VIDEO 1: GENERAL PRINCIPLES OF TAXATION PART 1

TAX - contribution, obligation, imposed by the government, deduction, system of

funding for the government, mandatory,
- All about money. There is a tax on that because we have to give something and
that’s something we have to give is money. It is a burden because we carry it, we
pay for it, and it is a mandatory obligation that we have to pay.
- Always run after us everywhere we go, we cannot avoid tax, because it is a duty
that we have to pay for it.
- As taxation students, we have to appreciate the purpose of why the government
imposes taxes. Because even taxes are all about money, taxes are used by the
government to support the people. To provide general welfare to the people.

INHERENT POWERS OF THE STATE - diri mag gikan ang power sa gobyerno in
imposing taxes.

1. POLICE POWER - the power of promoting the public welfare by restraining and
regulating the use of liberty and properties
- That is to promote public welfare anything that will put the public welfare in
danger the government can regulate or restrain. So even if you have the
power and freedom to do anything you want, if that freedom will put the
public in great danger, then the government can stop you. Freedom is not
absolute.
- Most pervasive, least limitable, and the most demanding of the three
powers
- Pervasive because they have to implement it; it must be implemented
without limit or minimal limitation, and it is most demanding we have to
follow it as a citizen of this country
- Once exercised, it is not deemed exhausted and may be exercised again
and again, as often as it is necessary for the protection of the public
welfare.
- Example: if you want to be a doctor, accountant, or engineer, and get a
license that is police power. If there are no regulations anyone can be a
doctor, accountant an engineer. Coming to school is an exercise of police
power, bar exams, following traffic rules, terrorism and etc.
● Police power is primarily lodged in the NATIONAL LEGISLATURE
● It lies in the discretion of the legislative department
● TEST OF THE POLICE POWER:
a. Lawful Subject - it must be within the scope of the police power, that is
the activity or property sought to be regulated affects the public welfare
 - Dapagt klaro didto unsay iregulate sa atong balaod
b. Lawful Means - a lawful subject must be pursued through a lawful method
- Dili pwede mo ingon nga mo labang gane sa “no jaywalking” pwede
ka pusilon when there is a lawful subject that is the person, but the
means is not lawful because that is just a minor crime. So it should
not have this penalty of the death penalty. For the government to
properly implement the police power there must be a lawful means
and lawful subject.

THREE BRANCHES OF THE GOVERNMENT

● LEGISLATIVE BRANCH - create laws
● EXECUTIVE BRANCH - implement laws
● JUDICIARY BRANCH - to make sure that the law is properly
crafted/implemented. If you have a question about the legality of the law, you go
to the judiciary, because all the laws passed by congress are always deemed
constitutional and effective, are all in the judiciary.
- Composes the legislative government: CONGRESSMEN AND
SENATORS

2. POWER OF EMINENT DOMAIN - also called POWER OF EXPROPRIATION

● The highest and most exact idea of property remaining in the government
that may be acquired for some public purpose through a method “in the
nature of a compulsory sale to the state” -
● pugsanay, kuhaon sa gobyerno imo property because they will use your
property for public purpose. That is why there is a road-widening project
and you are situated there on the side of the streets wherein the road
project is implemented, you need to give way, and you are forced to sell
your property.
● Art. 3 Sec 9 “Private property shall not be taken for public use without just
compensation” Dili pwede na kuhaon ra kalit sa gobyerno imo property,
they have to pay you, it is a compulsory sale, and since it is a sale, then it
must have consideration. That consideratioN there is the SELLING
PRICE.
Who may exercise the power?
● The congress
● The president of the Philippines
● The various local legislative bodies
● Certain public corporations like the Land Authority and National Housing
Authority
 ● Quasi-public corporations like the Philippine National Railways, the
Philippine Long Distance Telephone Co., Meralco, etc
● Private corporations can exercise the power of eminent domain as long as
it is a public utility company. Example: VECO.

Question: How can VECO MCWD exercise the power of eminent domain?
Answer: Creation of electric towers. Kanag imo balay gi tukoran ug poste that is
the exercise of eminent domain. MCWD for example, naay mo agi nga tubo saimo
garden you cannot say ‘dili pwede agihan kay maguba ang ako garden” that is
necessary that they have to put the pipes there in you garden so that they can
distribute the water in your neighborhood. That’s why the government needs to
grant a franchise so that these public utilities can exercise the power of an
eminent domain.

REQUISITES
a. Necessity of exercise
b. Private property
c. Taking of the private property
d. Public use
e. Just Compensation

Question: Who will determine or how will just compensation be determined?

Answer: The amount agreed upon by the government and the owner of the
property regardless of what amount it is; market value, selling price, or whatever.
Most of the time, dili sila magkasinabot, of course, the government wants to buy
it at the lowest price possible while the owner wants to sell it at the highest
possible, but they will not agree.

Question: Who will determine the just compensation?

Answer: it is the court that will determine the just compensation. Kung unsay
gamiton sa korte it can be a zonal value of BIR, depending on the judgment of the
court as to what is considered just compensation.

3. POWER OF TAXATION
- Power to raise revenue, through the enactment of laws, that impulse
charges upon persons, properties, and activity, under its jurisdiction to
defray government expenses.
- Everything about taxes is in this definition of the power of taxation.
- The purpose of granting this power is to raise revenue for the government.
 - The government provides you services, but that service is not for free, you
have to pay taxes for them
Question: How will they raise revenue?

Answer: Enactment of laws and that is through the legislative branch of the
government. That imposes charges so the law imposes charges as to whom they
can collect taxes; persons, activity, or property. And limitation is set there it must
be under its jurisdiction.

Question: What is the purpose of collecting?

Answer: That is to defray the government's expenses

a. The primary purpose: REVENUE - to raise revenue to meet the legitimate

objectives of the government
b. Secondary: REGULATORY - device for regulation or control by means of
which certain effects or conditions envisioned by the government may be
achieved.
- This is one way of imposing or exercising police power through the power
of taxation. They want to regulate some activity or some products and how
will the government regulate this activity or product by imposing taxes

- Ex: Cigarettes (SIN Taxes) that is the tax imposed by the government for you
not to commit sins. For the government to regulate sinful activities/products.
Cigarettes/alcoholic drinks/petroleum are sinful because it is harmful to the
person’s health or to the environment. But they cannot completely eradicate it, so
what they will do is regulate it. And how will they regulate it? IMPOSE MORE
TAXES TO THOSE PRODUCTS so that price will go high = people will not buy it
- Compensatory - Use in attaining some social or economic ends, irrespective of
whether revenue is actually raised or not.
- This is the opposite of 1.) Regulatory - impose more taxes so that they will stop
doing what they’re doing 2.) Compensatory - we will not let them pay taxes so
that they will continue doing what they’re doing.
- Do not impose taxes that they will continue what they’re doing because they help
the government serve the people
- Example: Charity, donation, NGO (Non-Government Organization) - grant tax
exemption
- Address inequality of wealth distribution. Life is unfair. How to make it fair?
Collect more taxes on those who earn more.
Question: Who will enjoy the services of public schools and hospitals?
Answer: The low and the middle-income earners.
 - To re-distribute the wealth of the rich people. Collect more taxes on those who
earn more, so that those who earn less can enjoy more.

Question: Why is it called INHERENT?

Answer: Power is given by the people. It co-exists with the government. Because
the government cannot operate without these powers, they do not wait for the
people to grant the power, there are some powers to be given right away because
they have a mandate. It is not sourced from anything, it is inherent, and it does
not need a CONSTITUTIONAL GRANT. Before the constitution is made, these
powers are already there, they are already inherent and needed by the
government
- These three are essential for the government to exist. Because in the absence of
any of these three powers the government cannot exist.

SIMILARITIES OF THE INHERENT POWERS

● They are inherent in the state
- all of these three powers are given, they co-exist with the state

● Underlie and exist independently of the constitution although the

conditions for their exercise may be prescribed by the constitution

- the constitution of the philippine is the supreme law of the land, everything that is
happening in the country must be there in the PH constitution, but the PH constitution
does not grant these three powers why? 1. These powers are already there before the
constitution was created. You cannot grant something that is already granted.

Question: So what the constitution provides?

Answer: They limit the exercise of these powers.

● Ways by which the state interferes with private rights and property.
● Legislative in nature and character
● Presuppose an equivalent compensation received, directly or indirectly by
the persons affected.

Power domain - DIRECT. The person who will enjoy is the owner of the property
Power of taxation - INDIRECT
Police Power - INDIRECT
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VIDEO 2: GENERAL PRINCIPLES OF TAXATION PART 2

DIFFERENCES OF THE INHERENT POWERS

POLICE POWER EMINENT DOMAIN POWER TO

(PP) (ED) TAXATION (PT)

AUTHORITY Government only Government and Government only

(exclusive to the (some) Public (exclusive to the
government) Service Companies government)
or Utilities (as long
as they provide
public utilities
through a grant of
franchise by
Congress)

PURPOSE Promotion of (Take property) for For the support of

general welfare public use the government
(expenses)

PERSONS Community or Owner of the Community or

AFFECTED Class of Individuals Property Class of Individuals
(everyone) (everyone)

BENEFITS Indirect Direct Indirect

RECEIVED (felt by everyone, (only one person (same lang sa PP)
not by a specific affected, pero sya
person) lang pod ang mag
Ex: kana nga enjoy sa benefit
person kay specific, which is just
gidakop kay compensation)
kriminal, but if that
person is put into
jail, everyone will
be benefited.
If naay positive,
isolate para
everyone will be
safe (it affects
everyone as a
community)

AMOUNT OF Sufficient to cover No imposition Unlimited

IMPOSITION cost of the license
and the necessary (It is the (as long as the
 expenses to police government who government needs
surveillance and will give money - money, it can
regulation that is just impose taxes
compensation) provided that there
Ex: you get driver’s is a law stating
license, it’ll cost you such)
500-600 pesos just
to pay the card
there and admin
expenses in LTO.
If mag jaywalking
ka, 50 pesos fine,
minimal.
Traffic violations
also minimal

(The amount there

should be enough
to cover the
regulation or the
expenses in the
implementation of
that specific rule.)

IMPAIRMENT OF SUPERIOR SUPERIOR INFERIOR

CONTRACTS
*If the government Ex: I sold a Ex: Carmel and I Ex: The corporate
exercises any of medicine kay Mary agreed nga akong income tax rate is
the three powers, - I year supply. After ibaligya nimo akong 30%. Way back in
will that impair/lose one month, there is house and lot. You 2017, i did not pay
the validity of that now a new law have to pay it in my taxes correctly
contract? stating that this installments. so the BIR sent me
medicine is Nabayran na ni an assessment
prohibited. It is now carmel ang tanan using the 30% rate.
considered illegal to yuta tanan Now there is a new
distribute the installment sa law, CREATE
medicine. But property and we LAW, which lower
remember there is are about to issue the tax rate to 20%.
already a contract, the deed of Wala ko nibayad sa
yet the law was absolute sale so akong 30%,
created because of that i can transfer naabtan kog
the government’s the ownership to bag-ong balaod
exercise of police carmel, but before that implements the
power. Can I still doing that, the city new rate of 20%.
insist on the of Cebu knocked Can i tell the
delivery of that on my door and told government “ah ato
 medicine to Mary me nga kuhaon nila ning usbon akong
using as a defense akong property bayronon kay
that we have para sa road niubos naman sa
entered into a widening. Can I tell 20% ang tax rate.
contract prior to the the government dili So i will not pay you
declaring that pwede kay with the 30%. I will
medicine as illegal? nagsabot nami ni only pay using the
Carmel? 20% rate.”
NO. The delivery
will now be NO. Power of ED is NO. The 30% will
impossible because still superior in the still prevail because
the exercise of the exercise of the that is inferior. It will
police power of the power of ED. It will not invalidate
government is invalidate prior previous contracts.
superior to the contracts.
impairment of Rule of thumb: the
contracts. law effective at the
time the transaction
The contract will is taxable should be
automatically be used.
void.

ASPECTS OF TAXATION (PROCESS; CYCLE)

1. LEVYING (LEVY/IMPOSITION) (Legislative)

- Legislative act of the government, it is a law.
- Enactment of a tax law by Congress and is called IMPACT OF
TAXATION. Legislative Act in Taxation
- Creation of the law
- Who levies the tax? It is not the BIR. It is the legislative branch: the
congressmen, the senators. Do not complain to the BIR if taxes are high.
If you want to hangyo, don’t go to BIR. Go to congressman and let him file
an amendment to the law.
2. ASSESSMENT (Executive)
- BIR will come in here
- Computation of correct taxes based on the law passed by Congress
- Determination of the tax liabilities of the taxpayer and collection
3. COLLECTION (Executive)
- Collect based on how much we computed
- Administrative act of the government to ask for the payment
ASSESSMENT AND COLLECTION
- Incidence of Taxation or the Administrative Act of Taxation
 4. PAYMENT OF TAXES (inserted from other books)
- Another aspect on the part of the taxpayer

THEORY OF TAXATION
- Lifeblood - in a human being, if makuwangan tag dugo, we need to fill in the
blood that we lost (abuno), if we fail to transfuse blood, that person will surely die.
- Taxes are the lifeblood of the government, if kuwang ang lifeblood, the
government will die

QUESTION: Do you agree that even if how corrupt, how inefficient, ineffective the
government is, we still need the government?

Yes, we still need the government. And how do we support the government? We
provide them blood thru taxes because if there is no lifeblood, the government will die,
and if the government will die, there will surely be chaos.

LIFEBLOOD THEORY
- Without taxes, the government can neither exist nor endure.
- Without taxes, the government will not survive, resulting in detriment to society.
- Without taxes, the government would be paralyzed for lack of motive power to
activate and operate it. (gubot ang country)

Since it is the lifeblood of the government, we have to collect taxes by all means.
Nothing should stop the government from collecting taxes because it is the lifeblood of
the government. We really need to collect taxes by all means.

CONCEPTS THAT SUPPORT THE LIFEBLOOD THEORY

1. RULE OF NO ESTOPPEL AGAINST THE GOVERNMENT
- The previous acts of the government will hinder them in performing other
actions.
- Ex: nag audit si BIR, niana si BIR, okay your total tax liability is 100K. Mao
nana sya tanan maam, you will not be collected again for year 2020.
Imong bayronon sa tax kay mao nang 100K. A year after, another
personnel from the BIR came to your office. “Maam among gitan-aw balik
ang imohang bayronon, among gicompute ug balik, ang imoha diayng
total bayronon is 150K. Kulang pa diay ka ug 50K. Can you tell the BIR
personnel, “Ah, binuang di ko mubayad ana kay nagsabot nata nga akong
bayronon ra kay 100K and here you are again telling me nga kuwang
akong gibayad? You are already estopped you promise me that’s my only
liability and here you are collecting for more! Di ko mubayad!” ?

NO. The rule of no estoppel will apply. They will not be estopped of any
action as long as it is needed to collect the money. They will surely collect
the money.

2. COLLECTION OF TAXES CANNOT BE ENJOINED BY INJUNCTION

- Injunction is an act/order by the court for that person/institution to
stop/temporary restraining order. They will stop you from doing that.
- So pwede baka muingon nga “hala, naabot si BIR diri, muadto ko sa korte,
mangayo kog restraining order. The same thing gud na for example, you
are married and you think that your spouse is physically abusing you. Ofc
you can go to court and ask for a restraining order so that my spouse
cannot go within 10 meters. yEs you can do that, but if the BIR person is
coming to your office para mangolekta didto, nya muingon si BIR, okay
balik lang ko ugma kay di paman ka mubayad karon. Can you rush to the
court and tell judge, samok kaayo taga BIR, tagai kog temporary RO so
that the BIR cannot go to my office to collect taxes? Can you stop the BIR
by a court order?

NO. but there is an exception to the rule:

- ONLY the CTA (Court of Tax Appeals) shall have the authority.

3. TAXES COULD NOT BE THE SUBJECT OF COMPENSATION OR SET-OFF

- One of the modes of extinguishing is compensation. Kung utangan ka
nako, nya utangan pod ko nimo, quits nata. Can that quits2 apply to the
government?
 - Ex: you are a contractor of DPWH, ikay naghimo sa dalan. The contract
there is 10M. Project is already ocmplete nya muingon dayon si DPWH ay
wala pami kabayad kay wala pay kwarta, later nalang or after 2 months.
Nya here comes the BIR collecting 5M taxes. Can you tell the BIR, ah
adto lang didto ni DPWH kaw kay pareha man mo taga gobyerno kay naa
man syay utang nako 10M didto, iquits nana didto akong bayronon nga
5M nimo didto ni DPWH.

NO. the authority to collect taxes derives from law. It is not a debt that can
be compensated because “the government needs the tax now”, we don’t
know when the money from DPWH will be available. It’s the lifeblood of
the government. Incur no delay in paying taxes, bahalag dugay mubayad
ang gobyerno nim

o
- Taxes are not subject to set-off or legal compensation because the
government and the taxpayer are not mutual creditors and debtors
of each other.
- Exception: If the budget for the payment is already available.
- Muana si DPWH nga hello taxpayer, nana diri ang imong bayad
nga 10M. Nya muabot si BIR maningil, can you now tell the BIR go
to DPWH, get my check there of 5M that is my payment” YES.
compensation is now allowed because the money is already there.
What’s important for the BIR is that I will receive the money now.
Money should be available now.

4. RIGHT TO SELECT OBJECTS (SUBJECTS) OF TAXATION

- The right to select the objects/subjects of taxation rests with Congress. It
includes the determination of
 a. Subject or object to be taxed (is it the person, the activity, whatever)
b. Purpose of the tax
c. Amount or rate of the tax
d. Kind of tax
e. Apportionment of the tax
f. Situs of taxation
g. The manner means, and agencies of collection of the tax

- As a creator of the law, bisag kinsa, bisag unsa pwede nilang mataxan as long as
it is necessary.

5. VALID TAX MAY RESULT IN THE DESTRUCTION OF THE TAXPAYER’S

PROPERTY
- POWER TO DESTROY - its exercise would be destructive or would bring
about insolvency to a taxpayer or forfeiture of properties.
- If the government exercises the power, they can close your property, they
can get your property, you can be insolvent. Ilaha nang kuhaon tanan just
to ensure that you will pay the correct taxes.

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VIDEO 3: BASIS OF TAXATION

BENEFIT RECEIVED OR RECIPROCITY THEORY

- Government provides benefit to the people in the form of public services and the
people provide the funds that finance the government.
- So there is a give and take in taxation. Everything that we enjoy is what the
government provides has a cost, which is taxes. Services that we receive would
not be equal or equitable to the taxes that we pay because sometimes we do not
pay anything but we enjoy the government services. The government needs to
provide services to the people so the people need to pay taxes.
- This refers to the mutuality of support between the people and the government.
- Mutuality, reciprocity between government and the people.
TAKE NOTE: You cannot use it as a justification that you have not received anything
from the government that’s why you will not pay taxes. Remember that the government
is the biggest business in the Philippines where they provide services in exchange for
that, we have to pay taxes. In going to SM, you have 10K, you shop there, and you
have 10K worth of service. However, in taxes, you pay 1M of taxes, do not expect 1M
worth of service from the government. Those who will enjoy the government’s services
are those who pay nothing or who pay less. Those who pay more will not be enjoying
much of the government’s services.

SCOPE OF TAXATION
A. SUPREME
- It can impose a tax on anything
- This is an application of the lifeblood theory wherein the government can
impose taxes on anything, anytime, at any amount, as long as there is a
law imposing such. As long as the government needs money, it can collect
taxes on anything.
- The most important power. The other two powers cannot be properly
implemented in the absence of the power of taxation. Ex: Police Power.
You have there the policemen and the military do not collect anything in
the exchange for their service. So where do we get the money for their
operations? Taxes are collected in the exercise of the power of taxation.
Same thing with the power of an eminent domain. It is the government
who will pay money - just compensation. Where to get the payment for just
compensation? Taxes they collect in the exercise of the power of taxation.
B. PLENARY
- Avail remedies just to endure collection
- It undergoes a process. It needs a law before the government can collect
taxes and the actions of the government should always be supported by
law. There is also a remedy what if the taxpayer is not willing to pay will
 the government have to power/right to send you to jail or impose collection
in court? YES. There is always a remedy in the exercise of the
assessment of the collection.
C. UNLIMITED
- Without restrictions
- The legislative branch of the government has the power to select the
object and subject of taxation as long as the government needs money.
They can collect taxes on anything.
D. COMPREHENSIVE
- It may cover person, businesses, activities, professions, rights, and
privileges

NOTE: Police power is the most supreme because it protects general welfare while the
power of taxation is the most important because the other two powers cannot work if
this is not present.

QUESTION: How would you go about it sir that taxation is also a police power?
ANSWER: Yes, taxation is police power. In the regulatory purpose of taxation,
remember that you can exercise police power through the power of taxation. How would
you regulate the use consumption of cigarettes, alcoholic products, purchase of
vehicles, and consumption of gas that would harm the environment and the person?
The government cannot stop it, but how can they regulate it? Regulation for the general
welfare is police power. But how will they do it? By imposing higher taxes. Didto
musulod ang power of taxation. Exercising police power thru the power of taxation.

INHERENT AND CONSTITUTIONAL LIMITATIONS

Constitutional Limitations
- are limitations stated in the Philippine constitution. The constitution does not
grant the power but it only limits the exercise of the power.
- Have more bearing than inherent limitation because the limitation set forth in the
constitution is to protect the people. Sometimes the inherent limitation is still
within the power of the government to interpret how will they apply the inherent
limitations as compared to what is written in the Phil constitution. Wala najud
silay mahimo ana. So it is more powerful/supersedes inherent limitations.

Inherent Limitations
- limitations that come together with the grant of power. So when the power was
granted, nikuyog pod ni atoang inherent limitations. When you were born, life is
granted to you. What is your inherent limitation that comes together at the time
 that you were born? Right to live and death. When you are born you will die.
Death is an inherent limitation.
- It’s not written, it’s there.

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VIDEO 4: INHERENT LIMITATIONS OF THE POWER OF TAXATION (Elements or
Characteristics of Taxation)

1. It should be for PUBLIC PURPOSE

- Taxes collected or imposed by the government must always be for public
purpose. There’s no other intention there. Therefore, the taxes collected
must not benefit an individual/ group of individuals/ a certain entity. The
purpose of taxation must always be for public use
- For the welfare of the nation or a greater portion of the population
- Affects the area as a community rather than as individuals
- So the benefit that we receive from taxation, remember it is indirect, the
entire community must be benefited.
- Ex: The government will use the taxes to build a Catholic church, do you
think it is a public purpose? NO. Because it will only benefit a special
group of individuals.
- Designed to support the services of the government for some of the
recognized objects of the country.

2. NO IMPROPER DELEGATION of the taxing power (INHERENTLY

LEGISLATIVE)
- It cannot be delegated to others. It must be the Congress, Senate, or
House of Representatives that should create the tax laws because they
are our representatives, they are the voice of the people. Generally, it
should not be delegated to others, even to the President of the
Philippines.
- No improper delegation of legislative authority to tax
- Power to tax is a power that is exercised by Congress as delegates of the
people, then as a general rule, Congress could not re-delegate this
delegated power.
- The HR/Congressmen are already our delegates, ato na sila gisugo to
represent us, dili pwede nga ila pana isugo sa lain. Sila ang muhimo sa
atong balaod kay they are considered as our voice.
- EXCEPTIONS:
a. Delegations to Local Governments (Cebu City, Cebu Province,
Municipalities - they have the power to collect taxes but only up to
the extent within their jurisdiction. This authority is granted by
Congress because of the local government code (LGC).

LGC - a law created by Congress that gives authority to local

government units to impose taxes.

b. Delegations to the President of the Philippines (there’s a specific

imposition that can be imposed by the President even without the
authority of the Congress:

The President is the one responsible for foreign relations. As part of

it, is the grant of tax exemptions or impositions of tariff and customs
duties to protect also the business in the Philippines. The
President, even without the need for a law on Congress (?) it is
allowed by the Philippine Constitution to impose specifically tariff,
import and export quotas, tonnage and wharfage fues, and other
impositions within the framework of national development.
 c. Delegation to administrative bodies

Ex: The BIR, as an admin body, the law will mention there nga
mufile ka sa BIR, but the law does not mention what BIR file to use
and what’s the manner of filing it, the attachment or schedule. It is
now administrative, but remember that the power originates from
the law.

Ang himoon nalang gyud sa admin body is to implement what is

stated in the law. You cannot make your own law. If there is an
issuance/policy/rules created by the BIR and you think it violates
the law, remember that the law will always prevail over the rules
stated by the BIR or any other admin body for that purpose.

3. Territorial Jurisdiction (TERRITORIALITY)

- Taxes must only be imposed within the jurisdiction of the Philippine
government. When we say jurisdiction, it is not just the geographic
limitations. Sometimes, even if outside the Philippines, the government
can still impose taxes, so what is important here is you have to know what
is being taxed because from there, you can determine the situs of
taxation.

Situs of taxation is the place or specifically what the government can

impose taxes with.

- Power of taxation could be exercised only within the territorial boundaries

of the taxing authority, except:
a. Taxation of resident citizens on their income derived from abroad
(by territoriality, the Philippine government has jurisdiction over the
resident citizen because they are living here and they are expected
to enjoy their income here in the Philippines.
b. Exempted by treaty obligations (there’s an agreement between the
Philippines and the other country wherein there is an exemption)
c. Exempted by international comity
SITUS OF TAXATION
- place/authority that has the right to impose and collect taxes
- You have to know kung unsa may gitaxan ana niya, kung ang gitaxan ba ang tao,
the property, or the activity? You have to know it because it will determine the
situs of taxation.

Poll/Capitation Tax - cedula or the community taxes

Excise Tax - tax on the privileges granted by the government have corresponding
taxes

a. Even if foreigners residing here in the Philippines, they have to pay their
personal taxes because they are residing in the Philippines. Because the
authority of the government is on the residence or in the citizenship of the
taxpayer.
b. Ex: your privilege to earn income, you have to pay income tax, your
privilege to do business, you have to pay business tax. Your privilege to
the person to transmit the property gratuitously thru death, or thru
donation, that is a privilege which is subject to taxes. So if you have your
business here in the Philippines, the gov can impose taxes on that
because it is where you are conducting your activity. If your activity is in
US, the gov cant impose taxes on that because it is in the other country.
How about if the person dies? You have to pay excise taxes. If a foreigner
dies in the Philippines, they have to pay taxes here in the Philippines
because it is where you can exercise your right because you died here
and you are residing here in the Philippines.
c. Regardless kung ang gisubjectan niya kay ang property mismo, it must be
the location of the property.

QUESTION: I have a property in Japan. Can the Philippine government impose a tax on
my property in Japan?
ANSWER: What is being taxed? It is the real property. And the situs of the real property
is the location of the real property and since it is located in Japan; therefore, the
Philippine government does not have any jurisdiction over that real property.

QUESTION: What if I will sell the property in Japan and I have generated income or
gain in the sale of property in Japan? Can the Philippine government now impose tax on
my income on the sale of property located in Japan?

ANSWER: YES. Because what is being taxed now is the person, the income. Since you
are a citizen of this country then the Philippine government can impose taxes on that
type of income.

NOTE: Cash is an intangible property for taxation purposes

d. I have a receivable. What is my right if I have a receivable? Right to

collect from your debtor. Therefore, you can exercise your right where
your debtor is located/residing. You cannot impose it here in the
Philippines if the debtor is not here in the Philippines. So kung naay
mangutang nimo amerkano nga naa sa US, then the Phil gov does not
have right/jurisdiction over that receivable. It is the american government.

What is your right if you have shares of stock? Right to receive

dividends. Your right to receive dividends can only be exercised on where
the corporation is operating. Ex: I own a shares of stock in San Mig, a Phil.
domestic corpo. I kept the stock certificates in Canada. Can the Phil
government impose taxes on that shares of stocks? YES! Look at where
the corporation is located, bahalag unsa panang sturya diha. Basta
domestic corporation, the situs there is always within the Philippines.

Outside the Philippines = without the Philippines (legal term)

4. Exemption of Government Entities, Agencies and Instrumentalities

 - Transfer from one pocket and placing it in another pocket.
- You cannot impose tax on tax. Mura kag nagkuhag kwarta sa imong right
pocket then transfer it sa imong left pocket, but still, it is your money.
- Generally, the government is exempted from all types of taxes provided
that the activity is already proprietary - there is already an intention to
generate income. Ex: a case between BIR and an LGU in Luzon wherein
the LGU establishes an amusement park (ride all you can) entrance
around 400 pesos. Now BIR said that you are taxable nya LGU said I am
not taxable kay I am a local government office. Who is correct between
the two? BIR. it is the responsibility of the LGU to provide
amusement places to their people but the entrance fee there should
not be intended to generate profit. The supreme court said that the
entrance fee is too expensive and maklaro nga naa juy intention to
generate profit from that activity. So naay tax giimpose ang BIR, SC
said that BIR is correct to impose taxes on that certain activity of the
LGU.
- Can the State tax itself?
- YES! Importations by government for its own use or that of its
subordinate branches or instrumentalities

5. International Comity
- COMITY - Respect accorded by nations to each other because they are
sovereign equals (between equals there is no sovereign)
- You cannot file a case against another country because they also have
their own power. You cannot impose tax on the income of the other
country generated here in the Philippines because they are also their own
sovereign.
- Ex: You apply for your US VISA in the US Embassy in the Philippines, you
have to pay for your processing fee. Can you collect taxes from the US
Embassy on that specific collection of VISA Processing Fee? NO.
The government cant impose tax there because that is a government
activity of the USA.
- The rule of international law that a foreign government may not be sued
without its consent so that it is useless to impose a tax which could not be
collected.
- Mananghid paka sa government if kasuhan nimo sila. Useless for you to
file cases against them.
- When a foreign sovereign enters the territorial jurisdiction of another, it
does not subject itself to the jurisdiction of the other.
- They will retain their own jurisdiction.
______________________________________________________________________
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VIDEO 5: (ERICA AND SHAM)

CONSTITUTIONAL LIMITATIONS
● Prohibition against imprisonment for non-payment of poll tax
- Wherein a person cannot be imprison for non-payment of poll tax
- It is only limited to poll taxes. Commonly known as sedula/community
taxes
- If you do not pay the community taxes, you will not be imprisoned/
Community tax - is a tax we pay every year for the privilege to live in a
community. Not mandatory but we have to get it because it is the taxes we
pay for the right of privilege to live in a certain community. So it is the
responsibility of the government to protect and give us peaceful life in that
certain community, so we have to pay poll taxes for that.
- A person may be imprisoned for non-payment of internal revenue taxes,
such as income tax, as well as other taxes that are not “poll tax”
- Since the limitation is on poll taxes, non-payment of other taxes you will be
prisoned.

● Uniformity and equitability of taxation

- To be uniform:
a. When the laws uniformly
b. On all person
c. Under similar circumstances
d. All persons are treated in the same manner
e. The conditions not being different
f. Both in privileges conferred and liabilities imposed.
g. Favoritism and preferences allowed
- So this means when a government creates a tax law it must be applied to all
people. No discrimination or special treatment. Example: When we say taxes
are imposed on agricultural products, all of the products regardless of their
location must be imposed with the same type of taxes.
- Example: Minimum wage earners are exempted from taxes, is that a violation
of the uniformity law of the constitution? NO, it is not favoritism compared
to other employees, since there is a special group with distinct
characteristics, being identified by the law then that is allowed. Therefore,
the minimum wage earner regardless of their location within the PH can enjoy the
exemption granted by law.
 - The constitution uses equality. This is on the taxes being imposed on those who
earned more and those who earned less will have lower taxes. The taxes you
pay is Equitable, so the income you earn or the increase of wealth. It is, not
equality, because regardless of the income you receive you will pay the same
taxes that is equality. But if you say equitability, meaning if you earn more expect
that you have to pay higher taxes compared to those who earn less will pay lower
taxes.

● Prohibition against taxation of religious charitable entities, and educational

entities shall be exempt from taxation
- This is only an exemption from property taxes, not from all taxes. Property
taxes only. So, therefore, if it is a property tax, what is being taxed there is
the property of an institution or a person. That property to be exempted
from taxes, must be ACTUALLY, DIRECTLY, AND EXCLUSIVELY use for
charitable and education purposes.
- Example: 1 thousand square meter lot owned by the diocese of Cebu, in a
600sqyare meter of a one thousand square meter there is a church built,
but the other 400 sqr meter was rented by 7/11

Question: Is the whole property exempted from property taxes:

Answer: Even if it is owned by the Arch Diocese of Cebu it will not matter, the owner of
the property will not matter. What matters is the usage of the said property? So if
the property is ACTUALLY, DIRECTLY, AND EXCLUSIVELY used for religious
charitable, and educational purposes then it can be exempted from taxes.
However, the entire 1,000 square meter, 600 square meters was used as the church
while the 400 sqr meter was used as commercial establishment being rented out to
7/11, therefore, only the 600 square meter is exempted from property taxes, the other
400 square meters is subject to tax because it is not ACTUALLY, DIRECTLY, AND
EXCLUSIVELY used for religious charitable and educational purposes

● Prohibition against taxation of non-stock, non-profit institutions

- This is an exemption from all taxes, as long as the organization is
registered as non-profit but it is specific in educational institutions. This
exemption granted by the PH constitution only extends to educational
institutions.
- All revenues and assets of non-stock, non-profit educational institutions,
used ACTUALLY, DIRECTLY, AND EXCLUSIVELY for education purposes
shall be exempt from taxes and duties.
- So no one shall be benefited from that certain income.
 - Example: USJR, USC, non-stock institutions all income generated by
those schools is used for educational purposes.
- UC is a profit institution since it generates income whatever income of the
school or certain individual is benefited from that educational institution,
they are subject to taxes.

● Majority vote of Congress for grant of tax exemption

- There are two houses: House representative & senate
- The tax bill shall always generate from congress it cannot advance to the
senate or the senate cannot discuss simultaneously with the congress. As
Compared to other regular laws (not a revenue bill, tax bill, or tariff bill), it
may originate from any of the houses, or discuss by both houses that it will
become law, once approved by the president. But revenue bills tax bills,
tariff bills anything that generates income by the government should
always originate from the house of Representatives.
- Requires majority vote of the congress for grant of tax laws
- Two types of tax laws: Tax law or Tax generating a bill. Imposes taxes and
collects taxes, and there is a tax exemption bill that exempts a certain
entity from any taxes.
- If the president did not sign after 30 days it will become law or without the
sign of the president.
- Veto na bill means disapproved by the bill
- No law granting any tax exemption shall be passed without the
concurrence of a majority of all the Members of the Congress.

● No appropriation or use of public money for religious purposes

- No public money or property shall be appropriated for the use, benefit, or
support of any sect, church, denomination, sectarian institutions or any
system of religion, or of any priest, preacher, minister or other religious
teachers, or dignitary as such, except when such priest, preacher, minister
or dignitary is assigned to the armed forces, or to any penal institution or
government orphanage or leprosarium
- Generally, you cannot bill a church or Muslim from the public funds
because it is a violation of this constitution limitation that no funds or
appropriation or use of public money for religious purposes because it is
not considered as the public purpose it will not be enjoyed by everyone.

● President’s veto power on appropriation, revenue, and tariff bills

 - The president shall have the power to veto any particular item or items in
an appropriation, revenue, or tariff bill, but the veto shall not affect the item
or items to which he does not object.

● Origination of appropriation, revenue, or tariff bills

● Due process
- A law which hears before it condemns, which proceeds upon inquiry and
renders judgment only after trial
- No person shall be deprived of life, liberty or property without the due
process of law
- One of the requirements of taxpayers, is a right of due process.

● Non-impairment of the jurisdiction of the Supreme Court

- The supreme court may review, revise, modify, or affirm on appeal or
certiorari as the law or the Rules of the Court may provide final judgments
and orders in
- All cases involving the legality of any tax, impost, assessment, or toll, or
any penalty imposed in relation thereto.

DOUBLE TAXATION

- Is an act of a sovereign, through its agent, of taxing twice the same property or
the same taxpayer for the same purpose during the same taxable year by the
same taxing authorities
- There are four requirements before a tax imposition will be considered as double
taxation
● Same object
● Same taxing period
● Same taxing authority
● Same taxing purpose
- These four items must be the same before we say it is double taxation
- Double taxation can be classified into two: DIRECT AND INDIRECT
A. Direct double taxation - these four items are the same
B. Indirect double taxation - only three or two or one of these four items are
the same.

Question: Is direct double taxation allowed in the PH?

Answer: Generally, yes the PH constitution does not prohibit double taxation.
However, it is considered a violation of uniformity and equitable rule. There is supreme
court jurisprudence. No direct double taxation here in PH.

Indirect Double taxation - we have cases of indirect in the PH that is allowed however
there are means to minimize the impact of indirect double taxation:
Example: The winnings of Manny Pacquiao, a resident citizen here in PH and has asa
boxer naay income when he has a boxing tournament in the US and he won and
receives money from that activity. The government says it is taxable in the PH and in the
U.S too.

Question: Is it direct or indirect double taxation?

Answer: IT IS INDIRECT. Ang gi tax ra sa U.S government kay ang activity, while sa PH
government ang gi tax is the person. Manny is a citizen here in PH so the PH
government has the right over that income. Out of the four, only the period is the same,
which is not considered double taxation in general.
Therefore, not double taxation. Examine the four items first that they should be the
same.

- Taxation in general has the power to destroy. According to the lifeblood theory,
taxes we collected without unnecessary hindrance, by all means, must be
collected, however, there are means to avoid or minimize the burden of taxation.

MEANS TO AVOID OR MINIMIZE THE BURDEN OF TAXATION:

● Shifting
- Transferring the economic burden from the one who pays the tax to
another
- Includes a part of the selling price
- Examples of taxes that can be shifted: meaning if I am taxable in the eyes
of the BIR I can pass it to others, if I am the business I can pass the tax to
my consumers: if you buy something in 7/11 the popular one is the VAT
a. Franchise Tax
b. VAT Tax - so if you buy something on 7/11, 7/11 is taxable should
be the one to pay the VAT but it is legal for 7/11 to pass on the VAT
to the consumers. So if you are buying on 7/11 you are the one who
is paying the VAT, it is just the 7/11 who will collect the VAT and
remit the VAT to the BIR.

Question: is there an actual disbursement on your part as a business?

Answer: NO, so you have avoided the imposition of taxes

c. Documentary Stamp Tax

d. Excise taxes
e. Other percentage taxes
● Transformation
- An escape from taxation where the producer or manufacturer pays the tax
and endeavor to recoup itself by improving his process of production
thereby turning out his units of products at a lower cost.
- Di ganahan itransfer sa consumer ang taxes, because if they pass the
taxes, the prices will be higher and wala nay ganahan mo palit. So to
minimize it iyaha absorb ang taxes and how he can recover from the taxes
thatnhe absorb? By improving his process para mas daghan products ang
mahimo means higher sales will be generated and lower costs for the unit.
● Tax evasion (TAX DODGING)
- Use of illegal or fraudulent means to defeat or lessen the payment of a
taxes
- So if naa kay sales nga 10M and gi kuhaan nimo ng isa ka ) para mahimo
1M imo sales. It is intentional and illegal thus, it is punishable by law.

● Tax Avoidance (TAX MINIMIZATION)

- Exploitation by the taxpayer of legally permissible alternative tax rates or
methods of assessing taxable property or income in order to avoid
reducing tax liability.
- Example: I want to transfer my property to my son. Should I sell it or
donate it? Which one na makaminimize it?
Answer: Both are legal ways, you are not evading there you are just
finding legal ways to minimize the imposition of taxes. The estate tax is
cheaper than donor taxes. Huwatan na lang mamatay pero if imo ihata
nga buhi paka then you can pass it on through donor taxes or donation.

● Tax Exemption - non-payment of taxes, allowing certain entity not to pay taxes
Principles:
- Tax exemption must be strictly construed against taxpayer
- Tax exemption is highly disfavored by the tax system because it lessens
the collection of taxes, and therefore it is not consistent with the lifeblood
theory but is required by the system. Gihatag na kontrsa gusto, we need
to provide an exemption to the taxpayers.
 - Tax exemptions are not presumed, you have to provide any evidence to
the BIR that you are exempted, but if you were not able to prove it the BIR
will not give you a certificate of exemption.
- Constitued grants of tax exemptions are self-executing - can stand on its
own
- Tax exemption are a personal example: USJR we have tax exemption
granted by BIR because we are a non-profit organization managed by
religious order, ere comes another school ok we are similar situated with
USJR feeling nimo exe pted ka then here comes BIR you did not pay the
taxes, then mo ingon ka nga ang USJR gane exempted tas ako dili. WHAT
IS GRANTED TO USJR CANNOT BE GRANTED TO EVERYONE EVEN
THOUGH YOU ARE SIMILARLY SITUATED, THUS YOU HAVE TO PAY
FOR IT.
- Kinds of taxpayers:
As to BASIS: COnstitutional or Statutory example: exemption of
minimum wager (statutory)
As to FORM: Express of Implied
As to CONTENT: Total or Portion

PRINCIPLES OF A SOUND TAX SYSTEM:

● FISCAL ADEQUACY
- Sources of government funds must be sufficient to cover government
costs
- Do we have enough funds to pay govt’ expenses.
- The gov’t must not incur a deficit
- Taxes should increase in response to government spending

● THEORETICAL JUSTICE
- Taxation should consider the taxpayer’s ability to pay
- Exercise of taxation should not be oppressive, unjust, or confiscatory.

● ADMINISTRATIVE FEASIBILITY
- Tax laws should be capable of efficient and effective administration to
encourage compliance
- The government should make it easy for the taxpayer to comply by
avoiding administrative bottlenecks and reducing compliance costs.

Question: When can you say that we have a good tax system?
Answer: If these three cririeria is met.
______________________________________________________________________
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VIDEO 6: (ERICA AND SHAM)

What is a tax?
- It is an ENFORCED CONTRIBUTION levied by the lawmaking body of the state
to raise revenue for public purpose
- Pugsanay mo contribute if a taxpayer failed to contribute there are consequences
there which involve imprisonment or filing criminal cases.

ELEMENTS OF VALID TAX:

● It must be levied by the taxing power having jurisdiction over the object of
taxation
- Which should be within the jurisdiction of the state imposing the taxes.
● Must not violate constitutional and inherent limitations
● Must be uniform and equitable
● Must be for public purpose
● Must be proportional in character
● Generally, payable in money

Question: Is there instances wherein taxes are not paid in money?

Answer: Yes, it is when the government imposes collection and wala na nagpabayd
ang taxpayer on this taxes. What the BIR can do is to forfeit property, personal or real of
a tax payer.

Classification of taxes:

● As to PURPOSE: Fiscal or Revenue; Regulatory; Sumputary or Compensatory

(di masabtan putol putol si sir)
● As to SUBJECT matter: Personal, Poll, or Capitation; Property excise or
privilege
- It depends on to what is being taxed; Privilege to do business here in PH
and etc. it is important for us to know what is being taxed is it the personor
property?
 ● As to INCIDENCE: Direct tax; Indirect Tax

- Direct Taxes: These are taxes cannot be transferred. Example: Income tax
- Indirect Tax: These are taxes can be legally transferred. Example: VAT
taxes (putol putol kaayo si sir)

● As to AMOUNT: Specific: Ad Valorem - based on the value of the property

- Depends what are the basis of tax

● As to RATE: Proportional - same amount of income ex: registration fee;

Progressive taxes - huhu di klaro, mo taas ang income mo taas sad imo bayran;
Regressive - opposite direction, if the tax base increase, the tax rate will
decrease vice versa. If dako ang income, gamay ang bayran na tax; if gamay
ang income taas imo bayran na tax however this is not usually applied kay luoy
tung mga tao na less ang income.

● As to IMPOSING country: National Tax - BIR; Local taxes - collected in

provinces

4 major classification of National taxes collected by BIR:

1. Income tax
2. Business tax: Three types of business taxes
a. VAT
b. Excise tax (jusko di maklaro ang isa)
3. Transfer tax
4. Documentary stamp tax

DISTINCTION OF TAXES WITH SIMILAR ITEMS

● TAX vs TOLL
a. Tax - levy of government, hence it is a demand of sovereignty
b. Toll - is a charge for the use of other’s property; hence. It is a demand of
owenershio
- The amount of tax depends upon the needs of the government but
the amount of toll is dependent upon the value of the property
leased.

● TAX vs DEBT (both are obligation)

a. Tax arises from law while debt arises from private contracts
b. Non-payment of tax leads to imprisonment but non-payment
c. Debt can be subject to set off but tax is not
 d. Debt can be paid in kind by dacion en pago but tax is generally payable in
money.
e. Tax draws interest only when the taxpayer is delinquent. Debt draws
interest when it is so stipulated by the contracting parties or when the
debtor incurs a legal day

● TAX vs SPECIAL ASSESSMENT

a. Tax is an amount imposed upon persons, properties, or privileges. Special
assessment is levied by the government to lands adjacent to a public
improvement.
b. The basis of special assessment is the benefit in terms of the appreciation
in land value caused by the public improvement. Tax is levied without
expectation of a direct proximate benefit

● TAX vs TARIFF
a. Tax is broader than tariff
b. Tax is an amount imposed upon persons, privilege, transactions or
properties. Tariff is the amount imposed on imported or exported
commodities

TAXATION LAW
- Refers to any law that arises from the exercise of the taxation power of the
STATE.

TYPES OF TAXATION LAWS

● Tax Laws - laws that provide for the assessment and collection of taxes
★ The national internal revenue code (NIRC)
★ The tariff and Customs code
★ The local tax code
★ The real property tax code

● Tax Exemption laws - laws that grant immunity from taxation

★ The minimum wage law
★ The Omnibus Investment Code of 1987
★ Barangay Micro Business Enterprise Law
★ Cooperative Development Act

SOURCES OF TAX LAWS

● Philippine Constitution
● Statues and Presidental Decrees - laws created by congress
 ● Judicial Decisions or Case Laws - cases decided by executive orders
● Executive Orders and batas Pambansa - issuances of the president of the
philippines
● Administrative Issuances - issued by BIR
● Tax treaties and conventions with foreign country - agreement between foreign
countries

Questions: If there are conflict between the sources of tax laws, what will prevail?
Answer: according to priority, kung unsay nakalista sa taas that will always prevail.
(very putolism si sir)

TYPES OF ADMINISTRATIVE ISSUANCES:

● REVENUE REGULATIONS
- Issuances signed by the Secretary of Finance, upon recommendation of
the commissioner of Internal Revenue
- Specify guidelines or define rules and regulations for the effective
enforcement of the provisions of the National Internal Revenue Code
- It is the BIR who will implement the law. To proper implement the law they
must provide their own interpretation and is found in revenue regulations.
- Formal pronouncement intended to clarify or explain the tax law and carry
inot effects its general provisions by providing details of administration and
procedure
- It has the force and effec of a law but it is not intended to expand or limit
the application of the law; otherwise it is VOID
● REVENUE MEMORANDUM ORDERS - issuances that provides directive
instructions; prescribe guidelines; and outline processes, operations, activities,
implementation stated policies, goals, objectives, plans and programs of the BIR
in all area of operations
-
● REVENUE MEMORANDUM CIRCULARS - issuances that publish pertinent and
applicable portions, as well as amplifications of laws, rules, regulations and
precedents issued by the BIR and other agencies/offices

● REVENUE MEMORANDUM RULINGS - rulings, opinions and interpretations of

the CIR with respect to the provision of the tax code and other tax laws, as
applied to a specific set of facts, with or without established precedents, and
which the CIR may issue from time to time for the purpose of providing taxpayers
guidance on the tax consequences in specific stipulations
 ● REVENUE BULLETINS - periodic issuances, notices and official announcements
of the CIR that consolidate the BIR’s position in that certain specific issues of law
of administration in relation to the provision of the tax code relevant.

RULES IN CONSTRUCTIONG TAX IMPOSING LAWS

● Public purpose is always presumed - when interpreting a tax imposing laws
● Legilsative intention must be considered (spirit of the law) -sometimes what we
think is ot what we write? If there is confusion on how the tax law is implemented,
you hav to look into the intention of the law
● Where the language is plain and there is no doubt tax law must be given their
ordinary meaning - no nee to over analyze it kung usany pasabot na word then
that’s it
● A statue will not be constructed as imposing a tax unless it does, clearly,
expresselt,and unambiguously - if its not clear tax is not imposed
● In case of doubt, it is constructed mst strongly against the government and
liberally in favor of the tax payer.

______________________________________________________________________
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VIDEO 7: (ERICA AND SHAM)
Question: Why there is a need to classify our taxpayers?
Answer:

Explanation:
- Maglahi lahi ang tax treatment sa atong income expenses depends on the tax
payers.
- There are some items of income that are taxable if the taxpayers is a resident,
there is an income a non-taxable if the tax-payer is a non-resdiet or foreign.
- The type of deductions: some may avail that deduction some taxpayers are not
allowed to pay that deduction. In the computation of taxes will also depend on the
tax-payers. If pila sa individual or sa corporation
-

Explanation:
 - That is what we call as a PERSON, dili ra sha individual for tax purposes, a
corporation, a tax and etc are included in the definition of a PERSON

Explanation:
- (gi basa ra ni sir ang ppt)

CITIZENS (ART. IV SEC 1)

● Those who are citizens of the Philippines at the time of the adoption of the
1987 constitutions
- So if you’re a citizen when the constitution was adapted then you’re
a citizen
● Those whose fathers or mothers are citizens of the Philippines
● Those born before January 17, 1973, of Filipino mothers who elect
Philippine citizenship upon reaching the age of maturity
- So before the 1987 constitution, if your mother is a Filipino then at the age
of maturity you elect to become a Filipino, then you’re a Filipino Citizen
● Those who are naturalized in accordance to the law

Question: If you’re not born as Filipino, naa bay chance mahimo kag Filipino
Citizen?
Answer: Yes, through the process of naturalization, they are called as naturalized
filipinos.
,
Explanation:
- Based on the intention, what is the intention of a Filipino. Does she intend to stay
in the PH permanently, obviously you’re a resident? What is the intention of a
Filipino going out abroad? Is the intention to have a short vacation abroad? Then
he is still a resident citizen since he has still the intention of going back.
- However, if he went abroad to work or immigrant then he is now a non-resident
citizen. Since by attention he intends to live outside the Philippines without the
intention of going back in the next few years.
- What if the intention is not clear? You will use the number of days how long the
Filipino stays outside the country. If a Filipino stays outside the country for less
than 183 days he is considered an RC, but if he stays outside more than 183
days then he is an NRC.

Question: How do we determine the 183 days?

Answer: Aggregated number of days.
Explanation:
Example: Naa kas abroad nya ni abot March 1, nya plan to reside here
permanently, so by intention at March 1 he is already considered as RC. What will
happen to his income from Jan 1, to feb 28 of the year? That is still considered
as NRC with respect to his income respect derive from sources abroad

RC - within or without ph taxable income

NRC - taxable income is within PH
Classification of a special alien has been eliminated already under the train law.
so we now have RA and NRA
To classify:
1. Intention of the alien
2. If for short vacay the NRANETB
3. But if the alien came here or has a registered business here in PH =
NRAETB
_ if he stayed in the country for more than 1 year then RA
 - For corporations, we have domestic and foreign corporations. Now for
taxation, domestic corp are taxable within and without the PH, while foreign
are taxable within the PH only.
- Domestic corporations and RFC are subject to regular tax, while NRFC is
subject to final tax.

Question: When will the estate become a taxable person?

Answer: An estate become a taxable person for example if he owns a property, an
apartment. A died the children of B, C, and D, what will B,C, and D do? They will
inherit the property, so when they inherit the property dili automatic it will take a
year before they owe the property. However, before they owe the property this
estate will continue to generate profit that’s why it is called an estate. At that time
when the estate generates profit before it is distributed to B, C, and D that estate
will become a taxable entity. If the property is now distributed to them, then they
will become taxable as an individual, dili na ang estate kay na distribute naman.

How about a trust agreement? Example: A who is called a trustor or grantor, has
a property, and that property he wants to give to C, but C is still incapacitated to
owe the property because he is a minor. So while waiting for C, A will trust the
property to B. So B here is the trustee, so B will take care of the property, and
when the time comes he will give it to C. Then C is considered as beneficiary. So
while the property is still entrusted, the property might generate income, then the
trust will become a taxable entity. But if B will transfer to C, then C will be taxable
as an individual not the property anymore.

PS: gi basa ra ni sir halos ang PPT which is understandable and comprehensible lang chos mao na wa nako
ni go on details

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VIDEO 8: BUREAU OF INTERNAL REVENUE

The BIR shall be under the supervision and control of the Department of Finance
and its powers and duties shall comprehend the assessment and collection of all
national internal revenue taxes, fees, and charges, and the enforcement of all
forfeitures, penalties, and fines connected therewith, including the execution of
judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary
courts. The Bureau shall give effect to and administer the supervisory and police
powers conferred to it by this Code or other laws. (Section 2 of the National Internal
Revenue Code of 1997)
- The BIR is under the Dept of Finance which is under the Office of the President
being in the executive branch of the government. The executive branch of the
government is responsible for implementing the laws created by the legislative
branch of the government.
- Their main role is to assess - compute the main amount of taxes and collect the
taxes. (Administrative Function: Assessment and Collection - aspect of taxation)
- national internal revenue taxes, fees, and charges - implemented by the NIRC of
1997)
 - forfeitures, penalties, and fines - government remedies in assessment and
collection of taxes in case the taxpayer will not pay on time. Applying the
lifeblood theory, they may enforce these remedies.
- If there is a case involving the BIR, taxpayer, and the CTA or any courts like
Supreme Court, will decide in favor of the BIR like enforcement of forfeitures, etc.
it is the mandate of the BIR to execute those judgments by the courts.
- BIR has a supervisory function: Registration of the taxpayers which is part of the
police power of the government to ensure that all businesses are registered,
legal, and will pay taxes to support the government, there should be a database
for that.

POWERS OF THE BIR

- Assessment and Collection of Taxes
- Enforcement of all:
a. Forfeitures
b. Penalties
c. Fines and judgments (surcharges)
- Giving effects to and administering the supervisory and police powers conferred
to it by the NIRC and other laws.

MISSION
We collect taxes through just enforcement of tax laws for nation-building and the
upliftment of the lives of Filipinos.
- Their main purpose is to have just, equitable, fair enforcement of tax laws for
nation building and the upliftment of the lives of Filipinos specially nowadays
during this pandemic.

VISION (what they want to be - image of the BIR in the long run)
The BIR is an institution of service excellence and integrity.

ORGANIZATIONAL STRUCTURE
 - BIR is headed by the Commissioner of Internal Revenue: appointee of the
president of the Philippines. He has 4 deputy commissioners for operations,
legal, information systems, and resource management group. Each of the deputy
commissioners has its own service lines.
- Ex: Operations group :client support service, assessment service, collection
service, and the 19 revenue regions in the Philippines. This is different from
geographical regions. Cebu City is in region 13 which includes Cebu City and
Bohol. Regions are further subdivided into revenue district offices. There are 5 or
more RDO in one region. RR 13 Cebu City there are 5 RDO. we have RDO 80 -
Mandaue, RDO 81 - Cebu City North, RDO 82 - Cebu City South, RDO 83 -
Talisay, RDO 84 -Tagbilaran Bohol.
- Ex: Legal Group: Legal Service, Internal Affairs Service, Enforcement and
Advocacy Service. Each service line are managed by assistant commissioners.
- Ex: Info Sys Group: Info Sys Development and Operations Service, Info Sys
Project Management Service, Revenue Data Centers
- Ex: Resource Management Group: Human Resource Development Service,
Finance Service, Administrative Service
- They are all appointees of the President of the Philippines

CHIEF OFFICIALS OF THE BUREAU

COMMISSIONER OF INTERNAL Caesar R. Dulay

REVENUE

DEPUTY COMMISSIONER - Arnel SD. Guballa

OPERATIONS GROUP

DEPUTY COMMISSIONER - Lanee C. David

INFORMATION SYSTEMS GROUP

DEPUTY COMMISSIONER - LEGAL Marissa O. Cabreros

AND INSPECTION GROUP

DEPUTY COMMISSIONER - Celia C. King

RESOURCE MANAGEMENT GROUP

POWERS OF THE COMMISSIONER OF THE INTERNAL REVENUE

1. To interpret tax laws

- Under the original jurisdiction of the CIR subject to review by the Secretary
of the Department of Finance.
- Manifested thru issuance of revenue regulations - interpretations of the
CIR on various tax laws. CIR is just for recommending approval, it is
actually promulgated and approved by the Secretary of the DF
- CIR is just recommendatory for approval. It is the Secretary of DF who
promulgates and approves the RR which is an interpretation of the
provisions of various tax laws.

2. To decide cases:
a. Disputed assessments - if there are questions as to how taxes are
computed. It is the CIR who will decide if there are any protests
b. Refunds of internal revenue taxes, fees or other charges whether to
grant or not
c. Penalties imposed in relation thereto on noncompliance by the
taxpayer
d. Other matters arising under the NIRC or other laws or portions
thereof administered by the BIR
Some of these powers can be delegated to the other officers. But there are some
powers that cannot be delegated to any officer. Only the CIR is allowed to execute
those powers.

3. To obtain information, and summon, examine, and take testimony of

persons
PURPOSE:
 a. To ascertain correctness of any return - taxpayer to file tax return, CIR
to verify taxpayer’s returns kay it will have an affect on how much the
taxpayer should pay. CIR can obtain information for this reason
b. To make a return when none has been made - when taxpayer does not
publish/submit to BIR. CIR has power to get info to testify para BIR will
make the tax return nya verify how much ang sales, expenses, etc.
c. To determine the liability of any person for any internal revenue tax
To verify how much is the actual tax liability of the taxpayer and compare it to the actual
tax that the taxpayer paid, and verify any discrepancies, BIR may collect more from the
taxpayer.
d. To collect from any person liability for any internal revenue tax
e. To evaluate tax compliance

EXTENT:
a. To examine any books, papers, record, or other data which may be
relevant or material to such inquiry.
b. To obtain on a regular basis from any person other than the person
whose tax liability is subject to audit or investigation - you can verify it
from third parties
c. To summon: (issue a subpoena)
I. Any person liable for tax or required to file a return
II. Any officer or employee of such person
III. Any person having possession, custody or care of the books of
accounts and other records
IV. Any person to appear before the CIR or his duly authorized
representative.
What you can summon here is not only the person, but also the
documents

d. To take such testimony of the person concerned, under oath, as may

be relevant to or material to such inquiry. - in case that they will not tell
you the truth. You can be charged of purgery or any other applicable
criminal cases.
e. To cause revenue officers and employees to make a canvass from
time to time of any revenue district or region and inquire after and
concerning:
I. All persons therein who may be liable to pay any internal revenue
tax and
II. All persons owning or having care, management or possession of
any object with respect to which a tax is imposed.
4. To make assessments and prescribe additional requirements for tax
administration and enforcement
I. To make assessments after a tax return has been filed as required under
the provisions of the NIRC, or even upon failure to file such a return.
II. The CIR shall or his duly authorized representative may authorize:
a. The examination of any taxpayer
b. The assessment of the correct tax
III. The tax of any deficiency tax so assessed shall be paid upon notice and
demand from the CIR or from his duly authorized representative.

5. To conduct inventory taking or surveillance

a. At any time during the taxable year
b. If there is a reason to believe that the taxable person is not declaring his
correct income, sales or receipts for internal revenue tax purposes. - BIR
may visit your establishment coz every year you need to submit to the BIR
your inventory of all your goods, raw materials, wip, fgi. If there is an
over/under declaration of your inventory, it will affect the sales, cost of
sales, and eventually to your taxable income which is the basis of
computing taxes - will have effect on the taxes paid.
Surveillance - BIR will go to your establishment from opening to closing.
Sit down there, observe for 15 days, depending if it is deemed appropriate
by the BIR.

6. To prescribed presumptive gross sales and receipts for a taxpayer when:

a. The taxpayer failed to issue receipts or
b. The CIR believes that the books or other records of the taxpayer for not
correctly reflect the declaration in the return.

7. To terminate tax period, when the taxpayer is:

a. Retiring from business
b. Intending to leave the PH
c. Intending to remove, hide or conceal his property
d. Intending to perform any act tending to obstruct the proceedings for the
collection of the tax or render the same ineffective.

8. To prescribe real property values

a. CIR is authorized to divide the PH into zones and prescribe real property
values after consultation with a competent appraiser. The value of the
property prescribed by the BIR is the Zonal Value.
 9. To compromise tax liabilities of the taxpayers
- To lower the tax liability after audit or any other procedures. This can only
be allowed under:
a. Insolvency and bankruptcy
b. Excessive assessments

10. To inquire into bank deposits, only under the ff instances:

- We have the bank secrecy law, but the BIR may inquire the bank if:
a. Determination of the gross estate of a decedent
b. To substantiate the taxpayer’s claim of financial incapacity to pay
tax in an application for tax compromise.

BIR is not allowed to inquire into bank deposits for the purpose of assessing the correct
taxes. Purposes of assessment and collections

11. To accredit and register tax agents

- BIR may ask you to register as an agent/representative of the taxpayer

12. To refund or credit internal revenue taxes

13. To abate or cancel tax liabilities in certain cases

- Compromise - lower the tax liability
- Abatement - cancel/zero out your tax liability

14. To prescribe additional procedures or documentary requirements

15. To delegate his powers to any subordinate officer with rank equivalent to a
division chief of an office.

NON-DELEGATED POWERS OF THE COMMISSIONER OF INTERNAL REVENUE

1. The power to recommend the promulgation of rules and regulations to the

Secretary of Finance - the power to interpret tax laws

2. The power to issue rulings of first impression or to reverse, revoke or

modify any existing rulings of the Bureau
- Rulings of first impression - if there are any tax queries wherein you ask
the BIR unsaon man jud ni siya, what is the appropriate tax treatment of
this certain transaction? If it is the first time of the BIR to encounter such
 case/request, it should always be the CIR who should issue the ruling of
first impression. First time that there is this certain case, unique from all
other cases.
- If recurring ruling lang (same circumstance lang) it can now be delegated
kay this is not a ruling of first impression.
- Even issuances of former CIR, the current CIR may revoke those
issuances.

3. The power to compromise or abate any tax liability

EXCEPT:
a. Assessments are issued by the regional offices involving basic deficiency
tax of P500,000 or less and
b. Minor criminal violations discovered by regional and district officials

If the assessment involves more than 500K, it cannot be delegated.

4. The power to assign/reassign internal revenue officers to establishments

where articles subject to excise tax are produced or kept. - ang pag assign
kung kinsay mutan-aw didto. Naay travel assignment orders, etc.