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MFABIAN
CLASSIFICATION OF TAX
As to subject matter
a. personal e.g. community tax
b. property e.g. real property tax
c. excise or privilege e.g. donors tax, estate tax, VAT, income tax
As to burden or incidence
a. Direct
b. Indirect VAT, percentage tax
As to determination of amount
a. Specific tax on cigars, distilled spirits
b. Ad-valorem real property tax
As to purpose
a. General or Fiscal income tax
b. Special, regulatory or sumptuary customs duties
As to taxing authority
a. National
b. Local
As to graduation
a. Progressive
b. regressive
c. Mixed
d. Proportionate
TAX
Power of taxation
Revenue
MFABIAN
LICENSE FEE
Police power
Regulation
Amount is unlimited
Amount is limited to
to the cost of (1)
issuance of license
and (2) inspection
and surveillance
except for non-useful
occupation
Normally paid before
the commencement
of business
May be with or
without
consideration
Nonpayment makes
the business illegal
The character or nature of tax is determined not by the title of the act
or ordinance, but by its operation, practical results and incidents.
Progressive vs qc
If the generating revenue is the primary purpose and regulation
is merely incidental, the imposition is tax
A charge of a fixed sum which bears no relation at all to the cost
of inspection and regulation may be held to be a tax
Pal vs edu
If the purpose is primarily revenue, or if revenue is, at least, one
of the real or substantial purposes, then the exaction is properly
called tax.
TAX
Enforced
proportional
contribution from
persons of property
A demand of
sovereignty
Levied for the
support of the
government
Amount is
determined by the
sovereign
TOLL
A consideration
which is paid for the
use of a property
which is of a public
nature
A demand of
proprietorship
For the use of
anothers property
Amount is
determined by the
cost of the property
or of the
improvement
By the government or
private individual
TAX
Enforced
proportional
contribution from
persons of property
Levied on land,
persons, property,
income, business etc
Personal liability of
taxpayer
Based on necessity
and partially on
benefits
General application
SPECIAL
ASSESSMENT / LEVY
Enforced
proportional
contribution from
owners of lands
especially or
peculiarly benefited
by public
improvements
Levied on land
Cannot be made a
personal liability of
the person assessed
Based solely on
benefits
Special application
only as to particular
time and place
TAX vs DEBT
Taxes are not contractual in nature, they are mandatory
TAX
Based on Law
Failure to pay may
result in
imprisonment
Not subject to
compensation or set
off
Imposed by public
DEBT
Contract
No imprisonment for
non-payment
May be subject to
compensation
By private individuals
authority
Philex vs CIR
Debts are due to the Government in its corporate capacity, while taxes
are due to the government in its sovereign capacity
SCOPE AND LIMITATIONS
Sison vs Ancheta
Arbitrariness - A mere allegation does not suffice
Where the assailed tax measure is beyond the JD of the state, or
is not for public purpose, or in case of a retroactive statute is so
harsh and unreasonable, it is subject to attack on due process
grounds.
Pepsi co vs Mun. of Tanauan (delegation to local government the power
to tax)
Comm vs Algue supra
i. INHERENT LIMITATIONS (PITSE)
1. Public Purpose
Test:
1. Duty Test
2. Promotion of General Welfare Test (Direct not incidental)
Pascual vs Sec of Public Works
It is the essential character of the direct object of the
expenditure which must determine its validity. Incidental
advantageto the public or the State, which results from the
promotion of private interests, does not justify their aid by the
use of public money.
Gomez vs Palomar (anti-TB stamp; mail users were already a class by
themselves)
The eradication of a dreaded disease is a public purpose
MFABIAN
just because all other needs are not addressed, does not mean it is not
for public purpose
Lutz vs Araneta (levied for the aid and support exclusively of the sugar
industry VALID)
Tio vs VRB
The public purpose of a tax may legally exist even if the motive which
impelled the legislature to impose the tax was to favor one industry over
another.
2. Inherently legislative (Non-delegation)
Abakada vs Ermita
There is no undue delegation of legislative power but only a
discretion as to the execution of the law
3. Territorial (Situs)
CIR vs Marubeni
All services for the design, fabrication, engineering and
manufacture of materials and equipment were made and
completed in Japan. These services were rendered outside
Philippines taxing jurisdiction and are therefore not subject to
contrators tax
4. Subject to international comity
5. Exemption of government agencies and instrumentalities (political
subdivisions)
II. CONSTITUTIONAL LIMITATIONS
1. Due Process and Equal Protection Clause (Art III, Sec 1)
*Sison vs Ancheta
*Victoria Milling case
2. Non-impairment Clause (Art III, Sec 10)
3. Non-imprisonment for Non-payment of Poll Tax (Art III, Sec 20)
4. Art VI, Sec 28
a. Uniform and Equitable
ADMU vs CIR
DLSU vs CIR
9. (Partial) Veto of the President (Art VI, Sec 27)ART
Hilado vs Collector
Tax laws are neither political nor penal in nature, and they are deemed
laws of the occupied territory rather than of the occupying enemy
Central azucarera vs CTA
Expost Facto Rule, except for the penalty imposed (not the interest),
would be inapplicable
NO DOUBLE TAXATION
1. There can be no DT where the State merely imposes a tax on every
separate and distinct business in which a party is engaged in.
2. Both a license fee and a tax may be imposed on the same business or
occupation, or for selling the same article
3. Subjecting the interest on bank deposits to 5% gross receipt tax
Double Taxation standing alone and not being forbidden by our
fundamental law is not a valid defense against the legality of a tax
measure
I. TAXPAYERS SUIT
It is only when an act complained of, which may include a legislative
enactment, directly involves the illegal disbursement of public funds
derived from taxation that the taxpayers suit may be allowed.
Maceda vs Macaraig
J. COMPROMISES
i. when the subject matter thereof is not expressly prohibited from being
compromised
ii. the public official entering into is authorized by law
ALIEN INDIVIDUAL
FOREIGN CORPORATION
(resident or not)
NON RESIDENT CITIZEN
1. A citizen who establishes to the satisfaction of the Commissioner the
fact of his physical presence abroad and his definite intention to reside
therein
2. A citizen who leaves the Philippines during the taxable year to reside
abroad, either as an immigrant or for employment on a permanent basis
3. A citizen who works and derives income from abroad and whose
employment thereat requires him to be physically present abroad most
of the time during the taxable year (183 days)
4. A citizen who has been previously considered a NRC who arrives in the
PH at any time during the taxable year to reside permanently in the PH
shall likewise be treated as NRC for the taxable year in which he arrives
in the PH with respect to his income derived from sources abroad until
the date of his arrival in th PH
Kinds of Income Taxpayers (Sec 22)
Evangelista vs Collector
Partnership
i. an agreement to contribute money, property or industry to a
common fund
ii.intent to divide the profits among the parties
CIR vs BTC same ruling
Income sources from within and without the Philippines (Sec 42)
RESIDENT CITIZEN
DOMESTIC CORPORATION
NON RESIDENT CITIZEN
MFABIAN
iv. Royalties
v. Sale of real property
vi. Sale of personal property
*sources within the country which sold
Except: gain from sale of shares of stock in a domestic corporation shall
be treated as derived entirely from sources within the Philippines
regardless where said shares sold
BOAC vs CIR
The source of an income is the property, activity or service that
produced the income
V. COMPUTATION OF TAXABLE INCOME
a. TAXABLE INCOME
i. the money or property received is income, gain or profit (and not
return of capital)
ii. the IGP is received (actually or constructively), accrued, or realized
during the taxable year;
3. The IGP is not exempt from income tax under the Constitution, tax
treaty or statute
Madrigal vs Rafferty
the Income tax law does not look on the spouses as individual partners
in an ordinary partnership
b. Computation of Gross Income
EXCEPTION:
If a corporation cancels or redeems stock issued as a dividend at
such time and in such manner as to make the distribution and
cancellation or redemption essentially equivalent to the
distribution of a taxable dividend
Elements:
i. there is redemption and cancellation
ii. transaction involves SD
iii. the time and manner of the transaction makes it essentially
equivalent to a distribution of taxable dividends
presence or absence of real business purpose
MFABIAN