TAXATION LAW
QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES
FOR THE 2017 BAR
(With Salient Provisions of the CMTA)
PIERRE MARTIN D. REYES
This supplement covers significant and relevant
Supreme Court jurisprudence on taxation law and
Bureau of Internal Revenue (BIR) issuances from June
1, 2016 to June 30, 2017.
For jurisprudence and BIR issuances for the period
prior to June 1, 2016, please refer to the previous
supplements. A review of the jurisprudence and BIR
issuances cited in previous supplements is strongly
encouraged.
In addition, this supplement covers the salient
provisions of the Customs Modernization and Tariff
Act (CMTA), which took effect on June 16, 2016.
GENERAL PRINCIPLES
Q. A non-stock, non-profit educational institution
argues that is rental income from
restaurants/canteens and bookstores operating
within its campus are exempt from income tax
considering that such revenues derived therefrom
are used for educational purposes. The BIR
argues that under the Tax Code, income of
whatever kind and character of a non-stock and
non-profit educational institution from any of its
properties, real or personal, or from any of its
activities conducted for profit regardless of the
disposition made of such income shall be subject
to income tax. Is the BIR correct?
No. The income, revenues and assets of non-stock,
non-profit educational institutions proved to have
been used actually, directly, and exclusively for
education purposes are exempt from duties and taxes.
There is a distinction between the tax treatment of
non-stock, non-profit educational institutions and
proprietary educational institutions. The latter is
granted tax exemption conditioned only on the actual,
direct and exclusive use of their revenues and assets for
educational purposes while tax exemptions for the
former are subject to limitations imposed by law such
as Section 30(H) of the Tax Code. The Tax Code
NOTICE
This material supplements the authors 2013 Bar Reviewer and its supplements. No portion of this work may
be copied or reproduced without the written permission of the author. Possessors may reproduce and
distribute this supplement provided the name of the author remains clearly associated with my work and no
alterations in the form and content of this supplement are made.
cannot qualify the exemption constitutionally-granted
to non-stock, non-profit educational institutions.
(Commissioner of Internal Revenue v. De La Salle
University, G.R. No. 196596, 198841, and 198941,
November 9, 2016)
It is clear and unmistakable from the Constitution that
non-stock, non-profit educational institutions are
constitutionally exempt from tax on all revenues
derived in pursuance of its purpose as an educational
institution and used actually, directly and exclusively
for educational purposes. This constitutional
exemption gives the non-stock, non profit educational
institutions a distinct character. And for the
constitutional exemption to be enjoyed, jurisprudence
and tax rulings affirm the doctrinal rule that there are
only two requisites: (1) The school must be non-stock
and non-profit; and (2) The income is actually, directly
and exclusively used for educational purposes. There
are no other conditions and limitations. (RMO 44-
2016 dated July 25, 2016 as cited in Commissioner
of Internal Revenue v. St. Paul College of Makati,
G.R. No. 215383, March 8, 2017)
Q. St. Lukes Medical Center (SLMC) is a hospital
organized as a non-stock and non-profit
corporation. It admits both paying and non-
paying patients. The BIR claimed that SLMC was
liable for income tax at 10% as provided under
Section 27(B) of the NIRC. SLMC argues that it is
a non-stock, non-profit institution for charitable
and social welfare purposes exempt from income
tax under Section 30(E) and (G) of the NIRC. Is
SLMC correct?
No. To be exempt, Section 30(E) and (G) of the
NIRC requires an institution to operate exclusively for
charitable or social welfare purpose. In case an exempt
institution earns income from its profit activities, it will
not lose its tax exemption. However, its income from
profit activities shall be subject to income tax. For
proprietary educational institutions and hospitals, the
rate shall be 10%. (Commissioner of Internal
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 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
Revenue v. St. Lukes Medical Center, G.R. No.
203514, February 13, 2017)
Q. Is a Revenue Regulation which treats
petroleum and petroleum products brought into
Freeport and economic zones (FEZs) as taxable
importations valid and constitutional?
No. Such a revenue regulation is invalid and
unconstitutional because:
1. It erroneously considers petroleum and
petroleum products brought into a FEZ as
taxable importations. Goods brought into an
FEZ remain to be in foreign territory and are
not therefore goods introduced into Philippine
customs territory subject to Philippine customs
and tax laws;
2. It illegally imposes taxes upon Freeport and
economic zones (FEZs), which, by law, enjoy
tax and duty-free incentives on its
importations;
3. It illegally amends the law a power vested
solely on the Legislature. Regulations may not
enlarge, alter, restrict, or otherwise go beyond
the provisions of the law they administer. The
revenue regulation, an executive issuance,
attempts to withdraw the tax incentives clearly
accorded by the Legislature to FEZ
enterprises. (Secretary of Finance v. Lazatin,
G.R. No. 210588, November 29, 2016)
Q. The governments of Japan and the Philippines
executed an Exchange of Notes, whereby the
former agreed to extend a loan amounting to Forty
Billion Four Hundred Million Japanese Yen
(40,400,000,000) to the latter for the
implementation of a Coal-Fired Thermal Power
Plant Project. In Paragraph 5 (2) of the Exchange
of Notes, the Philippine Government, by itself or
through its executing agency, i.e. National Power
Corporation, undertook to assume all taxes
imposed by the Philippines on Japanese
contractors, i.e. Mitsubishi Corporation, engaged
in the Project. Mitsubishi Corporation included in
its income tax payments to the BIR income
pertaining to the Japanese Government-funded
portion of the project. Thus, Mitsubishi filed for a
claim for refund. The BIR argues that (a)
Mitsubishi is not entitled to the refund as the
Exchange of Notes cannot be read as a treaty
validly granting tax exemption considering the
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
lack of Senate concurrence; and (b) that, based on
a revenue memorandum circular it issued, the
proper remedy of Mitsubishi is to recover or obtain
a refund from the National Power Corporation, the
executing agency. Is the BIR correct?
No. The subject taxes was erroneously collected from
the taxpayer, considering that the obligation to pay the
same had already been assumed by the Philippine
Government by virtue of its Exchange of Notes with
the Japanese Government. Case law explains that an
exchange of notes is considered as an executive
agreement, which is binding on the State even without
Senate concurrence.
Further, the Tax Code vests upon the CIR, being the
head of the BIR, the authority to credit or refund taxes
which are erroneously collected by the government.
This specific statutory mandate cannot be overridden
by averse interpretations made through mere
administrative issuances, which - as argued by the CIR
- shifts to the executing agencies the power to refund
the subject taxes. (Mitsubishi Corporation Manila
Branch v. Commissioner of Internal Revenue,
G.R. No. 175772, June 29, 2017)
INCOME TAXATION
Q. A law was passed granting income tax
exemption for minimum wage earners (MWE) as
well as increase in personal and additional
exemptions. The law became effective on July 6,
2008. The BIR issued a revenue regulation
providing for (a) the prorated application of the
personal and additional exemptions for taxable
year 2008 and for the period of applicability of the
MWE exemption for taxable year 2008 to begin
only on 6 July 2008; and (b) the disqualification of
MWEs who earn purely compensation income,
whether in the private or public sector, from the
privilege of availing themselves of the MWE
exemption in case they receive compensation
related benefits exceeding the statutory ceiling of
P30,000 (now P82,000). Is the revenue regulation
valid?
No. The personal and additional exemptions should be
applied to the entire taxable year 2008. The test is
whether the new set of personal and additional
exemptions was available at the time of the filing of the
income tax return. In other words, while the status of
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 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
the individual taxpayers is determined at the close of
the taxable year, their personal and additional
exemptions - and consequently the computation of
their taxable income - are reckoned when the tax
becomes due, and not while the income is being earned
or received. As in the case of the adjusted personal and
additional exemptions, the MWE exemption should
apply to the entire taxable year 2008, and not only from
6 July 2008 onwards.
The revenue regulations adds a requirement not found
in the law by effectively declaring that an MWE who
receives other benefits in excess of the statutory limit
is no longer entitled to the exemption provided by the
law. To be exempt, one must be an MWE, a term that
is clearly defined. Section 22(HH) says he/she must be
one who is paid the statutory minimum wage if he/she
works in the private sector, or not more than the
statutory minimum wage in the non-agricultural sector
where he/she is assigned, if he/she is a government
employee. Thus, one is either an MWE or he/she is
not. Simply put, MWE is the status acquired upon
passing the litmus test - whether one receives wages
not exceeding the prescribed minimum wage.(Soriano
v. Secretary of Finance, G.R. Nos. 184450, 184508,
184538, and 185234, January 24, 2017)
Q. The BIR contends that the 20-lender rule
should not strictly apply to issuances of
government debt instruments, which by nature,
are borrowings from the public. Considering that
the PEACe Bonds were intended to be freely
tradable in the secondary market to 20 or more
lenders/investors, they, like other similarly
situated government securities-awarded to 19 or
less Government Securities Eligible Dealers
(GSEDs) in the primary market but freely tradable
to 20 or more lenders/investors in the secondary
market should be treated as deposit substitutes
subject to the 20% final withholding tax. Is the
BIRs contention correct?
No. The definition of deposit substitutes in Section
22(Y) specifically defined "public" to mean "twenty
(20) or more individual or corporate lenders at any one
time." Hence, reckoning of whether there are 20 or
more individuals or corporate lenders is crucial in
determining the tax treatment of the yield from the
debt instrument. In other words, if there are 20 or
more lenders, the debt instrument is considered a
deposit substitute and subject to 20% final withholding
tax.
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
The existence of 20 or more lenders should be
reckoned at the time when the successful GSED-
bidder distributes (either by itself or through an
underwriter) the government securities to final holders.
When the GSED sells the government securities to 20
or more investors, the government securities are
deemed to be in the nature of a deposit substitute,
taxable as such. (Banco de Oro v. Republic, G.R.
No. 198756, August 16, 2016)
Q. The authorized capital stock of a taxpayer was
divided into common shares and preferred shares.
The preferred shares were solely and exclusively
subscribed by an affiliate non-resident foreign
corporation. The taxpayers Board of Directors
authorized a redemption of the preferred shares.
The BIR argues that while the payment of the
original subscription price could not be taxed as it
represented return of capital, the additional
amount of the redemption price represented
accumulated dividends in arrears, subject to 15%
final withholding tax. The taxpayer had no
unrestricted retained earnings. Is the BIR correct?
No. Dividends means any distribution out of earnings
or profits. In this case, the taxpayer did not have
unrestricted retained earnings. The primary feature of
an ordinary dividends is that the distribution should be
in the nature of a recurring return on stocks. In this
case, there is no periodic distribution of dividends, but
rather a payment for redemption of preferred shares.
If the distribution is in the nature of a recurring return
on stock it is an ordinary dividend. However, if the
corporation is really winding up its business or
recapitalizing and narrowing its activities, the
distribution may properly be treated as in complete or
partial liquidation and as payment by the corporation
to the stockholder for his stock. (Commissioner of
Internal Revenue v. Goodyear Philippines, G.R.
No. 216130, August 3, 2016)
VALUE-ADDED TAX
Q. Invoking Section 108(B)(2) of the Tax Code, a
business process outsourcing company filed a
claim for refund or credit of input VAT
attributable to zero-rated sales of its call services
to foreign corporations. Is it indispensable that the
said company prove that the recipient of its call
services are foreign corporations doing business
outside the Philippines?
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 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
Yes. An essential condition to qualify for zero-rating
under Section 108(B)(2) of the Tax Code is that the
service-recipient must be doing business outside the
Philippines. A taxpayer claiming for a VAT refund or
credit under Section 108(B)(2) has the burden to prove
not only that the recipient of the service is a foreign
corporation, but also that said corporation is doing
business outside the Philippines. (Sitel v.
Commissioner of Internal Revenue, G.R. No.
201326, February 8, 2017)
Q. What are the rules on the determination of the
prescriptive period for filing a tax refund or credit
of unutilized input VAT?
The rules are as follows:
1. An administrative claim must be filed with the
CIR within two years after the close of the
taxable quarter when the zero-rated or
effectively zero-rated sales were made.
2. The CIR has 120 days from the date of
submission of complete documents in support
of the administrative claim within which to
decide whether to grant a refund or issue a tax
credit certificate. The 120-day period may
extend beyond the two-year period from the
filing of the administrative claim if the claim is
filed in the later part of the two-year period. If
the 120-day period expires without any
decision from the CIR, then the administrative
claim may be considered to be denied by
inaction.
3. A judicial claim must be filed with the CTA
within 30 days from the receipt of the CIRs
decision denying the administrative claim or
from the expiration of the 120-day period
without any action from the CIR.
4. All taxpayers, however, can rely on BIR Ruling
No. DA-489-03 from the time of its issuance
on 10 December 2003 up to its reversal by this
Court in Aichi on 6 October 2010, as an
exception to the mandatory and jurisdictional
120+30 day periods. (Harte-Hanks
Philippines v. Commissioner of Internal
Revenue, G.R. No. 205721, September 14,
2016; Tekenaka Corporation v.
Commissioner of Internal Revenue, G.R.
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
No. 193321, October 19, 2016;
Commissioner of Internal Revenue v.
Deutsche Knowledge Services, G.R. No.
211072, November 7, 2016; Deutsche
Knowledge Services Pte v. Commissioner
of Internal Revenue, G.R. No. 197980,
December 1, 2016; Sitel v. Commissioner of
Internal Revenue, G.R. No. 201326,
February 8, 2017; Visayas Geothermal v.
Commissioner of Internal Revenue, G.R.
No. 205279, April 26 2017; Marubeni
Philippines v. Commissioner of Internal
Revenue, G.R. 198485, June 5, 2017)
Q. What are the rules on VAT claims filed and
pending prior to the effectivity of RMC No. 54-
2014?
The rules are as follows:
1. The claimant-taxpayer has two (2) years after
the close of the taxable quarter when the sales
were made to apply for the issuance of a tax
credit certificate or refund of creditable input
tax due or paid attributable to such sales. Thus,
before the administrative claim is barred by
prescription, the taxpayer must have submitted
his complete documents in support of the
application.
2. In all case, whatever documents a taxpayer
intends to file to support his claim must be
completed within the two-year period under
Section 112(A) of the Tax Code and the
Commissioner, or his duly authorized
representative should have decided on the
claim for tax credit or refund within 120 days
from the date of submission of complete
documents or from the date of filing of the
application if the claimant-taxpayer did not
submit additional documents. Pending
administrative claims prior to the effectivity of
RMC No. 54-2014 shall be processed based on
available documents submitted by the taxpayer
within the two-year period. (RR No. 1-2017
dated January 3, 2017)
NOTE: In Pilipinas Total Gas v. Commissioner of
Internal Revenue, G.R. No. 207112, December 8,
2016, the Supreme Court held that RMC No. 54-2014
cannot be applied retroactively as this would prejudice
taxpayers whose VAT claims for tax credit or tax
refund were filed and pending before June 11, 2014,
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 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
the date when RMC No. 54-2014 took effect. In light
of this, the BIR issued RR No. 1-2017 because RMC
No. 54-2014 was given retroactive affect as pending
claims were deemed denied upon expiration of the
120-day period from the date the claims were filed even
through the taxpayer-claimants are still in the
processing of submitting the complete documents
under the then RMC No. 49-2003. RMC No. 49-2003
gives the taxpayers a period of 30 days from filing of
the application for tax credit/refund to complete the
required documents unless given further extension
which shall not exceed 30 days.
BUT NOTE: As it now stands, RMC 54-2014 dated
June 11, 2014 mandates that the application for VAT
refund/tax credit must be accompanied by complete
supporting documents. Under the current rule, the
reckoning of the 120-day period has been withdrawn
from the taxpayer by RMC 54-2014, since it requires
him at the time he files his claim to complete his
supporting documents and attest that he will no longer
submit any other document to prove his claim.
Further, the taxpayer is barred from submitting
additional documents after he has filed his
administrative claim. Thus, the 120-day has to be
counted from the filing of the administrative claim.
Q. Can an entity located within an ECOZONE be
entitled to refund of its unutilized input taxes?
No. ECOZONES are by legal fiction foreign territory.
Thus, sales made by suppliers from a customs
territory to a purchaser located within an ECOZONE
shall be considered exportations. Following the Cross
Border Doctrine and Destination Principle, no VAT
shall be imposed to form part of the cost of goods
destined for consumption outside the territorial border
of the taxing authority.
As such, purchases of goods and services that are
destined for consumption within the ECOZONE
should be free of VAT. No input should be paid on
such purchases and thus the entity located within the
ECOZONE is not entitled to claim a tax refund or
credit.
If the taxpayer paid the input VAT, the proper
recourse is not a claim for tax refund or credit against
the government, but reimbursement against the seller
who shifted the output VAT. (Coral Bay Nickel
Corporation v. Commissioner of Internal
Revenue, G.R. No. 190506, June 13, 2016)
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
Q. (1) What is the distinction between a receipt
and an invoice as evidence in a claim for refund
or tax credit of unutilized input VAT? (2) Does the
grant of the application for zero-rating of a PEZA-
registered enterprise dispense with the need to
present the VAT official receipts?
(1) A VAT invoice is necessary for every sale, barter,
or exchange of goods or properties, while a VAT
official receipt properly pertains to every lease of goods
or properties as well as to every sale, barter, or
exchange of services.
(2) The fact that the application for zero-rating has
been approved does not, by itself, justify the grant of
refund or tax credit. Invoicing and accounting
requirements must be further complied with. Without
proper VAT official receipts issued to clients, the
payments received by a taxpayer for providing services
to PEZA-registered enterprises cannot qualify for
VAT zero-rating. Hence, it cannot claim such sales as
zero-rated VAT not subject to output tax. (Tekenaka
Corporation v. Commissioner of Internal
Revenue, G.R. No. 193321, October 19, 2016)
EXCISE TAX
Q. Is San Mig Light a new brand or a variant of
one of San Miguel Corporations existing beer
brands, the variant being subject to a higher excise
tax rate than a new brand?
It is a new brand. The variant contemplated under the
Tax Code has a technical meaning. A variant is
determined by the brand (name) of the beer product,
whether it was formed by prefixing or suffixing a
modifier to the root name of the alleged parent brand,
or whether it carries the same logo or design. San Mig
Light and Pale Pilsen do not share a root word.
Neither is there an existing brand called San Mig to
conclude that Light is a suffix rendering San Mig
Light as its variant. Thus, San Mig Light should
be considered as one brand name. (Commissioner of
Internal Revenue v. San Miguel Corporation, G.R.
No. 205405 & 205723, January 25, 2017)
DOCUMENTARY STAMP TAX
Q. Do interbank call loans fall under the
definition of loan agreements and thus subject to
documentary stamp tax?
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 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
No. An interbank call loan refers to the cost of
borrowings from other resident banks and non-bank
financial institutions with quasi-banking authority that
is payable on call or demand. It is transacted primarily
to correct a bank's reserve requirements. As such, it
does not fall under the definition of a loan agreement.
(Commissioner of Internal Revenue v. Philippine
National Bank, G.R. No. 195147, July 11, 2016)
TAX REMEDIES UNDER THE NIRC
Q. The BIR issued a Letter of Authority
authorizing its revenue officers to examine the
taxpayers books of accounts and other
accounting records for all internal revenue taxes
for the period Fiscal Year Ending 2003 and
Unverified Prior Years. Is the assessment made
pursuant to this Letter of Authority valid?
Partly. A LOA which contains a specified year and
unverified prior years is not entirely void. The
assessment for the year clearly specified remains to be
valid while the assessments which pertain to the
unverified prior years are void for having been
unspecified on separate LOAs. (Commissioner of
Internal Revenue v. De La Salle University, G.R.
No. 196596, 198841, and 198941, November 9, 2016)
Q. Is an assessment based merely on a Letter
Notice (LN) valid?
No. An assessment based only on a LN is void. A
Letter of Authority (LOA) cannot be dispensed with
just because none of the financial books or records
being physically kept was examined. The SC opined
that the statutory requirement of a LOA is not
dependent on whether the taxpayer may be required to
physically open his books or financial records but only
on whether a taxpayer is being subject to examination.
A LN is issued only for the purpose of notifying the
taxpayer that a discrepancy is found based on the BIRs
RELIEF System and nothing more.
Revenue Memorandum Order (RMO) No. 32-2005
states that in case the discrepancies shown in the LN
remained unresolved within 120 days from issuance of
the LN, the revenue officer shall recommend the
issuance of a LOA to replace the LN. Due process
requires that the revenue officer should secure first a
LOA before proceeding with the further examination
and assessment of a taxpayer. The Court cannot
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
convert or treat the LN into the LOA required under
the law. If no LOA is secured, the assessment on the
basis of a LN is void. (Medicard Philippines v.
Commissioner of Internal Revenue, G.R. No.
222743, April 5, 2017)
Q. (1) What is the consequence if a FAN does not
contain a definite due date for payment by the
taxpayer? (2) Can the reckoning date of the
accrual of the penalties and surcharges be
considered as the due date for payment?
(1) A Final Assessment Notice that does not contain a
definite due date for payment by the taxpayer is void.
(2) The reckoning date of the accrual of penalties and
surcharges cannot be considered as the due date for
payment of tax liabilities In the absence of an actual
due date, a FAN does not contain a definite and actual
demand to pay. (Commissioner of Internal Revenue
v. Fitness by Design, Inc., G.R. No. 215957,
November 9, 2016)
Q. The taxpayer filed its income tax return in 1995.
In 2014, the BIR issued a final assessment notice.
The taxpayer argued prescription as its defense.
The BIR, on the other hand, contends that the
assessment is based on fraud and thus the period
of assessment is 10 years, not 3 years. Is the BIR
correct?
No Fraud is a question of fact that should be alleged
and duly proven. To avail of the 10-year period to
assess, the BIR should show that the facts upon which
the fraud is based is communicated to the taxpayer.
The BIR must include the basis for its allegations of
fraud in the assessment notice. (Commissioner of
Internal Revenue v. Fitness by Design, Inc., G.R.
No. 215957, November 9, 2016)
Q. The BIRs audit investigation revealed that
there were undeclared VATable sales more than
30% of that declared in a taxpayers VAT returns.
The BIR concluded that there was prima facie
evidence of a false return warranting the
application of the ten (10) year prescriptive period
to assess. The taxpayer argues that the BIRs right
to assess had already prescribed considering that
the 3-year period had lapsed and that the CIR
should substantiate with clear and convincing
evidence its claim that it filed a false return for the
10-year period to apply. Is the taxpayer correct?
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 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
No. A mere showing that the returns filed by the
taxpayer were false, notwithstanding the absence of
intent to defraud, is sufficient to warrant the
application of the ten (10) year prescriptive period
under Section 222 of the NIRC.
Under Section 248(B) of the NIRC, there is a prima facie
evidence of a false return if there is a substantial
underdeclaration of taxable sales, receipt or income.
The failure to report sales, receipts or income in an
amount exceeding 30% what is declared in the returns
constitute substantial underdeclaration.
A prima facie evidence is one which that will establish a
fact or sustain a judgment unless contradictory
evidence is produced. In other words, when there is a
showing that a taxpayer has substantially underdeclared
its sales, receipt or income, there is a presumption that
it has filed a false return. As such, the CIR need not
immediately present evidence to support the falsity of
the return, unless the taxpayer fails to overcome the
presumption against it. (Commissioner of Internal
Revenue v. Asalus Corporation, G.R. No. 221590,
February 22, 2017)
HOWEVER: To warrant the application of the 10-
year prescriptive period, the filing of a false return must
be intentional and not due to honest mistake. Entry of
wrong information due to mistake, carelessness, or
ignorance, without intent to evade tax, does not
constitute a false return. (Philippine Daily Inquirer
v. Commissioner of Internal Revenue, G.R. No.
213943, March 22, 2017)
Q. (1) What is the effect of non-compliance with
the requirements of a valid waiver per RMO No.
20-90 and RDAO 05-01? (2) Is the taxpayer
estopped from questioning the validity of a
waiver?
(1) A waiver in order to be valid must comply with the
requirements per RMO No. 20-90 and RDAO 05-01.
A defective waiver does not extend the 3-year
prescriptive period and thus any assessment issued
beyond said period is void.
(2) No. The taxpayer is not estopped from questioning
the validity of a waiver. The BIR cannot shift the blame
to the taxpayer for issuing defective waivers. The BIR
cannot hide behind the doctrine of estoppel to cover
its failure to comply with RMO 20-90 and RDAO 05-
01 which were issued by the BIR itself. A waiver of the
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
statute of limitations is a derogation of the taxpayer's
right to security against prolonged and unscrupulous
investigations and thus, it must be carefully and strictly
construed. (Philippine Daily Inquirer v.
Commissioner of Internal Revenue, G.R. No.
213943, March 22, 2017)
BUT NOTE: In the above-cited case, the CIR failed
to provide the office accepting the 1st and 2nd waivers
with their respective third copies. Further, the third
waiver was not executed in three copies. Thus, the
waivers were defective. Note that there was no finding
that the taxpayer was equally at fault, thus, the case of
Commissioner of Internal Revenue v. Next
Mobile, G.R. No. 212825, December 7, 2015
applying the in pari delicto doctrine does not apply.
Q. Can the BIR collect deficiency taxes from a
corporation subject of rehabilitation proceedings
and where a Commencement Order has already
been issued?
No. Section 16 of RA 10142 or the Financial
Rehabilitation and Insolvency Act (FRIA) provides
that upon issuance of a Commencement Order which
includes a Stay or Suspension Order all actions or
proceedings, in court or otherwise, for the
enforcement of claims against a distressed company
shall be suspended.
Claims includes all claims of the government,
whether national or local, including taxes, tariffs and
customs duties. Creditors, including the government,
must ventilate their claims before the rehabilitation.
Thus, it is improper for the BIR to collect, or even
attempt to collect deficiency taxes outside of the
rehabilitation proceedings in willful disregard of a
Commencement Order lawfully issued by a
Rehabilitation Court. (Bureau of Internal Revenue v.
Lepanto Ceramics, G.R. No. 224764, April 24,
2017)
Q. When is an application for tax abatement
deemed approved?
An application for tax abatement is deemed approved
only upon issuance of a termination letter by the BIR.
The last step in the abatement process is the issuance
of the termination letter. The presentation of the
termination letter is essential as it proves that the
taxpayers application for tax abatement has been
approved. Thus, without a termination letter, a tax
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 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
assessment cannot be considered closed or terminated.
(Commissioner of Internal Revenue v. Asiatrust
Development Bank, G.R. Nos. 201680-81, April 19,
2017)
Q. A taxpayer filed its administrative claim and
judicial claim for refund of tax erroneously or
illegally collected only 13 days apart. The BIR
argues that this does not satisfy the requirement of
exhaustion of administrative remedies. Is the BIR
correct?
No. Section 229 of the Tax Code states that judicial
claims for refund of tax erroneously or illegally
collected must be filed within 2 years from the date of
payment of the tax or penalty providing further that
the same may not be maintained until a claim for
refund or credit has been duly filed with the CIR.
Section 229 does not mean that the taxpayer must
await the final resolution of its administrative claim.
Section 229 only requires that the administrative claim
should first be filed. The purpose of the administrative
claim is to serve as notice of warning to the CIR that
court action would follow unless the tax erroneously or
illegally collected is refunded. (Commissioner of
Internal Revenue v. Goodyear Philippines, G.R.
No. 216130, August 3, 2016)
Q. A taxpayer-bank extended a foreign currency
denominated loan to a company. As agreed, the
company withheld and paid to the BIR the final
withholding tax on taxpayer-banks interest
income on the said loan. However, the taxpayer-
bank mistakenly remitted the same amounts to
the BIR on April 25, 2001. Thus, the taxpayer-bank
filed its administrative claim for refund on
December 27, 2002 while the judicial claim was
filed only on September 10, 2003. The taxpayer-
bank argues that the two-year prescriptive period
of its claim for refund should be reckoned not from
April 25, 2001, when it remitted the tax to the BIR
but at the time it filed its Final Adjustment Return
or Annual Income Tax Return for the taxable year
of 2001, or in April 2002, as it was only at this time
that its right to refund was ascertained. Is the
taxpayer-bank correct?
No. In claims for refund of tax erroneously or illegally
collected, both the administrative and judicial claims
for refund should be filed within the two-year
prescriptive period. The two-year prescriptive period is
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
counted from the date of the payment of the tax or
penalty.
In this case, the tax involved in the case is the final
withholding tax on the taxpayers interest income on
its foreign currency denominated loan. Final
withholding taxes are considered as full and final
payment of the income tax due and thus are not subject
to any adjustments. Thus, the two-year prescriptive
period shall commence to run from the time the refund
is ascertained, i.e. date such tax was paid, and not upon
discovery of the taxpayer of the erroneous or excessive
payment of taxes. (Metropolitan Bank and Trust
Company v. Commissioner of Internal Revenue,
G.R. No. 182582, April 17, 2017)
Q. For taxpayers using the On-line Electronic
Documentary Stamp Metering Machine (DS
metering machine), what should be deemed the
date of payment of the DST for the purpose of
counting the two-year prescriptive period for filing
a claim for a refund or tax credit?
The date of payment of the DST when the
prescriptive period to file a claim for refund/credit
must commence shall be the date when the
documentary stamps are imprinted upon the
documents and not the date of purchase of
documentary stamps for loading or reloading on the
DS metering machine.
The payment of the DST and the filing of the DST
Declaration Return upon loading/reloading of the DS
Metering machine must not be considered as the date
of payment when the prescriptive period to file a
claim for refund/credit must commence. For DS
metering machine users, the payment of DST upon
loading/reloading is merely an advanced payment for
future application. The liability of the payment of DST
falls due only upon occurrence of the taxable
transaction. (Philippine Bank of Communications
v. Commissioner of Internal Revenue, G.R. No.
194065, June 20, 2016)
LOCAL GOVERNMENT TAXATION
Q. Uniwide conducted bsiness in buildings and
establishments constructed on parcels of land
covered by Transfer Certificates of Title (TCTs)
issued by the Registry of Deeds of Pasig City. In
the said TCTs, the location of the parcels of land
is indicated as being in Pasig. From 1989 to 1996,
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 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
Uniwide paid business and realty taxes, fees, and
other charges to the City of Pasig. However,
beginning 1997 and after receiving notice from the
Municipality of Cainta that the subject properties
were within its territorial jurisdiction, Uniwide no
longer paid local taxes to the City of Pasig. For
purposes of complying with local tax liabilities in
case of a boundary dispute between local
governments, to whom should the taxpayer pay its
local business tax and realty taxes?
The taxpayer should pay its local business tax to the
City of Pasig who has the apparent right to levy and
collect local business tax and realty taxes on the subject
properties on the basis of the TCTs. Under the Local
Government Code, local business taxes are payable for
every separate or distinct establishment or place where
business subject to the tax is conducted, which must
be paid by the person conduct the same. The situs of
taxation shall be paid to the local government where
such branch or sales outlet is located. For real property
taxes, collection is vested in the locality where the
property is situated. In determining the location for
purposes of identifying the local government entitled
to collect taxes, the taxpayer should follow the location
stated in the certificate of title until amended through
proper judicial proceedings. (Municipality of Cainta
v. City of Pasig and Uniwide, G.R. No. 176703,
June 28, 2017)
REAL PROPERTY TAXATION
Q. Does the exemption from real property taxes
given to cooperatives exclude real property leased
to other persons?
No. The Local Government Code exempts duly
registered cooperatives from payment of real property
taxes without distinction. Nothing in the law suggests
that real property tax exemption only applies when the
property is used by the cooperative itself. Thus, the
exemption from real property taxes given to
cooperatives applies regardless of whether or not the
land owned is leased. The instance that the real
property is leased to either an individual or corporation
is not a ground for withdrawal of tax exemption.
(Provincial Assessor of Agusan del Sur v. Filipinas
Palm Oil Plantation, G.R. No. 183416, October 5,
2016)
Q. A taxpayer is engaged in palm oil production.
The Local Assessor argues that, under the Local
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
Government Code, its road equipment and mini
haulers should be considered machinery directly
used by the taxpayer to meet the needs of its
operations and thus real property subject to real
property tax. The taxpayer, on the other hand,
contends that, under the Civil Code, they are
movables by nature. Is the taxpayer correct?
No. The characterization of machinery as real property
is governed by the Local Government Code and not
the Civil Code. In this case, the phrase pertaining to
physical facilities for production in the definition of
machinery in the Local Government Code is
comprehensive enough to include road equipment and
mini haulers as actually, directly, and exclusively used
by the taxpayer to meet the needs of its operations in
palm oil production. (Provincial Assessor of Agusan
del Sur v. Filipinas Palm Oil Plantation, G.R. No.
183416, October 5, 2016)
Q. A taxpayer argues that payment under protest
is not required before it could challenge the
authority of the local government to assess tax on
its tax exempt properties before the LBAA. Is the
taxpayer correct?
No. Settled is the rule that should the taxpayer/real
property owner question the excessiveness or
reasonableness of the assessment, the law directs that
the taxpayer should first pay the tax due before his
protest can be entertained.
A claim for exemption from the payment of real
property taxes does not question the assessors
authority to assess and collect such taxes, but pertains
to the reasonableness or correctness of the assessment
by the local assessor. Thus, payment under protest is
required. (National Power Corporation v. The
Provincial Treasurer of Benguet, G.R. No. 209303,
November 14, 2016)
Q. Does the filing of a Motion for Reconsideration
before the LBAA toll the 30-day period within
which to appeal before the CBAA?
No. Filing of a Motion for Reconsideration before the
Local Board of Assessment Appeals (LBAA) will not
toll the 30-day period within which to appeal before
the Central Board of Assessment Appeals (CBAA).
The fresh period rule in Neypes does not apply as the
appeal from a decision of the LBAA to the CBAA is
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 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
administrative in nature, not judicial. (National Power
Corporation v. The Provincial Treasurer of
Benguet, G.R. No. 209303, November 14, 2016)
TARIFF AND CUSTOMS DUTIES
Q. Can a forfeiture proceeding be instituted on the
basis of a certification issued by the Philippine
Coast Guard that the vessel did not log in or
submitted any Masters Oath of Safe Departure?
No. There must be a prior showing of probable cause
before any proceeding for seizure and/or forfeiture is
instituted. The determination must be made by the
BOC who ordered the forfeiture. Once established, the
burden of proof is shifted to the claimant.
A forfeiture proceeding cannot be instituted on the
basis of a certification issued by the Philippine Coast
Guard that the vessel did not log in or submitted any
Masters Oath of Safe Departure. (Commissioner of
Customs v. William Singson and Triton Shipping
Corporation, G.R. No. 181007, November 21, 2016)
Q. Does the Commissioner of Customs have the
power to interpret the provisions of the CMTA?
Yes. The Commissioner of Customs now has the
exclusive and original jurisdiction to interpret the
provisions of the CMTA in collaboration with other
relevant government agencies, subject to review by the
Secretary of Finance. (Section 201, CMTA)
Q. What are de minimis importations?
This pertains to imported goods with an FOB or FCA
value of ten thousand pesos (10,000.00) or below,
which are exempt from taxes and duties. (Section 423,
CMTA)
Q. (1) Define returning resident (2) What are the
conditions for tax and duty exemption of the
personal and household effects of returning
residents? (3) Is there an additional tax and duty
exemption granted to returning Overseas Filipino
Workers (OFWs)?
(1) Returning residents shall refer to nationals who
have stayed in a foreign country for a period of at least
six (6) months.
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
(2) Returning residents shall have tax and duty
exemption on personal and household effects
provided that:
a. It shall not be in commercial quantities;
b. It is not intended for barter, sale or for hire;
and
c. Limited to the FCA or FOB value of:
i. Three hundred fifty thousand pesos
(350,000.00) for those who have stayed in
a foreign country for at least ten (10) years
and have not availed of this privilege within
ten (10) years prior to returning resident's
arrival;
ii. Two hundred fifty thousand pesos
(250,000.00) for those who have stayed in
a foreign country for a period of at least
five (5) but not more than ten (10) years
and have not availed of this privilege within
five (5) years prior to returning resident's
arrival; or
iii. One hundred fifty thousand pesos
(150,000.00) for those who have stayed in
a foreign country for a period of less than
five (5) years and have not availed of this
privilege within six (6) months prior to
returning resident's arrival.
NOTE: Any amount in excess of the above-
stated thresholds shall be subject to the
corresponding duties and taxes.
(3) Yes. Returning Overseas Filipino Workers (OPWs)
shall have the privilege to bring in, tax and duty-free,
home appliances and other durables, limited to one of
every kind once in a given calendar year accompanying
them on their return, or arriving within a reasonable
time which, barring unforeseen and fortuitous events,
in no case shall exceed sixty (60) days after every
returning OFW's return upon presentation of their
original passport at the port of entry. (Section 800,
CMTA)
NOTE: Any amount in excess of FCA value of one
hundred fifty thousand pesos (150,000.00) for
personal and household effects or of the number of
duty-free appliances shall be subject to the
corresponding taxes and duties
Q. What are the conditions in order to avail of the
tax and duty exemption on balikbayan boxes?
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 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
Residents of the Philippines, OFWs or other Filipinos
while residing abroad or upon their return to the
Philippines shall be allowed to bring in or send to their
families or relatives in the Philippines balikbayan boxes
which shall be exempt from applicable duties and taxes
provided that:
1. The balikbayan boxes shall contain personal
and household effects only and shall neither be
in commercial quantities nor intended for
barter, sale or for hire;
2. The FCA value of which shall not exceed one
hundred fifty thousand pesos (150,000.00);
and
3. That residents of the Philippines, OFWs or
other Filipinos can only avail of this privilege
up to three (3) times in a calendar year.
(Section 800, CMTA)
NOTE: Any amount in excess of the allowable
non-dutiable value shall be subject to the
applicable duties and taxes;
Q. What is a Goods Declaration?
All goods declaration for consumption shall be cleared
through a formal entry process except for the
following goods which shall be cleared through an
informal entry process, namely:
1. Goods of a commercial nature with Free on
Board (FOB) or Free Carrier At (FCA) value
of less than fifty thousand pesos (50,000.00);
and
2. Personal and household effects or goods, not
in commercial quantity, imported in a
passengers baggage or mail. (Section 402,
CMTA).
The Goods declaration must be lodged within fifteen
(15) days from the date of discharge of the last package
from the vessel or aircraft. The period to file the goods
declaration may, upon request, be extended on valid
grounds for another fifteen (15) days. (Section 407,
CMTA)
Q. What is a Provisional Goods Declaration?
If, at the time of importation, the importer does not
have all the documents necessary to complete the
Goods Declaration, the importer shall file a
Provisional Goods Declaration.
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
The importer must likewise execute an undertaking to
complete the information or to submit the supporting
documents within 45 days from the filing of the
provisional goods declaration. For valid reasons, the
period may be extended for another 45 days. To
release the goods tentatively, the importer must post a
security or bond equivalent to the amount ascertained
to be the duties and taxes due. (Section 403, CMTA)
The duties and taxes initially assessed shall be deemed
tentative pending final readjustment and submission of
the additional information or documentation
necessary to complete the provisional goods
declaration. (Section 426, CMTA)
Q. What is the prescriptive period for any action or
claim questioning the propriety of the entry and
settlement of duties pertaining to a particular
shipment?
In the absence of fraud and when the goods have been
finally assessed and released, the assessment shall be
conclusive upon all parties three (3) years from the date
of final payment of duties and taxes, or upon the
completion of the post clearance audit. (Section 430,
CMTA)
The Bureau of Customs may conduct a post-clearance
audit within 3 years from the date of final payment of
duties and taxes or customs clearance, as the case may
be. (Section 1000, CMTA)
BUT NOTE: In Pilipinas Shell Petroleum
Corporation v. Commissioner of Customs, G.R.
No. 195876, December 5, 2016 and in Pilipinas Shell
Petroleum Corporation v. Commissioner of
Customs, G.R. No. 195876, June 19, 2017 the
Supreme Court mentioned a 1-year prescriptive period.
That is based on the former Section 1603 of the Tariff
and Customs Code (even prior to its most recent
amendment).
Q. What is the prescriptive period for a claim for
refund of customs duties?
All claims and application for refund of duties and
taxes shall be made in writing and filed with the Bureau
within twelve (12) months from the date of payment
of duties and taxes. (Section 913, CMTA)
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 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES

BUT NOTE: The filing of claims for refund of 2. When the
national internal revenue taxes shall be governed by the discrepancy in duty
provisions provided under the NIRC of 1997 as and tax to be paid
amended. between what is
legally determined
Q. Define misdeclaration, misclassification and what is declared
and undervaluation in the Goods Declaration. is more than ten
percent (10%)
They are defined as follows: 3. When the
discrepancy in duty
Misdeclaration Wrong declaration of quantity, and tax to be paid
quality, description, weight, or between what is
measurement of the goods legally determined
Misclassification Insufficient or wrong and what is declared
description of the goods or use is more than thirty
of wrong tariff heading percent (30%)
Undervaluation There is undervaluation when: 4. When the
(a) the declared value fails to misdeclaration,
disclose in frill the price misclassification or
actually paid or payable or any undervaluation is
dutiable adjustment to the price intentional or
actually paid or payable; or (b) fraudulent, such as
when an incorrect valuation when a false or
method is used or the valuation altered document is
rules are not properly submitted or when
observed. (Section 1400, false statements or
CMTA) information are
knowingly made
Q. What are the rules in case of misdeclaration,
misclassification or undervaluation in the Goods
Declaration?
Q. What are the grounds in order for imported
The rules are as follows: goods to be deemed abandoned?
250% surcharge of the
duty and tax due is
imposed
The discrepancy shall
constitute a prima facie
evidence of fraud.
500% of the duty and tax
due and that the goods
shall be subject to
seizure regardless of the
amount of the
discrepancy without
prejudice to the
application of fines or
penalties against the
importer and other
person or persons who
willfully participated in
the fraudulent act.
(Section 1400, CMTA)

1. When the No surcharge imposed Imported goods are deemed abandoned under the
discrepancy in duty is following circumstances:
less than ten percent
(10%), or when the 1. When the owner, importer, or consignee of the
declared tariff imported goods expressly signifies in writing to
heading is rejected in the District Collector the intention to abandon
a formal customs the same; or
dispute settlement 2. When the owner, importer, consignee, or
process involving interested party after due notice, falls to file the
difficult or highly goods declaration 15 days from notice of
technical question of discharge of the last package from the vessel or
tariff classification, aircraft (extendible for another 15 days on valid
or when the tariff grounds); or
classification 3. Having filed such goods declaration, the
declaration relied on owner, importer, consignee or interested party
an official after due notice, fails to pay the assessed duties,
government ruling. taxes and other charges thereon, or, if the
regulated goods failed to secure the necessary
Page 12 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
goods declaration or export declaration,
clearances, licenses, and any other
requirements, prior to importation, within
fifteen (15) days from the date of final
assessment; or
4. Having paid the assessed duties, taxes and
other charges, the owner, importer or
consignee or interested party after due notice,
fails to claim the goods within thirty (30) days
from payment; or
5. When the owner or importer fails to claim
goods in customs bonded warehouses within
the prescribed period. (Section 1129, CMTA)
JUDICIAL REMEDIES
Q. Does the Secretary of Justice have jurisdiction
to review disputed assessments involving
government owned and controlled corporations?
The Secretary of Justice does not have jurisdiction to
review disputed assessments. The prevailing rule is that
it is the CTA that has the exclusive appellate
jurisdiction to review, among others, the decisions of
the Commissioner of Internal Revenue in cases
involving disputed assessments. (Commissioner of
Internal Revenue v. Secretary of Justice and
Philippine Amusement and Gaming Corporation,
G.R. No. 177387, November 9, 2016)
Q. Does the CTA have exclusive jurisdiction to
determine the constitutionality or validity of tax
laws, rules and regulations, and other
administrative issuances of the CIR?
Yes. The CTA has exclusive jurisdiction to determine
the constitutionality or validity of tax laws, rules and
regulations, and other administrative issuances of the
Commissioner of Internal Revenue.
The CTA has not only jurisdiction to pass upon the
constitutionality or validity of a tax law or regulation
when raised by the taxpayer as a defense in disputing
or contesting an assessment or claiming a refund, but
also jurisdiction to take cognizance of cases directly
challenging the constitutionality or validity of a tax law
or regulation or administrative issuance (revenue
orders, revenue memorandum circulars, rulings).
The law intends the CTA to have exclusive jurisdiction
to resolve all tax problems. Petitions for writs of
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
certiorari against the acts and omissions of the said
quasi-judicial agencies should, thus, be filed before the
CTA. Except for local tax cases, actions directly
challenging the constitutionality or validity of a tax law
or regulation or administrative issuance may be filed
directly before the CTA.
With respect to administrative issuances (revenue
orders, revenue memorandum circulars, or rulings),
these are issued by the Commissioner under its power
to make rulings or opinions in connection with the
implementation of the provisions of internal revenue
laws. Tax rulings, on the other hand, are official
positions of the Bureau on inquiries of taxpayers who
request clarification on certain provisions of the
National Internal Revenue Code, other tax laws, or
their implementing regulations. Hence, the
determination of the validity of these issuances clearly
falls within the exclusive appellate jurisdiction of the
CTA, subject to prior review by the Secretary of
Finance. (Banco de Oro v. Republic, G.R. No.
198756, August 16, 2016)
Q. Can a taxpayer directly question a tax ruling
with the Supreme Court?
No. Rulings of the CIR (including Revenue
Memorandum Circulars) are appealable to the Court of
Tax Appeals, and not to any other courts. If a remedy
in the administrative machinery can still be resorted to,
then such remedy must first be exhausted before the
courts power of judicial review can be sought. In
questioning the validity of a Revenue Memorandum
Circular, taxpayers should not resort directly to the
Supreme Court. Taxpayers should comply with the
doctrine of administrative remedies and the rule on
hierarchy of courts. (Bloomberry Resorts and
Hotels v. Bureau of Internal Revenue, G.R. No.
212530, August 10, 2016)
Interpretative rulings of the Bureau of Internal
Revenue are reviewable by the Secretary of Finance.
However, in one case, the Supreme Court has held that
because of special circumstances - namely: the question
involved is purely legal; the urgency of judicial
intervention given impending maturity of the PEACe
Bonds; and the futility of an appeal to the Secretary of
Finance as the latter appeared to have adopted the
challenged Bureau of Internal Revenue rulings - there
was no need to exhaust all administrative remedies
before seeking judicial relief directly with the Supreme
Page 13 of 14
 QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
Court. (Banco de Oro v. Republic, G.R. No.
198756, August 16, 2016)
Q. The National Power Corporation (NPC)
received a notice of franchise tax delinquency
from the Provincial Government of Bataan. NPC
argued that it was exempt from the local franchise
tax. Eventually, the Provincial Government issued
Warrants of Levy on 14 properties owned by NPC
in Limay, Bataan. The same were likewise sold via
public auction where the Provincial Government
was the winning bidder. NPC filed a Petition for
declaration of nullity of foreclosure sale with
prayer for preliminary mandatory injunction with
the Regional Trial Court (RTC). The RTC
dismissed the same. NPC appealed to the Court of
Appeals (CA). The Provincial Government of
Bataan moved to dismiss the same for lack of
jurisdiction of the CA over the subject matter as
the suit was essentially a local tax case
questioning the validity of the imposition of the
local franchise tax. Is the Provincial Government
of Bataan correct?
Yes. The Court of Tax Appeals is vested with the
exclusive appellate jurisdiction over, among others,
appeals from the "decisions, orders or resolutions of
the Regional Trial Courts in local tax cases originally
decided or resolved by them in the exercise of their
original or appellate jurisdiction."
The case a quo is a local tax case that is within the
exclusive appellate jurisdiction of the Court of Tax
Appeals. Parenthetically, the case arose from the
dispute between Napocor and the Provincial
Government of Bataan over the purported franchise
tax delinquency of Napocor. Although the complaint
filed with the trial court is a Petition for declaration of
nullity of foreclosure sale with prayer for preliminary
mandatory injunction, the petition essentially assails
the correctness of the local franchise tax assessments
by the Provincial Government of Bataan. (Napocor v.
Provincial Government of Bataan, G.R. No.
180654, March 6, 2017)
Q. Does the CTA En Banc have jurisdiction to
take cognizance of a petition for annulment of
judgment to annul and set aside a final decision of
a CTA division ?
No. The Revised Rules of the CTA and even the Rules
of Court which apply suppletorily thereto provide for
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
no instance in which the en banc may reverse, annul or
void a final decision of a division. The Revised Rules of
the CTA provide for no instance of an annulment of
judgment at all. The Rules of Court are silent as to
whether a collegial court sitting en banc may annul a
final judgment of its own division.The silence of the
Rules may be attributed to the need to preserve the
principles that there can be no hierarchy within a
collegial court between its divisions and the en banc, and
that a court's judgment, once final, is immutable.
Further, a direct petition for annulment of a judgment
of the CTA to the Supreme Court, meanwhile, is
likewise unavailing, for the same reason that there is no
identical remedy with the High Court to annul a final
and executory judgment of the Court of Appeals. The
proper remedy of the taxpayer is to file a petition for
certiorari under Rule 65, which can be filed as an original
action with the Supreme Court and not before the
CTA En Banc. (Commissioner of Internal Revenue
v. Kepco Ilijan Corporation, G.R. No. 199422, June
21, 2016)
Q. May the requirement of a bond for the CTA to
suspend the collection of tax be dispensed with?
Yes. The requirement of the bond as a condition
precedent to suspension of collection applies only in
cases where the processes by which the collection
ought to be made by means thereof are carried out in
consonance with the law, not when the processes are
in plain violation of the law that they have to be
suspended for jeopardizing the interests of the
taxpayer.
The CTA should conduct a preliminary hearing to
ascertain and rule whether the bond may be dispensed
or reduced. The CTA should consider other factors
recognized by law towards suspending the collection
of the assessment, like whether or not the assessment
would jeopardize the interest of the taxpayer, or
whether the means adopted by the CIR in determining
the liability of the taxpayer was legal and valid.
(Tridharma Marketing Corporation v. Court of
Tax Appeals and Commissioner of Internal
Revenue, G.R. No. 215950, June 20, 2016)
***Nothing else follows***
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