Tax 2 Transcription VAT Donors Estate and Remedies Compilation Complete

TAXATION II
ATTY. RIZALINA LUMBERA
VALUE ADDED TAX (VAT)
- Value added on:

o sale of goods
o sale of service; and
o importation of goods
- Indirect tax
NOTE:
1. Sale of goods – must be in connection with trade or business

2. Sale of service – must be in connection with trade or business.
3. Importation of goods – may or may not be in connection with trade or business.
So even if you import for personal consumption pagdating ng goods sa Bureau of Customs (BOC) warehouse,
automatic VAT ang i-impose. And when you sell let us say nag-import ka, VAT ‘yun.
Whether kainin mo or ibenta mo ulit. Pag kinain mo, wala ka ng VAT, pero pag binenta mo, may VAT ulit, kasi
ang VAT ay each per transaction.
Bawat benta ng goods in the course of trade or business

Bawat benta ng service in the course of trade or business VAT is imposed
Bawat importation whether in the course of trade or business
12% - regular rate of tax imposed on the:

1. Gross selling price - in the case of goods;
2. Gross receipts - in the case of service; and
3. Total value used by the BOC in determining the tariff and customs duties including the excise
taxes in the case of importation. The BOC will determine the amount based on the historical data.
Kapag dumating ang goods sa Pilipinas, meron tayong tinatawag na dutiable value.
‘Yung BOC meron yan books, meron silang historical cost, meron silang dutiable value of goods.
So pag ang in-import mo electric fan hindi tinatanong kung anong brand kasi historically, ung ini-
import natin nakalista yan so alam nila ung valuation regardless of declared value. Kaya ung mga
importers nagde-declare ng value madalas undervaluation. So hindi pwedeng maging basehan
un.
 Dutiable value is the amount determined by the BOC as basis of 12 % VAT, including
excise taxes.
Excise taxes
- Imposed on importation and manufacture of goods.

- So pagdating ng goods mo dito, ‘yan mag-import BOC warehouse, automatic ini-
impose agad diyan tatlo:
1. Tariff and Customs Duties (TCD)
a. Regular
b. Special – these are the dumping duties, marking duties. If the
importation will damage local manufacturing industry, the DTI or
the Department of Agriculture will impose special tariff and customs
duties.
2. VAT
3. Excise Tax
Apostol | Badua | Barras | Cojamco | De Leon | Ico | Miranda | Pedernal | Vicente
1
TAXATION II
So tatlo agad. Posibleng apat, dalawang klase ng TCD, VAT and excise tax unless the law
exempts. Automatic yan.
So pag dumating ang goods hindi ka nagbayad ng tariff and customs duties, ng VAT, ang goods
mananatili sa warehouse, hindi mo mailalabas yan. Hindi mo makikita.
If you want to protest or question the tariff and customs duties, the VAT and everything else,
you pay under protest. Without payment, the goods will remain.
So ikaw na importer because you need the return of your value of money used in the
importation, magbayad ka.
NOTE: Only after payment will the goods be allowed exit from the BOC warehouse.
Kaya diyan mabilisan. Kung ang income tax isang beses lang binabayaran sa isang taon, dito
bawat importation bayad ka. And the assumption is you do not import for personal
consumption, very limited yun. You import for trade or business but it doesn’t mean that VAT
will not be imposed if the goods are imported for your personal consumption. Whether trade
or business or not, VAT will be imposed.
Goods
- Tangible and intangible objects which are capable of pecuniary estimation. Even real properties are
considered goods.
Sale
- Transfer of ownership with payment of compensation.
Transactions Deemed Sale (TDS)

- There is no sale to speak of but the goods are sold and VAT is imposed.
1. Transfer, use or consumption not in the course of business of goods or properties originally intended
for sale or for use in the course of business;
2. Distribution or transfer to shareholders or investors as share in the profits of the VAT registered
persons;
3. Distribution or transfer to creditors in payment of debt;
4. Consignment of goods if actual sale is not made within sixty (60) days following the date such goods
were consigned; and
5. Retirement from or cessation of business, with respect to inventories of taxable goods existing as of
such retirement or cessation.
Sale of goods, may seller, may buyer. Ang pagbebenta ni seller must be in the course of business.
- VAT is business tax so ‘pag ikaw ay empleyado lang, wala ka niyan.

- Kung wala kang business, wala ka niyan. Taga-bili ka lang, tawag sa iyo consumer so hindi ka nagi-
impose ng VAT kasi ikaw ay taga-kain.
- Pero kung ikaw ay taga-kain at ang binilhan mo ay engaged sa trade or business ay di ‘yung
nagbebenta sa’yo ay maglalagay 12% tax added to the value.
Take the case of McDo. Si seller nagbenta kay buyer, sabi sa TDS, walang sale, walang bayaran.
1. Tansfer, use or consumption not in the course of business of goods or properties originally intended
for sale or for use in the course of business.
2
TAXATION II
Ikaw si seller may-ari ka ng McDo, nagbenta ka ng burger P100 each. When is it deemed sold when
there is no sale? Kunwari, Mr. DL, may-ari ka ng Mcdo, all the burgers are intended for sale to
customers. Nagutom ka, kinain mo.
o Sold, 12% VAT. Nakalista sa sales mo nagbenta ka ng burger kahit wala kang binayad.
o Bakit?
 You consumed the burger originally intended for sale.
2. In payment of creditors.
Mr. Pokerface may utang ka dito 1 Million ginamit mo sa prangkisa mo ng McDo. Wala kang pambayad,
interest 10%, 1.1 million. Due date arrives wala kang 1.1 million. So you told the creditor, can you just
eat McDo for 1.1 million? Kasi sayang kesa wala kang matanggap na pera i-consume natin. Lahat ng
Mcdo burgers na kinain mo in payment of that loan.
o Deemed sold by McDo
3. In payment of investors (same with in payment of creditors)
May nag-invest sa business mo ng McDo. Wala kang pambayad na return na cash. Anong gagawin mo?
Pwede ho ba na lahat ng burgers ng Mcdo kainin na lang ninyo?
o So everyday dadating siya sa McDo, 1 burger, 1 burger, nililista yun ng cash register as if may
natanggap na salapi because for purposes of sales, that is considered sold and that is TDS.
That is the meaning of it.
4. Consignment of goods not sold within the agreed date of consignment or 60 days after date of
consignment.
‘Yung bakery, ikaw mautak ka, franchise. ‘Pag ikaw ay bumili ng supplies puhunan agad yun so sabi ko
‘di ako bibili ng tinapay pwede ho ba bakery ikaw magconsign? Mautak ako eh, nabubuhay ang negosyo
ko nang di naglalabas ng salapi. Consignment kung ilan madeliver mo ilan mabenta ko, sold. Eh ‘di ko
nabebenta 60 days na, may amag na ‘di pa nabebenta.
o So ‘pag ‘di nabenta si tinapay from date of consignment to the end of consignment, all of
those tinapays are deemed sold from the point of view of the consignor.
NOTE: If McDo sells it eventually and that’s another VAT, actual sale ‘yun.
5. Closure or cessation of business as far as all the stocks and inventory are concerned.
Sabi mo paggising mo pagod na pagod na ako. Ayoko na ng McDo, ayoko na magbusiness. Isara na
ang McDo. Noong sinara mo, meron laman ang ref, 1000 pieces patty, meron ka pang mayonnaise,
ketchup, tinapay, mantika, may French fries ka pa, nandun sa ref lahat. Ang gagawin ng BIR
bibilangin. Ilan burgers ang nagagawa ng patty na yan?
o Kapag sinara mo ang business mo lahat ng yan deemed sold kahit hindi nabenta. Yan ang
tinatawag na TDS.
Why does the law provide for these transactions deemed sale?
- Kasi sa business, these are the easiest ways or means of evading payment of tax by reducing the gross
sales by making it appear that all the goods are consigned, that all the goods have been consumed
pero walang ibinayad. Pwede yan, walang issue. Kung gusto niyong ipakain ng ipakain ng libre okay
fine. But for purposes of VAT and income tax hindi yan magbabago. For purposes of VAT, the burgers
sold may corresponding side ‘yan ng income tax kasi part ka ng gross sales niyo which will form part
of the gross income for income tax purposes. So lagi yan magkaganyan. Bawat benta niyo may
corresponding income tax side. Remember, ‘yung income tax,’ yung net income tax.
NOTE: Gross income – allowable deductions = Taxable net income x Rate
Lahat ng benta niyo dito ito ‘yun. Lahat ng importations niyo will form part of your inventory which will be
sold to the public while you are engaged in trade or business. That is why ‘pag tinignan niyo yang VAT return,
3
TAXATION II
monthly, ‘di ba ang nakadeclare lang dito VATable sales, receipts, ‘yan ‘yung nakabreak down. Sinusulat mo
kada end of the month kung magkano gross sales or gross receipts at magkano yung output VAT.
Ano mga entries dito? Of course your TIN number pinakaimportante kasi yan ay unique.
TIN Number
- Ang BIR computerized, pag in-input lang ang TIN lalabas lahat ng binenta at binili mo because of the
official receipt structure.
How is that captured?
o Whenever you buy or whenever you sell, there’s a withholding tax. That is the beauty of
withholding tax system because the withholding tax system parang record yan, binayaran yan sa
inyo, ti-nong kayo, and number 1 requirement sinong nagtong at sinong tinong?
o ‘Yun ay nakalagay agad using the TIN number. So isang pindutan lang ng BIR lahat ng
transactions mo na sinubject sa withholding tax lalabas agad.
o ‘Pag ikaw naman ay nagbenta siyempre meron ‘yun counterpart na buyer.
o ‘Yung buyer withholding tax agent. Pag pinindot ni BIR yang si TIN number ni seller o ni buyer,
magkakakitaan.
 That is what we call cross matching.
- Kaya itong form na ito hindi pwedeng baguhin kasi sa BIR computer system kina-capture agad yan.
The system captures the data and it goes in the fields. Meron silang sales, transactions, purchase
transactions so kitang-kita.
- Now this one, VAT ang unang nakalagay diyan ay gross receipts per month ito so lahat ng sales mo sa
isang buwan nakalagay, sale of goods, sale of service. Meron nakalagay dito zero-rated, exempt
transactions.
- ‘Dun muna tayo sa simpleng sales, so pag ikaw ay nagbenta ikaw ay nag-inpose ng 12%, ang tawag sa
12% ay output. Pag ikaw ay bumili at nagbayad ka ng 12% ang tawag doon ay input.
INPUT and OUTPUT Tax
Input Output
refers to the value added tax paid on purchases refers to the value added tax paid on sales
Take the case of McDo, Ako ang may-ari ng McDo, bumili kayo lahat ng burgers, kinain niyo.
 Ang tawag ko sa P12.00 = output

 Ang tawag niyo sa P12.00 = input
NOTE: Parehong P12.00 ang pinag-uusapan. Same 12%. We call it differently. I call it output, you call it
inpupt.
FORMULA IN VAT = OUTPUT – INPUT
 If it results to excess output = VAT payable (Bayaran mo sa BIR)

 If it results in excess input = Ask for refund or credit (Sobra ang binayaran mo)
NOTE: Sa isang buwan, grupohin mo dito lahat ng sales, grupohin mo ‘yung purchases, kunin mo ‘yung
component ng 12% = ang tawag mo dito ay OUTPUT
NOTE: Kunin mo ‘yung component ng 12% sa pinamili mo = ang tawag doon ay INPUT
OUTPUT LESS INPUT
4
TAXATION II
A. If you have more sales than purchases, may tubo ka.
 Pay income tax

 Pay VAT
NOTE: If you result in excess ouput = marami kang nabenta kaysa pinamili kaya ikaw ay tumubo. Dahil
tumubo ka, ang gobyerno dapat kumita sa’yo. Dalawang klase:
1. VAT payable; and

2. Income Tax
B. If you have more purchases than sales, lugi ka. If you have more input than output, lugi ka.. Dahil lugi ka,
marami kang binayad na 12%, sobra ang binayad mo.
 Refund or credit.
 No income = No income tax due for that particular period.
 To elucidate: Kapag ikaw ay maraming binili kaysa binenta, ang tawag sa’yo lugi o wala. Sobra ang
binayad mong 12% kaya sabi ng gobyerno, “Kawawa ka naman.” Parefund tayo or pacredit ‘nung
excess input VAT. At the same time, “I will not ask you to pay income tax because lugi ka, wala ka
ngang income.”
Every month, you do it this way. Include gross receipts, gross sales, VAT paid. Suma total, sa dulo; either VAT
payable or excess input.
 ‘Yan monthly sinasubmit. Ibig sabihin, BIR is monthly monitoring your sales (pati quarterly returns).
A. Monthly: January, February, March.
B. Quarterly: March (covering January, February, and March), June (covering April, May and June). Hanggang
sa dulo ng taon. Ang counterpart niya sa income tax kapag kinompare niyo ‘yan ang returns. If you’re engaged
in trade or business, ito ‘yung VAT returns mo:
VAT (Monthly) Engaged in Trade or

Business
January
February
Q1 March Q1 This should match
April
May
Q2 June Q2 This should match
July
August
Q3 September Q3 This should match
October
November
Q4 December Q4 This should match
You have 12 months. If you are engaged in trade or business, you are subject to VAT.
Dito, tao or korporasyon, ang returns mo ay quarterly (Q1, Q2, Q3, and the final consolidated return including
Q4).
5
TAXATION II
NOTE: If there is a discrepancy in the gross sales that you declared, either here or there, you are doing
something wrong. That is why BIR knows exactly how much income tax due will be paid by you even if you
have not filed the final consolidated return which is filed:
 If calendar year = April 15, the following year.

 If fiscal year = On the 15th of the 4th month following the close of the fiscal year.
So you can see the connection between the two. Lahat ng benta mo, bawat benta in the course of trade or
business will have an effect on your income tax kasi your income is derived from trade or business.
What happens to you if you are just a plain consumer (eg. Taga-kain sa restaurant, taga-inom ng kape sa McDo
o Starbucks, taga-bili ng libro, taga-bili ng damit)?
 We buy consumer goods from those who are engaged in trade or business. And they pay the
additional 12%. So what happens to your 12%? You have an input of 12%.
Uminom ka ng kape sa Starbucks, P100.00. P112.00 babayaran mo. So sabi mo tuwang-tuwa ka, “May input VAT
ako na P12.00. Ang Starbucks may output na P12.00.” Sabi mo ngayon, “Pwede ba ako mag-output less input?”
Eh ‘di wala akong output less ang dami mong input = excess input. Pwede ba kayo?
 Hindi, the only taxpayers allowed to use this (output less input) are those engaged in trade or
business.
 Kung kayo taga-kain, o consumers lang, you bear the impact in full of the 12% VAT. That’s the rule.
Kaya ‘di ba, nagrereklamo tayo, “Ang taas-taas naman ng VAT na ‘yan.”
History of VAT:
 Dati ‘yan kasi 10%, sales tax. Noong unang panahon, sales tax ang tawag dyan tapos ginawang VAT na
10% tapos naging 12% ang increase.
 So kaya ‘yan tinatawag na sales tax dahil tax ‘yan habang nagbebenta ka.
 If you are not engaged in trade or business, you cannot impose the 12% tax added to the value.
 If you’re a buyer whether engaged in trade or business or not, you bear the burden of 12%. The only
difference is if you’re also selling goods, your input VAT will have importance.
McDo, ako. Bumili ka ng isa. Barras, bayad ka sa’kin ng P112.00. Kinain mo. Si P12.00, kinain mo.
 Wala nang effect sa’yo. Consumer ka lang eh.
Pero si Barras matalino, business-minded, alam niyang may nagugutom tuwing Tax 2. Every 5:00 pm bibili siya
ng McDonald’s. Bibili siya ng 40 na McDo, P112.00 each. So merong siyang input na P12.00. Eh dahil kayo, dahil
tinatamad kayong pumila doon, siya ngayon ang nagnenegosyo, bumili siya ng 40. Ang benta niya sa inyo
P150.00. Kayo naman dahil ayaw niyong pumila, bumili kayo kay Barras. Pero si Barras, registered dapat, in
trade or business.
 Kung wala siyang registration, hindi siya pwede niyan.
So si Barras, registered, engaged in trade or business. Buy and sell of McDonald’s burgers. Binebentahan ko kayo
P150.00. Bili ka P150.00. Ang 12% ng P150.00, P18.00. Bayad ka sa kanya, P150.00 + P18.00 = P168.00.
 Ang tawag ni Barras sa P18.00 ay output.

 Ang tawag niyo sa P18.00 ay input.
Kapag tiningnan natin si Barras, meron siyang output na P18 minus input niya ng P12.00, equal P6.00, excess
output tax. So pumunta si Barras sa BIR, nilagay niya sa form, gross sales ? VAT, P8.00. Input VAT P12.00, Output
VAT P18.00. P18.00 – P12.00 = P6.00.
6
TAXATION II
 Excess output VAT = bayad ng VAT.

 Pero kung kinain niya lang ‘yan, wala siyang output less input, hindi siya pwede magfill out ng form.
SALE OF SERVICE
Service
 Legitimate only.
 eg. accounting services, legal services, medical services, security agencies, secretarial work, any other
kind of service.
 as long as the sale is sold in the course of trade or business, VAT will be imposed
Saan iniimpose?
 Sa Gross Receipts. Parehas lang ‘yan. Parehong gross receipts. Parang apply, ‘yung isa green at ‘yung
isa red. Pero parehong ibig sabihin ‘dun sa consideration.
 Kapag sale of service = gross receipts ang tawag.
 Kapag sale of goods = gross selling price ang tawag.
Pero pareho lang ‘yan, ‘yung consideration. ‘Yung isa nga lang green apply at ‘yung isa red apple.
NOTE: In sale of service, wala tayong “Transactions deemed sale.” It’s either you rendered service or you did
not. Meron lang tayong “Transactions deemed sale” sa sale of goods because may mga goods na nacconsume
pero sa service wala ‘yan.
Recall income tax. The items of gross income under Sec. 32:
Sec. 32. Gross Income –
(A) General Definition. - Except when otherwise provided in this Title, gross income means all
income derived from whatever source, including (but not limited to) the following items:
1) Compensation for services in whatever form paid, including, but not limited to fees,
salaries, wages, commissions, and similar items;
2) Gross income derived from the conduct of trade or business or the exercise of a
profession;
xxx
1. Compensation for services in whatever form paid, including, but not limited to fees, salaries, wages,
commissions, and similar items;
 Tax imposed: income tax only.

 No VAT because ER-EE Relationship exists.
2. Gross income derived from the conduct of trade or business or the exercise of a profession
 Tax/es imposed:
a. Income Tax
b. VAT
 If you realized income because you are selling service from the exercise of your profession, meaning
there is no EER, you are still subject to income tax, but in addition we impose the VAT of 12%.
NOTE: But when you are rendering service and you get compensation because of an EER, ang tax
component mo lamang ay income tax without VAT. VAT pertains to sale of service in the course of trade
or business, exercise of profession without EER.
7
TAXATION II
Ako, si Lumbera, meron akong law office. Lahat ng kliyente ko na nagbabayad sa akin, sale of service ‘yun.
Everytime that I sell my legal services, I will impose 12% VAT in my clients.
 12%, ang tawag ng mga kliyente ko ay input tax,

 12% ang tawag ko ay output tax.
Kung ang kliyente ay korporasyon:
 Client coporation has input of 12%

 Client corporation selling goods, eh ‘di ‘yung input sa akin na 12% na binayad sa’kin iccredit niya sa
lahat ng sales niya.
Output-input, output-input, output-input.
NOTE: Receipts of restaurants show no VAT because it is exempt under Section 109 of NIRC.
Lahat ng resibo may breakdown. Iba ‘yung official receipts ng BIR. The one registered is the cash register and
we call it POS (Point of sales) machines.
 Nakasulat dyan kung magkano gross selling price, 12% VAT, 0% VAT, Exempt. Lahat dapat ‘yan nasa
resibo.
a. If VATable, ‘yung 12% nandun sa 12% VAT.
b. If zero-rated, meron ding entry doon.
c. If exempt from VAT, meron ding entry doon.
NOTE: Tandaan ninyo, ang resibo ang pinakaimportanteng proof ng sale and purchase. Without the
receipts, you cannot claim your input. This is the most important proof.
Kung ikaw Mr. Barras, ‘yung resibo mo ng pagbili ng McDonald’s na 40 pieces of hamburgers
 That is the best proof that you pair the output tax, the 12% VAT which you consider as your input
VAT.
Paano kung nagbenta sa inyo ng walang resibo si Mr. Barras.
- Input cannot be credited against output.

- Mr. Barras should be registered in trade or business and should be issuing official receipts showing
that you bought P150 pesos worth of hamburger + 12% VAT.
- Kapag si Mr. Barras binitbit lang si 40 hamburgers at ibinenta sa inyo ng walang resibo:
o Output of Mr. Barras = zero.
o Consumer’s ouput = zero
o Consumer’s input = P12.00.
Pero kapani-paniwala ba na si Mr. Barras ay hindi nag-issue ng resibo?
- Hindi. Kasi siya ay required ng BIR na mag-issue ng resibo sa bawat benta.
NOTE: Kapag siya ay hindi nag-issue ng resibo, criminal case ‘yan.
Pwede ba siyang hindi mag-issue ng resibo?
- Oo, kung ayaw mo.

- Ano ang effect sa kanyang VAT?
o Zero output, less input is equal to? Magpapacredit ka Mr. Barras. Swerte mo naman, tama ba?
8
TAXATION II
NOTE: Pero hindi kapani-paniwala na si Mr. Barras ay hindi nag-issue ng resibo. Anong ginawa niya sa
burger, kinain? This is the mindset of BIR.
If you were the BIR, looking at Mr. Barras, “’Wag mo na ngang ideclare ‘tong binenta ko.” Pwede, gawin mo, okay
lang. Pero siya, registered siya as a BIR registered engaged in trade or business. Meron siyang resibo. Titingnan
ng BIR “Uy, hindi ka nga nag-issue ng resibo ibig sabihin wala kang benta. Acceptable ‘yun. Pero nasaan ang
burger Mr. Barras?”
- Ang katapat ng resibo, burger. So ang bawat resibo minus. Wala kang resibo. Ibig sabihin ang burger
nandyan 40. Bigay mo nga sa’kin ang 40 mong burgers.
- If you cannot explain, meaning it’s not in your inventory or stocks, BIR says everything is sold. “Mr.
Barras, everything is sold and you cannot credit your output because you don’t have receipt.”
- Ano mangyayari sa input mo?
o No effect on you. Wala ring effect sa’yo. Lugi ka. Pero you have to declare everything as sold.
All the 40 burgers despite the fact na wala kang resibo because the burgers are missing.
Burgers are deemed sold + 12%. Ang 12% galing sa sarili mong bulsa. When this happens,
BIR will presume that everything is sold and there is nobody who will shoulder the 12% and
therefore you should shoulder the 12%.
Even real properties are considered as goods.
Here is a subdivision lot, real estate developer. Sinubdivide ko ang mga lote, at ibinebenta ko sa inyo.
- Under regular circumstances, all of the real properties are considered as goods.
- When I sold each one to consumers, it is a VATable transaction.
Kapag ibinenta ko ito, may CGT ba?
o None. Because ang CGT ay inaapply lang if ang asset mo ay capital. This one, the real
properties are ordinary assets.
NOTE: Therefore the first conclusion is: When you are selling capital assets, VAT is not imposed.
VAT and CGT cannot go together because the assets are different.
 For CGT = you are selling capital assets

 For VAT = you are selling ordinary assets.
NOTE:
 If real properties are capital assets, then CGT will be imposed but VAT will not be imposed.
 If the real property is an ordinary asset of the taxpayer (used in trade or business), then meron
kayong VAT na iimpose.
If you are engaged in trade or business, everytime na magbenta ka ng goods or service, impose 12%, seller
side you call it output, buyer side you call it input.
 If the buyer is a plain consumer, disregard the impact, you bear the burden of the 12% input VAT.
 If the buyer is also engaged in trade or business, then the input VAT can be credited against his
output VAT from all his sales. It goes that way all the time. All the gross sales per month shall be
declared in accordance with this manner which coincides as well with your income tax return as
quarterly returns because you are engaged in trade or business. So match an match ‘yan
On the expense side, remember, gross income less allowable deductions.
If you are engaged in trade or business, what are the deductions that you are entitled to claim?
9
TAXATION II
 Individual: PE, AE, Itemized or OSD

 Corporation: Itemized or OSD
‘Yung itemized: expenses, interests, taxes, losses, bad debts, depreciation, etc.
NOTE: Among them, ‘yung necessary business expenses, you are buying from suppliers and therefore when
your expenses are declared as expenses from gross income, those same expenses should also reflect the
corresponding input VAT or your purchases.
So si Mr. Barras engaged in retail of hamburgers, buy and sell of hamburgers. What are the expenses of Mr.
Barras for income tax purposes?
1. Gasoline;
2. Telephone Expense; and
3. Utilities
Nakareflect sa income tax side. Nakareflect as input VAT for VAT purposes because those are purchases
of Mr. Barras.
NOTE: ‘Pag ‘yan ay hindi nakita ng BIR na matching expense side from income tax at 12% input VAT,
patay kayo, parehas kayong iaassess: Deficiency income tax and deficiency VAT. Dapat ‘yan match,
income tax and VAT side. Kapag hindi nagmatch, tigok kayo sa BIR.
ZERO-RATED AND EXEMPT TRANSACTIONS
- Lahat ng resibo dapat may provision ng zero-rate at exempt.
NOTE: The sale of the books, is one of the exempt transactions under Section 109. We do not impose VAT.
Distinction between Zero-rated
1. Zero –rated:
- 100 x zero % = zero tax

- Applicable to:
1. Section 106 (sale of goods); and
2. Section 108 (sale of service)
NOTE: No zero-rated in importation.
2. Exempt:
- No VAT.
Zero-rated Exempt
Transaction not subject to VAT in all stages; Transaction not subject to VAT only at a particular
No VAT at all stages. stage as provided by law.
Input VAT is allowed to be credited against output Input VAT not allowed to be credited against output
VAT. VAT.
In zero-rated transactions, input VAT is allowed to be credited against output VAT
- Beneficial to the taxpayer, if the input tax is allowed to be credited.
What is the reason why the law allows the crediting of the input against the output in case of zero-rated?
10
TAXATION II
- Tignan ninyo yung zero-rated sa sale of goods (Sec 106) at yung sale of service (Sec 108).
o Sa sale of goods, number one sa listahan ay export sales.
 ‘Pag importation = 12%.
 ‘Pag palabas naman ng Pilipinas which is export = 0%, provided that the selling
price or the consideration for the export sale is coursed through the BSP or the
banking system of the Philippines.
What are the advantages of export sales over an import sale?
- Of course it is more advantages to the Philippines.

- When we do export sales, we promote locally manufactured products and we increase our foreign
currency reserves, as far as the BSP is concerned. So happy ang gobyerno.
o Importation is the opposite. There are two disadvantages:
1. Nagcocompete sa local products; and
2. Nababawasan ang ating foreign currency kasi ang binabayad natin ay palabas—
outward remittance. So lugi ang gobyerno.
Dahil sa zero-rated, tubo ang gobyerno, nagbibigay ito ng pabuya:
1. 0% ang export sales; AND
2. You will be allowed to credit all of your input taxes for all of your purchases in manufacturing the
product against your output.
That is a lot of benefit on the part of the exporter Filipino.
‘Pag importation, 12% VAT pero ‘yung iyong input pwedeng i-credit. Anong input mo sa importation? WALA.
- Bakit?
o Eh hindi naman pwede na ‘yung ibinayad mo sa ibang bansa ay i-credit dito eh.
NOTE: So unless you sell the imported items or you do something in the imported item which will incur
expenses, that is the only time that you will credit the input tax.
- ‘Pag import kasi, finished product. ‘Pag diniretso mo lang ng sale, ano lang ang input tax mo?
o Transportation costs, gasoline, kuryente, tubig.
o Kasi unless yung product na inimport mo ay imamanufacture mo into something different—
let us say yung bote ginawa mong ginto—meaning may import ka na raw materials, dun ka
na magkakaroon ng input VAT.
- Pero kung itong tubig inimport ko tapos diretso kong ibinenta sayo, anong input ko? Anong gastos ko
dyan?
o Transportation, kuryente, storage lang. Kasi product to product ang sale.
Kung bakit beneficial ang export sale, may input VAT ka sigurado. Kasi bago mo nagawa yung exported
product, marami kang raw materials na binili. So may input VAT ka.
- So ‘yung lahat ng input VAT na ‘yun, ‘pag binenta ko yung produkto ko sa labas ng bansa ay
mamumultiply sa 0%. So wala akong output.
- Lahat ng input ko na ‘yan ay pwede kong icredit sa aking domestic sales. Eh ‘di beneficial sa akin.
Zero-rated in sale of service
Ano naman ang zero-rated sa sale of service?
- ‘Diba sa sale of good meron tayong export sales, sale of gold bars to BSP, etc. Basta ang lahat ng yan
ang common denominator ay ang bayad ay foreign currency na pinadaan sa banking system.
So ano ang sale of service na zero-rated?
- Repacking ang perfect example.
11
TAXATION II
o ‘Diba pag nagpunta kayo ng hotel, maliit yung sabon, maliit yung asukal, yung toothpaste din.
May mga persons na ang business ay to repack. They don’t produce or manufacture the
product. Since dati the Philippines had the lowest labor cost among Asian countries, yung ibang
bansa dinadala dito yung mga product nila in bulk para iparepack (eg. toothpaste repacking
ng imported brands like Colgate na ipaparepack dito).
 So yung toothpaste na yun kunwari pag tapos na i-repack ay ilalabas ulit. Ang tawag
dun ay ‘re-exporting’. Now, from the time na dumating yung goods dito for
repacking, that is an ordinary importation which should have been subjected to
12% VAT but it is exempt sabi ng batas.
- ‘Pag nirepack, sale of service, all the way until mailabas ng bansa yung finished product—zero-rate.
o NOTE: PROVIDED, there is no domestic sale.
o Otherwise, the repackaging and everything from the arrival of the importation, to the
pagbayad ng sale of service, up until sa pagbenta sa domestic market may 12% VAT ‘yan. So
tatlo.
 But because the importation is pertaining to a sale of service and to be exported out
of the Philippines, from that time from importation, repacking, to export ay zero-
rate.
Haven’t you ever wondered why there is no domestic sale of Coach bags here?
- Because domestic sale is not allowed. The PH is one of the biggest production houses of Coach.
- If domestic sale will be allowed, then the importation of the leather will be subject to 12%.
- ‘Yung ginamit dun sa paggawa nung bag, 12%. At yung pagbenta directly sa domestic market, 12%
ulit.
- In effect, the producer will be compelled to pay VAT three times.
- So ‘pag ginawa ‘yan dito, ilalabas uli yan bansa. And we can only buy Coach bags from outside the
country or through importing the finished product itself.
NOTE: So again, pag zero-rated, the transaction is not subject to VAT in all stages and you can credit all your
input tax because nakalagay sa batas.
EXEMPT TRANSACTIONS (Sec. 109 of the NIRC)
(A) Sale or importation of agricultural and marine food products in their original state, livestock and poultry
of or king generally used as, or yielding or producing foods for human consumption; and breeding stock and
genetic materials therefor.
Ito ikaw isang mangingisda, may nahuli ka na isang balyera ng buhay na bangus. May bumili sayo ng
balyera for P1000.
o Exempt kasi in its original state.
‘Yung bumilli ng balyera, may tindahan sa palengke. Ibinenta niya sa palengke pero patay na
o ‘Yung benta ay exempt.

May natira dun sa paninda, hiniwa at nilagyan ng paminta bawang at suka. Pero di niluto. Nilagay lang sa
plastic at binenta as daing na bangus.
o ‘Yung benta exempt uli.
‘Yung bumilli, pag niluto niya yung bangus at kinain niya.
o Exempt kasi consumer siya.

Pero kung yung nilutong bangus, inihain mo sa restaurant mo,
o VAT-able na to at 12%.
12
TAXATION II
NOTE: THEREFORE, hanggang sa original state lang nung bangus ‘yung exempt, kasi nga nakasulat
mismo sa batas.
- So dapat sa Sec. 109, alam niyo yung stage when the transaction is exempt from VAT.
NOTE: In exempt transactions, the input VAT is not allowed to be credited against the output VAT.
(R) Sale, importation, printing or publication of books and any newspaper, magazine review or bulletin which
appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to
the publication of paid advertisements;
- Exempt din yan. So no crediting of input tax.
NOTE: Mas advantageous ang zero-rated kasi pwede mo ipacredit lahat ng input tax mo while 0% lang
yung output mo.
(Q) Lease of a residential unit with a monthly rental not exceeding Twelve thousand eight hundred pesos
(P12,800.00): Provided, That not later than January 31, 2012 and every three (3) years thereafter, the
amount herein stated shall be adjusted to its present value using the Consumer Price Index as published by
the National Statistics Office (NSO); (as amended by R.R. No. 16-2011)
One, may-ari ng residential house pinarerentahan kay A. Two, may-ari ng commercial building
pinarerentahan kay B. May lessor-lessee relationship sa both.
Ang renta mo sa residential house ay P11, 800.00. Exempt o VAT-able?
- Exempt.
Eh P12,799.00?
- Exempt.
P500.00?
- Exempt.
P11, 800.00?
- Exempt.
P12, 799.00?
- Exempt.
P12, 800.00?
- Exempt. Ang sabi ng batas “not exceeding” P12,800.

P12, 801.00?
- Vat-able.
NOTE: PERO kapag commercial ‘yung property being rented out, VAT-able kahit pa magkano yung renta.
(P) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of
trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act No.
7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws,
residential lot valued at One million nine hundred nineteen thousand five hundred pesos
(P1,919,500.00) and below, house and lot, and other residential dwellings valued at Three million one
hundred ninety-nine thousand two hundred pesos (P3,199,200.00) and below: Provided, That not later
than January 31, 2012 and every three (3) years thereafter, the amount herein stated shall be adjusted to
13
TAXATION II
their present values using the Consumer Price Index, as published by the National Statistics Office (NSO); (as
amended by R.R. no. 13-2012)
May lupa, dinevelop mo into low-cost housing. Pag binenta yung mga bahay at 1.8M each.
- Exempt.
Kung lima ang binili mo.
- Exempt padin.
Suppose si Em tinirahan ‘yung bahay tapos binenta kay Jas ng 2M, not VAT-able but there is tax which is CGT
of 6% under Sec 24 (D), NIRC. Can you be exempt from the CGT of 6%?
- Yes. Provided:
a. It is your actual principal residence;
b. You inform BIR 30 days from sale that you are availing of the exemption;
c. You buy or build another actual principal residence within 18 months from date of sale;
d. You avail of the exemption once every ten years; and
e. The historical cost shall be considered in determining how much should be exempt.
So kung nagbenta ka ka kay A ng 5 residential houses under low cost housing at P1,800,000.00 each.
- Exempt yan.
NOTE: Wala naman low cost housing na sumosobra sa P1,919,500.00 kasi regulated ang presyo
niyan.
Pero kung yung buyer na si A ay ibinenta ulit ‘yung limang residential houses na ‘yun pursuant to his
real estate business, that is buy and sell, at binenta niya ng P1,900,00.00 ang bawat isa .
- Exempt ito from VAT.

‘Pag binenta niya ‘yung house and lot ng P2,500,000.00 each.
- Exempt pa rin kasi ‘pag house and lot ang threshold ay P3,199,200.00 and below.
- Why? Kasi tignan niyo ‘yung letter (P). Apat na magkakaibang exemptions ang tinutukoy
dyan:
1. Una, it refers to “sale of real properties not primarily held for sale to customers or held for
lease in the ordinary course of business.”
2. ‘Yung pangalawa ‘yung referring to low-cost and socialized housing.
3. Pangatlo naman ‘yung residential lot valued at P 1,919,500 and below.
4. Pang-apat yung house and lot and other residential dwellings valued at P 3,199,200.00 and
below.
Makikita niyo ‘yung difference:
 ‘Dun sa una CGT yung tax kasi capital asset yung binenta ni Em kay Jas.
 ‘Yung dito sa recent, yung binenta ni A ay ordinary asset. So yung issue is kung subject to VAT or
not. Kung binenta ni A yung house and lot ng mas mababa sa threshold na P 3,199,200.00 na
sinasabi ng batas, no VAT.
1st item in letter (P): Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business
- Walang amount dyan, the amount is not material.
Take the case of McDo. Iyo ang building, iyo ang lupa meron kang lupa, sarili mo ang lupa ng business mo.
Tinayuan mo ng McDo vs. Meron kang isang lupa na pinarentahan kay Mr. Cruz. You are engaging in a
14
TAXATION II
trade or business. Various businesses. You have a lot with you and you own McDo and you have a lot with
you which you lease to Mr. Cruz.
Parehong lote, binenta mo ng P4,000,000.00 each. Ayaw mo na ng McDo ibinenta mo kasama ang lupa at si
building, P4,000,000.00 each or P10,000,000.00. May VAT?
- Wala.
- The real property is held by me not primarily for sale or lease for business.
Eto (maybe pointing to the other example)
- VATable because primarily for sale or lease to customers.
NOTE:
Both are ordinary assets because both are used in trade or business.
A. When I sell this one (‘yung may Mcdo), not primarily held for sale or lease to customers,
EXEMPT from VAT. Tax due then is NIT.
B. For this one (‘yung pinaparentahan kay Mr. Cruz) VAT will be imposed and if there is income
from the sale, NIT plus VAT.
BUT both assets are ordinary therefore no CGT will be imposed.
This is enumeration number one sa letter (P). Walang amount. Regardless of amount yan. So yung isa walang
VAT, yung isa may VAT.
- Kahit magkano amount may VAT basta primarily held for sale or lease to customers. Apat yan. ‘Yung
(P)(1) ay ‘yung ordinary assets not held for sale or for lease to customers.
- Kung ito walang McDo, ‘di ko ginagamit for trade or business, capital asset siya. Walang VAT. CGT
yan.
NOTE: Depende ‘nung time na binenta ano ba siya. Capital or ordinary. The use during the time of the
sale is determinative. Since business is Mcdo this may be converted to ordinary to capital. Pero you have
to prove it to me. It is a matter of proof.
Relate to Sec. 39 of NIRC enumerating what are the capital assets. ‘Diba they are OTHER THAN the listed
ordinary assets.
1. Stock in trade of the taxpayer;
o (eg. Burger, mantika, patty, refrigator,). Yan yun. Ordinary.
2. Other property of a kind which would properly be included in the inventory of the taxpayer if on
hand at the close of the taxable year;
o Whether real or personal ‘pag nakalagay sa sa inventory.
3. Property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or
business;
4. Property used in the trade or business, of a character which is subject to the allowance for
depreciation provided in Subsection (F) of Section 34;
5. Real property used in trade or business of the taxpayer.
NOTE:
 Kahit ordinary asset, ‘pag binenta walang VAT dahil sa Section 109 sinasabi exempt. Correlate
Sec. 109 with Sec. 39.
 Pero ‘pag yung ordinary asset mo subject to sale or lease, may VAT.
(W) Sale or lease of goods or properties or the performance of services other than the transactions mentioned
in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of One million
five hundred thousand pesos (P1,500,000.00): Provided, That not later than January 31, 2009 and every three
15
TAXATION II
(3) years thereafter, the amount herein stated shall be adjusted to its present value using the Consumer Price
Index, as published by. the National Statistics-Office (NSO); (as amended by R.A. No. 10378) (The amount
now is P1,919,500.00 per R.R. No. 13-2012)
Sa madaling sabi:
1. Wala sa listahan na A-V; and
2. Ang gross sales ay ‘di nag eexceed ng P1,919,500 .00
No VAT pero magbabayad ka ng percentage tax na 3% of the gross.
SO dalawang negative yan ha? Pag may isang positive, wala yan sa letter (W).
Pharmacy. Merong Pharmacy sa palengke nagbebenta ng biogesic. Eto Mercury nagbebenta ng biogesic. Sa
palengke walang VAT. Sa Mercury may VAT. Bakit?
- Ang mercury nag e-exceed ang gross sales ng P1,919,500.00.
Magnolia chicken. Sa palengke walang VAT. Sa Savemore may VAT.
- Eh sasabihin “original state edi nasa letrang (A)”. Eh ‘di kaya ay letrang (W)? Para ma-exempt
wala sa (A)-(V) at ‘di nag-exceed sa P1,919,50000.
o If you miss in one condition then it is automatic, VATable. Ang opposite niyan ay both
are not present or one is present, VAT-able.
May poultry ka may piggery ka binenta mo sa Purefoods, P10,000,000.00, VATable ka or exempt? Nandoon
ba sa bentang ‘yun ang dalawa?
- Nasa una ka pero wala ka sa pangalawa edi hindi ka exempt. VATable ka.
Kandila. Kandila hanapin mo sa (A)-(V) wala. Ang sales ko P1,500,000.00.
- Exempt.
Kandila sales ko P2,000,000.00.
- VATable. The gross sales must not exceed P1,919,500. Lahat ng opposites niya VATable.
NOTE: Hindi kina-qualify ng (W) and (A)-(V).
- It depends on what are you selling.
- ‘Pag ikaw ay hindi registered sa VAT, wala kang output.
A. What if you are required to be registered but you are not registered:
- You shoulder all the output as if no input was made. Yan ang effect niyan.
1st effect: ‘Di ka pwede mag-impose ng 12%.
- Anong mangyayari sa input mo?
o Wala, eh hindi ka naman rehistrado eh.
- Ang presumption ng law because you are supposed to register and you do not register, you
shoulder all output.
- You get the output from your own pocket because you cannot impose the 12%.
B. What if you are not required to be registered but you registered:
- Mag impose ka ng 12% and all of your input VAT may be credited.
- The fact you are registered, the law recognizes that your gross sales in a year may exceed
P1,919,500.00.
16
TAXATION II
What do you do if you feel you will not reach P1,919,500.00?
- Do not register.
- BUT if at any given time you think that your gross sales for the year will exceed P1,919,500.00, you
must register. Otherwise, your crediting of output less input will not be allowed.
NOTE: The most important proof, before you can credit the input tax, is the official receipt. Yan ang
titignan ng BIR.
Requirement for billing of VAT
If your receipt merely states: Selling price P112.00/burger. 1 burger is equal to P112.00
- The assumption is it is exclusive of VAT. Therefore, times 12%.
- The assumption is that you did not collect 12% output VAT.
‘Pag ang kontrata niyo legal service professional fee P40,000.00 only.
- It does not mean that 12% is included.
- It means that it is exclusive of VAT and that’s your failure to impose the 12% against your client.
- Dapat ang siningil mo ay P44,800.00 para inclusive of VAT.
- Dahil ‘di mo chinarge ang client ‘nung P4,800.00 na VAT, therefore you should shoulder the
output tax of 12%.
NOTE: Ngayon hindi allowed ang billing ng VAT na inclusive. The assumption is always that the price
indicated does not include VAT. VAT must be separately indicated. Without separate indication output
VAT will be shouldered by the seller.
May isang lote binili mo ito. Six months after binili mo ito adjacent lots. P1,500,000.00 each yung adjacent
lots. Kapag adjacent lots, ang threshold ng dalawa ay P1,919,500.00. Hindi nagdodoble.
- So both VATable na kasi ang total is P3,000,000.00.
NOTE: When you buy adjacent lots threshold remains P1,919,500.00.

- What is the Logic?
o When you buy adjacent lots you can build one house in the middle or wherever
within the two adjacent lots.
Lote may bahay, lote may bahay, magkatabi. Binili mo yung dalawa within 6 months bawat isa
P3,000,000.00.
- Exempt.
- Why?
o Threshold sa bahay at lote = P 3,199,200.00. Exempt pareho. Hindi pinagcocombine.
o They are treated individually because it is impossible for the taxpayer to maintain 2
adjacent house and lots and live in the two. That is why the threshold remains at
P3,199,200.00 for each.
NOTE/S:
1. Within 100 meters, considered as adjacent lots.
2. If the transactions sa pagbili ng adjacent lots are within 1 year, ‘dun lang pumapasok yung
rules.
3. Kapag ang bentahan ng house and lot in the course of business, then that is the only time you
consider the threshold of P3,199,200.00. If the latter sold the house and lot are capital assets,
walang pag-uusapan na VAT, CGT ‘yun.
17
TAXATION II
ESTATE TAX
- These two are transfer taxes, unlike income tax, ito isang beses lang binabayaran.
A. Estate Tax - binabayaran lang kapag may namatay. Kapag walang namamatay wala niyan. Tuwing may
kamatayan lamang.
B. Donor’s Tax - bawat regalo meron. ‘Yung donor’s tax, as many gifts as you can give in one year, you pay the
tax. Bawat regalo meron.
VAT Income Tax Donor’s Tax Estate Tax

a. sale of goods Bawat kamatayan, Bawat bigay, meron.
b. sale of service meron.
c. imporation of goods
Both are transactional because these are really
based on transactions.
Taxability dependent on Taxability is dependent on the location of the
the source of the income. property.
- Ang gagamitin lang ay ang sense of sight,
paningin, at hahanapin ang mapa ng
Pilipinas.
a. Within – kung nasa loob ng mapa ng Pilipinas
b. Without – kapag wala sa sa loob ng mapa ng
Pilipinas
So because it is dependent on the location of the property. Ano namang klase ng property?
1. Real Property
o If real property na kitang kita naman ninyo kung nasa loob ng mapa ng Pilipinas o wala.
2. Tangible Personal Property
o Kitang-kita niyo rin kung nandyan sa loob ng mapa.
3. Intangible Personal Property
o Hindi niyo nakikita, hindi niyo naaamoy, hindi niyo nasasalat, hindi niyo nahahawakan
o Situs of donor’s tax or estate tax on intangible personal properties
 Apply Sec. 104 of NIRC.
GENERAL RULE: Mobilia secuntur personam; they follow the domicile of the owner.
Such that if X is a US Citizen and residing in the USA and he has shares of stock in
PLDT, a domestic corporation worth 500,000 pesos.
- Kapag namatay si X following the rule of mobila secuntur personam, the

shares of stocks will follow the domicile and therefore the shares of stocks
are outside of the Philippines, without.
EXCEPTIONS:
1. When the shares of stocks have acquired a different situs by reason of the
benefit and protection they can be seen from another taxing jurisdiction;
and
2. When the law itself provides a different situs. (eg. Sec. 104 of the NIRC)
18
TAXATION II
Under Sec.104, the gross estate or the gross donation of the non-resident alien decedent or donor, the
following intangible personal properties or gross gifts or gross estate of a non-resident alien or donor shall be
considered as from within: (Intangible Properties)
1. Franchise which must be exercised in the Philippines;

o Regardless of the owner.
2. Shares, obligations or bonds issued by any corporation or sociedad anonima organized or constituted
in the Philippines in accordance with its laws;
o Any shares, obligations or bonds issued by a domestic corporation or any organization
constituted within the Philippines.
3. Shares, obligations or bonds by any foreign corporation eighty-five percent (85%) of the business of
which is located in the Philippines;
o Lahat ng shares, obligations and bonds ng foreign corporation, 85% of the business of which
is located in the Philippines.
NOTE:
Compare this 85% with Sec. 42 (Dividends issued by a foreign corporation).
Sec. 42: For purposes of income tax, if a foreign corporation issues dividends in favor of
anybody, the dividends must be considered from within. Therefore whoever is the recipient
or stockholders everything is subject to income tax.
EXCEPTION: Kung tatlong taon bago binigay ang dibidendo, ang kinita sa Pilipinas ay mas
mababa sa singkwenta porsyento na suma-total ng kinita, hindi lahat ay within, kaunti
lamang.
For purposes of estate and donor’s tax, what is important is the 85% of the business which is
located in the Philippines.
That is the difference between the two.
4. Shares, obligations or bonds issued by any foreign corporation if such shares, obligations or bonds
have acquired a business situs in the Philippines;
o This one does not speak of 85%, regardless of the percentage of business, if the shares,
obligations and funds issued by a foreign corporation have acquired a Philippine situs
because they have acquired the benefits and protection of the Philippine laws, then
everything will be subject to estate or donors tax because they are considered as from within
the Philippines.
o The law does not make any distinction between a resident or non-resident foreign
corporation.
o Ang sinasabi lang niyan incorporated sa labas ng Pilipinas nag issue ng shares, obligations
and bonds, not dividends, have benefited protection form Philippine laws then everything
shall be considered from within.
5. Shares or rights in any partnership, business or industry established in the Philippines
‘Yang lima na yan shall be considered as from within the Philippines.
NOTE:
1. If real property nasa loob ng Pilipinas = within.
19
TAXATION II
2. If tangible personal property nasa loob ng Pilipinas = within.

3. If intangible personal property = Section 104 of the Tax Code will apply if we talk about estate and
donors tax.
Estate Tax Donor’s Tax

Mode of Transfer: Mortis Causa Mode of Transfer: Inter Vivos
Basis: Based on Death. Basis: Whether transaction is Gratuitous.
- Gratuitious, without consideration at ito ay
pwedeng tao o korporasyon.
Value Considered: Fair Market Value (FMV) at the Value Considered: FMV at the time of gift.
time of death regardless of whether or not the estate
is properly settled according to wills and succession.
In Philippines, hindi uso na kapag may namatay,
kinabukasan ay may settlement of estate na. Kaya
may mga lupa na nakapangalan sa mga
kanunununuan. Hindi uso sa atin. But regardless of
when the property is settled or the properties are
partition and distributed to the heirs, it is always the
value at the time of death.
A. Real Properties – FMV at the time of death.
So ang lolo mo namatay, 40 years ago or 50 years ago,
hanggang ngayon ang properties nakapangalan sa
lolo niyo ibig sabihin hindi sinettle ang estate
according to wills and succession. So ngayon
magbabayad tayo ng estate tax.
- Ang computation ng gross estate ay value 50
years ago.
- But kapag hindi ka nakabayad ng buwis
within 6 months after death 25% surcharge
plus 20% interest per annum computed
daily.
- On the fifth year, based in the industry, it is
always double the amount. So malamang
kapag yung property nilipat mo ngayon, 50
years ago ang mura noon ang mahal sa’yo,
25% surcharge plus 20% interest per annum
computed daily.
- On the 5th year yung principal amount of tax
due, doble na yan. So marami ayaw ang mag
settle ng estate dahil hindi mo malilipat ang
titulo ng lupa sa mga heirs kung walang
certificate of authority to register.
- Hindi ka papayagan ng register of deeds na
maglipat ng titulo kung hindi mo babayaran
ang estate tax due that is a requirement.
- Kaya ngayon ang ginagawa nila, binebenta
nila ng mas mura tapos sinasabi nila na
bahala na kayo ang magbayad ng estate tax.
The buyer shoulders everything. If you are
the buyer wag kang papayag kaagad.
Magcocomupute ka.
20
TAXATION II
Rates: Rates:
- 5% to 20% 1. Stranger ang donor sa donee = 30% of the
net gift.
2. Hindi stranger ang donor sa donee = 2% to
15% of the net gift.
In income tax,
Now estate tax, idudugtong,
For non-resident foreign corporation (NRFC), there is double taxation in the broad sense.
- For the income derived by a resident citizen (RC) from without, the same will be subject to tax from
the country it was derived from.
- And the income from the Philippines of aliens will also be subjected to income tax in the country
where they are residents or citizens of.
- In the same manner for the corporate taxpayers, the income of domestic corporations (DC) outside
the Philippines will definitely be subject to tax in the country where it is derived from.
- And in the case of foreign corporations, the income from the Philippines which are subject to tax here
are also subject to tax definitely in the country where they are residents of, meaning where the
country the corporation is incorporated. Technically there is double taxation in the broad sense.
In tax code, in income tax, the remedy available is tax credit.
- In order to reduce the impact of double taxation in the broad sense. Kasi sobrang impact niyan sa tax
payer. Technically dalawang beses ka nagbabayad.
We also have the tax sparing rule for branch profit remittances, may impact yan sa tax payer.
- So ito ang resident foreign corporation, ibig sabihin may branch sa Pilipinas tapos yung principal
place of business nasa ibang bansa. ‘Yung kinita niya sa Pilipinas, ang tax NIT. ‘Yang branch na ‘yan
hindi niya ititigil ang kinita niyan sa Pilipinas. You remit. Kapag niremit si income na tinax na,
mayroon tayong tinatawag na branch profit remittance tax na 15%.
21
TAXATION II
- So technically yung kinita mo na tinax ng 30% itatax ulit ng 15%, and therefore it creates the
situation of double taxation in the broad sense.
- Kaya yan mayroon tayong tinatawag na tax sparing rule.
o Meaning, itatax natin yan at 15% provided ‘dun sa bansa kung saan niremit ang tax in the
minimum ay 15%.
o Kapag sa ibang bansa tinax yan ng 20%, 15% tayo.
o Pero kung sa ibang bansa ay 5%, 30% tayo.
Now, citing the table, how do we compare this with the estate tax?
- Estate tax:14 provisions, Sections 84 to 97.

- Income tax: 61 provisions, Sections 23 to 83.
For purposes of Estate tax, we have four kinds of estates:
Location
DTRP
within without
RC   
NRC   
RA   
NRA   
Ang pinapakialaman sa Estate tax is the value at the time of death of all the properties wherever it is situated,
provided that in the case of a non-resident alien only the properties located within shall be included or shall
form part of the gross estate.
Using Sec. 85 as a guide these (referring to table) are the kinds of estates and decedents and the taxability is
dependent on the location. The taxability for the purpose of the income tax is the source. Dependent on the
location, within if located inside the map of the Philippines and without if outside of the Republic of the
Philippines. That’s why use your sense of sight but except in the case of intangible personal properties
wherein you just have to apply Sec. 104.
GROSS ESTATE
- Refers to the value of all the properties wherever situated within and outside the Philippines
provided that in case of a non-resident alien decedent only those properties located within shall be
subject to tax.
You can see there is also double taxation in the broad sense.
Remedies to reduce the impact of double taxation the broad sense:
Income Tax Estate Tax
Tax Credit Tax Credit
Reciprocity Rule
Vanishing Deduction or Property
Previously Taxed
22
TAXATION II
GENERAL RULE: The situs of estate tax or donor’s tax in case of intangible personal property is the domicile
of the owner or mobilia sequintur personam. (Sec. 104 of NIRC)
EXCEPTION: When the law itself provides for a different situs – intangible personal properties which were
owned at the time of death by a non-resident alien will be considered as from within and therefore subject to
estate tax.
EXCEPTION TO THE EXCEPTION: Reciprocity Rule (Sec. 104 of NIRC)
Example:
X, general rule, P500,000 – no estate tax, no donor’s tax. But because the shares of stocks are issued by a
domestic corporation that’s item no. 2 in the enumeration. So, P500,000 will be subject to donor’s tax
and estate tax.
But if the USA does not impose any inheritance or donor’s tax on similar properties listed under Sec. 104
owned by the Filipino citizen considered as non-resident alien therein, we will not collect tax on
P500,000 or if the USA tax laws there provide for imposition of tax reduced rate, meaning, partial
exemption, then we will also grant the partial exemption.
Kapag kabilang bansa tinototally exempt, we totally exempt. Kapag kabilang bansa partially exempt
then hindi natin itototally exempt syempre tayo masusunod eh. Kung hangang saan yung exeption nila
hanggang doon lang din ang ating tax. Kung anong rate nila na binigay kasi regular rate natin is 5-
20%.
If the USA imposes 3%, we will impose 3%.
ITEMS OF INCLUSION IN INCOME TAX
1. Compensation for services rendered including fees, commissions and other similar items. – (A)
2. Gains derived from dealings in property – (C),(B) or (A)
3. Gross income from exercise of profession or trade or business. – (A)
4. Dividends – (D) or (A)
5. Interest – (B) or (A)
23
TAXATION II
6. Rentals – (A)
7. Royalties – (B) or (A)
8. Annuities –(A)
9. Prizes and winnings – (B) or (A)
10. Pension- (A)
11. Partner’s distributive in net income of GPP – (A)
NOTE: When you sell service or you sell goods in the course of your trade or business you are subject to
column A (NIT) and while you are selling service or goods, the 12% VAT is added to the value. Every
time you sell and every time these individuals and corporations import, whether in trade or business or
for personal consumption, then we also impose the VAT of 12% tax is added to the value. So
simultaneous ‘yan habang nag-iincome tax ka may VAT. The only time na wala kang VAT na babayaran if
purely compensation income earner. Pero ikaw ang nagshoulder ng impact because you are just a plain
consumer.
Ang pinag-uusapan ngayon ay ‘yung properties mo at assets mo. Whether kinuha mo sa trade or
business or compensation at ikaw ay may natirang properties, tangible, personal, intangible personal or
real property na noong ikaw ay nabubuhay at pag ikaw ay namatay na.
ITEMS OF INCLUSION IN ESTATE TAX (SEC. 85)
GENERAL RULE: All transfers of properties, which take effect upon death, are subject to estate tax.
1. Decedent’s interest
Sa Tagalog, magakano ang interest mo o pag-aari sa isang property sa oras ng iyong pagkamatay. It varies.
Examples:
a. Ikaw ang may-ari, nabubuhay ka, may usufructuary. So ang ‘pag ang namatay ay ang may-ari,
ownership less usufruct,’ yun ang value. ‘Pag namatay naman angusufructuary, the usufruct is
extinguished and it is merged to the owner of the naked titile. ‘Pag ang namatay ay ang usufructuary,
walang estate tax sa kanya. Patay na ‘yung may-ari, decedent’s interest ang tawag dun less the usufruct
because that is exemption under Sec. 87. Merger of the usufruct to the owner of naked title.
NOTE: ‘Pag namatay ang may-ari, ang tawag sa kanyang pag-aari ay decedent’s interest. ‘Pag ang
namatay ay ang usufructuary, exempted from estate tax.
b. Contract of lease. Lessor requires 1-year payment of rental, so nagbayad ka, lessee. Bayad ka from
January to December. ‘Pag namatay ang lessor, siya ang may-ari ng property, that’s decedent’s interest.
Value of the property leased. ‘Pag ang namatay ay ang lessee, ano ang decedent’s interest? Kung
namatay ng May, may decedent’s interest sya? Oo. From May to December. 8 months of rental ang
decedent’s interest. ‘Pag namatay ang may-ari, ang decedent’s interest niya ay ang pinauupahang
bahay at lupa.
2. Transfers
a. In contemplation of death
o ‘Yung buhay pa, nagtransfer ng property with the thought of impending death as the cause of
transfer and the purpose is to evade payment of estate tax.
Examples:
24
TAXATION II
a. Si Mr. X may bahay at lupa. Binili niya for P1,000,000. The FMV is P3,000,000. Sabi ng doctor
niya may cancer siya, mamamatay siya sa loob ng 3 buwan. He is certain to die within 3
months. Because of the thought of impending death, sabi ni Mr. X, “I’m going to transfer it to
Mr. Barras.” The thought of impending death made him transfer the property to Mr. Barras
and the purpose is to evade payment of estate tax. In other words, nandito ’yung property at
malamang nasa kanya ang TCT, but regardless of the fact na ang title ay nasa name ni Mr.
Barras,m ang tanong natin sa oras ng pagtransfer is, “was it the thought of impending death
which made him transfer?” If yes, include in gross estate.
 How much should be included? Get the FMV at the time of death, that’s the amount
included.
P10,000,000 ang FMV ng property. P10,000,000 kasali sa gross estate. No need to

collate as this has nothing to do with collation. So kahit lumipat na ang titulo ng sampung
beses wala tayong pakiaalam. That law says that because it is the thought of your
impending death that made you transfer your property, we call it transfer in contemplation
of death and therefore it should be included in the gross estate.
 How does the BIR determine? This is motive or internal state of mind.
What are the indicators for the motive?

a. Age
b. Medical condition of seller at the time of sale
c. Period of time between transfer and time of death
NOTE: This is not automatic, but this gives us a glimpse of whether or not ito ay
linipat for the purpose of evading the payment of estate tax. Ano baang relationship
ng seller sa buyer. Ilang taon ang buyer at seller. Kalian namatay.
b. Paano kung tinamaan ng tren, may cancer. Namatay not because of cancer as predicted by
doctor. Will that fact change? No. Ang importante, noong oras na ibinenta or trinansfer, it is
the thought of impending death which made him transfer the property. Definitely, that is a
transfer in contemplation of death. Include at the time of death the value of the property
previously transferred.
b. For insufficient consideration – In correlation with Sec. 24 (B) and (C), Sec. 100, Sec. 85 (G)
o This means that it is not in accordance with the actual money’s worth and at the same time
in contemplation of death in the nature of revocable transfer or property passing through
general power of appointment, then we impose estate tax.
NOTE: Buhay, inilipat, for insufficient consideration. Meaning, sold.
Examples:
a. Shares of Stocks were bought for P1,000.00 each. Current FMV is P2,000.00.
Binenta for P5,000.00; not traded. Tubo ng P3,000.00.
1. Nagpakabit ng PLDT line sa bahay (capital asset) sa Pilipinas – CGT of 5% under

Sec. 24(C)
25
TAXATION II
2. Nagpakabit ng PLDT line sa parlor (ordinary asset) sa Pilipinas – NIT under Sec.
24(A)
3. Nagpakabit ng AT&T sa bahay sa USA – NIT under Sec. 24(A)
4. Nagpakabit ng AT&T sa parlor sa USA – NIT under Sec. 24(A)
Binenta for P5,000.00; traded. Tubo ng P3,000.00. Then apply Sec. 127.
1. Nagpakabit ng PLDT line sa bahay sa Pilipinas – ½ of 1% of the gross selling

price (GSP)
2. Nagpakabit ng PLDT line sa parlor sa Pilipinas – ½ of 1% of the gross selling
price (GSP)
3. Nagpakabit ng AT&T sa bahay sa USA – NIT
4. Nagpakabit ng AT&T sa parlor sa USA – NIT
Binenta for P100.00 each; not traded. Lugi ng P1,900.00. All of the four examples are not
subject to tax. But it may be subjected either to a donor’s tax (Sec. 100) or estate tax (Sec.
85), because it is a transfer for insufficient consideration, meaning, not in accordance
with the actual money’s worth.
NOTE: It may be estate tax if the shares of stocks are sold in contemplation of death or
in the nature of a revocable transfer or property passing under general power of
appointment, all of them are subject to estate tax. If any of them is/are not present, all
of them are subject to donor’s tax.
If traded:
1. Nagpakabit ng PLDT line sa bahay sa Pilipinas – ½ of 1% of the GSP + donor’s

tax or estate tax, as the case may be.
2. Nagpakabit ng PLDT line sa parlor sa Pilipinas – ½ of 1% of the GSP + donor’s
tax or estate tax, as the case may be.
3. Nagpakabit ng AT&T sa bahay sa USA – donor’s tax or estate tax
4. Nagpakabit ng AT&T sa parlor sa USA – donor’s tax or estate tax
REASON: Kasi kapag traded, lugi or tubo, gross selling price ang basis. Kapag not
traded, tubo lang ang may income tax; kapag lugi, wala.
b. House and lot
Binili for P1,000,000. FMV is P2,000,000.00. Binenta for P5,000,000.00 each. Tubo ng
P3,000,000.00
1. House and lot (capital asset) sa Pilipinas – CGT of 6% of the FMV or GSP,
whichever is higher, under Sec. 24(D)
2. Parlor (ordinary asset) sa Pilipinas – NIT
3. House and lot (capital asset) sa USA – NIT
4. Parlor (ordinary asset) sa USA – NIT
Binenta for P100,000 each. Lugi ng P1.9M.
26
TAXATION II
1. House and lot (capital asset) sa Pilipinas – CGT of 6% of the FMV or GSP,
whichever is higher, under Sec. 24(D)
2. Parlor (ordinary asset) sa Pilipinas – donor’s tax or estate tax
3. House and lot (capital asset) sa USA – donor’s tax or estate tax
4. Parlor (ordinary asset) sa USA – donor’s tax or estate tax
SUMMARY: This is a:
a. transfer for insufficient consideration; if at the same time

b. in contemplation of death;
c. in the nature of a revocable transfer; or
d. property passing under general power of appointment.
 If letters b, c, d are present – estate tax

 If letters b, c, or d are absent – donor’s tax
3. Revocable Transfers
- Property is transferred during lifetime but at the time of transfer, the seller retained for himself
certain rights, which may or may not be exercised, but available on the part of the seller at the time of
death.
What are the possible rights retained by the seller?
a. Right to revoke the sale

b. Right of possession
c. Right of enjoyment of fruits for a certain period of time
- Namatay siya that such right is existing, meaning, he could have exercised the right, pero hindi
niya ginamit.
- Kung nirevoke niya ang sale, siya ang may decedent’s interest kasi siya ang may-ari.
- If the rights are still existing at the time of death, regardless of whether or not hindi niya
nirevoke or hindi niya inexercise ang right to revoke, siya pa din ang may-ari. Pero ang
panggagalingan mo ngayon ay decedent’s interest, kasi ang full ownership nasa kanya na ulit.
- As long as the right is available at the point of death, then we call it a revocable transfer.
- It will then be included in the gross estate, the value of which is not the value at the time of
transfer or at the time of sale, but the value at the time of death.
What if there is a consideration?
- Then value will be FMV, at the time of death, less the consideration.
4. Property passing under general power of appointment
General Power of Appointment Special Power of Appointment

Si X sabi niya kay Y, tanggapin mo ang property ko. Si X sabi niya kay Y, tanggapin mo ang property ko.
Kapag ikaw ay namatay, Mr. Y, ibigay mo ‘yan kahit Kapag ikaw ay namatay, Mr. Y, ibigay mo ‘yan kay Mr.
kanino mo gusto. When Y dies, because Y chooses B. Kapag namatay si Y, hindi ito kasama sa gross
whoever be the succeeding possessor of the property he estate ni Mr. Y, dahil ang may control pa rin ay si X.
has control, then everything will be included in the
27
TAXATION II
gross estate of Y.
If the transfer from Y to subsequent transferees as

dictated by Y is for insufficient consideration, then it
is included in the gross estate, under Sec. 85(G).
If there is no consideration, it is considered as a

simple revocable transfer.
For X, laging included sa gross estate niya kasi decedent’s interest niya ‘yan.
Rule of thumb in Estate Tax: Kapag ikaw ay namatay at ikaw ay may control/interest sa property,
siguardong kasali sa gross estate.
5. Proceeds of life insurance policy – Sec. 85(E); take note Sec. 32(B)(1) and Sec. 36 (A)(4)
Examples:
a. X, an employee, takes a life insurance policy. While living, he pays a premium in the amount of P5,
000 per year. He designates his spouse, W, as the beneficiary. The policy provisions provide that the
proceeds will be P1M, and then the payment of 10% interest on the P1M if the insured survives the
term and a return of premium (ROP). Now, X dies.
Income Tax side [Sec. 32(B)] Estate Tax side [Sec. 85(E)]
Premium of P5,000 X can never claim it as a
deduction. X, as a
compensation income earner,
his allowed deductions are PE,
AE, and PHHI only.
Proceeds of P1,000,000 Income on the part of X. But It depends on the manner of
excluded, thus no tax. designation of the beneficiary.
Interest of 10% Income on the part of X. It is
included in his gross income, 1. If the designated beneficiary is
thus subject to tax of NIT. himself (Mr. X), his estate, the
ROP Not income as it is a return of executor or administrator of X,
capital, thus, no tax. whether the designation is
revocable or irrevocable, then
include in the gross estate and
subject to estate tax.
2. If the designated beneficiary is

any person other than the four
persons above:
a. Designation is revocable
– included in the gross
estate
b. Designation is
irrevocable – excluded
from the gross estate
REASON why excluded: The designation of wife, the beneficiary, is irrevocable. Buhay pa si X, he
divested himself of the right to any of the proceeds. Wala ding interest si X because the wife is neither
28
TAXATION II
an executor nor an administrator. But if the wife was designated as the administratrix or the
executrix of the estate of X, whether such designation was revocable or irrevocable, that is included.
Because X has still control, whether alive or not. Unlike ‘yung buhay pa, irrevocable na, tapos si wife,
hindi niya dinesignate an executrix or administratrix, talagang pinakawalan mo na ‘yan. Wala ka ng
makukuha, wala ka ng pakialam. Eh kapag nabuhay, wala ng bawian.
b. X is an employee of Y (employer). X wants to take a life insurance policy. Y gives X and additional
benefit by paying and shouldering the P5,000-premium, but the rest will be shouldered by Y. X
designated his wife as the beneficiary. Now, X dies.
On the part of X On the part of Y
Premium of When Y pays the Y can never claim it
P5,000 premium, it is income as a deductible
on the part of X, thus, business expense,
subject to NIT. because that is not
necessary in his
trade or business.
Proceeds of Income on the part of Same rules as the above-
P1,000,000 X. But excluded, thus mentioned
no tax.
Interest of 10% Income on the part of
X. It is included in his
gross income, thus
subject to tax of NIT.
ROP Not income as it is a
return of capital, thus,
no tax.
c. X is an employee of Y (employer). Y insures the life of X. Y pays the premium and designated himself
or his business as the beneficiary. Now, X dies.
Premium of P5,000 Y can never claim it as a
deduction, as it is not allowed
by law.
Proceeds of P1,000,000 Income on the part of Y. But Excluded from X’s gross estate
excluded, thus no tax. as he has no control/interest
Interest of 10% Income on the part of Y. It is over such.
included in his gross income,
thus subject to tax of NIT.
ROP Not income as it is a return of
capital, thus, no tax.
29
TAXATION II
6. Capital of surviving spouse of the decedent – shall not be deemed a part of his or her gross estate.
H W
HW
Kapag namatay si H (or W), yung circle ni W (or H) ay hindi kasama sa gross estate ni H (or W), dahil iyon ay
hindi kanya. ‘Yung circle niya at circle nila ni HW lang ang kasama.
ALLOWABLE DEDUCTIONS FROM GROSS ESTATE
FORMULA:
Gross Estate (GE) – Allowable Deductions (AD) = Taxable Net Estate (TNE)
Taxable Net Estate (TNE) x Rates (5%-20%) = Tax Due – Tax Credit, if any
TAX CREDIT
- STRICTLY HAPPENS when there is Estate Tax paid in other jurisdictions.

- When there are properties outside of the Philippines.
CAE CAIP RB VD/

FE JE UM UT CL TPU FH ME SD
(+,-) (+,-) (+,-) PPT
RC             
NRC             
RA             
NRA IP IP IP IP IP IP IP      
Section 86 (Computation of Net Estate)
A. Deductions Allowed to the Estate of Citizen or a Resident:
1. Expenses, losses, indebtedness, and taxes:
a. Funeral Expense (FE)

- Actual Expense; or
- An Amount equal to 5% of the gross estate
- WHICHEVER IS LOWER, but not exceeding Php 200,000.
30
TAXATION II
Example:
Funeral Expense: notices, telephone costs, telegrams, communication expenses, ataul, damit ng
namatay, clothing ng namataynanaiwan, pagkain, pamisa, libingan, urn, lapida, etc.
GE = P5,000,000.00 (PH); P3,000,000.00 (US)
TOTAL WORLD ESTATE = P8,000,000.00
RC, NRC, RA = entitled to deduction
- Funeral Expense = 300,000.

- Actual Funeral Expenses but NOT TO EXCEED 200,000.
- 5% of 8M = 400,000 but NOT TO EXCEED 200,000.
- WHICHEVER IS LOWER is deducted.
NRA = entitled to deduction
- In PROPORTION to the estate.
x 200,00 = 125,000 then apportion. [Sec. 86 (B)(1)]
b. Judicial Expenses (JE)

- Expenses for the settlement of the estate.
- NO LIMIT
- Incurred in order to assert his right as an heir: NOT INCLUDED.
Example:
Judicial Expenses: surveyor’s fees, appraiser’s fees, accountant’s fees, legal fees, etc.
RC, NRC, RA = entitled to deduction
NRA = entitled to deduction but IN PROPORTION
c. Claims Against The Estate (CAE)

d. Claims Against Insolvent Persons (CAIP)
Example:
X (Debtor); Y (Creditor)
Credit = 100,000; Interest = 10%; TOTAL = 110,000
ESTATE TAX
INCOME TAX
Claims Against Insolvent
Claims Against The Estate (CAE)
Persons (CAIP)
Both X and Y (ALIVE) X (Debtor) = DEAD Y (Creditor) = DEAD
31
TAXATION II
X paid 110,000 to Y. X did not pay. X did not pay.
Part of Y: Estate of X = Claim ENTIRE Estate of Y = Deduct ENTIRE

Income of Y = 10,000 110,000 as CAE 110,000 as CAIP
= Subject to INCOME TAX (NIT) - Provide that: 110,000
Special Proceeding: Estate if X should FIRST BE ADDED
Part of X: cannot be settled extrajudicially to the Gross Estate
X can claim Interest Expense because there is an indebtedness. BEFORE DEDUCTING
= 10,000 claims against insolvent
Provided that he incurred it: persons. (Add Deduct)
- In connection with his - Reason: Intangible
trade or business. Personal Property
= Subject to TAX ARBITRAGE (Credit) owned by Y =
(Sec. 34) Part of Gross Estate
- Interest Expense will be - If you did not add and did
further reduced by up not deduct, that is
to 33% of any interest CLAIMING DOUBLE
income from the bank. DEDUCTION (Sec. 85):
i. Did not include
X did not pay. as part of the
gross estate; and
Part of Y: ii. Did not claim it
No income as a deduction.
Tax consequence: BAD DEBT
Claim as Deduction = ENTIRE
110,000
Part of X:
Zero Consequence
X did not pay. After two years, X

paid 110,000.
- TAX BENEFIT RULE

applies.
e. Unpaid Mortgage (UM)

- Add Deduct (or Plus Minus as well)
Example:
X (Debtor) = DEAD
Credit = 100,000; Interest = 10% (10,000); TOTAL = 110,000
House = 500,000 (Mortgaged)
Estate of X = Claim UNPAID MORTGAGE (110,000)
- Add value of the security AT THE TIME OF DEATH (2M): Decedent’s Interest since X
is the owner.
- Then, DEDUCT unpaid mortgage loan.
32
TAXATION II
f. Unpaid Taxes (UT)
- Income Tax: TAXES PAID related to trade or business.

- Estate Tax: UNPAID TAXES whether or not related to trade or business. Becomes the liability
of the estate.
g. Transfers for Public Use (TPU)
- Transfers in favor of the government

- Only when there is a last will and testament
Example:
Si X binigay ang kanyang bahay at lupa na 45M sa DSWD.
o Income on the part of DSWD? YES.

o Within or without? WITHIN.
o Subject to Income tax? NO. It is an item of exclusion since it is an item of
exclusion. Section 32 (B)(3).
Assuming that X gave the same property to DSWD inter vivos? Can X claim it as
deduction on his income?
o It depends.
o If X were a purely compensation income earner: NO.
o If X were a business income earner: YES.
Can the estate of X claim the donation as a TPU? YES. In full?
o YES.
Eh kung non-resident alien si X? Is it required that the property be located in the

Philippines? It is not required. Can X claim it as a deduction?
o YES, IN FULL.
h. Family Home (FH)
- The limit is P1,000,000.00

- When the current fair market value exceeds P1,000,000.00, the excess shall be subject to
estate tax
- Pag hindi umabot ng isang milyon, hanggang value lang ng property
- Not applicable to non-resident alien
- The family home is directly chargeable to the value of the estate.
i. Medical Expenses (ME)
- Actual medical expenses incurred within 1 year prior to his decedent’s death but not to
exceed P500,000.00
33
TAXATION II
- Should there be a relationship between the expense and the cause death?
o NO. The law does not say so. All medical expenses as long as incurred within 1 year
prior to his decedent’s death. Hindi kailangan na yung expenses ay naincur doon
lang sa cause of death.
j. Standard Deduction (SD)
- It is directly chargeable to the gross estate.
k. Amount Received by Heirs under RA 4917 (Death Benefits)

- Amount received by heirs from the decedent’s employer as a consequence of the decedent-
employee.
NOTE: Include first in the gross estate of the decedent.
l. Property Previously Taxed (PPT)
2 aspects:
1. Property inherited (mortis causa); or

2. Property received as a gift (inter vivos)
Example:
Si X (tatay), may anak, si Y. Pag namatay si X, mapupunta kay Y. Ang tawag kay X ay prior
decedent. Pag namatay si Y, mapupunta sa kanyang anak, Si Z. Ang tawag kay Y ay present
decedent.
Vanishing Tax (VD)
- In computing the estate tax due of the present decedent, this can be used as a remedy to reduce
estate tax due.
0-1 year 100%
1-2 years 80%
2-3 years 60%
3-4 years 40%
4-5 years 20%
5 years or more 
34
TAXATION II
- Applicable to non-resident alien, provided that the property is in the Philippines
Conjugal Share of the Surviving Spouse
- Out of the conjugal properties of the spouses, deduct first the 9 prior deductions before you divide it
by two; the result will be the conjugal share of the surviving spouse.
Example:
P10,000,000 (conjugal properties) – P3,000,000.00 (9 prior deductions) = P7,000,000.00, divided by 2 =

P3,500,000.00 is the conjugal share of the surviving spouse.
Bakit ideduct mo yung siyam? Perfect example niyan yung claims against the estate? Kasi pag ang
asawa nangutang, ang presumption niyan under the civil code is that the family benefited from the
pangungutang. Also, the expenses of the family is presumed taken first from the conjugal properties.
EXEMPTIONS
Income Tax: Sec. 32 (B)
Estate Tax: Sec. 87
1. The merger of usufruct in the owner of the naked title

2. The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the
fideicommissary
3. The transmission from the first heir, legatee or done in favor of another beneficiary, in accordance
with the desire of the predecessor
4. All bequests, devises, legacies or transfers to social welfare, cultural and charitable institutions, no
part of the net income of which inures to he benefit of any individual, provided, that not more that
30% of the said bequests, etc. shall be used by such institutions for administration purposes
- It applies to non-stock, non-profit organizations
- If it is a transfer for public use, apply Sec. 87
35
TAXATION II
DONOR’S TAX
4 Kinds of Donors
- ‘yung donor’s tax, pareho lang yan ng estate tax. There are 4 Kinds of Donors. Actually in the Tax
Code, dalawa lang ‘yung klase ng donors, residents and non-residents. But when you look at it, pwede
mo siyang i-break into:
1. Resident citizens
2. Non-resident citizens
3. Resident aliens
4. Nonresident aliens
Here we are talking about transfers of property inter vivos, during lifetime and gratuitously made without
consideration. That’s Sec. 99 of the Tax Code.
Taxability of a gift: (same with estate tax)
- Dependent on the location of the property.

- Within or outside of the Philippines.
- In the case of a non-resident alien donor, only the properties located in the Philippines shall be
subject to donor’s tax.
NOTE:
 Inter vivos – donor’s tax

 Mortis causa – estate tax
Anu-ano ba ‘yung mga properties?
1. Real properties – within or outside the map of the Philippines.

2. Tangible Personal properties - within or outside the map of the Philippines.
3. Intangible Personal Properties – apply Section 104 similar to estate tax. Subject to Reciprocity Rule.
Same scenario yan, real property.
NOTE:
Capital Gains Tax (CGT) Donor’s tax

- file it in the place where the property is - paid by donor
located. - paid at place of residence of donor (not
based on location of property)
NOTE: In the case of a non-resident alien donor, wala
‘yan sa Pilipinas. Likewise in the case of non-resident
alien decedent, ‘yung namatay na wala sa Pilipinas.
 San fina-file ang return? San nagbabayad ng
estate at donor’s tax?
- Sa Office of the Commissioner.
‘Di ba sa SpecPro, “For judicial settlement of estate of nonresident aliens, you can file the petition anywhere,
in any court which have jurisdiction over any of the properties of the deceased. “
- We don’t follow that in estate tax or donor’s tax.

- Rule: If the decedent or the donor is a non-resident alien decedent or donor at the time of death or
gift, we file the return and pay the tax due before the Office of the Commissioner.
36
TAXATION II
- Hindi where any of the properties is located in the Philippines.
Location
Taxpayer
Within Without
RC  
NRC  
RA  
NRA  
We also have to understand that by looking at the table provided in Sec. 99 in relation to Sec. 104, that there
is double taxation in the broad sense. Kitang-kita agad especially in the case of a non-resident citizen, lahat
yan. Resident citizen for all the properties located outside, these may also be subjected to donor’s tax in the
country where it is located, pwede yan. Likewise in the case of a non-resident citizen, gano’n din. At itong
resident alien, the property located in the Philippines and outside the Philippines may also be subjected to
donor’s tax in the country of which he is a citizen of. Here, same thing. We can see immediately double
taxation in the broad sense.
And to reduce the impact of double taxation in the broad sense, the law provides for the following remedies:
1. Tax Credit
2. Reciprocity Rule under Sec. 104 of the Tax Code
NOTE: Doon sa estate tax we have the remedy of Property Previously Taxed as an additional remedy.
Ito ang pinakamadali sa lahat. Doon sa income tax ang daming items ng gross income. Sa estate tax ang
daming items ng inclusion. Dito, wala. Basta lahat ng pinamigay mo:
1. Transferred during lifetime

2. Gratuitous without consideration
- Subject to donor’s tax.
Does it have to be called a donation?
- No.
1. Condonation of indebtedness;
2. Waiver of indebtedness;
3. Waiver of inheritance.
- As long as you waive your right, meaning, you transfer your property without any consideration
during your lifetime, gratuitous, then it will be subject to donor’s tax.
NOTE: In case of waiver of inheritance, if the:
 Waiver is generic - no donor’s tax

 Waiver is specific, either as to an heir or as to share/s - subject to donor’s tax.
Kayong apat na magkakapatid, 4 sisters, nagmana kayo ng property sa magulang niyo. Sabi niya, I
waive my inheritance in favor of my co-heirs. Ibig sabihin the 3 of you get equal shares. Wala ‘yan,
generic yan. Pero sinabi niya, ‘yung aking share, ang ½ nun binibigay ko sa paborito kong kapatid na
ito, ‘yung ¼ binibigay ko sa kanya, ikaw 1/8 ka lang dahil masungit ka. Meaning specific as to share
iba-iba.
- May donor’s tax component yan. (Specific as to share)
37
TAXATION II
Or sabi mo I waive my share in the inheritance in favor of my sister B only. Kayong dalawa wala.
- May donor’s tax yan. (Specific as to heir)
EXCEPTION: Sec. 100.
o ‘Pag nagbenta ng lugi, namigay ng libre at ang pinamigay mo property other than Sec. 24 (B),
meaning property other than real property, capital asset located in the Philippines. Apat di
ba? Bahay, parlor, bahay, parlor. Natatandaan? Transfer for insufficient consideration.
SUMMARY:
Shares of Stock Shares of Stock

Real Property,
not traded, traded, Capital, Other than (Kapag
Capital Asset
Capital, Domestic Domestic wala sa iba)
located in the PH
Corporation Corporation
1. Sec. 127
Income/Gain CGT NIT
2. Estate Tax
1. Sec. 127, CGT
1. Donor’s Tax
Loss Sec. 100 2. Sec. 100, or
2. Estate Tax
3. Estate Tax
RATES
Donor/Donee
Taxpayer
Stranger Non-Stranger
RC
NRC
30% 2% to 15%
RA
NRA
If the net gift does not exceed P100,000.00 the same shall be exempt. Hindi ‘yan ‘yung the exemption is
P100,000.00. If the net gift does not exceed P100,000, it is not subject to donor’s tax. So hindi ibig sabihin na
kung ang net gift mo ay P1,000,000.00 minus P100,000.00, P900,000.00 lang.
Ang sinasabi ng batas ‘pag ang regalo mo ay hindi lumagpas ng P100,000.00, ‘yan ay exempt.
Pero hindi sinasabi ng batas na lahat ng regalo mo ay bawasan mo ng P100,000.
Who are strangers and who are not strangers?
The following are not strangers:
1. Brother, sister (whether by whole or half-blood), spouse, ancestor and lineal descendant; or
2. Relative by consanguinity in the collateral line within the fourth degree of relationship.
Dyan naman ako nagtataka, eto pag ikaw ay nagregalo sa asawa mo, bawal. Except for moderate gifts? Ano
bang moderate gifts ngayon? Bawal yan sa Civil Code. Pano pag nagbigay ka sa asawa mo?
Ano ang rule sa donation?
- Dapat may donative intent.
38
TAXATION II
- Eto lagi kaming nag-aargumento ng BIR. Donor’s tax is a tax imposed on transfer of property
gratuitously made with donative intent. Dapat may presence ng donative intent. Basic yan sa rules sa
Civil Code on donation.
- So if you do not have donative intent, there is no donor’s tax to be imposed.
Your marriage is annulled, here comes the decree of annulment. Presumptive legitime distributed to
children. Wala pang donative intent doon. Sabi ng batas idistribute mo. So punta ako ng RD, ang BIR,
“Ma’am kailangan pong magexecute ng Deed of Donation.” Bakit mo ipapag-execute ang husband and
wife ng Deed of Donation? Wala naman sinabi. Ang sinabi, ang batas ang nag-uutos na ibigay mo sa
mga anak. Tama ba? This is one in reality talaga. Lagi kaming nag-aargumento ng BIR. When there is a
Decree of Annulment, my position is, here’s the Decree of Annulment, the Registry of Deeds if it involves a
real property should only execute it by transferring the title. ‘Wag niyo ako hingan ng certificate of
Authority to Register and proof of payment of tax because I’m not supposed to pay any tax. I don’t have
any donative intent. I did not donate. I was ordered because of the annulment of our marriage, dissolved
ang property relations. Therefore, you distribute to children the presumptive legitime. So why are you
requiring me to pay the tax? What kind of tax do I pay? Donor’s tax? I did not donate. I do not have a
donative intent. That’s one argument.
Pagdating sa donations, Civil Code provisions apply.
If your gift is:
 P5,000 and below

o hindi mo kailangan ng dokumento.
o Ang proof mo lang ay in-accept.
 More than P5,000
o kailangan may document, notarized, and acceptance may be in the same document or
separate document.
 Real Property
o dapat talaga notarized.
NOTE: Kung wala kang gano’n, walang donasyon. At dahil walang donasyon, wag niyo akong i-tax.
Who are strangers and who are not strangers? Basta kapatid walang distinction, ke ¼ lang yan. Di ba? Wala
naman ¼. Eto (ancestor and lineal descendant) para di kayo nalilito, pataas, walang limit kanunununuan
hanggang sa descendants.
 Descendants - walang limit

 Ascendants - walang limit
 Collateral line - within the fourth degree of consanguinity.
So ‘yung mga in-laws, pag sila ang nagdonate to each other, strangers sila, 30% ang rate ng tax.
Political candidates, Political parties for Campaign Purposes
Sec. 98 (C) Any contribution in cash or kind to any candidate, political party or coalition of
parties for campaign purposes shall be governed by the Election Code, as amended.
We will notice in the code, meron nakalagay political candidates, political parties for campaign purposes. So
ano naman ang rule dito?
39
TAXATION II
Even if the tax reform is approved, that will not be changed and that will still be applicable.
So sabi dyan, donations in favor of any candidate, political party or coalition of parties for campaign purposes
shall be governed by the Election Code.
Rules:
1. ‘Pag nag-donate ka, say X nagdonate ng P500,000.00 in favor of a candidate or political party. Ito
‘yung mga katanungan.
o Ito ba ay income dito?
 Yes.
o Within or without?
 Within.
o Subject to income tax?
 No. Gifts, bequests and devises are items of exclusion.
 Likewise, it is provided in the Election Code.
o That is income but not taxable income because gifts, bequests and devises are items of
exclusion under Sec. 32 (B), no. 3.
2. Ang susunod na tanong, since it is not taxable income, lahat daw ba ay exempted sa income tax?
o Hindi.
o BIR Regulation, ang requirements para ma-exempt from income tax on the part of the
political party or candidate must be fully utilized for campaign purposes.
o How do we know if the donation of P500,000.00 is fully utilized by the political party or the
candidate?
 It is based on the Statement of Contributions and Expenditures (SOCE)
submitted before the COMELEC.
 So dyan yang SOCE everytime na may election may requirement lahat ng kandidato
at parties, whether winning or losing, na mag-submit ng SOCE sa COMELEC.
 ‘Yung SOCE, nakasulat doon magkano ang contributions at expenses. At sa expense
side meron specific na mga items na pwede niyo lang pagkagastusan. So lahat ng
contributions naka-enumerate din. Meron yang form so ganyan yan suma total,
suma total.
Kung ito ang contributions ay P500,000.00 at ang authorized expenses according to

Election Code for elections purposes eh P320,000.00 hindi ka nagfully utilized kaya ‘yung
P80,000.00 ay taxable income.
o Ang key is full utilization.

o If the contribution is not fully utilized as declared based on the SOCE, that portion which is
not fully utilized shall be subject to income tax and donor’s tax as well.
o ‘Di ba ito pag dinonate papunta dito walang income tax, no donor’s tax din, exempted. But
according to the BIR Regulation, every election kasi BIR issues this type of Revenue
Memorandum Circular every Local or National election. So ito ang gist ng lahat ng ‘yun, pare-
pareho ‘yun.
o Not subject to income tax and donor’s tax provided that the campaign contributions are fully
utilized for campaign purposes.
3. So there’s another requirement, if the candidate does not file a SOCE officially to the COMELEC, all
campaign contributions are deemed not to have been fully utilized. Therefore, all shall subject to
income and donor’s tax.
4. As far as all the legitimate authorized expenses for election campaign purposes as provided in the
Election Code, the most important requirement on the tax side is for all of these expenditures as
40
TAXATION II
provided in the Election Code the corresponding creditable withholding tax of 5% should have been
withheld and remitted to BIR.
Habang ‘yung P500,000.00 dinonate ko sayo ‘di ba pera, cash, ikaw gagamitin mo sa campaign.
o So anong mga expenditures mo?

 Posters. So ikaw binigyan kitang 500 bibili ka ng posters galing sa kanya.
o Sino ang income earner sa inyong dalawa?
 Siya. So dapat mag-withhold ka. Ikaw ang payor ng income sa kanya. I-withhold mo ang
5%.
 If you failed to withhold and remit to BIR the corresponding 5% even if it is clearly
utilized for campaign purposes then it will not be considered as utilized donation and
therefore lalaki ang iyong excess and therefore subject to donor’s and income tax yan.
‘Yan ang basic requirements.
Pano kung ang binigay mo in kind? Nagpagawa ka ng posters kay Mr. B worth P500,000.00 of posters.
‘Yung posters ang binigay mo kay candidate walang problema kung magkano ang poster ‘yun ang
ilalagay by the time of valuation.
o Is that income on your end?

 Yes.
o Is that taxable income?
 No. not subject to income tax, not subject to donor’s tax.
1. Posters were fully distributed; and
2. You have proof that the posters are distributed.
‘Pag nagpagawa ka ng posters may nakalagay doon, requirement from COMELEC, at saka TV ads,
“These are sponsored by Mr. A, cellphone number ____” kasi sayang ang airtime. Sa posters nakasulat
yan dito, “Paid for by friend of ganyan ganyan, telephone number.”
o Bakit may ganyan?

 Kasi dapat ‘yung tax ng posters sinubject sa 5% withholding tax.
o In this case, sino ang magiging withholding agent?
 Si X kasi siya ang nagpagawa ng posters kay B, siya ang nagbayad kay B. Pero ang
ibinigay kay X ay ang posters hindi P500,000.00. So dapat nakasulat doon paid for
by Mr. X.
o Sino ang hahabulin ng BIR?
 Si X kasi nakasulat. Lahat ng campaign ads di ba sa TV.
There’s another way to cross-match ng BIR and COMELEC. All ad agencies, TV stations, newspapers,
media na nag-accept ng campaign ads may requirement sa kanila to submit an independent report.
Anong independent report?
o May format. Sino? Magkano? Kailan? Ilang minutes? Anong itsura? At naka-CD ang sample,
naka-attach, notarized.
o So ico-cross match lang yan sa sinubmit na SOCE ng kandidato.
5. Next, paano ang campaign contributions received prior to official campaign period or after the official
campaign period?
o Everything before and after, subject to income tax, subject to donor’s tax.
o Lahat ng yan na tinanggap mo, kahit na ginastos mo, the same shall be subject to donor’s and
income tax. Sasabihin mo, tanga ba ako? Bat ko idedeclare ‘yan eh alam kong taxable sa akin?
41
TAXATION II
Eh napakadali. Eh kung dineclare ng donor na binigay sayo eh nasaan? Meron donor, walang
donee? Yan ang cross matching n’yan so very easy to detect and trace.
o Eh ‘pag election pa naman ang daming salapi kasi lahat cash ang transactions. Very few ang
check transactions. So cash, so umiikot. Bakit ginanyan yan ng BIR? If you look at the code,
walang nakasulat na ganyang rules. So naggawa ng regulations, RMC, ang BIR. Eh bakit kaya?
Ibig bang sabihin nyan, invalid determination na yan?
 Hindi, because it explains the operations on what to do and what happens normally.
o Ang nangyayari diyan pagka nagsubmit ng SOCE, pagkasubmit sa COMELEC, ‘yung may tatak
ng COMELEC, pupunta ka sa BIR patatakan mo para ‘yung COMELEC may kopya ng SOCE.
Failure to do that is non-compliance with the Election Code requirement. So ang BIR alam na
alam nila na sino ang nagtatago. Sino ang hindi.
NOTE:
 Contributions made not within campaign Subject to:

period 1. Income Tax
 Unutilized Contributions (Excess 2. Donor’s Tax
Contributions) – not fully utilized
6. Next na tanong heto, pagkatapos ng election ‘yung sa facebook ‘yung kay President Digong may nag-
post tseke. Sinosoli namin, di namin nagastos. Sinosoli namin ‘yung ibang contributions kasi di namin
nagastos. Anong effect ng pagsosoli? Does it mean that you will not be subjected to tax?
o No. the fact na sinosoli mo hindi ka nag-fully utilized. O di dapat itax mo muna yan. Hindi
namin nagamit. Sobra sobra pa nga po kami.
Kay VP Binay, there was an issue of unexplained wealth sa knaya ngunit at that time hindi pa
masyadong grabe ‘yung mga tira sa kanya. One of the reasons na sinabi ni Senator Nancy Binay, “Eh
ano namin ‘yan eh campaign contributions na di naming nagamit.” Patay. O sinabi niya ‘yan sa media
although it was way before the election so hindi masyadong napansin. Patay kako, so you mean you
have excess contributions. Meaning you did not fully utilize in the previous elections your campaign
contributions. Eh nasaan ang tax po? Although si Kim Henares for whatever reason hindi niya pinursue
yan or the candidates.
Remember also that the election made in the 2016, the year before in 2015, COMELEC came out with a
list of candidates winning and losing who did not submit the SOCE for the previous local election and
that was about 800 candidates and political parties. So dapat un sinubmit kay Kim at ng nakakolekta
ng tax. Pero come to think of it paano mo kokolektahin eh wala na nga po. Ubos na, because in
campaign talagang expenses are in out in out talaga yan eh. Ang hirap i-control. Nevertheless yan ‘yung
summary.
And then dun sa income tax at estate tax ang daming items of inclusion, dito wala nun basta inter
vivos, gratuitous, walang consideration, with donative intent, tapos ang usapan i-tax ninyo, donor’s
tax.
DEDUCTIONS
Net income tax formula:
Net Income – Allowable Deductions = Taxable Net Income x Rate, then Tax credit, if any.
42
TAXATION II
Estate tax formula:
Gross Estate – Allowable Deductions = Taxable net Estate x Rate, then Tax credit, if any.
Donor’s Tax formula:
Gross Gifts/Gross Donations – Allowable Deductions = Taxable Net Gift x Rate (depending if
stranger or not a stranger)
Donor/Donee Deductions
Taxpayers Within Without
Strangers Non-Strangers 1 2 3
RC     
NRC     
30% 2% to 15%
RA     
NRA     
Allowable Deductions
1. Dowries or gifts made on account of marriage and before its celebration or within one year thereafter
by parents to each of their legitimate, recognized natural, or adopted children to the extent of the
first P10,000.00.
Key words: On account of celebration of the marriage.
‘Pag binigyan ka ng regalo ng tatay mo Mr. S, kotse dahil nagraduate ka ng law school
o walang P10,000.00 deduction ang iyong ama.

o Hindi on account of the celebration of marriage.
Ay paano kung bigla kang iniwanan ng mapapangasawa mo na naibigay na ang regalo sa iyo?
o Ay walang problema. Ibinigay pa rin yan on account of the celebration of marriage. Pero
P10,000.00 lang.
o Ay yan talagang outdated, sampung libo. Magkano ang sampung libong regalo sa kasal?
Kulang pa sa traje de boda, kulang pa sa isang gown. Yan talaga dapat tinatanggal na yan.
Why deduction in no. 1 does not apply to NRA?
o Kasi po sa Pilipinas, uso na ‘pag mag-aasawa ka ay buhay ng magulang. Sa ibang bansa

magpakasal ka o hindi walang pakialam ang magulang mo. ‘Pag 18 ka kailangan mong
magtrabaho para mabuhay. Dito sa atin kasi filial tayo. That is why meron ganyan. ‘Di ba pag
mag-aasawa ang anak, ako ang gagastos. Tapos may regalong bahay. Meaning, they give you
all the benefits to start right. And that’s the reason. But like what I said, it is very outdated.
What is P10,000? Bilhan lang natin ng ilang hotdog yan.
2. Gifts made to or for the use of the National Government or any entity created by any of its agencies
which is not conducted for profit, or to any political subdivision of the said Government.
o Counterpart in Estate Tax: Transfers for Public Use
o Counterpart Income Tax: Sec. 34 (H)
Siyempre ‘pag namigay ‘to sa gobyerno libre, walang in proportion. Wala sa Pilipinas, foreigner nag-
care sa ating bansa, binigyan ang gobyerno, libre naman natin ng buwis.
43
TAXATION II
Nakwento ko na ba sa inyo kung bakit dyan (donor’s tax) walang for exclusively for public purpose?
Bakit ‘dun sa donor’s tax version sa Sec. 101 wala niyan? Ibig bang sabihin niyan pag nag-donate ka
sa inter vivos sa gobyerno hindi kailangan for public purpose pwedeng gamitin ng gobyerno?
o Hindi pwedeng hindi gano’n. Lahat ng yan may public purpose kaya ka nagdodonate.
o The assumption is all gifts in favor of government is given for public purpose.
o Bakit nga may requirement?
 Estate Tax - Kasi ‘pag estate tax kaya nilagyan ng ganyan kasi patay na ‘yung tao. So
pag ginamit ng gobyerno sa propriety purpose wala ng makakapaghabol kundi
‘yung kanyang heirs.
 Donor’s Tax - Unlike pagka-donation bakit wala? Kasi buhay na buhay ka. So pag
ginamit ng gobyerno kung pinaglagyan ng Mcdonalds, babawiin ko na yan kasi
walang public purpose. Pero hindi ibig sabihin na ‘yung isa walang public purpose
kasi the assumption is when you are giving in favor of the government the reason
why it is not subject to tax because ginagamit ng gobyerno, nagbenefit ang
gobyerno.
3. Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation,
institution, accredited nongovernment organization, trust or philanthropic organization or research
institution or organization: Provided, however, that not more than 30% of said gifts shall be used by
such done for administration purposes.
Pero may difference ito, ang donor’s tax when you look at Sec. 99 nakalagay calendar year. Anong ibig
sabihin nyan? Anong ibig sabihin nung based on a calendar year?
o Ibig sabihin January to December ang pagco-conclude. For gift as of.
Let us say Mr. S, ang tatay mo si Mr. X. binigyan ang anak. Kailan? January. Kawawa naman luma na
ang kotse. Binigyan ng kotse worth P600,000. February, naawa kay anak, B, P600,000 din para wala
kayong inggitan. Mr. C, due P600,000 on account of celebration of marriage. Aba ang anak magba-bar
ng November, kawawa. Ayan pare-pareho kayong apat kong anak. Bawat gift you pay the tax due
within 30 days from each gift. That’s the rule. Pay the tax due per gift 30 days after each gift. So per gift
you compute.
January S P600,000.00
February B P600,000.00
June C P600,000.00 (Wedding)
November D P600,000.00
Let’s take the case of Mr. S, magkano babayaran ng iyong ama?
o May deduction?
 Zero.
o Net gift
 P600,000.00 multiplied by the rate.
o Donor-donee related
 15%.
o Anong rate?
 P20,000, bayad 30 days pagkabigay ng regalo. Hindi dini-deduct si 100.
Nagregalo Valentine’s gift. P600,000.00
44
TAXATION II
o Sino lahat magbabayad ng donor’s tax?

 Si tatay
o Saan magbabayad?
 Place of residence ni tatay.
o So February P600,000.00, January P600,000.00. The gross gift as of February is
P1,200,000.00 less deductions.
Habang dumarami ang regalo sa padulo ng taon, lumalaki ang tax.
As of kasi kaya lahat ng previous gift kasali. AS OF. So lumalaki.
JANUARY (S) P600,000.00 FEBRUARY (B) P600,000.00 JUNE (C) P1,800,000.00

- 0 JANUARY + P600,000.00 0 (deductions on January)
0 0 (deductions on February)
P600,000.00 - P10,000.00 (deduction on
- P500,000.00 P1,200,000.00 account of marriage)
0 (deductions on January)
P100,000.00 - 0 (deductions on February) P1,790,000.00
x .06 - P1,000,000.00
P1,200,000.00
P6,000.00 - P1,000,000.00 P790,000.00
+ P14,000.00 x .08
P200,000
P20,000.00 x .08 P63,200.00
+ P44,000.00
P16,000.00
+ P44,000.00 P107,200.00
- P60,000.00
P60,000.00
- P20,000.00 (previous tax paid) P47,200.00
P40,000.00
Pagdating ng November iba na naman yan. ‘Yun ang ibig sabihin ng “As of.” So kung gusto niyong makatipid
ng donor’s tax ng hindi kayo magi-guilty na avoid ng evasion,
1. Huwag kayong magdonate ng madaming beses sa isang taon. Kasi ikaw ang nagbabayad.
2. Hatiin ninyo.
Anong unang gamit? 100? Hatiin ninyo. 200 ang regalo, isa December 31, isa January 1. The following year pa
lang na-tax na yan pareho. That’s allowed pero mahirap ‘yan ‘pag ang donation mo malaki kasi yearly sasabihin
mo halimbawa, P1,000,000.00. Paano kaya ako makaka-avoid?
- Ngayong taon na ito 1/10, sa susunod na taon 1/10.

- Sampung taon libre ka ng donor’s tax, papatayin ka naman sa registration fees.
- If real property, because everytime na you execute a document may DST (Documentary Stamp Tax)
na 1.5. So on top of the donor’s tax di ba documented, meron 1.5 na DST. So kung sampung beses
mong dinonate si P1,000,000.00, sampung 1.5, 15% un sa loob ng sampung taon.
- Comparing it with donating at P1,000,000.00 times the rate once mo lang i-donate. So you do the
computation.
45
TAXATION II
For purposes of registration of real property every time you present a document before the Registry of Deeds
kahit 1/10, 1/10, 1/10, hindi mo siya pwede ipresent ng isang beses lang ‘yung sampung dokumento. Dapat
taun-taon ipini-present mo, otherwise, may fees ka, may penalty ka. So kung donor’ tax ang pag-uusapan
walang problema, pwede kang malibre. Pero you must consider in reality ‘yung balik naman sa kabilang side,
documentation plus the processing of documents and the the DST pa, 1.5%. As many documents as you
execute times 1.5% yan. So gano’n din siya. Pero for purposes of donor’s tax, you can avoid, not evade,
because that is valid.
Bar Exams question: X and Y gave A and B P200,000, subject to donor’s tax?
Ilan ang regalo?
- Apat.
X+Y→A+B
o X → A (P50,000.00)
o X → B (P50,000.00)
o Y → A (P50,000.00)
o Y → B (P50,000.00)
Subject to donor’s tax?
1. Kung sila ay strangers - lahat yan subject sa donor’s tax at the rate of 30%.
2. Kung sila ay hindi strangers - each one is exempt.
Kung si X ba nagbigay kay A, nagbigay, kay B. On the assumption na isang taon yan binigay, may subject sa
tax? Si X nagdonate kay B.
1. Kung strangers, walang problema.

2. Kung hindi strangers, si X at A, at si X at B, at sa loob ng isang taon. Exempted or not?
o ‘Yung P50,000.00 exempted.
o ‘Yung B? As of. Ano unang level? P100,000.00. Exempted. But not over so exempted.
May sumunod na letter B question, ginawang P400,000. Isa lang ang pinalitan. So ang regalo ay P100,000 each.
Yan bang regalong yan ay subject sa donor’s tax o hindi? Bawat isa.
- Kung strangers lahat ng yan apat, bawat isa subject sa donor’s tax.
Assuming that X is related to A and B, they are not strangers and that the assumption that the gifts to A and
B are within 1 year. Subject to donor’s tax or not?
o Only the first gift is exempt.

o The 2nd gift will no longer be exempt because the gross gifts then become P200,000. Tama?
Gano’n din ka Y at A and B. Kung si Y at si A and B ay strangers, lahat yan parehong 100, 100
subject to donor’s tax. Pero kung sila ay not strangers and on the assumption that the gifts
are made in 1 year then the 2nd gift whichever is, the later gift will be subject to donor’s tax.
Not strangers – only first gift is exempt
Strangers – 30%
o X → A (100)
o X → B (100)
o Y → A (100)
o Y → B (100)
46
TAXATION II
REMEDIES UNDER THE NIRC
- Ang internal revenue tax ay pay as you file system.

- Self-assessment and pay as you file system.
Self-assessment - all the internal revenue taxes that we have, kayo ang nagco-compute, ang taxpayer. Kayo
ang nag-aassess sa sarili ninyo.
Pay as you file - Ibig sabihin as you file the return, you pay the tax due that you computed. Lahat yung
remedies, yung topic ng remedies will always start with you, the taxpayer.
Internal Revenue Taxes:
 Income tax
 Value-added tax
 Percentage tax
 Estate tax
 Donor’s tax
Anong fina-file?
- Return
o A verified and subscribed and sworn to statement made and prepared by the taxpayer
providing for the relevant information necessary or material to the kind of tax that you are
paying for.
o There is a presumption applied that all returns are prepared and filed in good faith. That is a
disputable presumption.
FILING OF RETURN:
When a return is filed, ang mga itatanong natin sa ating sarili ay ito:
1. What do you file?

o We file a return. For all kinds of internal revenue taxes there’s always the corresponding
return.
2. Where do you file?
o You file it before the Revenue District Office (RDO) which has jurisdiction ‘dun sa
transaction. Lahat kasi ng taxpayers registered lalung-lalo na kung income tax. Nakarehistro
kayo.
o Kapag mali ang venue ninyo kahit na tinanggap ang return at tinanggap ang bayad, it is as if
no return was filed and no tax was paid. Hindi ninyo pwedeng sabihin na kahit mali ang
venue total pare-pareho naman ang BIR ay credit nalang sa inyo sa tamang RDO. Walang
ganun dito.
 Anong remedy mo? Pwede mo bang sabihin, “Eh binayad ko naman po eh,” “Finile
ko naman ang return.”
 Hindi pwede ng estoppel sa gobyerno. Bawal yan, that is not acceptable.
 You have to pay again to the proper venue. File the correct return with the
proper venue, pay the same amount of tax and you file a refund for the
previously paid tax.
3. When do you file the return?
o Depende.
47
TAXATION II
A. Income Tax
1. Individual (compensation income earner) – on or before April of the following year.

2. Individual (business income only or business income + compensation income earner) – 1, 2, 3
quarterly returns within 60 days from the close of the quarter plus one final consolidated return on
or before April 15 of the following year.
3. Corporation – 1, 2, 3 quarterly returns within 60 days from the close of each quarter.
a. Calendar year - the 4th return shall be filed on or before April of the succeeding year.
b. Fiscal year - 1,2,3 quarterly returns within 60 days from the close of the quarter and the final
consolidated return is due on or before the 15th day of the fourth month following the close
of the fiscal year.
NOTE: Ang lahat ng tao ay gumagamit ng calendar year whether compensation income ka or
business income ka, kaya ang returns mo kapag compensation isa lang on or before April 15 of
the following year.
Individual Compensation Earner
- So January to December 2016, the due date is April 15 2017.
Individual (business income only or business income + compensation income earner)
- 1,2,3 quarterly returns within 60 days from the close of each quarter + one final consolidated
return on or before April 15.
o January, February, March, first quarter ang return ay due kalian? Kailan ang return? May.
o Second Quarter: April, May, June? August.
o Third Quarter: July, August, September? November.
o Final Consolidated Return: April 15, 2017.
Corporation
- 1,2,3 quarterly returns + one final consolidated return

a. Calendar year - same as individual.
b. Fiscal Year
So let us say ung fiscal year mo nagsimula ng February 1.
o First Quarter: June.
o Second Quarter: May, June, July? September.
o Third Quarter: December.
o Final Consolidated Return: May 15.
B. Capital Gains Tax
- 30 days after transaction.
C. Withholding Taxes (Creditable Withholding Taxes, or Final Withholding Taxes)
Sinong nagfi-file ng return?
- Withholding agent.
48
TAXATION II
Kailan ang due?
- Every 10th of the following month.
D. Value Added Tax
a. Monthly return
o on or before the 20th of the following month.
b. Quarterly returns
o on or before the 25th day after the close of the quarter.
So kung VAT returns:
VAT dalawang returns, monthly at quarterly. Monthly, every 20th of the following month. So kung January,
February 20. February, March 20. Dapat ang March meron April 20 pero tatanggalin mo na siya. ‘Yung
March hindi ka na magfi-file, nagiging quarterly return na siya sa tatlo. So April 25. Pagdating ng April, May
20. May, June 20. July di ka na magfi-file. Kalian? August 25. So on and so forth. So labindalawang returns
ang VAT na fina-file sa loob ng labindalawang buwan.
E. Percentage Tax
- Ang percentage tax ay katulad ng VAT. So ‘yan fina-file din ng ganyan (referring to VAT).
F. Estate Tax
- 6 months from death.
NOTE: Hindi iyan kino-convert sa 180 days.
Ang rule kung namatay ka ng February 14 - March 14, April 14, May 14, June 14, July 14, August 14. Gano’n
ang pagbilang. ‘Di ba tayo sa Civil Code, pag sinabing 1 x 30. So ang tendency lagi 180 days ay marami sa
Pilipino namamatay 1920 hindi sine-settle ang estate ngayon lang babayaran. So hahanap ka ng kalendaryo
nung 1920 bilang ng 180. Hindi na. Kung anong araw ng pagkamatay mo ‘yun ang bilang.
G. Donor’s Tax
- 30 days from gift.
NOTE: Ito naman kalendaryo ang katapat niyo. Hindi siya kino-convert ng araw.
May mga pilosopo 6 months. Eh Ma’am paano kung namatay February 29?
- Ay ‘ung susunod na buwan March 29 walang problema.
Ang problemahin paano pag namatay ng 30? Namatay ng August 30?
- ‘Di ang bilang mo ngayon, September 30, October 30, November 30, December 30, January
30, February 30. Wala akong 30. So ililipat ko ba ng March? Hindi, February 28. Kung leap
year ang tinapatan, February 29 ‘yun ang due date.
NOTE: So nagbibilang tayo depende sa due dates.
49
TAXATION II
NOTE: So tandaan ninyo pag compensation income earner ka di mo kailangang mag-file ng return if qualified
or substituted filing.
Substituted filing
- Employer files for you and your behalf.
Requisites:
1. Isa lang ang employer mo sa isang taon

2. Wala kang ibang income other than compensation
So kung ikaw ay January to April nag-resign. Wala kang trabaho ng Mayo hanggang Hunyo. Na-employ ka
August.
- Hindi ka pwede ng substituted. Why? Because you have 2 employers in a year.
Kahit pa isang araw ka lang, na-employ ka ng December 30. December 31 holiday nga employed ka na eh ‘di
may sweldo.
- Hindi ka pwede ng substituted filing. Bakit? You have 2 employers in a year. Your employer B will
not file for you and your behalf. That will not be allowed.
- Bakit? ‘Pag ikaw ay nahuli ng isang segundo isang araw ang katapat mo agad ay penalty.
- Magkano? 25% of the principal amount of tax due plus for every day of delay beyond the due date
20% interest per annum computed daily.
And worse, when there is fraud or bad faith in the preparation or filing of return , 50% surcharge will be
imposed.
NOTE: Tandaan ninyo pag narinig niyo ang salitang surcharge sa isang problem ibig sabihin may element
of fraud or bad faith. That is a criminal offense already kaya 50% surcharge. So mahuli ka ng isang minuto
isang araw ang katapat nyan ay penalty of 25% of the principal amount of tax due plus interest 20% per
annum computed daily. I repeat if you are guilty of fraud or bad faith in the filing of the return and
consequently in the payment of the tax due as you assessed and computed 50% of the principal amount
of tax due will be imposed.
Deficiency interest - kulang ang binayaran.
Delinquency interest – late nagbayad.
Taxpayer, ano ang posibleng gawin ninyo?
1. File return in good faith

2. File return in bad faith or fraudulent return
3. No return was filed
NOTE: When you do not file any return, the BIR may even file a return for you and your behalf.
50
TAXATION II
NOTE: Ang topic ng remedies wala ditong mga third-party, intervention. Tayo lang ang nag-aaway. Isa lang
pinag-aawayan natin ayaw mong magbayad ng buwis, ako naniningil ng buwis. Ang cause of action ay
pagbabayad ng buwis.
NOTE: Tayong dalawa lang ang magka-away. Walang third-party, intervention, cross-claimant.
So the ball game is now on me, BIR. Finile niyo sa akin sa due dates. Anong gagawin ko? Eh ‘di aaralin si
return.
NOTE: We now have the Electronic Filing and Payment System (EFPS).
- BIR is now automated but only on income tax and offering it to certain taxpayers. Hindi pa siya full
100% so ang automated pa lang talaga sa atin sistema ay income tax system. The filing of income tax
returns at ang requirement ay hindi pa lahat ng klase ng taxpayers ay required ng automated, ng
EFPS.
- Pero lahat ng forms natin ay electronic forms. Meaning, lahat ng forms ay electronic downloadable
and you can fill-out manually and you can file manually except for certain taxpayers. ‘Yung ibang
taxpayers like top 5,000 corporations these are not in the Code, these are covered by BIR issuances.
Top 10,000 individuals, any taxpayer who enters into government contracts required yan mag-EFPS.
So nag-concentrate muna sila sa isang segment ng taxpayer.
- Advantage of using the EFPS: Sa halip na alas singko ng hapon, pwede kang mag-file kahit alas onse
ng gabi. Pero dahil pay as you file ay hindi ka makakabayad sa bangko kasi ung bangko kailangan ang
bayad mo ay diyan din sa due date. So nag-file ka computerized eh internet pumasok may
confirmation receipt eh paano ka pupunta ng bangko? Eh di ka rin nagbayad, may penalty ka pa din.
NOTE: On-line banking transaction and credit cards are allowed but in selected banks only and there is
service level agreement (SLA) entered into between the bank and the BIR.
- What’s the undertone in using credit card?

o There is a requirement that your data will be forwarded to BIR. The requirement of the BIR
in the SLA is that all the credit cards holders the data should be given to them to make sure
that the credit card use is through (computerized?) transaction. What happens kung tayo
may maling transaction? ‘Pag nagkamali ang remedy mo is refund which will take time.
Tapos lahat ng charges of the bank will be on top of the tax due.
There was an issue this year. Last year kasi may lumabas na BIR issuance on the use of debit card and credit
card. Ang sabi ‘dun is that, when did you pay the tax? Kasi ‘di ba may transaction today tapos kinaskas ‘yung
card mo. Hindi naman ‘yan agad nire-remit eh. Last year ang ruling ng BIR ay payment shall be treated as
effective payment only upon actual remittance. So kung ikaw last day mo ngayon nagkaskas ka using your
credit card ininput mo eh ‘di pumasok sa card mo today siyempre ‘di yan mare-remit ng credit card issuing
bank. Kailan? Delayed ka. Penalty will be imposed.
This year, Commissioner Dulay revised that regulation. Ang rule na ngayon is as long as ma-input mo
regardless of remittance. As long as there is remittance, treated as paid on the date of the transaction.
Which is I think is more reasonable kasi you will have to incur penalties and surcharges eh ‘di mo naman
kasalanan kung last day April 15 ginamit mo ung credit card mo. Eh ‘di ba April 15 ka nagbayad? Although
saka pa lang siya mare-remit ng issuing bank. So ngayon baliktad na which is tama lang na ayusin nila.
51
TAXATION II
So eto na ‘ung return finile ninyo. Dapat finile ninyo sa:
- tamang lugar; at
- tamang panahon.
BIR’S ASSESSMENT OF THE RETURN:
So anong gagawin ko (BIR) dito (return)? Tititigan ko ‘to, aaralin ko ‘to. In other words, I’m going to
determine whether or not you filed the correct return. Even if you filed in good faith, it doesn’t mean that I
will not find anything wrong with the return that you filed. If you filed in bad faith, expect something from me
natural. So ang aking gagawin ay I will use all of the powers, duties and responsibilities under Sections 5-15
of the Tax Code.
- Issuance of subpoena duces tecum, ad testificandum.

- Require your employees to testify.
- Require you to submit documents.
- Use the net worth method.
- Provide for your presumptive gross sales or gross receipts based on the best evidence obtainable.
o Ibig sabihin ‘nun, ico-compare ko ang business mo sa business ng similarly situated
taxpayers. Alangan naman na pareho kayong parlor. Di ba uso sa Pilipinas sari-sari store
magkakatabi? Ang pinagtatakhan ko kung paano ka kumikita. Saka ung carinderia di ba? So
bakit ung carinderia ni Nanay 9 million ang kinita restaurant, ikaw 500,000? Anong meron?
So the BIR can use that on anything under Sec. 5-15 of the Tax Code.
If the BIR finds something wrong in the return that you filed,
1. I will issue a letter of authority (LA) and the first step is, letter of authority to investigate.
- You will be required to file a reply and produce the documents.
2. With or without the reply I will issue the Preliminary Assessment Notice (PAN).
- You will again be required to file a reply.
3. With or without the reply, I will issue the Final Assessment Notice (FAN).
When do we say that FAN is valid?
Requisites:
1. in writing
2. addressed to the taxpayer
3. providing for the basis in fact and in law of the assessment
4. the amount of tax due
5. the due date for the payment
6. the demand to pay
7. it must be signed by the duly authorized BIR representative
8. sent to and delivered to the taxpayer
NOTE: Pwede kayong walang PAN under Section 228 of the Tax Code.
NOTE: Tandaan din procedural requirements ito. Failure on the part of the BIR to follow the system, the
steps, is denial of due process. Napakarami na ng kaso ng BIR ang nadidismiss dahil dito. Steps 1,2,3 or 1,3, if
any of the circumstances under Sec. 228 is present. Pero hindi pwedeng 3, 2, 1 or 1, 3, 2 or 2, 3, 1. 1,2,3 dapat,
ang daming kaso niyan decided by the Supreme Court. Failure on the part of the BIR to comply with these
52
TAXATION II
shall be deemed the denial of due process and therefore the BIR will lose its right to issue an assessment and
collect.
So ‘pag kayo ay tinawagan, hindi kayo ngumiti wala pa. Hangga’t hindi kayo nakaka-tanggap ng in
writing, hindi yan valid. May mga kaso dito mga example nito sumulat dati si Commissioner Kim kay Leila
De Lima, DOJ Secretary. Ang nakasulat covering letter,
Dear Leila,
Please see the following attached complaint affidavits against various taxpayers. Please
facilitate the filing of tax evasion cases.
Love, Kim
Tapos may mga complaint affidavits, ay hindi ‘yan assessment kasi nakasulat dapat sa assessment ang
amount, anong basis, due date, demand to pay, signed by the Bureau of Internal Revenue duly
authorized representative.
What are the prescriptive periods for assessment? Until when can the BIR assess or issue the FAN?
1. Filed in good faith and the same is filed before due date – then BIR can issue the FAN, 3 years from
due date.
2. Exactly filed on due date – 3 years from due date.
3. Filed after due date – 3 years from actual date of filing.
4. Filed in bad faith or fraudulent return (regardless whether before, exactly, or after due date) –10
years from my discovery of the filing of fraudulent return.
5. Non-filing of return – 10 years from its discovery of the non-filing.
NOTE: There is another period covered by a valid waiver. What is a waiver of the prescriptive periods?
Waiver
- this is a contract entered into between the taxpayer and the BIR extending the periods of
assessment.
Ang tanong sa inyong sarili, bakit kayo papayag? Why would you waive? Ang ibig sabihin niyan
matatapos na ang periods na ‘yan, 3 at 10 hindi pa ako nakakapag-issue ng assessment. Sasabihin
ko sa’yo, pwede bang mag-execute ka ng waiver? Ay sasabihin mo, tanga ba ako? Hindi ako mage-
execute niyan para mag-expire iyang karapatan mo. Kasalanan mo iyan eh. Eh di ngingiti ka. Kasi if
I lose the right to issue the assessment I cannot collect by any other means from you. So I will ask you
to execute a waiver. And then you will say, why would I execute? Why would you sign the waiver? If
you don’t, it’s alright. Okay lang sa akin. Sabi ng BIR, okay fine ayaw mo okay lang. Here is the
Jeopardy Assessment (JA).
Jeopardy Assessment (JA)
- an assessment which is in the nature of a FAN and without giving you the benefit of
full audit of your operations.
53
TAXATION II
- issued by the BIR normally when the period of assessment is about to expire and the
taxpayer does not agree to execute a waiver.
- For all legal intents and purposes, the JA is in the nature of a FAN.
- BIR: “Ayaw mo, okay lang. Ayaw mo ng waiver, okay lang. JA ka ah. “
Requisites of a valid waiver:
1. The waiver should have been signed by the taxpayer and the BIR before the expiration of the
original period otherwise, there’s nothing more to extend.
2. The date of acceptance on the part of the taxpayer and the BIR should be indicated on the
face of the waiver.
3. The signature signifying the acceptance by the taxpayer and the agreement on the part of the
BIR should likewise be indicated on the face of the waiver.
4. Should be executed in 3 copies, 1 goes to the taxpayer, the other goes to the case files and the
last one goes to the BIR.
NOTE: Failure to comply with these very strict requirements on waiver, the waiver is not valid and
therefore the BIR loses forever its right to collect.
So nakatanggap ka ng FAN (taxpayer), anong gagawin mo? Kayo naman ulit ang ball game. Kailangan alam
niyo ‘ung due date. Eh kung lagpas ka ng due date, nag-file ka beyond, dapat alam mo pa rin para alam mo
kailan bibilangin. Madali kasi ang periods pero mahirap ang magbilang. Simulang bilangin saan? ‘Yun ang
kailangan dapat marunong kayong magbilang simula saan? Kasi kung hindi niyo alam ang due dates hindi
kayo makakasimula niyan.
Example: Compensation income.
Due date: 15 April 2017
Filed return: 14 February 2017.

BIR’s issuance of FAN (due date): 15 April 2020.
Filed return: Eksakto naman ang katamaran mo at kasipagan

BIR’s issuance of FAN (due date): 15 April 2020.
Filed return: 26 December 2017.

BIR’s issuance of FAN (due date): 26 December 2020.
Filed return: Fraudulent ang finile mo at finile mo on these due dates (referring to the 3 prior examples)
pero Discovery of fraudulent return: 2025
BIR’s issuance of FAN (due date): 2035
Non-filing of return
Discovery of non-filing of return: 2040.
BIR’s issuance of FAN (due date): 2050.
Waiver: Nag-agree tayo mag-eexpire na malapit na ito. Let us say March 29 hindi pa ako nakakapag-
issue. March 30, 2020 wala pa akong FAN. Sabi ko sa’yo, uy waiver nga kayo pwede? Eh ayoko
labinlimang araw na lang kung ‘di mo kayang tapusin problema mo,’iyan sabi niyo. O sige sige ayaw mo
54
TAXATION II
okay lang bigyan kita JA bago matapos ang April 15. Pero kung si JA in-issue ko April 30, 2020 hindi na
lagpas bawal na.
Anong ibig sabihin nito? Dapat ba ito na ma-issue o dapat mo na ma-receive prior to these dates?
Dapat kong ma-issue. So ‘yan ito dapat ang date ay April 15, 2020. Paano mo malalaman? Eh di
dapat nakasulat ang date. Pwede mo bang sabihin, uy niloloko niyo in-antedate niyo lang yan. Sige
may pruweba kayo? Internal ‘yan sa akin eh.
Is it necessary that you received this within on or before April 15, 2020?
No. Ang importante ma-issue ko on or before those dates. Last minute of that date. Hindi ninyo
kailangan matanggap. Kailangan kong ma-issue sa last day ng mga dates na yan.
SERVICE OF ASSESSMENT
1. Personal service
Who: To the taxpayer.
Let us take the case of an individual, Ms. A. How do I serve to Ms. A?
May counterpart ang sheriff, process server ang tawag nila doon.
Where? Registered address.
Eh paano dumating ako sa bahay mo wala si Ms. A. Kanino ko pwedeng iwan?
2. Substituted service
- Person of sufficient discretion.
o Any person who understands and comprehends the materiality of a FAN.
o So kanino? Kailangan bang 10? Kailangan bang 18? Walang ganun. Sufficient discretion.
o Burden of proof: BIR that it was properly served; that it was served personally to the
taxpayer or by substituted service to the taxpayer.
Katulong?
 Pwede basta may sufficient discretion.
Kapatid?
 Pwede.
So iniwanan ko ayaw tanggapin. Anong gagawin ko?
- Punta akong baranggay. Captain, baranggay officer i-serve ko sayo ayaw tanggapin. Witness ko kayo
na iniiwanan ko, isini-serve ko at ayaw tanggapin ung assessment.
- Pagbalik ko ng opisina gagawa ako ng return, parang return of summons.
o I-enumerate ko ung ginawa kong activities. Isusulat ko on this date, naka-detail iyan.
Personal service, wala doon nag-substituted service ako ayaw pa rin tanggapin. Kumuha po
55
TAXATION II
ako ng baranggay eto ang proof. Isusulat ko iyan. And that will form part of the records of the
case.
NOTE: If the taxpayer has not received any FAN it is as if no assessment was issued to him. Kailangan
matanggap niya ‘yan.
Service to Corporation
- Person of sufficient discretion:

1. President
2. Managing Partner
3. Treasurer
4. In-house Counsel
5. Corporate Secretary
6. General Manager
Eh wala sila, kanino?
- Substituted service to a person of sufficient discretion.
Pwede mo bang iwanan sa secretary ng Presidente?
o Yes.
Ayaw pa rin tanggapin. Anong gagawin ko na naman?
o Barangay, gano’n din.
When the personal service and the substituted service fail, what will I do?
o Registered mail. Ang BIR very few instances na nagre-resolve sila ng registered mail although
lately medyo effective na ulit sila sa registered mail. Pero kahit pa natanggap kung hindi kayang
i-prove ng BIR na ang tumanggap ay si Ms. A at sino si Ms. A in relation to the taxpayer,
mahihirapan pa rin ang BIR to prove that the taxpayer if he denies. All that he needs to do is
deny it eh. All that you need to do is deny receipt. The BIR is required to prove that you received
it either personally or by substituted service. So if the BIR cannot recognize the signature of star,
who is that star? Katulong ho yan. Eh sino bang katulong ko? Wala ho akong katulong nung araw
na yun. Gaganon lang yung taxpayer and that’s it. No assessment was received.
3. Mailing:
a. Registered mail
Now, when registered mail fails, is there any other alternative? Yes.
b. Regular mail
c. Fast courier
56
TAXATION II
Meron akong kliyente ang tumanggap ay OJT. Iniwanan ng BIR, in-assess ang kliyente ko. I am not denying that
it was received but it was received not by the duly authorized representative of the corporation. Therefore, nag-
prescribe si assessment kasi limang taon kaming nagbabalitaktakan eh ‘di lumagpas ‘yung prescriptive period.
Sabi nila ay Ma’am magre-reissue kami ng assessment. Sige mag-reissue kayo, anong ire-reissue mo eh
prescribed na ‘yan. Wala na silang magawa. ‘Yung service kasi very important of the FAN. Kasi ‘pag wala kayong
natatanggap through the proper service as provided by law it is as if no assessment was issued and therefore,
BIR cannot proceed against you.
Can the BIR issue several or successive assessment?
- Yes, you cannot prohibit.
Can you enjoin the BIR from issuing assessments?
- Never.
PROTEST
So natanggap mo na, anong gagawin mo dyan? Hindi reply ang tawag, PROTEST.
So nagpro-protesta ka, ilang araw?
- 30 days.
NOTE: ‘Pag hindi ka nagprotesta sa loob ng 30 days from your receipt then the FAN becomes final FAN
and you cannot question it anymore, anywhere else.
So you file the protest. Kanino ifi-file?
- BIR, ‘yung RDO na nag-issue niyan dun ka magfile ng protesta. ‘Di ka pwedeng umakyat sa BIR
Commissioner.
So what do I (BIR) do with this one?
1. Grant
o If I grant your protest it means I agree with your arguments against the assessment. ‘Pag
sinabing protest it is in writing providing for your basis in your arguments. So tapos na ang
pag-aaway natin. Cancel the assessment.
2. Deny
o Nakasimangot ka. Ikaw ang may remedy. Saan ka patungo? Hanggang dito administrative.
Pagkatapos dito judiciary.
o CTA Division – 30 days.
3. Partly grant or partly deny
4. Sit on it/Non-action
NOTE: In nos1, 2, and 3 – there is an actual decision issued by the BIR.

In no. 4 – no decision and what is being appealed is non-action on the part of the BIR.
How do we count the 180-day period?
57
TAXATION II
Receipt of FAN – you have 30 days to file the protest.
NOTE: Kung gusto mong umakyat, you may. If the BIR does not act on your protest within the period of 180
days from the filing of your protest, then you may go up to the CTA within 30 days after the expiration of the
180-day period. “May” not must. You may go up to the CTA within 30 days from the expiration of the 180-day
period. In other words, you may also not go up. Choice niyo ‘yan. If you do not go up then you just have to wait
for an actual decision by the BIR denying your protest so that you can go up on appeal and this may take a
long time.
The remedy of an appeal from a non-action on the part of the BIR and the remedy of an appeal from an actual
decision of the BIR denying your protest are mutually exclusive of each other.
Anong ibig sabihin nun? A leading case, let’s take this example, taxpayer bank from the receipt of the
final assessment notice bumilang ng 30 days, nag-file ng protesta. Lumipas ang 180. Pagkalipas ng 180,
umapila pero ang apila nasa 31st. Lampas na ng isang araw. So nag-avail siya ng remedy ng apila based
on non-action pero sobra ng isang araw. Ang ginawa ng CTA dinismiss for having been filed out of time.
Nakangiti si bangko, pag nagdesisyon ang BIR mag-aapila uli ako. That time kasi wala pang decided
case dito eh kasi wala iyan sa rules, sa internal rules ng CTA. Ang sabi ng taxpayer, ‘pag dumating ang
tunay na desisyon which I can do kasi technically wala pa naman desisyon then I will file an appeal
which it did. Ang sabi ng Supreme Court, “uy bangko iyang dalawang iyan mutually exclusive. ‘Pag nag-
avail ka dito, hindi ka na pwedeng mag-apila sa tunay na desisyon. ‘Pag di ka naman nag-apila dito,
ang remedy mo na lang ay maghintay ng tunay na desisyon para makapag-apila. That’s the meaning of
mutually exclusive of each other.”
The question in our minds is this, what if non-action, you made an immediate appeal, nandun ka na sa CTA. Is
the BIR prohibited from issuing an actual decision granting or denying your protest?
- No. BIR can issue.
What if the BIR issues a decision granting your protest and you have a pending appeal?
- Eh ’di ikaw ay ngumiti, at i-withdraw mo si appeal. Hindi naman mago-object si BIR for the
withdrawal of the appeal.
- Bakit? Ginrant na nga niya si protesta mo eh.
Eh pano kung denying eh may apila ka na. Magrerefile ka ba ng panibagong appeal?
- Hindi na. Punta ka ‘dun sa CTA nandun ka na eh. Hindi ka na rin magbabayad ng bagong filing fees.
Nandun ka na sasabihin mo lang sa CTA, hello justice meron na po akong desisyon. By way of
pleading.
Anong tawag pagdating sa CTA? Anong tawag sa parties? Sino ang nag-aapila?
NOTE: Taxpayer lang ang nag-aappeal, ‘di nag-aapila ang BIR dahil ang BIR di niya iaapila ang sarili niyang
desisyon. So pagtawid ng judicial procedures it is only the taxpayer who files an appeal to the CTA Division in
protest cases under the NIRC.
The proceeding before the CTA, sinong parties?
58
TAXATION II
1. Taxpayer - petitioner-appellant
2. BIR – appellee
Pero kahit ang tawag sa atin diyan ay appellant ka, appellee ako at iyan ay appeal.
NOTE: Proceedings before the CTA Division are trial de novo and we present evidence as if nasa RTC or
MTC. That is the first time that documentary evidence will be presented. From administrative tatawid ng CTA
trial de novo kaya nakapamadugo ang trial sa CTA Division.
CTA Division
- 30 days.
- There are instances that your protest is not complete.
- ‘Di ba nakalagay sa Code, in the event that your protest is not complete, you will be required to
submit documents within a period of 60 days.
o Kailangan ba 60? Pwede bang sabihin ng BIR 30 ka lang ha.
 Oo, walang bawal un.
 Maximum niyan 60 days.
Nag-issue ako ng FAN nareceive mo. You have 30 days to file the protest. So nag-file ka on the 10th. Your
protest is not complete kasi ‘di ka nagsumite ng dokumento. Kasalanan mo iyan. Bakit? When you are
arguing against my FAN you are supposed to know what documents are proper to be supporting
documents. Hindi kita sasabihan. You are supposed to know what documents are relevant to support
your arguments because you are protesting my FAN. So ‘pag mali ang dokumento mo at ni-require
kitang mag-sumite bahala kayo sa buhay niyo kung anong dokumentong kailangan niyo. ‘Pag mali ang
dokumento, problema niyo ‘yan di ko kayo aarugain. I will not require you to submit. In the first place,
when you filed the protest, you should have submitted those documents.
So in case of failure to submit as required by the BIR, what is the consequence?
- Sigurado denied ang protest niyo.
In the event you are required to submit documents like on the 10 th nag-submit ka ng protesta. Ni-require kita
syempre meron pa akong order requiring submission. In-email ko sa’yo, submit within 15 days. Kailan
bibilangin si 180?
- Ang word diyan ay actually received by the BIR. ‘Dun lang kayo magsimulang magbilang ng 180 ng
non-action.
Ikaw nasa Batanes ka, ang RDO nasa Aparri. Tatawid ka pa ng dagat. O ‘di minail mo na eh sa Rules of
Court date of mailing is the date of filing ung dokumento. Eh dun ka pa bibilang ng 180 maawa ka naman sa
BIR. Kailangan matanggap ko muna ung dokumento saka ka bumilang ng 180. ‘Pag hindi ako gumalaw,
non-action sa 180 saka ka pa lang magkakaroon ng 30. Napaka-unfair niyo naman kung pagka-mail ninyo
bilang ka na ng 180 tapos apila na kayo agad. Sino ba ang may kasalanan? Di ba kayo? Kaya dapat kayo
ang mag-suffer hindi ako. So in case of an instance in protest wherein the taxpayer is further required to
submit documents.
59
TAXATION II
Rules:
1. Failure to submit documents denied sigurado ang inyong protesta.

2. If you complied and submitted the documents we count the 180-day period from my receipt of the
documents as required.
Nandito ngayon sa CTA Division, hindi pwede dito ang non-action.
 Grant – nakangiti
 Deny – simangot
 Partly granted or partly denied
Whoever is the prejudiced party then the prejudiced party may file a motion for new trial or motion for
reconsideration within 15 days.
- And whoever is the prejudiced party kasi ‘pag ginrant ang MR, sino nag-file ng MR?
o Whoever is the prejudiced party will go up to the CTA En Banc within a period of 15 days.
o Whoever is the losing party will go to the Supreme Court within 15 days.
- Iyang prosesong yan hindi tumatawid. Ang tawag sa prosesong iyan protest cases under the NIRC.
Iyan ang tinatawag na protest cases.
From the illustration, jurisdiction of the CTA:
1. Exclusive appellate jurisdiction over decisions of the BIR denying the protest filed by the taxpayer.
2. Exclusive appellate jurisdiction over non-action of the BIR within 180 days from the filing of the
protest.
Suspension of Prescriptive Period:
- Section 222
Due date is April 15, 2017. Nag-file ka February 14, 2017. I find something wrong in the return that you filed.
Kailangan kong ma-issue si FAN ng April 15, 2020. Pagka-file mo ng return nag-issue na ako 2018 pa lang. Ay ‘di
kita makita dun sa registered address mo. Wala ka na ‘dun. Giba ang bahay lupa lang ang nakita ko. From
Aparri pa lang nasa Mindanao ka na at hindi mo ako nino-notify sa succeeding returns mo. Lahat ng succeeding
returns mo Aparri pa rin ang ginagamit mo. So I will never know where you are. But when I look at, punta ako sa
bahay mo to serve ay lupa na lang so suspended iyan.
So naka-isang taon na ako. In-issue ko ng 2018 eh. ‘Nung 2040 nag-file ka ng ITR, nasa Jolo ka na. Pwede pa ba
akong magserve?
- Oo.
- Ilang taon?
o Hanggang 2042. 1+ 2 =3. Kasi ‘pag hindi namin sinuspend iyan ang mangyayari sa inyo
pagkaka-file lilipat magtatago susulpot muli pagkatapos ng 3 taon o 10 taon.
Halimbawa diyan nagfile ka Feb. 14, 2017. Umalis ka ng bansa Feb. 15, 2017. Di ba dapat na-issue ko ang FAN
ng 2020? Eh di nga kita makita wala ka nga sa Pilipinas eh. Alangan naman na wala ka sa Pilipinas tumatakbo
60
TAXATION II
ang period. Eh di pagkatapos ng 2020 balik ka tapos na. Everybody will be doing that. So iyan ung suspension of
period. Memoryahin niyo yan 222, 223, 228 word for word niyo memoryahin iyan.
 Sec. 222 – exceptions

 Sec. 223 – suspension
 Sec. 228 – FAN
When is PAN not required?
1. When there is a mathematical error.

2. When there is a discrepancy between the tax withheld as reflected in the withholding tax certificates
and claimed in the return and the tax actually withheld and remitted.
3. Excise taxes
61
TAXATION II
PROCEDURE FOR PROTEST CASES
NO INJUNCTION RULE
- At any stage of the proceedings, ang gobyerno ay pwedeng mangolekta. Collection cases cannot be
enjoined because taxes are the lifeblood of the government (Lifeblood Theory). Pero may
repercussions ‘pag nangolekta ang gobyerno.
PRESCRIPTIVE PERIODS
When can the government collect? What are the prescriptive periods for the right of the government to
collect?
- Ang collection ng gobyerno ay pwedeng may ASSESSMENT (Notice of Deficiency Assessment), tapos
susunod ay COLLECT. Parang demand letter muna bago ka kokolekta sa korte.
- Meron din namang instances na walang ASSESSMENT, diretso ng COLLECT sa korte. Dito, the
complaint itself is a judicial demand.
Ano ang prescriptive period ng Deficiency Assessment?
- Three (3) years:

a. from due date, if filed before due date;
b. from due date also if filed exactly of due date; and
c. from actual date of filing if filed beyond due date.
- Ten (10) years:
a. From discovery of BIR of fraudulent return if return filed is false or fraudulent; or
b. From discovery of non-filing of return if no return was filed.
PERIOD OF WAIVER
The original period (3 or 10 years) can be extended prior to its expiration upon the execution of a valid
waiver between the government and the taxpayer.
Assuming that a notice of assessment has been issued by the BIR and the same is received by the taxpayer,
the collection period is 5 years from the time the taxpayer received the assessment.
However, there are instances when there is no need for the government (BIR) to issue an assessment. There
are two instances:
1. When the taxpayer files a false or fraudulent return; or

2. When the taxpayer did not file any return at all.
In these two cases, the BIR may directly collect and the period is ten (10) years from discovery by the BIR of
the fraudulent return or the non-filing of the return.
So in cases when the (a) return filed is false or fraudulent or if (b) no return was filed, the BIR has two
options:
1. They can issue an assessment within ten (10) years from discovery by the BIR of the fraudulent
return or the non-filing of the return; or
2. They can also collect immediately without issuing any assessment.
62
TAXATION II
If the BIR collects pursuant to an assessment, it can collect using administrative means or judicial means of
collection.
NOTE: If the BIR collects without an assessment, it can only collect by way of judicial means of collection.
ADMINISTRATIVE REMEDIES
What are the administrative means of collection on the part of BIR?
1. Lien,
2. Warrant of distraint;
3. Warrant of levy;
4. Notice of garnishment;
5. Compromise; or
6. Suspension of taxable periods. (Procedure: See Rule 39)
o ‘Pag nakatanggap ka ng “suspension of taxable periods”, hindi ka na makakapag-operate.
Sa judicial means of collection, ang BIR ay pupunta ng korte. Ang BIR ay nagf’file ng civil or criminal case.
When you receive an assessment, it triggers two things:
1. You will have the right to protest within 30 days from the receipt of the FAN; and
2. BIR will have the right to collect within the period of 5 years.
NOTE: Despite the taxpayer’s protest, the BIR has the right to collect within 5 years from the taxpayer’s
receipt of the FAN.
NOTE: When the taxpayer did not file any protest, then the FAN will become final and executory.
Suppose the taxpayer filed a protest and during its pendency the BIR decided to collect, whether
administrative or judicial.
- Protest is deemed denied.

- Remedy: appeal to CTA Division.
Suppose the taxpayer did not appeal before the CTA Division
- FAN will become final and executory.
Kung nag-appeal ang taxpayer sa CTA Division, magiging dalawa na ang proseso. Isa, yung administrative
collection at pangalawa, yung appeal (Judicial).
 Administrative: Taxpayer ang respondent.

 Judicial: BIR ang respondent.
Halimbawa, may pending protest si taxpayer, nag issue ang BIR ng warrant of distraint or levy.
- Deemed denied ang protest.
Ilang araw para mag appeal?
- 30 days.
63
TAXATION II
From when?
- From the receipt of warrant of distraint or levy. Kasi wala akong desisyon na actual.
CIVIL CASES
Civil case. BIR decided to file a civil case for collection. Anong title ng kaso?
- BIR vs. Taxpayer, for collection of deficiency tax.
Where to file?
MTC and other lower

RTC CTA
courts
P1,000,000.00 & above,
More than P400,000.00
Within Metro Manila P 0.00 to P400,000.00 exclusive of interest,
to below P1,000,000.00
penalties and surcharges
P1,000,000.00 & above,
More than P300,000.00
Outside Metro Manila P 0.00 to P300,000.00 exclusive of interest,
to below P1,000,000.00
penalties and surcharges
How do we determine jurisdictional amount? Totality rule?
Within metro manila, principal amount of P350,000, interest of P150,000 and penalties of P150,000. Saan if’file?
- MTC.
NOTE: If the main action is damages – inclusive of interests, penalties, etc.

If the main action is not damages – exclusive of interests, penalties, etc.
Does the CTA have exclusive original jurisdiction over tax collection cases?
- YES. But CTA will not consider “within” and “outside” Manila; For P1 Million and above, exclusive of
interest, penalties, and surcharges.
ILLUSTRATIONS:
1. Processor. Return (take not of due dates). Inaral ng BIR. Sabi ng BIR may kulang ka (taxpayer). Una, Letter of
Authority (LA), then preliminary assessment notice (PAN), kung kailangan. Kung hindi, tawid ng final
assessment notice (FAN). Serve. Barangay. Duly received by the taxpayer.
Ikaw, gagawin mo, protest. Inaral ng BIR, deny or grant.
a. If granted, you smile, tapos na ang proseso.

b. If denied, teardrops, punta ka sa BIR within 30 days.
c. If partly denied and partly granted, punta ka pa rin sa BIR.
d. If BIR sat on it for a period of 180 days from filing of the protest, then you may go up to the CTA
Division immediately within 30 days from the expiration of the 180-day period. Tatawid na sa
judicial process.
Ang laman ng tax deficiency mo or ang principal amount is P250,000, interest is P100,000, penalty is P100,000.
Ang total ay P450,000. BIR decided na ayaw niya ng administrative.
64
TAXATION II
NOTE: Kasi wala ‘yan hieararchy. Pwede niya piliing administrative or judicial, or pwedeng sabay-sabay ‘yan.
You cannot prevent the BIR. He can exercise any or all at the same time.
- Walang protesta si taxpayer, thus, final, mangongolekta si BIR.

- May protesta ka, nangongolekta ako. ‘Pag may protesta ka, deemed denied, therefore, from your end,
akyat ka doon.
So let’s take the case of civil. BIR nag-file ng civil case. Nag-file ng complaint for collection of tax deficiency.
Saang court pupunta si BIR?
- Sa MTC (first-level courts).
Anong iisue ni MTC Judge?
- Summons.
In the meantime, hindi mo pa alam na nagfile ng civil case si BIR. The only time na malalaman mo ‘yan ay
‘pag the summons is served.
The whole proceedings continue and one does not stop. So hindi porke ay nandon ka ay titigil ka, because
BIR has the right to collect. As long as the filing of the civil case is within the period of 5 years.
If BIR filed this beyond the 5 years, then the defense of the taxpayer is prescription. But the taxpayer
cannot file a motion to dismiss on the ground of prescription, because this is a judge of a MTC, and motion
to dismiss is a prohibited pleading. Therefore, the summons, with the attached complaint, should be
answered and you must file an answer.
If you do not file an answer, what happens to BIR’s complaint?
- BIR will ask the judge to declare the defendant in default and will present evidence ex parte. And
definitely, the judge will issue a decision favorable to the BIR, and against the taxpayer.
When the taxpayer files any responsive pleading, motion to dismiss will not be entertained, because that
is a prohibited pleading before the MTC Judge. If the taxpayer does not file an answer, talo siya sigurado,
kasi si BIR lang ang pakikinggan, unless, hindi nagpresenta ng ebidensya si BIR (failure to prosecute),
then dismissed ‘yan.
NOTE: Walang damages sa tax deficiency cases.
Now let us say si Judge ay nagdesisyon, pero tumatakbo pa din ang proceedings. Does the decision of the
judge favorable to the BIR affect the decision of the CTA Division?
- NO. They are completely separate and independent of each other.
Anong remedy ni taxpayer?
- File an appeal before the RTC within 15 days (in the meantime, nag-aaway pa din sa CTA
Division, tuloy-tuloy pa din ‘yan).
Nanalo ngayon ang taxpayer, ni-reverse. Pwedeng reversal or affirmation. Paano kung talo pa din si
taxpayer, pumunta siya ngayon sa CTA. Magpapanagpo ngayon sa CTA. Anong CTA?
Sa CTA, 2 hakbang: Division and En banc. There are 2 instances that you go directly to the CTA En
banc.
65
TAXATION II
1. If the decision being appealed is a decision rendered by the prior court or agency in the
exercise of appellate jurisdiction.
2. In the case of decisions of the Central Board of Assessment Appeals in real property taxation.
So, the losing party (taxpayer) sa RTC, pupunta sa CTA En banc within how many days?
‘Di ba sa CTA, dalawang hakbang:
1. Sa unang hakbang, within 30 days,

2. Sa pangalawang hakbang, within 15 days.
Dito sa CTA En banc, isang hakbang lang. Within 30 days ‘yan.
NOTE: Basta humakbang ng isa sa CTA, within 30 days. ‘Pag may pangalawa, doon lang magiging within
15 days.
Assuming that the taxpayer has a pending appeal before the CTA because of the protest, then these cases will
be consolidated, to avoid the possibility of contradicting decisions. In whatever stage, either with the CTA
Division or CTA En banc, arising from the protest case and at the same time, there is a civil case for collection
wherein the taxpayer makes an appeal to the CTA, as long as it reaches the CTA, these cases will be
consolidated and the CTA will decide on these cases as a whole. Whoever loses in these cases, he will have to
go to the SC within 15 days from receipt of the prejudicial decision.
2. Principal amount due is P450,000, interest is P100,000, surcharge is P100,000.
So saang korte ka pupunta si BIR?
- RTC.
This time, si Judge mag-iissue ng summons with the attached copy of the complaint., served by the sheriff. BIR
should be filing that complaint within 5 years from the taxpayer’s receipt of the assessment, which is already
subjected to a protest.
Nag-file ng answer si taxpayer, ‘pag di siya nag-file, default. Same rule. ‘Pag di siya sumagot, default, talo siya,
then pwede siya mag-appeal before the CTA Division, because the RTC decision is rendered in the exercise of
the original jurisdiction. Appeal before the CTA Division within 30 days. Then, to CTA En banc within 15 days.
Pero, pay may pending sa CTA na isa pang case, then may consolidation ulit, under the expanded jurisdiction
of the CTA.
3. What if the taxpayer has a pending protest based on that action. This is the scenario: You have a protest
case. You filed it within 30 days. BIR sat on it. So, the taxpayer is immediately before the CTA. Nag-issue ng
decision ang BIR after, granting the protest. What will the taxpayer do?
- The taxpayer will withdraw the appeal.
But very rare nangyayari ito. Kasi ang proceedings sa CTA ay trial de novo, ibig sabihin may presentation of
evidence.
Bakit trial de novo eh ‘yan ay appeal?
- Kasi when you look at the proceedings, prior to akyat sa CTA, administrative ‘yan. This is the first
time that the case reaches a court, that’s why trial de novo ang nature ng proceedings sa CTA, if it
involves a protest case. But, all other cases, such as appeal in civil cases, hindi ‘yan trial de novo,
kasi may korte na nagdesisyon at naghear na ng evidence.
66
TAXATION II
4. The amount being collected is P2,000,000.00, plus interest and penalties.
Saan mag-fifile si BIR?
- CTA.
In the above-mentioned cases, the CTA exercises its appellate jurisdiction. Dito, when the principal amount of
the tax due is P1 Million and above, the BIR will file the tax collection case with the CTA Division in the
exercise of its original jurisdiction. Isang CTA Justice ang i-aassign acting as a trial court. So, whoever loses sa
CTA Justice, aakyat sa CTA En banc within 15 days, kasi original jurisdiction ng CTA, hanggang sa makarating
sa SC.
JURISDICTION OF CTA IN TAX COLLECTION CASES:
1. Exclusive appellate jurisdiction over decisions of RTC rendered in the exercise of either original
jurisdiction or appellate jurisdiction;
2. Exclusive original jurisdiction over tax collection cases when the principal amount of the tax due is
P1,000,000.00 and above, exclusive of interest, penalties and surcharges;
3. Exclusive appellate jurisdiction over decisions of the BIR denying the protest of the taxpayer; and
4. Exclusive appellate jurisdiction over BIR’s non-action on a protest filed by the taxpayer.
Does the CTA have jurisdiction over petitions for certiorari (Rule 65) involving interlocutory orders of the
MTC or RTC?
Let us assume na nag-issue si RTC ng interlocutory order, such as denial of motion to declare in default. So
can the BIR go to the CTA and file a petition for certiorari? Or dapat ba pumunta siya sa CA under the Rules on
Civil Procedure? Definitely, the BIR can file a petition for certiorari pero saan siya pupunta?
- The BIR can file a petition for certiorari before the CTA under the expanded jurisdiction of the CTA
and under the internal rules of the CTA.
NOTE: Even the CTA will have jurisdiction over petitions for certiorari questioning or assailing an
interlocutory order issued by ordinary courts in tax collection cases.
- The CTA is a court, an appellate court as well. Why are we not applying the Rules of Court, eh
nakalaagay sa internal rules ng CTA, “The Rules of Court are applied in a suppletory character.”
- Petitions for certiorari under Rule 65 must be filed within 60 days from receipt of interlocutory order
or receipt of the denial of MR of the interlocutory order.
DOCTRINE OF ADMINISTRATIVE REMEDIES
Ikaw nakatanggap ka ng assessment. Doctrine of exhaustion of administrative remedies. This is a decided case.
Sabi mo, “Hindi muna ako maggprotesta.” Ang BIR, and RDO nag-issue niyan (assessment). “Aakyat muna ako,
papa-MR ako kay Commissioner Dulay.” Denied. “Mag-aapela ako sa Sec. of DOF.” Denied. “Akyat ako ng Office of
the President.” Can you do that?
- Yes. The law does not prohibit you from doing that.
What is the effect of you availing of exhaustion of administrative remedies to the sine qua non requirement of
an appeal to the CTA. Is it put on hold?
- No. Ibig sabihin, kung gusto mong umakyat, mag-exhaust, you are free to do so. But it will not
suspend the 30-day period to go up on appeal to the CTA Division.
67
TAXATION II
- Gawin mo pareho kung gusto mo. Kung hindi mo ginawa ito (protest), kahit manalo ka dito
(administrative), isa lang sasabihin ng BIR sa’yo, “Hello, talo ka. Hindi ka nag-appeal eh.”
NOTE: Failure to file the protest within the required 20-day period, BIR , TX .
How did the SC reconcile the Administrative Code providing for the Doctrine of Exhaustion of Administrative
Remedies and the appeal to the CTA:
- We recognize the right of every taxpayer to go up on appeal, or by way of exhaustion of

administrative remedies. But the CTA is the court which has technical expertise on all tax matters.
Therefore, we uphold the jurisdiction of the CTA.
If you have a pending protest and you receive summons with attached copy of the complaint, protest is
deemed denied. Therefore you must go up to the CTA division by way of an appeal in the protest case.
Deemed denied if hindi nakatanggap ng summons dito sa 2 judges. Deemed denied ang protest.
Sagutin mo ‘yan, umakyat ka ng CTA. Otherwise, FAN becomes final-final and therefore judgment on the
pleadings may be made.
Mas mahirap ang tax collection cases on the part of the taxpayer because tax is the lifeblood of the
government.
CRIMINAL CASES
Mode of collection.
There are 2 kinds of offenses under the NIRC:
1. Does not result in tax deficiency

o (eg). failure to obey subpoena
2. Offense which results in tax deficiency
o (eg) failure to issue receipt.
If hindi ka nag-issue ng receipt, hindi mo dinedeclare ‘yun sales sa gross income, may violation ka for failure to
issue receipt and at the same time may tax deficiency ka kasi hindi mo sinama sa gross income mo.
NOTE: In Criminal cases, venue is jurisdictional.
Steps:
1. Draft complaint-affidavit by BIR.

2. Filing before the fiscal.
3. Fiscal determines probable cause.
If no probable cause = dismissed complaint (BIR loses).
4. BIR goes to DOJ Secretary and file a petition for review.
DOJ: File information, there is finding of probable cause.
Sino mang matalo sa’tin sa preliminary investigation resolution, aakyat kay Secretary.
68
TAXATION II
Secretary -> Court of Appeals -> SC

Offenses under the RPC = goes to CA -> SC
Offenses under NIRC = goes to CTA -> SC
Fiscal files information before the: (depends on penalty)
 RTC: if the prescribed penalty in NIRC is more than 6 years

 MTC, MeTC, MTCC: if the prescribed penalty in NIRC is below 6 years
Situation no. 1:
Let us say the prescribed penalty under the NIRC is 4 years and 1 day. Fiscal files in MTC.
Judge holds hearing of the case. Convicted.
RTC, exercise of appellate jurisdiction. Convicted.
CTA En Banc, because appellate jurisdiction. 30 days. Convicted.
SC.
Situation no. 2:
MTC dismissed, acquitted.

- BIR has no remedy.
- BIR cannot appeal.
Situation no.3:
MTC convicted. RTC acquitted.
Is there a difference if the acquittal is rendered by the court of origin or appellate court? Is res judicata
applicable? When does res judicata apply? Does it apply to an acquittal to an acquittal by court of origin or
does it also apply to an acquittal by the appellate court?
- BOTH. Once acquitted, always acquitted. BIR cannot appeal anymore.
Meron bang exclusive original jurisdiction ang CTA?
In criminal cases, when the offense does not result in tax deficiency, CTA has no exclusive original
jurisdiction.
NOTE: When the offense does not result to a tax deficiency, the CTA does not exercise any exclusive original
jurisdiction. It can only exercise exclusive appellate jurisdiction based on the judgment of the conviction of
the RTC rendered either in the exercise of original or appellate jurisdiction.
What if the offense resulted to tax deficiency? (eg. Estafa, robbery, theft)
- Criminal case + civil liability

- (eg). Failure to issue receipt (P10,000,000.00) sigurado malaki ang tax deficiency mo. Saan iffile ng
fiscal and information?
NOTE: No. 1 rule, if the offense results in a tax deficiency, the civil liability is always incorporated in the
criminal case. They caanot be filed separately. No need for reservation.
69
TAXATION II
NOTE: You base the jurisdiction of the court in the amount in the tax liability such that if the principal amount
of tax due is P1,000,000.00 and above exclusive of interests and penalties, CTA can exercise exclusive original
jurisdicition in criminal cases involving tax deficiency.
SUMMARY:
 If the offense does not result in any tax deficiency, CTA exercises only appellate jurisdiction.
 If the offense results in tax deficiency, CTA may exercise original jurisdiction exclusive of that when
the principal amount of tax deficiency P1,000,000.00 and above exclusive of interests, penalties, and
surcharges.
Ikaw A, nagfile ka ng fraudulent return. Mag-expect ka ng tax deficiency. Or no return was filed. What will BIR
do? BIR discovered fraudulent return/non-filing of return.
- Only remedy is go to court. Ang remedy ko ay pwede akong mag-assessment sa’yo or wala ‘yan.
Kung wala ang assessment,
- Remedy: Pumunta kay judge (MTC/RTC). Kasi tax collection case judicial ‘yan.
Within what period of time?
- 10 years from BIR’s discovery of filing of fraudulent return/non-filing of return.
DIFFERENCE:
- BIR did not issue FAN.
Without any assessment, that cannot happen in criminal cases.
Sa criminal cases ba required na may assessment?
NOTE: NO. The issuance of FAN or finality of the FAN is not a sine qua non requirement before the
BIR can file a criminal case.
In civil cases as well, the issuance of an assessment is not necessary when the taxpayer did not file any return
at all or filed a fraudulent return.
Whether the BIR issued an assessment prior to collection within those periods of time or did not issue any
assessment under the exceptional circumstance, fraudulent return/non-filing of return, these periods of
assessment and collection, or collection only, may be suspended independently of each other when any of the
grounds provided under Sec. 223 of the NIRC is present.
It may be suspended independently of each other.
- Pwedeng assessment lang ang nasuspend at ang collection ay hindi.

- Pwedeng collection lang ang nasuspend at ang assessment ay hindi.
- Pwedeng parehong nasuspend kung during the period of collection any of the grounds under Sec. 223
is present.
70
TAXATION II
Kung walang assessment, the period of 10 years may be suspended as well when any of the grounds under
Sec. 223 of NIRC is present.
71
TAXATION II
72

Tax 2 Transcription VAT Donors Estate and Remedies Compilation Complete

Caricato da

Informazioni sul documento

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Tax 2 Transcription VAT Donors Estate and Remedies Compilation Complete

Caricato da

Copyright:

Formati disponibili

TAXATION II

ATTY. RIZALINA LUMBERA

VALUE ADDED TAX (VAT)

- Value added on:

1. Sale of goods – must be in connection with trade or business

Bawat benta ng goods in the course of trade or business

12% - regular rate of tax imposed on the:

- Imposed on importation and manufacture of goods.

Apostol | Badua | Barras | Cojamco | De Leon | Ico | Miranda | Pedernal | Vicente

- Transfer of ownership with payment of compensation.

Transactions Deemed Sale (TDS)

- VAT is business tax so ‘pag ikaw ay empleyado lang, wala ka niyan.

Apostol | Badua | Barras | Cojamco | De Leon | Ico | Miranda | Pedernal | Vicente

NOTE: Gross income – allowable deductions = Taxable net income x Rate

Apostol | Badua | Barras | Cojamco | De Leon | Ico | Miranda | Pedernal | Vicente

How is that captured?

INPUT and OUTPUT Tax

 Ang tawag ko sa P12.00 = output

FORMULA IN VAT = OUTPUT – INPUT

 If it results to excess output = VAT payable (Bayaran mo sa BIR)

OUTPUT LESS INPUT

Apostol | Badua | Barras | Cojamco | De Leon | Ico | Miranda | Pedernal | Vicente

A. If you have more sales than purchases, may tubo ka.

 Pay income tax

1. VAT payable; and

A. Monthly: January, February, March.

VAT (Monthly) Engaged in Trade or

Apostol | Badua | Barras | Cojamco | De Leon | Ico | Miranda | Pedernal | Vicente

 If calendar year = April 15, the following year.

 Wala nang effect sa’yo. Consumer ka lang eh.

 Kung wala siyang registration, hindi siya pwede niyan.

 Ang tawag ni Barras sa P18.00 ay output.

Apostol | Badua | Barras | Cojamco | De Leon | Ico | Miranda | Pedernal | Vicente

 Excess output VAT = bayad ng VAT.

Sec. 32. Gross Income –

 Tax imposed: income tax only.

Apostol | Badua | Barras | Cojamco | De Leon | Ico | Miranda | Pedernal | Vicente

 12%, ang tawag ng mga kliyente ko ay input tax,

Kung ang kliyente ay korporasyon:

 Client coporation has input of 12%

Output-input, output-input, output-input.

Paano kung nagbenta sa inyo ng walang resibo si Mr. Barras.

- Input cannot be credited against output.

Pero kapani-paniwala ba na si Mr. Barras ay hindi nag-issue ng resibo?

- Hindi. Kasi siya ay required ng BIR na mag-issue ng resibo sa bawat benta.

NOTE: Kapag siya ay hindi nag-issue ng resibo, criminal case ‘yan.

Pwede ba siyang hindi mag-issue ng resibo?

- Oo, kung ayaw mo.

Apostol | Badua | Barras | Cojamco | De Leon | Ico | Miranda | Pedernal | Vicente

Even real properties are considered as goods.

Kapag ibinenta ko ito, may CGT ba?

 For CGT = you are selling capital assets

On the expense side, remember, gross income less allowable deductions.

Apostol | Badua | Barras | Cojamco | De Leon | Ico | Miranda | Pedernal | Vicente

 Individual: PE, AE, Itemized or OSD

ZERO-RATED AND EXEMPT TRANSACTIONS

- Lahat ng resibo dapat may provision ng zero-rate at exempt.

Distinction between Zero-rated

- 100 x zero % = zero tax

NOTE: No zero-rated in importation.

In zero-rated transactions, input VAT is allowed to be credited against output VAT

- Beneficial to the taxpayer, if the input tax is allowed to be credited.

Apostol | Badua | Barras | Cojamco | De Leon | Ico | Miranda | Pedernal | Vicente

- Of course it is more advantages to the Philippines.