[TAX 2: ATTY.
LIM:SARAH TALI] 1
3 inherent power of the state
Police power
Power of eminent domain
Power of taxation
Why are these inherent? Saan ba galling ito?
Inherent means it is an unwritten authority, it did not come about from the constitution, and
nobody gave the power of taxation to the government. It existed together with the state, they are
born together with the state
POWER OF TAXATION
When we said inherent power of the legislative power, we are talking about the power of the
congress to tax, because it is not only the congress that exercise power of taxation, the power of
taxation is exercised by the president and the local government (province, cities, municipalities
and barangay). So 6 lahat yung pwedeng mag exercise ng power of taxationcongress, president
and the 4 local government
In congress its power is inherent, ibig sabihin walang nagbigay, pero pagdating sa president and
political subdivision yung kanilang power of taxation ibinigay, that is why we say that the nature
of tha power of the president to tax is a delegable authority, the nature of the local government to
tax is delegable authority din. Yung sa congress walang nagbigay, it was born together with the
state
The constitution did not grant the power of taxation to the congress, because nobody gave it to
them, so what is the role of the constitution as far as the power of the congress s concern?
The role of the constitution stays closely on monitoring on what the government is doing in
the exercise of the power of taxation
The constitution is the watch dog
The constitution is the german shepherd
How does the government exercise the power of taxation? Bakit kailangan bantayan?
Because the power of taxation is a very destructive power, it can build and it can destroy a
nation.
This power of the congress is imprescriptible--- DOCTRINE OF IMPRESCRIPTIBILTY
Ang nag pre-prescribed sa taxation ay yug mga process, the time when the government will
collect the tax, but as far as the power of taxation is concern it is imprescriptible.
Meaning yung power na yan hindi nababawasan, its not shrinking. It will always constatant,
its like the air that you breath,
Example:
The congress did not exercise the power of taxation on a particular activity, and the
congress has not been taxing that for the last 100 years, and today the congress tax it,
and you happen to be in that activity, can you question the congress?
No, because the said power is always available to use
Hence: not available in taxation
Doctrine of non-use
Doctrine Latches
Doctrine of Non-claim
If congress exercise their power to tax, ang mga ginagawa nilang batas are taxes involving the
national government, so ang lumalabas na tax sa kanila ay national taxes. This national taxes
ibabato yan sa BIR, the BIR does not exercise the power of taxation it merely implement the
tax laws created by congress
Pag may pera na ang BIR, yung perang pumapasok ay pera na ng national government.
Remember this: national taxes are not collected by the BIR they are enforced by the BIR,
we pay our national taxes to the accredited banks
National taxes (IR taxes) are all self-assessing taxes
Meaning self computed tax
One of the taxes enumerated in the tax code is income tax kung gusto mong magbayad ng
income kasi last year kumite ka at yang kinita mo na yan is subject to income tax, ikaw ang
mga cocompute ng income tax mo. So the definition of self-assessing tax is it is a self-
computed tax
Ikaw ang magcocompute hindi ang BIR, kasi ikaw ang nakakaalam kung gano kasami ang
income mo sa isang taon, ikaw ang nakakaalam kung ilan ang anak mo, ikaw ang
nakakaalam ng mga expenses mon a dedcutable, hindi alam ng government yan, ngayon
yang computation should be presented in a prescribed form, prescribe document, hindi yan
computation na nasa yellow pad, the computation must be transferred after you done it
correctly based on your evaluation on a prescribed report and show to the BIR, that piece of
paper is called TAX RETURN, lahat ng klase ng tax na nasa tax code they have their
own tax return hindi yan labo labo
If it is for income income tax return
If It is estate tax estate tax return
If it is a withholding tax withholding tax return
Do not forger that the supreme court in many cases held that our tax return are self- serving
document, syempre as a tax payer ang ilalagay mo dun yung makakabuti sayo, so when you
submit your return to BIR, the BIR is authorize to amend your return if he does not
belief that it is not correct, the BIR is also authorize to make a tax return in case the tax
payer failed to do so,
Note that the commissioner of the BIR has 25 powers, 5 of which are none delegable.
Powers that are delegable
The power to amend
Power to prepare a return
ORIGINATION RULE- revenue laws must originate from the lower court, so yung mga
congressman ang mag iinitiate yan, hindi yan power ng senador
From the congress (lower court) there will be hearing until majority approve the bill
senate revenue bill president to sign it goes to publication in newspaper of
general circulation at least twice, and 15 days thereafter we have a tax law
This answer the question of how the power of taxation is exercise?
The power of taxation is exercise by making a tax law
Kunwari, yung version ng lower house at version ng upper house may pag kakaiba
bicameral committee (they will try to harmonize the two version in mandate of the
constitution) babalik yan sa lower and upper house if gusti nila o hindi, if ayaw nila then
babalik yan sa bicameral committee
So you can see nap ag dating sa tax law it takes a while, its a long long process
Take note that in harmonizing the bills, hindi maiiwasan ng bicameral committee na hindi
mag dadagdag para maitugma ang dalawang ito, provided that the bicameral committee do
that, did the bicameral committee exercise the power of taxation?
No, as we said power of taxation is exercised on by congess in national level and
sanggunian in the local level
why not?
Because kung ano man ang dinagdag nya babalik yun sa dalawang chaimbers
subject to their evaluation, hence whatever they change it is not automatic na ok
nay un subject yan sa review or evaluation
How is power of taxation exercise by the senate?
The senate exercise the power of taxation through ARMS
A- amend the bill that originated from the lower house
R- revised it
M- modify it
S- Substitute it.
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It came to us through atty. Tolentino questioning the validity of VAT, ang When he is an overseas employee or a seaman.
nayari dito yung lower court nag draft ng VAT tapos yung upper house nag Summary: income earned by Filipino or domestic corporation
draft din ng sariling version nila while waiting for the the bill from the abroad is always subject to income tax, except when the
lower house, when the lower house approve there version of VAT and Filipino is an overseas employee or seaman
transfer it to the upper house, the upper house delete everything from that Estate tax- also a tax on a right, so even if the property is in abroad
version and substitute it with their own version copying only the title of the that property is still subject to an estate tax, because estate tax is a tax
bill so atty. Tolentino question the validity of the VAT law on the on a right.
ground that it violated the origination rule, SC approve the Doners right- it is a tax on your right to give donation while you are
constitutionality of the VAT law hence it tells us that the senate can alive, hence even if the subject of donation is in abroad it is still
substitute the entire body the bill provided that they maintain the title of subject to a doners tax
the bill. Stamp tax the documents that are subject to stamp tax are the
Is the power of taxation delegable? document that support the transfer of ROPI
No, unless the congress enact a law delegating the power and such delegation has valid R- right
standard O- obligation
Valid standard P- property
There is limitations there is no total delegation of power of taxation I-interest
Power of taxation is subject to territoriality: PRINCIPLE OF TERRITORIALITY A- acts
GENERAL RULE: It only means that power of taxation cannot be exercise beyond the P- persons
territory jurisdiction of the Philippines P- privileges
It only means the subject of taxation must be within the confineds of territory of the P- properties
taxing authority Power of taxation is a wholesome power, meaning to say it can tax anything under the sun, and
So if the taxing authority is the philippines that object or subject of taxation must be because of that we are made to understand that the power to tax is an absolute power BUT!
within the philippines, because the philippines has no taxing power outside the Power of taxation is an absolute power provided it does not contradict CIC
philippines C- constitution
EXCEPTION: if it is a right that is exercise, the exercise of right is taxable under philippine
I- inherent limitation
standard whether the right is used inside or outside the philippines it will be taxable,
C- contract
provided the tax payer or entity is a filipino or domestic corporation
When we said that it is a wholesome power, it includes a lot of things, it even include the
Note: business license and business permit are local tax
power to destroy,
What is the subject, object and scope of taxation?
Sample: if the government tax too much a certain activity, people will not invest on
BITRAP3
that activity, hence it will not support economic engine for the development of the
B- businesses
government
I- interest RESIDUAL POWER
T- transaction We discuss a while ago the scope of taxation, now question can the congress tax outside
R- rights that scope (BITRAP3)?
This is an excise tax the tax the we collect in the exercise of a right Yes, we call it the residual power in taxation (legal basis), the congress can tax
Kinds of excise tax anything outside the common enumeration provided that it does not violate the CIC to
Privilege tax tax in the exercise of the right make it valid
Excise tax on certain goods business tax Sample: tax messages
When it is the right that is exercise to know whether or not the government can NO INJUCTION RULE
collect the tax you have to find out who is the person to be taxed. When congress exercise the power of taxation national level no injunction rule applie,
if the person who exercise the right is a Filipino or domestic corporation hindi pwede ang TRO
the exercise of this right is taxable, whether it is exercise within the Saan ba ginagamit ang no injuction rule in taxation
Philippines or outside the Philippines hence the exemption in the When the BIR enforced tax collection, pag nag cocollect na sila-- di pwede ang
principle of territoriality is the exercise of a right. TRO
Samlple:4 taxes that are exemption to the doctrine of territoriality: Summary: so dalawa ang pinag gagamita natin ng no injuction rule
Income tax it is not a tax on the person earning the income, it is not
When congress exercise the power of taxation
a tax on the money earned, it is a tax on the right of the person to When the BIR enforces tax collection
earn an income. therefore if you are a Filipino and you have a
Local level- no injunction rule does not applywhen the local government enforces tax
condo unit in Singapore under rent, that income earned abroad is
collection
subject to income tax in the Philippines
DOUBLE TAXATION: not prohibited but avoided
Question? When is a Filipino exempt form income abroad?

Direct double taxation : should be avoidedextra burden to the tax payer
One entity tax twice within the same year, by the same authority, for the same purpose
imposing the same kind of tax
Remedies
Apply:
Tax exemption
Tax credit
Tax deduction
Tax incentive
Principle of reciprocity
Treaties
Avail privilege of franchise
Domestic double taxation
Both taxing authority are local
international double taxation
One of the taxing authorities is foreigner
If you read the constitution and you saw the word public fund then it means that the money came
from the power of taxation.
TAX RETURN
NIRC (national internal revenue code) has a tax return has prescriptive period
(assessment/ examination)
LTC (local tax code) no tax return has prescriptive period
RPTC (real property tax code) no tax return has prescriptive period
TCC (tariffs and customs code) no tax return imprescriptible
TAX EXEMPTION is the immunity from the payment of the tax where others are obliged
to pay, so you and the other has a different
the congress exercise the power of tax exemption hence the congress can also exempt those
it ca tax, so whatever is taxable by the congress can be subject to exemption by the congress
only the congress that grant tax exemption ang gagamit lang power to exempt is the
entity that exercise the power of taxationm since the BIR does not exercise the power of
taxation, hence the BIR cannot grant tax exemption
BUT the BIR can suspend you from the privilege, if the BIR finds that you are not
among those exempties provided by the law or you are not complying with the
requisite of the law they can suspend the privilege but not revoked the privilege
How broad is the power of the congress to EXEMPT?
Congress power to exempt is as broad as their power to tax. But no so with the
president as well as the LGU
The president exerises the power of taxation (delegation) his power to exempt
is very limited, hindi dahil pwede nyang itax pwede nyang iexempt no no no,
that statement belong to the congress
As a matter of facts the things that president or LGU can exempt are
already enumerated by the law (exclusive) outside of that enumeration
they cannot exempt.
The local government unit also exercise power of taxation (delegation) the
power to exempt is also very limited, hindi dahil pwede nyang itax pwede nyang
iexemp
The power to exempt is highly disfavored, because if the life blood doctrine pag nag
aapply tayo ng tax exemption para tayong dumadaan sa butas ng karayom
How do you avail tax exemption?
You have to apply, because tax exemtion is not automatic
[TAX 2: ATTY. LIM:SARAH TALI] 3
If you are the applicant you have to show in your petition
you have to write that there is a law granting the exemption and then you
site the law,
then you also have to site in your petition for tax exemption that you are
among those possible exemptee under that exempting law
you have to apply in lower house majority approval upper house
majority vote approval you have approval from both chamber BIR will
get your approval and replace it with CERTIFICATE OF TAX EXEMPTION
good only for 3 years because we do not have pertual tax exemption , kahit
under the law 20 years ang tax exemption pag dinala mo yung approve petition
mo sa BIR initially ang ibibigay lang nyan ay good for 3 years why?
Because they monitor that things that you do if it is really the things that are
exempt under the exempting law. so every 3 years you have to report to the
BIR kung ano ang ginawa mo or ano ang mga activities mo, you have to justify
that you are entitled to continue with that priviledge granted to you by the
congress then they will give you another 3 years, then another 3 years until
you consume the years given by the exempting law.
Tax exemption is none tranferable
Tax lien these are the taxes that are not collected by the government because of the tax
exemption priviledge
Tax exemption is not perpetual
The church, charitable and educational institution they are only enjoying the
priveldge because it is enshrined in the constitution, if the constitution will be
amended then so be it, wala silang magagawa.
How do we reconcile tax exemption with life blood doctrine?
We cen reconcile the both of them with the concept that tax exemptin is not perpetual.
The life blood doctrine means to collect tax but the power of taxation is not available
when there is a valid tax exemption priveledge within the confine, within the period
that is was granted, mean while when we are not collecting tax from that exemptee we
are collecting we are recovering elsewhere.
Illustration:
May naligaw na foreign investor dito satin, because of the amount of capital
that he will infuse in our country this foreigner is granted of income tax
exemption for 10 years within the first 10 years the government cannot
exercise the power of taxation you will note that wala tayong BLANKET
TAX EXEMPTION ( it means you are exempt from all kind of taxes) the
application of tax exemption in our country is particular and specific lang but
not all so the EES of that foreign investor are earning income, then those EES
will be subject income tax, but not the foreign investor so may nawawala
pero may napagkukunan naman ulit hence tax exemption is not condemable
besides his tax exemption is only for 10 years
When the government is granting tax exemption, the government basically exercises two
functions
Governmental function delivering basic services to the people
If the government is exercising governmental function the government is not
taxable
That is Enshrined in the constitution it premised in the situation where
the government is exercising governmental function.
So in the exercise of governmental function pag kumuta ang government
that money is exempt from income tax
In this capacity the government exercise TAX EXEMPTION
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The exemption granted by the government in the exercise of governmental
function is called a FRANCISED it is a tax privilege grated by the
government in the exercise of the governmental function
FRANCISED
It is always revocable
Not protected by non-impairment clause by the constitution
Reason because it is not a contract since there is no
meeting of the minds mere unilateral agreement.
Proprietary function when the government buys, when the government leases
If the government is exercising Proprietary function the government is
taxable
exemption that is granted in the exercise of proprietary function tax
exemption through a contract
not revocable
protected by the non-impairment clause of the constitution
Because there is a meeting of the minds between the government and
the person.
When the government exercises governmental function it steps in the shoes
of an ordinary tax payer hence the government is taxable
Sample:
the government lease a property to a private person to be a satellite the
government is taxable for VAT because when the government leases it is
taxable
There is a government property which id exempt from real property tax
exemption to that is when the said property is lease to a private entity,
when the beneficial used of the government property is transferred to a
private entity the said property becomes taxable the burden of taxation
is on the beneficial user NAPOCOL DOCTRINE
Church
Performs a religious activity and then after that said activity people donate
money so in the performance of religious activity by a religious organization
exempt from income tax (RR)
Sample:
Gusto ng church na ipagawa yung simbahan so nag fund raising activity
sila after 3 years nag karooon na ng pera and yung pera gagamitin pang
renovate ng simbahan the money earned is TAXABLE because that
money did not come from religious activity but from an independent
activity.
What if the church argued that the money will not be distributed to
anybody instead it will go back to the organization NOT tenable
because sec 30 is very clear, when there is money coming in from
an activity that is foreign from the main objective, regardless of the
disposition of that money, the money is subject to income tax.
What we are exempting as far as the church is concern is the property of the
church and the income of the church NOT the church itself. We are not
exempting the priest from taxation, we are exempting the church from taxation,
but we are exempting the property and income of the church from taxation when
the income is earned from an activity that is related from their main function.
Sample:
The priest perform a healing prayer to a certain man, then after that the
family of that man give the priest 20K is that money taxable?
DEPENDS if that money will be surrendered to the church then it is not
taxable, because it is a religious organization performing a religious
activity but if the 20k is the personal allowance or personal income of
the priest then that money is taxable because the priest is not exempt from
tax. Because the exempt is the property of the church and the income of the
church from its religious activities.
Educational institution non-stock, non-profit or educational institution that is
own by the church
educational institution performing an education services and earns money from
the students exempt from income tax (EE)
ang mga educational institution that can be exempt from taxation are those
owned by the government public schools non stock, non profit
non-stock hindi nag iinvite ng investor, they are not selling shares
non-profit you are not design to be in business, it is not your main
function
educational institution run by church exempt from income tax
educational institution which will include hospital or orphanage or charitable
organization, if these entities performs civic organization exempt from
income tax (CC)
Hospital non-stock, non-profit
Collects money from pay patience since money is also coming in for the
performance of hospital services operated by the hospital exempt from tax
Private school and private hospital
For these two entities the are required to maintain two sets of books
Private schools shall separate their income from tuition fees and income
from allied services ( could be canteen, bookstore, dormitory)
If the income from tuition fees of the private school is more than
of the income earn from the allied services then this school is
taxable at 10%
If the income from the tuition fees of the private school is less than
the income earned from the allied services then this school is an
ordinary corporation 30%
Same with hospital we call it the PRE-DOMINANT RULE we
use it to analyze how private entities are tax.
How do you define the MOST FAVORED NATION CLAUSE PRINCIPLE OF TAXATION
This is an international treaty that is practically recognized by all nations, dito sa treaty na
to sinasabi na pag meron foreign investor sa isang bansa treat them all equally and
uniformly, because they are all foreign inverstors treat them alike, do not distinguish
them
Pls rember papasok ang principle na ito if may uniformity and equallity in taxation you
have to prove CSC (same conditions, same situations, same circumtances) otherwise
there will discrikmination
UNIFORMITY
It takes about rates those similarly situated must be tax at the same rate
EQUALITY
Refers to privileges
Question: can these two (equality and uniformity) be achieve simultaneously? Pwede bang
pagsabayin ang benefits nyan?

No, you cannot, it is impossible to achieve these two together at the same time, you
have to separate them. Ideally pinagsasabay natin, pero mahirap abutin yung situation
na yan
Sample:
X is earning 300k per annum, has 3 kids, Y is also earning 300k but he has on 1
child at the end of the year you have to impose the same rate, while it is true
that they should be tax at the same rate but at the end of the day Y is paying
more taxes because he has less deductions , X will be enjoying more deduction
cause of his 2 dependents so may uniformity pero walang equality
Illustration: case
In our country there are a lot of foreign investors, there are a lot of resident
corporation (foreign investors engaged in business in our country) itong mga
foreign investors na ito bago sila mag business dito sa atin humihingi sila ng tulong sa
government nila na pakiusapan ang PHL na bigyan sila ng speacial package or special
treatment na babaan lang ang kanila taxes so makikita mo ang treatment natin sa
mga foreign investors natin iba-iba kasi iba-ibang governement ang kausap tapos
titingnan pa natin kung pioneer industry yung ipapasok or yung mga nasa negative list
(industry na marami na sa atin) so ang rate nila tapos may isang foreign investor
who is paying at the rate of 25% question kung bakit iba yung bina bayaran nya
compared dun sa iba na nag babayad ng 8% so he invoke the most favored nation
clause, and said that they should be treated alike SC, the Philippines recognizes the
most favored nation clause principle but then to enjoy that you have to show that you
are similarly situated, in like conditions, in like situations, in like circumstances, dapat
pare pareho kayo ng ginagawa, pag may pag kakaiba hindi mo pwedeng iinvoke ang
most favored nation clause principle.
TAX PYRAMIDING
When you tax a tax when you impose a tax on top of a tax
SC you cannot tax another tax because that is tax pyramiding
TOLL FEES VS TAX
Toll fees
Regulatory imposition, the purpose of this collection is to regulate business activities
of professional conduct.
Exercise through police power
Tax
Generate income for the survival of the government
Exercise through power of taxation
CHARGES vs TAX
Charges
The principle behind collecting charges is the principle of equity
Charges are being collected by the government only when it rendered services to the
public, meron syang ginawa ng pinakikinabangan ng taog bayan
Samaple:
Public market monthly fee must be paid by the lessee we call it
charges
Tax
Generate income
Question: can public funds be spend for private purpose?
Yes, provided it will enhance the social justice of the government, it has transcendental
importance (addressing emergency need or calamities) and it has far reaching implication (it
is not only benefiting people today but also future generation).
TAX PAYERS SUIT
[TAX 2: ATTY. LIM:SARAH TALI] 5
Is a class suit filed by any tax payer, so even an alien can file a tax payer suit, questioning
the illegal expenditure of public funds (money generated from power of taxation)
Need not be a party to the contract in question involving public fund, hence the direct injury
test is no longer applicable in tax payer suit.
TAX AMNESTY PROGRAM
This is a program that overlooks previous tax infraction, it is a general pardon of all your
tax violation calling for tax payers na may kulang sa binayaran (DIFFICIENCY TAX)
and yung mga hindi nag babayad at all (note: if wala ka talagang binayara we call it
DELINQUENCY TAX ) and voluntarily and honestly declare your undeclared income
then subject it to a very minimal rate once paid all your previous tax violation will be
pardon and you will be exempted from tax examination from all those previous years.
When the congress create this tax amnesty program, it already enumerated those who are
excluded from the program.
One of those enumerated is WITHHOLDING AGENT
Not qualified under the tax amnesty program because he is no a tax payer
He is an agent of the government in tax collection and he is also the
representative of the tax payer in the payment of taxes.
And those cases that were already decided by the court are not allowed to enjoy tax
amnesty
Pending assessment can enjoy tax amnesty
Note: Revenue regulation shall not contravene the law it seeks to
implement
The benefit attached to tax amnesty program is immediate, not conditional not subject to
BIR investigation (documents)
TRANSFER TAXES
we have 2 kinds of transfer taxes
estate tax death tax collected only when somebody dies
donors tax gift tax collected when somebody give a gift
but in reality we have one more stock transfer tax but this is a business tax
note: a property can be subject to different kind of taxes, but there is no double taxation there
because those taxes are of different nature and impose by different authority
ESTATE TAX
the most expensive tax that we have to pay
estate tax is not looking to the decease but to the heirs heirs receive windfall and in
every centavo that they received the government is their silent partner
The government is a silent partner, the government is a passive partner, the
government hidden partner in the process of wealth accumulation.
Reason What justify tax collection P2RIC note: presumed to be given by
the government
P- protection
P- peace and order
R- resources
I- incentive
C- conclusive climate
Titles to properties cannot be change without proof of payment of estate tax
Properties left behind cannot be partition without proof of tax payment
No tax payment, no partition
Estate tax rate
5, 8,11,15,20
Problem:
6 [TAX 2: ATTY. LIM:SARAH TALI]
if you were the government and you keep on lowering the state tax you are
favoring the rich because sila lang ang nakakapag mana
Only in our country that income tax is higher than the estate tax
We must change this this is a mortal sin
Reason: because people need food on the table
What are the theories advance the government in justifying the imposition of the estate tax?
Back tuck theory
Under this, there is a presumption that the deceased did not pay the government
of right taxes, so now that his death and before the properties are distributed to
the heirs the government will collect the tax that he did not pay through estate
tax
Benefit receive theory
Applies to instances when the decedent left a will (probate is mandatory)
once surrender to government, the government will make sure that the wishes of
the decedent are properly complied with so the government now render
service benefiting the family and for services rendered there must payment
the payment now would represent estate tax payment
Presumes that a will is left behind
Redistribution of wealth theory
To equalized the playing field between the poor and the rich
Kaso hindi eh, binaba ng binaba ang estate tax eh! galit na si maam
Ability to pay principle
Estate tax looks at the recipient of the inheritance since now this people receive
money so it creates from them the ability to pay, so they should be able now to
share the part of the government
The state tax payer partnership theory
For every centavo that we receive the government is our silent partner kaya
pag namatay tayo isa rin yan sa mga pipila
Question: when there is no money left behind but only property are you exempt from
payment of estate tax?
No, you are not the tax payer, the property is the tax payer, so you get the estate tax
from the property left behind , provided the property left behind is more than 200k
hindi ang mga heirs ang tinatax
More than 200k estate tax payment + estate tax return
If the value of the estate is less than 200k you are exempted from payment of an estate
tax BUT you are not exempted from the preparation of an estate tax return.
because transmission of properties from one person to another gratuitously by death or
by gift is a taxable transaction, so if you enter in a transaction that is taxable under the
tax code, even if you dont have tax to pay you are required to prepare a tax return
Less than 200k no estate tax payment + estate tax return
If you cannot pay estate tax in due time go to the BIR and ask for the extension, if not
there will penalty (by way of interest) lumaki yung interest mo kasi hindi mo agad na
settle ang remedy mo na lang ay mag intay ng tax amnesty
BANK DEPOSIT OF THE DECEDENT
Estate tax is exempt from Bank Secrecy Law, hence BIR is authorize to inquire to
bank deposit
Bank deposits will be freeze the only time that you can withdraw from that account
is for funeral expenses which is 20k
And/or account = survivors account =winner takes all account not included in the
estate tax
Joint account of the account is subject to estate tax
Where it should be paid?
Estate tax is paid in the nearest BIR in the domicile of the deceased prior to his death
What law should apply?
The law at the time of his death applies
Who are taxable?
resident decedent (RD) resident citizen(RC)- resident alien (RA)- non-resident
citizen (NRC)
FILIPINO
We do not care where he dies, filipino dying abroad will be subject to
estate tax
RA foreigner that is permanently residing in our country, for one reason or
another dont want to get our citizenship
RA is a tax payer tax like a Filipino so when a Filipino is taxable at
5% a resident alien is also taxable at 5%, if the Filipino enjoys privilege
then a resident alien also enjoy the same thing
The only exemption is taxability of income
A Filipino is taxable worldwide, while a RA is taxable only to
income earn from within.
Pls note: Si RA pwede syang pasukan ng income tax kung kumikita sya,
kung namatay naman sya yung properties left behind papasukan din yung
mga properties nya ng estate tax DO NOT FORGET:
If it is income taxable only to the income he earned within the
philippines, we do not care if he has income outside the country that
is beyond our control
If it is ESTATE TAX we will be taxing his property wherever
situated so even his property abroad is subject to estate tax
Means to check the truthfulness:
Go to the embassy and get a certification attesting to the
fact that the decedent has no property abroad if that is the
case or if there properties give us the current FMV of that
property at the time of death
If no certification then the family will not enjoy any
allowable deductions
non-resident decedent (NRD) non-resident alien (NRA)
ALIENS
Dying abroad will be subject to estate tax if there are properties within the
Philippines
NOTE:
20k
If the estate value left behind is more than 20k then the family is required
to submit with the BIR NOTICE OF DEATH (within 30 days from his
death) can be extended to 30 days from the expiration of the original
period total number of days for notice of death is 60 days in maximum
(mandatory)
Failure to submit penalty of 1k as minimum
If the estate left behind is less than 20k no notice of death
Exemption
If among the properties left behind is registrable property that
property cant be transferred without tax clearance/ BIR
clearance
 [TAX 2: ATTY. LIM:SARAH TALI] 7

Sample: properties subject to philippine taxes? yes, because a

Stocks, land, vehicle filipino is tax wordwide
200k A foreigner went to the philippines, tapos may dala sya mga
If the estate value left behind is 200k less or more estate tax return must certicates of shares then he died in the philippines
be filed (within 6 months from death )(peso value lang ng properties yung quesstion: is the foreign shares of stock issued by foreign
ilalagay) can be extended to another 3 months from expiration of the corporation taxable? we now have to take into
original period (the extension must be prayed within the original time) consideration the principle of reciprocity
Note: if more than 200k there is already tax that has to be paid When is the foreign shares located within? note: principle of
When? also within 6 months from death reciprocity is not applicable
Can be extended: depends If the foreign shares have acquired business situs
If there is a will 5 years from death Sample:
If no will 2 years from death REGISTRATION (for whatever reason) when
Note: while it is true that you can ask for the extension of the shares or transaction have been registered in any
payment, but it is not automatic, you have to ask. Do not forget if government entity, then it acquired business situs
youll be able to ask for extension the imposition of interest is not If the foreign shares is use in the philippines for furtherance of
suspended. profit
2M Sample:
COMPOSITION OF THE GROSS ESTATE when the property is used for business to gain profit
Decedent = RP +PP + IPP +life insurance (if qualified) + intervivos transfer (if If the IPP is a foreign franchise that is exercise in the
qualified) + donation mortis causa philippines
Sample:
Real property Personal Intangible francise is a privilege, if a filipino went to the US,
property personal property while going around he tried to look for a business na
RD World wide madadala nya dito sa Philippines, sabihin natin na dito sa
NRD within within Within * Philippines walang KFC, so si Filipino binili nya yung
Intangible personal property franchise na yun for $10M tapos dinala nya sa
Sample: shares, bank deposits Philippines, pag namatay si Filipino yung $10M na yun
it is taxable if the property is within the philippines and there is no that is a foreign franchise exercise here in the philipines,
recognition principile of reciprocity that is a privilege that was used in the Philippines.
* if it recognized the principle of reciprocity not taxable If the issuing company has more than 85% of its operation in
note: that this principle is only applicable to NRD if the owner of the Philippines
the shares of stock is a filipino, no question as it is subject to estate Sample:
tax, BUT if the owner of that shares of stock is a foreigner then many foreign corporation has there own factories here
we will introduce the principle of reciprocity. in the Philippines but not in other foreign country, because
How do you know that there is principle of reciprocity?: Principle they taking advantage of our cheap labor, then if this
reciprocity: ELEMENTS company has 85% of its operation in the Philippines, the
we have to establish there is a same or similar kind of tax in shares of stock issued by this company is considered
both countries property within the Philippines such as businesses in
Filipinos in that country are also enjoying the same privilege of the eco zone with no factory outside except the
being excluded philippiness
shares Bank deposits
When shares of stock is issued by domestic corporation always And/or account = survivors account =winner takes all account
considered as properties within the philippines not included in the estate tax
Joint account of the account is subject to estate tax
We do not care where the certificate is located
Life insurance
We do not care who is the owner of that share, so long as the
the only insurance that has tax implication
one who issued it is a domestic corporation then it is a property
Included in estate tax if qualified
within the philippines.
Illustration: Life insurance can be subject to income tax or estate tax
Income tax
There is a filipino who went abroad, while working abroad he
The life insurance was purchased by the tax payer (not a group
bought shares of stocks and bonds (foreign properties issued by
foreign corporation) he died question: are these insurance nor a company insurance) and the proceed of the
said insurance is not a product capital, labor or both hence
8 [TAX 2: ATTY. LIM:SARAH TALI]
that proceed receive by the beneficiaries are not subject to
income tax WE CALL IT THE EXCLUSION
If the money or the proceed of the said insurance will be used
as a capital then the fruits will be subject to income tax
Estate tax
The life insurance must be purchased by the decedent/ tax payer
(not a group insurance nor a company insurance)+ irrevocable
not subject to estate tax
The life insurance must be purchased by the decedent/ tax payer
(not a group insurance nor a company insurance)+ the
following RAEE: subject to estate tax
Revocable policy meaning the beneficiaries can be
change
if the policy is IRREVOCABLE NO ESTATE TAX
The court appointed an administrator to take care of the
properties left behind
Executor appointed by the decedent to take care of the
properties
If the benefits will go to estate of the testator/decedent
Inter vivos transfer subject to estate tax (testamentary substitute): CR2IG
included in estate tax if qualified
There are some transfers made by the decedent during his lifetime
taxation says that kahit wala na sa pangalan mo yung value nun pasok sa
estate tax we call it TESTAMENTARY SUBSTITUTE/ INTER VIVOS
TRANSFER SUBJECT TO ESTATE TAX
When it is included to estate tax? CR2IG
Transfer in contemplation of death
Exemption: bona fide sale
Illustration:
A- rich man, discovered that he has cancer when he
knows that he is dying, he started transferring properties
to his children and other relatives his purpose is to give
it habang buhay pa sya kasi ang donors tax is cheaper than
the estate tax if he died, all these properties will still
form part of his gross estate because he transfer it in
contemplation of death
BUT if he knows he is dying and he SOLD the properties
under a bona fide transaction the price is right NOT IN
CONTEMPLATION OF DEATH hence it will NOT
FORM PART OF THE GROSS ESTATE.
Transfer with reservation of certain rights or interest
Illustration:
A- wealthy man, every year malaki ang binabayaran
nyang income tax, kaya ang ginawa nya he transfer some
of his income generating properties to his children para
bumaba yung tax base and tax rate nya (this is tax
avoidance, because transferring of properties is legal)
but in the dead of transfer it states the he will still have
control over the income of the properties so he has
reserve to himself some interest still part of the gross
estate.
Note: a false return is not a fraudulent return, a fraudulent
return is a return that shows very clearly that you have the
intention to cheat the government in taxes (sample: under
declaring of income), if mahuli ka dya may civil liability na
meron pang criminal liability. Pero pag may mali lang doon sa
return mo, false return, there are some mistakes whether
intentionally done or unintentionally done, it is not going to be
covered by a fraud penalty because you do not have the
intention to cheat the government of taxes.
There is no presumption of fraud
Revocable transfer
Yung mga transfer na may bawian
It is subject to estate tax regardless whether the power to revoke
has been exercise or not, so as long as the transfer is revocable
then that property is subject to estate tax
Transfer for insufficient consideration
How does the BIR determine that?
Through the current fair market value (FMV) of the
property or zonal value as identified by the BIR.
Itong insufficient consideration madalas yan ginagamit sa
ordinary asset.
capital asset cannot be sold for insufficient
consideration, it is the ordinary asset that can be sold for
insufficient consideration.
Illustration: dalawang tax ang pumasok
There is a property worth of 2M (zonal value of the
BIR) if you are the owner of this property do not sell it
for insufficient consideration BUT you sell it only for
700k computation: get the 30% of 2M = 600, then 600-
2M =1.4M, so you are not suppose to sell the property
lower than 1.4M when you sold it for 700k, you sold
the property for insufficient consideration also since it
is an ordinary asset it is subject to donors tax, kasi
pinamimigay mo so selling an ordinary asset for
insufficient consideration is subject to donors tax, aside
from that if this is done by a decedent then the property
will also form part of the gross estate SUM: if you sold
the ordinary property for insufficient consideration and
the decedent is dead the property will still form part of
his gross estate, if he is still alive the property is subject to
an ADDITIONAL donors tax.
Note: if the taxpayer cannot be located the power
of the government to collect taxes is only suspended.
There is 2 kinds of properties:
Capital asset
Assets that are not use in business or not income
generating
if the property is a capital asset and you sold it then
hindi ka papasukan ng income tax, let say you bought a
property in 1990 for 500k, today the land is still vacant
and you are still the owner but the price now is 2.5M due

to the activities in the area question: are now subject to
income tax on the increases of your property? Not yet, yes
taxable but not yet taxable, it is subject to income tax but
not yet payable, because the difference with 500k and
2.5M is only a paper gain, meaning it is only in the paper
hindi mo pa sya magamit, hence paper gain is not yet
taxable
NOW, if you sell this property for 2.5M then you
will have an income of 2M dahil you gain income now
papasok na ang tax, but it is not subject to income tax
because the property that you are selling is a capital asset,
so kapag nag bebenta ka ng capital asset kahit magkano
pa nag kinita mo dyan hindi ka papasukan ng income tax,
ang papasok sayo ay capital gain tax and documentary
stamp tax
note: capital gain tax is a final withholding tax
(nature) kapag pumasok si capital gain tax never na
makakapasok si income tax, they are not compatible
Ordinary asset
Properties that are use to generate income, properties
use in business
pag ang binibenta mo naman ay ordinary asset, the
income that you will gain from the transaction is subject
to income tax
Passing under general power of appointment
If you are asking someone to do something for you and that
transaction has legal implication you have to prepare a written
authority remember that general power of appointment has
tax implication
A person with a GPA can do anything to the property that
is under his custody; hence in taxation that property
belongs to him. so when that person holding a GPA
dies, even in the property is still under the name of its real
owner it will still be subject to the estate tax of the former.
Because he is practically the owner of that property,
since he can do anything to that property, anything under
the sun.
Donation mortis causa
Covered by the estate tax,
We have two kinds of donations
Donation inter vivos binibigay habang buhay pa yung may ari
subject to donors tax
Donation mortis causa the effectivity of that donation only upon
the death of the donor subject to estate tax, even if it is given
during the lifetime of the donor but will take effect only upon his
death.
In case donors tax was paid, then it will be considered as an advance
payment of the estate tax
ALLOWABLE DEDUCTION IN ESTATE TAX: S2HO7E VAT2
[TAX 2: ATTY. LIM:SARAH TALI] 9
Shares of the surviving spouse = of the net estate wag mo munang
gagalawin unahin mo yung standard deduction
Standard deduction = 1M
Family home = 1M you cannot deduct a family home without a certificate
from the barangay (that the decedent is using that as his resident) maximum
of 1 lang ito, kahit na marami ka pang bahay isa lang
Ordinary deductions
Funeral expenses
actual expenses
(incurred by the at the
time of death until the
interment,not a
donation) --> must be
supported by receipt
Which
ever is
lower
funeral expenses
estaimated: 5% of the
gross estate
200k
Claims against the estate decedent is the debtor
Ito yung mga utang nya na hindi nya nabayaran na pwedeng ibawas
sa property na naiwan nya.
The creditor must be alert to make sure that the debt still exists, due
and demandable so that you can collect because doctrine of non-
claims may be applied.
Publication notice to the whole world one the proceeding
of the estate has been published then it will be a notice to the
whole world (constructive notice) so si creditor hindi nya
pwedeng sabihin na hindi nya nabasa yung news paper, hence
he is bound by it
GOVERNMENT is exempt from the doctrine of non-claims
Case: bong bong marcos: can the BIR forfeit properties
while the probate of the will is on going? Yes
Claims against insolvent person decedent is the creditor
Si decedent sya ang nag pautang, pero hindi na nya ma collect kasi
yung debtor is already insolvent, but like in income taxation you have
to include first before you can deduct all the obligation that were still
unpaid at the time of his death, then pag na include mo na and you
also able at the time you submit the estate tax return you able to
establish that B owes the decedent 200k who can no longer paid
because B is insolvent, then you are allowed to deduct, but you can
deduct only of you included it.
What if si B biglang nagbayad after 5 years, how do we treat
the 200k?
The 200k will be considered as a fresh income subject to
income tax, it is not a mere return of capital, because you
already benefited when you deducted it. WE CALL IT
RECAPTURE RULE/ TAX BENEFIT RULE
recapture rule is a bad debt that was deducted but
10 [TAX 2: ATTY. LIM:SARAH TALI]
subsequently paid, the payment is considered as fresh
income subject to income tax, NOT A MERE RETURN
OF CAPITAL
Remember:
The absence of a debtor is not bad debts, because your not able
to proved his insolvency and not your not able to established
your earnest effort to collect
Insolvency must be proven
Proof of effort to collect must also be proven on your part kung
sinusulatan mo ba yung debtor mo.
The purpose of inclusion and deduction is for the government
to collect more taxes
Unpaid mortgage indebtedness
We have to take note that all the properties belonging to the decedent
must form part if the gross estate, kahit na ka sangla pa yung ibang
properties nya then the unpaid mortgage indebtedness is allowable
deduction
Expenses for judicial testamentary proceedings
Presumed that there is a will you have to surrender that to the
probate court all the expenses incurred can be deducted provided
it has receipt because of the substantiation rule no receipt, no
deduction
All extra judicial expenses are also deductible
Unpaid taxes
Taxes that accrued already during his life but remain unpaid are
deductible but not all taxes are deductible, but you have to note for
income purposes taxes are also deductible but not all are deductible
Sa book hanapin nyo na lang sa book kung ano yung mga taxes
na deductible
Losses
Pag may losses ka kailangan go to the BIR and report your losses
within 30 days para maibawas mo yung mga losses mo, kasi pag
hindi ka pumunta hindi mo mababawas yung mga losses mo sa taxes
mo.
So this losses can be deducted to the gross estate provided within 6
months from death the loss occurred is duly reported and you have
now certification from the government agency that indeed that
property sustained lost
Pls take note again that losses are deductible in income taxation and
it is also deductible under estate tax. so the law says if you claim it
in income tax you dont claim it anymore in the estate tax. you
deduct it only once.
Medical expenses maximum of 500k incurred 1 year prior to his death
Papasok naman dito ang substantiation rule, so kailangan may resibo
Maximum lang ang 500k kahit na more than pa yung nagastos, so kung
1M talaga yung medical expenses nya you can only deduct 500k, the
remaining 500k pwede syang maging claim sa estate.
Vanishing deduction
Note that in taxation movement of property creates tax events
Vanishing deduction is a special discount that is deducted in the gross
estate
Purpose it reduces the harshness of successive taxation involving the
same properties
Requirements:
2 deaths occurring within the period of 5 years
There are 2 sets of transfer taxes (donors tax or estate tax) paid from
the first to the second
The first transfer can either be donation or succession but the second
transfer must be through succession
time computation:
in taxation we are using the prime num doctrine (not sure sa spelling)
every month is 30 days, so sa taxation wala tayong 31 days, wala
tayong 29 days, wala tayong 28 days
year month day
2012 09 02
2006 10 11
5 years 10 moths 21 days
in civil law
1 year = 365 days if it is a leap year then 366 days
Administrative law
1 years = 12 months
1 month = 30 days
1 year = 360 days
illustration
if H died and he left properties to W, before W can transfer the name
of that property to her she must first pay the right taxes (movement of
properties create tax events) the problem is within 5 years from
the transfer W also died so the properties now pupunta sa anak ni W
na si S and since movement creat tax event itong anak na to
kailangan ulit mag bayad ng taxes para malipat yung name nila dun
sa property so si S pag babayaran na nya yung estate tax para
magtangal yung pangalan ng W mag kakaroon sya ng special
discount we call it vaninshing deductions PLS remember that it is
S that would enjoy the vanishing deduction
Amount receive by heirs through RA 4917
RA 4917 it is a law that mandates all ERs to give financial assistance to
all EEs that died while in active duty. once the heirs receive this then
they have to deduct in the gross estate
Sample:
You have a janitor tapos inutusan mo yung janitor mo na
magdala ng letter sa post office , tapos habang tumatawid
nasagasaan then you will give financial assistance to that
person deductible in the gross estate
Hindi kasama dito ang retirement benefits kasi retirement benefits are
absolutely exluded from estate tax
Transfer for public use
Illustration

In the will the decedent said that his property in manila will be
donated to the local government as day care center hence that
property is deductible
But do not forget pledges are non-deductible
Estate tax paid abroad
DONORS TAX
Void donation is not subject to donors tax
The donee is not being considered in donors tax but only the donor
when it is impossible?
When the value of the donation is more than 100K
Exactly 100k wala
When it is payable?
Within 30 days from donation
Who pays this?
The donor
Venue;
In the residence of the donor
If NRA has property within the Philippines paid in the head office of the BIR
Note:
if the donor is a Filipino all donation within and without that is more than 100k
is subject to Philippines donors tax
if the donor is a non-resident donor or non resident alien he will be subject to
donors tax only if the property is within the philippines
Rates:
2-15% only when the donee is a relative within 4th degree of the donor
30% donation in favor of a stranger donation made to person not within 4th civil
degree
Donation mortis causa is not subject to donors tax, but if the donor paid the donors tax then
it will be considered as advance payment of the estate tax
Donors tax is cumulative in nature
Illustration:
S, son of B, ask B for 180k for business purposes, then B agreed, kaso ayaw
ibigay ni B ng isang bagsakan kasi magbabayad sya ng donors tax, so ang
ginawa ni B binigay muna nya yung 70k, then 50k, then 60k so binigay yung
180k for 3 times all under 100k question: did B avoid donors tax? NO, B is
still liable , because the computation of the donors tax is cumulative (you have
to add all donation given within a tax period)
If you are entering in a transaction that is identified under the tax code
maski wala kang babayaran na tax mag bibigay ka ng tax return, so yung
70k, being a taxable transaction under the tax code hence it will be covered
by a donors tax return, so the next time B give the 50k he has to report
again, but since B gave them within 1 year then B has to identify all
previous gift given, so pag binigay na yung pangalawa na 50K i-identify
nya yung unang binigay nya plus yung 50k = 120k subject na ng donors
tax
TAX PERIOD it is a time frame of 12 months or shorter than 12 months
but not longer than 12 months
GIFT SPLITTING divide you gift into small pieces within the same taxable year
General rule: not allowed, it is illegal
Exception: unless given in different tax period
Transactions covered by donors tax
[TAX 2: ATTY. LIM:SARAH TALI] 11
Donation has donative intent
Condonation of debt
If the value of debt condoned is more than 150k then it is subject to donors tax
Question: what is now the implication of this to the debtor?
The debt condoned as far as the debtor is concerned is referred to as
remuneratory (not sure) donation subject to income tax
Pero kung si debtor ay insolvent kailangan nyang patunayan na
insolvent muna sya , if na established nya yun then hindi muna
sya papasukan ng income tax, papasukan lang ulit sya ng
income tax if he recover to that insolvency.
Sale of ordinary asset with insufficient consideration
Illustration:
There is an Apartment, the FMV of that property is 7M, but X sold it for
3M only, so papasukan ba to ng donors tax? (7M x 30%= 2.1M -7M =
4.9M- hindi mo pwedeng ibenta lower than this) YES, because you sold
in for insufficient consideration
If ang binibenta mo ay capital asset hindi ka papasukan ng donors tax, kasi there
is no way na maibenta mo ang capital asset for insufficient consideration.
Irrevocable trust
1
grandm
6M BANK
a (G) 2
3
if G has 6M and gave to the bank as the trustee of that money, sabi nya sa bank
bank inegsyo mo yang pera ko, yung kita ibigay mo sa mga apo ko 1,2,3
this is trust agreement, somebody owns the money, somebody will use the
money, somebody will enjoy the fruit of the money
Irrevocable trust meaning yung mga beneficiaries mo hindi pwedeng palitan,
walang pakinabang na mapupunta kay G, lahat ng kinikita ibibigay kay 1,2,3
at the end of the contract the money is also to be distributed equally to the
beneficiaries mean while na kumikita ang pera na ito, the tax payer is the 6M
(called the irrevocable trust of G for the account (FAO) of 1,2,3) as far as
income tax is concerned, the trustee will also be tax by reason of the commission
that it gets, the beneficiaries will be tax independently and separately based on
distributive share, BUT G is exempt from tax, wala na syang pakinabang dun.
kapag nag end na ang contract tapos ibibigay na sa mga beneficiaries yung
part nila, then 6M (FAO) will pay the donors tax
Revocable trust there is no donors tax, kasi sa revocable pag end ng contract
ang pera ay babalik ka G, so yung pera hindi tax payer, ang tax payer ay si G.
Allowable deductions
Donee deduction only to resident donor, equivalent to 10k provided that the
donation is occasioned by a marriage made by the parent to a child given before the
wedding or within 1 year after the marriage.
The child must be a legitimate, legally adopted or natural recognize child
Illustration:
Parent giving gift to his Son, whose getting married, the gift must be given
before or within 1 year after the marriage, let us say there is a parcel pf
12 [TAX 2: ATTY. LIM:SARAH TALI]

land valued at 280k , so it is given to the son as a wedding gift, since it Yung binibigay mong property sa iba may baggage, may utang, may
is a parent and child and this is a wedding gift given before the marriage so mortgage na babayaran ng donee
meron 10k donee deduction so it will now be 270k and then the first sum What if nung binigay ni A yung car kay B fully paid na, pero sabi ni A kay
exempted is 100k ( a gift 100k and below is exempted from donors tax) so B tol sayo na yung car,pero bahala ka na sa donors tax ah, if the donee
if we deduct it again we have now 170k subject to donors tax (Summary: assumes the payment of the donors tax, is the tax paid an allowable
280k-10k (donee deduction)- 100k (exempted)= 170k (subject of donors deduction? NO, because it is not an encumbrance in the property donated.
tax)) Conditional donation if A give the a property (1M) to B under the
What if the husband and wife has a conjugal property tapos gusto nilang condition that if the son of A reaches the age of 18 you give to him the
ibigay sa anak nila pati dun sa magiging asawa ng anak nila, so in this case of this property. Question: is the value of this donation subject to donors
merong 4 parties, if ang magulang ay may conjugal property you have to tax?
divide the value of that property between them (sample: 900k), so as if the Yes if A give to be B the whole property is subject to donors tax, but
Husband give 450k and the wife give 450k since the husband is giving when B give the to the son that is no longer subject to donors
to 2 different persons the 450k, then we have to divide again that 450k into tax.
2, as if he is giving the som 225k, as if he is giving the soon to be wife Note: When you buy capital asset make sure that you cultivate that property because if not it will
225k, same with the wife COMPUTATION: below there will be 4 be subject to a tax called idle tax.
tax returns Church not exempt from donors tax and idle tax,
The church is only exemption from income and property tax use in religious activities.
Husband 450k Wife 450k
SON 225k Soon to be wife SON 225k Soon to be wife BUSINESS TAX
225k- 10k (donee 225k 225k- 10k (donee 225k
deduction)-100k 225k-100k deduction)-100k 225k-100k VAT 12%
(exempted)= 115k (exempted)= 125k (exempted)= 115k (exempted)= 125k percentage tax indirect taxes paid in advance by
subject of the subject of the subject of the subject of the excise tax on certain goods the businessman and passed on the
donors tax donors tax donors tax donors tax documentary stamp tax consumers and will be part of the
the rate is 2-15% The daughter the rate is 2-15 The daughter consumers price
in law is not in law is not
subject of subject of
donee donee VAT value added tax
deduction deduction
since she is since she is 3 figures that are important in VAT
not a relative not a relative 1,919,500
within 4th within 4th 3,199,200
degree degree 12800
hind naman hindi naman today if you are in business or a professional in your own you are required every year on or before
kasi sya anak kasi sya anak jan. 31 to go to the BIR and register yourself as a businessman or as a professional mandatory
the rate is the rate is remember of you are a professional but you have an ER you are not vatable hence ER-EE is not
30% since 30% since vatable
the daughter the daughter eh sino ang mga businessman?
in law is not in law is not they are the people that are selling goods or services and they are in that activity repeatedly,
a relative a relative habitually or customarily.
within 4th within 4th so if it is only an isolated transaction you do not have to go to the BIR and register
degree degree since you are not undertaking that activity repeatedly.
those that are traditionally exempt from income tax and property tax are not exempted from
this registration to determined whether they are habitually engaged in business activities
Encumbrances attached to the property donated FEES is not tax
Illustration: tall fees are vatable, because fees is not a tax
A bought a car in installment payable for 5 years, A was able to pay for 2 if you go to the BIR dapat alam mo kung magkano yung pumasok na pera sayo nung nakaraang taon,
years, tapos at the end of the 2 year period A gave the car to his brother B, so the businessman or professional is already engaged in a business before jan 31. it is not
sabi nya tol sayo na tong car ah pero ikaw na ang bahala sa bayad, so imporatant kung kaylan ka nag start ng business so long as you added everything that you earned for
may assumed balance yung donee, so kung ano man ang utang nan aka that year and end in jan 31 so meaning you have to know the gross sale (sale of goods) or gross
dikit sa donation na yun that is an allowable deduction receipt (sale of services) if the amount is: (threshold 1,919,500)
vatable businessman vs non-vatable businessman
 [TAX 2: ATTY. LIM:SARAH TALI] 13

if more than 1,919,500 register your self as vatable businessman subject to 12 % 900,000 x 3% = 27,000 so you can see you will end up paying more taxes if non-vat ka
if you register yourself as vatable businessman then you are vatable, hence kapag may in vat 3 is bigger than 12 kaya may optional registration.
bumibili sayo kailangan pasahan mo ng VAT 12% 1,919,500
if equal or less than 1,919,500 register yourself as non-vatable businessman applies
these two figures applies to real estate dealers
if you are registered under this then you are not vatable so wag mong papasahan ng to land provided it is
3,991,200 (RED nagtitinda ng lupa, ng condo units)
VAT yung mga bumibili sayo, wala dapat na 12% so yung resibo mo, since walang
applies to house and lot they are necessarily VAT registered
vat kang babayaran, BUT YOU ARE SUBJECT TO 3% percentage tax
** sample:
what are business vatable? activities that are vatable X a real estate dealer is selling
SEBTIL vacant lot worth of 1.5 M since the price of the lot is less than 1,919,500 is is exempt
sale from tax hence hindi mo pwedeng lagyan ng 12% yan
exchange plus lease it is presumed to be for dwelling so pag for dwelling purposes you are exempted to
barter must be pay VAT if it is less than 1,919,500
transaction that are deemed vatable habitually for house and lot worth of 2.5 M since the price is less than 3,992,200then there will be
importation whether for own use or commercial no VAT, the 12% can be pass on the buyer
commercial purposes it is vatable activity if the house and lot is for the purpose of dwelling exempted from VAT if less than
lease 3,991,200
who registers as vat tax payer? house and lot plus vacant lot for parking in this case the house and lot is subject to the
businessman who were able to realized a gross sale or gross receipt that rule above, but the parking lot is subject to VAT what ever its value provided ang
is more than 1,919,500 mandator nagbebenta ay VAT registered, because under the law it is not for dwelling purposes.
those who did not meet the threshold hence they register themselves as y 3rd figure: more than 12,800 + vat registered lease on residential units to be vatable
non vatable, but in the course of there sale (in the middle of the year) they reach the
gross sale or gross receipt of 1,919,500, then they are required to go to the BIR within 30 days Lessee (rent) lessor Vatable (can pass the 12%)
from reaching that portion and registered as vatable businessman CONVERSION 13,550 (kahit more than or Non VAT registered x
OPTIONAL voluntarily registered themselves as vatable even if you are not within the less than)
threshold or even if they are just starting there business because it is more advantageous to be a 10,000 VAT registered x
vat businessman or vat professional kasi less than 12, 800
VAT registered businessman, meaning he reach the threshold monthly payment More than 12,800 not exactly VAT registered /
input the tax that is absorbed by reason of purchase note: not the totality of the income but the individual rent of the lessee
if vat registered ka dapat bumili karin sa vat registered na seller, kasi kung sa non vat ka X owner of a dorm total income is 2.5M from the rent collected so X have to
bumili yung resibo na ibibigay ni seller sayo hindi mo magagamit to lessen your tax burden. register himself as a VAT businessman kasi higher then 1,919,500 yung income ni X.
you buy from a vat registered may additional na 12% lahat ng binili mo, then at the Y the lessor of X is paying 3,000 as rent question: can X pass a 12% vat to Y?
end of the month you total all the 12% that you have absorbed by reason of the purchased = NO, since the rent of Y did not reach the threshold of more than 12,800, so it is not the
INPUT TAX totality of the income but the individual rent of the lessee determines whether the VAT
output the 12% vat that is pass on to the buyer by reason of the sale registered can pass on the 12% vat
formula VAT REGISTERED RATE
Output input 12%
O>I the consequence of this is you have to pay VAT to the BIR meaning maganda ang domestic sale
negosyo. has an input and output
O 24,000 I 17,000= 7,000 ito yung business tax for the month, you go to the BIR 0%
and pay it. it does not mean the person is exempt, since he is still vat registered
O<I consequence of this is you do not have to pay VAT and you apply the carry forward sample: EXPORT activity (meron pang iba look for it and memorize)
feature (CFF) if you are in export, wala kang babayaran na VAT, since export is exempt from vat to
O 11,000- I 39,000 = 28,000 this is your unutilized input tax na hindi mo na bawas encourage the businessman to export.
kasi maliit ang output tax mo, so ang gagawin yung 28,000 hahawakan mo and for the has an INPUT BUT no OUTPUT hence hindi ka pwedeng mag pass ng 12% vat, since
next succeeding months you can deduct that from your all output taxes until fully wala ka naming babayaran sa government
utilized. if this happen you have an UNUTILIZED INPUT TAX remedy get it to the
NON VAT meaning hindi ka umabot sa 1,919,500 government either as TAX REFUND or TAX CREDIT (alternative not cumulative)
no input and output so walang bawas INPUT TAX
how do you compute your business tax? Percentage tax
total na benta (gross sale/ gross receipt) x 3% = payment Transitional : 2% Presumed : 4%
Applicable lang kay non vat converted to vat Itong presumptive na ito ay para sa mga
 14 [TAX 2: ATTY. LIM:SARAH TALI]

registered businessman businesses na gustohin man nila hindi sila corporation

Ano ang input mo?
1. kung sa month nato may natira pag
unsold then compute it then itcan be
your input tax
2. baka may past receipt ka then
compute mo yun
which ever is higher x 2%= input
0%
Automatic
Need not be reported so everytime na may
transaction ka hindi mo kailangan magreport lagi sa
BIR, basta may mga records ka
Refers to export sale
It has input but no output
Remedy Tax refund or Tax Credit
makakuha ng resibo. hindi sila binigyan
ng resibo ni mother earth
Applicable only to producers of sardines,
agricultural but commercial farmers,
producing rice corn suger wheat, also to
producers of milk if you are not into this
business then receipt is needed.
get the total harvest for the month x
4% = input tax
Effective
Need to be reported within 30 days from the
transaction
Applicable to domestic sale
Sample:
Kay Vat registered may bumili na isang tao na nag
eenjpy ng blanket exemption (WHO), meaning
exempt from direct an indirect tax at the time na
bumili si WHO kay vat registered, si vat registered
must report to the government with in 30 days from
the said transaction so that si vat registered can avail
tax refund or tax credit, kasi si government has to
validate the transaction kung si WHO ay tax exemto
talaga. because he cannot pass on the 12% vat to
WHO since it is tax exempt.
you pay your income tax 4 times a year so sa first quarter you have to compute you
income tax and pay it, then on the secomd quarter compute mo ulit yung income tax mo
tapos add the income you earned in the first quarter, para Makita ng BIR na hindi mo inuulit
yung expenses mo, then what you paid in the first quarter you
can deduct it in the second quarter so mas mababa yung
babayaran mo, kaya mo lang isasama yung first quarter inly
for the BIR to check on you exposes if you are going to
pay your income tax for the second quarter you pay it within
60 days of the next succeeding quarter , same then sa 3 rd
quarter you pay it with in 60 days on the next succeeding
quarter and income tax for the whole year you pay that on
or before april 15 if the corporation is using a calendar period
( from January first until the end of the year yung
computation)
in case they are using fiscal some business did not start on January example they
stared only on march 16, 2014 then the 12 month period is on march 16 2015 so
kaylan sya mag babayad ng income tax? just add 4 months tapos dagdagan mo ng 15
so july 15, 2015
you have to ask permission from the BIR if you want to change your calendar method.
1-3 4-6 7-9 10-12
the corporation shift the garments 5/26/2014, meaning the garments was shift in the
second quarter so the reckoning period of the 2 year period is the last day of the
last month of quarter of export = 6/30/2014
the two year period will be 6/30/2014 (just add 2)
- /10(kasi prime____ doctrine)/

= 6/20/2016

if you exported the product on 01/07/2015, until when you are allowed?
the last month is 03/31/2015
both has an
unutilized input tax - /10/
vat
TAX REFUND/ TAX CREDIT applicable only to VAT for UTI (unutilized input tax) alternative not = 03/21/2017
cumulative

tax refund you want the UTI in cash

tax credit ibabawas sa ibang IR taxes mo
you have 2 years to claim this remedy from the last day of the last month quarter of export all the
periods in tax in jurisdictional meaning it is not extendable.
DOCTRINE of OPERATIVE FACT
Revenue regulation will remain valid and effective until they revoked, revised or modified by
competent court
you must give confirmation receipt to the BIR, but even without it you must file you claim to the BIR
within 2 years valid claim parin yan you file your claim to the commissioner 2 year period
sample:
 [TAX 2: ATTY. LIM:SARAH TALI] 15

You are an individual tax payer and you go to the BIR to pay your income tax, the last day
for the payment of income tax is april 15.
30 days/ 60 days If you pay your tax early ( on or before due date) the reckoning point of the 2 years
(discretion pwdedeng is from payment
maiba hindi lang yan) to If you pay late (after due date, the last day of payment of that tax) from due date
complete your documents ang reckoning point ng 2 year period.
Sample:
you pay on april 2,2015 then the two year period will end on march 23, 2017
how ? you add 2 from 2014 =2017, then you minus 10 from 2 so you still have 8
after the 30 days or days so you minus 8 from 31 = 22 hence you have march 23, 2017
in case the BIR
60/ once the you pay on aug 8, 2015 then the 2 year period will prescribed on april 5, 2017
denied it file document is already doctrine of twin prescriptitive period
a petition for complete days the applicable only to invalid payment not to UTI
review to the BIR is given 120 it means that you must file your claim with the BIR within that 2 year period and
CTA under rule days to act on it your entry to the CTA must also fall within that 2 years period.
42 within 30 Hence in case of inaction of the BIR, you must file a petition for review to
days from in case after 120 days the CTA within 30 days before the 2 years prescribed
the BIR did not act on Hence you can file your claim simultaneously with the BIR and the CTA
the claim, then the tax process
payer can file within 30 from payment/ from due date you are given to file your claim 2 years the BIR
days from the then will act on that, but the BIR is not mandated to act within specific period
expiration of the 120 unlike in UTI (meron lang 120 days) if within the 2 year period the BIR
days, a petition for denied your claim then you are given 30 days to file it with the CTA for review
BUT since the BIR is not mandated to act within specific period on your
claim, wag mong pababayaan yun, because it is subject to the DOCTRINE OF
TWIN PRESCRIPTIVE PERIOD, meaning it means that you must file your
claim with the BIR within that 2 year period and your entry to the CTA must
also fall within that 2 years period. kaya if malapit ng matapos yung 2 years
right to claim INVALID PAYMENT applicable to INCOME tax , VAT, other IR taxes mo pumunta ka na ng CTA and invoke silence is equal to a denial, within 30
days before that expires
when do you have an invalid payment? for corporate tax payer
over payment partial payment is not subject to tax refund this applies to individual as well
wrong computation the 2 year period is reckoned from the day the FAR is submitted
illegal payment we said before that a corporation is paying its income tax in a quarterly basis, so lets
collection without legal bas talk about the income tax the corporation paid its income tax:
sample: nag prescribed na yung time for payment hence si BIR wala na syang right to first quarter correctly
collect second quarter nag karoon sya ng over payment, this over payment cannot be
erroneous payment applied to the next quarter
violation of tax situs you pay the tax in the wrong place third quarter yung income tax ditto bayaran mo lang wag mong iaappaly
different from mistaken payment, in mistaken payment you are not liable but you still pay, yung overpayment sa second quarter
sa erroneous payment you are liable to pay pero sa wrong place mo binayaran 4th quarter sa corporation yung last return nila merong pangalan we call it the
penalties imposed without authority final adjustment return (FAR)
if you received a notice from the BIR for payment ng penalties you have to pay it even if The FAR is due depending on the kind of accounting system that they are
some of it hindi ka talaga dapat mag bayad, after paying the penalties, then you can can file using
a claim for invalid payment for the portion of then penalty that you are not subject of. Calendar method = april 15
Remedies: tax refund and tax credit subject to irrevocable rule meaning the choice of one will Fiscal last month of the 12 months + 4 months + 15
abandoned the other If the corporation is inside the ECO ZONE (export processing zone)
to file your claim for invalid payment you have 2 years reckoning point depends when the tax Invalid payment can be claimed 6 years from payment
was paid Mistaken payment 6 years from payment
for individual payers
2 YEAR prescriptive period is jurisdictional, hence it is not extendable BUT the SC in 2 cases extend
this period
16 [TAX 2: ATTY. LIM:SARAH TALI]

The 2 year period of for the tax payer to file the claim, it is not for the government to refund
so the government may refund outside the two year period provided that the claim is seasonably
made.
Promissory estoppel
Doctrine of estoppel does not apply in taxation, but promissory estoppel does.
There is a promise between the BIR and the tax payer to wait for the decision of the court
and they will be bound by the decision in this case kahit na lagpas na ng 2 years yung
decision ng court the BIR is still bound by the said decision provided that the claim was
seasonably made.

REMEDIES:
4 sets of remedies
in case it involves taxes in NIRC The remedies that you apply are those under the tax code
if it is a local imposition like business permit you apply the remedies under local taxation
real property tax remedies under the real property tax code
if it is an import export tax you apply the tariff and customs code
VIP (very important)
FAILURE TO DISPUTE AN ASSESSMENT WILL RIPENS INTO A COLLECTION
CASE
the assessment is considered valid hence you can no longer question it, what will you
facing the government is on the validity of the collection so yung collection process
na lang yung pwede mong ma question
so pag hindi mo na dispute ang assessment lahat ng defenses mo about that
assessment mawawala
you will only have limited defenses like:
the collection case was not approved by the commissioner
no jurisdiction cause of the amount
the right to collect has prescribed
IN CASE OF CONFLICT BETWEEN LIFE BLOOD AND PRESCRIPTIVE PERIOD
(collection) PRESCRIPTIVE PERIOD PREVAIL
life blood doctrine can be use anytime provided that it is still within the prescriptive period.
if you want to dispute the assessment under local taxation you have to pay first before you can
file your protest, whereas if it involves taxes under the tax code you can file your protest even
without payment.
REMEDIES under the TAX CODE
TAX RETURN mandatory
remember that the right of the government to investigate or assess a tax payer commences
from the filing of the tax return, BUT it does not mean na hindi ka na lang mag bibigay ng
tax return mo, because the commissioner of internal revenue can prepare a tax return in
your behalf in case one is required. basta mabunot ang pangalan mo, may tax return or
wala, you will be investigated.
BUT if the commissioner prepare a tax return in your behalf he must be guided
by the best evidence obtainable rule
best evidence obtainable rule
if the BIR amend the return or prepare a return because one has not been
submitted kung ano man ang ilagay ni commissioner dun should be
supported by substantial value legal evidence, hindi hearsay yung ilalagay
dun.
when do we use it?
in case of the amendment of a tax return
in case failure to file a tax return
in case the tax payer failed to cooperate with the BIR during the
investigation.
lahat ng IR taxes is under the umbrella of pay as you file system meaning you
cannot pay a tax unless you file a return hence the return and payment must come
together
in case the payment is not required, the return is still mandatory basta you enter
in a transaction taxable under the tax code, you have to submit a return even if
payment is not required.
[TAX 2: ATTY. LIM:SARAH TALI] 17
SAMPLE: nalugi ka ngayon taon na to sa negosyo mo, income tax lang yung
hindi mo babayaran, pero dapat mag submit ka parin ng return
in all instances a RETURN IS MANDATORY.
tax return is a self serving document so the government is not bound by it, if the BIR
believes that it is ridiculous or unreasonably low, then the commissioner can amend your
return. acceptance of the return by the BIR is not equivalent to estoppel (doctrine of
estoppel does not apply in the government in case of taxation)
the commissioner of internal revenue can:
prepare a return in your behalf in case one is required and you failed to submit
it OR
Amend your return
Limitation
Commissioner is not authorized to amend the assessment pending
appeal BUT can recomputed surcharges and interest even pending
appeal, because the interest and surcharges keeps on running even if
the tax payer is successful in getting a suspension in the collection or
assessment.
you have to submit the tax return on or before due date
in case beyond due date you can still file your return, BUT subject to penalties
already.
once you submit your return it is NON-WITHDRAWABLE you are bound by all the
mistakes you have committed in that return
remember that under the tax code there is no provision requiring the tax payer to
personally prepare his tax return, hence he can ask somebody to prepare it, BUT pls
remember that once you ask somebody to do your return, the principle of agency
will apply, therefore what ever error or mistakes committed by that agent will
bind the tax payer (PREPARATION OF TAX RETURN IS DELEGABLE
AUTHORITY)
WHAT WILL BE YOUR REMEDIES IN CASE ERROR IN YOUR TAX
RETURN?
You can amend your return in case of error or
Prescriptive period:
you can amend your return within 3 years from submission of that
erroneous return, provided there is no investigation yet
once the BIR started its investigation to your return YOU
CANNOT AMEND IT na.
Submit a supplemental return to complete an incomplete return
Once you submit your tax return it must be accompanied by your SMR (statement of
management responsibility) this is an undertaking that all the data in that return are true
and correct, so that later on during the investigation pag- nakita na mali yung nandyan puro
false, then the BIR can file a perjury case.
where do you submit your return?
to the regional director or
in the office of commissioner
RIGHT OF THE GOVERNMENT TO INVESTIGATE or ASSESS THE RETURN
the power of the commissioner to asses is a delegable authority (can be delegated to the
regional director only) and it is a discretionary power (so mag aassess sya kung gusto nya,
kung ayaw nya wala kang magagawa, hence it is not subject to mandamus)
DELEGABLE authority dahil delegable authority sya if you dont agree with the
decision of the Regional director you can file a motion for reconsideration kay CIR
tapos from CIR if hindi parin favor sayo then CTA. pero bago ka pumunta kay CIR
18 [TAX 2: ATTY. LIM:SARAH TALI]
punt aka muna dun RD nag nagissue nung assessment, pag hindi parin kayo nag
kasundo then you now go to CIR
the dispute must be address to the person who signed the LA
LETTER of AUTHORITY bago mag asses yung mga tax examiner at pumunta sa tax
payer may dala yang mission order ang tawag natin dyan ay letter of authority.
is it mandatory all examination should be supported by LA? it is not necessary,
because there times when that collection of the BIR is based on your tax return, and in
your tax return it shows clear mathematical error, then LA is no longer requires.
however if the examination is not based on defective computation or defective return,
but from other things, such as there is a finding that you did not report the money that
somebody paid you or there is finding that your claimed deductions are not allowed,
so these things are not found from the tax return itself, but from other areas, then if the
BIT pursue investigation then kailangan ng LA.
in income tax the tax payer is required to pay his income tax on or before april 15, yung
babayaran mong income tax dito refer to your income last year;
now in case yung babayaran mong income tax is
more than 2000 you can split this into 2 equal halves the 1st 1000 you
pay that on april 15 and the 2nd 1000 you pay it on july 15 without any interest.
in case you made an early payment on or before due date (from January 2 to april
15)
the BIR has 3 years to assess that return reckoning point is 1 day after due
date (april 16)
sample: from april 16, 2016 the BIR has the right to investigate your return
until april 1, 2019 how? you add 3 from 2016, then minus 15 s from 16
in case of late payment
the BIR has 3 years to investigate that return reckoning point is from
payment
sample: you paid on july 2, 2016 the BIR has the right to investigate
until june 17, 2019
NOTE:
this 3 year period to assess applies to all IR taxes, such as withholding taxes
the 3 year period of the government to asses refer to a regular return meaning
there is no fraud in the return submitted, because if during the 3 year period the
BIR discover that it is a fraudulent return or during the investigation somebody
reported that they pay you a sum of money and you did not report that money for
tax purposes, then automatically the right of the BIR to investigate this fraud or
failure to make a return is 10 years from discovery of the fraud or failure to
make a return or failed to pay the tax.
exemption in the 3 year period
if during the 3 year period the BIR discover that it is a fraudulent return or
during the investigation somebody reported that they pay you a sum of
money and you did not report that money for tax purposes, then
automatically the right of the BIR to investigate this fraud or failure to
make a return is 10 years from discovery of the fraud or failure to make a
return.
fraud
under declaring your income
over claiming of deductions
the BIR
Written agreement between the BIR and the tax payer to suspend the 3 year
period to assess
remember if the BIR failed to make any assessment during the 3 year
period it follows that there was collection made by the BIR, then the tax
payer is untouchable beyond the 3 year period, the BIR can no longer
make any assessment against the tax payer.
in this case the 3 year period to assess will only commence from the
expiration of the agreement, hence the 3 year period began to run again.
the written agreement must be submitted within the original 3 period
waiver
when the tax payer dispute a formal assessment, you have to sign a
waiver.
once you dispute it means that you dont agree with what is being
claim by the government
wag mong tutulugan yang mga assessment na yan kasi if you
failed to dispute it within the period prescribed by law it ripens
to a collection case
the waiver is submitted if the tax payer wants to dispute the assessment.
Remember we can only suspend the period of assessment when there is
a valid waiver
there is a valid waiver when:
when it is submitted by the tax payer
signed and dated by the tax payer
should be notarized
must contain the period that you are waiving (how much time
you are suspending the assessment), because there is no
indefinite waiver
then submit it to the BIR, then the commissioner will
acknowledge that by affixing his signature and a copy of that
waiver be given to the tax payer
if the BIR chance upon your return and find something wrong in there, then the BIR will
call your attention, it will invite you its office etc. basically the BIR will give an
assessment notice then the BIR will now conduct its preliminary assessment.
saan ipapadala yung assessment notice?
dun sa address na nakalagay sa return mo
what is an assessment notice
it is a notice to the tax payer that: purposes of assessment notice.
fixes or determined tax liability
and it serves as a demand letter
sabi natin in case the BIR chance upon your return and find something wrong or needs
clarification from you, then it is now mandatory for the BIR to conduct a
preliminary assessment,
preliminary assessment
this is mandatory otherwise the assessment is void
during the preliminary assessment you will be given a chance to explain
yourself (15 days from receipt)
this preliminary assessment must be conducted within the 3 year period
(yung kaninna sa taas)
during the preliminary assessment the BIR will give you a prospective
assessment (PAN)
a PAN is not appealable in the CTA because it is an interlocutory
order.
you have 15 days to dispute it

whenever you are disputing an assessment you have to state the
error and your defenses or the legal basis for your dispute, hindi
pwedeng sabihin mo lang na you dont agree.
once you dispute the preliminary assessment, then the BIR did not
agree with you it will cancel the preliminary assessment and it will
issue a formal assessment.
formal assessment
- pls remember that the formal assessment need not
come within the original 3 period, what should
come should be the preliminary assessment
- this is the one that is appealable in the CTA
- this formal assessment is valid if it is preceded by
a preliminary assessment filed within the original
3 year period.
- it must contain the facts that transpired during the
preliminary assessment, it must also state what
particular provision of the tax code was violate,
what particular revenue regulation was not complied
with and some jurisprudence in case there is any, in
support of the assessment.
- further discussion below
balik tayo sa formal assessment
pls remember that the formal assessment need not come within the
original 3 period, what should come should be the preliminary
assessment there is no period when the BIR will give you the
formal assessment, basta ang important is meron syang preliminary
assessment
this is the one that is appealable in the CTA,
it is in the formal assessment wherein tax payer has judicial
remedies, wala yan sa preliminary assessment kasi interlocutory
yun
it must contain the facts that transpired during the preliminary
assessment, it must also state what particular provision of the tax
code was violate, what particular revenue regulation was not
complied with and some jurisprudence in case there is any, in support
of the assessment
the non-receipt of the FAN or formal assessment is immaterial as
far as the BIR is concerned there is a constructive receipt.
GENERAL RULE:
This formal assessment is valid if it is preceded by a
preliminary assessment filed within the original 3 year
period.
EXEMPTION: formal assessment is valid even without
preliminary assessment; TR2EM
when the issue involve is special tax lien
special tax lien refers to taxes that were not collated by
the government due to an exemption so kunwari si X
ay nasa eco-zone hence pag naimport sya ng mga raw
materials that are needed for his business exempted sa tax
yun, so yung mga naipon na taxes na hindi binayara ang
tawag natin dun special tax lien ngayon if yung binili
ni X sa ibang bansa a truck for his business, kaso pag
[TAX 2: ATTY. LIM:SARAH TALI] 19
dating dito sa Philippines nakita nya hindi practical for his
business so X decided to sell it to Y, si Y ngayon pag
binili nya yun kailanga bayaran nya lahat ng special tax
lien na naipon dun sa truck, kasi tax exemption is not
tranferable. sabihin natin hindi alam ni Y yun, basta
binili lang nya yung truck, tapos hinanapan sya ng proof
of payment ng tax, then the BIR will assess you
immediately even without preliminary assessment.
the remittances of the withholding agent cannot reconcile with
the amount withheld
a withholding agent is the payor of money under the
taxable transaction, any person who pays under a taxable
transaction is a withholding agent no need for an approval
to the BIR.
yung withholding agent nay an kung ano yung
winiwithhold nya yung din yung ireremit nya sa BIR
kunwari si X a withholding agent, yung amount na
winiwithhed nya every month is 25k, pero since no body
is checking him hindi nya lahat nireremit sa BIR tapos
during the investigation ang unang tinitingan ng BIR ay
yung withholding taxes, tapos pag tiningin nila mag kaiba
yung withholding sa remittance and they cannot reconcile
the difference hence X will be automatically subjected
to assessment even without preliminary assessment.
the simultaneous claim of tax refund and tax credit under
invalid payment
sabi natin pag meron kang invalid payment meron kay 2
remedies (refund or credit) let us say hindi moa lam
yun, so nagkaroon ka ng invalid payment tapos nag apply
for tax refund, eh isang taon na wala paring action si
commissioner hanggang maabutan ka ng sunod na
bayaran ng tax, so ang ginawa mo binwas mo na lang dun
sa babayaran mo so you are applying simultaneously
the tax refund and tax credit if you will be caught by
the BIR then you will be assess immediately without
preliminary assessment, because you are not allowed to
use the 2 remedies simultaneously, they are an alternative
remedies, choosing one abandon the other.
when the issue involves excisable goods goods that are
subject to excise taxes, either domestic or imported goods
it is payable within 15 days from removal of the product
from production site. if it is imported product then it is
payable within 15 days from removal from customs
custody.
what are the good subject to excise taxes? SWAM3-
C2LEP these are sin products
- S- spirit raw materials in the production of beer
or soft drinks
- W- wine
- A- Automobiles
- M3- Mineral products (NOTE: ang LGU meron
ding tax ang mineral products, but the LGU tax the
20 [TAX 2: ATTY. LIM:SARAH TALI]

extracting of it from the public land, sa tax code motion for reinvestigation
ang tinatax ay yung mismong product hence there is - if the motion for reinvestigation if granted , the right
no conflict) , manufactured oil, miscellaneous item of the government to collect is suspended. dito
(accessories) lang pwedeng ma suspend dun sa remaining 3 hindi.
- C2 cigar, cigarette - in this case you are asking the BIR to allow you to
- L- liquor submit a newly discovered evidence, which you
- E non-essential items have not submitter earlier.
- P- petroleum products - you are given 60 days to submit all the documents
Clear mathematical error relevant to your motion reckoning point is the
once the BIR issues a formal assessment you have 30 days to dispute it from receipt , following day after dispute. if you failed to
and formal assessment is appealable to the CTA submit the required documents then the assessment
tandaan natin during the preliminary assessment padadalhan ka ng PAN you can shall attain finality and as if you did not file a
dispute that with 15 days and that assessment is not appealable to the CTA dipute.
pag tapos na, terminated na yung preliminary then yung BIR papadalhan ka ng motion for withdrawal of the assessment
formal assessment, that formal assessment can be disputed within 30 days from - in case you are not the right person for the said
receipt. then the decision of the BIR is appealable within 30 days from assessment, like officer or accountant ka ng isang
receipt or from the lapse of 180 days, in case of in action, to the CTA. corporation, tapos yung assessment nung
computation of the 30 days corporation naka address sayo, then you can ask the
if the month is 31 days move back the day then advance the month BIR to withdraw that assessment telling them that
march 19, 2016 april 18,2016 you are not the right person and it should be the
if the month is 30 days advance the month and copy the day corporation.
april 19,2016 may 19,2016 motion for cancelation assessment
NO DISPUTE NO APPEAL = uncontested assessment (final assessment) = - you only used this if you already has a proof of tax
ripens into collection case CTA has no jurisdiction over collection case. payment
FAILURE TO DISPUTE it ripens to a collection case.
note: in case the tax payer failed to received the assessment and a
collection was filed the failure to received will not cause the
dismissal of the case, what can happen is the suspension of the
collection case for the tax payer be given a time to dispute the assessment.
if you are a tax payer and you are getting series of assessment of notices
saan ngayong yung reckoning point ng 30 days mo?
the reckoning point
is the 1st notice if the 2nd notice is a mere reiteration of the 1st notice
or
the 2nd notice if materially different from the 1st one.
when an assessment deemed made? bar question
an assessment is deemed made if one is released, made or sent to the tax
payer at his given addressed in the tax return together with 2 sworn
affidavits
1. by post master general attesting to the facts that his office
receives an assessment notice to be forwarded to the tax payer
2. sworn affidavit of the processor
4 MODES OF DISPUTE
file an MR
- in this case you are asking the BIR to go over all the
records you submitted, because they might have
miss some, and if the go over it again they will find
out that you are indeed not liable

ONCE you submitted your DISPUTE the BIR is given 180 days to resolve
that

FAN
given 30 days
from recipt to
dispute
upon recipt of the BIR --> the BIR is given 180 days to
resolve that (the reckoning is from the filing of the MR or
from the expiration of the 60 days period of filing the
relavant document is case of reinvestigation)
failure to appeal -->
denial ( whole or in part) --> you in action of the assessment shall attain
can appeal it to the CTA within 30 finality --> you must pay or
days from receipt
BIR
enter into compromise
agreement
may treat is as deemed denial -->
you can wait for
appeal to the CTA within 30 days from
he decision
the lapse of 180 days
note: IMPLIED DENIAL
sometimes there is no denial, what the BIR will do is issue a warrant in
lieu of an answer of your dispute: this warrant is an implied denial of
your dispute, this implied denial is a decision appealable to the CTA and
therefore from the day you receive the warrant you have 30 days to go to
the CTA for appeal failure to do that then the assessment shall attain
finality
warrant (2 kinds)
warrant of distraint 2 kinds
actual distraint meaning that assessment is
mandatory, to exercise this the government should be
assured na alam nya ang tax liability mo, so nag compute
na sya or nag assess na sy, kasi under this remedy pupunta
sya sa bahay mo kukunin nya yung mga personal
properties equivalent to your tax liability, and order you to
settle that tax liability within a given time frame,
otherwise it will be sold in a public sale, pag may sobra
babalik say, pag kulang babalikan kan
constructive distraint hindi nya kailangan alamin kung
magkano ang utang mo, kasi wala naman syang kukunin
eh, pupunta lang sya sa bahay mo tapos pag dating dun
ililista lang nya yung mga properties na nakita nya sa
bahay mo tapos iiwanan ka nya nung inventory sheet nay
un then ask you to sign it. lahat ng nakalista dun hindi mo
pwedeng ilabas, hindi mo pwedeng ilipat iwan mo lang
yan.
warrant of levy real properties
warrant of garnishment bank deposits, shares of stock
[TAX 2: ATTY. LIM:SARAH TALI] 21
sometimes walang denial or walang warrant, but instead the BIR send you
a final demand letter reiterating that the government has a claim over you
and you must settle it this final demand letter send with in the 180 days
is an implied denial you have 30 days to appeal with the CTA from
receipt. failure to appeal assessment shall attain finality
sometime walang denial, walang warrant, walang demand letter but the
BIR files a judicial collection in court against you implied denial din
so pag collection you have to do 2 things
1. Answer the summons within 15 days before the regular court
2. Within 30 days from receipt of the summon you perfect your
appeal to the CTA failure to do that assessment shall attain
finality.
remember once CTA takes cognizance over the tax case the
regular court is automatically divested of its authority to
continue with the case.
in action of the BIR
options
you can wait for the decision
may treat it as deemed denial appeal to the CTA within 30
days from the lapse of the 180 days
PETITION IS GRANTED
it means that the first assessment is abandoned and 2nd assessment
will be issue, once you received it you are again given 30 days to
dispute that failure to do that assessment shall attain finality
But remember the second assessment must come to you within the
remaining period of the 3-year period of the right of the government
to asses.
sample:
first assessment july 20, 2015, the right of the
government to asses is 2013 april 16 so you deduct
2015/07/20 2013/04/16 2 years 3 months and 4 days
(ito yung nag consume nya for the first assessment then
you have to deduct this to the 3 years
2 years 11 months 30 days 2 years 3 months and 4 days
= 8 months and 26 days( dapat yung 2 nd assessment within
this period) if it is beyond this period it will be
considered as a void assessment, hence the government
cannot collect.
REMEMBER THIS
ang unang papasok lagi sa CTA ay tax payer, hindi pwedeng
government muna
Exemption
when the government is in the exercise of its proprietary
function pls remember that if a government is in the
exercise of its proprietary function it is like an ordinary
tax payer, so BIR can assess them.
COMPROMISE AGREEMENT remedies available to the tax payer and the government
the best remedy at pinaka madali.
if the BIR give you a preliminary assessment, then you have to dispute, can you enter in a
compromise agreement?
22 [TAX 2: ATTY. LIM:SARAH TALI]

YES, because a compromise agreement is a remedy available to the tax payer in any Note:
stages, even if you have a case pending appeal to the supreme court compromise Compromise agreement cannot be acted upon by the local treasurer of the LGU,
agreement is still possible. because the only person who can condone is the person who has the power to
the tax payer can already enter into a compromise agreement kahit nasa initial stage pa lang. tax, the local treasurer collects taxes but does not exercise the power to ax
who initiated compromise agreement? LGU has no power to condone local taxes, they can only condone real property
the BIR or taxes in case calamity, but that condonation is good only for one year
if the BIR believes that the predecessor or the finding is at the end of the day pls remember na hindi lahat ng IR taxes ay subject to compromise proposal, merong mga
mali pala, there is no basis for that assessment, so may mali sila so makikipag taxes na hindi pwedeng icompromise sample:
compromise sila Estate tax
or they really found out na wala ng pera ang tax payer tax payer is insolvent if the case has been finally decided by the court may final decision na
the tax payer when there is already schedule of payment approved
rates: minimum, you cant go lower than this kunwari nag bigay ng assessment sayo, hindi mo naman dinispute, ang sabi mo
10% lang babayan mo ng installment, tapos yung schedule of payment nayan ay na
in case the tax payer claims insolvency (must be duly proved) approve na ng BIR, then hindi na pwede ang compromise.
must comply when you are violating the tax code, you are violating not only the civil aspect (the money
1. your insolvency must be duly proved portion) but also the criminal aspect of it, question what are the limitations if the cir
2. you give up you 1405 (bank secrecy law) you have to authorize in accepting and rejecting a compromise agreement?
the commissioner to go with your bank deposit.
20% CIVIL CRIMINAL
Based on jurisprudence CIR has no criminal Administrative level DOJ
If the corporation received an assessment of its back taxes, but at the time jurisdiction. Hence if the
of receipt of that assessment notice the corporation has already suspended CIR believes that you are
its operation for more than 3 years. also criminally liable he
40% will endorse it to the DOJ,
then the fiscal will conduct
you want to compromise but you are not insolvent
the preliminary
lahat ng tax payer proposing compromise pero hindi insolvent
investigation to determine
the commissioner can either REJECT OR ACCEPT IT.
the probable cause, then file
Even if the amount you are offering is more than the minimum compromise rate, it
an information to the court
does not mean that the BIR will automatically accept it because your compromise will if so needed.
is still subject to investigation and validation. BUT pwede mong gawan
the power of the commissioner to accept or reject is delegable authority, when? ng paraan yan, basta nasa
if the main tax is in the amount of administrative level pa lang
more than 1M the commissioner cannot act upon your proposal, but it the CIR can accept If the criminal liability If the case is already
will be subject to the evaluation of the evaluation board your compromise of the tax payer is still with the DOJ, the tax
Evaluation board involving the civil under the payer can still
it is compose of the CIR and 16 deputies liability for as long as: administrative level, compromise
the evaluation board can only act when: no decision yet ibig sabihin nasa office provided:
when the assessment of the main tax is more than 1M or has been arrive palang ni it has the
when the proposal is below the minimum compromise by the court and commissioner, the tax consent of the
rate. the issue does payer can ask for a prosecutor and
1M to 500K the power of the commissioner to accept or reject a not involve fraud compromise penalty no information
compromise agreement is not delegable note: pag pumasok the compromise yet has been
less than 500k the power of the commissioner to accept or reject a kahit alin dun sa penalty is impose in filed and
compromise agreement is a delegable authority to the regional directors dalawa sa taas wala ng lieu of criminal there is no
where the tax payer is staying compromise. prosecution, this is fraud
if accepted an amount of money
you cannot yet go to the bank and pay it, because it is still added to your civil
subject to the review of the CIR liability because the
if rejected commissioner will no
Not appealable being an interlocutory order longer pursue your
 [TAX 2: ATTY. LIM:SARAH TALI] 23

criminal liability. decision SF involving the decisions of CIR and CC

against the government is subject to AR (automatic
PROVIDED: review) +SD (special duties)
There is no fraud duties import export taxes
4 kinds of special duties
Dumping duties the one who
recommend the additional
imposition of dumping duties is the
Secretary of Trade and Industry
a tax that protects the local
industry.
Counter veiling duties
recommended by the
JURISDICTION OF THE CTA Secretary of Agriculture
parehalang nung dumping,
pero more on the
RA 1125 RA 9282 RA 9503 agriculture and marine
products
CTA =RTC CTA =CA and we Marking duties recommended
added divisions by CC
Jurisdiction of the CTA; whose decisions are appealable to the When you file your case in a penalty for wrongly
CTA under 1125? the CTA you file it in;
declaring imported goods.
division en banc SC
decision of the CIR involving NIRC cases involving Retaliatory duties
DROP JURISDICTION: recommended by president of
D disputed assessment Lahat nung nandun sa 1125 the Philippines
R refund on IR taxes ilalagay natin dito + local question: what kind of decisions are appealable to the CTA?
O- other matters found in other laws, special laws and real property taxes
only final decisions of the above
hence all kind of taxes now
administered by the CIR is appealable to the CTA, final decision in taxation it does not mean
other matter it still refers to DRP but it but not all kind of cases. final and executory, INSTEAD meaning the
can be found in other laws, part of laws, or amount is already fix and determined tax
special laws administered by the CIR liability.
(DOCTRINE OF EJUSTREM GENERIS) REMEMBER: you cannot go to court unless you exhaust
P- penalties imposed without authority all your administrative remedies meaning before you
CC TCC COFS can appeal to CTA you must first go to the CIR or CC
C- imposition of customs duties, that is export Under this law local taxes is not included, Walang real
and import taxes property taxes so under 1125 if you have a problem
O- other matters found in other laws, special involving local tax and real property tax you go to the
laws administered by the CC regular court
F- imposition of fines, forfeiture, penalties of
imported goods
S- cases involving search, detention and release
of imported goods
NOTE: if it involves import and export
taxes under the customs code before you
can dispute you must pay first