TAX MADE LESS TAXING: A REVIEWER WITH CODALS AND CASES SECOND EDITION 2018 IGNATIUS MICHAEL D. INGLES5 uy 1s by, ol aaa IGNATIUS MICHMEL D, INGLES. Philippine Copyright, 2018 PREFACE TO THE SECOND EDITION meres For those who like to keep count, this second edition ISBN 978-971-23-9368-6 I includes Supreme Court decisions and relevant BIR issuances t up to June 2017, adds suggested answers to Bar Exam No portion of this book may be copied or ‘ questions from 2014 to 2016, incorporates updates from new reproduced in books, pamphlets, outlines or notes, i laws like R.A. 10653, corrects annoying typographical errors whether printed, mimeographed, typewritten, copied a (which 1 apologize for), and revamps the chapter on Tariffs, in different electronic devices or in any other form, for i and Customs with the new Customs Modernization and Tariffs distribution or sale, without the written permission P Act (R.A. 10863). of the author except brief passages in books, articles, { reviews, legal papers, and judicial or other official { proceedings with proper citation, i Makati City Any copy of this book without the correspond- I November. 2017, ing number and the signature of the author on this i page either proceeds from an illegitimate source or is | in possession of one who has no authority to dispose of the same, ALL RIGHTS RESERVED BY THE AUTHOR, No. 0542 | Ign o7p.071 23-3986 023778 | | QLLEZ ine expiring company i | ATENACKNOWLEDGMENT FOR THE SECOND EDITION Tax Made Less Taxi : Episode Two (as I'd like to call not have been possible without the help and support of the following: Ad me Attys. Michael Snoops Montero, Adan Delamide, Raymond Roque, Alex Ner, T3. Rocamora, Paolo Santos, Camille Lim, and Gla Geraldez-Abarquez, who were enough to fentertain my tax and customs questions while making this book ‘The Ateneo de Manila University and Ateneo School of Law for selecting me as the recipient of the Nippon Foundation Professorial Chair for 2016-2017—this updated edition is the result of the generous grant; Everyone, especially the students, who bought the first edition—this second edition would literal possible if the first edition had not sold and had turned out to bbe a magnificent dud; Rex Book Store, Inc. which gave this reviewer a home; Mang Nats of the Ateneo School of Law Rex Book Store branch; ks on Facebook and on Twitter, who kept me pleasantly distracted with words of affirmation and funny gifs; The Law Firm of Ingles, Laurel, and Calderon, for giving me the valuable resources of time and flexibility (not to mention access to an online legal database); My minions, who now include Sassy the rescued pitbull; My parents and my brother, for their love and encouragement; My wife, for her unending patience and support and the amazing dakgalbi that she can whip up at a moment's notice; and God, rajorem Dei gloriam.i PREFACE TO THE FIRST EDITION This work was and is the child of necessity. When I was a law student in the Ateneo de Manila College of Law studying taxation law, the biggest challenge I faced was finding study materials that had erything. By everything, I mean the codal provisions, relevant BIR Issuances, and Supreme Court doctrines. As a student who absolutely detested studying in a desk with gazillions of paper strewn in front Of him, 1 knew I had to compile everything into one study material, lest a) coffee shop baristas shoo me away for making a total mess on their small tables and b) T go crazy come exam time, What you are holding right now is the “new and improved” version of the notes I made and used as a student, a bar candidate, and a tax practitioner As "Tax Made Less Taxing” is the combined work of a nerdy student, a nervous bar candidate, and a newbie practitioner, I believe it will likewise be helpful for the law students, the bar candidates, and the tax practitioners. "Tax Made Less Taxing" will appeal to law student who needs examples to thresh out mind- boggling tax concepts. It will appeal to bar candidates who need a comprehensive reviewer with on point doctrines and enumerations. And it will (hopefully) appeal to tax practitioners as an adequate research material But as the name suggests, thi a treatise on taxation; ‘not include groundbreaking analysis of tax cancepts and problems. It will also not include documentary stamp and percentages taxes (which are excluded in the Bar Exams), T suggest readers supplement their curiosity and interest with other textbooks. | likewise suggest readers — specifically, the law students who are studying tax for the first time — to read the original texts of the Supreme Court cases, As I have repeatedly told my students, there is no substitute for reading the “originals”; the pain that comes with pouring over the words of the Court often leads to a deeper understanding and easier memorization. More importantly, it leads to critical analysis, which, in turn, leads to creative thinking and Innovation ‘The goal of this book is to make tax easier to digest. People find it difficult to understand tax and that is completely understandable. Tax is not the most exciting of subjects, and paying tax is neither exciting, Hence; I havé endeavored to break down the codal provisions work is a reviewer. It is not‘and concepts without sacrificing the essence of the law and to include fun examples to lighten the mood. I Anyway, enough of this babble, get those highlighters out and Do not be scared of tax; try it out. Hopefully, after 2 tax will be less taxing for you. Who knows? It might ACKNOWLEDGMENT FOR THE FIRST EDITION Pasig City and Boston, Massachusetts November 2014 ; ; This book would not have been possible were it not for the help and guidance of the following: + Atty. Michael Snoops Montero, my tax professor who made tax less taxing for everyone (OBF!); + Atty. Serafin U. Salvador, Jr, my boss, the Jedi Master of tax; ‘+ Dean Lily K, Gruba, who T worked with for the Ateneo Bar Operations for Tax; ‘+My officemates from Salvador and Associates, who continue toteach me the ropes and are repositories of tax knowledge; ‘+ My friends, blockmates, and batchmates in Ateneo Law ‘School, who encouraged me to make the reviewers in the first place (the encouragement increased as exams neared) ‘and whose kind words of affirmation I still look back upon today; + Elvis, Fabio, Pierre, and Elton, my minions, who make me happy; + My parents, for showing me anything is possible since 1984; + My wife, whose wonderful name Is overshadowed only by her beauty, support, love, and patience; and * Jesus Christ, my Lord and Savior, for I am able to do all things through Him who strengthens me (Philippians 4:13) Ad majorem Del gloriam. | |DEDICATION For my loving parents and my lovely wife.i moop> AYSzon PAYS zommone> z Poz CONTENTS General Principles of Taxation Definition... Nature and Characteristics of Taxation and Taxes. Attributes of a Sound Taxation System. ‘Tax as Distinguished from Other Exactions Impact and Incidence of Taxation (Direct and Indirect Taxes)... Inherent Limitations on the Power of Taxation. Constitutional Limitations on the Power of Taxation... Double Taxation. Forms of Escape from Taxation Exemption from Taxation Other Doctrines .... Income Tax Income Tax Systems .. Income, In General General Principles of incom Situs of Taxation Income Tax on Individuals. Partnerships.. . Corporations: Estates and Trusts... Taxable Income Gross Income Deductions. Capital Gains and Losses (Sale or Exchange of Property) . Determination of Gain or Transfer of Property. Fringe Benefits Tax... Withholding Tax Returns and Payments of Tax... Estate Tax Principles and Defi Rates and Value.. ioncxYrzommon HEQ ™m™90BP EPRYME @ =mONB> monp> Gross Estate. a Computation for the Net Estate.. Special Deductions Net Estate Computation of Married Persons Gross Estate aa Exemption from Estate Tax Notice of Death... Estate Tax Returns . a Payment of Tax. . no Miscellaneous Provisions ...... Donor’s Tax In General Gross Gifts| ‘Transfer for Insufficient Consideration. Cancellation of Indebtedness Value of the Gifts Deductions from Grass Gifts Resident ar Citizen Donors. Deductions from the Gross Gifts by Husband and wife Deductions for a Non-resident, Not Citizen Donor Other Deductions. Exemptions Under Special Laws ... Tax Rates Payable by Donor. Donor's Tax Return Donor's Tax Credit... Value-added Tax In General Normal VAT Transactions (12%) Zero-ratea/Etfectively Zero-rated Ta Exempt Transactions fr Input VAT Transitional and Presumptive Input Tax Credits and Withholding VAT. VAT Refunds or Tax Credits. VAT on Real Properties. Administrative Provisions Government's Remedies Powers of the BIR Tax Assessment Imposition of Penaities. ; Criminal Action and Other Penalties... Power of Collection. 258 267 277 283 283 287 289 289 291 293, 296 298 300 301 301 301 303 304 304 304 305 308 310 312 317 329 336 345 352 356 363 365 374 387 401 ait 428 zammooe> mono> zommone> Protesting an Assessment Claiming a Refund..... Jurisdiction of the CTA Procedure in Civil and Criminal Cases Principles, Definitions, and Limitations .. Taxing Powers of LGUS.. Collection of Local Taxes Retirement of Remedies for Exemption from Local Tax .. Prescriptive Periods and Taxpayers Remedies General Principles and Definitions. Real Property and Machinery Apprai Imposition of Real Property Tax and Spec Ex Col ‘Taxpayer's Remedies .. Disposition and Allotment of Local Taxes .. ‘Tariff and Duties Requirements of importation Accrual and Payment of Tax and Duties. Unlawful Importation or Expotation Remedies. ‘Taxpayer's Remedies Court of Tax Appeals (R.A. 1125, as amended and Revised Rules of Court of the CTA, A.M. No. 05-11-07-CTA, as amended) Local Government Taxation n of Local Taxes in Local Taxatio Real Property Taxation and Assessment.. ition from Real Property Tax, ction of RPT and LGU Remedies for Tariff and Customs Code of 1978, ‘As Amended by the Customs Modernization and Tariff Act (R.A. 10863 or the CMTA) 451 463, 474 482 490 502 519 523, 525 526 532, 535 542 Baa 508, 557 561 569 576 581 587 598 604 623 631