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CABANEIRO) A2011 4
ASPECTS OF TAXATION Toll is paid for the used of another’s property; tax is paid for the
1) LEVY or IMPOSITION support of government.
enactment of tax laws The amount paid as toll depends upon the cost of construction or
legislative in character maintenance of the public improvements used; while there is no
2) ASSESSMENT limit on the amount collected as tax as long as it is not excessive,
collection unreasonable, or confiscatory.
administrative in character Toll may be imposed by the government or by private individuals or
entities; tax may be imposed only by the government.
TAXES DISTINGUISHED FROM OTHER IMPOSITIONS
1) toll – amount charged for the cost and maintenance of property Penalty v. Tax
used; Penalty is any sanction imposed as a punishment for violation of law
2) penalty – punishment for the commission of a crime or for acts deemed injurious; taxes are enforced proportional
3) compromise penalty – amount collected in lieu of criminal contributions from persons and property levied by the State by
prosecution in cases of tax violations; virtue of its sovereignty for the support of the government and all
4) special assessment – levied only on land based wholly on the public needs.
benefit accruing thereon as a result of improvements of public works Penalty is designed to regulate conduct; taxes are generally
undertaken by government within the vicinity. intended to generate revenue.
5) license fee – regulatory imposition in the exercise of the police Penalty may be imposed by the government or by private individuals
power of the State; or entities; taxes only by the government.
6) margin fee – exaction designed to stabilize the currency
7) debt – a tax is not a debt but is an obligation imposed by law. Special assessment v. Tax
8) regulatory fees – exaction designed to regulate industries A special assessment tax is an enforced proportional contribution
9) subsidy – legislative grant of money in aid of a private enterprise from owners of lands especially benefited by public improvements
deemed to promote the public welfare. A special assessment is levied only on land; tax is imposed on
10) custom duties and fees – duties charged upon commodities on persons, property and excises.
their being imported into or exported from a country; A special assessment is not a personal liability of the person
11) revenue – broad term that includes not only taxes but income from assessed; it is limited to the land.
other sources as well. A special assessment is based wholly on benefits, not necessity.
12) Tribute – synonymous with tax A special assessment is exceptional both as to time and place; a tax
13) Impost – signifies any tax, tribute or duty. has general application.
Some rules:
Toll v. Tax An exemption from taxation does not include exemption
Toll is a sum of money for the use of something. It is the from a special assessment.
consideration which is paid for the use of a road, bridge, or the like, The power to tax carries with it the power to levy a special
of a public nature. Taxes, on the other hand, are enforced assessment.
proportional contributions from persons and property levied by the
State by virtue of its sovereignty for the support of the government
and all public needs.
Toll is a demand of proprietorship; tax is a demand of sovereignty.
AS TO THE DETERMINATION OF AMOUNT A taxpayer has no legal standing to question executive acts that do
10. Specific tax not involve the use of public funds. (GONZALES vs. MARCOS)
A specific tax is a tax of a fixed amount imposed by the head or It is only when an act complained of which may include a legislative
number or by some other standard of weight or measurement. It enactment of a statute, involves the illegal expenditure of public
requires no assessment other than the listing or classification of the money that the so-called taxpayers suit may be allowed. LOZADA vs.
objects to be taxed. COMELEC
11. Ad valorem tax Taxpayers may be levied with a regulatory purpose to provide
An ad valorem tax is a fixed proportion of the value of the property means for the rehabilitation and stabilization of a threatened
with respect to which the tax is assessed. It requires the industry which is affected with the public interest as to be within the
intervention of assessors or appraisers to estimate the value of such police power of the State. CALTEX vs. COA
property before due from each taxpayer can be determined. The Supreme Court has discretion whether or not to entertain
12. Customs Duties taxpayers suit and could brush aside lack of locus standi. KILOS
Duties charged upon the commodities on theor being imported into BAYAN vs. GUINGONA
or exported from a country.
REQUISITES FOR A TAXPAYERS PETITION
AS TO GRADUATION OR RATE 1) That money is being extracted and spent in violation of specific
13. Proportional tax constitutional protections against abuses of legislative power
Tax based on a fixed percentage of the amount of the property 2) That public money is being deflected to any improper purpose
receipts or other basis to be taxed. Example: real estate tax. 3) That the petitioner seeks to restrain respondents from wasting
14. Progressive or graduated tax public funds through the enforcement of an invalid or
Tax the rate of which increases as the tax base or bracket increases. unconstitutional law.
Digressive tax rate: progressive rate stops at a certain point.
Progression halts at a particular stage. CASES:
15. Regressive tax
Tax the rate of which decreases as the tax base or bracket Commissioner vs. Algue
increases. There is no such tax in the Philippines. GRL-28890, 17 February 1988.First Division, Cruz (J); 4 concur
TAXPAYER’S SUIT Facts: The Philippine Sugar Estate Development Company (PSEDC)
One where a taxpayer who feels aggrieved by the implication of a appointed Algue Inc. as its agent, authorizing it to sell its land, factories, and
tax law goes now via judicial review to the SC and asks for a oil manufacturing process. The Vegetable Oil Investment Corporation
nullification of the law. (VOICP) purchased PSEDC properties. For the sale, Algue received a
In availing judicial review as a taxpayer, the only option one can commission of P125,000 and it was from this commission that it paid
look into are the inherent and constitutional limitations on taxation. Guevara, et. al. organizers of the VOICP, P75,000 in promotional fees. In
Taxpayers have sufficient interest of preventing the illegal 1965, Algue received an assessment from the Commissioner of Internal
expenditures of money raised by taxation ( NOT DONATIONS AND Revenue in the amount of P83,183.85 as delinquency income tax for years
CONTRIBUTIONS) 1958 amd 1959. Algue filed a protest or request for reconsideration which
A taxpayer is not relieved from the obligation of paying a tax was not acted upon by the Bureau of Internal Revenue (BIR). The counsel
because of his belief that it is being misappropriated by certain for Algue had to accept the warrant of distrant and levy. Algue, however,
officials filed a petition for review with the Coourt of Tax Appeals.
Issue: Whether the assessment was reasonable. Representatives. To insist that a revenuestatute and not only the bill which
Held: Taxes are the lifeblood of the government and so should be collected initiated the legislative process culminating in the enactment of the law must
without unnecessary hindrance. Every person who is able to pay must substantially be the same as the House bill would be to deny the Senate’s
contribute his share in the running of the government. The Government, for power not only to concur with amendments but also to propose
his part, is expected to respond in the form of tangible and intangible amendments. Indeed, what the Constitution simply means is that the
benefits intended to improve the lives of the people and enhance their moral initiative for filingrevenue, tariff or tax bills, bills authorizing an increase of
and material values. This symbiotic relationship is the rationale of taxation the public debt, private bills and bills of local application must come from the
and should dispel the erroneous notion that is an arbitrary method of House of Representatives on the theory that, elected as they are from
exaction by those in the seat of power. Tax collection, however, should be the districts, the members of the House can be expected to be more
made in accordance with law as any arbitrariness will negate the very reason sensitive to the local needs and problems. Nor does the Constitution
for government itself. For all the awesome power of the tax collector, he prohibit the filing in the Senate of a substitute bill in anticipation of its
may still be stopped in his tracks if the taxpayer can demonstrate that the receipt of the bill from the House, so long as action by the Senate as a body
law has not been observed. Herein, the claimed deduction (pursuant to is withheld pending receipt of the House bill.
Section 30 [a] [1] of the Tax Code and Section 70 [1] of Revenue Regulation
2: as to compensation for personal services) had been legitimately by Algue The next argument of the petitioners was that S. No. 1630 did not pass
Inc. It has further proven that the payment of fees was reasonable and 3 readings on separate days as required by the Constitution because the
necessary in light of the efforts exerted by the payees in inducing investors second and third readings were done on the same day. But this was because
(in VOICP) to involve themselves in an experimental enterprise or a business the President had certified S. No. 1630 as urgent. The presidential
requiring millions of pesos. The assessment was not reasonable. certification dispensed with the requirement not only of printing but also that
of reading the bill on separate days. That upon the certification of a bill by
Tolentino vs. Secetary of Finance the President the requirement of 3 readings on separate days and of printing
GR No. 115455. August 25, 1994 and distribution can be dispensed with is supported by the weight of
legislative practice.
Facts: The value-added tax (VAT) is levied on the sale, barter or exchange
of goods and properties as well as on the sale or exchange of services. RA EXERCISES:
7716 seeks to widen the tax base of the existing VAT system and enhance
its administration by amending the NationalInternal Revenue Code. There Discuss the importance of taxes
are various suits challenging the constitutionality of RA 7716 on various SUGGESTED ANSWER:
grounds. Taxes are the lifeblood of the government, for without taxes, the
One contention is that RA 7716 did not originate exclusively in the House of government can neither exist nor endure. A principal attribute of
Representatives as required by Art. VI, Sec. 24 of the Constitution, because sovereignty, the exercise of taxing power derives its source from the
it is in fact the result of the consolidation of 2distinct bills, H. No. 11197 and very existence of the state whose social contract with its citizens
S. No. 1630. There is also a contention that S. No. 1630 did not pass obliges it to promote public interest and common good. The theory
3 readings as required by the Constitution. behind the exercise of the power to tax emanates from necessity;
Issue: Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) of the without taxes, government cannot fulfill its mandate of promoting the
Constitution general welfare and well-being of the people. (NAPOCOR v. City of
Held: The argument that RA 7716 did not originate exclusively in the House Cabanatuan, G.R. No. 149110, April 9, 2003).
of Representatives as required by Art. VI, Sec. 24 of the Constitution will not
bear analysis. To begin with, it is not the law but the revenue bill which is
required by the Constitution to originate exclusively in the House of
Nature of the Power of Taxation (#1, 2000 Bar Exams) SUGGESTED ANSWER:
Justice Holmes once said: “The power to tax is not the power to Yes, the legislative body may enact laws even in the absence
destroy while this Court (the SC) sits.” Describe the power to tax and its of a constitutional provision because the power to tax is inherent in the
limitations. government and not merely a constitutional grant. The power of taxation is
SUGGESTED ANSWER: an essential and inherent attribute of sovereignty belonging as a matter
of right to every independent government without being expressly granted
The power to tax is an inherent power of the sovereignty which is
by the people. (Pepsi-Cola Bottling Company of the Philippines, Inc. v.
exercised through the legislature to impose burdens upon subjects and
Municipality of Tanauan, Leyte, G.R. No. L-31156)
objects within its jurisdiction for the purpose of raising revenues to
Taxation is the inherent power of a State to collect enforced proportional
carry out the legitimate objects of gov’t. The underlying basis for its
contribution to support the expenses of government. Taxation is the
exercise is governmental necessity for without it, no gov’t can exist nor power vested in the legislature to impose burdens or charges upon
endure. Accordingly, it has the broadest scope of all the powers of persons and property in order to raise revenue for public purposes.
government because in the absence of limitations, it is considered an The power to tax is so unlimited in force and so searching in extent that
unlimited, plenary, comprehensive and supreme. The two limitations courts scarcely venture to declare it is subject to any restrictions whatever,
on the power of taxation are the inherent and constitutional except such as rest in the discretion of the authority which exercises it. (Tio
limitations which are intended to prevent abuse on the exercise of the v. Videogram Regulatory Board, G.R. No. L-75697, June 18, 1987) So
otherwise plenary and unlimited power. It is the Court’s role to see to it potent is the power to tax that it was once opined that "the power to tax
that the exercise of the power does not transgress these limitations. involves the power to destroy."(C.J. Marshall in McCulloch v. Maryland)
Power of Taxation: Legislative in Nature (Bar 1994) Revocation of Exempting Statutes (Bar 1997)
The Secretary of Finance, upon recommendation of the "X" Corporation was the recipient in 1990 of two tax exemptions both from
Commissioner of Internal Revenue, issued a Revenue Regulation Congress, one law exempting the company's bond issues from taxes and
using gross income as the tax base for corporations doing business the other exempting the company from taxes in the operation of its
in the Philippines. Is the Rev.Reg.valid? public utilities. The two laws extending the tax exemptions were revoked
SUGGESTED ANSWER: by Congress before their expiry dates. Were the revocations constitutional?
The regulation establishing gross income as the tax base for
SUGGESTED ANSWER:
corporations doing business in the Philippines (domestic as well as Yes. The exempting statutes are both granted unilaterally by
resident foreign) is not valid. This is no longer implementation of the Congress in the exercise of taxing powers. Since taxation is the rule and
law but actually it constitutes legislation because among the powers tax exemption, the exception, any tax exemption unilaterally granted can be
that are exclusively within the legislative authority to tax is the power withdrawn at the pleasure of the taxing authority without violating the
to determine -the amount of the tax. (See 1 Cooley 176-184). Constitution (Mactan Cebu International Airport Authority v, Marcos,
Certainly, if the tax is limited to gross income without deductions of G.R No. 120082, September 11, 1996).
these corporations, this is changing the amount of the tax as said Neither of these were issued by the taxing authority in a contract lawfully
amount ultimately depends on the taxable base. entered by it so that their revocation would not constitute an
impairment of the obligations of contracts.
Power of Taxation; Inherent in a Sovereign State (2005)Describe ALTERNATIVE ANSWER:
the power of taxation. May a legislative body enact laws to raise No. The withdrawal of the tax exemption amounts to a
revenues in the absence of a constitutional provision granting said body deprivation of property without due process of law, hence
the power to tax? Explain. unconstitutional.
DOCTRINE OF INCORPORATION The validity of statute maybe contested only by one who will sustain
The Philippines adopts the generally accepted principles of a direct injury in consequence of its enforcement
international law as part of the law of the land
If a tax law violates certain principles of international law, INSTANCES WHEN THE TAX LAW MAYBE DECLARED AS
then it is not only invalid but also unconstitutional UNCONSTITUTIONAL (CUNO – pag constitutional cuno, eh di
unconstitional yun.)
CONSTITUTIONAL LIMITATIONS ON THE TAXING POWER 1) If it amounts to Confiscation of property without due
process
A. DUE PROCESS OF LAW (Sec. 1, Art. III) 2) If a tax law which is applied retroactively, imposes Unjust
Due process of law in taxation: Before a tax can be collected, and oppressive taxes.
there must be a law. 3) The law maybe declared as unconstitutional if it is imposed
Before a tax is to be paid for: Not for a public purpose
1. There must be a law 4) If the subject of taxation is Outside of the jurisdiction of the
2. It must not be arbitrary taxing state
Relationship between impact, shifting, and incidence of tax Note: Equity is not a ground for tax exemption. Exemption is allowed
The impact is the initial phenomenon, the shifting is the intermediate only if there is a clear provision therefore.
process, and the incidence is the result. Thus, the impact in a sales
tax (e.g. VAT) is on the seller (manufacturer) who shifts the burden Nature of tax exemption
to the customer who finally bears the incidence of the tax. 1. It is a mere personal privilege of the grantee.
Impact is the imposition of the tax; shifting is the transfer of the tax; 2. It is generally revocable by the government unless the exemption is
while incidence is the setting or coming to rest of the tax. founded on a contract which is protected from impairment.
3. It implies a waiver on the part of the government of its right to
TAX EXEMPTION collect what otherwise would be due to it, and so is prejudicial
It is the grant of immunity to particular persons or corporations of a thereto.
particular class from a tax which persons and corporations generally 4. It is not necessarily discriminatory so long as the exemption has a
within the same state or taxing district are obliged to pay. It is an reasonable foundation or rational basis.
immunity or privilege; it is freedom from a financial charge or
burden to which others are subjected.
Exemption is allowed only if there is a clear provision therefore.
It is not necessarily discriminatory as long as there is a reasonable
foundation or rational basis.
Davao Gulf v. Commissioner, [293 SCRA 76(1998)] Tax amnesty, tax condonation, and tax exemption
A tax cannot be imposed unless it is supported by the clear and Tax amnesty, being a general pardon or intentional overlooking by
express language of a statute; on the other hand, once the tax is the State of its authority to impose penalties on persons otherwise
unquestionably imposed, “a claim of exemption from tax payments guilty of evasion or violation of a revenue or tax law, partakes of an
must be clearly shown and based on language in the law too plain to absolute forgiveness or waiver by the government from its right to
be mistaken.” Since the partial refund authorized under Sec. 5, RA collect what otherwise would be due it and, in this sense, prejudicial
1435, is in the nature of a tax exemption, it must be construed to itself. It is granted particularly to tax evaders who wish to relent
strictissimi juris against the grantee. Hence, petitioner’s claim for and are willing to reform, thus giving them a chance to do so and
refund based on specific taxes it actually paid must expressly be thereby become a part of the new society with a clean slate,
granted in a statute stated in a language too clear to be mistaken. [Republic v. IAC, 196 SCRA 335].
Like tax exemption, tax amnesty is never favored nor presumed in
TAX REMISSION OR TAX CONDONATION law. It is granted by statute. The terms of the amnesty must also be
The word “remit” means to desist or refrain from exacting, inflicting construed against the taxpayer and liberally in favour of the
or enforcing something as well as to restore what has already been government. Unlike a tax exemption, however, a tax amnesty has
taken. The remission of taxes due and payable to the exclusion of limited applicability as to cover a particular taxing period or
taxes already collected does not constitute unfair discrimination. transaction only
Such a set of taxes is a class by itself and the law would be open to There is tax condonation or remission when the State desists or
attack as class legislation only if all taxpayers belonging to 1 class refrains from exacting, inflicting or enforcing something as well as to
were not treated alike,[JuanLunaSubdivision v. Sarmiento,91Phil370] restore what has already been taken. The condonation of a tax
The condonation of a tax liability is equivalent to and is in the nature liability is equivalent to and is in the nature of a tax exemption.
of a tax exemption. Thus, it should be sustained only when expressly Thus, it should be sustained only when expressed in law.
provided in the law. [Surigao Consolidated Mining v. Commissioner Tax exemption, on the other hand, is the grant of immunity to
of Internal Revenue, 9 SCRA 728]. particular persons or corporations of a particular class from a tax
which persons and corporations generally within the same state or
TAX AMNESTY taxing district are obliged to pay. Tax exemption is not favored and
Tax amnesty, being a general pardon or intentional overlooking by is construed strictissimi juris against the taxpayer.
the State of its authority to impose penalties on persons otherwise
guilty of evasion or violation of a revenue or tax law, partakes of an
absolute forgiveness or waiver by the government from its right to
collect what otherwise would be due it and, in this sense, prejudicial
to itself. It is granted particularly to tax evaders who wish to relent
and are willing to reform, thus giving them a chance to do so and
Chapter 3: DOUBLE TAXATION AND TAX EXEMPTIONS. Page 5 of 7
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 6
TAX EVASION State the principle laid down in the case of UNGAB v. CUSI
Tax evasion is the use by the taxpayer of illegal or fraudulent means Remedies for the collection of deficient taxes may be by either civil or
to defeat or lessen the payment of a tax. It is also known as “tax criminal action. In case of failure to file a return, the tax may be assessed or
dodging.” It is punishable by law. a proceeding in court may be begun without an assessment. An assessment
Tax evasion is a term that connotes fraud through the use of is not necessary before a taxpayer may be prosecuted if there is prima facie
pretense or forbidden devices to lessen or defeat taxes, [ Yutivo v. showing of wilful and deliberate attempt to file a fraudulent return with the
CTA 1 SCRA 160]. intent to evade and defeat tax. A criminal complaint is instituted not to
Example: Deliberate failure to report a taxable income or property; demand payment, but to penalize the taxpayer for violation of the Tax Code,
deliberately reduction of income that has been received. [Ungab v. Cusi, 97 SCRA 877]
BIR rulings
Chapter 4: TAX LAWS AND REGULATIONS. Page 3 of 4
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 4
PRINCIPLE OF LEGISLATIVE APPROVAL OF AN ADMINISTRATIVE Purpose of Taxation; Interpretation (2004)
INTERPRETATION THROUGH REENACTMENT Which of the following propositions may now be untenable:
It means that where a statute is susceptible of the meaning placed 1) The court should construe a law granting tax exemption strictly against
upon in by a ruling of government agency charged with its the taxpayer.
enforcement and the legislature thereafter re-enacts the provisions 2) The court should construe a law granting a municipal corporation the
without substantial change, such action is to some extent power to tax most strictly.
confirmatory that the ruling carries out the legislative purpose. 3) The Court of Tax Appeals has jurisdiction over decisions of the Customs
Legislative adoption of tax rulings Commissioner in cases involving liability for customs duties.
Reenactment of a statute substantially unchanged is persuasive 4) The Court of Appeals has jurisdiction to review decisions
indication of the adoption by Congress of prior executive of the Court of Tax Appeals.
construction. (ABS-CBN vs CTA) 5) The Supreme Court has jurisdiction to review decisions of the Court of
Appeals. Justify your answer or choice briefly.
DOCTRINE OF IMPLICATIONS SUGGESTED ANSWER:
What is plainly implied in the language of the statute is as much a 2. The court should construe a law granting a municipal corporation
part of it as that which is expressed the power to tax most strictly.
This proposition is now untenable. The basic rationale for the grant of tax
TAX TREATY power to local government units is to safeguard their viability and self-
A tax treaty is one of the sources of our law on taxation. The sufficiency by directly granting them general and broad tax powers (Manila
Philippine government usually enters into tax treaties in order to Electric Company v. Province of Laguna et. al., 306 SCRA 750 [1999]).
avoid or minimize the effects of double taxation. A treaty has the Considering that inasmuch as the power to tax may be exercised by local
force and effect of law. legislative bodies, no longer by valid congressional delegation but by direct
authority conferred by the Constitution, in interpreting statutory provisions
EXERCISES on municipal fiscal powers, doubts will, therefore, have to be resolved in
favor of municipal corporations (City Government of San
Tax Laws; BIR Ruling; Non-Retroactivity of Rulings (2004) Pablo, Laguna v. Reyes, 305 SCRA 353 [1999]). This means that the court
Due to an uncertainty whether or not a new tax law is applicable to printing must adopt a liberal construction of a law granting a municipal corporation
companies, DEF Printers submitted a legal query to the Bureau of Internal the power to tax.
Revenue on that issue. The BIR issued a ruling that printing companies are Note: If the examinee chose proposition no. 4 as his
not covered by the new law. Relying on this ruling, DEF Printers did not pay answer, it should be given full credit considering that the present CTA Act
said tax. Subsequently, however, the BIR reversed the ruling and issued a (R.A. No. 9282) has made the CTA a coequal judicial body of the Court of
new one stating that the tax covers printing companies. Could the BIR now Appeals. The question "Which of the following propositions may now be
assess DEF Printers for back taxes corresponding to the years before the untenable" may lead the examinee to choose a proposition which is
new ruling? Reason briefly. untenable on the basis of the new law despite the cut-off date adopted by
SUGGESTED ANSWER: No. Reversal of a ruling shall not be given a the Bar Examination Committee. R.A. No. 9282 was passed on March 30,
retroactive application if said reversal will be prejudicial to the taxpayer. 2004.
Therefore, the BIR cannot assess DEF printers for back taxes because it
would be violative of the principle of non-retroactivity of rulings and doing so
would result in grave injustice to the taxpayer who relied on the first ruling
in good faith (Section 246, NIRC; CIR v. Burroughs, Inc.,142 SCRA 324).
Chapter 4: TAX LAWS AND REGULATIONS. Page 4 of 4
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 1
Chapter 5: TAX ADMINISTRATION AND ENFORCEMENT Power to interpret tax laws
The power to interpret the provisions of the NIRC and other tax laws
shall be under the exclusive and original jurisdiction of the
IN GENERAL Commissioner.
This power is subject to review by the Secretary of Finance.
Agencies involved in tax administration
1. Bureau of Internal Revenue Jurisdiction of Commissioner re. tax cases
2. Bureau of Customs The Commissioner has the power to decide:
3. Provincial, city and municipal assessors and treasurers 1. disputed assessments;
2. refunds of the internal revenue taxes, fees, or other charges;
Bureau of Internal Revenue 3. penalties imposed in relation thereto; or
Headed by the Commissioner and two Deputy Commissioners 4. other matters arising under this Code or other laws or portions
Assistant Commissioners and Division Chiefs thereof administered by the Bureau of Internal Revenue
Regional Directors This is subject to the exclusive appellate jurisdiction of the Court of
Revenue District Officers Tax Appeals.
Revenue Enforcement Officers or Examiners
Power of the Commissioner to obtain information, and to summon,
Sources of Revenue: The ff are deemed National Internal Revenue Taxes: examine, and take testimony of persons
Income Tax Commissioner has power to obtain information and to summon,
Estate and Donor’s taxes examine and take testimony of persons in:
Value-Added tax 1. ascertaining the correctness of any return; or
Other percentage taxes 2. in making a return when none has been made; or
Excise taxes 3. in determining the liability of any person for any internal
Documentary stamp taxes revenue tax; or
Such other taxes as are or hereafter may be imposed and collected 4. in collecting any such liability; or
by the BIR. 5. in evaluating tax compliance
Such power includes:
POWERS OF THE COMMISSIONER OF INTERNAL REVENUE 1. To examine any book, paper, record or other data which may be
relevant or material to such inquiry.
General powers of the Commissioner of Internal Revenue 2. To obtain or a regular basis from any person other than the
1. Interpret tax laws and to decide tax cases. person whose internal revenue tax liability is subject to audit or
2. Obtain information and to summon, examine, and take testimony of investigation, or from any office or officer of the national and
persons. local governments, government agencies and instrumentalities
3. Make assessments and prescribe additional requirements for tax any information.
administration and enforcement. 3. To summon the person liable for tax or required to file a return,
or any officer or employee of such persons, or any person
having possession, custody, or care of the books of accounts
and other accounting records, or any other person, to appear
before the Commissioner or his duly authorized representatives.
Chapter 5: TAX ADMINISTRATION AND ENFORCEMENT. Page 1 of 8
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 2
4. To take such testimony of the person concerned, under oath, as However, failure to file a return does not prevent the Commissioner
may be relevant or material to such inquiry. from authorizing the examination of the taxpayer.
5. To cause revenue officers and employees to make a canvass Any return, statement or declaration filed in any office authorized to
from time to time of any revenue district or region and inquire receive the same shall not be withdrawn
after and concerning persons therein who may be liable to pay However, such may be modified, changed or amended within three
any internal revenue tax. (3) years from the date of their filing provided no notice for audit or
investigation for such return, statement or declaration has been
Power of the Commissioner to make assessments and prescribe actually served upon the taxpayer.
additional requirements for tax administration and enforcement
1. Examination of returns and determination of the tax due. Assess the proper tax on the best evidence obtainable
2. Assess the proper tax on the best evidence obtainable. A Commissioner is given the power to assess deficiency tax based on
3. Conduct inventory-taking, surveillance and to prescribe presumptive the best evidence obtainable:
gross sales and receipts. 1. when a report required by law as a basis for the assessment of
4. Issue jeopardy assessments and terminate the taxable period. any national internal revenue tax shall not be forthcoming within
5. Prescribe real property values. the time limit fixed by law or rules and regulations; or
6. Inquire into bank deposit accounts. 2. when there is reason to believe that any such report is false,
7. Accredit and register tax agents. incomplete or erroneous.
8. Prescribed additional procedural or documentary requirements. In Bonifacia Sy Po V. CTA, the Supreme Court upheld the
assessment made by the Commissioner on the basis of the bottles of
Authority of the Commissioner to delegate power: wine seized and the worn statements of the former employees of the
The Commissioner may delegate his powers to any or such Silver Cup Wine Factory for failure of the latter’s proprietor to submit
subordinate officials with the rank equivalent to a DIVISION CHIEF the factory’s book of accounts and related records despite repeated
OR HIGHER subject to certain limitations. Provided the ff CANNOT demands by the BIR.
be delegated:
1. The power to recommend the promulgation of rules and regulations Conduct inventory-taking, surveillance and to prescribe
by the Sec of Finance presumptive gross sales and receipts
2. The power to issue rulings of first impression or to reverse, revoke, Commissioner may, at any time, during the taxable year, order
or modify any existing ruling of the Bureau inventory-taking of goods of any taxpayer as a basis for determining
3. The power to compromise or abate except liabilities less than his internal revenue tax liabilities.
P500,000. Commissioner may also place the business operations of any person,
4. The power to assign or reassign internal revenue officers to natural or juridical, under observation or surveillance if there is
establishments where the articles subject to excise tax are produced reason to believe that such person is not declaring his correct
or kept. income, sales or receipts for internal revenue tax purposes.
Commissioner may also prescribe presumptive gross sales and
Examination of returns and determination of the tax due receipts in the following instances:
After the filing of the return, the Commissioner or his duly 1. When it is found that a person has failed to issue receipts and
authorized representative may authorize the examination of any invoices in violation of the NIRC; or
taxpayer and the assessment of the correct amount of tax.
Prescription for violations of any provision of the NIRC Discovery and seizure of smuggled goods
All violations of any provision of the NIRC shall prescribe in 5 years. To encourage the public to extend full cooperation in eradicating
Prescription shall begin to run from the day of the commission of the smuggling, a cash reward equivalent to 10% of the fair market value
violation of the law, and if the same be not known at the same time, of the smuggled and confiscated goods or P1,000,000 per case,
from the discovery thereof and the institution of judicial proceedings whichever is lower.
for its investigation and punishment.
The prescription shall be interrupted when proceedings are instituted Reward subject to income tax
against the guilty persons and shall begin to run again if the The cash rewards of informers shall be subject to income tax collected as a
proceedings are dismissed for reasons not constituting jeopardy. final withholding tax, at the rate of ten percent (10%).
The term of prescription shall not run when the offender is absent
from the Philippines.
Chapter 5: TAX ADMINISTRATION AND ENFORCEMENT. Page 8 of 8
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 1
Chapter 6: REMEDIES OF THE GOVERNMENT COMPROMISE
Compromise v. abatement
IN GENERAL CIR may compromise both civil and criminal liability of the taxpayer
Unlike compromise which involves a reduction of the taxpayer’s
Remedies of the government liability, abatement of tax means that the entire tax liability of the
1. Tax lien taxpayer is cancelled.
2. Compromise Compromise and abatement have different grounds.
3. Distraint
4. Levy Grounds for compromise
5. Civil action 1. A reasonable doubt as to the validity of the claim against the
6. Criminal action taxpayer exists; or
7. Forfeiture 2. The financial position of the taxpayer demonstrates a clear
8. Suspension of business operations in violation of VAT inability to pay the assessed tax
9. Enforcement of administrative fine
Grounds for abatement
TAX LIEN 1. When the tax or any portion thereof appears to be unjustly or
excessively assessed.
Tax lien 2. When the administration and collection costs involved do not justify
Only one property subject to tax the collection of the amount due.
When a taxpayer neglects or refuses to pay his internal revenue tax
liability after demand, the amount so demanded shall be a lien in Cases that may be compromised
favor of the government from the time the assessment was made by 1. Delinquent accounts
the Commissioner until paid with interest, penalties, and costs that 2. Cases under administrative protest
may secure in addition thereto, upon all property and rights to 3. Cases disputed before the courts
property belonging to the taxpayer. [Section 219, NIRC] 4. Cases for collection already filed in courts
Lien shall not be valid against any mortgagee, purchaser or 5. Criminal violations except those already filed, and those involving
judgment creditor until notice of such lien shall be filed by the fraud.
Commissioner in the Register of Deeds of the province or city where
the property of the taxpayer is located. Cases that cannot be compromised
A tax lien created in favor of the government is superior to all other 1. Withholding tax cases
claims and preferences, even to that of a private litigant predicated 2. Criminal tax fraud cases
on a court judgment. 3. Criminal cases already filed in court
4. Delinquent accounts with duly approved schedule of installment
Tax lien and Distraint payments
Tax lien is directed to the property subject to the tax, regardless of 5. Cases where reduction of payments had already been granted.
the owner. 6. cases already decided and are final and executory
In distraint, property seized must be that of the taxpayer, although it
need not be the property in respect to which the tax is assessed.
What is the purpose of a waiver of the statute of limitations to Imprescriptibility of Tax Laws (1997)
assess and collect internal revenue taxes? Taxes were generally imprescriptible; statutes, however, may provide
SUGGESTED ANSWER otherwise. State the rules that have been adopted on this score by The
A waiver of the statute of limitations under the NIRC, to a certain extent, is a National Internal Revenue Code.
derogation of the taxpayers' right to security against prolonged and SUGGESTED ANSWER:
unscrupulous investigations and must therefore be carefully and strictly The statute of limitation for assessment of tax if a return is filed is within
construed. The waiver of the statute of limitations is not a waiver of the right three (3) years from the last day prescribed by law for the filing of the return
to invoke the defense of prescription. It is an agreement between the or if filed after the last day, within three years from date of actual filing. If
taxpayer and the BIR that the period to issue an assessment and collect the no return is filed or the return filed is false or fraudulent, the period to
taxes due is extended to a date certain. The waiver does not mean that the assess is within TEN YEARS from discovery of the omission, fraud or falsity.
taxpayer relinquishes the right to invoke prescription unequivocally The period to collect the tax is within FIVE YEARS from date of assessment.
particularly where the language of the document is equivocal. For the In the case, however, of omission to file or if the return filed is false or
purpose of safeguarding taxpayers from any unreasonable examination, fraudulent, the period to collect is within TEN YEARS from discovery without
investigation or assessment, our tax law provides a statute of limitations in need of an assessment.
the collection of taxes. Thus, the law on prescription, being a remedial
measure, should be liberally construed in order to afford such protection.
As a corollary, the exceptions to the law on prescription should perforce be
strictly construed. (Philippine Journalists, Inc. v. CIR, G.R. No. 162852,
December 16, 2004)
Decisions of the Regional Director ILLEGALLY COLLECTED TAX vs. ERRONEOUSLY COLLECTED TAX:
It should be noted that the Regional Director may also render Illegally collected tax means it violates certain provision of the
decisions on protests. law. It may not be authorized by a peculiar Tax Law or statute.
Revenue Regulations 12-85 authorizes appeals to the CTA from
Erroneously collected tax means there may be a law passed but
decisions of the Regional Director on administrative protests within
there was a mistake in the collection.
the same 30 day period. Sec. 7 of RA 1125, however, mentions only
decisions of the Commissioner. WHEN TO FILE: Within 2 years from the date of payment
Be that as it may, it is very well within the perimeter of correct
Payment must be proven in contemplation of Tax Law, there is
procedure if the taxpayer, instead of going directly to the CTA,
payment when the tax liability is fully paid. So, if it is payable in
appeals the decision of the Regional Director to the Commissioner,
installment, there can only be payment when the final installment
since it is the Commissioner who has the final authority to decide,
has been paid.
assessment protests.
REFUND AND CREDIT
Two ways of protesting administratively These are remedies of the taxpayer after payment of tax.
1. Request for reconsideration: This refers to a plea for re-evaluation of Both are modes of recovering taxes which are either erroneously or
an assessment on the basis of existing records without the need of illegally paid to the government.
additional evidence. It may involve a question of fact or law or both. Tax refund is when there is actually a reimbursement of the tax,
2. Request for reinvestigation: This refers to a plea for re-evaluation of improperly collected and paid. In tax credit, the government applies
an assessment on the basis of newly-discovered or additional the amount determined to be improperly collected, after proper
evidence. It may also involve a question of fact or law or both. verification, against any sum that may be due and collectible from
the taxpayer.
CLAIMS FOR REFUND AND CREDIT OF TAXES
The taxpayer may, instead of filing a protest, file a written When may claim for refund or credit be filed?
claim for refund. 1. When tax has been erroneously or illegally collected.
By virtue of solutio indebiti principle 2. When any penalty is claimed to have been collected without
authority.
REQUISITES FOR FILING REFUND: 3. When any sum is alleged to have been excessively or in any manner
1. This must be filed within the two (2) year period from the date of wrongfully collected, [Sec. 229, NIRC].
payment; 4. Commissioner is also given the authority to refund the value of
2. The fact of withholding must be proven; Internal Revenue Stamps when they are returned in good condition
3. This must be included in the income tax return of the taxpayer; by the purchaser, and in his discretion redeem or change unused
Chapter 8: TAXPAYER’S REMEDIES. Page 2 of 4
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 3
stamps that have been rendered unfit for use and refund their value 2. If claim is denied or is not acted upon by the Commissioner, the
upon proof of destruction. [Sec. 204, NIRC] taxpayer must file an appeal to the CTA within 30 days after the
receipt of the decision of the Commissioner.
Requisites for refund or credit 3. Both the written claim and the appeal to the CTA must be filed
1. A written claim for refund or credit must be filed with the within the two-year prescriptive period.
Commissioner.
2. The claim for refund or credit must be a categorical demand for The two-year prescriptive period for overpaid quarterly corporate
reimbursement; and income tax
3. It must be filed within two years from the date of payment of the In case of an overpaid quarterly income tax for corporations, the
tax or penalty regardless of any supervening event that may arise prescriptive period of two years within which a claim for refund
after the payment. should be filed is counted, not from the time the corporation files its
4. The tax should have been paid in full. quarterly income tax return and pays the tax thereon, but from the
Payment under protest is not required. Sec. 229 of the NIRC date the final adjustment return is filed after the end of the taxable
provides that a suit or proceeding for refund or credit may be year.
maintained whether or not such tax, penalty, or sum has been paid
under protest or duress. Prescriptive period for taxes withheld
In the case of taxes withheld under the withholding tax system, the
When payment under protest required two-year prescriptive period for refunds is counted not from the date
1. In real property protest cases the tax is withheld and remitted to the Bureau of Internal Revenue
2. Protest in customs cases but from the end of the taxable year.
EQUITABLE RECOUPMENT
It is a principle which allows a taxpayer whose claim for refund has
been barred due to prescription to recover said tax by setting off the
prescribed refund against a tax that may be due and collectible from
him.
This rule is not applicable in the Philippines.
LOCAL TAXATION State itself which has the “inherent power to tax.” LGU cannot
tax instrumentalities of the National Government, in this case,
Local taxation as decentralization PAGCOR.
The principles of local taxation under the 1987 Consititution Authority to prescribe penalties for tax violations and limitations
simply means “Decentralization”. It does not mean that local
governments are sovereigns within the state or “imperium in Limited as to the amount of fine that they may impose as well as
imperio”. the length or period of imprisonment that they may provide.
Two aspects of local taxation Fees means a charge fixed by law or ordinance for the regulation
or inspection of a business or activity. [Section 131(i), Local
1. Levy of taxes, fees, charges and other impositions Government Code]
2. Real property taxation
Charges refer to pecuniary liability, as rents or fees against
POWER TO LEVY TAXES, FEES, CHARGES AND OTHER persons or property. [Section 131(g), Local Government Code]
IMPOSITIONS
Authority to grant tax exemption privileges
POWER OF LOCAL TAXATION
With the grant of the power of taxation, local government units
Power of local taxation not inherent have also been given the power to grant tax exemptions
corresponding to its taxing powers.
Each local government unit shall have the power to create its
own sources of revenues and to levy taxes fees and charges Local government units may, through ordinances duly approved,
subject to such guidelines are limitations as the Congress may grant tax exemptions, incentives or reliefs under such terms and
provide, consistent with the basic policy of local autonomy. Such conditions as they may deem necessary.
taxes, fees, and charges shall accrue exclusively to the local
governments. [Section 5, Article X, Constitution] Guidelines of Sanggunians
On the grant of tax exemptions or tax reliefs
The power of local taxation is not inherent and is conferred on 1. May be granted in cases of natural calamities, civil
local government units by the Constitution. This is reiterated in disturbance, general failure of crops, or adverse
Section 129 of the Local Government Code of 1991. economic conditions such as substantial decrease in
prices of agricultural or agri-based products.
Power is not plenary and absolute as it is subject to guidelines 2. Shall be through ordinance.
and limitations as may be provided by Congress. 3. Shall take effect only during the next calendar year for a
period not exceeding 12 months.
Basco v. PAGCOR; A municipal corporation has no inherent 4. Any exemption or relief granted to a type or kind of
right to impose taxes. The “power to tax” must always yield to a business shall apply to all businesses similarly situated.
legislative act which is superior for having been passed by the
Chapter 10: LOCAL TAXATION. Page 1 of 10
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 2
SCOPES AND EXERCISE OF LOCAL TAXING POWER in at least two (2) conspicuous and publicly accessible places. [Section
188, Local Government Code]
Local authority that shall exercise taxing power
4. Furnishing of copies to local treasurer
The power shall be exercised by the appropriate sanggunian or
the sangguniang panlalawigan in the case of provinces, the Copies of all provincial, city and municipal tax ordinances or
sangguniang panglungsod in the case of cities, the sangguniang revenue measures shall be furnished to the respective local treasurers for
bayan in the case of municipalities or the sangguniang barangay public dissemination. [Section 189, Local Government Code]
in the case of barangays, through an appropriate ordinance.
[Section 132, Local Government Code]
The exercise of the power to tax by the local legislative assembly Procedure for protest of tax ordinances
is subject to the veto power of the local chief executive.
Any question on the constitutionality of tax ordinances or revenue
1. Ultra Vires measures may be raised on appeal within 30 days from the
2. Prejudicial to the public welfare effectivity thereof to the Sec. of Justice. [Sec. 187, Local
Government Code].
However, the sanguniang may override the veto by a 2/3 vote of
all its members. After the lapse of 30 days and declaratory relief – before
assessment; before payment
Procedure for approval and effectivity of tax ordinances and Note: Appeal from where? The provision is not really clear but
revenue measures presumably after going through the same process of appealing legality of
ordinances, i.e. from municipal to provincial sanggunian before going to
1. Enactment and approval by sanggunian. the Secretary of Justice. Otherwise, direct appeal to the Secretary may
be made.
The procedure for approval of local tax ordinances and revenue
measures shall be in accordance with the provisions of the Local The Secretary of Justice shall render a decision within sixty (60)
Government Code. [Section 187, Local Government Code] days from the date of receipt of appeal. [Section 187, Local
Government Code]
2. Mandatory public hearings
Such appeal shall not have the effect of suspending the
Public hearings shall be conducted for the purpose prior to the effectivity of the ordinance and the accrual and payment of the
enactment thereof. [Section 187, Local Government Code] tax, fee, or charge levied therein. [Section 187, Local
Government Code]
3. Publication requirements
Within thirty (30) days after receipt of the decision or the lapse of
Within ten (10) days after their approval, certified true copies of the 60-day period without the Secretary of Justice acting upon
all provincial, city and municipal tax ordinances or revenue measures shall the appeal, the aggrieved party may file appropriate proceedings
be published in full for three (3) consecutive days in a newspaper of local with a court of competent jurisdiction. [Section 187, Local
publication or, in the absence of newspapers of local publication, posted Government Code]
Prescription for filing of review 6. The collection of local taxes, fees, charges, and other impositions
shall, in no case, be let to any person. Note: This overrules the
Barangay ordinance – file petition for review to municipal/city Bagatsing ruling [Bagatsing v. Ramirez 7 SCRA 306]
sangunian within 10 days from enactment.
Asiatic v. Alikpala – The mere collection of market stall
Municipal or Component city ordinance – file with Provincial fees may be let to a private entity, the same not being taxes.
sanggunian within 3 days from approval.
This is a doubtful decision since Sec. 130 of the LGC covers
Chartered City/Provincial sanggunian – file with Sec. of Justice not only the collection of taxes but likewise all other
within 30 days from effectivity. impositions under the LGC.
Review powers, of local treasurers and the Sec. of Finance, on 7. The revenue collected under the local Government Code shall
the validity of revenue ordianances have been abrogated by the inure solely to the benefit of, and subject to disposition by, the
Local Government Code. local government unit levying the tax, fee, charge or other
imposition unless specifically provided therein.
No power of control by Secretary of Justice over LGUs
8. Each local government unit shall, as far as practicable, evolve a
Section 187 of the Local Government Code, which authorizes the progressive system of taxation. [Section 130, Local Government
Secretary of Justice to review the constitutionally or legality of a Code]
tax ordinance – and, if warranted, to revoke it on either or both
grounds – is valid, and does not confer the power of control over 9. The interpretation of laws on the grant of taxing power to LGU’s
local government units in the Secretary of Justice; as even if the shall be liberally interpreted in favor of the LGU, But, doubts on
latter can set aside a tax ordinance he cannot substitute his own the liability of the taxpayer under a valid tax ordinance is
judgment for that of the local government units. [Drillon v. construed strictly against the LGU, except as regards to tax
Lim, 253 SCRA 135] exemptions, incentives or reliefs.
Fundamental principles governing local taxation 10. The National Government cannot deprive LGU’s of their taxing
power as this power is expressly granted and mandated by the
1. Taxation shall be uniform in each local government unit. Constitution. The laws may provide limitations, but they cannot
totally abrogate the taxing power of the LGU’s
2. Taxes, fees, charges and other impositions shall be equitable and
based as much as possible on the taxpayer’s ability to pay. 11. Congress cannot enact local tax law, only guidelines and
limitations.
3. They shall be levied and collected only for public purposes.
4. Customs duties, registration fees of vessels and wharfage on 14. Taxes, fees or charges on Countryside and Barangay
wharves, tonnage dues, and all other kinds of customs fees, Business Enterprises and cooperatives duly registered under
charges and due, except wharfage on wharves constructed Republic Act No. 6810 and Republic Act No. 6938, otherwise
and maintained by the LGU concerned; known as the Cooperative Code of the Philippines;
5. Taxes, fees and charges and other impositions upon goods 15. Taxes, fees or charges of any kind of the National
carried into or out of, or passing through, the territorial Government, its agencies and instrumentalities, and local
jurisdictions of LGUs in the guise of charges for wharfage, government units. [Section 133, Local Government Code]
tolls for bridges or otherwise, or other taxes, fees or charges
in any form whatsoever upon such goods or merchandise; Common limitations may be classified into the following
categories
6. Taxes, fees or charges on agricultural and aquatic products
when sold by marginal farmers or fishermen; 1. Taxes which are levied by the NIRC
2. Taxes, fees and charges which are imposed under the Tariff and
7. Taxes or business enterprises certified to by the Board of Customs Code and other custom laws
Investments as pioneer or non-pioneer for a period of six (6) 3. Taxes, fees and charges the imposition of which contravenes
and four (4) years, respectively from the date of registration; existing governmental policies or which are violative of the
fundamental principles of taxation
8. Excise taxes on articles enumerated in the NIRC, as 4. Taxes, fees and charges imposed under special laws
amended, and taxes, fees or charges on petroleum products;
Scope of taxing power of provinces A broker is an agent of the company, a dealer is not.
1. Tax on the transfer of real property ownership – ½ or 1% within A city can validly tax the sales to customers outside the city as
60 days long as the orders were booked and paid for in the company’s
2. Tax on the business of printing and publication branch office in the city.
3. Franchise tax
Scope of taxing power of cities
A local franchise tax may only be imposed on companies
with legislative franchises that do not have the “ In lieu 1. The city may levy the taxes, fees and charges which the province
of all taxes” proviso. or municipality may impose. [Section 151, Local Government
Code]
4. Tax on sand, gravel and other quarry resources
5. Professional tax – P300 Note: The rates of taxes that the city may levy may exceed the
maximum rates allowed for the province of municipality by not more than
Professional exclusively employed in the government shall be fifty percent (50%) except the rates of professional and amusement
exempt from the payment of tax. taxes.
Business means trade or commercial activity regularly engaged in 1. On commercial breeding of fighting cocks, cockfights and
as a means of livelihood or with a view to profit. cockpits;
2. On places of recreation which charge admission fees; and
A manufacturer or producer which sells its products through a 3. On billboards, signboards, neon signs, and outdoor
broker, is subject to excise tax (business tax) in the city or advertisements.
municipality where the broker conducts its business.
1. who has been regularly employed on a wage or salary basis 1. Diplomatic and consular representatives
for at least 30 consecutive working days during any calendar
year; or 2. Transient visitors when their stay in the Philippines does not
exceed three (3) months. [Section 159, Local Government Code]
2. who is engaged in any business or occupation; or
Accrual and payment of community tax
3. who owns real property with an aggregate assessed value of Community tax shall accrue on the first day of January which
P1,000 or more; or shall be paid not later than the last day of February each year.
Means any person, irrespective of his or her citizenship or New taxes, fees or charges, or charges in the rates thereof, shall
nationality, who dwells or resides in the Philippines for a period accrue on the first day of the quarter of the next following the
exceeding three (3) months. effectivity of the ordinance imposing such new levies or rates.
[Section 166, Local Government Code]
Calendar year unless otherwise provided Local taxes, fees, or charges shall be assessed within five (5)
years from the date they became due. [Section 194(a), Local
Taxes shall be paid within the first twenty (20) days of January Government Code]
or of each subsequent quarter, as the case may be.
In case of fraud or intent to evade the payment of taxes, fees, or
The sanggunian concerned may, for a justifiable reason or charges, the same may be assessed within ten (10) years from
cause, extend the time for payment of such taxes, fees, or discovery of the fraud or intent to evade payment. [Section
charges without surcharges or penalties, but only for a period 194(b), Local Government Code]
not exceeding six (6) months. [Section 165 and 167, Local
Government Code] Period of collection
Local government lien Local taxes, fees, or charges may be collected within five (5)
years from the date of assessment of administrative or judicial
Local taxes, fees, charges and other revenues constitute a lien, action. [Section 194 ©, Local Government Code]
superior to all liens, charges or encumbrances in favor of any
person, enforceable by appropriate administrative or judicial Suspension of period of assessment and collection
action, not only upon any property or rights therein which maybe
subject to the lien but also upon property used in business, 1. The treasurer is legally prevented from making the assessment or
occupation or calling, or exercise of privilege with respect to collection.
which the lien is imposed.
2. The taxpayer requests for a reinvestigation and executes a
The lien is extinguished upon payment of the tax, fee or charge, waiver in writing before expiration of the period within which to
including the interest and surcharges. [Section 173, Local assess or collect.
Government Code]
3. The taxpayer is out of the country or otherwise cannot be
Civil remedies for collection located. [Section 194(d), Local Government Code]
1. By administrative action
REMEDIES OF THE TAXPAYER IN LOCAL TAXATION
a. Distraint of personal property
1. Protest by means of appeal to the secretary of Justice.
b. Levy upon real property 2. Protest against the assessment
3. Claim for refund or tax credit
2. By judicial action [Section 174, Local Government Code]
Protest against a newly enacted ordinance within which to appeal with the court of competent jurisdiction;
May be raised on appeal within 30 days from the effectivity otherwise, the assessment becomes conclusive and unappealable.
thereof to the Secretary of Justice. [Section 195, Local Government Code]
Shall NOT have the effect of suspending the effectivity of the
ordinance and the accrual and payment of the tax, fee or charge Claim for refund or tax credit
levied therein.
Appeal from the decision of of the Sec of Justice is filed with the Remedy after payment in cases where tax was erroneously or
regular court. illegally collected.
CTA has no jurisdiction over said appeal.
No case or proceeding shall be maintained in any court for the
PROCEDURE FOR PROTEST OF ASSESSMENT recovery of any tax, fee, or charge erroneously or illegally
collected until a written claim for refund or credit has been filed
1. Notice of Assessment with local treasurer. [Section 196, Local Government Code]
When the local treasurer or his duly authorized representative Written claim for refund or credit must be filed with the treasurer
finds that correct taxes, fees, or charges have not been paid, he shall within two (2) years form the date of payment of the tax, fee or
issue a notice of assessment stating the nature of the tax, fee or charge, charge or from the date the taxpayer is entitled to a refund or
the amount of deficiency, the surcharge, interests and penalties. [Section credit (doctrine of supervening cause therefore applies). [Section
195, Local Government Code] 196, Local Government Code]
2. Written protest Note: There is no provision governing the procedure in case the claim
for refund or credit is denied or not acted upon by the local treasurer.
Within sixty (60) days from the receipts of the notice of The same procedure for protest of assessment may be followed and, as
assessment, the taxpayer may file a written protest with the local such, the taxpayer may appeal with the court of competent jurisdiction.
treasurer contesting the assessment; otherwise, the assessment shall
become final and executory. [Section 195, Local Government Code] Injuction on the collection of local taxes
3. Decision Unlike in the NIRC, the LGC does not specifically prohibit the
issuance of injunctions on the collection of local taxes.
The local treasurer shall decide the protest within sixty (60) days
from the time of its filing. If the treasurer finds the protest to be wholly However, injunctions cannot be issued on the basis of the alleged
or partly meritorious, he shall issue a notice canceling wholly or partially unconstitutionality of the tax ordinance. Until the tax ordinance is
the assessment. However, if the local treasurer finds the assessment to declared to be unconstitutional, it is presumed to be valid and
be wholly or partly correct, he shall deny the protest wholly or partly with constitutional.
notice to the taxpayer. [Section 195, Local Government Code]
4. Appeal
The taxpayer shall have thirty (30) days from the receipt of the
denial of the protest or from the lapse of the sixty-day period prescribed
Power to prescribe penalties for tax violations gov’t seems to be bereft of this authority insofar as realty taxes are
Local governments have the power to impose penalties for tax concerned.
violations. By specifying in Sec 234 of LGC on what particular properties are
Penalty: exempt, it follows by clear implication that the law has withheld the
Fine: not less than 1000 but not more than 5000 local gov’ts the power to exempt.
Imprisonment:not less than 1 month but not more than 6mo The Latin maxim “expressio unius est exclusion alterius” applies.
Power to fix penalties applies only to provinces, cities and
municipalities of Metro Manila. Properties exempt from real property taxes (Sec 234, LGC)
Reason: 1. Real property owned by the Republic of the Philippines or any of its
It is only the Sanggunians of these local government units political subdivisions except when the beneficial use thereof has
that can levy real property taxes (Sec. 232, LGC) been granted for consideration or otherwise to a taxable person.
2. Charitable institutions, churches, parsonages, or convents
Fundamental principles governing real property taxation appurtenant thereto, mosques, non-profit or religious cemeteries,
1. Real property shall be appraised at its current and fair market value and all lands, buildings, and improvements actually, directly and
2. Real property shall be classified for assessment purposes on the exclusively used for religious, charitable, or educational purposes.
basis of its actual use. 3. All machineries and equipment that are actually, directly and
3. Real property shall be assessed on the basis of a uniform exclusively use by local water utilities and government-owned or
classification within each local government unit. controlled corporations engaged in supply and distribution of water
4. The appraisal, assessment, levy and collection of real property tax and/or generation and transmission of electric power.
shall not be let to any private person. 4. All real property owned by duly registered cooperatives as provided
5. The appraisal and assessment of real property shall be equitable. for under Republic Act No. 6938.
[Section 197, Local Government Code] 5. Machinery and equipment used for pollution control and
environmental protection. [Section 234, Local Government Code]
Ty, et al vs Trampe (December 1, 1995)
The Supreme Court declared illegal the 400% to 570% increase in Property owned by the Republic of the Philippines and its political
real estate taxes imposed on landowners in Pasig City because the subdivisions
new schedule of taxes did not comply with the provision of PD 921 MCIA v. Marcos : MCIA, which is a government owned or
which mandates that “real estate taxes shall not unduly burden the controlled corporation, mandated to control, manage and supervise
taxpayers”. the Mactan International Airport, is not exempt from real property
The exhaustion of administrative remedies was not necessary before tax. It is a GOCC and not an instrumentality of the government.
they could raise the issue judicially because the complainants raised
purely legal issues which the Board of Assessment Appeals has no National Development Co. V. Cebu City : It may therefore be
competence to decide since it can deal only with findings of facts. stated that tax exemption of “property owned by the Republic of the
Philippines” refers to properties owned by the government and by its
Do local governments have the power to exempt real property from agencies which do not have separate and distinct personalities, as
taxation? distinguished from GOCC’s which have separate and distinct
Unlike in the case of local taxes where Sec 192 of LGC explicitly personalities.
authorizes them “to grant tax exemptions, incentives, or reliefs
under such terms and conditions as they may deem necessary,” local City of Baguio V. Busuego : While the GSIS may be exempt from
real estate tax under its charter and Real Property Tax Code, said
property is taxable of the beneficial use or actual possession thereof by right of accession, [Board of Assessment Appeals of
is granted for a consideration or otherwise to a taxable person. Zamboanga del Sur v Samar Mining Co.]
Caltex Phils Inc V Central Board of Assessment Appeals: “USE” AND “OWNERSHIP” IN REAL PROPERTY TAXATION
Underground tanks, elevated water tanks, gasoline pumps, Two interrelated concepts that are important factors in determining
computing pumps, water pumps, car washer, truck hoists, air whether real property tax is tax-exempt or not.
compressors and tireflators of a gasoline station located on leased Tax-exempt properties enumerated in Sec. 28(3) art VI of the
land are taxable as necessary fixtures to the gasoline station witgout Constitution, the tax exemptions thereunder rest on the premise that
which the gasoline station would be useless. The ruling in Davao they are actually, directly and exclusively used by said entities or
Sawmill v Castillo which states that machinery which is movable by institutions for their stated purposes, and not necessarily because
nature becomes immobilized when placed by the owner of the they are owned by religious, charitable or educational institution.
property but not so when placed by a tenant, a usufructuary or a Once the use of those properties lose their tax-exempt character
person having a temporary right is not applicable. Machinery because they are neither essentially nor incidentally used for
installed by the lessee of leased land is not real property for religious, charitable or educational purposes, their tax exempt status
purposes of execution of a final judgment only. The issue on the likewise ceases even if there is no corresponding change in
taxability of improvements is, however, a different matter. ownership.
If property is tax exempt at the beginning of the year because its
Manila Electric Co. V Central Board of Assessment of use at the time is confined actually, directly and exclusively to
Appeals: Oil storage tanks while not embedded in the land or religious, charitable or educational purposes, the exemption covers
attached to any part of the foundation by bolts, screws or similar the entire year, even assuming that sometime during that year the
devices are nevertheless be considered as improvements on the land use of that property ceases to be for the above-mentioned purposes.
enhancing its utility and rendering it useful to the oil industry. If at the beginning of the year, the property is taxable because at
Hence, taxable. that point in time, the use is for non-exempt purpose, the taxable
status continues for that entire year even if at a certain time during
Fernandez v Shearer: Sugar mills with appropriate machinery on that year it is used for religious, charitable or educational purposes.
real estate are improvements subject to real estate tax.
Meralco Securities Industrial Corp v CBAA: Pipeline system RULE APPLIED WHERE THE PERSON ASSESSED IS NEITHER
consisting of cylindrical steel pipes to carry oil from Batangas to OWNER NOR USER – CONCORDIA LIM CASE
Manila is taxable. The court applying Art 415 par 1 and 3 of the civil In the case of Testate Estate of Concordia Lim V. City of Manila, it
code, ruled that the pipeline system is a construction adhering to the was held that the unpaid tax attaches to the property and is
soil because it is attached to the land in such a way that it cannot be chargeable against the person who had actual or beneficial use and
separated therefrom without breaking the material or deterioration possession of it regardless of whether or not he is the owner. To
of the object. impose the real property tax on the subsequent owner who was
neither the owner nor the beneficial user of the property during the
Board of Assessment Appeals v Manila Electric Co: Steel designated periods would not only be contrary to law but also
towers constructed by Manila electric on land belonging to it at unjust.
intervals from its hydroelectric plant in Laguna to the City of Manila Therefore the tax liability that was paid by the heir of Concordia Lim
are not subject to real estate tax. They do not constitute buildings under protest maybe refunded by the city government, however
or constructions adhered to the soil under Art 415 par 1 of the CC, they are not entitled to reimbursement from respondent GSIS
nor are they attached to an immovable in a fixed manner under par because 1. GSIS is exempt from payment of real property tax and 2.
3. They are also cannot be considered as immobilized by destination The tax should be on actual use of the property. If there is anyone
under par 5 of the same article. liable, the law and applicable jurisprudence point to the lessees of
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land owned by the government-owned and controlled corporations. Real property shall be listed, valued, and assessed in the name of
In this case, the court can only declare the non-liability of a right to the owner or administrator, or anyone having legal interest in the
refund. The court cannot rule on the liability of the lessees whose property.
identities are not even clear because they were never impleaded.
Schedule of fair market values
APPRAISAL AND ASSESSMENT Local assessors shall prepare a schedule of fair market values for the
different classes of property situated in their respective LGU’s for
Appraisal enactment by ordinance of the sanggunian concerned.
Appraisal is the act or process of determining the value of property The schedule shall be published in a newspaper of general
as of a specific date for a specific purpose, [Sec. 199(e), Local circulation in the locality or, in the absence thereof, posting in two
Government Code] conspicuous and publicly accessible places, [Sec. 212, Local
Government Code].
Appraisal of real property Assessment is the act or process of determining the value of a
All Real property, whether taxable or exempt, shall be appraised at property, or proportion thereof, subject to tax, including the
the current and fair market value prevailing in the locality where discovering, listing, classification, and appraisal of properties, [Sec.
such property is situated. 199(f), Local Government Code].
Assessment Roll Reyes v. Almanzo: Both the income approach and the comparative
This is a listing of all real property, whether taxable or exempt, sales approach are valid methods of ascertaining proper tax.
located within the territorial jurisdiction of the local government unit However, in the case at bar, the income approach should have been
concerned. used due to the effect of the Rent Control Law on the lease of the
All provincial, city, or municipal assessors are required to prepare involved properties. The use of the comparative sales approach
and maintain in every province and city an Assessment Roll. would lead to inequitable results.
Date of accrual of tax and tax lien 1. administrative action through levy
The real estate tax for any year shall accrue on the first day of The remedy of levy can be pursued by putting up for sale only the
January and from that date it shall constitute a lien on the property real property subject to tax. The personal liability is on the owner of
which shall be superior to any other lien, mortgage or encumbrance the real property at the time the tax accrues.
of any kind whatsoever and shall be extinguished only upon the
payment of the delinquent tax. [Section 246, Local Government 2. judicial action
Code] A formal demand for the payment of the delinquent tax is not
required for the initiation of either remedy.
Payment of real property tax in installments The collection of local taxes may be enforced through either or both
The owner of the real property or the person having legal interest the above mentioned remedies, alternatively or simultaneously, and
therein may pay the basic real property tax and the additional tax for the use or non-use of either remedy shall not be a bar to avail of the
the special education fund thereon without interest in four (4) equal other remedy.
installments; except the special levy, the payment of which shall be
governed by an ordinance of the sanggunian concerned. [Section Procedure for levy
250, Local Government Code] 1. Notice of delinquency- Posted and published
2. Warrant of levy – Mailed and served
Tax discount 3. Advertisement – After 30 days from service of Warrant of Levy
In case of payment in advance of the basic real property tax and - Posting and Publication
additional SEF tax, sanggunian may grant a discount in an amount 4. Auction sale
not exceeding 20% of the annual tax due. [Section 251, Local
Government Code] Notes on levy on real property
Notices and publication, as well as the legal requirement for the sale
Prescriptive periods of collection are mandatory, the failure of which can invalidate the sale.
The basic real property tax and any other tax levied under the Local An auction sale, even if preceded by posting, publication and
Government Code shall be collected within five (5) years from the advertisement, but without actual notice to the delinquent taxpayer,
date they become due. is void. The notice must be given to the person who had therefore
In case of fraud or intent to evade payment of the tax, such action declared the property for tax purposes.
may be instituted for the collection of the same within ten (10) years Redemption of one who is not entitled thereto is ineffectual.
from the discovery of such fraud or intent to evade payment.
under the provisions of the National Internal Revenue Code, as amended, or SUGGESTED ANSWER:
other applicable laws: Provided, That the taxes, fees, or charges shall not be The following properties are exempt from the real property
unjust, excessive, oppressive, confiscatory or contrary to declared national tax (Section 234, Local Government Code):
policy: Provided, further, That the ordinance levying such taxes, fees or (1) Real property owned by the REPUBLIC OF THE PHILIPPINES or any of its
charges shall not be enacted without any prior public hearing conducted for political subdivisions except when the beneficial use thereof has been granted for
the purpose. consideration or otherwise to a taxable person;
The City of Cebu passed an ordinance imposing a tax of P5.00 on every (2) CHARITABLE INSTITUTIONS, churches, parsonages or convents appurtenant
kilo of lechon taken out of the City. Is the tax valid? thereto, mosques,
No, it is not valid. Section 133 of the Local Government Code clearly non-profit or religious cemeteries, and all lands, buildings, and improvements
proscribes the imposition of a tax by local government units concerning all articles actually, directly and exclusively used for religious, charitable or educational
that are going in or out, or passing through, the territorial jurisdiction of the local purposes;
government unit. (3) All machineries and equipment that are actually, directly and exclusively used by
K is engaged in the business of producing mineral water. In order to trim LOCAL WATER UTILITIES and government-owned or controlled corporations
down the cost of operations, K decided to produce her own plastic bottles engaged in the supply and distribution of water and/or generation and transmission of
for her mineral water. K is producing the said plastic bottles exclusively electric power;
for her mineral water business. (4) All real property owned by duly REGISTERED COOPERATIVES as provided
The City of Cebu, where K has her principal place of business, enacted an for under R.A. 6938; and
ordinance levying taxes on the business of producing mineral water. It also (5) Machinery and equipment used for POLLUTION CONTROL and
enacted an ordinance levying taxes on the production of plastic bottles. K ENVIRONMENTAL PROTECTION.
asked your learned advice whether or not she should pay the said taxes. Property Tax; Req’ts; Auction Sales of Property for Tax Delinquency (2006)
Discuss your advice. Quezon City published on January 30, 2006 a list of delinquent real property
I would advise K to pay the tax on her business of producing taxpayers in 2 newspapers of general circulation and posted this in the main lobby
mineral water, but not on her production of plastic bottles. This is because her of the City Hall. The notice requires all owners of real properties in the list to pay
main line of business is the production of mineral water, for which she is liable for the real property tax due within 30 days from the date of publication, otherwise the
the local business tax. On the other hand, her production of plastic bottles is properties listed shall be sold at public auction.
done exclusively for her mineral water business; hence, the same should not be Joachin is one of those named in the list. He purchased a real property in 1996 but
treated as a separate business. It is well-settled that where a taxpayer is failed to register the document of sale with the register of Deeds and secure a new
engaged in a distinct business and, as a feature thereof, in an activity merely real property tax declaration in his name. He alleged that the auction sale of his
incidental which serves no other person or business, the incidental activity property is void for lack of due process considering that the City Treasurer did not
should not be separately or additionally taxed. send him personal notice. For his part, the City Treasurer maintains that the
Real Property Taxation: Fundamental Principles (1997) publication and posting of notice are sufficient compliance with the requirements of
State the fundamental principles underlying real property taxation in the the law.
Philippines. 1. If you were the judge, how will you resolve this issue?
SUGGESTED ANSWER: SUGGESTED ANSWER:
The following are the fundamental principles governing I will resolve the issue in favor of Joachin. In auction sales
real property taxation: of property for tax delinquency, notice to delinquent landowners and to the public in
1) Real property shall be appraised at its current and general is an essential and indispensable requirement of law, the non-fulfillment of
fair market value; which vitiates the same (Tiongco v. Phil. Veterans ). The failure to give notice to the
2) Real property shall be classified for assessment purposes on the basis of its right person i.e., the real owner, will render an auction sale void (Tan v. Bantegui,
actual use: City Treasurer of Q.C. v. CA).
3) Real property shall be assessed on the basis of a uniform classification within 2. Assuming Joachin is a registered owner, will your answer be the same?
each local government unit; SUGGESTED ANSWER:
4) The appraisal, assessment, levy, and collection of real property tax shall not be Yes. The law requires that a notice of the auction sale must
let to any private person; and be properly sent to Joachin and not merely through publication (Tan v.
5) The appraisal and assessment of real property shall be equitable. Bantegui,,October24, 2005; Estate of Mercedes Jacob v. CA, Dec. 22, 1997).
Real Property Taxation; Exempted Properties (2006)
What properties are exempt from the real property tax?
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Extend not only to the provisions of the Tariff and Customs Code
but to all other laws as well as Central Bank Circulars, the
TARIFF AND CUSTOMS CODE enforcement of which is entrusted to the Bureau of Customs.
IN GENERAL
Division of the Tariff and Customs Code
Book I – Tariff laws
CUSTOMS LAW – does not refer only to the provisions of Tariff and
Book II – Customs laws
Customs Code. It also includes other laws and regulations subject to
enforcement by the Bureau of Customs.
Customs duties
Customs duties are duties which are charged upon commodities
Other laws subject to enforcement by the Bureau of Customs:
on their being imported in or exported out of a country
1. NIRC – Sec. 107. Importation of goods or articles subject to VAT. The
Garcia v. Executive Secretary: Customs duties, which are
assessed at the prescribed tariff rates, are very much like taxes,
VAT must be paid before these goods are released from Customs
which are frequently imposed for both revenue raising and for
regulatory purposes. This, it has been held that “Customs duties”
Custody.
is “the name given to taxes on the importation and exportation of
commodities, the tariff or tax assessed upon merchandise
2. NIRC – Sec. 131. Importation of Articles subject to excise taxes. The imported from, or exported to, a foreign country.”
payment of excise tax must be made before the goods are released from
Customs custody. Flexible tariff clause (Flexible Power of the President)
Section 28(2), Article VI, Constitution: The Congress may,
3. Regulations that may be issued by the CB, the implementation of such by law, authorize the President to fix within specified limits, and
regulation is vested in the Bureau of Customs. subject to such limitations and restrictions as it may impose, tariff
rates, import and export quotas, tonnage and wharfage dues,
CUSTOMS DUTIES – are duties which are charged upon commodities and other duties or imposts within the framework of the national
on their being imported in or exported out of a country. development program of the Government.
TARIFF – means a book of rates; a table or catalogue drawn usually in Section 401, Tariff and Customs Code: In the interest of
alphabetical order containing the names of several states that hold national economy, general welfare and/or national security, the
commerce together. President upon recommendation of the National Economic and
Development Authority, is empowered:
Scope of tariff and customs laws
Section 3514 of the Tariff and Customs Code provides that tariff 1. To increase, reduce, or remove existing protective rates of
and customs laws include not only the provisions of the Code import duty, provided that the increase should not be higher
itself and regulations pursuant thereto but all other laws and that 100% ad valorem;
regulations which are subject to enforcement by the Bureau of 2. To establish import quota or to ban imports or any
Customs or otherwise within its jurisdiction. commodity; and
3. To impose additional duty on all imports not exceeding 10%
ad valorem
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Additional notes: bought and sold like a commodity. Money orders, also considered
1. An order issued by the President pursuant to the flexible tariff as bills of exchange of limited negotiability, possess the same
clause shall take effect thirty (30) days after promulgation, attributes as other negotiable instruments. Thus, they may also
except in the imposition of additional duty not exceeding ten be bought and sold like checks.
percent (10%) ad valorem which shall take effect at the
discretion of the President. Kinds of goods/merchandise
2. In the case of imposition of additional duty, the investigation of 1. articles subject to duty
the Tariff Commission and recommendation of NEDA are needed. 2. prohibited importations
3. conditionally-free importations
ARTICLES SUBJECT TO CUSTOMS DUTIES
Articles subject to duty
Goods for customs duty purposes As a general rule, all articles when imported from a foreign
country including those previously exported from the Philippines
All articles, when imported from any foreign country into the are subject to duty unless otherwise specifically provided in the
Philippines, shall be subject to duty upon each importation, even Code.
though previously exported from the Philippines, except as
otherwise specifically provided for in this Code or in other laws Prohibited importations
[Section 100, Tariff and Customs Code]
1. Dynamite, ammunitions and other explosives, firearms and
The Code also imposes export tariff and premium duty or certain weapons, except when authorized by law.
articles.
2. Written or printed articles containing any matter advocating of
Whether subject to duty or not, all imported articles shall be inciting treason, rebellion or subversion against the Philippine
entered through a custom house at the port of entry. Government, or forcible resistance to any law of the Philippines.
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KINDS OF DUTIES royalties and license fees; cost of transport; loading, unloading
and handling charges; and cost of insurance.
Classification of custom duties
EXPORT VALUE
1. Ordinary or regular customs duties Export value is that which, at the time of exportation, the same
> Imposed and collected merely as a source of revenue. or identical, like or similar article is freely offered for sale in the
principal export markets of the exporting country for exportation
2. Special customs duties to the Philippines, in the usual wholesale quantities and in the
> Imposed and collected in addition to ordinary customs duties ordinary course of trade (excluding internal excise taxes to be
usually protect local industries against foreign competition. remitted or rebated).
Kinds of ordinary or regular customs duties Wholesale price in principal export markets of the exporting
country.
1. Ad valorem
> The duty is based on the market value of the price of the HOME CONSUMPTION VALUE
imported article. Wholesale price of goods in market of exporting country.
Basis of dutiable value 2. If Commissioner of Customs has reason to doubt the truth or
The dutiable value of an imported article subject to an Ad accuracy of the declaration or documents provided in support of
Valorem rate of duty shall be the transaction value. the declared value of importation, he may require the importer to
give further explanation and submit additional documents.
Republic Act No. 8181 mandated the change of basis of the
dutiable value from the home consumption value to the 3. If Commissioner still has reasonable doubt as to the accuracy of
transaction value by January 1, 2000. Before such date, export the declared value after the explanation and additional
value was used as the basis for the determination of the dutiable documents are given, he may apply two alternative methods, to
value as a transitional device. wit:
a. The dutiable value shall be the transaction value of
TRANSACTION VALUE identical goods sold for export to the Philippines at or
Transaction value is the price actually paid or payable for the about the date of the exportation of the goods being
goods when sold for export to the Philippines. valued; or
It is adjusted by adding certain expenses to the extent that they b. If the dutiable value cannot be determined under the
are incurred by the buyer but are not included in the price preceding method, it shall be the transaction value of
actually paid or payable for the imported goods, i.e. commissions similar goods sold for export to the Philippines at or
and brokerage fees; the value of the materials, components, about the date of exportation of the goods being valued.
parts and items incorporated in the imported goods; amount of
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4. If still not able to determine the dutiable value: reflected by the importer in his customs declaration, for valuation
a. The unit price at which the imported goods or identical or purposes.
similar goods are sold domestically, in the same condition as
when imported, in the greatest aggregate quantity, to Such condition may include, but is not limited to, any of the
persons not related to the seller, at or about the time of the following conditions:
importation of the goods being valued;
1. If the sale or price is subject to some consideration for which a
b. The computed value; or value cannot be determined with respect to the goods being
valued; or
c. Any other reasonable means consistent with GATT.
2. If part of the proceeds of any subsequent resale, disposal or use
Reiteration of the sequence in determination of value of the goods by the buyer will accrue directly or indirectly to the
1st - Transaction value seller, unless an appropriate adjustment can be made; or
2nd - Transaction value of identical goods
3rd - Transaction value of similar goods 3. If the buyer and the seller are related to one another, and such
4th - Deductive value relationship influenced the price of the goods.
5th - Computed value
6th - Other reasonable means or fallback value RELATED SELLERS AND BUYERS
1. Officers or directors of one another’s businesses.
IDENTICAL GOODS 2. Legally recognized partners in business.
Identical goods mean goods which are the same in all respects, 3. Employer and employee.
including physical characteristic, quality and reputation. 4. Any person who directly or indirectly owns, controls or holds 5 %
or more of the outstanding voting stock or shares of both seller
Minor differences in appearances shall not preclude goods and buyer.
otherwise conforming to the definition from being regarded as 5. One of them directly or indirectly controls the other.
identical. 6. Both of them are directly or indirectly controlled by a third
person.
Should be from the same country, and the same producer. 7. Together, they directly control a third person.
8. Members of the same family including brothers and sisters
SIMILAR GOODS (whether full or half-blood), spouse, ancestors, and lineal
Similar goods mean goods which, although not alike in all descendants.
respects, have like characteristics and like component materials
which enable them to perform the same functions and to be Basis for dutiable weight for specific customs duties
commercially interchangeable. 1. Gross weight
2. Legal weight
Reasonable doubt 3. Net weight
Reasonable doubt refers to any condition that creates a probable
cause to make the Commissioner of Customs believe in the
inaccuracy of the invoice value of the imported goods, as
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advantage by imposing countervailing duties. The purpose there is to to place it at a disadvantage compared with the commerce of any foreign
protect our local products against unfair competition. country.
This represents the inland excise tax on locally manufactured
articles of the same kind to off-set this advantage. The amount may be increased in an amount not
As regards dumping duties, the extent of the special duty is the exceeding 100% ad valorem when the President finds
amount that represents under-pricing. the public interest may be served thereby.
As regards countervailing duties, the extent is the excise inland
tax or the amount of advantage enjoyed by that imported article. This may be imposed by the President of the Philippines
when our goods are discriminated against.
The rate is 5% ad valorem. Answer: That includes the power to impose discriminatory duties.
The President upon recommendation of the Tariff Commission may
The articles shall be deemed abandoned upon failure to mark increase the tariff rates by not more than 5x or meaning 500x of the tariff
them within 30 days from notice. rates. He may also decrease the tariff rates by not less than 50%.
Marking duty – duty on ad valorem basis imposed for improperly marked He can only exercise these powers in the interest of the national
articles. The requirement that foreign importation must be marked in any economy, national security and general welfare of the people.
official language of the Phils., the name of the country of origin of the
article. DRAWBACKS
A drawback is a device resorted to for enabling a commodity
The purpose is to prevent deception of consumers. affected by taxes to be exported and sold in foreign markets
The articles must be properly marked, otherwise a special upon the same terms as if it had not been taxed at all. It may be
duty of 5% of the value shall be imposed. full or partial.
RETALIATORY DUTY The return of 99% of customs paid on imported articles when
Duty imposed upon articles of a foreign country which they are re-exported forming part of domestically produced
discriminates against Philippine commerce in such a manner as to articles.
place it at a disadvantage compared with the commerce of
another foreign country, [Sec. 304, Tariff and Customs Code]. The refund of 99% duty on imported fund when used for
propulsion vessels engaged in the foreign or coastwise trade.
Retaliatory or Discriminatory duty – duty imposed on imported
goods whenever it is found as a fact that the country of origin
discriminates against the commerce of the Philippines in such manner as
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Wharfage dues Unless otherwise relieved by laws or regulations, the liability for
Wharfage dues are assessed against the cargo of a vessel duties, taxes, fees and other charges attaching on importation
engaged in foreign or coastwise trade, based in the quantity constitutes a personal debt due from the importer to the
weight or measure received and/or discharged by such vessel. government which can be discharged only by payment in full of
said duties and charges.
Berthing fees
Berthing fees are assessed against a vessel for mooring or It also constitutes a lien upon the articles imported which may be
berthing at a pier, wharf, or river at any port in the Philippines. enforced which such articles are in custody or subject to the
control of the government.
Storage charges
Storage charges are assessed on articles for storage in customs GOVERNMENT IMPORTATIONS
premises, cargo sheds and warehouses. All importations by the government for its own use or that of its
subordinate branches or instrumentalities, or corporations,
Arrastre charges agencies or instrumentalities owned or controlled by the
Arrastre charges are imposed on all imported and exported government shall be subject to the duties, taxes, and other
articles and baggage of passengers for their handling, receiving charges provided in the Tariff and Customs Code, [Sec. 1205
and custody. Tariff and Customs Code].
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When importation begins and when deemed terminated customs duties and internal revenue taxes due on the
Importation begins when carrying vessel or aircraft enters the importation.
jurisdiction of the Philippines with an intent to unload.
Person authorized to make an import entry
Importation terminates upon payment of the duties and other 1. Importer, being the holder of the bill of lading
charges due upon the articles, or secured to be paid, at the port 2. A duly licensed customs broker, acting under authority from
of entry and the legal permit for withdrawal shall have been the holder of a bill of lading
granted. 3. A duly empowered agent or attorney in fact for each holder
of a bill of lading
In the case of articles that are free of duties, taxes and other
charges, importation is deemed terminated from the time they Import entry filed by person other than importer
have legally left the jurisdiction of the customs. If filed by a party other than the importer, the importer himself is
required to declare under oath and under penalties of falsification
Entry through customhouse or perjury that the declarations and statements contained in the
All articles imported into the Philippines, whether subject to duty entry are true and correct. Such statements constitute prima
or note, shall be entered through a customhouse at a port of facie evidence of knowledge and consent of the importer.
entry. [Section 1201, Tariff and Customs Code]
Period for filing of import entry
A “port of entry” means a domestic port open to both foreign and Within thirty (30) days from the date of discharge of the last
coastwise trade, including “airport of entry.” [Section 3514, package from the vessel.
Tariff and Customs Code]
ABANDONMENT
Cargo manifest Abandonment is the renunciation by an importer of all his
All cargo, exported or imported, shall be included in the cargo interests and property rights in the imported article.
manifest, except the ship’s stores.
It may be express or implied.
Commissioner v. Delgado: The evident purpose of the
provision requiring vessels to declare the correct weight of their Express abandonment
cargo is to curb smuggling due to underdeclarations. Hence, When the owner, importer or consignee of the imported article
imposing the maximum fine on vessels which grossly fail to expressly signifies in writing and under oath to the Collector of
comply with the obligation to declare the correct weight of their Customs his intention to abandon his shipment in favor of the
cargo truly promotes the spirit and purpose of the law, since government, within ten days after filing of the import entry, he
imposing a minimum fine would only embolden would be shall be relieved from payment of duties, taxes and other charges
smugglers and foster negligence on the part of the master of the and expenses.
vessel in checking the true weight of the cargo.
Article shall be delivered by the owner, importer or consignee at
Import entry such place which the Collector designates; failure to comply shall
A declaration to the Bureau of Customs showing the description, make him liable for expenses that may be incurred in connection
value, tariff classification and other particulars of the imported with the disposition thereof.
article to enable the customs authorities to determine the correct
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3. It does not relieve owner or importer from any criminal liability Functions of the Tariff Commission
which may arise from any violation of law committed in The Commission shall investigate:
connection with the importation of the abandoned article. 1. The administration of and the fiscal and industrial effects of
the country’s tariff and customs laws;
Smuggling or unlawful importation
Any person who shall fraudulently import or bring into the 2. The relations between the rates of duty on raw materials
Philippines, or assist in doing so, any article, contrary to law, or and finished or partly finished goods;
shall receive, conceal, buy, sell, or in any manner facilitate the
transportation, concealment, or sale of such article after 3. The effects of ad valorem and specific duties and of
importation, knowing the same to have been imported contrary compound specific and ad valorem duties;
to law, shall be guilty of smuggling.
4. All questions relative to the arrangement of schedules and
After importation, the act of facilitating the transportation, classifications of articles under the tariff law;
concealment or sale of the unlawfully imported article must be
with the knowledge that the article was smuggled. However, 5. The tariff relations between the Philippines and foreign
upon trial, if the defendant is found to have been in possession of countries, commercial treaties, etc.
such article, this shall be sufficient to authorize the conviction
unless the defendant explains his possession to the satisfaction of 6. The volume of importations compared with domestic
the court. production and consumption;
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5. The supervision and control over the handling of foreign mails Cases arising under the tariff and customs code
arriving in the Philippines, for the purpose of the collection of the 1. Customs protest cases or those where the importer questions the
lawful duty on the dutiable articles thus imported and the legality of the assessment and collection of customs duties and
prevention of smuggling through the medium of such mails. other fees or charges. The issue involved in these cases
generally relates to the correctness of the appraisal and/or
6. Supervision and control over all import and export cargoes, classification of imported goods.
landed or stored in piers, airports, terminal facilities, including
container yards and freight stations, for the protection of 2. Seizure and forfeiture cases or those where goods or
government revenue. merchandise are ordered seized by customs authorities and made
subject to the penalty of forfeiture or fine for violation of the
7. Exclusive original jurisdiction over seizure and forfeiture cases customs laws. Here, the issue involved is the legality of the
under the tariff and customs laws. importation of goods either because the goods are in themselves
prohibited importations or their importation of effected contrary
to law.
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CUSTOMS PROTEST CASES 6. When a protest in form is presented, the Collector shall issue an
order for hearing within fifteen (15) days from receipt of the
Procedure on customs protest cases protest and hear the matter thus presented. Upon the
1. Firs of all, the Collector shall cause all articles entering the termination of the hearing, the Collector shall render a decision
jurisdiction of his district and destined for importation through his within thirty (30) days, and if the protest is sustained in whole or
port to be entered at the customhouse. He shall cause all such in part, he shall make the appropriate order, the entry re-
articles to be appraised and classified, and shall assess and liquidated if necessary.
collect the duties, taxes, and other charges thereon, and shall
hold possession of all imported articles, upon which duties, taxes, 7. The person aggrieved by the decision or action of the Collector in
and other charges have not been paid or secured to be paid, any matter presented upon protest may within fifteen (15) days
disposing of the same according to law. [Section 1206, Tariff after notification in writing by the Collector of his action or
and Customs Code] decision, give written notice to the Collector and one copy
furnished to the Commissioner of his desire to have the matter
2. The party adversely affected by the ruling or decision of the reviewed by the Commissioner. Thereupon, the Collector shall
Collector whereby liability for duties, taxes, fees or other charges forthwith transmit all records of the proceedings to the
are determined, may protest such ruling or decision. [Section Commissioner, who shall approve, modify, or reverse the action
2308, Tariff and Customs Code] or decision of the Collector and take such steps and make such
orders as may be necessary to give effect to his decision.
3. The protest, which must be in writing, is filed with the Collector [Section 2313, Tariff and Customs Code]
within fifteen (15) days. No protest shall be considered unless
payment of the amount due after final liquidation (i.e. 8. If in any case involving the assessment of duties, the Collector
computation of the liability) has first been made and the renders a decision adverse to the Government, such decision
corresponding docket fee actually paid. shall automatically be elevated to, and reviewed by the
Commissioner; and if the Collector’s decision would be affirmed
4. Every protest shall be filed in accordance with rules and by the Commissioner, such decision shall automatically be
regulations promulgated for the purpose, and shall point out the elevated to, and be finally reviewed by, the Secretary of Finance.
particular decision or ruling of the Collector to which exception is However, if within thirty (30) days form the receipt of the record
taken or objection made, and shall indicate with reasonable of the case by the Commissioner or by the Secretary of Finance,
precision the particular ground or grounds upon which the as the case may be, no decision is rendered by either of them,
protesting party bases his claim for relief. [Section 2310, Tariff the decision under review shall become final and executory. Any
and Customs Code] party aggrieved by either the decision of the Commissioner or the
Secretary of Finance may appeal to the Court of Tax Appeals
5. The scope of a protest shall be limited to the subject matter of a within thirty (30) days from receipt of a copy of such decision.
single adjustment or other independent transaction; but any [Section 2315, Tariff and Customs Code]
number of issues may be raised in a protest with reference to the
particular item or items constituting the subject matter of the Incidentally, in case of appeals to the Court of Tax Appeals from
protest. Single adjustment refers to the entire content of one the decisions of the Secretary of Finance as a consequence of the
liquidation, including all duties, fees, surcharges or fines incident automatic review by the Secretary of Finance of decisions emanating
thereto. [Section 2310, Tariff and Customs Code] form Customs, the thirty-day period of appeal under Republic Act No.
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1125 will necessarily be counted from the receipt of the decision of the However, if within thirty (30) days form receipt of the record of
Secretary of Finance. the case by the Commissioner or the Secretary of Finance, as the case
may be, no decision is rendered by either or them, the decision under
PROCEDURE IN PROTEST review shall become final and executory.
Remedy Where [Issues which Prescriptive Any party aggrieved by either the decision of the Commissioner
to file may be raised] Period or the Secretary of Finance may appeal to the Court of Tax Appeals
(1) File a protest Collector (a) Validity if the 15 days from within thirty (30) days from receipt of a copy of such decision.
of assessment or the payment of
Customs collection Customs duties Except as provided above, the supervisory authority of the
(b) Validity of Secretary of Finance over the Bureau of Customs does not extend to the
classification of administrative review of the ruling of the Commissioner in matters
articles appealed to the Court of Tax Appeals.
(2) If protest is Customs Within 15 days
denied, Appeal Commiss Questions of fact or from receipt of Automatic review is intended to protect the interest of the
collector’s ruling ioner Question of law the Collector’s government in the collection of taxes and customs duties in
(CC) ruling seizure and protest cases which, without such review, neither the
(3) If CC affirm Question of fact or Within 30 days Commissioner nor the Secretary of Finance would probably know
collector’s ruling, Question of law from receipt of about.
Appeal CTA the decision of
the CC. Automatic review as a procedural rule applies to both customs
(4) If CTA affirm Question of fact or Within 15 days cases and seizure and forfeiture cases incident to smuggling or
collector’s ruling, Question of law from receipt of unlawful importation or exportation.
Appeal CA CTA decision
(5) If CA affirm Within 15 days Likewise, supervisory authority is exercised by the Commissioner
CTA, Appeal Question of law from receipt of on seizure and forfeiture cases while the case is still pending in
SC CA decision the Office of the Collector of Customs and before the decision of
the Collector becomes final.
Automatic review and supervisory authority of Commissioner
and Customs and Secretary of Finance Burden of proof in protest cases
If in any case involving the assessment of duties, the Collector In protest cases, the protestant has the burden of proving the
renders a decision adverse to the government; such decision correctness of his contention for the issue is not whether the
shall automatically be elevated to, and reviewed, by the Collector was wrong but whether the importer is right.
Commissioner.
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SEIZURE AND FORFEITURE CASES When a vessel becomes subject to seizure by reason of an act
done in Philippine waters in violation of the tariff and customs
Nature of seizure and forfeiture proceedings laws, a pursuit of such vessel begun within the jurisdictional
Proceedings in seizure cases are actions in rem directed against waters may continue beyond the maritime zone, and the vessel
the property seized, against the owner thereof. may be seized on the high seas. [Section 603, Tariff and
Forfeiture proceedings are civil and are not criminal in nature. Customs Code]
Proof beyond reasonable doubt is not required to warrant Imported articles which may be subject to seizure for violation of
forfeiture. tariff and customs laws may be pursued in their transportation in
A customs seizure and forfeiture case is administrative and civil in the Philippines by land, water, or air, and such jurisdiction
nature and is directed against the res or imported articles and exerted over them at any place therein as may be necessary for
entails a determination of the legality of their importation. the due enforcement of the law.
[Commissioner of Customs v. Makasiar, GR No. 79307, In Asaali v. Commissioner [27 SCRA 312], the Supreme Court
August 29, 1989] held as valid the interception and seizure of a vessel on the high
Forfeiture is in the nature of proceedings in rem and is directed seas, saying that the authority of a nation within its territory is
against the res. The fact that the owner of the vessel had no absolute and exclusive. The power to secure itself form injury
actual knowledge that the vessel was illegally used does not may certainly be exercised beyond the limits of its territory.
render the vessel immune from forfeiture. This is so because
forfeiture action is against the vessel itself. [Vierneza v. Places where searches and seizures may be conducted
Commissioner, 24 SCRA 294] 1. Right of police officer to enter enclosure without a warrant,
except a dwelling house
Doctrine of primary jurisdiction over seizure and forfeiture cases 2. Search of dwelling house must be with proper warrant
[Rallos v. Gako Doctrine 344 SCRA 178] 3. Right to search vehicles or aircrafts and persons or articles
The prevailing doctrine is that the exclusive jurisdiction in seizure conveyed therein
and forfeiture cases vested in the Collector of Customs precludes 4. Right to search vehicles, beasts and persons
a regular court from assuming cognizance of such matter. 5. Search of persons arriving from foreign countries
It is the settled rule that the Bureau of Customs acquires
exclusive jurisdiction over imported goods, for the purpose of Right of police officer to enter enclosure without a warrant
enforcement of the customs laws, from the moment the goods Any person exercising the police powers conferred under said
are actually in its possession or control, even if no warrant of Code may at any time enter, pass through, or search any land or
seizure or detention had previously been issued by the Collector enclosure or any warehouse, store or other building, not being a
of Customs in connection with seizure and forfeiture proceedings. dwelling house.
A warehouse, store or other building or enclosure used for the
Jurisdiction of the Bureau of Customs keeping or storage of articles does not become a dwelling house
The Bureau of Customs has the right of supervision and police within the meaning hereof by reason of the fact that a person
authority over all seas within the jurisdiction of the Philippines employed as watchman lives in the place, nor will the fact that
and over all coasts, ports, airports, harbors, bays, rivers and his family stays therein with him alter the case.
inland waters whether navigable from the sea or not. [Section
603, Tariff and Customs Code]
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The person aggrieved by the decision or action of the Collector in Burden of proof in seizure and/or forfeiture
any matter presented upon protest or by his action in any case of seizure In all proceedings taken for the seizure and/or forfeiture of any
may, within fifteen (15) days after notification in writing by the Collector vessel, vehicle, aircraft, beast or articles under the provisions of
of his action or decision, give written notice to the Collector and one copy the tariff and customs laws, the burden of proof shall lie upon the
furnished to the Commissioner of his desire to have the matter reviewed claimant. Provided that probable cause shall be first shown for
by the Commissioner. Thereupon, the Collector shall forthwith transmit the institution of such proceedings and that seizure and/or
all the records of the proceedings to the Commissioner, who shall forfeiture was property made.
approve, modify or reverse the action or decision of the Collector and
take such steps and make such orders as may be necessary to give effect Commissioner of Customs v. Manila Star Ferry GR# L – 31776-78
to his decision. It is not a defense that the owner of the vessel sough to be
10. Notice of decision of Commissioner forfeited had no actual knowledge that his property was used
Decision of the Commissioner of Customs shall be appealed to illegaly
the Court of Tax Appeals within thirty (30) days after receipt of the
decision. In case of automatic reviews, the decision of the Secretary of Seizure of other articles
Finance shall be appealed within the same period after receipt of the The Commissioner of Customs and Collector of Customs and/or
decision of the Secretary. any other customs office, with the prior authorization in writing
11. Supervisory authority of Commissioner and of Secretary of by the Commissioner, may demand evidence of payment of
Finance in certain cases. Automatic review by the Commissioner duties and taxes on foreign articles openly offered for sale or
and Secretary on certain cases. kept in storage, an dif no such evidence can be produced, such
12. Authority of Commissioner to make compromise articles may be seized and subjected to forfeiture proceedings.
Subject to the approval of the Secretary of Finance, the Provided that during such proceedings, the person or entity for
Commissioner of Customs may compromise any case arising under the whom such articles have been seized shall be given the
Code or other laws or part of laws enforced by the Bureau of Customs opportunity to prove or show the source of such articles and the
involving the imposition of fines, surcharges and forfeitures unless payment of duties and taxes thereon.
otherwise specified by law.
Redemption of forfeited property
Property not subject to forfeiture As a means of settlement, redemption of forfeited property is not
The forfeiture of the vehicle, vessel, or aircraft shall not be available when:
effected if it is established that the owner thereof or his agent in a. When there is fraud.
charge of the means of conveyance used as aforesaid has no b. When the importation is absolutely prohibited
knowledge of or participation in the unlawful act. c. When the release of property would be contrary to law.
However, a prima facie presumption shall exist against the
vessel, vehicle or aircraft under any of the following Extent of Importer’s liability
circumstances: The liability of an importer is limited to the value of the imported
1. If the conveyance has been used for smuggling at least merchandise
twice before; In case of forfeiture of the seized merchandise, the maximum
2. If the owner is not in the business for which the civil penalty is the forfeiture itself.
conveyance is generally used; and
3. It the owner is not financially in a position to own such
conveyance.
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