Failure to act within 180 day period by BIR
Lascona vs. CIR, January 4 2000
Effect: inaction can be treated as denial.
After lapse of the period, taxpayer can immediately appeal
However, under Sec 228, the law does not limit the taxpayer to a single remedy.
The taxpayer has two options:
1. Treat the inaction as denial, and immediately appeal to CTA Division within 30 days; or
2. Wait for the decision of the BIR, and then appeal the decision to the CTA Division within 30
days from the receipt of the decision.
If a taxpayer opted for the 1st option but filed the petition for review with the CTA out of time, can
he wait for the final decision of the CIR and then appeal the same to the CTA?
NO.
After availing of the first option (filing of the petition for review) which was however filed out
of time, a taxpayer cannot successfully resort to the second option (await final decision and
appeal the same to the CTA) on the pretext that there is yet no final decision on the disputed
assessment because of the CIRs inaction.
RCBC vs. CIR
July 5 2001- Date of receipt of formal letter of demand, dated May 25 2001
July 20 2001- Taxpayer filed a protest
April 30 2002- Taxpayer filed petition for review before CTA
CTA dismissed on the ground that the petition for review was filed beyond the prescriptive
period.
BIRs assessment has become final and unappealable. Thus, taxpayer cannot question it
anymore.
Issue: Has the assessment attained finality?
Yes
First question: was there decision made by CIR?
None. The taxpayer can treat this as denial.
Remedies of the Taxpayer on the event of inaction of CIR:
1. File appeal within 30 days after lapse of 180 days.
2. Wait for the decision, then file appeal within 30 days after receipt of decision; or
In this case, there was no decision by CIR. Notwithstanding the inaction, he filed for petition for
review. Hence taxpayer chose the first remedy.
Here, petition to review was filed in May 30 2002.
RCBC chose to file a petition within 30 days after lapse of the 180-day period.. Since taxpayer
opted to choose this remedy, he should have filed within the 30-day prescriptive period. Since it
filed beyond, the CIR assessment became final and executory. As such, there is no more disputed
assessment to speak of. CTA cannot acquire jurisdiction over the petition for review.
Second Question: Can taxpayer raise the defense that since the protest has not been acted upon,
there is no decision to speak of?
No. The law already deems the inaction as denial.
While the taxpayer has two options, these options are mutually exclusive. The choice of one
precludes the application of the other.
March 27 98: Assessment notice
April 20 98: Protest
CIR denied the protest on March 3 99
March 12 99: Taxpayer received the denial
April 12 99:Taxpayer filed for a petition for review
The protest was filed within the prescriptive period.
Protest should have been filed until April 26 98. Taxpayer filed it on April 20 1998 so it was
within the period.
The taxpayer decided to await for the decision of the CIR (remedy no.2). He received the denial
of protest on March 12 99. He has until April 11 to file appeal to CTA. When it filed appeal on
April 12, it was timely filed.
(If you are going to be technical about the prescriptive period, it was filed out of time. It was one
day delayed. However, this delay was not assailed by the parties)
SC Discussion:
In case of the inaction of the CIR on the protested assessment, while we reiterate the taxpayer
has two options, either: (1) file a petition for review with the CTA within 30 days after the
expiration of the 180-day period; or (2) await the final decision of the Commissioner on
the disputed assessment and appeal such final decision to the CTA within 30 days after the
receipt of a copy of such decision, these options are MUTUALLY EXCLUSIVE and resort to one
bars the application of the other.
Accordingly, considering that Lascona opted to await the final decision of the Commissioner on
the protested assessment, it then has the right to appeal such final decision to the Court
by filing a petition for review within thirty days after receipt of a copy of such decision or
ruling, even after the expiration of the 180-day period fixed by law for the Commissioner of
Internal Revenue to act on the disputed assessments. Thus, Lascona, when it filed an
appeal on April 12, 1999 before the CTA, after its receipt of the Letter dated March 3,
1999 on March 12, 1999, the appeal was timely made as it was filed within 30 days after receipt
of the copy of the decision
Administrative Actions Taken During the 180-day Period
CIR vs. Union Shipping, May 21 1990
Letter dated 12/27/74: Letter of assessment
01/04/75: Receipt of assessment
01/13/75: Cir received protest
11/25/76: Taxpayer received warrant of distraint or levy
11/27/76: Date of letter requesting investigation
11/29/76: Receipt of letter by BIR
Collection suit was filed by BIR, without acting on the letter for reinvestigation
12/28/78: Summons served upon the taxpayer
01/10/79: Petition for review was filed by the taxpayer before CTA
CIR argument: petition for review must be dismissed being filed beyond 30 days period from the
decision of CIR. 30 day should be reckoned from 11/25/76 which is receipt by taxpayer of
Page | 59
distraint or levy. The act of CIR of issuing the warrant shall be deemed a denial of the request for
protest of the taxpayer.
Under the rules, appeal can be taken upon the decision of CIR. Without this decision, there is
nothing to review. CTA only acquires jurisdiction when there is decision to speak of.
Issue: Is the issuance of warrant of distraint and service thereof to the taxpayer treated as decision?
SC discussion:
Not only was the Notice the only response received; its content and tenor supported the
theory that it was the CIR's final act regarding the request for reconsideration. The very
title expressly indicated that it was a final notice prior to seizure of property. The letter itself
clearly stated that respondent was being given "this LAST OPPORTUNITY" to pay; otherwise, its
properties would be subjected to distraint and levy

NO. Union Shipping compared with Isabela Cultural

In Union Shipping: the warrant does not indicate that it is the final act of the CIR on the
CIR shall always indicate to the taxpayer in a clear and unequivocal language what matter.
constitutes final determination of the disputed assessment. In Isabela: the tenor and content of the final notice communicates to the taxpayer that it is the
CIRs final act regarding the matter.
In this case, taxpayer does not know what constitutes decision. This is why it reiterated its
request for reinvestigation. The warrant was not clear if it constitutes as final decision of CIR. Important Tenet
The taxpayer shall treat the final notice as the decision. In Isabela, the taxpayer himself
The filing of the collection suit is deemed to be the final decision of CIR. Since summons was treated the notice as the CIRs decision. This was not present in the case of Union Shipping.
received, appeal must be reckoned from the date the summons was received by taxpayer.
Effect of Protest Filed out of Time
Appeal here was filed within the 30 day period. Assessment becomes final and unappealable

SC Discussion: Protector's Services v. CA, April 12, 2000

Under the circumstances, the Commissioner of Internal Revenue, not having clearly signified his
final action on the disputed assessment, legally the period to appeal has not commenced to run.
Thus, it was only when private respondent received the summons on the civil suit for collection
of deficiency income on December 28, 1978 that the period to appeal commenced to run.
The request for reinvestigation and reconsideration was in effect considered denied by
petitioner when the latter filed a civil suit for collection of deficiency income. So. that on
January 10, 1979 when private respondent filed the appeal with the Court of Tax Appeals, it
consumed a total of only thirteen (13) days well within the thirty day period to appeal.
CIR v. Isabela Cultural Corporation, July 11, 2001
02/ 23/90: Assessment received by Taxpayer, dated February 9 90
03/22/90: Date of protest by taxpayer
04/18/90: Taxpayer submitted relevant documents
02/9/95: Final notice before seizure was received by the taxpayer
03/9/95 Petition for review was filed by taxpayer before CTA
Was the protest filed within 30 day period?
YES.
Can you treat the final notice before seizure as the decision of CIR?
Ordinarily, it is not a final decision on disputed assessment.
However, in this case, the final notice says:
We are giving you the last opportunity to settle the adverted assessment. Otherwise, we will be
constrained to enforce collection by summary remedy.
12/7/87: Assessment notice sent by CIR
12/10/87: Assessment notices for taxable period 1983 and 1984 were received by taxpayer
1/12/88: Taxpayer filed protest for taxable years 1983 and 1984
Was the protest filed within the period?
NO.
When should the period be reckoned?
Date when the taxpayer received the assessment notice (12/10/87)
If what is being asked is the reckoning period to collect the tax: consider the date when the CIR
has sent the notice
If what is being asked is the reckoning period for the remedy of taxpayer: consider the date
when the taxpayer received the assessment notice
Taxpayer received the assessment notice on 12/10/87
Protest was filed on 1/12/88
33 days had lapsed from date of receipt of assessment notice.
Effect: assessment becomes final and unappealable.
Since assessment becomes final and unappealable, taxpayer can no longer dispute the
correctness of assessment. CTA cannot acquire jurisdiction since there is no disputed assessment
to speak of.
Was there receipt of notice of deficiency for 1985 by the taxpayer?
Since the letter /notice is properly addressed and postage is properly paid, there is presumption
that the assessment was properly served to the taxpayer.

By considering this statement, it is treated as a final decision of CIR,

Since the final notice before seizure was the only respondent received by taxpayer and the
content and tenor of letter is that it is the CIRs final act on the disputed assessment, the taxpayer
can treat it as the CIR decision disposing of the request for reconsideration.

Page | 60
 Remedies from Denial of Protest
Recall: flowchart
CIRs Action or Inaction
Taxpayer files appeal before CTA division within 30 days
Motion for New Trial or Motion for Reconsideration to CTA Division within 15 days.
Petition for Review before CTA En Banc
Motion for Reconsideration before CTA En Banc
Petition for Review (Rule 45) to SC
Is the filing for motion for reconsideration or motion for new trial mandatory?
Commission of Customs vs. Marina Sales Inc; November 22 2010
The filing for motion for reconsideration or motion for new trial is mandatory.
Effect of non-filing: Petition for review shall be dismissed.
It is mandatory under Revised Rules of CTA.
Fishwealth Canning vs CIR; January 21 2010
5/16/2000: CIR has written a letter of assessment for taxable year 1999
8/25/2000: Taxpayer sent request for reinvestigation
8/30/2000: Taxpayer settled obligation based on the reinvestigation.
Cir issued subpoena for taxpayer to submit relevant documents. Petitioner did not heed to the
subpoena issued by the CIR after the settlement of obligation.
8/6/2003: CIR issued formal assessment notice
9/23/2003: Taxpayer filed protest
8/2/2005: CIR issued final decision on disputed assessment
8/4/2005: Taxpayer received this final decision
9/1/2005: Taxpayer filed a letter of reconsideration
9/6/2005: Preliminary collection letter issued by CIR
10/20/2005: Taxpayer filed petition for review before CTA
After receipt of final decision of CIR. the next step should be to file an appeal to the CTA division.
However taxpayer filed a letter of reconsideration. After the preliminary collection letter by CIR,
it is only when the taxpayer filed petition before CTA.
When should you reckon the period of filing appeal?
Filing of motion for reconsideration before the CIR will not toll the running the 30 day
period to appeal the case to the CTA.
Hence, the taxpayer has 30 days from August 4 2005 to file the petition for review before the
CTA.
Fishwealth compared to Commissioner Customs
Commissioner Customs: Motion for Reconsideration before the CTA division is mandatory
Fishwealth: Motion for Reconsideration before CIR is not mandatory. Filing of such would not
toll the filing of the prescriptive period.
NOTE: Read PAGCOR VS BIR JANUARY 27 2016
Revenue Regulation 18-2013
o Requirement: the final decision shall indicate the law, facts jurisprudence from
which the decision is made
Note: In the case of Isabela: the final notice before seizure contained no law and
facts from which the notice was made. Hence, the Supreme may declare this as a
void demand.
o Administrative appeal: if the protest has been decided by a duly authorized
representative of the CIR (Regional Director), the decision may still be appealed to
the CIR within 30 days.
o Judicial appeal: Another remedy is to appeal directly the decision of regional
director to the CTA Division
B. AFTER PAYMENT
1. Refund
Section 229: Refund of overpayment, illegal payment, erroneous payment, or payment of penalties not
authorized by law
Prescriptive Period: 2 years from the date of payment, regardless of any supervening event.
Regardless of any supervening event
It could be possible that taxpayer, upon filing of original income tax return, paid his taxes (for
example, 150k). After such filing, the return was amended and the taxpayer paid additional
taxes (e.g. 40k)
In this case of amendment, when should you reckon prescriptive period?
From the original filing of return, as to those taxes paid at that time (150k)
The amendment of the return will not matter as to those taxes paid at that time of filing.
From the filing of the amended return, as to those taxes paid at that time (40k).
If the return was amended so as to effect another payment, each payment made for each of
the return will have its own prescriptive period from the date of the respective payment.
Nature of Refund
Similar to tax exemptions.
Apply the principle of strictissimi juris: any ambiguity shall be construed strictly against the
taxpayer.
Page | 61
Review of Income taxation on administrative requirements When is the reckoning date?
From date of filing of the final adjusted return.
For individual taxpayers earning income from business, trade and profession NOT from the date of remittance
Quarterly returns
1st: due on April 15 The taxes withheld are merely provisional in nature. The final determination of tax liability is at the
2nd: due on August 15 time of filing of the final adjusted return which is the annual income tax return (April 15)
3rd: due on November 15
No 4th quarter return for income tax purposes (unlike in VAT). This will be reflected in the annual tax Claimant has burden of proof to establish factual basis for refund because tax refunds are
return like tax exemptions.

For corporate taxpayers
Quarterly return
1st Q: due on 60 days from end of 1st quarter (from March31)
2nd Q: due on 60 days from end of 2nd quarter (from June30)
3rd Q: due on 60 days from end of 3rd quarter (from September 30)
For individuals earning Rental Income
Income is subject to 5% withholding tax withheld by lessee and remitted to the Government.
If the lessee did not withhold, he can be held personally liable being a withholding agent. Also, he cannot
deduct rental expenses.
In general, there is no disagreement that a claimant has the burden of proof to establish the factual
basis of his or her claim for tax credit or refund. Tax refunds, like tax exemptions, are construed
strictly against the taxpayer.
Proof of inclusion of payments; detailed proof not required
A refund claimant is required to prove the inclusion of the income payments which were the
basis of the withholding taxes and the fact of withholding. However, detailed proof of the
truthfulness of each and every item in the income tax return is not required. That function is lodged
in the commissioner of internal revenue by the NIRC which requires the commissioner to assess
internal revenue taxes within three years after the last day prescribed by law for the filing of the
return.

Under Sec 34 of NIRC, if expense is subject to withholding tax, the taxpayer should withhold the same
and remit to the government.
If the lessee deducted 500 per month, (6k for 1yr), this is reflected in the quarterly returns of the lessor.
These payments are considered as advance payments of the lessor to his annual taxes. Lessor may
deduct this from his income tax since it is an advance payment .
Illustration: The taxpayer has 5 qualified dependents.
Grant of a refund is founded on the assumption that the tax return is valid
In San Carlos Milling Co., Inc. vs. Commissioner of Internal Revenue, the Court held that the
internal revenue branch of government must investigate and confirm the claims for tax refund
or credit before taxpayers may avail themselves of this option. The grant of a refund is founded on
the assumption that the tax return is valid; that is, the facts stated therein are true and correct.
In fact, even without petitioner's tax claim, the commissioner can proceed to examine the books,
records of the petitioner-bank, or any data which may be relevant or material in accordance
with Section 16 of the present NIRC

He acquires 120k worth of rental income per year.

He can deduct 40% optional standard deduction (equal to 48k). There could also be other deductions. Grounds for Filing a Claim for Refund
In the end, his tax liability becomes zero because of the deductions. (Not discussed in class)
Aside from these deductions, he can also deduct the creditable withholding tax of 6k as he already made 1. The tax was illegally collected There is no law that authorizes the collection of the tax
advance payment. This 6k is an overpayment. 2. The tax was excessively collected There is a law that authorizes the collection but
the tax collected was more than what the law allows
This can be carried over for the succeeding period; or he may file for application for refund of this 3. The tax was paid through a mistaken belief that the taxpayer should pay the tax This is a
amount. case of solutio indebiti
Two options:
1. Tax refund
Procedure in Filing a Claim for Refund
Application of tax refund, or
Application for issuance of tax credit certificate
Filing of written claim for refund
2. Tax Credit Required to be filed before the CIR
Carry over of overpayment for the succeeding taxable periods
Exception: 204c of NIRC
A written claim for refund must be filed before commissioner except if the overpayment or
erroneous payment clearly appears on the face of the return.
Citibank NA vs. CA; October 10 1997
In this case, the written claim for refund is no longer necessary.
Is the lessor entitled to a refund of such withheld amount after it is determined that the lessor is not
CIR v. ACOSTA, Aug. 3, 2007
liable for income tax?
Yes Taxpayer paid taxes for taxable year 1996. She filed an annual tax return in 1997. Judicial claim for
refund in 1998.

Page | 62
 ACCRA Investments Corporation vs. Court of Appeals; December 20 1991
The CTA dismissed the petition on the ground that no written claim for refund was filed, which is a
condition sine qua non for filing judicial claim for refund. From the date of payment of tax, defined

Requirements for filing for refund:
1. A written claim for refund or tax credit must be filed by the taxpayer with the Commissioner;
2. The claim for refund must be a categorical demand for reimbursement;
3. The claim for refund or tax credit must be filed, or the suit or proceeding therefor must be
commenced in court within two (2) years from date of payment of the tax or penalty regardless of
any supervening cause
--------------------------------------------------------------------------------------------------------------------------------
Lecture Notes:
If the ITR clearly shows the overpayment, is the filing of written claim for refund required?
No, if under the effectivity of RA 8424.
Yes, if before the effectivity of RA 8424.
RA 8424 was effective on January 1 1998. It was not applicable in this case since the return was filed
in 1997. The Supreme Court in this case applied the Old Tax Code, under which there exists no
exception as to the requirement of filing for a written claim for refund.
Is it proper for CTA to dismiss the judicial claim for refund?
Yes.
From the end of the taxable year when petitioner Corporation was deemed to have paid its tax
liabilities under the withholding tax system.
But since there is a need to file for a claim first, the 2yr prescriptive period is not counted from the
end of taxable year but from the date of filing of the final adjusted return. It is the only time that
taxpayer may ascertain whether it gained profits or incurred losses.
Discussion by SC:
The rationale in computing the two-year prescriptive period with respect to the petitioner
corporation's claim for refund from the time it filed its final adjustment return is the fact that it was
only then that ACCRAIN could ascertain whether it made profits or incurred losses in its
business operations. The "date of payment", therefore, in ACCRAIN's case was when its tax liability,
if any, fell due upon its filing of its final adjustment return.
What if the transaction falls under installment transactions? When will we reckon the prescriptive period?
From the date of last payment or installment
Other notes:
In VAT, there is no final adjusted return, only quarterly returns.
What if there was overpayment of tax? When should you reckon the prescriptive period under
Sec 229?
If he filed a quarter return, it is considered the final adjusted return.

Other notes:
The 2-year period in Section 229 applies to both administrative claim for refund and judicial
claim for refund.
Can the taxpayer file the administrative claim for refund and the judicial claim simultaneously?
Yes. There is no need to wait for the decision of CIR before the judicial claim can be filed.
Section 229 requires that no proceeding in court shall be filed beyond the prescriptive period.
Hence, there is no requirement to wait first for CIR to decide because the judicial claim must
be filed within the prescriptive period.
Note that in VAT, what you reflect in a quarter return are your information in that
quarter alone. The quarterly returns in VAT are not cumulative. You dont add
your first and second quarterly taxes to reflect on your 2nd quarterly return and so
on. THUS, the quarter returns are already considered as final adjusted return.
In income taxes, on the other hand, your quarterly returns are cumulative in
nature. What you reflect in your first quarter will also be reflected in your second
quarter, and so on. The quarterly returns here are not considered as final adjusted
return, hence the need to file an annual income tax return.

Period within which to File a Claim for Refund So 2 year prescriptive period for refund shall reckon from the date of payment
of first quarter tax, second quarter tax, and so on.

i.) General Rule: 2 years from the date of payment What if no indication of tax of payment, but only the date of filing?
Date of filing is deemed as the date of payment, under the pay-as-you-file system.
CIR vs. TMX Sales; January 15 1992

Taxpayer paid taxes on a quarterly basis. For income taxes, the taxpayer must file an annual income tax return.
The prescriptive period is reckoned from the date of filing the annual adjusted
When to count prescriptive period? return/annual income tax return,
From date of filing of the final adjusted return
Not from date of filing of the quarter returns. For donors taxes
The prescriptive period is reckoned from date of filing of donors tax return
Taxes paid on quarterly basis are mere installment payment of taxes and are therefore mere
provisional in nature. The final determination of tax liability is at the time of filing of the final For estate taxes
adjusted return. Date of filing of estate tax return
Extension is possible, depending on whether the estate is under judicial or
extrajudicial settlement
Judicial: 5yrs
Extrajudicial: 2yrs

Page | 63
 If the estate tax return was erroneous: 2yr prescriptive period is reckoned from
date of final or last payment
ii.) In case of Amended Returns
If the return was amended, the running of the prescriptive period still starts from the date of
the original filing because supervening events are immaterial.
BUT if the return was amended so as to effect another payment, each payment made for
each of the return will have its own prescriptive period from the date of the respective
payment.
Recall previous discussion:
It could be possible that taxpayer, upon filing of original income tax return, paid his taxes (150k).
After such filing, the return was amended and the taxpayer paid additional taxes (e.g. 40k)
In this case of amendment, the prescriptive period should be reckoned:
From the original filing of return, as to those taxes paid at that time (150k)
The amendment of the return will not matter as to those taxes paid at that time of filing.
From the filing of the amended return, as to those taxes paid at that time (40k).
CIR v. Primetown, August 28, 2007
1yr: 12 calendar months
In 1987, EO 292 or the Administrative Code of 1987 was enacted. Section 31, Chapter VIII, Book I
thereof provides:
Sec. 31. Legal Periods. Year shall be understood to be twelve calendar months; month of thirty
days, unless it refers to a specific calendar month in which case it shall be computed according to the
number of days the specific month contains; day, to a day of twenty-four hours and; night from
sunrise to sunset.
A calendar month is a month designated in the calendar without regard to the number of
days it may contain. It is the period of time running from the beginning of a certain numbered day
up to, but not including, the corresponding numbered day of the next month, and if there is not a
sufficient number of days in the next month, then up to and including the last day of that
month.
To illustrate, one calendar month from December 31, 2007 will be from January 1, 2008 to January
31, 2008; one calendar month from January 31, 2008 will be from February 1, 2008 until February
29, 2008.
Final adjusted return on April 14, 1998: Respondent's petition (filed on April 14, 2000) was filed on
the last day of the 24th calendar month from the day respondent filed its final adjusted return.
Hence, it was filed within the reglementary period
CIR v. PNB, October 25, 2005
PNB made advance payment of tax. PNB claimed for refund after more than 2 years. CIR denied the
claim for refund because it was filed beyond the prescriptive period.
Is the 2 year prescriptive period applicable in this case?
No.
What is present in this case is not payment of taxes that had already accrued but the
payment of future tax liabilities.
Apply the Civil Code provision for written contracts: prescriptive period is 10 years.
Exception to the two-year period
Special circumstance and equity.
The advance payment made by PNB was made in order to help alleviate the economic situation of
the country at the time of the Aquino Administration, in response to Cory Aquinos call.
In the strict legal viewpoint, therefore, PNBs claim for tax credit did not proceed from, or is a
consequence of overpayment of tax erroneously or illegally collected. It is beyond cavil that
respondent PNB issued to the BIR the check for P180 Million in the concept of tax payment in
advance, thus eschewing the notion that there was error or illegality in the payment.
The suspension of the two (2)-year prescriptive period is warranted not solely by the objective or
purpose pursuant to which respondent PNB made the advance income tax payment in 1991.
Prescriptive period applicable
10 years from the date of the agreement, based on the New Civil Code, that is from the time the
advance payment was made.
CIR v. Philam Life, May 29, 1995
Tax credits for reasons other than overpayment, erroneous, illegal and penalties not authorized
shall have prescriptive period of 10 years, not 2 years.
Other SC discussions:
Although quarterly taxes due are required to be paid within sixty days from the close of each
quarter, the fact that the amount shall be deducted from the tax due for the succeeding quarter
shows that until a final adjustment return shall have been filed, the taxes paid in the preceding
quarters are merely partial taxes due from a corporation. Neither amount can serve as the final
figure to quantity what is due the government nor what should be refunded to the corporation.
This interpretation may be gleaned from the last paragraph of Section 69 of the Tax Code which
provides that the refundable amount, in case a refund is due a corporation, is that amount which is
shown on its final adjustment return and not on its quarterly returns.
Therefore, when private respondent paid P3,246,141.00 on May 30, 1983, it would not have been
able to ascertain on that date, that the said amount was refundable. The same applies with cogency
to the payment of P396,874.00 on August 29, 1983.
The prescriptive period of two years should commence to run only from the time that
the refund is ascertained, which can only be determined after a final adjustment return is
accomplished.
In the present case, this date is April 16, 1984, and two years from this date would be April 16, 1986.
The record shows that the claim for refund was filed on December 10, 1985 and the petition for
review was brought before the CTA on January 2, 1986. Both dates are within the two-year
reglementary period. Private respondent being a corporation, Section 292 (now Section 230)
cannot serve as the sole basis for determining the two-year prescriptive period for refunds. As
we have earlier said in the TMX Sales case, Sections 68, 69, and 70 on Quarterly Corporate
Income Tax Payment and Section 321 should be considered in conjunction with it.
Can the Supreme Court suspend the 2-year prescriptive period?
Yes.
For reasons of equity or other special circumstances.
Page | 64

iii.) Corporations Contemplating Dissolution
Section 52c of the Tax Code
Corporations contemplating dissolution must file an information return within 30 days
After adoption of plan of dissolution; or
From notice of dissolution in case of voluntary dissolution
Review: For ordinary taxpayers
Section 229 of Tax Code: prescriptive period of 2 years from date of payment/date of filing a final
adjusted return
If return is filed after the last day prescribed by law, (e.g. on April 30 2016), the repercussion
is that taxpayer is liable for payment of interest, surcharge or compromise penalty
The 2 year prescriptive period is reckoned from the actual filing of the final adjusted return.
In case of business with corporate existence, apply this rule: count the prescriptive period
from actual date of filing
Would you apply the same rule with corporate taxpayers contemplating dissolution?
NO.
BPI vs. CIR
Taxpayer BPI merged with FBTC.
The plan of merger and AOI of merger were approved by SEC on the same date: July 1 1985
FBTCs business operation had ceased on June 30 1985. The surviving corporation is BPI
During the same year, FBTC suffered financial losses but had paid taxes through creditable
withholding tax. FBTC also had prior years excess credits.
On April 15 1986, BPI filed the final adjusted return of FBTC.
Because of the excess credits from operation of FBTC, BPI claimed for refund. CIR granted the refund
partially
BPI filed a petition for review before CTA on December 29 1987.
CTA dismissed the petition on the ground that it was filed beyond the prescriptive period.
The dismissal of the petition is proper
Apply a different rule regarding the reckoning of the prescriptive period on corporations
contemplating dissolution or corporations already dissolved. The 2-year rule from actual filing of
return is only applicable if the corporation has continued its business in the taxable year.
For dissolved corporations, apply Section 52C of the Tax Code
Corporation must file an information return
2-year period is not counted from filing of final adjusted return but from the last day
prescribed by law for filing of the return , which is 30 days from the adoption of
plan of dissolution
The plan of merger was adopted on July 1 1985.
Taxpayer has until July 31 1985 to file an information return. This is the last day prescribed by law
for filing of the return, from which the 2-year prescriptive period will be reckoned.
From here, taxpayer has until July 30 1987 to file for a petition for review before the CTA. (Note that
CIR vs. Primetown was not yet applicable in this case)
The petition for review was filed on December 29 1987. Hence it was filed beyond the
prescriptive period.
What if the date of adoption of articles of merger and the approval of the same were on different dates?
Refer to the date of adoption of the merger and not on the approval of the same,
When shall an article of merger be effective?
Corporation Code: Upon execution of the merger plan
What is the purpose of submission of this plan to the SEC?
to be binding upon 3rd persons
Section 52C of Tax Code: From adoption of the plan of dissolution
If the corporation plans to dissolve its operation, the SEC will not act on the plan of dissolution unless all
documentary requirements have been submitted to the SEC.
One of these documents is tax clearance certificate by CIR. This is not issued by CIR unless the
corporation has filed an information return under Section 52 c
Notes for exam or quiz:
If corporation is continuing business, count 2-years from date of payment, which is date
of filing a final adjusted return
If corporation is contemplating dissolution, count the 2-years from the last day
prescribed by law for filing a return
Section 56A: Pay-as-you-file system
Tax must be paid at the time the return is filed
Engtek Phils vs. CIR January 26 2005
Corporation declared dividend income in favor of stockholders
The corporation decided to withdraw the declaration but prior to this withdrawal, the corporation
(as withholding agent) had already remitted the corresponding taxes to the BIR
Can NTEC claim for refund for such taxes paid to CIR?
No.
Apply the provision on Refund under Section 229 if subject matter is overpaid tax, illegally collected
tax, excessive tax, or payment of penalties not authorized by law.
At the time of remittance of tax, there appears to be a legal basis for such remittance. The declaration
of dividends has not yet been withdrawn. Hence, it cannot be classified under those payments
covered by Section 229.
Personality to File for a Claim for Refund
Two individuals who can file for claim of refund
1. Statutory taxpayer having a direct interest over the overpayment of tax
2. Withholding agent
Page | 65
 CIR v. Smart Communications, August 25, 2010 If tax due is less than tax paid:

A withholding agent can file a claim for refund
Reasons:
1. He is considered a taxpayer under the Tax Code as he is directly and personally liable for
the withholding tax as well as for deficiency assessments, surcharges, and penalties,
should the amount withheld be finally found to be less than the amount that should
have been withheld
2. As an agent of the taxpayer, his authority to file the income tax return and remit the tax
withheld to the government includes the authority to file a claim for refund and to
bring an action for recovery of such claim.
Paragraph (b): Carry over of excess credit
Reflect the excess credit for succeeding taxable returns
Paragraph (c ): To be credited or refunded of excess amount
Application for refund or
Application for tax certificate
If the term used is tax credit: it refers to the carry over principle
If the term used is tax refund: it refers to the option to be credited or refunded of excessively paid tax

Silkair v. CIR, Nov. 14, 2008 Irrevocability Rule

Once the option to carry over and apply the excess quarterly income tax against the tax due
Silkair bought petroleum products from Petron, wherein it paid for indirect tax. Petron remitted this has been made, such option shall be considered irrevocable for that taxable period and no cash refund or
tax paid by Silkair. issuance of tax credit certificate shall be allowed.

Realizing that the transaction should have been exempt from tax, Silkair claimed for refund. Calamba Steel v. CIR, April 28, 2005

Silkair is neither the statutory taxpayer nor a withholding agent. Corporation reported that it has excess credits in the year 1995
In 1996, the excess credits were not utilized
The statutory taxpayer is the proper party to seek refund of indirect tax. In 1997, the taxpayer claimed for a refund of the excess credits acquired in 1995

Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Would the claim for refund be allowed?
Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and
Singapore. Sec 76: Irrevocability Rule

Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Taxable period: what does it refer to?
Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser. o Where the credit was acquired?; or
o Where the option has been made?

Is setting off of taxes against a pending claim for refund allowed? Taxable period refers to the period when the excess credits have already been acquired.

No. Set-off is not allowed
Rationale: The government and the taxpayer are not creditors and debtors of each other.
There is a material distinction between a tax and debt.
Debts are due to the Government in its corporate capacity
Taxes are due to the Government in its sovereign capacity
Equitable recoupment
a claim for refund already barred by prescription can be set off by the tax arising from the
same transaction
The doctrine of equitable recoupment is not applicable in the Philippine setting
Is automatic application of excess tax credits allowed?
Section 76, NIRC
Applicable for Corporate Taxpayers
Requirement: Filing of final adjusted return
Involves a situation when the amount of tax due is not equal to tax paid.
Can Calamba still ask for a refund for excess credits acquired in 1995?
If the Present Tax Code is applied: Calamba can no longer claim for a refund. The option has already
been made with respect to the excess credits acquired in 1995. If the taxpayer already made the
option to carry over, it cannot seek for a refund. The only remedy is to carry the excess credits over
the succeeding taxable years until the credits are fully utilized.
However, the Supreme Court in this case held that the Calamba can still claim for a refund.
This case was decided prior to RA 8424, which was effective on January 1 1988
Old Tax Code RA 8424
No irrevocability rule Contains an irrevocability rule
Taxpayer can carry over excess credits for the Option to carry over can be made for the next
next succeeding taxable year (singular) succeeding taxable yearssssssss (plural)
The two rules cannot concur. If the two rules would concur (e.g. if the option is irrevocable [RA
9424] and the taxpayer can only carry over the excess credits for the next singular year [Old Tax
Code]) it will be tantamount to a forfeiture of the excess credits by the Government. It will be
repugnant to the constitution as it would constitute confiscation of private property of the taxpayer.

Options of the taxpayer:

If tax due is greater than tax paid: pay the remaining balance

Page | 66
 Systra Philippines v. CIR, Sept. 21, 2007 o prior years excess credits for year 1997
BPI opted to carry over its 1998 excess credits
April 16 2001: Taxpayer filed income tax return for taxable year 2000
In the return filed, an option has been made that the excess credits will be carried over to taxable In 1999: BPI incurred losses in operations
year 2001 In 2000: BPI again suffered losses but failed to indicate its option whether tax credit or application
April 12 2002: income tax return for 2001 was filed for refund or issuance of tax credit certificate
In the income tax return, it was reflected that the option of the taxpayer is to be issued a tax credit April 3 2001: BPI filed application for claim for refund
certificate
If the claim for refund includes excess credits for year 1998, will the refund prosper?
Can this be legally done? No.
Yes, as to those credits incurred for taxable year 2001. Apply the irrevocability rule

There can no longer be a refund of the tax credits acquired in 1998

Taxable period, defined In the ITR, BPI indicated its option to carry over its 1998 excess credit. The only remedy of BPI is to
Year when excess credits were acquired carry over these excess credit until it is fully utilized.

In here, there are two tax credits acquired: for taxable years 2000 and 2001 Failure to indicate option in the 2000 ITR
Since BPI had failed to indicate in its return (2000 ITR) its option to carry over or refund, such
As to taxable year 2000, there was already an option made. failure does not automatically mean that BPI had opted for a tax credit/carry over.
An option has been made that the excess credits will be carried over to taxable year 2001. Hence,
this cannot be revoked anymore
Philam Asset Management v. CIR, Dec. 14, 2005
Options are mutually exclusive. Once option has been made, it cannot be revoked anymore for that
taxable period. One option precludes the application of the other. April 3 1998: ITR for 1997 has been filed
In this ITR, the taxpayer failed to indicate its choice whether to apply for refund or to carry over the
As to taxable year 2001, the Corporation can still exercise an option different from that which excess credits
was made for year 2000. September 11 1998: administrative claim for refund was filed.

Other SC Discussion: Can the excess credits acquired in 1997 be a subject of a refund?
YES.
A corporation entitled to a tax credit or refund of the excess estimated quarterly income taxes paid
has two options: The intention of the taxpayer is to apply for refund.
(1) to carry over the excess credit or Despite failure to indicate option, the act of filing its written claim for refund serves as an expression
(2) to apply for the issuance of a tax credit certificate or to claim a cash refund. of its choice.

If the option to carry over the excess credit is exercised, the same shall be irrevocable for that
taxable period.
In exercising its option, the corporation must signify in its annual corporate adjustment return (by
marking the option box provided in the BIR form) its intention either to carry over the excess
credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the
choice of one precludes the other.
Therefore, the application for tax refund can be allowed.
Also Failure to indicate the option is not a ground for denial of the refund
Excess credits acquired in 1998
In the tax return filed for year 1999, the prior years excess credits had been filled out by taxpayer.
1999 ITR reflected these excess credits acquired in 1998

Note for Bar Exam
If the exam indicates 2001 ITR, it is pertaining to the income tax return for the taxable year 2001,
which is filed on the next year (April 15, 2002)
It does not pertain to the ITR filed IN 2001, because that would involve a return for the
taxable year 2000. Rather, it pertains to the ITR filed FOR the year 2001.
Taxpayer did not make markings as to its option, whether to carry over or refund
Taxpayer then filed for application of refund for these excess credits acquired in 1998
Can it be subject of refund considering that it did not indicate its choice in filing of the return?
NO.

CIR v. BPI, July 7, 2009 The intent of the taxpayer can be gleaned from its subsequent act, which is the filing of ITR
indicating the excess credits. Hence, it is deemed that the option of the taxpayer was to carry over
April 15 1999: BPI filed ITR for year 1998 these excess credits.
In this ITR, BPI reflected
o its quarterly payment, The taxpayer cannot claim for refund for the excess credits acquired in 1998 because of the
o withholding taxes remitted by BPIs withholding agent, irrevocability rule.
o foreign tax credits and

Page | 67
 CIR v. Mirant, June 15, 2011
Summary of Rules:
Options under Section 76 are alternative in nature.
1. Before the irrevocability rule could be applied, the controlling factor is the fact that the The choice of one option precludes the application of the other.
taxpayer must have made an option and the option can be gleaned from the final adjusted
return
2. If no option was made, the subsequent acts of the taxpayer can dictate the choice of the
taxpayer Winebrenner & Inigo v. CIR, January 28 2015

In case a taxpayer opts to file a claim for refund, is it required to show the quarterly ITRs of
Asiaworld Properties v. CIR, July 29, 2010 the next taxable period to prove that it did not avail itself of the crediting mechanism?
NO.
April 5 2002: Taxpayer filed ITR for taxable year 2001.
In the ITR filed, the taxpayer reflected overpayment Proving that no carry-over has been made does not absolutely require
April 9 2002: taxpayer filed a request for refund of the excess credits for year 2001 the presentation of the quarterly ITRs.

If the 2001 ITR reflects excess credits acquired in year 1999, can the 1999 excess credits be subject of A taxpayer who seeks a refund of excess and unutilized creditable withholding tax must:
request for refund filed in 2002? 1) File the claim with the CIR within the two year period from the date of payment of the tax;
NO. 2) Show on the return that the income received was declared as part of the gross income;
and
The mere fact that the excess credit was included in the 2001 ITR shows that the taxpayer 3) Establish the fact of withholding by a copy of a statement duly issued by the payor to the
opted to carry over the excess credits acquired in 1999. Therefore, once such option has been payee showing the amount paid and the amount of tax withheld.
made, it is irrevocable.
Any document, other than quarterly ITRs may be used to establish that indeed the non-carry
Remedy of taxpayer: carry it over for the next succeeding taxable years until fully utilized over clause has been complied with, provided that such is competent, relevant and part of the
records.
CIR v. McGeorge Food Industries, October 20, 2010
In Philam, the Court ruled that the presentation of the quarterly ITRs was not necessary:
April 15 1998: ITR for 1997 was filed
The return indicated an overpayment. The taxpayer chose to carry over these excess payments. Requiring that the ITR or the FAR of the succeeding year be presented to the BIR in requesting a tax
refund has no basis in law and jurisprudence.
April 15 1999: Taxpayer filed ITR for 1998
Prior years excess credits were not utilized by the taxpayer. First, Section 76 of the Tax Code does not mandate it. The law merely requires the filing of the
FAR for the preceding not the succeeding taxable year. Indeed, any refundable amount indicated
April 14 2001: Taxpayer filed administrative claim for refund and judicial claim for refund for in the FAR of the preceding taxable year may be credited against the estimated income tax liabilities
payment made in 1997 for the taxable quarters of the succeeding taxable year. However, nowhere is there even a tinge of a
hint in any provisions of the [NIRC] that the FAR of the taxable year following the period to which
Issue: The excess credits were acquired in 1997, prior to the effectivity of RA 8424. However, the filing of the tax credits are originally being applied should also be presented to the BIR.
the return reflecting such excess credits was made in 1998, upon effectivity of RA 8414. What law shall
govern? Second, Section 5 of RR 12-94, amending Section 10(a) of RR 6-85, merely provides that claims
for refund of income taxes deducted and withheld from income payments shall be given due course
The governing law shall be the law effective at the time the taxpayer had made known its only (1) when it is shown on the ITR that the income payment received is being declared part of the
preference to the BIR taxpayers gross income; and (2) when the fact of withholding is established by a copy of the
withholding tax statement, duly issued by the payor to the payee, showing the amount paid and the
April 15:1988 income tax withheld from that amount.
Apply RA 8424
It appears that there is misunderstanding in the ruling of the Court in Philam. That factual distinction
Is McGeorge still allowed to claim for refund? does not negate the proposition that subsequent quarterly ITRs are not indispensable. The logic in
NO. not requiring quarterly ITRs of the succeeding taxable years to be presented remains true to this
day. What Section 76 requires, just like in all civil cases, is to prove the prima facie
There is already irrevocability rule. At the time of filing of ITR 1997, the taxpayer already made the entitlement to a claim, including the fact of not having carried over the excess credits to the
option to carry over the excess credits. Hence, it cannot anymore ask for refund. subsequent quarters or taxable year. It does not say that to prove such a fact, succeeding
quarterly ITRs are absolutely needed.

This simply underscores the rule that any document, other than quarterly ITRs may be used to
establish that indeed the non-carry over clause has been complied with, provided that such is
competent, relevant and part of the records. The Court is thus not prepared to make a

Page | 68
pronouncement as to the indispensability of the quarterly ITRs in a claim for refund for no court can NOTE: Maam Tin assigned this case for reading. It may be asked in the exam so just read the full case
limit a party to the means of proving a fact for as long as they are consistent with the rules of
evidence and fair play. The means of ascertainment of a fact is best left to the party that alleges the
same. Effect of Existing Tax Liability on a Pending Claim for Refund
In the present case, while petitioner did offer its Annual ITR/Final Adjustment Return for taxable CIR v. CA and Citytrust
year 2004, it appears that petitioner miserably failed to submit and offer as part of its evidence the
first, second, and third Quarterly ITRs for the year 2004. Consequently, petitioner was not able to
1994
prove that it did not exercise its option to carry-over its excess CWT.
August 26 1986: Citytrust filed administrativ claim for refund for year 1984.
Indeed, an annual ITR contains the total taxable income earned for the four (4) quarters of a
Two days after, Citytrust filed a judicial claim for refund. CTA granted this refund.
taxable year, as well as deductions and tax credits previously reported or carried over in the
quarterly income tax returns for the subject period.
The CIR questioned the grant on the ground that Citytrust was not able to substantiate the claim and
the findings of deficiency taxes bars the payment of refund. Since application of refund refers to
The annual ITR (including any other proof that may be sufficient to the Court) can sufficiently reveal
1984 and there is pending deficiency assessment in that same year, the tax court should not have
whether carry over has been made in subsequent quarters even if the petitioner has chosen the
granted the refund.
option of tax credit or refund in the immediately 2003 annual ITR.
The grant of refund is founded on the assumption that the tax return is valid. The facts stated
Section 76 of the NIRC requires a corporation to file a Final Adjustment Return (or Annual ITR) in the return are correct and accurate. However, the deficiency assessment although not yet final
covering the total taxable income for the preceding calendar or fiscal year. The total taxable income
created a doubt and constitutes a challenge against the facts stated in the return.
contains the combined income for the four quarters of the taxable year, as well as the deductions and
excess tax credits carried over in the quarterly income tax returns for the same period.
Therefore, the return cannot be a basis for the grant of refund.
If the excess tax credits of the preceding year were deducted, whether in whole or in part, from the
The case has to be remanded to the CTA. The issue on the pending assessment and refund must be
estimated income tax liabilities of any of the taxable quarters of the succeeding taxable year, the total
decided simultaneously in order to avoid multiplicity of suits.
amount of the tax credits deducted for the entire taxable year should appear in the Annual ITR under
the item Prior Years Excess Credits. Otherwise, or if the tax credits were carried over to the
SC discussion
succeeding quarters and the corporation did not report it in the annual ITR, there would be a
To avoid multiplicity of suits and unnecessary difficulties or expenses, it is both logically necessary
discrepancy in the amounts of combined income and tax credits carried over for all quarters and the and legally appropriate that the issue of the deficiency tax assessment against Citytrust be resolved
corporation would end up shouldering a bigger tax payable.
jointly with its claim for tax refund, to determine once and for all in a single proceeding the true and
correct amount of tax due or refundable.
It must be remembered that taxes computed in the quarterly returns are mere estimates. It is the
annual ITR which shows the aggregate amounts of income, deductions, and credits for all quarters of
If the deficiency assessment should subsequently be upheld, the Government will be forced to
the taxable year. It is the final adjustment return which shows whether a corporation incurred a loss
institute anew a proceeding for the recovery of erroneously refunded taxes which recourse
or gained a profit during the taxable quarter. Thus, the presentation of the annual ITR would suffice
must be filed within the prescriptive period of ten years after discovery of the falsity, fraud
in proving that prior years excess credits were not utilized for the taxable year in order to make a
or omission in the false or fraudulent return involved
final determination of the total tax due.
2006
Stateland and Mirant are equally challenged. In all these cases however, the factual distinctions only
serve to bolster the proposition that succeeding quarterly ITRs are not indispensable. Implicit from
CTA conducted proceedings with respect to refund and pending assessment.
all these cases is the Courts recognition that proving carry-over is an evidentiary matter and
Lawyer of Citytrust paid the assessment since the assessment is lower than the amount claimed for
that the submission of quarterly ITRs is but a means to prove the fact of ones entitlement to a
refund.
refund and not a condition sine qua non for the success of refund. True, it would have been
better, easier and more efficient for the CTA and the CIR to have as basis the quarterly ITRs, but it is
CTA granted the refund for the year 1984.
not the only way considering further that in this case, the Annual ITR for 2004 is sufficient. Courts
CIR questioned the grant of refund on the ground that there is pending assessment for year 1985
are here to painstakingly weigh evidence so that justice and equity in the end will prevail.
CTA correctly granted for refund. The pending assessment does not refer to taxable year 1984
The CIR must then be reminded that in Philam, the CIRs failure to present the quarterly ITRs and which is the subject of the refund.
Annual Returns to support its contention against the grant of a tax refund to a claimant is certainly
fatal. The PERF Case (CIR vs. PERF) reinforces this with a sweeping statement holding that the
verification process is not incumbent on PERF or any claimant for that matter; but is the duty of the
CIR to verify whether xxx excess income taxes have been carried over.

And should there be a possibility that a claimant may have violated the irrevocability rule and
thereafter claim twice from its credits, no one is to be blamed but the CIR for not discharging its
burden of evidence to destroy a claimants right to a refund. At any rate, a claimant who
defrauds the government cannot escape liability be it criminal or civil in nature.

Page | 69
 Period of Validity of a Tax Refund
Section 230, NIRC
Forfeiture of Cash Refund and of Tax Credit.
(A) Forfeiture of Refund. - A refund check or warrant issued in accordance with the pertinent
provisions of this Code, which shall remain unclaimed or uncashed within five (5) years from
the date the said warrant or check was mailed or delivered, shall be forfeited in favor of the
Government and the amount thereof shall revert to the general fund.
(B) Forfeiture of Tax Credit. - A tax credit certificate issued in accordance with the pertinent
provisions of this Code, which shall remain unutilized after five (5) years from the date of
issue, shall, unless revalidated, be considered invalid, and shall not be allowed as payment for
internal revenue tax liabilities of the taxpayer, and the amount covered by the certificate shall
revert to the general fund.
Aguilar v. CIR, March 30, 1990
Returns are not actionable documents for purposes of the
rules on civil procedure and evidence
Income tax returns are not actionable documents because the action is not based on the income tax
returns but on the entitlement of the taxpayer to tax refund. Therefore, his claim for refund must be
supported by proof.
Nature of Tax Credit Certificate
Pilipinas Shell Petroleum Corporation v. CIR, December 21, 2007
Tax credit certificates (TCCs) were acquired by Pilipinas Shell from BOI Registered companies
Pilipinas Shall used tax credit certificates for payment of excise tax liabilities.
CIR issued assessment notices. It argued that Pilipinas Shell is not a qualified transferee. Hence it
cannot use the tax credit certificates as payment of its excise tax liabilities.
Arguments of CIR
1. Tax credit certificates are not immediately valid and effective. There exists a suspensive
condition that the TCCs must pass post-audit. If Pilipinas Shell does not require the
requirements in post-audit, the TCCs are not valid and effective.
2. Pilipinas Shell acquired TCCs fraudulently. It cannot acquire any right over the TCCs
fraudulently issued.
Article 1181 of the Civil code governing suspensive conditions does not apply because the
taxpayers (BOI- registered cos and government) did not agree to a suspensive condition.
The special laws governing the issuance of the tax credit certificates do not provide for a condition
before the TCCs shall become valid and effective.
There being no suspensive conditions provided under the special laws, the tax credit certificates are
immediately valid and effective upon their issuance.
Tip for exam/quiz:
If you are faced with a similar problem, check if the taxpayer and government had agreed on a
suspensive condition. If there are, TCCs are not immediately valid and effective.
If the problem is under similar facts with the case of Pilipinas, then the ruling shall be the same:
Under special laws, there exists no suspensive condition for issuance of tax credit certificates
Tax Credit Certificates, defined
Certification named under the taxpayer and issued by the government acknowledging the
overpayment made by the taxpayer.
The TCCs are in the nature of an undertaking that must be respected by government. Hence, they are
transferrable in nature because they are proprietary rights.
There is no evidence that Pilipinas is a party to a fraduluent issuance of the TCCs. Being a
transferee in good faith and for value, its rights must not be prejudiced.
Any reassessment or determination that TCCs are fraudulently issued shall not prejudice the rights
of a transferee in good faith. Since Pilipinas had already utilized the TCCs in payment of its tax
liabilities, these TCCs can no longer be cancelled to protect that interest of a transferee in good faith
and for value.
---------------------------------------------------------------------------------------------------------------------------------
Full Supreme Court discussion:
Tax Credit Certificate, defined
a certification, duly issued to the taxpayer named therein, by the Commissioner or his duly
authorized representative, reduced in a BIR Accountable Form in accordance with the
prescribed formalities, acknowledging that the grantee-taxpayer named therein is legally entitled a
tax credit, the money value of which may be used in payment or in satisfaction of any of his internal
revenue tax liability (except those excluded), or may be converted as a cash refund, or may
otherwise be disposed of in the manner and in accordance with the limitations, if any, as may be
prescribed by the provisions of these Regulations.
From the above definitions, it is clear that a TCC is an undertaking by the government through the
BIR or DOF, acknowledging that a taxpayer is entitled to a certain amount of tax credit from either an
overpayment of income taxes, a direct benefit granted by law or other sources and instances granted
by law such as on specific unused input taxes and excise taxes on certain goods. As such, tax
credit is transferable in accordance with pertinent laws, rules, and regulations.
Therefore, the TCCs are immediately valid and effective after their issuance.
Second, the only conditions the TCCs are subjected to are those found on its face. And these are:
1. Post-audit and subsequent adjustment in the event of computational discrepancy;
2. A reduction for any outstanding account/obligation of herein claimant with the BIR
and/or BOC; and
3. Revalidation with the Center in case the TCC is not utilized or applied within one
(1) year from date of issuance/date of last utilization.
The above conditions clearly show that the post-audit contemplated in the TCCs does not pertain
to their genuineness or validity, but on computational discrepancies that may have resulted from
the transfer and utilization of the TCC.
Page | 70
 Refund and Protest are mutually exclusive remedies
Is taxpayer entitled to claim interest for refunded taxes?
Vda. De San Agustin v. CIR, September 10, 2001
Section 79 (c) (2), NIRC
Decedent died. In his holographic will, he named his wife as sole heir and Jose feria as executor. (2) Employees. -The amount deducted and withheld under this Chapter during any calendar year
Feria requested for extension of 2-year for payment of the estate tax. The CIR granted extension only shall be allowed as a credit to the recipient of such income against the tax imposed under Section 24(A)
for 6 months. The estate paid the tax within the 6 months period of this Title.

On October 11991: CIR issued preliminary assessment notice indicating the deficiency estate tax
On October 4 1991: CIR reiterated its demand to pay the deficient estate tax liabilities on its
assessment notice
On October 31 1991: Taxpayer filed a request for reconsideration only with respect to the
surcharges imposed by the CIR. Taxpayer manifested willingness to pay tax except to surcharge
December 18 1991: CIRs acceptance of payment of liability
January 25 1993: Taxpayer paid surcharge under protest
February 18 1993: Taxpayer filed for a petition for review before the CTA.
CIRs argument: Since taxpayer did not file administrative claim for refund before Cir, the judicial
claim for refund must be dismissed. Under Tax Code, administrative claim must be filed first before
judicial claim for refund shall prosper.
Refunds and credits in cases of excessive withholding shall be granted under rules and
regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner.
Any excess of the taxes withheld over the tax due from the taxpayer shall be returned or
credited within three (3) months from the fifteenth (15th) day of April. Refunds or credits made after
such time shall earn interest at the rate of six percent (6%) per annum, starting after the lapse of the
three-month period to the date the refund of credit is made
Summary on overly withheld taxes from salaries or wages of an employee
Excess taxes withheld from income of employee must be refunded within 3 months from
April 15. If not, there shall be accrual of interest at the rate of 6% per annum.
The employer refunds the overly withheld taxes to the employee. If he fails to do so within 3
months after April 15, he is liable for interest

Review: C. OTHER REMEDIES

Under old tax code: written claim for refund must be filed 1. Action to contest forfeiture of chattel
Under new tax code: written claim for refund must be made except when overpayment appears Can be done:
in the face of the return before sale or
after sale
Whether in the old or new tax code, there must be administrative claim for refund. If filed after sale, it must be within 6 months after such sale

When the action is filed after sale, the movable property will no longer be vested upon taxpayer if such
The filing of an administrative claim for refund is no longer necessary. is transferred to a purchaser in good faith. In this case, the proceeds from the sale shall be given to the
taxpayer.
This case does not involve a plain application for refund but a disputed assessment. The
payment of 438k surcharges was covered by the assessment notice issued by the CIR. 2. Redemption of property sold
If real property is sold to satisfy tax, taxpayer can redeem such property within 1 year from
The filing of administrative claim for refund will be a useless formality. A portion of the 438k must date of sale
be refunded since CIR has excessively computed the amount of surcharges and interests.

---------------------------------------------------------------------------------------------------------------------------------
If in the exam, you are faced with a similar problem: apply this case only if the refund sought for is
covered by an assessment notice. If no assessment notice is issued and disputed by the taxpayer,
the taxpayer is required to file an administrative claim for refund.

This is a special circumstance because payment of surcharges is covered by notice of

assessment. Hence it involves disputed assessment, in which case the filing of administrative claim
for refund is not necessary and is already a useless formality.

Query in class:
What if the payment of the surcharge here was not made under protest? (The taxpayer simply paid
the surcharge, without filing for a protest)

A; The petition for review must be dismissed, not because of the lack of administrative claim for
refund, but because there is no disputed assessment to speak of. The payment was not made
under protest. If no protest is filed after an assessment is made by the CIR, that assessment becomes
final and executory. Hence, the petition for review will not prosper.

Page | 71
 Remedies Available To The Government
No Injunction to Restrain Collection of Taxes
Section 218, NIRC: Injunction not Available to Restrain Collection of Tax.
No court shall have the authority to grant an injunction to restrain the collection of any national internal
revenue tax, fee or charge imposed by this Code.
This rule applies only to internal revenue taxes AND NOT to local taxes.
CIR vs. Angeles University
Local government Code does not contain similar provision involving the Rule under section 218 of
the tax code. Hence collection of local taxes can be restrained.
Can the collection of tax be suspended by filing of a protest or a petition for review?
No.
Under RA 9282, the filing of a protest or petition before CTA will not suspend the collection of
the tax
Exception, where the collection of tax may be suspended:
If the CTA ordered the suspension of the collection of the tax in order to protect
the interest of the government and taxpayer
Requirement: taxpayer must post a bond.
Period within which the Government could collect
Determination of Prescription of Collection
CIR v. Hambrecht and Quist Philippines, November 27, 2010
February 18 1993: BIR received a letter for change of business address of the taxpayer
November 4 1993: Taxpayer received a letter demanding for payment of deficiency taxes
January 8 1993: assessment notice has been sent through mail
December 3 1993: Taxpayer filed a protest
November 7 2001: Taxpayers auditor received letter from BIR denying the protest because it was
filed beyond the 30-day prescriptive period.
December 6 2001: Petition for review was filed before the CTA
CTA ruling: since the assessment notice was sent by mail on January 8 1993, it will be presumed as
having been duly served upon the taxpayer. Therefore, the CTA upheld the argument of CIR that the
protest was already filed beyond the 30- day period.
Also, notwithstanding the fact that assessment final and unappealable, CIR cannot collect the taxes
since collection is already barred by prescription. Hence CTA ordered cancellation and withdrawal of
the assessment notices.
CIRs argument: since CTA ruled that assessment is final, it should likewise concluded that it had not
acquired jurisdiction
CTA properly acquired jurisdiction over case notwithstanding the fact that assessment had
attained finality.
The CTA can acquire jurisdiction over other matters arising out of NIRC and other special
laws administered by the BIR. The issue on prescription of the BIR right to collect the tax is
covered by other matters.
Further, the term disputed assessments and other matters are independent and separate of each
other. It is not necessary that the phrase other matters must involve disputed assessments. It may
involve final and undisputable assessments.
The BIRs right to collect the tax has been barred by prescription.
Overview of Remedies (Section 205)
Section 205, NIRC: Remedies for the Collection of Delinquent Taxes.
The civil remedies for the collection of internal revenue taxes, fees or charges, and any increment
thereto resulting from delinquency shall be:
(a) By distraint of goods, chattels, or effects, and other personal property of whatever character,
including stocks and other securities, debts, credits, bank accounts and interest in and rights
to personal property, and by levy upon real property and interest in rights to real property;
and
(b) By civil or criminal action.
Either of these remedies or both simultaneously may be pursued in the discretion of the authorities
charged with the collection of such taxes: Provided, however, That the remedies of distraint and
levy shall not be availed of where the amount of tax involve is not more than One hundred pesos
(P100).
The judgment in the criminal case shall not only impose the penalty but shall also order payment of the
taxes subject of the criminal case as finally decided by the Commissioner.
The Bureau of Internal Revenue shall advance the amounts needed to defray costs of collection by
means of civil or criminal action, including the preservation or transportation of personal property
distrained and the advertisement and sale thereof, as well as of real property and improvements
thereon.
1. Tax Lien
Section 219, NIRC: unpaid taxes shall constitute a tax lien over the properties of the taxpayer.
CIR v. NLRC, November 9, 1994
CIR sent two demand letters on January 12 1984.
Taxpayer did not file any protest. Hence, assessment became final and unappealable
CIR issued warrant of distraint, served on January 28 1985
April 16 1985: receipt for goods was executed pursuant to tax code involving distraint of personal
property.
The receipt enumerated the property of taxpayer that are subject of the distraint.
Deemed a constructive distraint
The execution of the receipt will be tantamount to the actual seizure of properties but the
CIR does not have physical possession of these properties
CIR discovered that 4 barges were already subject of execution for nonpayment of wages to
employees. The execution was made on July 20 1985. The barges were sold on August 12 1985
Page | 72
 When CIR learned of the same, it wrote letter to Labor Arbiter requesting for cancellation of sale or
turnover of the proceeds of the sale to the BIR.
Labor Arbiter did not grant the request of CIR. The Labor Arbiter ruled that there was no valid
distraint because the receipt was not signed by the taxpayer. Also, it cited Article 110 of the Labor
Code, the claims of the employees take preference over other claims, including the claim of
government for unpaid taxes.
The claim of the government is predicated on a tax lien superior to the claim of a private
litigant predicated on a judgment. The tax lien attaches not only from the service of the
distraint or levy but from the time the tax became due and payable.
Regardless of this fact, whose right came first?
Government: warrant of distraint or levy was served on January 28 1985.
Employees: execution of the barges was made on July 20 1985.
The governments right came first.
Since the warrant or distraint or levy is already served prior to the execution by the trial
court to enforce the unpaid wages and benefits of the employees, then the property subject of
the execution is no longer the properties of Maritime Company.
Upon service of distraint, these barges are already properties of the government. They are already
subject of constructive distraint. The company is no longer owners of the properties. The courts
cannot execute a judgment through properties not belonging to the debtor.
Article 110 on the preference of unpaid wages will only apply in cases of bankruptcy.
Maritime did not apply for bankruptcy so Article 110 will not apply.
The tax lien shall be constituted upon all the properties of the insolvent taxpayer whether
movable or immovable, (not only properties upon which the tax is due.)
2. Compromise
3. Distraint or Levy
4. Civil Action
5. Criminal Action
6. Forfeiture
7. Suspension of business operations
8. Enforcement of administrative funds
Administrative Remedies in Detail (Sections 206-217 NIRC)
Note: Read the provisions!
Section 206. Constructive Distraint of the Property of A Taxpayer. - To safeguard the
interest of the Government, the Commissioner may place under constructive distraint the property of a
delinquent taxpayer or any taxpayer who, in his opinion, is retiring from any business subject to tax, or is
intending to leave the Philippines or to remove his property therefrom or to hide or conceal his
property or to perform any act tending to obstruct the proceedings for collecting the tax due or which
may be due from him.
The constructive distraint of personal property shall be affected by requiring the taxpayer or any
person having possession or control of such property to sign a receipt covering the property distrained
and obligate himself to preserve the same intact and unaltered and not to dispose of the same ;in any
manner whatever, without the express authority of the Commissioner.
In case the taxpayer or the person having the possession and control of the property sought to be
placed under constructive distraint refuses or fails to sign the receipt herein referred to, the
revenue officer effecting the constructive distraint shall proceed to prepare a list of such property and, in
the presence of two (2) witnessed, leave a copy thereof in the premises where the property distrained is
located, after which the said property shall be deemed to have been placed under constructive distraint.
Section 207. Summary Remedies.
(A) Distraint of Personal Property. - Upon the failure of the person owing any delinquent tax or
delinquent revenue to pay the same at the time required, the Commissioner or his duly authorized
representative, if the amount involved is in excess of One million pesos (P1,000,000), or the Revenue
District Officer, if the amount involved is One million pesos (P1,000,000) or less, shall seize and distraint
any goods, chattels or effects, and the personal property, including stocks and other securities, debts,
credits, bank accounts, and interests in and rights to personal property of such persons ;in sufficient
quantity to satisfy the tax, or charge, together with any increment thereto incident to delinquency, and
the expenses of the distraint and the cost of the subsequent sale.
A report on the distraint shall, within ten (10) days from receipt of the warrant, be submitted
by the distraining officer to the Revenue District Officer, and to the Revenue Regional Director:
Provided, That the Commissioner or his duly authorized representative shall, subject to rules and
regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner, have
the power to lift such order of distraint: Provided, further, That a consolidated report by the Revenue
Regional Director may be required by the Commissioner as often as necessary.
(B) Levy on Real Property. - After the expiration of the time required to pay the delinquent tax or
delinquent revenue as prescribed in this Section, real property may be levied upon, before simultaneously
or after the distraint of personal property belonging to the delinquent. To this end, any internal
revenue officer designated by the Commissioner or his duly authorized representative shall
prepare a duly authenticated certificate showing the name of the taxpayer and the amounts of the tax
and penalty due from him. Said certificate shall operate with the force of a legal execution throughout
the Philippines.
Levy shall be affected by writing upon said certificate a description of the property upon which levy is
made. At the same time, written notice of the levy shall be mailed to or served upon the Register of
Deeds for the province or city where the property is located and upon the delinquent taxpayer, or if he be
absent from the Philippines, to his agent or the manager of the business in respect to which the liability
arose, or if there be none, to the occupant of the property in question.
In case the warrant of levy on real property is not issued before or simultaneously with the
warrant of distraint on personal property, and the personal property of the taxpayer is not sufficient to
satisfy his tax delinquency, the Commissioner or his duly authorized representative shall, within
thirty (30) days after execution of the distraint, proceed with the levy on the taxpayer's real property.
Within ten (10) days after receipt of the warrant, a report on any levy shall be submitted by
the levying officer to the Commissioner or his duly authorized representative: Provided, however, That a
consolidated report by the Revenue Regional Director may be required by the Commissioner as
often as necessary: Provided, further, That the Commissioner or his duly authorized
representative, subject to rules and regulations promulgated by the Secretary of Finance, upon
recommendation of the Commissioner, shall have the authority to lift warrants of levy issued in
accordance with the provisions hereof.
Section 208. Procedure for Distraint and Garnishment. - The officer serving the warrant of
distraint shall make or cause to be made an account of the goods, chattels, effects or other personal
property distrained, a copy of which, signed by himself, shall be left either with the owner or person from
whose possession such goods, chattels, or effects or other personal property were taken, or at the
dwelling or place of business of such person and with someone of suitable age and discretion, to which list
shall be added a statement of the sum demanded and note of the time and place of sale.
Stocks and other securities shall be distrained by serving a copy of the warrant of distraint upon the
taxpayer and upon the president, manager, treasurer or other responsible officer of the
corporation, company or association, which issued the said stocks or securities.
Page | 73

Debts and credits shall be distrained by leaving with the person owing the debts or having in his
possession or under his control such credits, or with his agent, a copy of the warrant of distraint. The
warrant of distraint shall be sufficient authority to the person owning the debts or having in his
possession or under his control any credits belonging to the taxpayer to pay to the Commissioner the
amount of such debts or credits.
Bank accounts shall be garnished by serving a warrant of garnishment upon the taxpayer and
upon the president, manager, treasurer or other responsible officer of the bank. Upon receipt of
the warrant of garnishment, the bank shall tun over to the Commissioner so much of the bank accounts
as may be sufficient to satisfy the claim of the Government.
Section 209. Sale of Property Distrained and Disposition of Proceeds. - The Revenue District
Officer or his duly authorized representative, other than the officer referred to in Section 208 of this Code
shall, according to rules and regulations prescribed by the Secretary of Finance, upon recommendation of
the Commissioner, forthwith cause a notification to be exhibited in not less than two (2) public places in
the municipality or city where the distraint is made, specifying; the time and place of sale and the articles
distrained. The time of sale shall not be less than twenty (20) days after notice. One place for the posting
of such notice shall be at the Office of the Mayor of the city or municipality in which the property is
distrained.
At the time and place fixed in such notice, the said revenue officer shall sell the goods, chattels, or effects,
or other personal property, including stocks and other securities so distrained, at public auction, to the
highest bidder for cash, or with the approval of the Commissioner, through duly licensed
commodity or stock exchanges.
In the case of Stocks and other securities, the officer making the sale shall execute a bill of sale which he
shall deliver to the buyer, and a copy thereof furnished the corporation, company or association which
issued the stocks or other securities. Upon receipt of the copy of the bill of sale, the corporation,
company or association shall make the corresponding entry in its books, transfer the stocks or other
securities sold in the name of the buyer, and issue, if required to do so, the corresponding certificates of
stock or other securities.
Any residue over and above what is required to pay the entire claim, including expenses, shall be
returned to the owner of the property sold. The expenses chargeable upon each seizure and sale shall
embrace only the actual expenses of seizure and preservation of the property pending ;the sale,
and no charge shall be imposed for the services of the local internal revenue officer or his deputy.
Section 210. Release of Distrained Property Upon Payment Prior to Sale. - If at any time
prior to the consummation of the sale all proper charges are paid to the officer conducting the sale, the
goods or effects distrained shall be restored to the owner.
Section 211. Report of Sale to Bureau of Internal Revenue. - Within two (2) days after the sale, the
officer making the same shall make a report of his proceedings in writing to the Commissioner
and shall himself preserve a copy of such report as an official record.
Section 212. Purchase by Government at Sale Upon Distraint. - When the amount bid for the
property under distraint is not equal to the amount of the tax or is very much less than the actual market
value of the articles offered for sale, the Commissioner or his deputy may purchase the same in
behalf of the national Government for the amount of taxes, penalties and costs due thereon.
Property so purchased may be resold by the Commissioner or his deputy, subject to the rules and
regulations prescribed by the Secretary of Finance, the net proceeds therefrom shall be remitted
to the National Treasury and accounted for as internal revenue.
Section 213. Advertisement and Sale. - Within twenty (20) days after levy, the officer
conducting the proceedings shall proceed to advertise the property or a usable portion thereof as
may be necessary to satisfy the claim and cost of sale; and such advertisement shall cover a period of a
least thirty (30) days. It shall be effectuated by posting a notice at the main entrance of the
municipal building or city hall and in public and conspicuous place in the barrio or district in which
the real estate lies and ;by publication once a week for three (3) weeks in a newspaper of general
circulation in the municipality or city where the property is located. The advertisement shall contain a
statement of the amount of taxes and penalties so due and the time and place of sale, the name of the
taxpayer against whom taxes are levied, and a short description of the property to be sold. At any
time before the day fixed for the sale, the taxpayer may discontinue all proceedings by paying the
taxes, penalties and interest. If he does not do so, the sale shall proceed and shall be held either at the
main entrance of the municipal building or city hall, or on the premises to be sold, as the officer
conducting the proceedings shall determine and as the notice of sale shall specify.
Within five (5) days after the sale, a return by the distraining or levying officer of the proceedings shall
be entered upon the records of the Revenue Collection Officer, the Revenue District officer and the
Revenue Regional Director. The Revenue Collection Officer, in consultation with the Revenue district
Officer, shall then make out and deliver to the purchaser a certificate from his records, showing the
proceedings of the sale, describing the property sold stating the name of the purchaser and setting out
the exact amount of all taxes, penalties and interest: Provided, however, That in case the proceeds of the
sale exceeds the claim and cost of sale, the excess shall be turned over to the owner of the property.
The Revenue Collection Officer, upon approval by the Revenue District Officer may, out of his
collection, advance an amount sufficient to defray the costs of collection by means of the summary
remedies provided for in this Code, including ;the preservation or transportation in case of
personal property, and the advertisement and subsequent sale, both in cases of personal and real
property including improvements found on the latter. In his monthly collection reports, such
advances shall be reflected and supported by receipts.
Section 214. Redemption of Property Sold. - Within one (1) year from the date of sale, the
delinquent taxpayer, or any one for him, shall have the right of paying to the Revenue District Officer
the amount of the public taxes, penalties, and interest thereon from the date of delinquency to the date of
sale, together with interest on said purchase price at the rate of fifteen percent (15%) per annum f rom the
date of purchase to the date of redemption, and such payment shall entitle the person paying to the
delivery of the certificate issued to the purchaser and a certificate from the said Revenue District Officer
that he has thus redeemed the property, and the Revenue District Officer shall forthwith pay over to the
purchaser the amount by which such property has thus been redeemed, and said property thereafter shall
be free from the lien of such taxes and penalties.
The owner shall not, however, be deprived of the possession of the said property and shall be entitled to
the rents and other income thereof until the expiration of the time allowed for its redemption.
Section 215. Forfeiture to Government for Want of Bidder. - In case there is no bidder for
real property exposed for sale as herein above provided or if the highest bid is for an amount insufficient
to pay the taxes, penalties and costs, the Internal Revenue Officer conducting the sale shall declare the
property forfeited to the Government in satisfaction of the claim in question and within two (2)
days thereafter, shall make a return of his proceedings and the forfeiture which shall be spread upon
the records of his office. It shall be the duty of the Register of Deeds concerned, upon registration
with his office of any such declaration of forfeiture, to transfer the title of the property forfeited to the
Government without the necessity of an order from a competent court.
Within one (1) year from the date of such forfeiture, the taxpayer, or any one for him may
redeem said property by paying to the Commissioner or the latter's Revenue Collection Officer
the full amount of the taxes and penalties, together with interest thereon and the costs of sale,
but if the property be not thus redeemed, the forfeiture shall become absolute.
Section 216. Resale of Real Estate Taken for Taxes. - The Commissioner shall have charge of any
real estate obtained by the Government of the Philippines in payment or satisfaction of taxes, penalties or
costs arising under this Code or in compromise or adjustment of any claim therefore, and said
Commissioner may, upon the giving of not less than twenty (20) days notice, sell and dispose of the same
of public auction or with prior approval of the Secretary of Finance, dispose of the same at private sale. In
either case, the proceeds of the sale shall be deposited with the National Treasury, and an accounting of
the same shall rendered to the Chairman of the Commission on Audit.
Page | 74
 Section 217. Further Distraint or Levy. - The remedy by distraint of personal property and levy on Judicial Remedies in Detail
realty may be repeated if necessary until the full amount due, including all expenses, is collected.
a. Period within which action may be filed
1. Distraint
Seizure by the government of personal property, tangible or intangible, to enforce the payment of faces, Civil case: Apply Sec 203 and 222 of Tax Code
to be followed by its public sale, if the taxes are not voluntarily paid.
SUMMARY
Kinds: Assessment Collection
a. Actual There is taking of possession of personal property out of the taxpayer into that of the
Tax assessed 3 years from last day 3 years from
government. In case of intangible property, taxpayer is also diverted of the power of control over the Regular Period prescribed for filing of assessment
property. (Section 203) return
b. Constructive There is execution of receipt covering the properties subject of constructive distraint.
No tax assessed (Proceeding in court 3 years from filing of
If a property is already covered by a receipt, taxpayer is prohibited from disposing of these properties
without assessment) return
False/fraudulent Tax assessed 10 years 5 years from
Difference between Actual and Constructive Distraint (SLU Reviewer)
return or Failure assessment
Actual Constructive
to file No tax assessed (proceeding in court) 10 years from
Made on the property only of a May be made on the property of (Section 222) discovery of the fraud
delinquent taxpayer. any taxpayer whether delinquent
Agreed period Agreed period
or not
There is actual taking or possession Taxpayer is merely prohibited
Tax assessed pursuant to waiver If no agreed period: 5
of the property. from disposing of his property.
years from date of
Effected by having a list of the Effected by requiring the taxpayer assessment
distraint property or by service or to sign a receipt of the property or
warrant of distraint or garnishment. by leaving a list of same
An immediate step for collection of Such immediate step is not
Criminal case
taxes where amount due is definite. necessary; tax due may not be
Must be filed within 5 years from commission of violation or from the discovery thereof.
definite or it is being questioned.
Section 281: Such 5 year period may be interrupted when proceedings are instituted against the guilty
persons and will begin to run again if the proceeding is dismissed for reasons other than double
2. Levy jeopardy.
An act of seizure of real property in order to enforce the payment of taxes.
The property may be sold at public sale, if after seizure, the taxes are not voluntarily paid. The period shall not run when the offender is absent from the Philippines.
Difference between Distraint and Levy (SLU reviewer)
Distraint Levy
Lim v. CA, October 18, 1990
Personal property Real property
Forfeiture by government is not Forfeiture by government is
Doctrine:
provided authorized where there is no bidder The discovery of the offense is not the only determining factor for the period to run. The
or the highest bid is not sufficient to institution of judicial proceedings is necessary so that the period will begin to run.
pay the taxes, penalties and costs.
Taxpayer was not given the right of Taxpayer can redeem properties CIR discovered the filing of fraudulent returns by the taxpayer on October 15 1964
redemption levied upon and sold/forfeited to Affidavit complaint was filed on September 1 1969.
the government. The information filed in court was made beyond the 5-year period if it will be counted form the date
Both are summary remedies for collection of taxes. of discovery

3. Garnishment CIRs argument: The 5 year period is not counted from October 15 1964 but on date of filing of the
The taking of personal properties usually cash or sums of money owned by the delinquent taxpayer affidavit complaint before the Office of Prosecutor
which is in the possession of a third party.
Discussion: This usually involves intangible properties The five year period shall run from September 1 1969, the date when the affidavit complaint was filed.
The tax code does not merely provide for the discovery of the offense or commission, but likewise
includes the institution of judicial proceeding before the period will begin to run.

Institution of judicial proceeding:

refers to filing of complaint before of the office of prosecutor.

Page | 75
 Tax cases are practically imprescriptible for as long as the period from the discovery and Sec 220 of Tax Code which provides for the legal officers primary responsibility to conduct
institution of judicial proceedings up to the filing of the information in court does not exceed civil or criminal action pertains only to the institution or commencement of action.
a period of 5-years.
If it pertains to appeal of the case, only the Solicitor General can appear for and represent the State.
b. Where should the cases be filed?
Solicitor General was directed to make his appearance before the CA.
Criminal Cases
Supreme Courts Discussion:
Municipal Trial Court Penalty of imprisonment for 6 years and below The institution or commencement before a proper court of civil and criminal actions and
Regional Trial Court Penalty of imprisonment for more than 6 years proceedings arising under the Tax Reform Act which "shall be conducted by legal officers of the
Court of Tax Appeals If the basic tax due is 1 million pesos and above, exclusive of Bureau of Internal Revenue" is not in dispute. An appeal from such court, however, is not a matter of
interests and surcharges right. Section 220 of the Tax Reform Act must not be understood as overturning the long established
Inclusive ONLY of basic tax due procedure before this Court in requiring the Solicitor General to represent the interest of the
Republic. This Court continues to maintain that it is the Solicitor General who has the primary
Note: RTC and MTC will only acquire jurisdiction (depending on the length of imprisonment) if: responsibility to appear for the government in appellate proceedings
the basic tax due is below 1M pesos; or
the basic tax due is unspecified Marcos II v. CA, June 5, 1997

Civil cases
Municipal Trial Court Outside Metro Manila
Within Metro Manila
Regional Trial Court Outside Metro Manila
Within Metro Manila
Court of Tax Appeals If the basic tax due is 1
million pesos and above,
exclusive of interests and
surcharges
Inclusive ONLY
of basic tax due
Claim is P300k and below
Claim is P400k and below
Claim is more than 300k
Claim is more than 400k
1.If the basic tax due is 1 million
pesos and above, exclusive of
interests and surcharges
Inclusive ONLY of basic tax due
distributive share to any party interested in the estate, unless it is shown a Certification by the
2. If collection of tax liability
pertains to assessments that had
become final and unappealable
The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is
not a mandatory requirement in the collection of estate taxes.
It cannot therefore be argued that the Tax Bureau erred proceeding with the levying and sale of
the properties allegedly owned by the late President, on the ground that it was required to seek first
the probate court's sanction. There is nothing in the Tax Code, and in the pertinent remedial laws
that implies the necessity of the probate or estate settlement court's approval of the state's claim for
estate taxes, before the same can be enforced and collected.
On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden
not to authorize the executor or judicial administrator of the decedent's estate to deliver any
Commissioner of Internal Revenue that the estate taxes have been paid. This provision
disproves the petitioner's contention that it is the probate court which approves the assessment
and collection of the estate tax

Right to Reserve Civil Action Judy Anne Santos v. People, August 26, 2008

In criminal tax cases, there is no right to reserve civil action.
Approval of Filing of Civil and Criminal Actions
Republic v. Hizon, December 13, 1999
Revenue Administrative Order No. 10-95 specifically authorizes the Litigation and
Prosecution Section of the Legal Division of regional district offices to institute the necessary
civil and criminal actions for tax collection.
Denial of motion to quash was filed by Judy Anne before the CTA division. CTA division denied
motion to quash.
Judy Anne Santos filed extension to file for petition review before CTA En Banc but this was denied.
CTA En Banc held that it does not take cognizance of petition for review on denial of motion to
quash.
Can CTA En Banc acquire jurisdiction over an interlocutory order of the CTA Division?

As the complaint filed in this case was signed by the BIR's Chief of Legal Division for Region 4 and
verified by the Regional Director, there was, therefore, compliance with the law
Participation of the Office of Solicitor General
CIR v. La Suerte Cigar, July 4, 2002
Can legal officer of BIR appeal a tax case?
Action was instituted by the BIRs legal officer. On appeal, he also represented the BIR.
Important note: Denial of motion to quash is merely an interlocutory order.
If we will look into RA 9282, a denial of a motion to quash can be reviewed by the CTA En Banc.
RA 9282 expanded the jurisdiction of CTA En Banc, wherein it can take cognizance of any resolution,
decision or order of CTA Division. Hence, CTA has an expanded jurisdiction.
However, it is a basic rule in Remedial Law that an interlocutory order is not appealable.
Will an interlocutory order, such as the denial of a motion to quash be considered as a proper subject of
special civil action of certiorari under Rule 65?

Page | 76
 NO. The denial of a motion to quash is not a proper subject of an appeal and not a proper subject
for a special civil action of certiorari ground for certiorari
Remedy of the Accused
to go to trial and raise the issue of denial of motion to quash as a special defense.
Exception, where CTA En Banc may acquire jurisdiction over an interlocutory order:
if it deals with exceptional circumstances, such that it is for the enlightenment and
substantial interest of justice
Judy Anne in this case did not prove exceptional circumstance for the CTA to take jurisdiction over
the denial of the motion to quash either through appeal or a special civil action for certiorari.
Effects of Failure to Pay the Tax on Time
Additions to the tax:
Interest20% per annum fully paid.
Surcharges 25% of the basic tax due (one-time imposition)
If involves fraud penalty: 50% of the basic tax due
Compromise penalty: depends on the tax bracket
1. SURCHARGES
Nature: A civil penalty imposed by law as an addition to the main tax required to be paid. It is not a
criminal penalty but a civil administrative sanction provided primarily as safeguard for the protection
of the State revenue and to reimburse the government for the expenses of investigation and the loss
resulting from the taxpayers fraud. A surcharge added to the main tax is subject to interest. (SLU
Reviewer)
A. ORDINARY (SEC. 248A, NIRC)
Penalty: 25% of the amount due, in addition to the tax required to be paid
Grounds:
1. Failure to file any return and to pay the tax due thereon as required by the NIRC or rules.
2. Filing a return with an internal revenue officer other than those with whom the return is
required to be fired. (Not authorized officer)
3. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of
assessment.
4. Failure to pay the full or part of the amount of tax shown on any return, or the full amount of
tax due for which no return is required to be filed, on or before the date prescribed for its
payment.
B. FRAUD PENALTY (SEC. 248B, NIRC)
Penalty: 50% of the amount due, in addition to the tax required to be paid
Grounds:
1. In case of willful neglect to file the return within the period prescribed by the NIRC or rule.
2. In case a false or fraudulent return is willfully made.
CIR vs. Javier, July 31, 1991
There was no actual intentional fraud in filing the return.
Private respondents notation on the tax return was at most an error or mistake of fact or law not
constituting fraud, an invitation for investigation and private respondent had literally laid his cards
on the table.
The fact that taxpayer has reported the excess income in the return even if not included in the gross
sales or receipts will negate fraud. If he had intention to evade tax, he should not have included it as
a footnote.
2. INTEREST
This is an increment on any unpaid amount of tax assessed at the rate of 20% per annum or such higher
rate as may be prescribed by the regulations from the date prescribed for payment until the amount is
Classes of interest
A. Deficiency interest
B. Delinquency interest
C. Interest on extended payment
Deficiency interest
Any deficiency in the tax due shall be subject to the interest of 20% per annum which shall be assessed
and collected from the date prescribed for its payment until the full payment thereof.
Delinquency interest
Delinquency interest is imposed in case of failure to pay:
1. The amount of the tax due on any return required to be filed; or
2. The amount of tax due for which no return is required; or
3. A deficiency tax or any surcharge or interest thereon on the issue date appearing in the notice
and demand of the Commissioner. (SLI Reviewer)
Rate is 20% per annum until the amount is fully paid which interest shall form part of the tax.
Interest on Extended Payment
1) any person who is qualified and elects to pay the tax on installment but fails to pay the tax, or
any installment, or any part on or before the date prescribed; or
2) where the Commissioner has authorized an extension of time within which to pay a tax or a
deficiency tax or any part thereof,
It accrues from the date of notice and demand until it is paid.
3. COMPROMISE PENALTY
It is a certain amount of money which the taxpayer pays to compromise a tax violation.
It is paid in lieu of a criminal prosecution.
Since it is voluntary in character, the same may be collected only if the taxpayer is willing to
pay them.
NOTE: This is the only addition to tax that can be legally reduced by Revenue Examiner
Page | 77
 EFFECT OF FAILURE TO FILE CERTAIN INFORMATION RETURNS
Failure to File Certain Information Returns (Sec. 250, NIRC)

In the case of each failure to file:

information return;
statement or list;
keep any record; or
supply any information
as required by NIRC or by the Commissioner on the date prescribed thereof.

Effect: Penalty: P 1,000 for each failure

o The aggregate amount for all such failure shall not exceed P 25,000 during a calendar year
o Upon notice and demand by the Commissioner
Unless it is shown that such failure is due to reasonable cause and not to willful neglect.

Page | 78

Local Taxation
GENERAL CONCEPT
Nature of the Local Taxing Power
Constitutional Provision (Section 5, Article X)
Each local government unit shall have the power to create its own sources of revenues
and to levy taxes, fees and charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees,
and charges shall accrue exclusively to the local governments.
A delegated power?
No. The power to tax of Local Government Units (LGUs) is not a delegated power. LGUs no longer need
enabling law to levy taxes fees and charges.
The limitation on the LGUs power to tax is set forth under the Local Government Code.
Is there a need for the LGUs to enact a law in order to collect the tax?
Yes, through ordinances enacted by legislative branch
Without ordinances, they cannot collect the tax on the ground of due process.
Note: The Local Government Code is not a source of tax liability. It merely sets limitation of the power to
tax of the LGUs.
City of San Pablo Laguna vs. Reyes, March 25, 1999
The power to tax is primarily vested in Congress. However, in our jurisdiction, it may be exercised
by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to
direct authority conferred by Section 5, Article X of the Constitution. The important legal effect
of Section 5 is that henceforth, in interpreting statutory provisions on municipal fiscal powers,
doubts will have to resolved in favor of municipal corporations.
Meralco vs. Province of Laguna, May 5, 1999
Local governments do not have the inherent power to tax except to the extent that such
power might be delegated to them either by the basic law or by statute.
Presently, under Article X of the 1987 Constitution, a general delegation of that power has been
given in favor of local government units. The 1987 Constitution has a counterpart provision in the
1973 Constitution, which did come out with a similar delegation of revenue making powers to local
governments.
Under the now prevailing Constitution, where there is neither a grant nor a prohibition by statute,
the tax power must be deemed to exist although Congress may provide statutory limitations and
guidelines. The basic rationale for the current rule is to safeguard the viability and self-
sufficiency of local government units by directly granting them general and broad tax powers.
Nevertheless, the fundamental law did not intend the delegation to be absolute and unconditional;
the constitutional objective obviously is to ensure that, while the local government units are being
strengthened and made more autonomous, the legislature must still see to it that (a) the taxpayer
will not be over-burdened or saddled with multiple and unreasonable impositions; (b) each local
government unit will have its fair share of available resources, (c) the resources of the national
government will not be unduly disturbed; and (d) local taxation will be fair, uniform, and just.
Mactan Cebu International Airport Authority vs. Marcos, September 11, 1996
The taxing powers of local government units cannot extend to the levy of, inter alia, taxes, fees and
charges of any kind on the National Government, its agencies and instrumentalities, and local
government units.
However, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila
Area may impose the real property tax except on, inter alia, real property owned by the Republic of
the Philippines or any of its political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person, as provided in item (a) of the first
paragraph of Section 234.
NAPOCOR vs. City of Cabanatuan, April 9, 2003
In recent years, the increasing social challenges of the times expanded the scope of state activity, and
taxation has become a tool to realize social justice and the equitable distribution of wealth, economic
progress and the protection of local industries as well as public welfare and similar objectives.
Taxation assumes even greater significance with the ratification of the 1987 Constitution.
Thenceforth, the power to tax is no longer vested exclusively on Congress; local legislative bodies are
now given direct authority to levy taxes, fees and other charges pursuant to Article X, section 5 of the
1987 Constitution.
This paradigm shift results from the realization that genuine development can be achieved
only by strengthening local autonomy and promoting decentralization of governance.
For a long time, the countrys highly centralized government structure has bred a culture of
dependence among local government leaders upon the national leadership. It has also dampened
the spirit of initiative, innovation and imaginative resilience in matters of local development on the
part of local government leaders. The only way to shatter this culture of dependence is to give the
LGUs a wider role in the delivery of basic services, and confer them sufficient powers to generate
their own sources for the purpose. To achieve this goal, section 3 of Article X of the 1987
Constitution mandates Congress to enact a local government code that will, consistent with the basic
policy of local autonomy, set the guidelines and limitations to this grant of taxing powers.
Inherent power?
The power to tax as an inherent power pertains to such power of the State and not of the LGUs.
If there is no Constitution, there must be a law that shall enable the LGUs the collect the taxes. This
shows that the power to tax by the LGUs is not inherent. The power to tax of the State, on the other
hand, is inherent. As long as the state exists, power to tax exists.
Extent of the Power of Congress in Local Taxation
City Govt. of Quezon City vs. Bayantel, March 6, 2006
The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely be virtue of a valid delegation as
before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution.
Page | 79
 Under the latter, the exercise of the power may be subject to such guidelines and limitations as the Fundamental Principles on the Exercise of the Local Taxing Power
Congress may provide which, however, must be consistent with the basic policy of local autonomy.
Section 130, Local Government Code
Clearly then, while a new slant on the subject of local taxation now prevails in the sense that the
former doctrine of local government units delegated power to tax had been effectively modified with The following fundamental principles shall govern the exercise of the taxing and other revenue-raising
Article X, Section 5 of the 1987 Constitution now in place, the basic doctrine on local taxation powers of local government units:
remains essentially the same. For as the Court stressed in Mactan, "the power to tax is [still] 1. Taxation shall be uniform in each local government unit;
primarily vested in the Congress." 2. Taxes, fees, charges and other impositions shall:
be equitable and based as far as practicable on the taxpayer's ability to pay;
In net effect, the controversy presently before the Court involves, at bottom, a clash between the be levied and collected only for public purposes;
inherent taxing power of the legislature, which necessarily includes the power to exempt, and the not be unjust, excessive, oppressive, or confiscatory;
local governments delegated power to tax under the aegis of the 1987 Constitution not be contrary to law, public policy, national economic policy, or in restraint of trade;
3. The collection of local taxes, fees, charges and other impositions shall in no case be let to any private
-------------------------------------------------------------------------------------------------------------------------------- person;
Lecture Notes: 4. The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and
be subject to disposition by, the local government unit levying the tax, fee, charge or other imposition
Under the Local Government Code, Government owned and controlled corporations (GOCCs) are no unless otherwise specifically provided herein; and,
longer exempt from tax. 5. Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

Bayantel is a GOCC. Under its charter, it enjoys exemption from local taxes, including real property Violation of these principles would render the imposition of the tax as void.
tax.

Under effectivity of Local Government Code, its exemption was withdrawn by virtue of Section 193.
Common limitations on the exercise of
the local taxing power and
Bayantels charter was amended after LGC where it was again granted an exemption from local taxes. the principle of preemption/exclusionary rule
Does the Congress still have the power to grant exemptions to entities? SEC. 133, LOCAL GOVERNMENT CODE

Yes. Power to tax is vested to the Congress. Along with this is its power to grant exemptions from Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
taxes in favor of entities. barangays shall not extend to the levy of the following:

Two entities may grant exemptions from taxes: (a) Income tax, except when levied on banks and other financial institutions;
LGUs; and (b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided
Congress herein;
(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other kinds of
Residual Power to Tax customs fees, charges and dues except wharfage on wharves constructed and maintained by the local government
unit concerned;
Preemption (133 of LGC) (e) Taxes, fees and charges and other impositions upon goods carried into or out of, or passing through, the
Subject matters already subject to taxes imposed by national government can no longer be subject to tax territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for bridges or
otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or merchandise; (f) Taxes, fees
by the Local Government Units.
or charges on agricultural and aquatic products when sold by marginal farmers or fishermen; (g) Taxes on business
enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of six (6) and four (4)
Examples of National Taxes: VAT, Capital Gains Tax, Percentage Tax, etc years, respectively from the date of registration;
(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or
Residual Power to Tax charges on petroleum products;
A Local Government Unit can impose taxes not being imposed by national government and other local (i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services
government units except as otherwise provided herein; (j) Taxes on the gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as
provided in this Code;
E.g. Municipality has power to impose business taxes. Therefore, province can no longer (k) Taxes on premiums paid by way of reinsurance or retrocession;
impose same tax. (l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or
permits for the driving thereof, except tricycles;
What if municipality opted not to collect business tax. (m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided herein;
The province can now collect the business tax pursuant to its residual power. (n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered
However, this must be put in line with preemption. If such is already subjected to tax by under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known
as the "Cooperatives Code of the Philippines" respectively; and
national government, it cannot be taxed by LGUS.
(o) Taxes, fees or charges of any kind on the National Government , its agencies and instrumentalities, and local
government units.
Hanging question: Is local business tax akin to percentage tax?

Page | 80

The Principle of Preemption
Province of Bulacan vs. CA, November 27, 1998
A province may not levy excise taxes on articles already taxed by the National Internal Revenue
Code.
It is clearly apparent from Section 151 of the National Internal Revenue Code levies a tax on
all quarry resources, regardless of origin, whether extracted from public or private land.
Thus, a province may not ordinarily impose taxes on stones, sand, gravel, earth and other quarry
resources, as the same are already taxed under the National Internal Revenue Code.
The province can, however, impose a tax on stones, sand, gravel, earth and other quarry resources
extracted from public land because it is expressly empowered to do so under the Local Government
Code. As to stones, sand, gravel, earth and other quarry resources extracted from private land,
however, it may not do so, because of the limitation provided by Section 133 of the Code in relation
to Section 151 of the National Internal Revenue Code.
First Philippine Industrial Corp. vs. CA, December 9, 1998
Are pipeline concessionaires considered as common carriers?
Yes.
Petitioner can no longer be taxed by the Local Government Unit.
There is no doubt that petitioner is a "common carrier" and, therefore, exempt from the business tax
as provided for in Section 133 (j), of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following :
xxx xxx xxx
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by air, land or water, except as provided in this Code."
The legislative intent in excluding from the taxing power of the local government unit the imposition
of business tax against common carriers is to prevent a duplication of the so-called "common carrier's
tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings
under the National Internal Revenue Code. To tax petitioner again on its gross receipts in its
transportation of petroleum business would defeat the purpose of the Local Government Code.
Palma Development Corp. vs. Municipality of Malangas, October 16, 2003
By express language of Sections 153 and 155 of RA No. 7160, local government units, through their
Sanggunian, may prescribe the terms and conditions for the imposition of toll fees or charges for the
use of any public road, pier or wharf funded and constructed by them.
A service fee imposed on vehicles using municipal roads leading to the wharf is thus valid.
However, Section 133(e) of RA No. 7160 prohibits the imposition, in the guise of wharfage, of
fees -- as well as all other taxes or charges in any form whatsoever -- on goods or
merchandise.
It is therefore irrelevant if the fees imposed are actually for police surveillance on the goods, because
any other form of imposition on goods passing through the territorial jurisdiction of the municipality
is clearly prohibited by Section 133(e).
Batangas Power Corp. vs. Batangas City, April 28 2004
Sec. 133 (g) of the LGC, which proscribes local government units (LGUs) from levying taxes on BOI-
certified pioneer enterprises for a period of six years from the date of registration, applies
specifically to taxes imposed by the local government, like the business tax imposed by Batangas City
on BPC in the case at bar.
Reliance of BPC on the provision of Executive Order No. 226 specifically Section 1, Article 39, Title
III, is clearly misplaced as the six-year tax holiday provided therein which commences from the date
of commercial operation refers to income taxes imposed by the national government on BOI-
registered pioneer firms.
Clearly, it is the provision of the Local Government Code that should apply to the tax claim of
Batangas City against the BPC. The 6-year tax exemption of BPC should thus commence from the
date of BPCs registration with the BOI on July 16, 1993 and end on July 15, 1999.
As to exemption of National Power Corporation
NPC is exempted from local taxes under its charter. However, because of passage of Local
Government Code, the exemption of NPC was already withdrawn.
After LGC, NPC is no longer exempt from local taxes, unless the charter will be amended.
MIAA vs. CA and Paranaque; July 20 2006
MIAA is a government instrumentality.
Section 133o: Exemption of Republic and its instrumentalities from local taxes.
Since MIAA is instrumentality, it is exempt from local tax.
If an entity is a government owned and controlled corporation (GOCC)
Not exempt. The exemption of GOCC from local taxes was already withdrawn in the Local
Government Code.
Philreca vs. DILG; June 10 2003
Sec 234 of LGC: Only cooperatives registered under CDA are exempt from local property tax.
Those registered under NEA are not exempt from such taxes.
Philreca is a cooperative registered under PD 269 (NEA). A law was passed imposing real property
taxes on cooperatives registered under PD 269
Sec 234 of the Local Government Code: Enumerates properties exempt from tax, one of which are
properties of duly registered cooperatives under RA 6938 (CDA)
Was there a violation of Equal Protection Clause?
There was no violation. There is a substantial distinction between cooperatives registered under PD
269 and RA 6938
Page | 81
 PD 269 RA 6938
Members are not required to pay reasonable 25-25 rule compliance
contributions; Only membership fee of P5.00 25% of authorized contributions must be
which is non-refundable subscribed,
25% of subscribed contribution must be
paid.
Cooperatives must be controlled by NEA Subsidiarity
They can act on their own without
much governmental control or
supervision
Still controlled by government but
exercises subsidiarity
Philreca is not registered under CDA, and therefore is not exempt from local tax
Petron Corporation v. Tiangco; April 16 2008
Specific Taxing Powers of Local Government Units
Provinces
Scope of the Taxing Power
Local Government Code Provisions
Section 134: Scope of Taxing Powers. - Except as otherwise provided in this Code, the province may levy
only the taxes, fees, and charges as provided in this Article.
Section 186. Power to Levy Other Taxes, Fees or Charges. - Local government units may exercise the
power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein
or taxed under the provisions of the National Internal Revenue Code, as amended, or other applicable
laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or
contrary to declared national policy: Provided, further, That the ordinance levying such taxes, fees or
charges shall not be enacted without any prior public hearing conducted for the purpose.

May a Local Government Unit impose tax on sale of petroleum products? Taxes that may be levied by provinces

All kinds of taxes including business tax cannot be imposed upon the sale of petroleum products
because they are already subject to excise taxes imposed by the National Government.
Section 133h of the Local Government code also prohibits LGUs from imposing taxes on the sale of
petroleum products.
Pelizloy vs. Municipality of Tuba
Municipality of Tuba collected amusement taxes from Pelizloy, an owner of a resort.
The contention of the municipality is that the resort is an amusement place and as such is subject to
amusement tax.
Pelizloy questioned the ordinance before the Secretary of Justice.
Are the gross receipts of Pelizloy subject to amusement tax?
NO.
LGUs can collect amusement tax. It is imposed upon receipts arising from cinemas, theaters, boxing,
amusement cases.
While it is true that you will be visually engaged in a resort, it is not within the definition of
amusement places, using the principle of ejusdem generis.
The phrase other amusement places must refer to one where there is display of artistic
performance.
Hence, gross receipts arising from services of Pelizloy cannot be subject to Amusement Tax.
The gross receipts of Pelizloy are already subjected to other percentage tax collected by the national
government. LGUs cannot collect tax from them anymore. They are being collected by the
government.
Local Government Code (Sections 135-141)
SEC. 135. Tax on Transfer of Real Property Ownership.
(a) The province may impose a tax on the sale, donation, barter, or on any other mode of transferring ownership or
title of real property at the rate of not more than fifty percent (50% of one percent (1%) of the total consideration
involved in the acquisition of the property or of the fair market value in case the monetary consideration involved
in the transfer is not substantial, whichever is higher. The sale, transfer or other disposition of real property
pursuant to R.A. No. 6657 shall be exempt from this tax.
(b) For this purpose, the Register of Deeds of the province concerned shall, before registering any deed, require the
presentation of the evidence of payment of this tax. The provincial assessor shall likewise make the same
requirement before cancelling an old tax declaration and issuing a new one in place thereof. Notaries public shall
furnish the provincial treasurer with a copy of any deed transferring ownership or title to any real property within
thirty (30) days from the date of notarization. It shall be the duty of the seller, donor, transferor, executor or
administrator to pay the tax herein imposed within sixty (60) days from the date of the execution of the deed or
from the date of the decedent's death.
SEC. 136. Tax on Business of Printing and Publication.
The province may impose a tax on the business of persons engaged in the printing and/or publication of books,
cards, posters, leaflets, handbills, certificates, receipts, pamphlets, and others of similar nature, at a rate not
exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year. In
the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the
capital investment. In the succeeding calendar year, regardless of when the business started to operate, the tax
shall be based on the gross receipts for the preceding calendar year, or any fraction thereof, as provided herein.
The receipts from the printing and/or publishing of books or other reading materials prescribed by the
Department of Education, Culture and Sports, as school texts or references shall be exempt from the tax herein
imposed.
SEC. 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other special law, the province
may impose a tax on businesses enjoying a franchise, at a rate not exceeding fifty percent (50%) of one percent
(1%) of the gross annual receipts for the preceding calendar year based on the incoming receipt, or realized, within
its territorial jurisdiction. In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of
one percent (1%) of the capital investment. In the succeeding calendar year, regardless of when the business
started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction
thereof, as provided herein.
SEC. 138. Tax on Sand, Gravel and Other Quarry Resources. - The province may levy and collect not more than
ten percent (10%) of fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and
other quarry resources, as defined under the National Internal Revenue Code, as amended, extracted from public
lands or from the beds of seas, lakes, rivers, streams, creeks, and other public waters within its territorial
jurisdiction. The permit to extract sand, gravel and other quarry resources shall be issued exclusively by the
provincial governor, pursuant to the ordinance of the sangguniang panlalawigan. The proceeds of the tax on sand,
gravel and other quarry resources shall be distributed as follows

Page | 82
 (1) Province - Thirty percent (30%); 3. Franchise Tax
(2) Component city or municipality where the sand, gravel, and other quarry resources are extracted - Thirty Government franchise, whether primary or secondary, i.e. public utility companies
percent (30%); and If the franchise grants tax exemption and the same was executed prior to 1991 LGC, it is
(3) barangay where the sand, gravel, and other quarry resources are extracted - Forty percent (40%).
deemed revoked by reason of the laws blanket revocation.
SEC. 139. Professional Tax. At a rate not exceeding of 1% of the Gross Amount receipt of the preceding calendar year
(a) The province may levy an annual professional tax on each person engaged in the exercise or practice of his
profession requiring government examination at such amount and reasonable classification as the sangguniang 4. Professional Tax
panlalawigan may determine but shall in no case exceed Three hundred pesos (P=300.00). Those who have passed government licensure examinations are the ones liable
(b) Every person legally authorized to practice his profession shall pay the professional tax to the province where Amount not exceeding Php 300.00
he practices his profession or where he maintains his principal office in case he practices his profession in several Imposed by the city or province where the taxpayers principal office is located
places: Provided, however, That such person who has paid the corresponding professional tax shall be entitled to
With employer-employee relationship liability to PTR depends on the extent of services
practice his profession in any part of the Philippines without being subjected to any other national or local tax,
license, or fee for the practice of such profession. provided. If services provided is exclusive to the employer, PTR is not necessary, otherwise,
(c) Any individual or corporation employing a person subject to professional tax shall require payment by that the employee is liable.
person of the tax on his profession before employment and annually thereafter.
(d) The professional tax shall be payable annually, on or before the thirty-first (31st) day of January. Any person 5. Sand and Gravel Tax
first beginning to practice a profession after the month of January must, however, pay the full tax before engaging Imposed on extraction of sand, gravel and other quarry resources
therein. A line of profession does not become exempt even if conducted with some other profession for which the Not more than 10% of the FMV of what was extracted
tax has been paid. Professionals exclusively employed in the government shall be exempt from the payment of this
tax.
(e) Any person subject to the professional tax shall write in deeds, receipts, prescriptions, reports, books of 6. Amusement Tax
account, plans and designs, surveys and maps, as the case may be, the number of the official receipt issued to him. As high as 30%
Applies to theaters, cinemas, concert halls, boxing stadiums, circuses and other places of
SEC. 140. Amusement Tax. amusements.
(a) The province may levy an amusement tax to be collected from the proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate of not more than thirty 7. Taxes on Delivery trucks
percent (30%) of the gross receipts from admission fees.
(b) In the case of theaters or cinemas, the tax shall first be deducted and withheld by their proprietors, lessees, or
operators and paid to the provincial treasurer before the gross receipts are divided between said proprietors, Province of Bulacan vs. Court of Appeals; November 27 1998
lessees, or operators and the distributors of the cinematographic films.
(c) The holding of operas, concerts, dramas, recitals, painting and art exhibitions, flower shows, musical programs, Sports centers are not subject to amusement tax
literary and oratorical presentations, except pop, rock, or similar concerts shall be exempt from the payment of the
tax herein imposed. Are transfer taxes the same with Capital Gains Tax?
(d) The sangguniang panlalawigan may prescribe the time, manner, terms and conditions for the payment of tax. In
case of fraud or failure to pay the tax, the sangguniang panlalawigan may impose such surcharges, interests and
penalties as it may deem appropriate. If yes, province cannot impose since CGT is imposed by the national government.
(e) The proceeds from the amusement tax shall be shared equally by the province and the municipality where such
amusement places are located. No. These two taxes are different.

SEC. 141. Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or Producers, Wholesalers CGT: in the nature of an income tax.
of, Dealers, or Retailers in, Certain Products. Transfer tax: merely a tax on the privilege of transferring the property within the locality. It is imposed
(a) The province may levy an annual fixed tax for every truck, van or any vehicle used by manufacturers,
producers, wholesalers, dealers or retailers in the delivery or distribution of distilled spirits, fermented liquors,
for administration purposes.
soft drinks, cigars and cigarettes, and other products as may be determined by the sangguniang panlalawigan, to
sales outlets, or consumers, whether directly or indirectly, within the province in an amount not exceeding Five Municipalities
hundred pesos (P500.00).
(b) The manufacturers, producers, wholesalers, dealers, and retailers referred to in the immediately foregoing Scope of Taxing Powers
paragraph shall be exempt from the tax on peddlers prescribed elsewhere in this Code.
Section 142: Except as otherwise provided in this Code, municipalities may levy taxes, fees, and charges
Summary of Taxes that may be Levied by Provinces (SLU Reviewer) not otherwise levied by provinces.
1. Transfer of Real Property ownership Taxes that may be levied by Municipalities
Whether onerous or gratuitous
Preemption rule is not applicable Local Government Code
Rate: of 1% of the total consideration involved in the acquisition of the property or of the SEC. 143. Tax on Business.
fair market value in case the monetary consideration involved in the transfer is not substantial, The municipality may impose taxes on the following businesses:
whichever is higher
(a) On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders
2. Printing and Publication of liquors, distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or
nature, in accordance with the following schedule: With gross sales or receipts for the Amount of Tax
preceding calendar year in the amount of:
xxx
6,500,000.00 or more at a rate not exceeding thirty-seven and a half percent (37 1/2%) of one percent (1%)

Page | 83
 (b) On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature in (a) The taxes imposed under Section 143 shall be payable for every separate or distinct establishment or place
accordance with the following schedule: With gross sales or receipts for the Amount of Tax preceding where business subject to the tax is conducted and one line of business does not become exempt by being
calendar year in the amount of: conducted with some other business for which such tax has been paid. The tax on a business must be paid by the
person conducting the same.
Per Annum (b) In cases where a person conducts or operates two (2) or more of the businesses mentioned in Section 143 of
Less than P1,000.00 18.00 this Code which are subject to the same rate of tax, the tax shall be computed on the combined total gross sales or
xxx receipts of the said two (2) or more related businesses.
2,000,000.00 or more at a rate not exceeding fifty percent (50%) of one percent (1%). (c) In cases where a person conducts or operates two (2) or more businesses mentioned in Section 143 of this Code
which are subject to different rates of tax, the gross sales or receipts of each business shall be separately reported
(c) On exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers or retailers for the purpose of computing the tax due from each business.
of essential commodities enumerated hereunder at a rate not exceeding one-half (1/2) of the rates
prescribed under subsections (a), (b) and (d) of this Section: SEC. 147. Fees and Charges.
1. Rice and corn; The municipality may impose and collect such reasonable fees and charges on business and occupation and, except
2. Wheat or cassava flour, meat, dairy products, locally manufactured, processed or preserved as reserved to the province in Section 139 of this Code, on the practice of any profession or calling, commensurate
food, sugar, salt and other agricultural, marine, and fresh water products, whether in their with the cost of regulation, inspection and licensing before any person may engage in such business or occupation,
original state or not; or practice such profession or calling.
3. Cooking oil and cooking gas;
4. Laundry soap, detergents, and medicine; SEC. 148. Fees for Sealing and Licensing of Weights and Measures.
5. Agricultural implements, equipment and post- harvest facilities, fertilizers, pesticides, (a) The municipality may levy fees for the sealing and licensing of weights and measures at such reasonable rates
insecticides, herbicides and other farm inputs; as shall be prescribed by the sangguniang bayan.
6. Poultry feeds and other animal feeds; (b) The sangguniang bayan shall prescribe the necessary regulations for the use of such weights and measures,
7. School supplies; and subject to such guidelines as shall be prescribed by the Department of Science and Technology. The sanggunian
8. Cement. concerned shall, by appropriate ordinance, penalize fraudulent practices and unlawful possession or use of
instruments of weights and measures and prescribe the criminal penalty therefor in accordance with the
(d) On retailers, With gross sales or receipts for the preceding calendar year of: provisions of this Code. Provided, however, That the sanggunian concerned may authorize the municipal treasurer
Per annum Rate to settle an offense not involving the commission of fraud before a case therefor is filed in court, upon payment of a
P400,000.00 or less 2% compromise penalty of not less than Two hundred pesos (P=200.00).
more than P400,000.00 1%
SEC. 149. Fishery Rentals, Fees and Charges-
Provided, however, That barangays shall have the exclusive power to levy taxes, as provided under Section 152 (a) Municipalities shall have the exclusive authority to grant fishery privileges in the municipal waters and impose
hereof, on gross sales or receipts of the preceding calendar year of Fifty thousand pesos (P=50,000.00) or less, in rentals, fees or charges therefor in accordance with the provisions of this Section.
the case of cities, and Thirty thousand pesos (P=30,000.00) or less, in the case of municipalities. (b) The sangguniang bayan may:
(1) Grant fishery privileges to erect fish corrals, oyster, mussels or other aquatic beds or bangus fry areas,
(e) On contractors and other independent contractors, in accordance with the following schedule: within a definite zone of the municipal waters, as determined by it: Provided, however, That duly registered
organizations and cooperatives of marginal fishermen shall have the preferential right to such fishery
With gross receipts for the preceding calendar year in the amount of: privileges: Provided, further, That the sangguniang bayan may require a public bidding in conformity with
and pursuant to an ordinance for the grant of such privileges: Provided, finally, That in the absence of such
Amount of Tax Per Annum organizations and cooperatives or their failure to exercise their preferential right, other parties may
Less than P= 5,000.00 27.50 participate in the public bidding in conformity with the above cited procedure.
xxx
2,000,000.00 or more at a rate not exceeding fifty percent (50%) of one percent (1%) (2) Grant the privilege to gather, take or catch bangus fry, prawn fry or kawag-kawag or fry of other species
and fish from the municipal waters by nets, traps or other fishing gears to marginal fishermen free of any
(f) On banks and other financial institutions, at a rate not exceeding fifty percent (50%) of one percent rental, fee, charge or any other imposition whatsoever.
(1%) on the gross receipts of the preceding calendar year derived from interest, commissions and
discounts from lending activities, income from financial leasing, dividends, rentals on property and (3) Issue licenses for the operation of fishing vessels of three (3) tons or less for which purpose the
profit from exchange or sale of property, insurance premium. sangguniang bayan shall promulgate rules and regulations regarding the issuances of such licenses to
qualified applicants under existing laws.
(g) On peddlers engaged in the sale of any merchandise or article of commerce, at a rate not exceeding
Fifty pesos (P50.00) per peddler annually. Provided, however, That the sanggunian concerned shall, by appropriate ordinance, penalize the use of explosives,
noxious or poisonous substances, electricity, muro-ami, and other deleterious methods of fishing and prescribe a
(h) On any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned criminal penalty therefor in accordance with the provisions of this Code: Provided, finally, That the sanggunian
may deem proper to tax: Provided, That on any business subject to the excise, value-added or concerned shall have the authority to prosecute any violation of the provisions of applicable fishery laws.
percentage tax under the National Internal Revenue Code, as amended, the rate of tax shall not exceed
two percent (2%) of gross sales or receipts of the preceding calendar year. The sanggunian concerned
Yamane v. BA Lepanto Condominium Corporation; October 25 2005
may prescribe a schedule of graduated tax rates but in no case to exceed the rates prescribed herein.

SEC. 144. Rates of Tax within the Metropolitan Manila Area.
The municipalities within the Metropolitan Manila Area may levy taxes at rates which shall not exceed by fifty
percent (50%) the maximum rates prescribed in the preceding Section.
SEC. 145. Retirement of Business. - A business subject to tax pursuant to the preceding sections shall, upon
termination thereof, submit a sworn statement of its gross sales or receipts for the current year. If the tax paid
during the year be less than the tax due on said gross sales or receipts of the current year, the difference shall be
paid before the business is considered officially retired.
SEC. 146. Payment of Business Taxes.
Are all activities subject to local business tax?
No. The catch all phrase all activities under the law presupposes that it involves activity for profit.
It must be for business activity,
Are the association dues collected by the petitioner an income derived from business activity?
No. It is not a profit activity. Hence income derived from such activity is not subject to local business
tax.

Page | 84
 Local business tax shall be imposed only for activities conducted for profit.
Ericson Telecommunications vs. City of Pasig; November 22 2007
Is the local business tax computed based on gross receipts or gross revenue?
Gross receipts
Amount receivables should not be included in the computation of local business tax.
Gross receipts: income is recognized when already collected, whether actually or constructively
Gross revenue: all types of income are recognized whether or not received
Amount receivables are part of gross revenue since they are recognized when earned. Right over the
same has already accrued eventhough it is not yet received.
Amount of receivables must not be included in the computation of local business tax, since local
business tax is computed based on gross receipts.
Cities
SEC. 151. Scope of Taxing Powers
Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the
province or municipality may impose.
Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and
independent component cities shall accrue to them and distributed in accordance with the provisions of
this Code. The rates of taxes that the city may levy may exceed the maximum rates allowed for the
province or municipality by not more than fifty percent (50%) except the rates of professional and
amusement taxes.
Barangay
SEC. 152. Scope of Taxing Powers
The barangays may levy taxes, fees, and charges, as provided in this Article, which shall exclusively
accrue to them:
(a) Taxes - On stores or retailers with fixed business establishments with gross sales or receipts
of the preceding calendar year of Fifty thousand pesos (P=50,000.00) or less, in the case of
(b) cities and Thirty thousand pesos (P=30,000.00) or less, in the case of municipalities, at a rate
not exceeding one percent (1%) on such gross sales or receipts.
(c) Service Fees or Charges - barangays may collect reasonable fees or charges for services
rendered in connection with the regulation or the use of barangay-owned properties or
service facilities such as palay, copra, or tobacco dryers.
(d) Barangay Clearance - No city or municipality may issue any license or permit for any
business or activity unless a clearance is first obtained from the barangay where such
business or activity is located or conducted. For such clearance, the sangguniang barangay
may impose a reasonable fee. The application for clearance shall be acted upon within seven
(7) working days from the filing thereof. In the event that the clearance is not issued within
the said period, the city or municipality may issue the said license or permit.
(e) Other Fees and Charges - The barangay may levy reasonable fees and charges:
(1) On commercial breeding of fighting cocks, cockfights and cockpits;
(2) On places of recreation which charge admission fees; and
(3) On billboards, signboards, neon signs, and outdoor advertisements.
Common Revenue-Raising Powers
SEC. 153. Service Fees and Charges. - Local government units may impose and collect such reasonable
fees and charges for services rendered.
SEC. 154. Public Utility Charges. - Local government units may fix the rates for the operation of public
utilities owned, operated and maintained by them within their jurisdiction
SEC. 155. Toll Fees or Charges. - The sanggunian concerned may prescribe the terms and conditions
and fix the rates for the imposition of toll fees or charges for the use of any public road, pier or wharf,
waterway, bridge, ferry or telecommunication system funded and constructed by the local government
unit concerned: Provided, That no such toll fees or charges shall be collected from officers and enlisted
men of the Armed Forces of the Philippines and members of the Philippine National Police on mission,
post office personnel delivering mail, physically-handicapped, and disabled citizens who are sixty-five
(65) years or older. When public safety and welfare so requires, the sanggunian concerned may
discontinue the collection of the tolls, and thereafter the said facility shall be free and open for public
use.
Community Tax
Once a person becomes a resident of a local government unit, he becomes liable for
community tax.
The amount to be collected by the LGU depends on whether the resident earns income or not.
Local Government Code
SEC. 156. Community Tax. - Cities or municipalities may levy a community tax in accordance with the provisions
of this Article.
SEC. 157. Individuals Liable to Community Tax. - Every inhabitant of the Philippines eighteen (18) years of age
or over who has been regularly employed on a wage or salary basis for at least thirty (30) consecutive working
days during any calendar year, or who is engaged in business or occupation, or who owns real property with an
aggregate assessed value of One thousand pesos (P=1,000.00) or more, or who is required by law to file an income
tax return shall pay an annual community tax of Five pesos (P=5.00) and an annual additional tax of One peso
(P=1.00) for every One thousand pesos (P=1,000.00) of income regardless of whether from business, exercise of
profession or from property which in no case shall exceed Five thousand pesos (P=5,000.00). In the case of
husband and wife, the additional tax herein imposed shall be based upon the total property owned by them and the
total gross receipts or earnings derived by them.
SEC. 158. Juridical Persons Liable to Community Tax. - Every corporation no matter how created or organized,
whether domestic or resident foreign, engaged in or doing business in the Philippines shall pay an annual
community tax of Five hundred pesos (P=500.00) and an annual additional tax, which, in no case, shall exceed Ten
thousand pesos (P=10,000.00) in accordance with the following schedule:
(1) For every Five thousand pesos (P=5,000.00) worth of real property in the Philippines owned by it
during the preceding year based on the valuation used for the payment of the real property tax under
existing laws, found in the assessment rolls of the city or municipality where the real property is
situated - Two pesos (P=2.00); and
(2) For every Five thousand pesos (P=5,000.00) of gross receipts or earnings derived by it from its
business in the Philippines during the preceding year - Two pesos (P=2.00). The dividends received by
a corporation from another corporation however shall, for the purpose of the additional tax, be
considered as part of the gross receipts or earnings of said corporation.
SEC. 159. Exemptions. - The following are exempt from the community tax:
(1) Diplomatic and consular representatives; and
(2) Transient visitors when their stay in the Philippines does not exceed three (3) months.
SEC. 160. Place of Payment. - The community tax shall be paid in the place of residence of the individual, or in the
place where the principal office of the juridical entity is located.
SEC. 161. Time for Payment; Penalties for Delinquency.
Page | 85
 (a) The community tax shall accrue on the first (1st) day of January of each year which shall be paid not
later than the last day of February of each year. If a person reaches the age of eighteen (18) years or
otherwise loses the benefit of exemption on or before the last day of June, he shall be liable for the
community tax on the day he reaches such age or upon the day the exemption ends. However, if a
person reaches the age of eighteen (18) years or loses the benefit of exemption on or before the last
day of March, he shall have twenty (20) days to pay the community tax without becoming delinquent.
Persons who come to reside in the Philippines or reach the age of eighteen (18) years on or after the
first (1st) day of July of any year, or who cease to belong to an exempt class on or after the same date,
shall not be subject to the community tax for that year.
(b) Corporations established and organized on or before the last day of June shall be liable for the
community tax for that year. But corporations established and organized on or before the last day of
March shall have twenty (20) days within which to pay the community tax without becoming
delinquent. Corporations established and organized on or after the first day of July shall not be subject
to the community tax for that year. If the tax is not paid within the time prescribed above, there shall be
added to the unpaid amount an interest of twenty-four percent (24%) per annum from the due date
until it is paid.
SEC. 162. Community Tax Certificate. - A community tax certificate shall be issued to every person or
corporation upon payment of the community tax. A community tax certificate may also be issued to any person or
corporation not subject to the community tax upon payment of One peso (P=1.00).
SEC. 163. Presentation of Community Tax Certificate On Certain Occasions.
(a) When an individual subject to the community tax acknowledges any document before a notary public,
takes the oath of office upon election or appointment to any position in the government service;
receives any license, certificate, or permit from any public authority; pays any tax or fee; receives any
money from any public fund; transacts other official business; or receives any salary or wage from any
person or corporation, it shall be the duty of any person, officer, or corporation with whom such
transaction is made or business done or from whom any salary or wage is received to require such
individual to exhibit the community tax certificate. The presentation of community tax certificate shall
not be required in connection with the registration of a voter.
(b) When, through its authorized officers, any corporation subject to the community tax receives any
license, certificate, or permit from any public authority, pays any tax or fee, receives money from public
funds, or transacts other official business, it shall be the duty of the public official with whom such
transaction is made or business done, to require such corporation to exhibit the community tax
certificate.
(c) The community tax certificate required in the two preceding paragraphs shall be the one issued for the
current year, except for the period from January until the fifteenth (15th) of April each year, in which
case, the certificate issued for the preceding year shall suffice.
SEC. 164. Printing of Community Tax Certificates and Distribution of Proceeds.
(a) The Bureau of Internal Revenue shall cause the printing of community tax certificates and distribute
the same to the cities and municipalities through the city and municipal treasurers in accordance with
prescribed regulations. The proceeds of the tax shall accrue to the general funds of the cities,
municipalities and barangays except a portion thereof which shall accrue to the general fund of the
national government to cover the actual cost of printing and distribution of the forms and other related
expenses. The city or municipal treasurer concerned shall remit to the national treasurer the said share
of the national government in the proceeds of the tax within ten (10) days after the end of each quarter.
(b) The city or municipal treasurer shall deputize the barangay treasurer to collect the community tax in
their respective jurisdictions: Provided, however, That said barangay treasurer shall be bonded in
accordance with existing laws.
(c) The proceeds of the community tax actually and directly collected by the city or municipal treasurer
shall accrue entirely to the general fund of the city or municipality concerned. However, proceeds of
the community tax collected through the barangay treasurers shall be apportioned as follows:
(1) Fifty percent (50%) shall accrue to the general fund of the city or municipality concerned;
(2) and (2) Fifty percent (50%) shall accrue to the barangay where the tax is collected.
REMEDIES IN LOCAL TAXATION
Remedies of the Government
Angeles City vs. Angeles City Electric Corporation; June 29 2010
Section 218 of Tax Code: No injunction shall be issued to restrain collection of tax.
Can there be injunction to restrain collection of local taxes?
Yes. There is no similar provision under LGUs which prohibits issuance of injunction to restrain
collection to local taxes. Section 218 is only applicable to national internal revenue taxes.
Administrative Remedies
1. Local Governments Lien
All unpaid taxes already accrued shall constitute lien over properties of the taxpayer.
Section 173, Local Government Code
Local taxes, fees, charges and other revenues constitute a lien, superior to all liens, charges or
encumbrances in favor of any person, enforceable by appropriate administrative or judicial action, not
only upon any property or rights therein which may be subject to the lien but also upon property used
in business, occupation, practice of profession or calling, or exercise of privilege with respect to which
the lien is imposed. The lien may only be extinguished upon full payment of the delinquent local taxes
fees and charges including related surcharges and interest
2. Assessment by Local Treasurer
SEC. 194, Local Government Code
(a) Local taxes, fees, or charges shall be assessed within five (5) years from the date they became
due. No action for the collection of such taxes, fees, or charges, whether administrative or
judicial, shall be instituted after the expiration of such period: Provided, That, taxes, fees or
charges which have accrued before the effectivity of this Code may be assessed within a
period of three (3) years from the date they became due.
(b) In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be
assessed within ten (10) years from discovery of the fraud or intent to evade payment.
(c) Local taxes, fees, or charges may be collected within five (5) years from the date of
assessment by administrative or judicial action. No such action shall be instituted after the
expiration of said period: Provided, however, That, taxes, fees or charges assessed before the
effectivity of this Code may be collected within a period of three (3) years from the date of
assessment.
(d) The running of the periods of prescription provided in the preceding paragraphs shall be
suspended for the time during which:
(1) The treasurer is legally prevented from making the assessment of collection;
(2) The taxpayer requests for a reinvestigation and executes a waiver in writing before
expiration of the period within which to assess or collect; and
(3) The taxpayer is out of the country or otherwise cannot be located
Page | 86
 National Local Government (c) Publication
Government
Assessment Collection Assessment Collection The officer shall forthwith cause a notification to be exhibited in not less than three (3) public and
conspicuous places in the territory of the local government unit where the distraint is made, specifying
Ordinary 3 years from 3 years from 5 years from the 5 years from date
the time and place of sale, and the articles distrained. The time of sale shall not be less than twenty (20)
date of filing of date of time that the tax of assessment
days after notice to the owner or possessor of the property as above specified and the publication or
return assessment becomes due
posting of the notice. One place for the posting of the notice shall be at the office of the chief executive of
When local taxes
the local government unit in which the property is distrained.
accrue: first day of
January (d) Release of distrained property upon payment prior to sale
Extraordinary 10 years from 5 years from 10 years from 5 years from date
date of date of date of of assessment If at any time prior to the consummation of the sale, all the proper charges are paid to the officer
discovery assessment discovery conducting the sale, the goods or effects distrained shall be restored to the owner.

Filing of false or Filing of false or (e) Procedure of sale

fraudulent return, fraudulent return
and omission to
file a return
Suspension of Collection of taxes
(Section 223)
(1) When the treasurer is legally prevented from collecting the tax
(2) Taxpayer files for request for reinvestigation and there was execution of waiver in writing
before the expiration of the period to assess or collect.
o The filing of the reinvestigation request must be accompanied with an execution of
waiver
(3) Taxpayer is out of country and cannot be located.
3. Distraint of Personal Properties (Section 175)
The remedy by distraint shall proceed as follows:
(a) Seizure
Upon failure of the person owing any local tax, fee, or charge to pay the same at the time required, the
local treasurer or his deputy may, upon written notice, seize or confiscate any personal property
belonging to that person or any personal property subject to the lien in sufficient quantity to satisfy the
tax, fee, or charge in question, together with any increment thereto incident to delinquency and the
expenses of seizure. In such case, the local treasurer or his deputy shall issue a duly authenticated
certificate based upon the records of his office showing the fact of delinquencycy and the amounts of the
tax, fee, or charge and penalty due. Such certificate shall serve as sufficient warrant for the distraint of
personal property aforementioned, subject to the taxpayer's right to claim exemption under the
provisions of existing laws. Distrained personal property shall be sold at public auction in the manner
herein provided for.
(b) Accounting of distrained goods
The officer executing the distraint shall make or cause to be made an account of the goods, chattels or
effects distrained, a copy of which signed by himself shall be left either with the owner or person from
whose possession the goods, chattels or effects are taken, or at the dwelling or place of business of that
person and with someone of suitable age and discretion, to which list shall be added a statement of the
sum demanded and a note of the time and place of sale.
At the time and place fixed in the notice, the officer conducting the sale shall sell the goods or effects so
distrained at public auction to the highest bidder for cash. Within five (5) days after the sale, the local
treasurer shall make a report of the proceedings in writing to the local chief executive concerned.
Should the property distrained be not disposed of within one hundred and twenty (120) days from the
date of distraint, the same shall be considered as sold to the local government unit concerned for the
amount of the assessment made thereon by the Committee on Appraisal and to the extent of the same
amount, the tax delinquencies shall be cancelled. Said Committee on Appraisal shall be composed of the
city or municipal treasurer as chairman, with a representative of the Commission on Audit and the city
or municipal assessor as members.
(f) Disposition of proceeds
The proceeds of the sale shall be applied to satisfy the tax, including the surcharges, interest, and other
penalties incident to delinquency, and the expenses of the distraint and sale. The balance over and
above what is required to pay the entire claim shall be returned to the owner of the property sold. The
expenses chargeable upon the seizure and sale shall embrace only the actual expenses of seizure and
preservation of the property pending the sale, and no charge shall be imposed for the services of the
local officer or his deputy. Where the proceeds of the sale are insufficient to satisfy the claim, other
property may, in like manner, be distrained until the full amount due, including all
4. Levy on Real Property (Section 176)
After the expiration of the time required to pay the delinquent tax, fee, or charge, real property may be
levied on before, simultaneously, or after the distraint of personal property belonging to the delinquent
taxpayer.
To this end, the provincial, city or municipal treasurer, as the case may be, shall prepare a duly
authenticated certificate showing the name of the taxpayer and the amount of the tax, fee, or charge,
and penalty due from him. Said certificate shall operate with the force of a legal execution throughout
the Philippines.
Levy shall be effected by writing upon said certificate the description of the property upon which
levy is made. At the same time, written notice of the levy shall be mailed to or served upon the assessor
and the Registrar of Deeds of the province or city where the property is located who shall annotate
the levy on the tax declaration and certificate of title of the property, respectively, and the delinquent
taxpayer or, if he be absent from the Philippines, to his agent or the manager of the business in respect
to which the liability arose, or if there be none, to the occupant of the property in question.
In case the levy on real property is not issued before or simultaneously with the warrant of distraint on
personal property, and the personal property of the taxpayer is not sufficient to satisfy his delinquency,
the provincial, city or municipal treasurer, as the case may be, shall within thirty (30) days after

Page | 87
execution of the distraint, proceed with the levy on the taxpayer's real property. A report on any levy
shall, within ten (10) days after receipt of the warrant, be submitted by the levying officer to the
sanggunian concerned Judicial Remedies
Contents of assessment (From SLU Reviewer): 1. Period within which to collect (Section 194)
o within 5 years from the date of assessment by administrative or judicial action
A notice of assessment as provided for in the Real Property Tax Code should effectively inform the
taxpayer of the value of a specific property, or proportion thereof subject to tax, including the discovery,
listing, classification, and appraisal of properties. The petitioner is also correct in pointing out that the 2. Accrual of tax (Section 166)
last paragraph of the said notices that inform the taxpayer that in case payment has already been made,
the notices may be disregarded is an indication that it is in fact a notice of collection. It could only General rule: All local taxes, fees, and charges shall accrue on the 1st day of January of each year.
qualify as a notice of collection if there is an unmistakable demand for payment of back taxes.
Meralco vs. Barlis (Feb. 1, 2002) Except: Unless otherwise provided in the LGC,

Who is entitled to the notice of assessment New taxes, fees or charges, or changes in the rates of the local taxes shall accrue on the 1st
Cases involving an auction sale of land for the collection of delinquent taxes are in personam. Thus, day of the quarter next following the effectivity of the ordinance imposing such new levies or
notice by publication, though sufficient in proceedings in rem, does not as a rule satisfy the requirement rates
of proceedings in personam. As such, mere publication of the notice of delinquency would not suffice,
considering that the procedure in tax sales is in personam. It was, therefore, still incumbent upon the 3. Time of payment (Section 167)
city treasurer to send the notice of tax delinquency directly to the taxpayer in order to protect the
interests of the latter. General Rule: All local taxes, fees and charges shall be paid within the first 20 days of January
or of each subsequent quarter, as the case may be.
In the present case, the notice of delinquency was sent by registered mail to the permanent address of
the registered owner in Manila. In that notice, the city treasurer of Baguio City directed him to settle the Except:
charges immediately and to protect his interest in the property. Under the circumstances, we hold that
the notice sent by registered mail adequately protected the rights of the taxpayer, who was the 1. Unless otherwise provided by the LGC
registered owner of the condominium unit. 2. The Sanggunian concerned may, for a justifiable reason or cause, extend the time for
payment of such taxes, fees, or charges or penalties, but only for a period not exceeding 6
For purposes of the real property tax, the registered owner of the property is deemed the taxpayer. months.
Hence, only the registered owner is entitled to a notice of tax delinquency and other proceedings
relative to the tax sale. Not being registered owners of the property, petitioners cannot claim to have 4. Surcharge, Interests and Penalties
been deprived of such notice. In fact, they were not entitled to it.
Talusan vs. Tayag, (April 04, 2001) Surcharge: 25% of basic tax due
Interest: 2% per month of the basic tax due, not exceeding 36 months.
No compromise penalty
Personal Properties Exempt from Distraint or Levy (Section 185)
Memorize! Remedies of Taxpayer
The following property shall be exempt from distraint and the levy, attachment or execution thereof
Administrative Remedies
for delinquency in the payment of any local tax, fee or charge, including the related surcharge and
interest:
1. Appeal to the Secretary of Justice
Re: newly enacted tax ordinance (Sec. 187, LGC)
(a) Tools and the implements necessarily used by the delinquent taxpayer in his trade or
employment;
Any question on the constitutionality or legality of tax ordinances or revenue measures may be
(b) One (1) horse, cow, carabao, or other beast of burden, such as the delinquent taxpayer may
appealed by the taxpayer to the Secretary of Justice within 30 days from its effectivity.
select, and necessarily used by him in his ordinary occupation;
(c) His necessary clothing, and that of all his family;
Secretary of Justice has period of 60 days to decide on the appeal filed by the taxpayer.
(d) Household furniture and utensils necessary for housekeeping and used for that purpose by the
delinquent taxpayer, such as he may select, of a value not exceeding Ten thousand pesos
When the appeal was not acted upon within 60 days by the SOJ
(P=10,000.00);
(e) Provisions, including crops, actually provided for individual or family use sufficient for four (4)
Recourse of taxpayer: treat the inaction of SOJ as tantamount to a denial. U
months;
Upon lapse of the 60day period, the taxpayer must elevate the case to a court of competent jurisdiction.
(f) The professional libraries of doctors, engineers, lawyers and judges;
(g) One fishing boat and net, not exceeding the total value of Ten thousand pesos (P=10,000.00), by
Where to Elevate?
the lawful use of which a fisherman earns his livelihood; and
Regional Trial Court
(h) Any material or article forming part of a house or improvement of any real property.
The case is incapable of pecuniary estimation.

Page | 88
The rules is the same with Civil Procedure. The only difference is that in a tax ordinance, there is a
requirement to appeal to the Secretary of Justice first before bringing the same case to the RTC.

Proper Petition
Petition for Declaratory relief, if there is no breach yet of the law committed by the petitioner.

Failure to appeal the ordinance to SOJ

The petition will be dismissed for failure to exhaust administrative remedies.

Relaxation of the Rule on Mandatory Appeal to SOJ

Cagayan de Oro

If it can be shown that ordinance is null and void on its face, there can relaxation of the rule
under Section 187.

This is merely an exception to the general rule.

2. Protest of Assessment (Section 195)

When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges
have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee or charge, the
amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days from the receipt of
the notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the
assessment; otherwise, the assessment shall become final and executory. The local treasurer shall
decide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest
to be wholly or partly meritorious, he shall issue a notice canceling wholly or partially the assessment.
However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the
protest wholly or partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the
receipt of the denial of the protest or from the lapse of the sixty (60) day period prescribed herein
within which to appeal with the court of competent jurisdiction otherwise the assessment becomes
conclusive and unappealable.

3. Claim for Refund of Tax Credit (Section 196)

No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge
erroneously or illegally collected until a written claim for refund or credit has been filed with the local
treasurer.

No case or proceeding shall be entertained in any court after the expiration of two (2) years from the
date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or
credit.

4. Remedies from a denial of the protest and refund

It should not only be the written claim before the treasurer that must be filed in 2 years but the
taxpayer must also be able to file a case in court before the expiration of the 2 year period.

There is no appellate remedy from the denial of the treasurer before the regular court but an
independent and original action for refund.

Page | 89