PRIME CUTS IN TAXATION

By: Atty. Edwin R. Abella, cpa

The power to interpret tax laws

The power to interpret the provisions of the National Internal Revenue Code and other tax laws is the
exclusive and original jurisdiction of the Commissioner.

The interpretation of the Commissioner is subject to review by the Secretary of Finance. (Section 4,
NIRC).

The power to issue regulations

This power is vested with the Secretary of Finance upon the recommendation of the Commissioner.

The power of the Commissioner is merely to recommend and this power is non-delegable (Section 7,
NIRC).

Regulations must not be contrary to law because a regulation promulgated on a wrong interpretation of
the law or in contravention thereof cannot give rise to a vested right that can be invoked either by the
taxpayer or the Government.

The regulations to be valid and effective must be published in the Official Gazette or in a newspaper of
general circulation (E.O. 200).

The regulations must be reasonable and must be within the authority conferred since the power to make
regulations is not the power to legislate. Under the guise of regulation, legislation may not be enacted.
Administrative regulations have the force and effect of law (Valerio v. Secretary of Agriculture and
Natural Resources, L-18587, April 23, 1963).

Interpretation of Tax Laws

Tax statutes are construed most strongly against the Government and liberally in favor of the citizen
because burdens are not to be imposed beyond what the statutes expressly and clearly import (CIR v.
La Tondena, Inc., L-10431, July 31, 1962).

A statute will not be construed to be imposing a tax unless it does so clearly, expressly and
unambiguously. A tax cannot be imposed without clear and express words for that purpose.
Accordingly, the provisions of a taxing act cannot be extended by implication. (Marinduque Mines v.
Hinabagan, L-18924, June 30, 1964). This is the so-called hornbook doctrine in the interpretation of
tax laws.

Tax laws operate prospectively whether they enact, amend or repeal unless the purpose of the
legislature to give retrospective effect is expressly declared or may be implied from the language used.
(Lorenzo v. Posadas).

Non-retroactivity of regulations and rulings

Regulations, rulings and circulars are generally prospective in application.

Any revocation, modification or reversal shall not be given retroactive application if it will be
prejudicial to the taxpayers, except in the following cases:

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1.

Where the taxpayer deliberately misstates or omits material facts from his return or any
document required of him by the BIR;

2.

Where the facts subsequently gathered by the BIR are materially different from the facts
on which the ruling is based; or

3.

Where the taxpayer acted in bad faith. (Section 246, NIRC).

The BIR rulings have no retroactive effect where a grossly unfair deal would result to the prejudice of
the taxpayer. When a ruling was issued exempting Health Maintenance Organizations (HMOs) from
the VAT and later on the BIR takes a contrary position on the theory that HMOs are not engaged in the
rendition of medical services, the latter position cannot be given a retroactive application. Any
assessment of deficiency VAT during the interim cannot be enforced. The Commissioner is precluded
from adopting a position contrary to one previously taken where injustice would result to the taxpayer.
(Commissioner v. Phil. Health Care Providers, Inc., G.R. No. 168129, April 24, 2007)

Tax Avoidance and Tax Evasion

Tax avoidance is the minimization of tax liabilities through legal means. It is a settled principle that a
taxpayer may diminish his tax liability by any means which the law permits. (Heng Tong Textiles Co.,
Inc. v CIR, L-19737, August 26, 1968).

Tax evasion is the use of illegal means in order to escape a tax liability. Tax evasion may be
exemplified by means of tax fraud or the use of deceit in order to evade taxes. Fraud, however, is a
serious charge and to be sustained, it must be supported by clear and convincing evidence. (Republic v.
Ker & co. Ltd., L-21609, September 29, 1966).

There is tax evasion if there is concurrence of three factors, namely:

1.

Payment of an amount of tax less than what is known by the taxpayer to be legally due;

2.

An accompanying state of mind which is evil, in bad faith, deliberate, willful or intentional, and
not merely incidental; and

3.

A cause of action or failure of action which is unlawful. (CIR v. Toda, 2004).

Capital Gains Tax on Sale of Shares of Stocks

Shares must be held as capital assets

Applies only to shares of stocks of domestic corporations

Tax base is the net capital gain during the taxable year (taxable year of the seller)

Net capital gain is the excess of capital gains over capital losses. (Section 39, NIRC)

The tax will not cover shares sold or disposed of through the stock exchange

The rate of tax is 5% for the 1st P100,000 of net capital gain and 10% on the excess

Minimum Corporate Income Tax

Applies to Domestic Corporations and Resident Foreign Corporations

MCIT of 2% of Gross Income when the minimum income tax is greater than the normal corporate
income tax of 35% based on net income

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Imposed beginning on the 4th taxable year immediately following the commencement of business
operation

Excess MCIT shall be carried forward and credited against the normal corporate income tax for the 3
immediately succeeding taxable years

The Secretary of Finance is authorized to suspend the imposition of MCIT on any corporation which
suffers losses on account of i) prolonged labor dispute, or ii) because of force majeure, or iii) because
of legitimate business reverses.

What constitutes prolonged labor dispute? Strike lasting for more than six months causing the
temporary shutdown of business operations.

What is force majeure? It refers to irresistible force like lightning, earthquake, storm, flood and the
like. It also includes armed conflicts like war or insurgency.

What are losses caused by legitimate business reverses? These are losses sustained due to fire, robbery,
theft, or embezzlement or due to other economic reasons as maybe determined by the Secretary of
Finance.

The tax base of the MCIT Gross Income.

1.

For Sellers of Goods Gross Income means gross sales less sales returns, discount and
allowances and cost of goods sold. Cost of goods sold shall include all business expenses
directly incurred to produce the merchandise to bring them to their present location and
use.

2.

For sellers of Service Gross Income means gross receipts less sales returns, discounts
and cost of services. Cost of Services shall mean all direct costs and expenses incurred to
provide the services required by the customers and clients, i.e., a) salaries and employee
benefits of personnel, consultants and specialists directly rendering the service, and b)
cost of facilities directly utilized in providing the service such as depreciation or rental of
equipment used and cost of supplies. For banks, cost of services shall include interest
expense.

The MCIT will apply only to corporations subject to normal income tax, thus:
1.

Corporations registered with BOI deriving income from registered and unregistered
activity shall be subject to MCIT only on their unregistered activity.

2.

Domestic corporations subject to preferential tax rates are not covered, i.e. proprietary
educational institutions, non-profit hospitals, PEZA firms, CDA and SBMA enterprises,
etc. are not subject to MCIT.

3.

Resident foreign corporations subject to special tax rates, i.e. international carriers,
OBUs, ROHQs are not subject to MCIT.

The 20% Final Withholding Tax on Interest

It applies only on:

1.

interest on peso bank deposits (irrespective of the currency brought to the bank for
deposit)

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2.

Yield or other monetary benefit from deposit substitutes and from trust funds and similar
arrangements.

What is a deposit substitute? The term deposit substitutes shall mean an alternative form of
obtaining funds from the public other than deposits, through the issuance, endorsement, or acceptance
of debt instruments for the borrowers own account, for the purpose of relending or purchasing of
receivables and other obligations, or financing their own needs or the needs of their agent or dealer.
These instruments may include, but not limited to, bankers acceptances, promissory notes, repurchase
agreements, including reverse repurchase agreements entered into by and between the BSP and any
authorized agent bank, certificates of assignment or participation and similar instruments with recourse.
However, interbank call loans (to cover deficiency in reserve with maturity of not more than 5 days)
are not considered as deposit substitute debt instruments.(Section 22(Y), NIRC).

What does public mean? The term public means borrowing from twenty (20) or more individual or
corporate lenders at any one time.

The Senior Citizens Discount (RA 7432 as amended by RA 9257)

Discounts granted to senior citizens are now treated as deductions from the gross income of the seller
instead of being allowed as tax credits.

What are deductions for income tax purposes? These are the items expenses allowed by law to be
deducted from gross income to arrive at the taxable income. It also covers the Optional standard
Deduction which is allowed to be claimed by individual taxpayers in lieu of the itemized deductions.

Can the State, in promoting the health and welfare of a special group of citizens, impose upon private
establishments the burden of partly subsidizing a government program? Yes. The State has the power
to require business establishments to shoulder a burden in accordance with a legitimate exercise of
police power which has general welfare for its object. A taxpayers right to property can be
relinquished upon the command of the State for the promotion of public good. (Carlos Superdrug
Corp., v. DSWD, DOH, DOF; G.R. No. 166494, June 29, 2007).

Will not the grant of 20% discount to senior citizens which allows the business establishment a mere
deduction from gross income amount to taking of private property for public use without payment of
just compensation? No. This is not done in the exercise of imminent domain but under the exercise of
the police power of the State. (Carlos Superdrug case).

Non-stock, non-profit organizations (Section 30)

They are exempt from income tax in respect to the income received by them as such. The
organizations exempt from the income tax on corporations are:
1.

Labor, agricultural or horticultural organization not organized principally for profit;

2.

Mutual savings bank not having capital stock represented by shares and cooperative bank
without capital stock organized and operated for mutual purposes and without profit;

3.

A beneficiary society, order or association, operating for the exclusive benefit of the
members such as a fraternal organization operating under the lodge system, or mutual aid
association or a nonstock corporation organized by employees providing for payment of
life, sickness, accident, or other benefits exclusively to the members of such society,
order, or association, or nonstock corporation or their dependents;

4.

Cemetery company owned and operated exclusively for the benefit of its members;

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5.

Nonstock corporation or association organized and operated exclusively for religious,

charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no
part of its net income or asset shall belong to or inure to the benefit of any member,
organizer, officer or any specific person;

6.

Business league, chamber of commerce, or board of trade, not organized for profit and no
part of the net income of which inures to the benefit of any private stockholder, or
individual;

7.

Civic league or organization not organized for profit but operated exclusively for the
promotion of social welfare;

8.

A nonstock and nonprofit educational institution;

9.

Government educational institution;

10. Farmers or other mutual typhoon or fire insurance company, mutual ditch or irrigation
company, mutual or cooperative telephone company, or like organization of a purely local
character, the income of which consists solely of assessments, dues and fees collected
from members for the sole purpose of meeting its expenses; and
11. Farmers, fruit growers or like association organized and operated as a sales agent of its
members and turning back to them the proceeds of sales, less the necessary selling
expenses on the basis of the quantity of produce finished by them.

Income of whatever kind and character of the foregoing organizations 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.

What is the rule on interest income earned by a non-stock, non-profit educational institution? They are
exempt from taxes on all their revenues and assets used actually, directly and exclusively for
educational purposes. The exemption extends to interest income earned by them if used for
educational purposes. They shall, however, be subject to internal revenue taxes on income from trade,
business or other activity the conduct of which is not related to the exercise or performance by such
educational institution of its educational purpose or function. (RMC 45-95, Department Order No.
149-95, dated November 24, 1995)

Tax-free Exchanges (Section 40)

Exchanges pursuant to a merger or consolidation results to non-recognition of gain or loss.

1.

Property solely for stock

2.

Stock solely for stock

3.

Security for stock or securities

Exchange pursuant to a merger or consolidation is not tax-free if it is an exchange not solely in kind.
The gain, if any, but not the loss, shall be recognized but in an amount not in excess of the sum of the
money and fair market value of such other property received.

Exchange of property for shares resulting to corporate control will not give rise to recognition of gain
or loss.

Capital assets v. ordinary assets

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Definition of capital asset under Section 39

The law enumerated what are ordinary assets. Any asset outside of the enumeration is a capital asset.

The compartmentalized income tax approach in taxing capital gains:

1.

Sale of real property

2.

Sale of shares of stocks

3.

Other capital assets

a.

Capital losses are deductible only to the extent of capital gains

b.

Holding period for individuals as a rule on recognition

c.

Net capital loss carry-over rule for individual taxpayers

Deductions from Gross Income and the all events test

For a taxpayer using the accrual method, when do the facts present themselves in such a manner that
the taxpayer may recognize an expense? The accrual of the expense is permitted when the all-events
test has been meet which requires (1) fixing the liability to pay; and (2) the availability of the
reasonable accurate determination of such liability.

The all-events test (applied in the recognition of income or expense) requires the right to income or
liability be fixed, and the amount of such income or liability determined with reasonable accuracy.
However, the test does not demand that the amount of income or liability be known absolutely, only
that a taxpayer has at his disposal the information necessary to compute the amount with reasonable
accuracy.

The all-events test is satisfied where computation remains uncertain, if its basis is unchangeable; the
test is satisfied where a computation may be unknown, but is not as much unknowable, within the
taxable year. The amount of liability does not have to be determined exactly; it must be determined
with reasonable accuracy. Accordingly, the term reasonable accuracy implies something less than
an exact or completely accurate amount. (CIR v. Isabela Cultural Corporation, GR No. 172231,
February 12, 2007).

For an accrual basis taxpayer, are the billings of a lawyer received in 1986 for professional services
rendered in 1984 and 1985 allowed as deductions from gross income in the year the billings were
made? NO.

The vanishing deduction

The purpose is to reduce the harshness of imposing transfer taxes on the successive transmission of the
same property over a short span of time.

Legal requirements:
1.

It must be a property forming part of the gross estate situated in the Philippines;

2.

It must be identified as the same property previously acquired by the present decedent
either by gift or by inheritance, or it must be identified to be a property acquired in
exchange therefore;

3.

The present decedent must have died within five (5) years from the previous transfer;

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4.

The gift tax or the estate tax, as the case may be, must have been paid in the previous
transfer (this makes the property previously taxed); and

5.

No previous vanishing deduction on the property or property acquired in exchange

therefore was claimed.

The tax base of the VAT on sale of services

Gross receipts is the tax base of the VAT on services (essentially following the cash basis).

The term gross receipts means the total amount of money or its equivalent representing the contract
price, compensation, service fee, rental or royalty, including the amount charged for materials supplied
with the services and deposits and advanced payments actually or constructively received during the
taxable quarter for services performed or to be performed for another person, excluding the valueadded tax.

The VAT on leases of property

Leases of property, whether real or personal, are generally subject to VAT as sale of services.

To be subject to VAT, it must follow the general threshold of P1.5 million.

Lease of residential units with a monthly rental per unit not exceeding P10,000, regardless of the
amount of aggregate rentals received by the lessor during the year, is exempt from VAT.

In cases where a lessor has several residential units for lease, some are leased out for a monthly rental
per unit of not exceeding P10,000 while others are leased out for more than P10,000 per unit, his tax
liability will be as follows:
1.

The gross receipts from rentals not exceeding P10,000 per month per unit shall be exempt
from VAT regardless of the aggregate annual gross receipts.

2.

The gross receipts from rentals exceeding P10,000 per month per unit shall be subject to VAT
if the aggregate annual gross receipts from said units only exceeds P1.5 million. Otherwise,
the gross receipts will be subject to the 3% tax imposed under Section 116 of the Tax Code.

The term residential units shall refer to apartments and houses & lots used for residential purposes,
and buildings or parts or units thereof used solely as dwelling places (e.g., dormitories, rooms and bed
spaces) except motels, motel rooms, hotels and hotel rooms.

The term unit shall mean an apartment unit in the case of apartments, house in the case of residential
houses; per person in the case of dormitories, boarding houses and bed spaces; and per room in case of
rooms for rent.

Administrative Protest

The law governing administrative protest is Section 228 of the Tax Code.

The period to file a protest is within 30 days from receipt of the final assessment notice or FAN. Failure
on the part of the taxpayer to file the protest within this period will make the assessment final,
executory and demandable.

An assessment notice which is not served upon the taxpayer or any of his authorized representatives is
not valid and the failure to protest the same within the period provided by law will not make the

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assessment final, executory and incontestable. Estate of Gabriel v. Commissioner, G.R. No. 155541,
January 1, 2004).

There are two types of protests: 1) A request for reinvestigation, and 2) A request for reconsideration.
The first presupposes the existence of newly discovered evidence which the taxpayer wanted to
introduce for the first time, which is not present in the second type of protest.

A protest will suspend the running of the prescriptive period to collect only if it is in the nature of
request for reinvestigation. (Bank of Philippine Islands v. Commissioner, G.R. No. 139736, October 17,
2005).

Warrant of Distraint and Levy

These are remedies in tax collection which run parallel, in point of importance, to the remedies of
collection by civil and criminal action.

Distraint and levy are also known as summary, extrajudicial or administrative remedies.

Distinction between distraint and levy: Distraint is a remedy whereby the collection of taxes is enforced
on the goods, chattels, or effects of the taxpayer including other personal property of whatever
character as well as stocks and other securities, debts, credits, bank accounts and interest in and rights
to personal property (Section 207(A), NIRC). On the other hand, levy means that collection
enforcement is effected on the real property of the delinquent taxpayer.

The levy may be made before, simultaneously with, or after the distraint of personal property of the
delinquent taxpayer. (Section 207(B), NIRC).

Statute of Limitation on Assessment of Internal Revenue Taxes

Internal Revenue taxes shall be assessed within three years after the last day prescribed by law for the
filing of the return. Where the return is filed beyond the period prescribed by law, the three year period
shall be counted from the day the return was filed (Section 203, NIRC).

However, if no return was filed or a return was filed but said return is false or fraudulent, assessment
shall be made within ten years from discovery of the omission to file, or discovery of the falsity or
fraud (Section 222, NIRC).

For purposes of complying with the prescriptive period to assess, an assessment is deemed made when
it is released, mailed or sent to the taxpayer. (Basilan Estates, Inc. v. Commissioner, 21 SCRA 17).

Where an assessment notice is sent by mail (for example by ordinary mail) the rule is, it is presumed
that the taxpayer received the mailed notice within the period of time when mail of such kind are
ordinarily received so that if such presumed receipt is still within the prescriptive period, the
taxpayers contention that the Governments right to assess the tax has already prescribed cannot be
given due credit. (Republic v. Tan Kim En, CA-G.R. No. 28743-R, February 29, 1964).

Prescriptive Periods for Collection of Taxes

1.

If there is an assessment, the period shall be five (5) years from the date of assessment (Section 222(c),
NIRC). This rule is believed to cover by implication regular assessments, otherwise, the, period to
collect an assessment issued under normal circumstances will be imprescriptible. Thus, it was held that
where the assessment of any internal revenue tax has been made within the time allowed by law, the tax
must be collected within three years (now five years) after the assessment of the tax (Collector vs.
Clement, L-12101, January 24, 1959)

2.

In the absence of an assessment, and a return was filed as long as it is not false or fraudulent, the period
is five (5) years from the date the tax is due.

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3.

If no return was filed, the period to collect is within ten (10) years from the date of discovery of the
omission to file without need for an assessment (Evangelista vs. Collector, October 15, 1957; See also
Sec. 222(a), NIRC).

4.

If the return filed was false or fraudulent, collection maybe resorted to without need of an assessment
within ten years from discovery of the fraud or falsity (Ungab vs. Cusi, 97 SCRA 877; See also Sec.
222(a), NIRC).

Exceptions from the Three-year Prescriptive Period for Assessment and Five-year Prescriptive Period for
Collection.
1.

False or fraudulent return, or omission to file a return [Section 222(a)].

2.

If there is an agreement in writing to extend the period to assess or to collect [Section 222(b)].

A waiver of the prescriptive period by the taxpayer is ineffective if not accepted by the
Commissioner of Internal Revenue. (CIR v. Carnation Phils., Inc., February 25, 2000).

What is the nature of a waiver? A waiver of the statute of limitation under the NIRC, to a
certain extent, is a derogation of the taxpayers right to security against prolonged and
unscrupulous investigations and must therefore be carefully and strictly construed. The waiver
is not a unilateral relinquishment of the right by the taxpayer. It is an agreement in writing
between the taxpayer and the BIR that the period, either to assess or to collect, is extended to a
date certain. (Phil. Journalists, Inc. v. CIR, G.R. No. 162852, December 16, 2004).

An assessment is issued beyond the prescriptive period because the BIR believes that the
prescription is tolled by the taxpayers execution of a waiver by said waiver is legally infirm.
The taxpayer failed to protest the assessment. What remedy is available to the taxpayer to
protect his rights against the assessment? The taxpayer shall wait for the enforcement of the
assessment. The taxpayer aggrieved by the action for collection can file a petition for review
with the CTA to question the validity of the enforcement action by the BIR invoking the basic
flaws on the waiver upon which the validity of the assessment rests.

The waiver of prescription to be valid must comply strictly with the following requirements,
viz: (Phil. Journalists case citing RMO No. 20-90).
1.

It must not be an indefinite waiver. There should be an agreed date between the BIR
and the taxpayer within which the former may assess and/or collect revenue taxes.

2.

It must be signed by the taxpayer and accepted by the Commissioner before the
expiration of the original period to assess or collect.

3.

A copy of the accepted waiver must be duly served upon the taxpayer. The
requirement to furnish the taxpayer with a copy of the waiver is not only to give
notice of the existence of the document but of the acceptance by the BIR and the
perfection of the agreement.

Instances Where the Running of the Prescriptive Period is Suspended (Sec. 223, NIRC):
1.

For the period where the Commissioner is prohibited from making the assessment or beginning
distraint or levy or a proceeding in court and for sixty days thereafter (Republic vs. Ker & Co., 25
SCRA 208).

2.

When the taxpayer requests for a reinvestigation which is granted by the Commissioner (See Bank of
Philippine Islands v. Commissioner, G.R. No. 139736, October 17, 2005). A request for the
reinvestigation of an assessment by the taxpayer which was not considered or acted upon by the
Commissioner will not suspend the period for filing of an action for collection (Republic vs. Acebedo,
22 SCRA 135).

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.

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4.

When warrant of distraint or levy is duly served and no property could be located. (Republic v. Salud
Hizon, G.R. No. 130430, December 13, 1999).

5.

When the taxpayer is out of the Philippines.

Classification of Importation:
(1) Articles subject to duty; (2) Prohibited Importations; and (3) Conditionally-free importations.
Classification of Customs Duties:
1) Regular duties Ad valorem duty and Specific duty; and 2) Special duties Dumping duty,
Countervailing duty, Marking duty and Discriminatory or Retaliatory duty.
Procedural Aspect of Tariff and Customs Laws

Procedure-wise, Customs laws comprehend two kinds of proceedings in the Bureau of Customs. One is
known as Customs protests, and the other is called Customs seizure and forfeiture case.

Customs protest cases deal solely with liability for customs duties, fees and other charges.

Seizure and forfeiture cases, however, refer to matters involving smuggling or the act of any person
who fraudulently imports or brings into the Philippines, or assists in so doing, any article contrary to
law, or shall receive, conceal, buy, sell or in any manner facilitate the importation, concealment, or sale
of such article after importation, knowing the same to have been imported contrary to law (Sec. 3154,
TCC).

Tariff and customs law subjects to forfeiture any article which is removed contrary to law from any
public or private warehouse under Customs supervision or released irregularly from Customs custody.
Before forfeiture proceedings are instituted, the law requires the presence of probable cause. Once
established, the burden of proof is shifted to the claimant (Carrara Marble Philippines, Inc. v.
Commissioner of Customs, G.R. No. 129680, Sept. 1, 1999).

As explained in a certain case, a Customs seizure and forfeiture case in administrative and civil in
nature, is directed against the res or imported article and entails a determination of the legality of their
importation (Commissioner v. Makasiar, G.R. No. 79307, August 29, 1989).

Properties Subject to Forfeiture Read Section 2530 of the Tariff and Customs Code. Can a common carrier
be the subject of forfeiture? As a general rule, a common carrier cannot be the subject of forfeiture. However, if
the owner has knowledge of its use in smuggling and was a consenting party, it may also be forfeited.
Primary Jurisdiction of Collector of Customs in Seizure Proceedings to the Exclusion of Regular Courts.

The Collector of Customs has the primary and exclusive jurisdiction in seizure proceedings which
includes abandonment.

The RTC is devoid of any jurisdiction to pass upon the validity or regularity of seizure and forfeiture
proceedings conducted by the BOC, and to enjoin or otherwise interfere with the said proceedings even
if the seizure was illegal. (R.V. Marzan Freight, Inc. v. CA. G.R. No. 128064, March 4, 2004).

Procedure in Customs Protest Cases (Secs. 1206, 2308, 2310, 2312, 2313 and 2135 of TCC).
1.

The Collector shall cause the importation to be entered at the customs house and assess and collect all
duties, taxes and charges thereon (Sec. 1206);

2.

The party adversely affected by the ruling or decision of the Collector, whereby liability for duties,
taxes, fees or other charges are determined, may protest such ruling or decision (Sec. 2308);

3.

The protest, which must be in writing, is filed with the Collector within 15 days. No protest shall be
considered unless payment of the amount due after final liquidation has first been made, and the
corresponding docket fee actually paid.

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4.

Every protest shall be filed in accordance with the rules and regulations promulgated for the purpose,
and shall point out the particular decision or ruling of the Collector to which exception is taken or
objection is made, and shall indicate with reasonable precision the particular ground or grounds upon
which the protesting party bases his claim or relief (Sec. 2310);

Reason for Automatic Review in Customs Proceeding (Yaokasin v. Commissioner, G.R. No. 84111,
December 22, 1989) Automatic review is intended to protect the interest of the Government in the collection
of taxes and customs duties in seizure and protest cases, which, without such review, neither the Commissioner
of Customs nor the Secretary of Finance would probably know about. A decision which is favorable to the
taxpayer will not be appealed by him and certainly a Collector will not appeal his own decision (admission of
mistake?)
If a payment under protest is not acted upon for a long time, will the taxpayer loss his right to the refund
if no judicial action is filed? No. the claim for refund of customs duties may be foreclosed only when the
interested party claiming the refund fails to file a written protest before the Collector of Customs. (Nestle,
Phils., Inc. v. Commissioner of Customs, G.R. No. 134114, 2001)
Will the inaction of the Collector be considered as a denial of the claim for refund? No. the Tariff and
Customs Code is silent on this. However, the continued inaction of the Collector or Commissioner should not be
allowed to prejudice the right of the taxpayer. Accordingly, if a taxpayer after waiting for almost six years had
decided to appearl the case to the CTA, the CTA acquires jurisdiction over the refund case. (Nestle, Phils., Inc. v.
Commissioner of Customs, GR No. 134114, 2001)
Tax Period and Manner of Payment of Local Taxes

The tax period of all local taxes, fees and charges shall be the calendar year (Section 165, LGC).

The local taxes, fees and charges are on the calendar year basis, this being the tax period for them,
unless otherwise provided in the LGC like in the case of the tax on transfer of real property ownership
which is not based on the calendar year. This tax is payable within 60 days from date of execution of
the deed or from date of decedents death (Section 135, last par., LGC).

Generally, local taxes, fees or charges are payable in quarterly installments.

Distinction between calendar year and fiscal year Calendar Year is a 12-month period ending
December 31; while a Fiscal Year is a 12-month period ending at the end of any month except
December.

-Good Luck-

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