact that LRTA collects fees and other charges from the public does not remove
the character of the railroads and terminals as properties for public use. The operation by the government of an elevated
highway or expressway with a tool does not change the character of the road as one for public use. Thus, the inescapable
conclusion is that the properties of the LRTA are not merely patrimonial properties, but are properties of the public
domain that cannot be subjected to RPT. (Light Rail Transit Authority vs. City of Pasay, G.R. No. 211209, June 28, 2022)

182. Is an owner of real property liable for RPT that accrued prior to the acquisition of the real property?
No. Unpaid RPT attaches to the real property and is chargeable against the taxable person who had actual or beneficial
use and possession of it regardless of whether or not he is the owner. The contractual assumption of tax liability must be
supplemented by an interest that the party assuming the liability had on the property; the person from whom payment is
sought must have also acquired the beneficial use of the property taxes. In other words, he must have use and possession
of the property. (Provincial Government of Cavite V. CQM Management, G.R. No. 248033, July 15, 2020)

183. Can the City Treasurer accept a protest without the taxpayer paying the RPT first?
No. No protest shall be entertained unless the taxpayer first pays the tax. He shall then be issued a receipt duly annotated
with “paid under protest". After which a protest in writing must be filed with the City Treasurer within 30 days from payment
of the tax. (Sec 252 of the LGC)

IV. JUDICIAL REMEDIES

184. Over what civil cases does the CTA exercise jurisdiction?
The CTA shall exercise exclusive appellate jurisdiction to review by appeal:
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 Tax Code 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 relations thereto, or other matters arising under the Tax Code or other laws administered by
the BIR, where the Tax Code provides a specific period of action, in which case the inaction shall be deemed a
denial;
3. Decisions, orders or resolutions of the RTC in local tax cases originally decided or resolved by them in the exercise
of their original or appellate 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 or other penalties in relation thereto, or
other matters arising under the Customs Law or other laws by the BOC;
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving
the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals;
6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of
the Commissioner of Customs which are adverse to the Government under the Tariff and Customs Code; and
7. Decisions of the Secretary of Trade and Industry, in the case of non-agricultural product, commodity or article, and
the Secretary of Agriculture in the case of agricultural product, commodity or article, involving dumping and counter
ailing duties under 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. (Sec. 7, R.A. 9282)

185. Does the Court of Tax Appeals have the jurisdiction to decide the validity of Warrant of Distraint and/or Levy
(WDL) issued by the CIR?
Yes, RA 9282 provides for the exclusive appellate jurisdiction of the CTA on matters arising under the NIRC or other law
administered by the BIR. The CTA's appellate jurisdiction is not limited to cases involving decisions of the CIR on matters
relating to assessments or refunds. Section 7 (a)(2) of RA 9282 also covers "other matter arising under the NIRC or other
laws administered by the Bureau of Internal Revenue." Clearly, the CTA has jurisdiction to determine whether the WDL
issued by the BIR is valid and rule on the validity of the waivers of the statute of limitations and application for tax amnesty
under RA 9480. (La Flor Dela Isabela, Inc. vs. CIR, G.R. No. 202105. April 28, 2021)

186. Does failure to comply with the requirements of an administrative claim for CWT refund/credit preclude judicial
claim?
No. What is vital in the determination of a judicial claim for a tax credit/refund of CWT is the evidence presented before the
CTA, regardless of the body of evidence found in the administrative claim. The independence of the judicial claim for a tax
credit/refund CWT from its administrative counterpart is implied in the NIRC, which allows the filing of both claims
contemporaneously within the two-year prescriptive period. Under the NIRC, the only requirement for a judicial claim of

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 tax credit/refund to be maintained is that a claim of refund or credit has been filed before the CIR; there is no mention in
the law that the claim before the CIR should be acted upon first before a judicial claim may be filed. (CIR v. Philippine Bank
of Communications, G.R. No. 211348. February 23, 2022.)

187. The CIR issued the FDDA dismissing the protest of ABC Inc. affirming the assessment against said corporation.
ABC Inc. filed a Petition for Review (PetRev) with the CTA Division. The CTA Division dismissed the case. ABC
Inc. immediately filed a PetRev before the CTA En Banc. Is the appeal to the CTA En Banc the proper remedy?
No. ABC Inc. should have filed a Motion for Reconsideration with the CTA Division first. Before the CTA En Banc could
take cognizance of the petition for review concerning a case falling under its exclusive jurisdiction the litigant must
sufficiently show that it sought prior reconsideration or moved for a new trial with the concerned CTA Division. (Commissioner
of Customs v. Marina Sale, G.R. No. 183868, November 22, 2010; Rule 8, Sec. 1 of the Revised Rules of CTA)

188. Y filed an administrative claim for refund of excess input VAT attributable to his export sale of goods to Japan.
The claim for refund was filed on April 10, 2020. On June 10, 2020, Y filed an appeal with the CTA without waiting
for the BIR’s decision on his pending claim for refund. Does the CTA have jurisdiction over Y’s appeal?
No, because the appeal filed with the CTA was premature. The Tax Code provides that the taxpayer has 30 days to appeal
to the CTA from receipt of a decision on his claim for refund. Here, there was no decision yet on his claim for refund.
Likewise, there is no more inaction for VAT refund purposes. The BIR must first render a decision before the taxpayer can
appeal. (Section 112 (C) NIRC, as amended)

189. Are courts empowered to grant an injunction against the collection of taxes?
As a general rule, no. Courts are not empowered to grant an injunction against the collection of taxes. A principle deeply
embedded in our jurisprudence is that taxes being the lifeblood of the government should be collected promptly, without
unnecessary hindrance or delay. In line with this principle, Section 218 of the NIRC expressly provides that no court shall
have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed
by the code. An exception to this rule, under RA 1125, obtains only when in the opinion of the CTA, the collection thereof
may jeopardize the interest of the government and/or the taxpayer. (CIR v. Standard Insurance Co., G.R. No. 219340. April 28,
2021)

190. Applying the ruling in Aichi, when is the period for filing a judicial claim for refund of unutilized input VAT credits
under Section (A) and (D) of the NIRC?
Aichi delineated the applicability of the two-year prescriptive period mentioned in Section 112 (A) of the NIRC solely to
administrative claims for input VAT tax credit or refund. The phrase "within two (2) years ... apply for the issuance of a tax
credit certificate or refund" refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA.
This is apparent in the first paragraph of subsection [(C)] of the same provision, which states that the CIR has "120 days
from the submission of complete documents in support of the application filed in accordance with Subsections (A) and (B)"
within which to decide on the claim. In fact, applying the two-year period to judicial claims would render nugatory Section
112 [(C)] of the NIRC, which already provides for a specific period within which a taxpayer should appeal the decision or
inaction of the CIR. The second paragraph of Section 112 [(C)] of the NIRC envisions two scenarios: (1) when a decision
is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made after the 120-day period. In
both instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it then, the 120-day period
is crucial in filing an appeal with the CTA. (Energy Development Corporation, v. CIR, G.R. No. 203367, March 17, 2021 [Landmark
Case Q&As])
Note: TRAIN law amended Section 112, reducing the period for the CIR to decide from 120 days to 90 days. Also, denial
by inaction is also removed since the BIR is required to render its decision within ninety (90) days. Failure on the part of
any official, agent, or employee of the BIR to act on the application within the ninety (90) day-period shall be punishable
under Section 269 of this Code.

191. Does the 30-day period to appeal to the CTA need to fall within the two-year prescriptive period?
No, the Tax Code clearly, plainly, and unequivocally provides that the taxpayer "may, within two (2) years after the close
of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of the creditable
input tax due or paid to such sales." In short, the law states that the taxpayer may apply with the CIR for a refund or credit
"within two (2) years," which means at anytime within two years. (Energy Development Corporation, v. CIR, G.R. No. 203367,
March 17, 2021 [Landmark Case Q&As])

192. Which has jurisdiction to rule on the constitutionality and validity of revenue issuances by the CIR?
The CTA shall exercise exclusive appellate jurisdiction to review by appeal decisions of the CIR on other matters arising
under the NIRC or other law or part of Law administered by the BIR. (St. Mary’s Academy Caloocan City v. CIR, G.R. No. 230138,
January 13, 2021)

193. What are the legal remedies available to an aggrieved taxpayer at the judicial level?
The taxpayer may file a PetRev with the CTA within 30 days from receipt of the denial by the CIR of the taxpayer’s protest.
If, however, the CIR did not act on the protest, the aggrieved taxpayer may file the PetRev with the CTA within 30 days
following the lapse of 180 days of inaction by the CIR. (Section 3, Revised Rules of the CTA)

SOAR HIGH, HERON!

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