d.
Refund – The recovery of any alleged to have been
1. Inherent Limitations of Taxation
a. Public Purpose - used (a) for the support of the
State or (b) for some recognized objective of the
government or to directly promote the welfare of
the community
b. Inherently Legislative – cannot be delegated.
XPN: can be delegated to LGU (on local taxes),
President (on tariffs), admin agencies (on
administrative implementations)
c. Territorial - exercised only within the territorial
jurisdiction of the taxing authority
d. International Comity - respect accorded by
nations to each other because they are sovereign
equals
Note: Tax treaties prevail over NIRC. Ratio: Special
law prevails over general law, and pacta sunt servanda
e. Exemption of Government – XPN: When the
government chooses to tax itself in its proprietary
activities.
2. Constitutional Limitations of Taxation
a. No imprisonment for non- payment of poll tax.
b. Uniformity and equality rule in taxation
c. Prohibition against taxation of religious, charitable
entities, and educational entities. (Covers only RPT)
d. Prohibition against taxation of non-stock,
nonprofit educational institutions (Covers income
tax, VAT, and local business tax)
e. Absolute majority vote of Congress for grant of
tax exemption
f. Power of item veto of the President in revenue and
tariff bills.
g. Revenue and tariff bills must originate in the
House of Representatives; Note: Senate may
introduce amendments.
h. No appropriation or use of public money for
religious purposes
i. Due process – Tax imposition must be for public
purpose and must not be arbitrary.
Equal Protection Clause - Requisites [SAGA]
i. Substantial distinction
ii. Applies to present and future conditions
iii. Germane to the purpose of the law
iv. Applies equally to all members of the same
class
3. Stages of Taxation
a. Levy or imposition (tax legislation) – This refers
to the enactment of a law by Congress authorizing
the imposition of tax.
b. Assessment and collection (tax administration)
– This is the act of administration and
implementation of the tax law by executive through
its administrative agencies.
c. Payment – The act of compliance by the taxpayer,
including such options, schemes or remedies as
may be legally available.
erroneously or illegaly assessed or collected, or of
any penalty claimed to have been collected without
authority, or of any sum alleged to have been
excessively, or in any manner wrongfully collected.
4. When is there direct double taxation? (SPA-JPK)
There is direct double taxation when two or more taxes
are:
a. imposed on the same subject matter,
b. for the same purpose,
c. by the same taxing authority,
d. within the same jurisdiction,
e. during the same taxing period; and
f. taxes must be of the same kind or character
5. Under the NIRC, the earnings of banks from
“passive” income are subject to a 20% final
withholding tax (FWT). Apart from the FWT,
banks are also subject to a 5% gross receipts tax
(GRT) which is imposed by the NIRC on their
gross receipts, including the “passive” income. Is
there double taxation on the banks’ “passive”
income?
Yes, there is double taxation but in its broad sense
which does not make the tax imposition invalid.
Firstly, the taxes herein are imposed on two different
subject matters as FWT is the passive income generated
in the form of interest on deposits and yield on deposit
substitutes, while the subject matter of the GRT is the
privilege of engaging in the business of banking.
Secondly, although both taxes are national in scope
because they are imposed by the same taxing authority,
the taxing periods they affect are different. The FWT is
deducted and withheld as soon as the income is earned,
and is paid after every calendar quarter in which it is
earned. On the other hand, the GRT is neither deducted
nor withheld, but is paid only after every taxable quarter
in which it is earned.
Third, these two taxes are of different kinds or
characters as the FWT is an income tax subject to
withholding, while the GRT is a percentage tax not
subject to withholding (CIR v. Solidbank Corporation,
G.R. No. 148191, November 25, 2003)
6. Construction and interpretation of tax laws
Construction Tax statutes must be construed strictly
of Tax Laws against the government and liberally in
favor of the taxpayer
Tax exemptions are construed in
strictissimi juris against the taxpayers
and liberally in favor of the taxing
authority
1

Prospectivity GR: Tax laws must only be imposed
of Tax Laws prospectively.
XPN: If the law expressly provides for
retroactive application. Such may be
allowed if it will not amount to denial of
due process
Marshall and Marshall Doctrine - The power to tax
Holmes involves the power to destroy since the
Doctrine power to tax includes the power to
regulate even to the extent of prohibition
or destruction, when it is used validly as
an implement of police power.
Holmes’ Doctrine - The power to tax is
not the power to destroy while this
Court sits. While taxation is said to be the
power to destroy, it is by no means
unlimited. If so great an abuse is
manifested as to destroy natural and
fundamental rights which no free
government consistently violate, it is the
duty of the judiciary to hold such an act
unconstitutional.
for profit making, unregistered partnership is formed
(Ona v. CIR, 45 SCRA 74).
A joint purchase of land, by two, does not constitute a
co-partnership in respect thereto, nor does an
agreement to share the profits and losses on the sale of
land create a partnership; the parties are only tenants in
common. Where the transactions are isolated, in the
absence of other circumstances showing a contrary
intention, the case can only give rise to a co-
ownership (Pascual v. CIR, 166 SCRA 560).
Co-heirs who own inherited properties which produce
income should not automatically be considered as
partners of an unregistered partnership or corporation
subject to income tax. REASONS: Sharing of gross
returns does not by itself establish a partnership; there
must be an unmistakable intention to form a
partnership or joint venture. There is no
contribution or investment of additional capital to
increase or expand the inherited properties, merely
continuing the dedication of the property to the use
to which it had not been put by their forbears
(Obillos Jr. v. CIR, 139 SCRA 436).
10. Tax on income earned by a non-resident citizen
abroad

A citizen of the Philippines who works and derives

7. Tax Amnesty v. Tax Exemption income from abroad and whose employment thereat
requires him to be physically present abroad most of the
Tax Amnesty Tax Exemption time during the taxable year is considered a non-
Scope of Immunity from all Immunity from civil resident citizen who shall be liable for income tax on
immunity criminal, civil and liability only income earned from Philippine sources.
administrative obligations
arising from non-payment Compensation income from services rendered abroad
of taxes is an income from sources without the Philippines. It
Grantee General pardon given to A freedom from a shall not be subject to Philippine income tax, and hence,
all erring taxpayers charge or burden to no withholding tax shall be applied.
which others are
subjected 11. Income tax on interest on bank deposits
How Applied retroactively Applied
Interest income earned from bank deposits of a Filipino
applied prospectively
citizen is subject to 20% final withholding tax
notwithstanding the fact that the deposit is sourced
8. Tax Evasion v. Tax Avoidance
from income exempt from income tax (such as pension
Tax Evasion Tax Avoidance received from GSIS).
Means Course of action is Course of action is
unlawful lawful 12. What is the concept of Minimum Corporate
Purpose Payment of less than that Minimization of tax Income Tax (MCIT)?
known by the taxpayer to liability.
be legally due, or non- The imposition of the MCIT is designed to forestall the
payment of tax when it is prevailing practice of corporations of over claiming
shown that the tax is due deductions in order to reduce their income tax
Penalty Results to criminal There is no criminal payments.
penalty. penalty.
A corporation should pay the MCIT whenever its
9. Taxation of Co-ownership vis a vis Unregistered normal corporate income tax (NCIT) is lower than
Partnership the MCIT, or when the firm reports a net loss in its
tax return. Conversely, the NCIT is paid when it is
As a rule, co-ownership is tax exempt. It becomes higher than the MCIT.
taxable if it is converted into an unregistered
partnership. It is converted into partnership if the The MCIT is imposed beginning on the fourth taxable
properties and income are used as common fund with year immediately following the year in which the
the intention to produce profits. If after partition, the corporation commenced its business operations.
shares of the heirs are held under a single management

2
13. Coverage of MCIT
The MCIT covers domestic and resident foreign
corporations which are subject to the 30% normal
corporate income tax; hence, corporations which are
subject to special corporate taxes do not fall within the
coverage of the MCIT.
The minimum corporate income tax is a proxy for the
normal corporate income tax of 30%, not the special
corporate taxes paid by a corporation. For instance, a
proprietary educational institution may be subject to a
regular corporate income tax of 10% (depending on its
dominant income), but it is exempt from the imposition
of MCIT because the latter is not intended to substitute
special tax rates. So is with PEZA enterprises, CDA
enterprises etc.
14. What are the reliefs against MCIT?
The Secretary of Finance is hereby authorized to
suspend the imposition of the minimum corporate
income tax on any corporation which suffers losses on
account of prolonged labor dispute, or because of
force majeure, or because of legitimate business
reverses.
15. Section 29(A) of the NIRC provides that a
corporation shall be imposed for each taxable year
with improperly accumulated earnings tax (IAET)
on its income considered as improperly
accumulated earnings.
For year 2010, ABC Corporation was assessed for
improperly accumulated earnings supposedly
accumulated since year 2007 as shown in its
income tax return.
a. Explain the rationale of the concept of
Improperly Accumulated Earnings, being
subject to improperly accumulated earnings
tax.
The rationale is that if the earnings and profits were
distributed, the shareholders would then be liable
to income tax thereon, whereas if the distribution
were not made to them, they would incur no tax in
respect to the undistributed earnings and profits of
the corporation. Thus, a tax is being imposed in
the nature of a penalty to the corporation for
the improper accumulation of its earnings, and
as a form of deterrent to the avoidance of tax
upon shareholders who are supposed to pay
dividends tax on the earnings distributed to them
by the corporation. (RR 2-2001)
b. Can ABC Corporation invoke the defense of
prescription, considering that according to
Section 203 the prescriptive period for
assessment and collection is 3 years?
No, the period for assessment has not yet
prescribed.
The dividends must be declared and paid or
issued not later than one year following the
close of the taxable year, otherwise, the IAET,
if any, should be paid within fifteen (15) days
thereafter.
Hence, the 3 year prescriptive period must be from
2008 instead of 2007.
16. Entities Exempt from IAET
a. Banks and other non-bank financial
intermediaries;
b. Insurance companies;
c. Publicly-held corporations;
d. Taxable partnerships;
e. General professional partnerships;
f. Non- taxable joint ventures; and
g. Enterprises duly registered with the Philippine
Economic Zone Authority (PEZA) under R.A.
7916, and enterprises registered pursuant to the
Bases Conversion and Development Act of 1992
under R.A. 7227, as well as other enterprises duly
registered under special economic zones declared
by law which enjoy payment of special tax rate on
their registered operations or activities in lieu of
other taxes, national or local. (Revenue Regulations No.
02-01, [February 12, 2001])
17. Valid justifications for accumulation of earnings to
avoid IAET
Accumulated earnings shall not be liable to IAET if it is
retained for the reasonable needs of the business. The
the following constitute accumulation of earnings for
the reasonable needs of the business:
a. Allowance for the increase in the accumulation of
earnings up to 100% of the paid-up capital of the
corporation as of Balance Sheet date, inclusive of
accumulations taken from other years;
b. Earnings reserved for definite corporate expansion
projects or programs requiring considerable capital
expenditure as approved by the Board of Directors
or equivalent body;
c. Earnings reserved for building, plants or equipment
acquisition as approved by the Board of Directors
or equivalent body;
d. Earnings reserved for compliance with any loan
covenant or pre-existing obligation established
under a legitimate business agreement;
e. Earnings required by law or applicable regulations
to be retained by the corporation or in respect of
which there is legal prohibition against its
distribution;
f. In the case of subsidiaries of foreign corporations
in the Philippines, all undistributed earnings
intended or reserved for investments within the
Philippines as can be proven by corporate records
and/or relevant documentary evidence. (Revenue
Regulations No. 02-01, [February 12, 2001])
18. Income Taxation of an Association formed to
Promote Good Governance
Under Section 30 of the Tax Code, civic league or
organization not organized for profit but operated
exclusively for the promotion of social welfare (like
good governance) is exempt from income tax.
3
 Hence, no income tax is imposed on the monthly dues
from the members of such association.
However, under the last paragraph of Section 30 of the
Tax Code, the income of whatever kind and character
of the foregoing organizations from any of their
properties, real or personal, or from any of their
activities conducted for profit regardless of the
disposition made of such income, shall be subject to
income tax.
Thus, income of such association derived from
activities conducted for profit, such as proceeds from
publications and fees from seminars and trainings, shall
be subject to income tax.
Note: CIR v. De la Salle University - Inapplicability
of exception clause (last par. of Sec. 30 of the Tax
Code) to non-stock, non- profit educational
institutions.
Article XIV, Section 4(3) of the 1987 Constitution
provides that the assets of a non-stock, non-profit
educational institution shall be exempt from taxes and
duties only if the same are used actually, directly, and
exclusively for educational purposes. The test of
exemption from taxation is the use of the
property/income and not the source of the
property/income. A statutory clause cannot
overcome a constitutional exemption.
19. A Co., a Philippine corporation, has two divisions
manufacturing and construction. Due to the
economic situation, it had to close its construction
division and lay-off the employees in that division.
A Co. has a retirement plan approved by the BIR,
which requires a minimum of 50 years of age and
10 years of service in the same employer at the time
of retirement. There are 2 groups of employees to
be laid off:
a. Category (A) employees - Employees who are
at least 50 years of age and has at 10 years of
service at the time of termination of
employment.
b. Category (B) employees - Employees who do
no meet either the age or length of service A
Co. plans
A Co. intends to give the following benefits
a. For category (A) employees – the benefits
under the BIR approved plan plus an ex gratia
payment of one month of every year of service.
b. For category (B) employees – one month for
every year of service.
For both categories, the cash equivalent of unused
vacation and sick leave credits. A Co. seeks your
advice as to whether or not it will subject any of
these payments to withholding tax. Explain your
advice.
For category A employees, all the benefits received on
account of their separation are not subject to income
tax, hence no withholding tax shall be imposed. The
benefits received under the BIR-approved plan upon
meeting the service requirement and age requirement
are explicitly excluded from gross income. The ex gratia
payment also qualifies as an exclusion from gross
income being in the nature of benefit received on
account of separation due to causes beyond the
employees’ control (Section 32(B), NIRC). The cash
equivalent of unused vacation and sick leave credits
qualifies as part of separation benefits excluded from
gross income (CIR v. Court of Appeals, GR No.
96O16, October 17, 1991).
For category B employees, all the benefits received by
them will also be exempt from income tax, hence not
subject to withholding tax. These are benefits received
on account of separation due to causes beyond the
employees’ control, which are specifically excluded
from gross income (Section 32(B), NIRC).
Note: A Co. can claim as allowable deduction the
amount it paid to its employees. Under the Tax Code, a
reasonable allowance for salaries, wages, and other
forms of compensation for personal services actually
rendered is considered an ordinary and necessary
business expense that can be claimed as allowable
deduction against the gross income.
20. Tax Treatment of De Minimis Benefits
De minimis benefits not exceeding the amount
prescribed by BIR regulations are neither considered as
taxable compensation nor taxable fringe benefit and
and hence, it is not subject to withholding tax on
compensation or fringe benefit tax.
21. What is the concept of “Convenience of the
Employer Rule”?
An exemption from taxation is granted to benefits
which are given to the employee for the exclusive
benefit or convenience of the employer.
22. Requisites for deductibility of Bad Debts
a. The debts are uncollectible despite diligent
effort exerted by the taxpayer;
Note: To prove that the taxpayer exerted diligent
efforts to collect the debts:
i. Sending of statement of accounts;
ii. Sending of collection letters;
iii. Giving the account to a lawyer for collection;
and
iv. Filing a collection case in court.
b. Existing indebtedness subsisting due to the
taxpayer which must be valid and legally
demandable;
c. Connected with the taxpayer’s trade, business or
practice of profession;
d. Actually charged off in the books of accounts of
the taxpayer as of the end of the taxable year;
e. Actually ascertained to be worthless and
uncollectible as of the end of the taxable year
(usually supported by board resolution in case of
corporations); and
f. Must not be sustained in a transaction entered into
between related parties.
4
23. Capital Asset v. Ordinary Asset e. Public Records. - Basis of any valuation, including
the records of consultations done, shall be public
Ordinary assets include inventory or those held records open to the inquiry of any taxpayer.
primarily for sale to customers, as well as those assets
used in trade or business of the taxpayer. Any other 26. Requisites for Exemption of Sale of Principal
assets which are not considered ordinary assets are Residence from Capital Gains Tax (CGT)
classified as capital assets.
a. Proceeds are fully utilized to acquire/construct
A sale of land classified as ordinary asset is subject to new principal residence within 18 months from
creditable withholding tax (which can be applied as tax the sale of old principal residence. (Note: The sale
credit to the annual income tax liability), VAT, must precede the acquisition/construction)
documentary stamp tax, and local transfer tax. On the b. Availed once every 10 years
other hand, if the land is classified as capital asset, the c. CIR is notified within 30 days of sale
sale thereof shall be subject to capital gains tax (instead d. 6% CGT is deposited in an escrow account
of CWT and VAT), documentary stamp tax, and local
transfer tax. 27. Requisites of Tax-Free Exchange under Section
40(C)(2) of the Tax Code
24. Net Capital Loss Carry-Over (NCLCO) v. Net
Operating Loss Carry-Over (NOLCO) a. the transferee is a corporation;
b. the transferee exchanges its shares of stock for
BASIS NCLCO NOLCO property/ies of the transferor;
Source Excess of the losses Excess of allowable c. the transfer is made by a person, acting alone or
from sales or deduction over gross together with others, not exceeding four (4)
exchanges of capital income. persons; and,
assets over the gains d. as a result of the exchange the transferor, alone or
from such sales or together with others, not exceeding four (4), gains
exchanges control of the transferee. (Commissioner of Internal
Who can Individual Individual and corporate Revenue v. Dominium Realty & Construction Corp.,
avail taxpayer C.T.A. EB Case No. 1713 (C.T.A. Case No. 8887),
Period of In the next Carryover of operating [November 13, 2018])
carry- over succeeding taxable loss in 3 succeeding
year taxable years or 5 years, in The term "control" is defined as "ownership of stocks
the case of mining in a corporation possessing at least fifty-one percent
companies (51%) of the total voting power of all classes of stocks
entitled to vote.
25. Tax Base of Capital Gains Tax (CGT)
Securing a tax-free exchange BIR ruling is not a
The tax base of CGT on sale of real property is the condition sine qua non for the availment of tax
highest among the: exemption. (Commissioner of Internal Revenue v. Northern
a. Gross selling price; Tobacco Redrying Co., Inc., C.T.A. EB Case No. 1664
b. Zonal value; (C.T.A. Case No. 8866), [January 31, 2019])
c. Market value per tax declaration.
28. Creditable Withholding Tax (CWT) v. Final
Note: Under the TRAIN Law, additional rules have Withholding Tax (FWT)
been prescribed for the determination of zonal values, CWT FWT
to wit:
Nature? Constitutes Constitutes final
a. Mandatory Consultation. – Consultation with
advance payment and full
competent appraisers both from the private and
of the income tax settlement of the
public sectors in determining fair market value
due on the income tax liability on the
(“FMV”) of real properties is expressly made
subjected to income subjected
mandatory.
withholding. to withholding.
b. Prior Notice to Affected Taxpayers. –
Part of the The income The income
Adjustment of FMV of real properties must be
income in the subjected to subjected to
made upon prior notice to affected taxpayers.
ITR subject withholding is withholding is not
c. Automatic Adjustment. - FMV of real properties
to income included in the included in the
is subject to automatic adjustment once every 3
tax? taxable income in taxable income in
years through rules and regulations issued by the
ITR. ITR.
Secretary of Finance.
Tax Credit? The tax withheld The tax withheld
d. Publication Requirement. – Requires publication
in a newspaper of general circulation in the can be claimed as a cannot be
province, city or municipality concerned, or in the tax credit against claimed as tax
absence thereof, posting in the provincial capitol, income tax due. credit.
city or municipal hall and in 2 other conspicuous Filing of The earner is If the only source
public places therein, before adjustment in zonal ITR? required to file an of income is
valuation can be valid. ITR. already subjected
to FWT, there is
no more need to
file ITR.
5

29. What is the concept of Irrevocability Rule?
Irrevocability rule applies only to the option of
carry-over. A taxpayer is still free to change its choice
after electing a refund of its excess tax credit. But once
it opts to carry over such excess creditable tax, after
electing refund or issuance of tax credit certificate, the
carry-over option becomes irrevocable. Accordingly,
the previous choice of a claim for refund, even if
subsequently pursued, may no longer be granted.
Choice of refund or tax credit certificate is not
irrevocable. (University Physicians Services, Inc. v. CIR
2018).
30. Allowable Deductions of Citizen or Resident
Decedent Against Gross Estate
a. Prior to TRAIN Law - [ELIT-V-T-F-S-M-
4917]
i. Expenses
a) For actual funeral expenses or in an
amount equal to 5% of the gross estate,
whichever is lower, but in no case to
exceed P200,000;
b) For judicial expenses of the testamentary
or intestate proceedings;
ii. Losses
a) Casualty losses (1) incurred during the
settlement of the estate (2) arising from
fires, storms, shipwreck, or other
casualties, or from robbery, theft or
embezzlement, (3) not compensated for by
insurance or otherwise, (4) not been
claimed as a deduction for the income tax
purpose, and (5) incurred not later than the
last day for the payment of the estate tax.
iii. Indebtedness
a) Claims against the estate - Requisites for
deductibility.
(1) The liability represents a personal
obligation of the deceased existing at
the time of his death;
(2) The liability was contracted in good
faith and for adequate and full
consideration in money or money's
worth;
(3) The claim must be a debt or claim
which is valid in law and enforceable
in court;
(4) The indebtedness must not have been
condoned by the creditor or the action
to collect from the decedent must not
have prescribed.
b) Unpaid mortgage or indebtedness on
property - Requisites for deductibility:
(1) The value of the property to the extent
of the decedent’s interest therein,
undiminished by such mortgage or
indebtedness is included in the gross
estate
(2) The mortgage indebtedness was
contracted in good faith and for an
adequate and full consideration in
money or money’s worth
c) Claims against insolvent person
iv. Taxes - accrued as of the death of the decedent
which were unpaid as of the time of death.
Note: Excluded taxes (cannot be deducted
against gross estate) – income tax arising after
death, property tax accruing after death, estate
tax.
v. Vanishing Deduction - Requisites for
deductibility:
a) Present decedent died within 5 years from
receipt of property from a prior decedent
or donor
b) The property formed part of the gross
estate situated in the Philippines of the
prior decedent or was a taxable gift of the
donor
c) The estate tax on the prior succession or
donor’s tax must have been paid
d) The property must be identified as the one
received or acquired
e) No vanishing deduction was allowed on
the same property on the prior decedent’s
estate
vi. Transfer for Public Use – The amount of all
bequests, legacies, devises or transfers to or for
the use of the Government of the Republic of
the Philippines or any political subdivision
thereof, for exclusively public purposes.
vii. Family Home – up to P1 Million
viii. Standard Deduction – P1 Million
ix. Medical Expenses – Requisites for
deductibility.
a) Medical Expenses incurred by the
decedent within one (1) year prior to his
death which shall be duly substantiated
with receipts: and
b) No case shall the deductible medical
expenses exceed Five Hundred Thousand
Pesos (P500, 000).
x. Amount Received by Heirs under Republic
Act No. 4917. - Any amount received by the
heirs from the decedent - employee as a
consequence of the death of the decedent-
employee
b. Post TRAIN Law - [LIT – V – T – F(10) S(5)
4917]
Note: Funeral, judicial and medical expenses
are no longer allowable deductions.
i. Losses – same as above
ii. Indebtedness - same as above
iii. Taxes – same as above
iv. Vanishing Deduction – same as above
v. Transfer for Public Use – same as above
6
 vi. Family Home - Increases the limit of the
value of the family home that is allowed as
deduction from P1,000,000 to P10,000,000.
Furthermore, the amendment removes the
certification of the barangay captain of the
locality that the family home is decedent’s
family home as sine qua non condition for
exemption or deduction.
vii. Standard Deduction. – Increases the amount
of standard deduction from P1,000,000 to
P5,000,000.
viii. Amount Received by Heirs under Republic
Act No. 4917 – same as above
31. BIR issued an Estate Tax Assessment Notice
demanding payment of the deficiency estate tax
against Jose Fernandez’s estate. The administrator
claims that in as much as the valid claims of
creditors against the estate are in excess of the
gross estate, no estate tax was due.
May the actual claims of the creditors be fully
allowed as deductions from the gross estate of Jose
despite the fact that the claims were reduced or
condoned through compromise agreements
entered into by the estate with its creditors?
YES. Under the date-of-death valuation rule, claims
existing at the time of death should be made the basis
of the determination of allowable deductions. Thus,
post-death developments, such as condonotion in this
case, are not material in determining the amount of the
deduction (Dizon, et. al v. CA, G.R. No. 140944, April 30,
2008).
32. Filing and payment of estate tax
The estate tax return shall be filed within one (1) year
from the decedent's death. The estate tax shall be paid
at the time of filing
When the Commissioner finds that the payment on the
due date of the estate tax or of any part thereof would
impose undue hardship upon the estate or any of
the heirs, he may extend the time for payment of such
tax or any part thereof not to exceed five (5) years, in
case the estate is settled through the courts, or two
(2) years in case the estate is settled extrajudicially.
If an extension is granted, the Commissioner may
require the executor, or administrator, or beneficiary, as
the case may be, to furnish a bond in such amount,
not exceeding double the amount of the tax and
with such sureties as the Commissioner deems
necessary, conditioned upon the payment of the said tax
in accordance with the terms of the extension.
33. Rule on Renunciation of Inheritance by an Heir
a. Renunciation by the surviving spouse of his/her
share in the conjugal partnership or absolute
community after the dissolution of the marriage in
favor of the heirs or any other person/s is subject
to donor’s tax;
b. However, general renunciation by an heir,
including the surviving spouse, of his/her share in
the hereditary estate left by the decedent is not
subject to donor’s tax, unless specifically and
categorically done in favor of identified heir/s to
the exclusion or disadvantage of the other co-
heirs in the hereditary estate. In general
renunciation, there is no donation since the
renouncer has never become the owner of the
property/share renounced.
34. Requisites for Claim for Refund or Tax Credit of
Unutilized Input VAT
a. the taxpayer is VAT-registered;
b. the taxpayer is engaged in zero-rated or effectively
zero-rated sales;
c. the input taxes are due or paid;
d. the input taxes are not transitional input taxes;
e. the input taxes have not been applied against
output taxes during and in the succeeding
quarters;
f. the input taxes claimed are attributable to zero-
rated or effectively zero-rated sales;
g. for zero-rated sales under Sections 106 (A) (2) (1)
and (2); 106 (B); and 108 (B) (1) and (2), the
acceptable foreign currency exchange proceeds
have been duly accounted for in accordance with
the rules and regulations of the Bangko Sentral ng
Pilipinas;
h. where there are both zero-rated or effectively zero-
rated sales and taxable or exempt sales, and the
input taxes cannot be directly and entirely
attributable to any of these sales, the input taxes
shall be proportionately allocated on the basis of
sales volume; and
i. the claim is filed within two years after the
close of the taxable quarter when such sales
were made. (Luzon Hydro Corp. v. Commissioner of
Internal Revenue, G.R. No. 188260, [November 13,
2013], 721 PHIL 202-217)
35. Destination Principle vis a vis Cross Border
Doctrine
Under the Destination Principle, the goods and
services are taxed only in the country where these are
consumed, and in connection with the said principle,
the Cross Border Doctrine mandates that NO VAT
shall be imposed to form part of the cost of the goods
destined for consumption OUTSIDE the territorial
border of the taxing authority. Thus, exports are zero-
rated, while imports are taxed.
36. Claim for refund under Section 112 of the NIRC of
1997.
a. Two-Year prescriptive Period
i. It is only the administrative claim that must
be filed within the two-year prescriptive period.
(Aichi)
ii. The proper reckoning date for the two-year
prescriptive period is the close of the taxable
quarter when the relevant sales were made.
(San Roque)
7
 iii. The only other rule is the Atlas ruling, which
applied only from 8 June 2007 to 12 September
2008. Atlas states that the two-year prescriptive
period from filing a claim for tax refund or
credit of unutilized input VAT payments
should be counted from the date of filing of the
VAT return and payment of the tax. (San Roque)
b. 120+30 Day Period
i. The taxpayer can file an appeal in one of two
ways:
(1) file the judicial claim within thirty days
after the Commissioner denies the
claim within the 120-day period, or
(2) file the judicial claim within the thirty days
from the expiration of the 120-day
period if the Commissioner does not act
within the 120-day period.
ii. The 30-day period always applies, whether
there is a denial or inaction on the part of the
Commissioner.
iii. As a general rule, the 30-day period to appeal is
both mandatory and jurisdictional. (Aichi
and San Roque)
iv. As an exception to the general rule, premature
filing is allowed only if filed between 10
December 2003 and 5 October 2010, when
BIR Ruling No. DA-489-03 was still in force.
(San Roque)
v. Late filing is absolutely prohibited, even
during the time when BIR Ruling No. DA489-
03 was in force. (San Roque) (Silicon Philippines v.
Commissioner of Internal Revenue, G.R. No.
173241, March 25, 2015)
c. In case of taxpayer’s claim for VAT refund, under
the TRAIN Law, effective January 1, 2018, such
claim should be acted upon within the 90-day
period days from the date of submission of the
official receipts or invoices and other
documents in support of the application for
refund.
37. What is a Letter of Authority (LOA)? How is it
different from a Letter Notice (LN)?
An LOA is the authority given to the appropriate
revenue officer assigned to perform assessment
functions. It empowers or enables said revenue officer
to examine the books of account and other accounting
records of a taxpayer for the purpose of collecting the
correct amount of tax.
The following differences between an LOA and LN are
crucial. First, an LOA addressed to a revenue officer is
specifically required under the NIRC before an
examination of a taxpayer may be had while an LN is
not found in the NIRC and is only for the purpose
of notifying the taxpayer that a discrepancy is
found based on the BIR's RELIEF System.
Second, an LOA is valid only for 30 days from date of
issue while an LN has no such limitation.
Third, an LOA gives the revenue officer only a period
of 120 days from receipt of LOA to conduct his
examination of the taxpayer whereas an LN does not
contain such a limitation.
Simply put, LN is entirely different and serves a
different purpose than an LOA. Due process demands,
as recognized under RMO No. 32-2005, that after an
LN has serve its purpose, the revenue officer
should have properly secured an LOA before
proceeding with the further examination and
assessment of the petitioner. (Medicard Philippines, Inc.
v. Commissioner of Internal Revenue, G.R. No. 222743, [April
5, 2017], 808 PHIL 528-556)
38. Preliminary Assessment Notice (PAN) v. Final
Assessment Notice (FAN)
A PAN merely informs the taxpayer of the initial
findings of the Bureau of Internal Revenue. It does
not contain a demand for payment but usually
requires the taxpayer to reply within 15 days from
receipt. Otherwise, the Commissioner of Internal
Revenue will finalize an assessment and issue a FAN.
The PAN gives both the taxpayer and the
Commissioner of Internal Revenue the opportunity to
settle the case at the earliest possible time without
the need for the issuance of a FAN.
On the other hand, a FAN contains not only a
computation of tax liabilities but also a demand for
payment within a prescribed period. It also signals the
time when penalties and interests begin to accrue
against the taxpayer.
Considering the functions and effects of a PAN vis à
vis a FAN, it is clear that the assessment
contemplated in Sections 203 and 222 of the
National Internal Revenue Code refers to the
service of the FAN upon the taxpayer. (Commissioner
of Internal Revenue v. Transitions Optical Philippines, Inc.,
G.R. No. 227544, [November 22, 2017])
39. Request for Reconsideration v. Request for
Reinvestigation
Request for Reconsideration – refers to a plea for re-
evaluation of an assessment on the basis of existing
records without need of additional evidence. It may
involve a question of fact or of law or both.
Request for Reinvestigation – refers to a plea for re-
evaluation of an assessment on the basis of newly
discovered or additional evidence that a taxpayer
intends to present in the reinvestigation. It may also
involve a question of fact or of law or both. (RR 18-
2013 dated November 28, 2013)
40. In the event that the protest is denied in whole or
in part, or is not acted upon by the Commissioner’s
duly authorized representative, what alternative
recourse of action is open to a Taxpayer?
8
 If the protest is denied, in whole or in part, by the
Commissioner or his duly authorized representative,
the taxpayer may either:
a. appeal to the Court of Tax Appeals, through a
Petition for Review, within thirty (30) days from
receipt of the said decision; or
b. elevate his protest through request for
reconsideration to the Commissioner within
thirty (30) days from date of receipt of the said
decision.
No request for reinvestigation shall be allowed in
administrative appeal and only issues raised in the
decision of the Commissioner’s duly authorized
representative shall be entertained by the
Commissioner.
If the protest is not acted upon by the
Commissioner’s duly authorized representative within
one hundred eighty (180) days counted from the date
of filing of the protest, the taxpayer may either:
a. appeal to the CTA within thirty (30) days after the
expiration of the one hundred eighty (180) day
period; or
b. await the final decision of the Commissioner’s
duly authorized representative on the disputed
assessment. (Section 228, NIRC and RR 18-2013
dated November 28, 2013)
41. What recourse is open to a Taxpayer if his request
for reconsideration (administrative appeal) is
denied by the Commissioner?
If the request for reconsideration is denied by the
Commissioner, the taxpayer may appeal such Final
Decision to the CTA, within 30 days after receipt of a
copy of such decision (RR 18-13 dated November 28,
2013)
42. Requisites of a valid waiver of statute of limitations
a. The waiver must be in the proper form prescribed
by the BIR. Expiry date should be indicated.
b. The waiver must be signed by the taxpayer
himself or his duly authorized representative.
In the case of a corporation, the waiver must be
signed by any of its responsible officials.
c. The waiver should be duly notarized.
d. The CIR or the revenue official authorized by
him must sign the waiver indicating that the BIR
has accepted and agreed to the waiver. The date of
such acceptance by the BIR should be
indicated.
e. Both the date of execution by the taxpayer and
date of acceptance by the Bureau should be
before the expiration of the period of
prescription or before the lapse of the period
agreed upon in case a subsequent agreement is
executed.
f. The waiver must be executed in three copies, the
original copy to be attached to the docket of the
case, the second copy for the taxpayer and the third
copy for the Office accepting the waiver. (Revenue
Memorandum Order No. 20-90)
43. What is "Jeopardy Assessment"?
A Jeopardy Assessment is a tax assessment made by an
authorized Revenue Officer (RO) without the benefit
of complete or partial audit, in light of the RO’s belief
that the assessment and collection of a deficiency tax
will be jeopardized by delay caused by the Taxpayer’s
failure to:
a. Comply with audit and investigation requirements
to present his books of accounts and/or pertinent
records, or
b. Substantiate all or any of the deductions,
exemptions or credits claimed in his return.
44. What is “Best Evidence Obtainable Rule”?
In the conduct of a tax audit, the BIR may resort to any
document material to the inquiry, information
from government offices, testimony of other
persons when the report or records requested from
the taxpayer is not forthcoming (i.e. records are lost,
refusal of taxpayer to submit such records), or the
reports submitted are false, incomplete or
erroneous.
45. Claim for refund under Section 229 of the NIRC of
1997, as amended.
The claim for refund of excessively or erroneously
collected taxes under Section 229 should be made
within two (2) years from the date the taxes are
paid. Both the administrative and judicial claims
should be brought within the two (2)- year prescriptive
period. Otherwise, they shall forever be barred. Thus,
the taxpayer may elevate his claims to the CTA if the
two (2) year prescriptive period is about to expire
and the BIR has not yet rendered a decision on his
claim. (CBK Power Company Ltd. Vs. Commissioner of
Internal Revenue,750 Phil. 748 [2015])
46. Silkair (Singapore) Pte. Ltd. (Silkair) purchased
aviation jet fuel from Petron for use on Silkair
international flights. Later, it filed a claim for tax
refund of the excise tax passed on by Petron based
on Section 135 (b) of the NIRC as well as Article 4
(2) of the Air Transport Agreement between the
Government of the Republic of the Philippines and
the Government of the Republic of Singapore.
Silkair argues that it is exempt from indirect taxes
because the Air Transport Agreement between RP
and Singapore grants exemption "from the same
customs duties, inspection fees and other duties or
taxes imposed in the territory of the first
Contracting Party”.
a. Is Silkair exempt from indirect taxes?
The exemption granted under Section 135(b) of
the NIRC of 1997 and Article 4(2) of the Air Transport
Agreement between RP and Singapore cannot, without
a clear showing of legislative intent, be construed as
including indirect taxes. Exemption from "all
taxes" excludes indirect taxes, unless the
exempting statute is so couched as to include
indirect tax from the exemption (e.g. use of the
phrase "all forms" of taxes).
Statutes granting tax exemptions must be construed
in strictissimi juris against the taxpayer and liberally in
9
 favor of the taxing authority, and if an exemption is
found to exist, it must not be enlarged by construction.
b. Can Silkair claim a refund?
No, the proper party to question, or seek a refund of,
an indirect tax is the statutory taxpayer, the person on
whom the tax is imposed by law and who paid the same
even if he shifts the burden thereof to another. (Silkair
Singapore Pte. Ltd. v. CIR)
47. PAL received from Caltex an Aviation Billing
Invoice for the purchased aviation fuel. PAL,
through a letter-request addressed to respondent
Commissioner of Internal Revenue (CIR), sought
a refund of the excise taxes passed on to it by
Caltex. It hinged its tax refund claim on its
operating franchise, i.e., Presidential Decree No.
1590 (PAL's franchise), which conferred upon it
certain tax exemption privileges on its purchase
and/or importation of aviation gas, fuel and oil,
including those which are passed on to it by the
seller and/or importer thereof.
Does PAL has a legal legal personality to file the
aforesaid tax refund claim?
If the law confers an exemption from both direct or
indirect taxes, a claimant is entitled to a tax refund
even if it only bears the economic burden of the
applicable tax.
PAL's payment of either the basic corporate income tax
or franchise tax, whichever is lower, exempt it from
paying: (a) taxes directly due from or imposable upon
it as the purchaser of the subject petroleum products;
and (b) the cost of the taxes billed or passed on to it
by the seller, producer, manufacturer, or importer of the
said products either as part of the purchase price or by
mutual agreement or other arrangement.
PAL's franchise grants it an exemption from both
direct and indirect taxes on its purchase of petroleum
products, hence, it has a legal standing to claim for
refund. (Philippine Airlines, Inc. v. Commissioner of Internal
Revenue, G.R. No. 198759, [July 1, 2013], 713 PHIL 134-
160)
48. Does the CTA have jurisdiction over a special civil
action for certiorari assailing an interlocutory order
issued by the RTC in a local tax case?
YES. A court may issue a writ of certiorari in aid of its
appellate jurisdiction if said court has jurisdiction to
review, by appeal or writ of error, the final orders or
decisions of the lower court (The City Of Manila v. Hon.
Grecia-Cuerdo, G.R. No. 175723, February 4, 2014).
The CTA may take cognizance of cases directly
challenging the constitutionality or validity of a tax
law or regulation or administrative issuance. RA 9282,
a special and later law than BP Blg. 129 provides an
exception to the original jurisdiction of the RTC over
actions questioning the constitutionality or validity of
tax laws or regulations. Except for local tax cases,
actions directly challenging the constitutionality or
validity of a tax law or regulation or administrative
issuance may be filed directly before the CTA (BDO v.
Secretary of Finance).
49. Fundamental Principles of Local Taxation [UE-
LIP]
a. Taxation shall be Uniform in each LGU;
b. Taxes, fees, charges and other impositions shall:
[EPU]
i. be equitable and based as much as possible on
the taxpayer's ability to pay;
ii. be levied and collected only for public
purposes;
iii. shall not be unjust, excessive, oppressive, or
confiscatory;
c. The collection of local taxes, fees, charges and other
impositions shall in no case be Let to any private
person;
d. The revenues collected pursuant to the provisions of
the LGC shall Inure solely to the benefit of, and be
subject to the disposition by, the LGU levying the
tax, fee, charge or other imposition unless otherwise
specifically provided herein; and
e. Each LGU shall, as far as practicable, evolve a
Progressive system of taxation.
50. Real Property Exempt from Real Property Tax
(RPT)
a. Real property owned by the Republic of the
Philippines or any of its political subdivisions
XPN: when the beneficial use thereof has been
granted, for consideration or otherwise, to a
taxable person;
b. Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, non-profit
or religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively
used for religious, charitable or educational
purposes;
c. All machineries and equipment that are actually,
directly and exclusively used by local water
districts and GOCCs engaged in the supply and
distribution of water and/or generation and
transmission of electric power;
d. All real property owned by duly registered
cooperatives; and
e. Machinery and equipment used for pollution
control and environmental protection.
51. Distribution of Proceeds of RPT among LGUs
a. In case levied by a province:
i. province - 35%
ii. municipality - 40%; and
iii. barangay - 25%
b. In case levied by a city:
i. city - 70%;
ii. barangay where the property is located – 15%;
and
iii. all component barangays of the city – 15%
52. City Assessor of Baguio City assessed Camp John
Hay Development Corporation (CJHDC) for non-
payments of RPT for several buildings it owned
10
and two (2) parcels of land it leased from the Base
Conversion Development Authority (BCDA) in the
John Hay Special Economic Zone (JHSEZ).
On 23 May 2002, CJHDC filed with the Board of
Tax Assessment Appeals (BTAA) an appeal
challenging the validity and propriety of the
assessments of the City Assessor. CJHDC argues
that it is exempt from paying the assessed RPT
pursuant the Bases Conversion and Development
Act 1992.
taxation as they are being used exclusively for
educational purposes; and (5) some errors are made in
the assessment and collection of taxes due on
petitioners' properties, and that respondents committed
grave abuse of discretion in making the "improper,
excessive and unlawful the collection of taxes against
the petitioner[s]." These arguments essentially involve
questions of fact. Hence, payment under protest is
required.

BTAA ordered CJHDC to first pay under protest in

accordance with Sec. 252 of the LGC before
hearing on the matter can proceed. It also pointed
out that CJHDC failed to present any documentary
evidence to prove that it is a tax-exempt entity.

CJHDC thus appealed to the Central Board of

Assessment Appeals (CBAA), and then to the CTA
where its appeals were denied on the basis of Sec.
231 of LGC which provides that “appeals on
assessments of real property made under the
provisions of this Code shall, in no case, suspend
the collection of the corresponding realty taxes on
the property involved as assessed by the provincial
or city assessor, without prejudice to subsequent
adjustment depending upon the final outcome of
the appeal“.

Hence, CJHDC filed a Petition for Review on

Certiorari seeking to reverse and set aside said
decision.

Is payment under protest is required for a valid

protest?

Payment under protest is a condition sine qua non

before a protest or an appeal questioning the
correctness of an assessment of real property tax
may be entertained.

Moreover, a claim for exemption from payment of real

property taxes does not actually question the assessor's
authority to assess and collect such taxes, but pertains
to the reasonableness or correctness of the assessment
by the local assessor, a question of fact which should be
resolved, at the very first instance, by the LBAA. (Camp
John Hay Development Corp. v. Central Board of Assessment
Appeals, G.R. No. 169234, [October 2, 2013], 718 PHIL
543-574)

Note: When what is actually being assailed is the

correctness of the assessments made by the local
assessor and not the assessor's authority to assess
and collect the taxes, the issue involve is a question
of fact for which payment under protest is required
before the matter can be elevated to the LBAA.

In the case of Olivares v. Marquez (G.R. No. 155591,

[September 22, 2004]), what petitioners raise are the
following: (1) some of the taxes being collected have
already prescribed and may no longer be collected as
provided in Section 194 of the Local Government Code
of 1991; (2) some properties have been doubly
taxed/assessed; (3) some properties being taxed are no
longer existent; (4) some properties are exempt from

11