Atty. Eufrocina M.

Sacdalan-Casasola
Author, Professor & Bar Reviewer
of Taxation Law
GENERAL PRINCIPLES OF
TAXATION
 The power to tax is an attribute of sovereignty. It is inherent
in the State, but can be delegated to municipal
corporations, consistent with the principle that legislative
powers may be delegated to local governments in respect
of matters of local concern. FDCP v. Colon Heritage, 758
SCRA 536 (2015)
 Provinces, cities, municipalities, and barangays are mere
territorial and political subdivisions of the State. They act
only as part of the sovereign. Thus, they do not have the
inherent power to tax. The LGUs power to tax is subject to
Congressional guidelines and limitations), consistent with
the basic policy of local autonomy.”
 Fiscal autonomy entails “the power to create own sources of
revenue.” Demaala v. COA, 750 SCRA 612 (2015).
 Between the power of the State to tax and an
individual’s right to due process, the scale
favors the right of the taxpayer to due process.
CIR v. Fitness by Design, 808 SCRA 422 (2016)
 The exercise of the power of taxation
constitutes a deprivation of property under
the due process clause, and the taxpayer’s
right to due process is violated when
arbitrary or oppressive methods are used in
assessing and collecting taxes. MERALCO v.
City Assessor, 765 SCRA 52 (2015)
 Uniformity of taxation, like the kindred concept
of equal protection, requires that all subjects or
objects of taxation, similarly situated, are to be
treated alike, both in privileges and liabilities. Alta
Vista Golf v. City of Cebu, 781 SCRA 335 (2016)
 Equality and uniformity of taxation means that
all taxable articles or kinds of property of the
same class shall be taxed at the same rate. CIR
v. DLSU, 808 SCRA 156 (2016)
 Debts are due to the Govt in its corporate capacity, while
taxes are due to the Govt in its sovereign capacity.
 Tax is compulsory rather than a matter of bargain. Hence, a
tax does not depend upon the consent of the TP. If any TP
can defer the payment of taxes by raising the defense that it
still has a pending claim for refund or credit, this would
adversely affect the govt revenue system.
 A TP cannot refuse to pay taxes when they fall due simply
because he has a claim against the govt or that the
collection of the tax is contingent on the result of the lawsuit
it filed against the govt or that the tax liabilities were offset
against any alleged claim the TP may have against the
government. Air Canada v. CIR, GR 169507, Jan. 11, 2016,
(778 SCRA 131), LEONEN, J.

 In indirect taxes (like VAT and excise tax), the
incidence of taxation falls on one person but the
burden thereof can be shifted or passed on to
another person.
 In the case of WHT, the incidence and burden of
taxation fall on the same entity, the statutory
taxpayer. The burden of taxation is not shifted to
the WHA who merely collects, by withholding the
tax due from income payments to entities arising
from certain transactions and remits the same to
the government. Asia Intl. Auctioneers v. CIR, GR
179115, Sept. 26, 2012, J. Perlas-Bernabe
 General Rule: Prescription does not run against the right of the
govt. to assess and collect taxes.
 The rule, however, applies only when Congress does not provide
a time limit. The rationale for the rule is that restrictions on the
right of the government to assess and collect taxes "will not be
presumed in the absence of clear legislation to the contrary."
 But Secs. 203 , NIRC, has set a time limit for the government to
collect the assessed tax, which is 3 years, to be reckoned from
the date when the BIR mailed/released/sent the assessment
notice to the TP. Consequently, the general rule that taxes are
imprescriptible does not apply to this case.
 BP Blg. 700(5 April 1984) shortened the statute of limitations on
the assessment and collection of national internal revenue taxes
from 5 years to 3 years. CBC v. CIR, GR 172509, June 22, 2015
 Tax laws are prospective in
application, unless their
retroactive application is
expressly provided. CIR v. PNB,
795 SCRA 158 (2016)
 There is already double taxation if respondent is subjected to the
taxes under both Secs. 14 and 21 of Tax Ordinance No. 7794,
since these are being imposed:
 (1) on the same subject matter - the privilege of doing business in
the City of Manila;
 (2) for the same purpose - to make persons conducting business
within the City of Manila contribute to city revenues;
 (3) by the same taxing authority- petitioner City of Manila;
 (4) within the same taxing jurisdiction - within the territorial
jurisdiction of the City of Manila;
 (5) for the same taxing periods -per calendar year; and
 (6) of the same kind or character - a local business tax imposed on
gross sales or receipts of the business. City of Manila v. Cosmos
Bottling, G.R. 196681, June 27, 2018, MARTIRES, J.
 A tax amnesty is a general pardon or the intentional
overlooking by the State of its authority to impose penalties
on persons otherwise guilty of violating a tax law.
 It partakes of an absolute waiver by the govt. of its right to
collect what is due it and to give tax evaders who wish to
relent a chance to start with a clean slate.
 A tax amnesty, much like a tax exemption, is never favored
or presumed in law.
 The grant of tax amnesty, similar to tax exemption, must be
construed strictly against the taxpayer and liberally in favor
of the taxing authority. Asia Intl. Auctioneers v. CIR, GR
179115, Sept. 26, 2012, J. Perlas-Bernabe

 Tax exemptions are construed in strictissimi juris. Indeed,
taxation is the rule and tax exemption the exception. BIR v.
Manila Home Textile, 792 SCRA 283 (2016)
 A claim for refund or credit is similar to a tax exemption and
should be strictly construed against the taxpayer. Coral Bay
Nickel v. cir, 793 scra 190 (2016)
 Tax exemption must be clear and unequivocal, and must be
directly stated in a specific legal provision. NGCP v. Oliva, 800
SCRA 142 (2016)
 If the claimant asserts that he should be refunded the amount
of tax he has previously paid because he is exempted from
paying the tax, he must point to the specific legal provision of
law granting him the exemption. CIR v. United Cadiz, 813 SCRA
345 (2016)
 Exempting a person or entity from tax is to relieve or to excuse
that person or entity from the burden of the imposition. FDCP
v. Colon Heritage, 758 SCRA 536 (2015)
 As a rule, taxes cannot be subject to
compensation because the government and the
taxpayer are not creditors and debtors of each
other. CIR v. Toledo Power, 775 SCRA 709 (2015)
 In matters of taxation, the government cannot be
estopped by the mistakes, errors or omission of its
agents for upon it depends the ability of the
government to serve the people for whose
benefit taxes are collected. CIR v. Nippon Express,
771 SCRA 27 (2015)
 Therefore it should be exercised with caution to minimize
injury to the proprietary rights of a taxpayer. It must be
exercised fairly, equally and uniformly, lest the tax collector
"kill the hen that lays the golden egg."
 Legitimate enterprises enjoy the constitutional protection
not to be taxed out of existence.
 Incurring losses because of a tax imposition may be an
acceptable consequence but killing the business of an entity
is another matter and should not be allowed.
 It is counter-productive and ultimately subversive of the
nation's thrust towards a better economy which will
ultimately benefit the majority of our people. Tridharma
Marketing Corp v. CTA, G.R. 215950. June 20, 2016,
BERSAMIN, J.:
 It simply means that the tax system should be
capable of being effectively administered and
enforced with the least inconvenience to the
taxpayer. Mun. of Cainta vs. City of Pasig and Uniwide
Sales Warehouse, G.R. No. 176703 & 176721, June 28,
2017, MARTIRES, J. .
 Revenue laws are not intended to be liberally construed.
Taxes are the lifeblood of the government and in Holmes'
memorable metaphor, the price we pay for civilization;
hence, laws relative thereto must be faithfully and strictly
implemented. Pilmico Mauri Foods Corp. v. CIR, G.R.
175651 , Sept. 14, 2016
 Taxes are the lifeblood of the government and should be
collected without hindrance. However, the collection of
taxes should be exercised reasonably and in accordance
with the prescribed procedure. CIR v. Fitness by Design, Inc.
808 SCRA 422 (2016)
 Taxes are the nations lifeblood through which government
agencies continue to operate and which the State discharges
its functions for the welfare of its constituents. CIR v. Next
Mobile, 776 SCRA 343 (2015)
 It is said that taxes are what we pay for civilized society.
 Without taxes, the govt would be paralyzed for lack of the motive power to
activate and operate it.
 Hence, despite the natural reluctance to surrender part of one's hard-earned
income to the taxing authorities, every person who is able to must contribute
his share in the running of the government.
 The govt for its part, is expected to respond in the form of tangible and
intangible benefits intended to improve the lives of the people and enhance
their moral and material values.
 This symbiotic relationship is the rationale of taxation and should dispel the
erroneous notion that it is an arbitrary method of exaction by those in the seat of
power.
 But even as we concede the inevitability and indispensability of taxation, it is a
requirement in all democratic regimes that it be exercised reasonably and in
accordance with the prescribed procedure.
 If it is not, then the taxpayer has a right to complain and the courts will then come
to his succor.
 For all the awesome power of the tax collector, he may still be stopped in his
tracks if the taxpayer can demonstrate, as it has here, that the law has not been
observed. CIR v. San Miguel Corporation, GR 205045, Jan. 4, 2017, LEONEN, J.
TAXING AUTHORITIES
 Sec. 4 of the NIRC confers upon the CIR both
 (a) The power to interpret the NIRC and other tax laws in the exercise of her quasi-
legislative function. This power shall be under the exclusive and original jurisdiction of
the CIR, subject to review by the Secretary of Finance, however, Sec. 7 of the same Code
does not prohibit the delegation of such power to any or such subordinate officials with the
rank equivalent to a division chief or higher; and
 (b) The power to decide tax cases in the exercise of her quasi-judicial functions. The
power to decide disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising under this Code
or other laws or portions thereof administered by the BIR is vested in the CIR, subject to
the exclusive appellate jurisdiction of the CTA. The CTA is a court of special jurisdiction,
with power to review by appeal decisions involving tax disputes rendered by either the CIR
or the CoC.
 Before a party is allowed to seek the intervention of the courts, it is a precondition that he
avail of all administrative processes afforded him, such that if a remedy within the
administrative machinery can be resorted to by giving the administrative officer every
opportunity to decide on a matter that comes within his jurisdiction, then such remedy
must be exhausted first before the court’s power of judicial review can be sought,
otherwise, the premature resort to the court is fatal to one’s cause of action. CIR v. CTA
and Petron Corp., GR 207843, July 15, 2015 (763 SCRA 123)J. PERLAS-BERNABE, First
Div.
 Quasi-judicial function is “a term which applies to the
action or discretion of public administrative officers or
bodies required to investigate facts, or ascertain the
existence of facts, hold hearings, and draw conclusions from
them, as a basis for their official action and to exercise
discretion of a judicial nature.”
 On the other hand, quasi-legislative power is exercised by
administrative agencies through the promulgation of rules
and regulations within the confines of the granting statute
and the doctrine of non-delegation of powers from the
separation of the branches of the government.
 Clark Investors and Locators Association, Inc. v. Sec. of
Finance and CIR, G.R. 200670, July 6, 2015 (761 SCRA 586)
 The determination of the validity or
constitutionality of BIR issuances clearly falls
within the exclusive appellate jurisdiction of the
CTA, not the RTC, under Sec. 7(1) of RA 1125, as
amended, subject to prior review by the Sec. of
Finance, consistent with the doctrine on exhaustion of
administrative remedies .
 In other words, within the judicial system, the law
intends the CTA to have exclusive jurisdiction to
resolve, in general, all tax problems CIR v. Leal, GR
113459, Nov. 18, 2002 [Per J. Sandoval-Gutierrez,
Third Div.]
 Yes. While there is no express grant of such power
with respect to the CTA, Sec. 1, Art. VIII of the 1987
Constitution provides, nonetheless, that judicial
power shall be vested in one SC and in such lower
courts as may be established by law and that
judicial power includes the duty of the courts of
justice to settle actual controversies involving rights
which are legally demandable and enforceable, and
to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or
instrumentality of the Govt.
 Thus, the power of the CTA includes that of determining
WON there has been grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the RTC in
issuing an interlocutory order in cases falling within the
exclusive appellate jurisdiction of the tax court, like
issues on local tax cases.
 Hence, demands, matters or questions ancillary or incidental
to, or growing out of, the main action, and coming within
the above principles, may be taken cognizance of by the
court and determined, since such jurisdiction is in aid of its
appellate j urisdiction or IN AID OF ITS AUTHORITY OVER
THE PRINCIPAL MATTER. City of Manila v. Cuerdo, GR
175723, Feb. 4, 2014 [Per Peralta, En Banc]
 Admittedly, there is no provision of law that expressly provides where
exactly the ruling of the SoF is appealable to.
 However, Sec. 7(a)(l) of RA 1125, as amended, addresses the seeming gap
in the law as it vests the CTA, albeit impliedly, with jurisdiction over the
CA petition as "other matters" arising under the NIRC or other laws
administered by the BIR so long as it is within its appellate jurisdiction.
 Hence, the CTA can now rule not only on the propriety of an assessment or
tax treatment of a certain transaction, but also on the validity of the RR or
RMC on which the said assessment is based.
 In other words, within the judicial system, the law intends the CTA to
have exclusive jurisdiction to resolve all tax problems. Petitions for writs
of certiorari against the acts and omissions of the said quasi-judicial
agencies should thus be filed before the CTA.
CIR v. CTA and Petron, G.R. No. 207843, February 14, 2018, PERLAS-
BERNABE, J.:

Yes. Although, as a rule, the interpretative rulings of the CIR are
reviewable by the SoF under Sec. 4 of the NIRC, yet the SC held that
because of the special circumstances availing in this case-namely:

a. the question involved is purely legal;

b. the urgency of judicial intervention given the impending
maturity of the PEACe Bonds; and
c. the futility of an appeal to the SoF as the latter appeared to have
adopted the challenged BIR rulings –

there was no need for taxpayers to exhaust all administrative

remedies before seeking judicial relief. BDO v. Republic, G.R.
198756, Aug. 16, 2016, LEONEN,J.: EN BANC
 Under PD 242, all disputes and claims solely between govt agencies and
offices, including GOCCs, shall be ADMINISTRATIVELY settled or adjudicated
by the Sec. of Justice, the Solicitor General, or the Govt Corporate Counsel,
depending on the issues and government agencies involved.
 As regards cases involving only questions of law, it is the Secretary of Justice
who has jurisdiction, as Attorney General and ex officio adviser of all GOCCs and
entities, in consonance with Sec. 83 of the Rev Admin Code. His ruling or
determination of the question in each case shall be conclusive and binding upon
all the parties concerned.
 The purpose of PD 242 is to provide for a speedy and efficient administrative
settlement or adjudication of disputes bet govt. offices or agencies under the
Executive branch, as well as to filter cases to lessen the clogged dockets of the
courts.
 PD 242 will only apply when all the parties involved are PURELY government
offices and GOCCs.
 It is only proper that intragovernmental disputes be settled administratively
since the opposing govt offices, agencies and instrumentalities are all under
the President’s executive control and supervision. PSALM v. CIR, G.R. No.
198146,Aug. 8, 2017 (835 SCRA 235)
 Yes. The law is clear and covers “ALL DISPUTES, claims and
controversies SOLELY between or among the depts., bureaus, offices,
agencies and instrumentalities of the Natl Govt, including
constitutional offices or agencies arising from the interpretation and
application of statutes, contracts or agreements." When the law says
"all disputes, claims and controversies solely" AMONG GOVT
AGENCIES, the law means all, WITHOUT EXCEPTION.
 The use of the word "shall" in a statute connotes a mandatory order or
an imperative obligation. Its use rendered the provisions mandatory
and not merely permissive, and unless PD 242 is declared
unconstitutional, its provisions must be followed. The use of the word
"shall" mean that admin settlement or adjudication of disputes and
claims between govt agencies and offices, including GOCCs, is not
merely permissive but mandatory and imperative. Thus, under PD 242,
it is mandatory that disputes and claims "solely" between govt.
agencies and offices, including GOCCs, involving only questions of law,
be submitted to and settled or adjudicated by the Secretary of Justice.
PSALM v. CIR, G.R. No. 198146, Aug. 8, 2017
 No. This case is different from the case of PNOC v. CA which
involves not only the BIR (a govt bureau) and the PNOC and PNB
(both GOCCs), but also respondent Tirso Savellano, a private
citizen.
 While the BIR is obviously a govt bureau, and both PNOC and PNB
are GOCCs, respondent Savellano is a private. citizen. His standing
in the controversy could not be lightly brushed aside. It was private
respondent Savellano who gave the BIR the information that
resulted in the investigation of PNOC and PNB; who requested
the CIR to reconsider the compromise agreement in question; and
who initiated the CTA Case No. 4249 by filing a Petition for Review.
 PSALM v. CIR, G.R. No. 198146, Aug. 8, 2017
 To harmonize Section 4, NIRC with PD 242, the following
interpretation should be adopted:
 (1) As regards private entities and the BIR, the power to
decide disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties in relation thereto, or
other matters arising under the NIRC or other laws
administered by the. BIR is vested in the CIR subject to the
exclusive appellate jurisdiction of the CTA, in accordance
with Section 4 of the NIRC; and
 (2) Where the disputing parties are all public entities
(covers disputes between the BIR and other government
entities), the case shall be governed by PD 242.
 PSALM v. CIR, G.R. No. 198146, Aug. 8, 2017
 The CIR may delegate the powers vested in him
under the pertinent provision of the NIRC to any
or such subordinate officials with the rank
equivalent to a division chief or higher, subject
to such limitations and restrictions as may be
imposed under rules and regulations to be
promulgated by the Sec. of Finance, upon
recommendation of the CIR. CIR v. Hedcor
Sibulan, Inc. 831 SCRA 131 (2017)
 The power to interpret rules and regulations is
not exclusive and may be delegated by the CIR
to the DCIR. P &G v. CIR, 791 SCRA 399 (2016)
 Sec. 246 of the NIRC is not limited to a
reversal only by the CIR because the same
expressly states “any revocation,
modification or reversal” without specifying
who made the revocation, modification or
reversal, hence, a reversal by the SC is
covered under the said tax provision.
Deutsche Knowledge v. CIR, 811 SCRA 440
(2016)
TAXABLE PERIOD
 While taxable income is based on the method of
accounting used by the taxpayer, it will almost
always differ from accounting income.
 This is so because of a fundamental difference in the
ends the two concepts serve.
 Accounting attempts to match cost against revenue.
 Tax law is aimed at collecting revenue. It is quick to
treat an item as income, slow to recognize
deductions or losses.
 Thus, the tax law will not recognize deductions for
contingent future losses except in very limited
situations.
 Good accounting, on the other hand, requires their
recognition.
 No. Because tax laws borrowed concepts that had origins from
accounting.
 In truth, tax cannot do away with accounting.
 It relies upon approved accounting methods and practices to effectively
carry out its objective of collecting the proper amount of taxes from the
taxpayers.
 Thus, an important mechanism established in many tax systems is the
requirement for TPs to make a return of their true income.
 Maintaining accounting books and records, among other important
considerations, would in turn assist the TPs in complying with their
obligation to file their income tax returns.
 At the same time, such books and records provide vital information and
possible bases for the govt, after appropriate audit, to make an
assessment for deficiency tax whenever so warranted under the
circumstances.
 The NIRC recognizes the important facility provided by GAAP and
methods to the primary aim of tax laws to collect the correct amount of
taxes. CIR v. Lancaster Phils., 831 SCRA 1 (2017)
 All returns required to be filed by the NIRC shall be
prepared always in conformity with the provisions
of the NIRC, and its IRRs.
 Taxability of income and deductibility of expenses
shall be determined strictly in accordance with the
provisions of the NIRC and its IRRs.
 In case of difference between the provisions of the
NIRC and its IRRs, on one hand, and the GAAP and
the GAAS, on the other hand, the provisions of the
NIRC and its IRRs shall prevail. CIR v. Lancaster
Phils., 831 SCRA 1 (2017)
 In our jurisdiction, the concepts in business accounting,
including certain GAAP embedded in the NIRC comprise the
rules on tax accounting.
 Sec. 43, NIRC, authorizes the CIR to allow the use of a
method of accounting that in its opinion would clearly
reflect the income of a TP.
 The crop method recognizes that the harvesting and
selling of crops do not fall within the same year that they
are planted or grown.
 A TP is authorized to employ what it finds suitable for the
purpose so long as it consistently does so.
 The matching concept, which is one of the GAAP, directs
that the expenses are to be reported in the same period
that related revenues are earned. CIR v. Lancaster Phils.,
831 SCRA 1 (2017)
 If the Taxpayer is on cash basis, the expense is
deductible in the year it was paid, regardless of the
year it was incurred. If he is on the accrual
method, he can deduct the expense upon accrual
thereof. ING Bank v. CIR, 763 SCRA 350 (2015)
INCOME TAX
 Individuals earning pure compensation income shall
be taxed based on the income tax rates prescribed
under Section 24(A) of the Tax Code based on his
taxable income.
 If the taxable income is not over P250,000, the income
tax rate is 0%.
 TAXABLE INCOME income for PURE compensation
earners is the GROSS COMPENSATION income LESS
nontaxable income/benefits such as but not limited
to the 13th month pay and other benefits up to a
maximum of P90,000, de minimis benefits, and the
MANDATORY DEDUCTIONS, such as employee's
share in the SSS, GSIS, PHIC, Pag-ibig contributions
and union dues.
 Husband and wife shall compute their individual
income tax separately based on their respective
taxable income;
 If any income cannot be definitely attributed to
or identified as income exclusively earned or
realized by either of the spouses, the same shall
be divided equally between the spouses for the
purpose of determining their respective taxable
income.
 Individuals earning income PURELY from self-
employment and/or practice of profession
whose GS/GR and other non-operating income do
not exceed the P3 Million shall have the option to
avail of:
 1. The GRADUATED TAX RATES under
Sec.24(A)(2)(a) , NIRC, as amended; OR
 2. An 8% tax on GS/GR and other non-operating
income in excess of P250,000, in lieu of the
graduated income tax rates under Sec. 24(A) and
the 3% OPT under Sec. 116, NIRC.
For mixed income earners, the income tax rates
applicable are:
1. For the taxable income derived from compensation
– the GRADUATED income tax rates ; AND
2. For the income from business or practice of
profession -
 a. lf the GS/GR and other non-operating income do
not exceed P3 Million, the individual has the option to
be taxed at:
 a.1. Graduated income tax rates, OR
 a.2. 8% income tax rate based on GS/GR and other
non-operating income in lieu of the graduated
income tax rates and 3% OPT under Sec. 116, NIRC.
 The total tax due shall be the sum of:
 (1) tax due from compensation, computed using
the graduated income tax rates; and
 (2) tax due from self-employment/practice of
profession, resulting from the multiplication of the
8% income tax rate with the total of the GS/GR
and other non-operating income.
 MIEs who opted to be taxed under the
graduated income tax rates for income
from business/practice of profession shall
COMBINE THE TAXABLE INCOME from
both compensation and business/practice
of profession in computing for the total
taxable income and consequently, the
income tax due.
1. Senior Citizens (MWEs)
2. Minimum Wage Earners
3. Exemptions granted under
international agreements
 MWEs shall be EXEMPT from the payment
of income tax on the income they derive as
a MWE based on the prevailing statutory
minimum wage rates in the place where they
are working.
 The holiday pay, overtime pay, night shift
differential pay and hazard pay received by
such earner are likewise exempt.
 To be exempt, one must be a MWE , i.e. - one who is paid the SMW if he works in the
private sector, or not more than the SMW in the nonagri sector where he is assigned, if
he is a govt employee.
 The minimum wage exempted is that which is referred to in the Labor Code. It is
distinct and different from other payments including allowances, honoraria,
commissions, allowances or benefits that an employer may pay or provide an
employee.
 The law EXEMPTS from income taxation the most basic compensation an employee
receives – the amount afforded to the lowest paid employee by the mandate of law.
 Workers who receive the SMW their basic pay remain MWEs. The receipt of any other
income during the year does not disqualify them as MWEs. They remain MWEs,
entitled to exemption as such, BUT the TAXABLE INCOME income they receive other
than as MWEs may be subject to appropriate taxes.
 The canon is tempered by several exceptions, one of which is when the TP falls within
the purview of the exemption by clear legislative intent. In this situation, the rule of
liberal interpretation applies in favor of the grantee and against the govt.
 RA 9504 provides relief by declaring that a MWE, one who is paid the SMW, is exempt
from tax on that income, as well as on the associated statutory payments for
hazardous, holiday, overtime and night work. Jaime Soriano v. Secretary of Finance,
 G.R. 184450/G.R. 184508/G.R. 184538/G.R. 185234. Jan. 24, 2017, SERENO, CJ:
 “Bracket creep” - the process by
which inflation pushes individuals
into higher tax brackets.
 Jaime Soriano v. Sec of Finance,
G.R. 184450/G.R. 184508/G.R.
184538/G.R. 185234. Jan. 24, 2017,
SERENO, CJ:
 GPP is not subject to income tax imposed pursuant to Sec. 26 , NIRC.
 However, the partners shall be liable to pay income tax on their separate and
individual capacities for their respective distributive share in the net income of the
GPP.
 The GPP is not a taxable entity for income tax purposes since it is only acting as a
"pass-through” entity where its income is ultimately taxed to the partners
comprising it.
 Sec. 26 , NIRC provides that for purposes of computing the distributive share of
the partners, the NET INCOME of the GPP shall be computed in the same
manner as a corporation.
 The following may be allowed as deductions from the GROSS INCOME of the
GPP:
 a. Itemized DEDUCTIONS which are ordinary and necessary, incurred or paid for
the practice of profession; OR in lieu thereof
 b. Optional Standard Deduction (OSD) allowed to corporations in claiming the
deductions in an amount not exceeding 40 % of its gross income.
 This NET INCOME of the GPP will be the basis of the distributIve
 The share of the partners in the net income of the GPP,
actually or constructively received, shall be reported as
taxable income of EACH PARTNER.
 The partners comprising the GPP can no longer claim
further deduction from their distributive share in the net
income of the GPP and are not allowed to avail of the 8%
income tax rate option since their distributive share from
the GPP is already net of cost and expenses.
 But, if the partner also derives other income from trade,
business or practice of profession apart and distinct from the
share in the net income of the GPP, the deduction that can
be claimed from the other income would either be the
itemized deductions or OSD.
 When a NSNP educational institution proves that it USED
its revenues actually, directly, and exclusively for
educational purposes, it shall be exempted from income
tax, VAT, and local business tax.
 On the other hand, when it also shows that it USED its
assets in the form of real property for educational purposes,
it shall be exempted from real property tax. Art XIV, Sec. 4(3),
Constitution
 The last par. Of Sec. 30, NIRC, is declared without force
and effect for being contrary to the Constitution insofar
as it subjects to tax the income and revenues of NSNP
educational institutions USED actually, directly and
exclusively for educational purposes. CIR v. DLSU, 808
SCRA 156 (2016)
 Proprietary NONPROFIT educational institutions shall pay a tax of 10% on
their taxable income IF its GI from unrelated trade, business or activity DOES
NOT EXCEED 50% of the TOTAL GROSS INCOME.
 But If the GROSS INCOME from unrelated trade, business or other activity
EXCEEDS 50% of the TOTAL GROSS INCOME derived by such educational
institutions from all sources, the 30% income tax rate shall be imposed on the
entire taxable income.
 The term 'unrelated trade, business or other activity' means any trade,
business or other activity, the conduct of which is not substantially related to
the exercise or performance by such educational institution of its primary
purpose or function.
 A 'proprietary educational institution' is any private school maintained and
administered by private individuals or groups with an issued permit to operate
from the DECS or the CHED, or the TESDA, as the case may be, in accordance
with existing laws and regulations. Sec. 27B, NIRC
 For a NSNP hospital to be completely
exempt from income tax, Sec. 30E and
G of the NIRC requires said institution
to be organized and operated
EXCLUSIVELY and derive income AS
SUCH charitable or social welfare
institution. CIR v. St. Luke’s Medical
Center, Inc. 817 SCRA 347 (2017)
 Proprietary NONPROFIT HOSPITALS shall pay a tax of
10% on their taxable income if the GI from unrelated
trade, business or activity DOES NOT EXCEED 50% of the
TOTAL GROSS INCOME.
 If the GROSS INCOME from unrelated trade, business or
other activity exceeds 50% of the TOTAL GROSS INCOME
derived by such hospital from all sources, the 30% income
tax rate shall be imposed on the entire taxable income.
 The term 'unrelated trade, business or other activity' means
any trade, business or other activity, the conduct of which is
not substantially related to the exercise or performance by
such nonprofit hospital of its primary purpose or function.
 That is why in CIR v. St. Luke’s Medical Center, Inc. 817
SCRA 347 (2017), St. Luke’s income derived from its paying
patients was subjected to the 10% income tax rate.
 Section 1 of RA 9337, excluded PAGCOR from the enumeration
of GOCCs exempted from corporate income tax.
 PAGCOR's tax privilege of paying 5% franchise tax, in lieu of all
other taxes, with respect to its income from gaming
operations, such as the operation and licensing of gambling
casinos, gaming clubs and other similar recreation or amusement
places, gaming pools and related operations is not repealed or
amended by R.A. 9337.
 Like PAGCOR, its contractees and licensees remain exempted
from the payment of corporate income tax and other taxes, but
subject only to the 5% franchise tax. Bloomberry Resorts and
Hotels, Inc. v. BIR 800 SCRA 123 (2016)
 PAGCOR's income from other related services is subject to the
30% corporate income tax only. PAGCOR v. CIR, 846 SCRA 840
(2017)
 The government's cause of action against PAGCOR
is not for the collection of income tax, for which
PAGCOR is exempted, but for the enforcement of
the WHT provision of the NIRC FBT , compliance of
which is imposed on PAGCOR as, the WHA, and not
upon its employees. Consequently, PAGCOR's non-
compliance thereof made it personally liable for the
FBT arising from the breach of its legal duty.
 Regarding VAT - the legislative intent is for
PAGCOR to remain exempt from VAT even with the
enactment of RA 9337. PAGCOR v. CIR, 846 SCRA
840 (2017)
 Upon the amendment of the 1997 NIRC, R.A. 9337 abolished the
franchise tax and subjected PAL and similar entities to corporate
income tax and VAT on its sale of goods, property or services and
its lease of property.
 However, the franchise of PAL REMAINS THE GOVERNING LAW
ON ITS EXEMPTION FROM TAXES.
 PAL remains exempt from taxes, duties, royalties, registrations,
licenses, and other fees and charges, provided it pays corporate
income tax as granted in its franchise agreement, the payment of
which shall be in lieu of all other taxes, except VAT, and subject to
certain conditions provided in its charter. RP v. PAL, G.R. Nos.
209353-54/ G.R. Nos. 211733-34, July 6, 2015, SERENO, CJ:
 An offline international air carrier with no landing rights in the
Phils or that do not have flights to and f rom the Phils. but
nonetheless earn income from other activities in the country
(i.e., sale of airline tickets) will be taxed at the rate 30% of such
taxable income derived from sources within the Phils.
 It falls within the definition of a Resident Foreign Corporation
under Sec. 28(A)(1), NIRC.
 It is NOT liable to tax on Gross Phil. Billings .
 The IRR of RA 7042 clarifies that “doing business” includes
“appointing representatives or distributors, operating under
full control of the foreign corporation, domiciled in the Phils.
or who in any calendar year stay in the country for a period
totalling 180 days or more
 But International air carriers maintaining flights to and from
the Phils shall be taxed at the rate of 2 ½% of its Gross
Philippine Billings under Sec. 28(A)(3) of the NIRC. Air Canada
v. CIR, 778 SCRA 131 (2017)
 GROSS INCOME
 Debt instruments issued and sold to 20 or more
lenders/investors by commercial or industrial companies to
finance their own needs are considered deposit substitutes,
subject to the 20% FWHT on the imputed interest income from
the bonds.
 As defined in the banking sector, the term "public" refers to 20
or more lenders.
 What controls is the actual number of persons or entities to
whom the products or instruments are issued.
 The phrase "at any one time" is ambiguous in the context of
the financial market.
 The determination of the phrase "at any one time" to
determine the "20 or more lenders" is to be determined at the
time of the original issuance.
 This being the case, the PEACe Bonds were not to be treated
as deposit substitutes. BDO v. Republic, 800 SCRA 392 (2016)
 Trading gains, or gains realized from the sale or transfer of bonds (i.e., those
with a maturity of more than 5 years) in the secondary market, are exempt
from income tax. These "gains" refer to the difference between the selling price
of the bonds in the secondary market and the price at which the bonds were
purchased by the seller. For discounted instruments such as the zero-coupon
bonds, the trading gain is the excess of the selling price over the book value or
accreted value (original issue price plus accumulated discount from the time of
purchase up to the time of sale) of the 106 instruments.
 Section 32(B)(7)(g) also includes gains realized by the last holder of the bonds
when the bonds are redeemed at maturity, which is the difference between
the proceeds from the retirement of the bonds and the price at which the last
holder acquired the bonds.
 On the other hand, gains realized from the trading of short-term bonds (i.e.,
those with a maturity of less than 5 years) in the secondary market are subject
to regular income tax rates. BDO v. Republic, 800 SCRA 392
 No. Because the said dividends are NOT RECURRING DIVIDENDS but rather they are
payments for the redemption of shares of the NRFC since it surrendered its stocks in
return for the said distribution, thus ceasing to be a stockholder of the company.
 Under Art. 11 (5) of the RP-US Tax Treaty, the term "dividends" should be understood
acc. to the taxation law of the State in which the corp making the distribution is a
resident, which, in this case, pertains to Goodyear, Phils, a resident of the Philippines.
 Accordingly, the statutory definition of "dividends," (Sec. 73 (A), NIRC) "[t)he term
'dividends' means any distribution made by a corporation to its shareholders out of its
earnings or profits and payable to its shareholders, whether in money or in other
property."
 Thus, the redemption price received by GTRC could not be treated as accumulated
dividends in arrears that could be subjected to 15% FWT because respondent's AFS
covering the years 2003 to 2009 show that it did not have UNRESTRICTED RETAINED
EARNINGS, and in fact, operated from a position of deficit.
 ABSENT the availability of UNRESTRICTED RETAINED EARNINGS, the board of
directors of respondent had no power to issue dividends. CIR v. Goodyear Phils., GR
216130, Aug. 3, 2016 [Per J. Perlas-Bernabe, First Div.]

 Capital gains tax due on the sale of real property is
a liability for the account of the SELLER.
 Since capital gains is a tax on passive income, it is
the seller, not the buyer, who generally would
shoulder the tax. Republic v. Soriano, 752 SCRA
71.
 FRINGE BENEFITS TAX
 To avoid the imposition of the FBT on the benefit
received by the employee, and, consequently, to
avoid the withholding of the payment thereof by
the employer, PAGCOR must sufficiently establish
that the FB is required by the nature of, or is
necessary to the trade, business or profession of
the employer, or when the FB is for the
convenience or advantage of the employer. CIR
v. Sec. of Justice, 808 SCRA 12 (2016)
 DEDUCTIONS
ITEMIZED DEDUCTIONS
Applicable only to those who are engaged in
business or exercise of profession
Consist of Business Expenses, Interest
Expense, Taxes, Losses, Bad Debts,
Depreciation, Depletion of oil and gas wells
and mines, Charitable and other contributions,
Research and Development, Pension Trusts
Regular deduction
OPTIONAL STANDARD DEDUCTION
SAME
In lieu of the itemized deductions, there is
allowed an OSD of 40% depending on the kind
of TP.
INDIVIDUALS (except NRANETB) - 40% of
the GS/GR
CORPORATIONS (except NRFC) – 40% of GI
There is a need to elect this when filing the 1st
quarter income tax return
Once elected, IRREVOCABLE for the taxable
year.
Individuals need not submit FS.
GPP and partners may avail of OSD ONLY
ONCE, either by the GPP or the partners.
But TPs should still keep records of GS/GR/GI
1. Expenses must be ordinary and necessary;
2. Must be paid or incurred during the taxable year;
3. Must be paid or incurred in carrying on the trade or
business, or the exercise of profession by the taxpayer,
4. Amount must be reasonable;
5. Must be substantiated by SIs or ORs issued by the seller of
goods or service.
6. If subject to WHT, the same should be properly withheld and
remitted on time with the BIR thru the AABs. Ing Bank v. CIR,
763 SCRA 359 (2015)
7. Must be legitimately paid (not contrary to law, morals,
public policy or public order) or not in the form of bribe,
kickbacks and other similar payments. Pilmico Mauri Foods
Corp. v CIR, gr 175651, Sept. 14, 2016[Per J. Reyes, Third Div.]
 IRREVOCABILITY RULE
 When a corporation overpays its income tax liability as
adjusted at the close of the taxable year, it has two options:
 (1) to apply for a CASH REFUND or issuance of a TCC, or
 (2) to CARRY OVER such overpayment to the succeeding
taxable quarters to be applied as AUTOMATIC TAX CREDIT
against the estimated quarterly income tax liabilities of the
succeeding TYs until fully utilized (meaning there is no
prescriptive period).
 Once the carry-over option is taken, it becomes
IRREVOCABLE such that the taxpayer cannot later on change
its mind in order to claim a cash refund or the issuance of a TCC
of the very same amount of overpayment or excess income tax
credit. University Physician Services, Inc. v. CIR, G.R. 205955.
March 7, 2018, Martires, J.
 YES. The irrevocability rule under Sec. 76, NIRC, is
limited only to the option of CARRY-OVER.
 But the law does not prevent a taxpayer who
originally opted for a refund or TCC from shifting to
the carry-over of the excess creditable taxes to the
taxable quarters of the succeeding taxable years.
 However, in case the taxpayer decides to shift its
option to carryover, it may no longer revert to its
original choice DUE TO THE IRREVOCABILITY
RULE.
University Physicians Services v. CIR, GR 205955,
March 7, 2018[Per J. Martires, Third Div.]
 The evident intent of the legislature, in
adding the last sentence to Section 76 of
the NIRC of 1997, is to keep the
taxpayer from flip-flopping on its
options, and avoid confusion and
complication as regards said
taxpayer's excess tax credit. University
Physician Services, Inc. v. CIR, G.R. 205955.
March 7, 2018, Martires, J.
 When a taxpayer who opted to claim a refund or
tax credit of excess creditable withholding tax for a
taxable period which was GRANTED was
determined to have carried over and automatically
applied the same amount claimed against the
estimated tax liabilities for the taxable quarter or
quarters of the succeeding taxable year, said TP
shall be subject to tax audit due to overclaim of
refund and he will be informed in writing of the
law and the facts on which the assessment is
made in the form of a FAN, NOT thru a PAN.
 The govt. may immediately proceed to the
issuance of a FAN, and dispense with the PAN,
for the reason that the discrepancy or deficiency
is so glaring or reasonably within the TP's
knowledge such that a PAN would be a
SUPERFLUITY.
 It is because this scenario contemplates a
DOUBLE RECOVERY by the TP of an overpaid
income tax that arose from an over-withholding
of CWHTes.
 This par. envisages that the TP had previously asked for and
SUCCESSFULLY RECOVERED from the BIR its excess
CWT thru REFUND or TCC;
 If the govt. had already granted the refund, but the TP is
determined to have automatically applied the excess CWT
against its estimated quarterly tax liabilities in the
succeeding TYs, the TP would undeservedly recover 2x the
same amount of excess CWTes.
 There appears, therefore, no other viable remedial recourse
on the part of the govt. except to assess the TP for the
double recovery.
 In this instance, and in accordance with the above rule, the
government can right away issue a FAN. University
Physician Services, Inc. v. CIR, G.R. 205955. March 7, 2018,
Martires, J.
 No. If, on the other hand, an administrative claim for refund is still PENDING
but the TP had in the meantime automatically carried over the excess
creditable tax, it would appear not only wholly unjustified but also tantamount to
adopting an unsound policy if the government should resort to the remedy of
assessment.
 First, on the premise that the carry-over is to be sustained, there should be no
more reason for the govt to make an assessment for the sum (equivalent to the
excess CWT) that has been justifiably returned already to the TP (thru automatic
tax credit) and for which the govt has no right to retain in the first place. In
this instance, all that the govt needs to do is to DENY the refund claim.
 Second, on the premise that the carry-over is to be disallowed due to the
pending application for refund, it would be more complicated and circuitous if
the govt were to grant first the refund claim and then later assess the TP for
the claim of automatic tax credit that was previously disallowed.
 Such procedure is highly inefficient and expensive on the part of the govt due to
the costs entailed by an assessment.
 It unduly hampers, instead of eases, tax administration and unnecessarily
exhausts the govt’s time and resources. It defeats, rather than promotes,
administrative feasibility. University Physician Services, Inc. v. CIR, G.R. 205955.
March 7, 2018, Martires, J.
(1) That the claim for refund was filed within the 2-
year reglementary period pursuant to Sec. 229, NIRC;
(2) When it is shown on the ITR that the income
payment received is being declared part of the TP’s
gross income; and
(3) When the fact of withholding is established by a
copy of the withholding tax statement, duly issued by
the payor to the payee, showing the amount paid and
income tax withheld from that amount. CIR v. Cebu
Holdings, GR 189792, June 21, 2918, J. Carpio
 It is only logical to reckon the 2-year prescriptive period to
claim refund from the time the FAR or the Annual ITR was
filed, since it is only at that time that it would be possible to
determine whether the corporate taxpayer had paid an
amount exceeding its annual income tax liabilities.
 The 2-year prescriptive period commences to run from the
time the refund is ascertained, i.e., the date such tax was
paid, and not upon the discovery by the taxpayer of the
erroneous or excessive payment of taxes. MBTC v. CIR, 822
SCRA 496 (2017)
 Sec. 76, NIRC, requires a corporation to file a FAR or Annual
Income Tax Return covering the total taxable income for the
preceding calendar year or fiscal year.
 Winebrenner v. CIR, 748 SCRA 591 (2015)
 Claims for refund are civil in nature and as such,
petitioner, as claimant, though having a heavy
burden of showing entitlement, need only prove
preponderance of evidence in order to recover
excess credit in cold cash. Winebrenner v. CIR,
748 SCRA 591 (2015)
 (This was the rule under the aegis of the old NIRC of
1977 when the irrevocability rule had not yet been
established.)
 It only means that the TP cannot avail of both
REFUND and CARRY-OVER (automatic tax credit)
at the same time.
 Thus, as Philam declared: "One cannot get a tax
refund and a tax credit at the same time for the
same excess income taxes paid."
 This is the import of the Court's pronouncement that
the options under Section 76 are alternative in
nature.
 Withholding tax
 The tax on compensation income is withheld at
source under the CWT system wherein the tax
withheld is intended to equal or at least
approximate the tax due of the payee on the said
income. ING Bank N.V. v. CIR, 763 SCRA 359
(2015)
 Under RR 2-98, the obligation of a
taxpayer to deduct or withhold tax
arises at the time an income is paid
or payable, whichever comes first.
Edison (Bataan) Cogeneration Corp
v. CIR, 838 SCRA 287
 In case of doubt, a withholding agent may always
protect himself or herself by withholding the tax
due and return the amount of the tax withheld
should it be finally determined that the income
paid is not subject to withholding. BDO v.
Republic, 745 SCRA 361 (2015)
No. Because
(i) The payor-WHA (bank) is responsible for the withholding and remitting of the income taxes;
(2) the payee-refund claimant has no control over the remittance of the WHT;
(3) the Certs of FWHT at source issued by the bank-WHAs of the govt are prima facie proof of actual
payment by payee-refund claimant to the govt itself and are declared under perjury.
(4) While tax exemptions are strictly construed against the TP, the govt should not misuse
technicalities to keep money it is not entitled to.

PAL , on the other hand, has proven that

(i) it is exempted from paying WHT under the statutory exemption granted to it;
(ii) amounts were withheld and deducted from its accounts;
(iii) and the CIR did not contest the withholding of these amounts and only raises that they were not
proven to be remitted,
Thus Court finds that PAL sufficiently proved that it is entitled to its claim for refund.
In requiring PAL to prove actual remittance, the court a quo and the CIR effectively put the burden on
the payee to prove that both govt and the banks complied with their legal obligation. It would have
been near impossible for the TP to demand to see the records of the payor bank or the ledgers of the
govt. The legislative policy was to provide incentives to the TP by unburdening it of taxes. By
administrative and judicial interpretation, such policy would have been unreasonably reversed. This is
not this Court's view of equity. Clearly, the TP in this case is entitled to relief. PAL v CIR/ CIR v PAL,
G.R. 206079-80/G.R. 206309. January 17, 2018, LEONEN,J.:
 The probative value of BIR Form 2307, which is
basically a statement showing the amount paid for
the subject transaction and the amount of tax
withheld therefrom, is to establish only the fact of
withholding of the claimed CWT.
 There is nothing in BIR Form 2307 which would
establish either utilization or non-utilization, as the
case may be, of the creditable withholding tax.
PNB v. CIR, 753 SCRA 663 (2015)
 FILING OF RETURN AND PAYMENT OF TAX
 Individual taxpayers receiving pure compensation
income, regardless of amount, from only one
employer in the Philippines for the calendar year,
the income tax of which has been withheld correctly
by the said employer (tax due equals tax withheld )
shall not be required to file an annual income tax
return.
 The certificate of withholding (BIR Form 2316) filed
by the respective employers, duly stamped
“received” by the BIR, shall be tantamount to the
substituted filing of income tax returns by said
employees. Sec. 51-A, NIRC, as amended by TRAIN.
(a) An individual whose taxable income does not exceed P250,000 under
Sec 24(A)(2)(a): Provided, That Filipino citizens and Resident Aliens engaged
in business or practice of profession within the Phils. shall file an ITR,
regardless of the amount of gross income.
(b) An individual with respect to pure compensation income, derived from
sources within the Phils., the income tax on which has been correctly
withheld under the provisions of Sec. 79, NIRC: Provided, That an individual
deriving compensation concurrently from 2 or more employers at any time
during the taxable year shall file an ITR.
(c) An individual whose sole income has been subjected to FWHT
pursuant to Sec. 57(A), NIRC; and
d) A MWE or an individual who is exempt from income tax pursuant to the
provisions of this Code and other laws, general or special.
(e) Senior citizens who are also considered as MWEs shall also be exempt
from the payment of individual income tax.
 ESTATE TAX
1. New estate tax rate – 6% of the value of the net
estate. (Sec. 84)
2. New deductions for citizens and resident aliens
 a. Standard deduction – P5,000,000 (Sec. 86(A)(1)
 b. Family home – P10,000,000 (Sec. 86(A)(7)
3. Standard deduction for nonresident aliens–
P500,000 (Sec. 86(B)(1)
3. ETR with gross value exceeding P5 Million shall be
supported with a statement duly certified by a CPA
containing
a. Itemized assets of the decedent with GV at the
time of death
b. Itemized deductions from GE
c. Amount of tax due (Sec. 90(A)
 4. Time for filing – within 1 year from the decedent’s
death. (Sec. 90B)
 5. Payment by Installment. – In case the available
cash of the estate is insufficient to pay the total estate
tax due, payment by installment shall be allowed
within 2 years from the statutory date for its
payment without civil penalty and interest. (Sec.
90C)
 6. If a bank has knowledge of the death of a person,
who maintained a bank deposit account alone, or
jointly with another, it shall allow any withdrawal
from the said deposit account without the required
eCAR, subject to a FWHT of 6%. (Sec. 97)
 DONOR’S TAX
 New Donor’s Tax Rate – 6% of the total gifts in excess of P250,000 exempt
gift regardless of the relationship between the donor and the donee.
(Sec. 99)
 Transfer for Less than Adequate and Full Consideration. - Where
property, other than real property which is a capital asset, is transferred
for less than an adequate and full consideration in money or money's
worth, then the amount by which the FMV of the property exceeded the
value of the consideration shall, be deemed a gift, and shall be included in
computing the amount of gifts made during the calendar year: Provided,
however, That a sale, exchange, or other transfer of property made in
the ordinary course of business (a transaction which is a bona fide, at
arm’s length, and free from any donative intent), will be considered as
made for an adequate and full consideration in money or money’s
worth. (Sec. 100)
 Also, the exemption of dowries or gifts made by parents to their
children on account of marriage and before its celebration or within
one year thereafter to the extent of P10,000 was deleted under RA
10963 (TRAIN Law).
 VALUE-ADDED TAX
 For context, VAT is a tax imposed on each sale of goods or
services in the course of trade or business, or importation of
goods "as they pass along the production and distribution
chain.“
 It is an indirect tax, which "may be shifted or passed on to the
buyer, transferee or lessee of the goods, properties or services.“
 The output tax due from VAT-registered sellers becomes the
input tax paid by VAT-registered purchasers on local purchase
of goods or services, which the latter in turn may credit against
their output tax liabilities.
 On the other hand, for a non-VAT purchaser, the VAT shifted
forms part of the cost of goods, properties, and services
purchased, which may be deductible as an expense for income
tax purposes. TEC v. CIR, G.R. No. 197663/G.R. No. 197770.
March 14, 2018, LEONEN, J.
 With the issuance of RMC 74-99, the distinction
under the old rule was disregarded and the new
circular took into consideration the two
important principles of the Phil VAT system – the
Cross Border Doctrine and the Destination
Principle.
 No VAT shall be imposed to form part of the cost
of goods destined for consumption outside of
the territorial border of the taxing authority.
Coral Bay Nickel Corp v. CIR, 793 SCRA 190 (2016)
 The VAT is a tax on consumption, an indirect tax that the provider of goods or services
may pass on to his customers.
 Under the VAT method of taxation, which is invoice-based, an entity can subtract from the
VAT charged on its sales or outputs the VAT it paid on its purchases, inputs and imports. For
example, when a seller charges VAT on its sale, it issues an invoice to the buyer, indicating
the amount of VAT he charged.
 For his part, if the buyer is also a seller subjected to the payment of VAT on his sales, he
can use the invoice issued to him by his supplier to get a reduction of his own VAT
liability.
 The difference in tax shown on invoices passed and invoices received is the tax paid to
the government. In case the tax on invoices received exceeds that on invoices passed, a
tax refund may be claimed.
 If at the end of a taxable quarter the seller charges output taxes equal to the input taxes
that his suppliers passed on to him, no payment is required of him. It is when his output
taxes exceed his input taxes that he has to pay the excess to the BIR. If the input taxes
exceed the output taxes, however, the excess payment shall be carried over to the
succeeding quarter or quarters. Should the input taxes result from zero-rated or effectively
zero-rated transactions or from the acquisition of capital goods, any excess over the output
taxes shall instead be refunded to the taxpayerTEC v. CIR, G.R. No. 197663/G.R. No.
197770. March 14, 2018, LEONEN, J.
 Our VAT system is invoice-based, i.e. taxation relies
on sales invoices or official receipts.
 A VAT-registered entity is liable to VAT, or the output
tax at the rate of 0% or 12% on the gross selling price
of goods or gross receipts realized from the sale of
services.
 Sections 106(D) and 108(C) of the Tax Code expressly
provide that VAT is computed at 12% of the total
amount indicated in the invoice for sale of goods or
official receipt for sale of services.
 This tax shall also be recognized as input tax credit to
the purchaser of the goods or services. TEC v. CIR,
G.R. No. 197663/G.R. No. 197770. March 14, 2018,
LEONEN, J.
 Input VAT is, strictly speaking, a financial cost and
not a direct construction cost. A taxpayer has to
pay input VAT as part of the contract price of goods
and properties purchased, and services procured in
order to complete the project.
 In offsetting its input VAT against output VAT,
buyer is merely availing of the benefits of the tax
credit provisions of the law, and it cannot be said to
have benefited at the expense or the damage of
seller. Malayan Insurance Co. v. St. Francis
Square Realty Corp, 778 SCRA 540 (2017)
 Ordinarily, VAT registered entities are liable to pay
excess output tax if their input tax is less than their
output tax at any given taxable quarter. However, if
the input tax is greater than the output tax, VAT
registered persons can carry over the excess input
tax to the succeeding taxable quarter or quarters.

 If the excess input tax is derived from zero-rated or

effectively zero-rated transactions, the taxpayer
may either seek a refund. CE Luzon Geothermal
Power Co. v. CIR, 832 SCRA 589 (2017)
 No. Sec. 229 is inapplicable to claims for recovery of unutilized input VAT. Only
the person legally liable to pay the tax can file the judicial claim for refund.
The person to whom the tax is passed on as part of the purchase price has no
personality to file the judicial claim under Sec. 229.
 In a claim for refund or credit of "excess" input VAT , the input VAT is not
"excessively" collected as understood under Section 229.
 At the time of payment of the input VAT the amount paid is the correct and
proper amount.
 Under the VAT System, there is no claim or issue that the input VAT is
"excessively" collected, that is, that the input VAT paid is more than what is
legally due.
 The person legally liable for the input VAT cannot claim that he overpaid the input
VAT by the mere existence of an "excess" input VAT.
 The 'term "excess" input VAT simply means that the input VAT available as credit
exceeds the output VAT, not that the input VAT is excessively collected
because it is more than what is legally due.
 Thus, the taxpayer who legally paid the input VAT cannot claim for refund or
credit of the input VAT as "excessively" collected under Section 229. Coca-Cola v.
CIR, G.R. No. 222428. February 19, 2018, PERALTA,J.:
 Under Section llO(B), a taxpayer can apply his input VAT only against his output VAT.
 The only exception is when the taxpayer is expressly "zero-rated or effectively zero-
rated" under the law, like companies generating power through renewable sources of
energy.
 Thus, a non zero-rated VAT-registered taxpayer who has no output VAT because he has no
sales cannot claim a tax refund or credit of his unused input VAT under the VAT System.
 Even if the taxpayer has sales but his input VAT exceeds his output VAT, he cannot seek a
tax refund or credit of his "excess" input VAT under the VAT System. He can only CARRY-
OVER and apply his "excess" input VAT against his future output VAT.
 If such "excess" input VAT is an "excessively" collected tax, the taxpayer should be able to
seek a refund or credit for such "excess" input VAT whether or not he has output VAT.
 The VAT System does not allow such refund or credit.
 Such "excess" input VAT is not an "excessively" collected tax under Section 229.
 The "excess" input VAT is a correctly and properly collected tax.
 However, such "excess" input VAT can be applied against the output VAT because the VAT
is a tax imposed only on the value added by the taxpayer.
 If the input VAT is in fact "excessively" collected under Sec. 229, then it is the person legally
liable to pay the input VAT, not the person to whom the tax was passed on as part of the
purchase price and claiming credit for the input VAT under the VAT System, who can file
the judicial claim under Sec. 229. Coca-Cola v. CIR, G.R. No. 222428. February 19, 2018,
PERALTA,J.:
 "Excess input tax is NOT an excessively, erroneously, or illegally collected
tax." A claim for refund of this tax is in the nature of a tax exemption, which is
based on Sections 110(B) and 112(A) of 1997 NIRC, allowing VAT-registered
persons to recover the excess input taxes they have paid in relation to their
zero-rated sales. The term 'excess' input VAT simply means that the input VAT
available as [refund] credit exceeds the output VAT, not that the input VAT is
excessively collected because it is more than what is legally due." Accordingly,
claims for tax refund/credit of excess input tax are governed NOT by Section
229 but only by Section 112 of the NIRC.
 A claim for input VAT refund or credit is construed strictly against the taxpayer.
Accordingly, there must be strict compliance with the prescriptive periods and
substantive requirements set by law before a claim for tax refund or credit may
prosper. The mere fact that Team Energy has proved its excess input VAT does
not entitle it as a matter of right to a tax refund or credit. The 120+30-day periods
in Section 112 is not a mere procedural technicality that can be set aside if the
claim is otherwise meritorious. It is a mandatory and jurisdictional condition
imposed by law. Team Energy's failure to comply with the prescriptive periods is,
thus, fatal to its claim. TEC v. CIR, G.R. 197663/G.R. 197770. March 14, 2018,
LEONEN, J.
 1. The taxpayer-claimant is VAT-registered;
 2. It is engaged in zero-rated or effectively zero-
rated sale;
 3. There are creditable input taxes due or paid
attributable to the zero-rated or effectively zero-
rated sale;
 4. This input tax has not been applied against the
output tax; and
 5. The application and the claim for refund have
been filed within the prescribed period. CIR v.
Toledo Power, 765 SCRA 511 (2015)
 There is a clear delineation between official receipts
and sales invoices and that these 2 documents could
not be used interchangeably.
 Sec. 113 on invoicing requirements must be read in
conjunction with Sections 106 and 108, which
specifically delineates sales invoices for sales of
goods and official receipts for sales of services.
 To claim a refund of unutilized or excess input VAT,
purchase of goods or properties must be supported by
VAT invoices, while purchase of services must be
supported by VAT official receipts. TEC v. CIR, G.R.
No. 197663/G.R. No. 197770. March 14, 2018,
LEONEN, J
 Strict compliance with substantiation and .invoicing
requirements is necessary considering VAT's nature and VAT
system's tax credit method, where tax payments are based
on output and input taxes and where the seller's output tax
becomes the buyer's input tax that is available as tax credit
or refund in the same transaction.
 It ensures the proper collection of taxes at all stages of
distribution, facilitates computation of tax credits, and
provides accurate audit trail or evidence for BIR monitoring
purposes.
 The noninterchangeability between VAT official receipts and
VAT invoices avoids having the government refund a tax
that was not even paid. TEC v. CIR, G.R. No. 197663/G.R.
No. 197770. March 14, 2018, LEONEN, J.
 It should be noted that the seller will only become liable to pay the output
VAT upon receipt of payment from the purchaser. If we are to use sales
invoice in the sale of services, an absurd situation will arise when the
purchaser of the service can claim tax credit representing input VAT even
before there is payment of the output VAT by the seller on the sale
pertaining to the same transaction. As a matter of fact, if the seller is not
paid on the transaction, the seller of service would legally not have to pay
output tax while the purchaser may legally claim input tax credit thereon.
The government ends up refunding a tax which has not been paid at all.
Hence, to avoid this, VAT official receipt for the sale of services is an
absolute requirement.
 In conjunction with this rule, RMC No. 42-03 expressly provides that an
"invoice is the supporting document for the claim of input tax on
purchase of goods whereas official receipt is the supporting document
for the claim of input tax on purchase of services.“
 It further states that a taxpayer's failure to comply with the invoicing
requirements will result to the disallowance of the claim for input tax.
 TEC v. CIR, G.R. No. 197663/G.R. No. 197770. March 14, 2018, LEONEN,
J.
 Pursuant to Secs. 106(D) and 108(C) in relation to
Sec. 110 of the 1997 NIRC, the output or input tax
on the sale or purchase of goods is determined by
the total amount indicated in the VAT invoice,
while the output or input tax on the sale or
purchase of services is determined by the total
amount indicated in the VAT official receipt.
TEC v. CIR, G.R. No. 197663/G.R. No. 197770.
March 14, 2018, LEONEN, J
 Agri food products that have undergone simple processes of preparation or preservation for the market
are nevertheless considered to be in their original state.
 Sale of raw cane sugar is VAT exempt because it is considered to be in its original state. On the other
hand, refined sugar is an agri product that can no longer be considered to be in its original state because
it has undergone the refining process.
 The VAT exempt nature of the sales made by agri coops under the NIRC is consistent with the tax
exemptions granted to qualified coops under the Cooperative Code which grants coops exemption from
sales tax on transactions with members and nonmembers.
 Persons liable for the VAT on their sale of goods shall pay the VAT due , in general, on a monthly basis.
VAT accruing from the sale of goods in the current month shall be payable the following month.
However, there are instances where VAT is required to be paid in advance, such as in the sale of refined
sugar.
 The transaction subject to VAT is still the sale of refined sugar. The withdrawal of sugar is not a separate
transaction subject to VAT. It is only the payment thereof that is required to be made in advance.
 The sale of refined sugar by an agri coop duly registered with the CDA is exempt from VAT.
 Art. 2d of the Coop Code defines a certificate of tax exemption as the ruling granting exemption to the
coop issued by the BIR.
 Once the coop has sufficiently shown that it has satisfied the requirements under Sec. 109(L) of the
NIRC for the exemption from VAT on its sale of refined sugar )i.e., that it is duly registered with the CDA
and it is the producer of the sugar cane from which refined sugar is derived), its exemption from the
advance payment of VAT should automatically be granted and recognized.
 The basic rule is that if any BIR ruling or issuance promulgated by the CIR is subsequently revoked or
nullified by the CIR herself or by the Court, the revocation/nullfication cannot be applied retroactively to
the prejudice of the taxpayers. CIR V. United Cadiz Coop, 813 SCRA 345 (2016)
 Semirara is exempt from the payment of VAT on the
sale of coal produced under its Coal Operating
Contract because Sec. 16a of PD 972, a special law,
grants SMC exemption from all national taxes
except income tax.
 Therefore, since the main object of the COC for
which the tax exemption was granted is the active
exploration, development and production of coal
resources, SMC's sales of coal produced by virtue of
a COC with EDB remain exempt from VAT pursuant
to Sec. 109(1)(k) of the Tax Code, as amended by
R.A. 9337, in relation to PD 972, as amended. CIR v.
Semirara Mining Corp, 827 SCRA 300 (2017)
 The NPC is an entity with a special charter, which
categorically exempts it from the payment of any
tax, whether direct or indirect, including VAT. CBK
Power Company Ltd. v. CIR, 714 SCRA 45.
 Sec. 6 of the EPIRA provides that the sale of generated
power by generation companies shall be zero-rated.
 Section 4 (x) of the same law states that a generation
company "refers to any person or entity authorized by the
ERC to operate facilities used in the generation of
electricity (must have a COC from EPIRA).
 Corollarily, to be entitled to a refund or credit of
unutilized input VAT attributable to the sale of electricity
under the EPIRA, a taxpayer must establish:
 (1) that it is a generation company, and
 (2) that it derived sales from power generation. TEC v.
CIR, G.R. No. 197663/G.R. No. 197770. March 14, 2018,
LEONEN, J.
UPDATES ON VAT under the TRAIN LAW
 Sale of gold to the BSP which was previously a
zero-rated sale of goods is now a VAT-exempt
transaction under Sec. 109)(1) (Z), this Tax Code.
 “Foreign Currency Denominated Sale” had been
deleted from the list of zero-rated sale of goods.
 Provided, That subparagraph (B)(1) and (B)(5) hereof shall be subject to the 12% VAT
and no longer be subject to 0% VAT rate upon satisfaction of the ff conditions:
 (1) The successful establishment and implementation of an ENHANCED VAT REFUND
SYSTEM that grants refunds of creditable input tax within 90 days from the filing of
the VAT refund application with the BIR: Provided, That, to determine the effectivity
of Item No. 1, all applications filed from Jan. 1, 2018 shall be processed and must be
decided within 90 days from the filing of the VAT refund application; and
 (2) All pending VAT refund claims as of Dec. 31, 2017 shall be fully paid in cash by Dec.
31, 2019.
 The DOF shall establish a VAT refund center in the BIR and in the BoC that will handle
the processing and granting of cash refunds of creditable input tax.
 An amount equivalent to 5% of the total VAT tax collection of the BIR and the BOC
from the immediately preceding year shall be automatically appropriated annually and
shall be treated as a special account in the General Fund or as trust receipts for the
purpose of funding claims for VAT Refund: Provided, That any unused fund, at the end
of the year shall revert to the General Fund.
 The BIR and the BOC shall be required to submit to the COCCTRP a quarterly report of
all pending claims for refund and any unused fund.
(D) Importation of professional instruments and implements, tools of trade,
occupation or employment, wearing apparel, domestic animals, and
personal and household effects belonging to persons coming to settle in the
Philippines or Filipinos or their families and descendants who are now
residents or citizens of other countries, such parties hereinafter referred
to as Overseas Filipinos, in quantities and of the class suitable to the
profession, rank or position of the persons importing said items, for their
own use and not for barter or sale, accompanying such persons, or arriving
within a reasonable time: Provided, That the Bureau of Customs may,
upon, the production of satisfactory evidence that such persons are actually
coming to settle in the Philippines and that the goods are brought from
their former place of abode, exempt such goods from payment of duties
and taxes: Provided, further, That vehicles, vessels, aircrafts, machineries
and other similar goods for use in manufacture, shall not fall within this
classification and shall therefore be subject to duties, taxes and other
charges;
(P) Sale of real properties not primarily held for sale to customers or held for
lease in the ordinary course of trade or business, or real property utilized for
low-cost and socialized housing as defined by RA 7279, otherwise known as
the Urban Development and Housing Act of 1992, and other related laws,
residential lot valued at P1,500,000 and below, house and lot, and other
residential dwellings valued at P2,500,000 and below: Provided, That
beginning Jan. 1, 2021, the VAT exemption shall only apply to sale of real
properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business, sale of real property utilized for
socialized housing as defined by RA 7279, sale of house and lot, and other
residential dwellings with selling price of not more than P2,000,000:
Provided, further, That every 3 years thereafter, the amount herein stated
shall be adjusted to its present value using the Consumer Price Index, as
published by the Philippine Statistics Authority (PSA);
(Q) Lease of a residential unit with a monthly rental not exceeding P15,000;
(U) Importation of fuel, goods and supplies by persons engaged in
international shipping or air transport operations: Provided, That the fuel,
goods, and supplies shall be used for international shipping or air
transport operations;
(W) Sale or lease of goods and services to Senior Citizens and PWDs as
provided in RA 9994 (Expanded Senior Citizens Act of 2010) and RA 10754
(X) Transfer of property pursuant to Sec. 40(C)(2) of the NIRC.
(Y) Association dues, membership fees, and other assessments and
charges collected by homeowners associations and condominium
corporations;
(Z) Sale of gold to the BSP;
(AA) Sale of drugs and medicines prescribed for diabetes, high
cholesterol, and hypertension beginning January 1, 2019; and
(BB) Sale or lease of goods or properties or the performance of services
other than the transactions mentioned in the preceding paragraphs, the
gross annual sales and/or receipts do not exceed the amount of P3,000,000.
 In proper cases, the CIR shall grant a refund for creditable input taxes within 90
days from the date of submission of the official receipts or invoices and other
documents in support of the application filed in accordance with Subsec. (A) and
(B) hereof:
 Provided, That, should the CIR find that the grant of refund is not proper, the
CIR must state in writing the legal and factual basis for the denial.
 In case of full or partial denial of the claim for tax refund, the taxpayer affected
may, within 30 days from the receipt of the decision denying the claim, appeal
the decision with the CTA:
 Provided, however, That failure on the part of any official, agent, or employee
of the BIR to act on the application within the 90-day period shall be
punishable under Sec. 269 , NIRC.
 The term “tax credit certificate” was deleted by RA 10963 under this provision.
 The clause “or tax credit, or the failure on the part of the CIR to act on the
application within the period prescribed above” was deleted under RA 10963
 The phrase “or after the expiration of the 120 period” was deleted under RA
10963.
 SAN ROQUE DOCTRINE
I. Two years to file ADMINISTRATIVE CLAIM.
The ADMINISTRATIVE claim for tax refund or
credit is initially filed before the CIR within 2 years
from the end of the taxable quarter when the
zero-rated sales were made. Aichi Forging Co. of
asia, Inc. v. CTA En Banc, 838 SCRA 188 (2017)
Absence or nonprinting of the word “zero-rated”
in respondent’s invoices is fatal to its claim for the
refund and/or tax credit representing the
unutilized input VAT attributable to its zero-rated
sales. CIR v. Silicon, 718 SCRA 512 (2014)
 The CIR is given 120 days from the date of submission of complete documents in
support of the application, within which to (1) grant a refund or issue a TCC for
creditable input taxes, or (2) make a full or partial denial of the claim for tax refund or
tax credit. It is the taxpayer who ultimately determines when complete documents
have been submitted for the purpose of commencing and continuing the running of
the 120-day period. Silicon v. CIR, 785 scra 351 (2016)
 The failure to indicate the words “zero-rated” on the invoices and receipts issued by a
taxpayer would result in the denial of the claim for refund or tax credit. Eastern
Telecom v. CIR, 754 SCRA 369 (2015)
 In a long line of cases, the SC had interpreted the 120-day period as both mandatory
and jurisdictional such that the taxpayer is forced to await the expiration of the period
before initiating an appeal before the CTA because the CTA does not acquire
jurisdiction over a judicial claim that is filed before the expiration of the 120-day
period. CIR v. Mirant Pagbilao, 781 SCRA 364 (2016)
 Failure to comply with the 120-day waiting period violates a mandatory provision of
law. It violates the doctrine of exhaustion of administrative remedies and renders the
petition premature and thus without a cause of action, with the effect that the CT A
does not acquire jurisdiction over the taxpayer's petition. TSC v. CIR, G.R. No. 201225-
26/G.R. No. 201132/G.R. No. 201133. April 18, 2018, REYES, J.
 (1) Upon receipt of the CIR’s decision or ruling denying the said claim, or (2)
upon the expiration of the 120-day period without action from the CIR,
whichever is sooner, the taxpayer has 30 days within which to file a JUDICIAL
CLAIM with the CTA. Sitel Phils. Corp. v. CIR, 817 SCRA 193 (2017)
 The 120+30-day prescriptive periods are mandatory and jurisdictional, and the
matter of jurisdiction cannot be waived because it is conferred by law and is
not dependent on the consent or objection or the acts or omission of the
parties or any 1 of them. Silicon Phils. V. CIR, 754 SCRA 279 (2015)
 The appeal to the CTA is always initiated within 30 days from decision or
inaction regarding whether the date of the filing is within or outside the 2-year
period of limitation. Aichi Forging Co. of asia, Inc. v. CTA En Banc, 838 SCRA
188 (2017)
 In order for the CT A to acquire jurisdiction over a judicial claim for refund or
tax credit arising from unutilized input VAT, the said claim must first comply
with the mandatory 120+30-day waiting period. Any judicial claim for refund
or tax credit filed in contravention of said period is rendered premature,
depriving the CTA of jurisdiction to act on it. TSC v. CIR, G.R. No. 201225-
26/G.R. No. 201132/G.R. No. 201133. April 18, 2018, REYES, J.
 Although the BIR Ruling DA 489-03 is an erroneous interpretation of the law,
the SC made an exception explaining that “taxpayers should not be
prejudiced by an erroneous interpretation by the CIR, particularly on a
difficult question of law.” CE Luzon Geothermal Power Co. v. CIR, 832 SCRA
589 (2017)
 In CIR V. Deutsche Knowledge Services, 807 SCRA 90 (2016), where the SC
reiterated that all taxpayers may rely upon BIR Ruling No. 489-03, as a
general interpretative rule, from the time of its issuance on Dec. 10, 2003
until its effective reversal by the Court in CIR v. Aichi Forging, 632 SCRA 422
(2010). PG Asia, Pte. Ltd v. CIR, 839 SCRA 58 (2017)
 During the period Dec. 10, 2003 (when BIR Ruling DA 489-03 was issued) to Oct.
6, 2010 (when the CIR v. Aichi Forging Co. of Asia, 632 SCRA 422, case was
promulgated), which refers to the interregnum when BIR Ruling DA 489-03 was
issued until the date of promulgation of Aichi, TP-claimants need not observe
the stringent 120-day period before it could file a judicial claim for refund of
excess input VAT before the CTA. Before and after the aforementioned period
(i.e., Dec. 10, 2003 and Oct. 5, 2010) the observance of the 120-day period is
mandatory and jurisdictional to the filing of the judicial claim. Panay Power
Corp. v. CIR, 746 scra 588 (2015)
 Following CIR v. Burmeister and Wain Scandinavian Contractor
Mindanao, Inc. 512 SCRA 124 (2007), the SC, in Accenture, Inc.
v. CIR, 676 SCRA 325 (2012), emphasized that a TP claiming for
a VAT refund or credit under Sec. 108B has the burden to prove
not only that the recipient of the service is a foreign
corporation, but also that said corporation is doing business
outside the Phils.
 In Wester Mindanao Power Corp. v. CIR, 672 SCRA 350 (2012),
the SC ruled that in a claim for tax refund or tax credit, the
applicant must prove not only entitlement to the grant of the
claim under substantive law, he must also show satisfaction of
all the documentary and evidentiary requirements for an
administrative claim for a refund or tax credit and compliance
with the invoicing and accounting requirements mandated by
the NIRC, as well as the revenue regulations implementing
them. Sitel Phils. Corp. v. CIR, 817 SCRA 193 (2017)
 Taxrefunds or tax credits, just like tax
exemptions, are strictly construed
against taxpayers, the latter having
the burden to prove strict compliance
with the conditions for the g rant of
the tax refund or credit. Sitel Phils.
Corp. v. CIR, 817 SCRA 193 (2017)
 Statute of Limitations
 The law prescribing a limitation of actions for the collection of the income tax is beneficial
both to the Government and to its citizens; to the Government because tax officers would
be obliged to act promptly in the making of assessment, and to citizens because after the
lapse of the period of prescription citizens would have a feeling of security against
unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers,
not to determine the latter's real liability, but to take advantage of every opportunity to
molest peaceful, law-abiding citizens.
 Without such a legal defense, taxpayers would furthermore be under obligation to always
keep their books and keep them open for inspection subject to harassment by
unscrupulous tax agents.
 The law on prescription being a remedial measure should be interpreted in a way
conducive to bringing about the beneficent purpose of affording protection to the taxpayer
within the contemplation of the Commission which recommend the approval of the law.
Republic v. GMCC United Devt. Corp., GR 191856, Dec. 7, 2016, LEONEN,J.:
 The government must assess internal revenue taxes on time so as not to extend
indefinitely the period of assessment and deprive the taxpayer of the assurance that it will
no longer be subjected to further investigation for taxes after the expiration of a
reasonable period of time. CIR v. STI, 833 SCRA 285 (2017)
 Since time immemorial, the SC has consistently recognized and applied the Statute of
Limitations to preclude the Govt from exercising the power to assess and collect taxes
beyond the prescribed period. Pilipinas Shell v. CIR, 812 SCRA 1 (2016)
 As a general rule, Sec. 203 of the Tax Code
limits the CIR’s period to assess and collect
internal revenue taxes to 3 years counted
from the last day prescribed by law for the
filing of the return, or where the return is
filed beyond the period, from the day the
return was actually filed, whichever comes
later. CIR v. STI, 833 SCRA 285
 The 3-year prescriptive period under Sec.
203, NIRC, to assess and collect internal
revenue taxes is extended to 10 years in
cases of (1) fraudulent return fraudulent
return with intent to evade tax, (2) false
return; and (3) failure to file a return, to be
computed from the time of discovery of
the fraud, falsity, or omission. BDO v.
Republic, 745 SCRA 361
 To avail of the extraordinary period of assessment
in Sec. 222a, NIRC, the CIR should show that the
facts upon which the fraud is based is
COMMUNICATED TO THE TAXPAYER.
 The willful neglect to file the required tax return
or the fraudulent intent to evade the payment
of taxes cannot be presumed. CIR v. Fitness by
Design, 808 SCRA 422 (2016)
 While the filing of a fraudulent return necessarily
implies that the act of the taxpayer was
intentional and done with intent to evade the
taxes due, the filing of a false return can be
intentional or due to honest mistake. CIR v.
Philippine Daily Inquirer, Inc.,G.R. 213943. March
22, 2017, CARPIO,J.
 Under Sec. 248B of the NIRC, there is a prima facie
evidence of a false return if there is a substantial
underdeclaration of taxable sales, receipt or income
or if there is substantial overstatement of
deductions.
 The failure to report sales, receipts or income in an
amount exceeding 30% what is declared in the
returns constitutes substantial underdeclaration,
and a claim of deduction in an amount exceeding
30% of actual deductions shall render the taxpayer
liable for substantial overstatement of deductions .
CIR v. Asalus Corp. 818 SCRA 543 (2017)

 A waiver of the Statute of Limitations is nothing more than “a
bilateral written agreement between the taxpayer and the BIR
executed before the expiration of the 3-year period to assess
in order to extend the period of assessment and collection of
taxes to a date certain.” CIR v. SCB, 764 SCRA 174 (2015)
 The requirement to furnish the taxpayer with a copy of the
waiver is not only to give notice of the existence of the
document but of the acceptance by the BIR and the perfection
of the agreement. Phil. Journalists, Inc. v. CIR, 488 Phil 218
(2004) [Per J. Ynares-Santiago, First Division].
 As a rule, the failure to raise the defense of prescription at the
administrative level prevents the taxpayer from raising it at
the appeal stage. CBC v. CIR, 749 SCRA 525
 The BIR’s right to assess and collect taxes should not be
jeopardized merely because of the mistakes and lapses of its
officers, especially in cases like this where the taxpayer is
obviously in bad faith. CIR v. Next Mobile, 776 SCRA 343 (2015)
Prior to RMO 14-2016 (April 18, 2016), the rule prevailing was that the Waiver must faithfully
comply with the provisions of RMO 20-90 and RMC 29-2012 in order to be valid and binding,
viz:
1. Waiver must be in the proper form prescribed in RMC 29-2012 . (New: Waiver may NOT
necessarily be in the form prescribed)
2. Phrase “but not later than ________”, which indicates the expiry date of the period agreed
upon to assess/collect the tax after the ordinary/regular 3-year period of prescription, should
be filled up.
3. Waiver must be signed by TP himself or his duly authorized representative & such
delegation should be in WRITING. (New: In the case of corp., by any of its responsible
officials.)
4. Waiver should be duly notarized. (NEW: It MAY BE NOTARIZED. It is sufficient that it is
in writing.)
5. The CIR or the RO authorized by him shall sign the waiver indicating the date when it was
signed and that the BIR has accepted and agreed to the waiver. It is a BILATERAL
AGREEMENT between the parties.
6. Both the date of execution by the TP and date of acceptance by the BIR 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.
7. Waiver must be executed in 3 copies (Orig copy attached to docket of the case, 2nd copy
for TP; 3rd copy for the Office accepting the waiver). The fact of receipt by the TP of his file
copy must be indicated in the orig copy to show that the TP was notified of the acceptance of
the BIR and the perfection of the agreement.
 The GR is that when a waiver does not comply
with the requisites for its validity , it is invalid and
ineffective to extend the prescriptive period to
assess taxes.
 Altho the parties are in pari delicto, the Court may
interfere and grant relief at the suit of one of
them, where public policy requires its intervention,
even though the result may be that a benefit will
be derived by one party who is in equal guilt with
the other.CIR V. Next Mobile, Inc., 776 SCRA 343
(2015)
 The doctrine of estoppel cannot be applied in this case as an exception to the
statute of limitations on the assessment of taxes considering that there is a
detailed procedure for the proper execution of the waiver, which the BIR must
strictly follow. As such, the doctrine of estoppel cannot give validity to an act
that is prohibited by law or one that is against public policy.
 BIR cannot hide behind the doctrine of estoppel to cover its failure to comply with
RMO 20-90 and RDAO 05-01, which the BIR itself issued. Having caused the
defects in the waivers, the BIR must bear the consequence. It cannot shift the
blame to the taxpayer. The invalid Waivers did not operate to toll or extend the
period of prescription.To stress, a waiver of the statute of limitations, being a
derogation of the taxpayer's right to security against prolonged and unscrupulous
investigations, must be carefully and strictly construed. As such, it is clear that
the right of petitioner to assess respondent has already prescribed and
respondent is not liable to pay the deficiency tax assessment. The period of
collection has also prescribed. CIR v. BPI, G.R. 224327. June 11, 2018, Peralta, J.
 However, estoppel does not prevent the govt
from collecting taxes; it is not bound by the
mistake or negligence of its agents. CBC v. CIR,
749 SCRA 525 (2014)
In this case, respondent, after deliberately executing defective
waivers, raised the very same deficiencies it caused to avoid the
tax liability determined by the BIR during the extended assessment
period.
It must be remembered that by virtue of these Waivers, respondent
was given the opportunity to gather and submit documents to
substantiate its claims before the CIR during investigation.
It was able to postpone the payment of taxes, as well as contest and
negotiate the assessment against it.
Yet, after enjoying these benefits, respondent challenged the
validity of the Waivers when the consequences thereof were not in
its favor.
In other words, respondent's act of impugning these Waivers after
benefiting therefrom and allowing petitioner to rely on the same is
an act of bad faith. CIR v. Next Mobile ,G.R. 212825. Dec. 7, 2015
(776 SCRA 343); Velasco, J.
 REMEDIES
 1. LOA
 2. NIC
 3. PAN
 4. REPLY
 5. FAN/FLD
 6. Protest/Disputed Assessment
 7. FDDA
 8. CTA Div.
 9. MR (CTA Div.)
 10. CTA en BANC
 11. SC
 The audit process normally commences with the issuance by the CIR of a
Letter of Authority (LOA).
 The LOA gives notice to the taxpayer that it is under investigation for possible
deficiency tax assessment;
 At the same time it authorizes or empowers a designated revenue officer to
examine, verify, and scrutinize a taxpayer's books and records, in relation to
internal revenue tax liabilities for a particular period. CIR v. Lancaster, GR
183408, July 12, 2017, MARTIRES, J.
 If the CIR intended the investigation to include prior years, then it should issue
a separate LOA as specified in RMO 43-90.
 Unless authorized by the CIR himself or by his duly authorized representative,
through a LOA, an examination of the taxpayer cannot ordinarily be
undertaken. Medicard Phils., Inc. v. CIR, 822 SCRA 444 (2017)
 The requirement to specify the taxable period covered by the LOA is simply to
inform the taxpayer of the extent of the audit and the scope of the revenue
officer’s authority. CIR v. DLSU, 808 SCRA 156 (2016)
 Tax Assessment refers to the determination of the taxes due from a taxpayer
under the NIRC. They are presumed correct and made in good faith. CIR v. Fitness
by Design, 808 SCRA 422 (2016)
 NIC is a written notice informing a TP that findings of the
audit conducted on his books of accounts and accounting
records indicate that additional taxes have to be paid.
 If after the culmination of an audit, the RO and GS submit
their preliminary findings with the RDO and the RDO
approves it, a NIC stating the discrepancy in the TP’s
payment of his taxes, will be issued recommending the
proposed assessment with an invitation for an informal
conference in order to afford the TP with an opportunity
to present his side of the case.
 TP SHALL then have 30 days from the date of his receipt
of the NIC to explain his side by submitting a position
paper based on facts and applicable laws and regulations.
 One of the first requirements of Sec.3 of RR 12-99,
is that a NIC be first accorded to the taxpayer.
 The use of the word “SHALL” in subsection 3.1.1
describes the mandatory nature of the service of a
NIC.
 The purpose of sending a NIC is but part of the “due
process requirement in the issuance of a deficiency
tax assessment,” the absence of which renders
nugatory any assessment made by the tax
authorities.
 Spouses Paquiao v. CTA and CIR, GR 213394, April 6,
2016
 If after review and evaluation by the Assessment Div or by the CIR or
his duly authorized representative, as the case may be, it is
determined that there exists sufficient basis to assess the taxpayer
for any deficiency tax or taxes, the said Office shall issue to the
taxpayer, at least by registered mail, a PAN for the proposed
assessment, showing in detail, the facts and the law, rules and
regulations, or jurisprudence on which the proposed assessment is
based.
 If the taxpayer fails to respond within 15 days from date of receipt of
the PAN, he shall be considered in default, in which case, a FLD and a
FAN shall be caused to be issued by the said Office, calling for
payment of the taxpayer's deficiency tax liability, inclusive of the
applicable penalties. RR 12-99
 The PAN is a part of due process. It gives both the taxpayer and the
CIR the opportunity to settle the case at the earliest possible time
without the need for the issuance of a FAN. CIR v. Transition Optical
Phils., G.R. No. 227544, Nov. 22, 2017, LEONEN, Jr.
 REPLY/response against the PAN is optional/NOT
MANDATORY.
 But a TP has 15 days from date of receipt of the
PAN to respond that he disagrees with the findings
of deficiency tax/es, otherwise, he shall be
considered IN DEFAULT, in which case, FLD/FAN
shall be issued calling for payment of TP’s
deficiency tax liability, inclusive of the applicable
penalties.
 An FLD/FAN issued reiterating the immediate
payment of deficiency taxes and penalties
previously made in the PAN is a denial of the
response to the PAN.
 FLD/PAN is a written FINAL NOTICE of the deficiency taxes issued to a
taxpayer, or whose reply to the PAN was found out to be without merit,
 issued by the CIR or his duly authorized representatives calling for
payment of TP’s deficiency tax liability, inclusive of the applicable
penalties.
 stating the facts, the law, rules and regulations, or jurisprudence on
which the assessment is based, and
 issued within the 3-year period from the date of filing of the tax return,
or the due date thereof, whichever is later, otherwise, the
ASSESSMENT SHALL BE VOID.
 RMO 20-2016 provides that it shall be issued WITHIN 15 days from date
of receipt by the TP of the PAN, whether the same was protested or not.
 But RMC 11-2014, FLD/FAN issued beyond 15 days from
filing/submission of the TP’s REPLY shall be valid, provided that, it is
issued within the period of limitation to assess internal revenue taxes.
The non- observance of the 15-day period, however, shall constitute an
administrative infraction and the ROs who caused the delay shall be
subject to administrative sanctions.
 Sec. 3.1.4, RR 12-99, as amended
 The written notice requirement for both the FLD
and the FAN is in observance of due process – that
no person shall be deprive of his property without
due process of law and to afford the taxpayer
adequate opportunity to file a protest on the
assessment and thereafter file an appeal in case of
an adverse decision. Merely NOTIFYING the
taxpayer of his tax liabilities without details or
particulars is not enough.
 CIR v. Liquigaz, 790 SCRA 79 (2016)
 As soon as it is served, an obligation arises on the part of the
TP to pay the amount assessed and demanded.
 It also signals the time when penalties and interests begin to
accrue against the taxpayer.
 Thus, the NIRC imposes a penalty, in addition to the tax
due, in case the TP fails to pay the deficiency tax within the
time prescribed for its payment in the FAN.
 Likewise, an interest of is to be collected from the date
prescribed for payment until the amount is fully paid.
 Failure to file an administrative protest within 30 days
from receipt of the FAN will render the assessment final,
executory, and demandable.
 CIR v. Transitions Optical, GR 227544, Nov. 22, 2017;
LEONEN, J.
 If the taxpayer denies having received an assessment notice from the BIR, it
then becomes incumbent upon the latter to prove by competent evidence
that such notice was indeed received by the addressee. CIR v. GJM
Manufacturing, Inc. 785 SCRA 253 (2016)
 While an assessment may have been made when sent within the prescribed
period, even if received by the taxpayer after its expiration (Coll. of Int. Rev.
vs. Bautista, L-12250 and L-12259, May 27, 1959), this ruling makes it the more
imperative that the release, mailing, or sending of the notice be clearly and
satisfactorily proved. Mere notations made without the taxpayer's
intervention, notice, or control, without adequate supporting evidence,
cannot suffice; otherwise, the taxpayer would be at the mercy of the revenue
offices, without adequate protection or defense.
 Thus, the failure of petitioner to prove the receipt of the assessment by
respondent would necessarily lead to the conclusion that no assessment was
issued. CIR v. BPI, G.R. 224327. June 11, 2018, Peralta, J.
 A FLD with assessment notice which says that “this is
our FINAL DECISION based on investigation. If you
disagree, you may appeal this final decision within 30
days from the receipt hereof.”
 Thus, it became an exception to the rule on
exhaustion of administrative remedies.
 The words “final decision” and “appeal” taken
together led TP to believe that the FLD/FAN was in
fact the final decision of the CIR on the letter protest
and that the available remedy was to appeal to the
CTA.
 Allied Bank v. CIR, GR 175097, Feb. 5, 2010, DEL CASTILLO,
J.
(1) When the findings for any deficiency tax is the result of MATHEMATICAL ERROR
in the computation of the tax as appearing on the face of the tax return; or
(2) When a discrepancy has been determined between the TAX WITHHELD and
the amount ACTUALLY REMITTED by the withholding agent; or
(3) When a taxpayer who opted to claim a REFUND OR TAX CREDIT of excess
creditable withholding tax for a taxable period was DETERMINED TO HAVE
CARRIED OVER AND AUTOMATICALLY APPLIED THE SAME AMOUNT CLAIMED
AGAINST THE ESTIMATED TAX LIABILITIES for the taxable quarter or quarters of
the succeeding taxable year; or
(4) When the EXCISE TAX due on excisable articles has NOT been paid; or
(5) When an article locally purchased or IMPORTED BY AN EXEMPT PERSON, such
as, but not limited to, vehicles, capital equipment, machineries and spare parts, has
been sold, traded or transferred to non-exempt persons.
Sec. 228, NIRC; Sec. 3.1.2, RR 12-99, CIR v. Cebu Holdings, Inc., G.R. No. 189792.
June 20, 2018, Carpio, J.
PROTESTING AN ASSESSMENT
 Disputed Assessment is A WRITTEN PROTEST
ADMINISTRATIVELY filed by a TP against the FLD/FAN
within 30 days from date of receipt by filing either of the
following remedy, and the filing of one precludes the
filing of the other remedy:
 (1) Request for reconsideration –. refers to a plea of re-
evaluation of an assessment on the basis of existing records
without need of additional evidence. It may involve both a
question of fact or of law or both.
 (2) Request for reinvestigation - refers to a plea of 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.
 Sec. 3.1.5, RR 12-99, BPI v. CIR, GR 181836, July 9, 2014
 An assessment becomes final and unappealable
if within 30 days from receipt of the assessment,
the taxpayer fails to file his or her protest
requesting for reconsideration or reinvestigation .
CIR v. BPI, G.R. 224327. June 11, 2018, Peralta, J. ,
Second Division
 No request for reconsideration or reinvestigation
shall be granted on tax assessments that have
already become final, executory and demandable.
 (1) If the TP only disputes or protests against the validity of some of
the issues raised, the assessment attributable to the undisputed issue/s
shall become final, executory and demandable; and the TP shall be
required to pay the deficiency tax/es attributable thereto, in which case, a
COLLECTION LETTER shall be issued to the TP calling for payment of the
said deficiency tax/es, inclusive of the applicable surcharge and/or
interest.
 (2) If the TP fails to state the facts, the applicable law, rules and
regulations, or jurisprudence in support of his protest against some of
the several issues on which the assessment is based, the same shall be
considered undisputed issue/s, in which case, the assessment
attributable thereto shall become final, executory and demandable; and
the TP shall be required to pay the deficiency tax/es attributable thereto
and a COLLECTION LETTER shall be issued to the TP calling for payment
of the said deficiency tax, inclusive of the applicable surcharge and/or
interest.
 Sec. 2.1.5, RR 12-99, as amended.
For request for reinvestigation,
 TP shall submit all relevant supporting documents
in support of his protest within 60 days from date of
filing of his letter of protest, otherwise, the
“assessment shall become final. “
 CIR has 180 days within which to decide on the
protest from the submission of all relevant supporting
documents, in case the protest is in the form of a
request for reinvestigation.
 A request for Reinvestigation shall be available in a
protest to a FAN/IFLD only. After the issuance of a
FDDA, a request for Reinvestigation shall no longer
be available as a taxpayer remedy. (RMO 26-2016)
 The term “relevant supporting documents” refers
to those documents necessary to support the
legal and factual bases in disputing a tax
assessment as determined by the taxpayer.
 The 60-day period for the submission of all
relevant supporting documents shall not apply to
request for reconsideration.
 The term “the assessment shall become final” –
means that the FAILURE of the TP who requested for
a reinvestigation to submit all relevant supporting
documents within 60-day period shall render the
FLD/FAN FINAL by operation of law.
 In which case, TP shall be barred from disputing the
correctness of the FLD/FAN by the introduction of
newly discovered or additional evidence because he is
deemed to have lost his chance to present these
evidences.
 The BIR shall then DENY the request for
reinvestigation through the issuance of an FDDA.
 (RMC 11-2014)
A request for reinvestigation alone will not suspend the statute of limitations on
collection.
Two things must concur:
 (1) there must HAVE BEEN FILED a request for reinvestigation and
 (2) the CIR must have GRANTED it.
 The burden of proof that the request for reinvestigation had been actually
granted shall be on the CIR.
 Such grant may be expressed in its communications with the TP or implied
from the action of the CIR or his authorized representative in response to
the request for reinvestigation.
 Undoubtedly, it entails the reception and evaluation of additional evidence &
will take more time than a Motion for Recon, and thus justifying why it can
suspend the running of the statute of limitations, while the former can not. If
there is no showing that it has been granted, then the running of the 3-year
period is NOT SUSPENDED.
China Banking Corp. v. CIR. G.R. 172509. Feb. 4, 2015;
 The decision of the CIR or his duly authorized
representative on a disputed assessment shall
state the facts, law and rules and regulations, or
jurisprudence on which the decision is based.
 Failure of the FDDA to reflect the facts and the law
on which it is based will make the decision void. It ,
however, does not extend to the nullification of the
entire assessment. RR 12-99; CIR v. Liquigaz, 790
SCRA 79
 All decisions on protest to the
FLD/FAN, whether the TP's protest
is accepted or denied partially or
wholly, shall be communicated to
the TP through the issuance of a
FDDA.
 RMO 26-2016
The FDDA of the CIR SHALL state the
(1) facts, the applicable law, rules and regulations, or jurisprudence
on which such decision is based, otherwise, the decision SHALL
BE VOID, and
(2) that the same is his FINAL DECISION.
The use of the word “SHALL” in Sec. 228, NIRC and in RR 12-99
indicates that the requirement of informing the taxpayer of the
legal and factual bases of the assessment and the decision made
against him is MANDATORY. CIR v. United Salvage and Towage
(Phils.), Inc., G.R. No. 197515, July 2, 2014, (729 SCRA 113)
 The APPEALABLE DECISION is the one which categorically
states that the CIR’s action on the disputed assessment is
FINAL, and therefore, the reckoning of the 30-day period to
appeal to the CTA is from the receipt of that FDDA of the CIR.
 Sec. 3(3.1.5), RR 12-99, as amended; CIR v. Liquigaz Phils. Corp.
v. CIR, G.R. 215534/G.R. 215557, April 18, 2016.
 NO. A void FDDA does NOT IPSO FACTO render the
assessment void.
 In resolving the issue on the effects of a void FDDA, it is
necessary to differentiate an “assessment” from a “decision.”
 Where a TP questions an assessment and asks the CIR to
reconsider or cancel the same because the TP believes he is
not liable thereto, the assessment becomes a "disputed
assessment" that the CIR must decide, and the TP can appeal
to the CTA only upon receipt of the CIR’s FDDA, in accordance
with par.(1) of sec. 7, RA 1125, conferring appellate jurisdiction
upon the CTA to review "decisions of the CIR in cases involving
disputed assessment” .
 What is appealable to the CTA is the “DECISION” of the CIR on
disputed assessment and NOT the assessment itself.
 An assessment becomes a disputed assessment only after a
TP has filed its protest to the assessment in the
administrative level.
 An FDDA that does not inform the taxpayer in writing of the
facts and law on which it is based renders the decision VOID.
 Therefore, it is as if there was NO DECISION RENDERED by
the CIR.
 It is tantamount to a DENIAL BY INACTION by the CIR, which
may still be appealed before the CTA and the assessment
evaluated on the basis of the available evidence and
documents.
 Thus the merits of the assessment should have been discussed
and not merely brushed aside on account of the void FDDA.
 Tax laws may not be extended by implication beyond the clear
import of their language, nor their operation enlarged so as to
embrace matters not specifically provided.
 CIR v. Liquigaz Phils., G.R. 215534 & 215557. April 18, 2016
 After a TP files his PROTEST, the CIR either ISSUES an
FDDA or FAILS to act on it and is, therefore, considered
DENIED.
 Clearly, a decision of the CIR on a disputed assessment
DIFFERS from the assessment itself.
 Hence, the invalidity of one does not necessarily result to
the invalidity of the other—unless the law or regulations
otherwise provide.
 A "decision" differs from an "assessment" and failure of
the FDDA to state the facts and law on which it is based
renders the decision void.
 It, however, does not extend to the nullification of the
entire assessment.
 CIR v. Liquigaz Phils., G.R. 215534 & 215557. April 18, 2016
 The reason for requiring that TPs be informed in writing of the facts
and law on which the assessment is made is the constitutional
guarantee that no person shall be deprived of his property without
due process of law.
 Merely NOTIFYING the taxpayer of its tax liabilities without elaborating
on its details is insufficient.
 The old requirement of merely notifying the taxpayer of the CIR's
findings was changed in 1998 to INFORMING the TP of not only the
law, but also of the facts on which an assessment would be made;
otherwise, the assessment itself would be INVALID.
 The cardinal rule in administrative law is that the TP be accorded due
process. Not only was the law here disregarded, but no valid notice
was sent, either. A void assessment bears no valid fruit.
 The law imposes a SUBSTANTIVE, not merely a formal, requirement.
To proceed heedlessly with tax collection without first establishing a
VALID assessment is evidently violative of the cardinal principle in
administrative investigations: that TPs should be able to present their
case and adduce supporting evidence.
 CIR v. Liquigaz Phils., G.R. 215534 & 215557. April 18, 2016
If the protest is denied, in whole or in part, by the CIR’s
duly authorized representative, the TP may either:
 (1) Appeal to the CTA within 30 days from date of
receipt of the said decision; or
 (2) Elevate his protest through request for
reconsideration to the CIR within 30 days from date of
receipt of the said decision.
No request for reinvestigation shall be allowed in
administrative appeal to the CIR and only issues raised
in the decision of the CIR’s duly authorized representative
shall be entertained by the CIR.
 If the protest is not acted upon by the CIR’s duly authorized
representative within 180 days counted from the date of
filing of the protest in case of a request for reconsideration;
or from date of submission by the TP of the required
documents within 60days from the date of filing of the
protest in case of a request for reinvestigation, the
taxpayer may either:
 (1) Appeal to the CTA within 30 days after the expiration of
the 180-day period; or
 (2) Await the final decision of the CIR’s duly authorized
representative on the FDDA, and once denied, he may
appeal to the CTA such FDDA within 30 days from the
receipt of a copy of such FDDA.
 PAGCOR v. BIR, G.R. 208731, Jan. 27, 2016
 If the protest or administrative appeal, as the
case may be, is denied, in whole or in part, by
the CIR, the TP may
 (1) appeal to the CTA within 30 days from date
of receipt of the said decision. Otherwise, the
assessment shall become final, executory and
demandable.
 (2) But a motion for reconsideration of the CIR’s
denial of the protest or administrative appeal, as
the case may be, shall not toll the 30-day period
to appeal to the CTA.
 If the protest or administrative appeal is not acted
upon by the CIR within 180 days counted from the
date of filing of the protest, the taxpayer may
either:
 (1) Appeal to the CTA within 30 days from the
expiration of the 180-day period; or
 (2) Await the final decision of the CIR on the FDDA
and appeal such final decision to the CTA within 30
days after the receipt of a copy of such decision.
These remedies are MUTUALLY EXCLUSIVE and
the resort to one bars the application of the other.
 APPEAL
 Any aggrieved party may seek a reconsideration
or new trial of any decision of the CTA Division by
filing a Motion for Reconsideration or New Trial
within 15 days from the date of receipt of notice of
the decision of the CTA Division. Rule 15, Sec. 1,
RRCTA (This MR shall be deemed ABANDONED
if, during its pendency, the movant shall appeal to
the SC pursuant to Sec. 1 of Rule 16, RRCTA)
 If denied, the aggrieved party may file a Petition
for Review with the CTA en banc.
 A party adversely affected by a decision of the
CTA en banc may APPEAL therefrom by filing
with the Supreme Court a verified Petition for
Review on Certiorari within 15 days from
receipt of a copy of the decision under Rule 45 of
the Rules of Court.
 If sucH party has filed a Motion for Recon or for
New Trial, the period herein fixed shall run from
the party’s receipt of a copy of the resolution
denying the motion for Recon or for new trial.
 COLLECTION OF TAXES
1. Summary Administrative Remedies
a. Issuance of Warrant of Distraint
b. Issuance of Warrant of Levy

2. Judicial action
a. Civil action
b. Criminal action
 The issuance of a valid formal assessment is a
substantive prerequisite for collection of taxes.
 Taxes are the lifeblood of govt and should be collected
without hindrance. However, the collection of taxes
should be exercised reasonably and in accordance
with the prescribed procedure. CIR v. Fitness by
Design, 808 SCRA 422 (2016)
 While the TP has an obligation to honestly pay the
right taxes, the government has a corollary duty to
implement tax laws in good faith; to discharge its
duty to collect what is due to it; and to justly return
what has been erroneously and excessively given to
it. CBK Power Co. v. CIR, 746 SCRA 93 (2015)
 As to the period of collection, the regular period to collect taxes is 3 years in
accordance with Sec. 203 and 5 years in accordance with Sec. 222 ( c) and (d) of
the 1997 Tax Code.
 It must be remembered that the law imposes a substantive, not merely a formal,
requirement. To proceed heedlessly with tax collection without first
establishing a valid assessment is evidently violative of the cardinal principle
in administrative investigations: that taxpayers should be able to present their
case and adduce supporting evidence.
 Although taxes are the lifeblood of the government, their assessment and
collection "should be made in accordance with law as any arbitrariness will
negate the very reason for government itself.
 TAXPAYERS REMEDIES
 Asiatrust’s application for tax abatement will be
deemed approved only upon he issuance of a
termination letter, and only then will the deficiency
tax assessment be considered closed and
terminated. Asiatrust Dvt. Bank, v. CIR, 823 SCRA
648 (2017)
I. ADMINISTRATIVE CLAIM FOR REFUND/TCC (Sec. 204(C ),
NIRC
(1) A written claim for refund must be filed with the CIR within
2 years from the date of payment of the tax; although the
CIR may, even without a written claim therefor, refund or
credit any tax where on the face of the return upon which
payment was made, such payment appears CLEARLY to have
been erroneously paid. PURPOSE: to serve as a notice of
warning to the CIR that court action would follow unless the
tax or penalty alleged to have been collected erroneously is
refunded. CIR v. Goodyear, 799 SCRA 489 (2016)
(2) The claim must state a categorical demand for recovery
or reimbursement of illegally or erroneously or overpaid
taxes;
(3) There must be a PROOF OF PAYMENT;
B. JUDICIAL CLAIM (Sec. 229, NIRC)
(4) A decision of the CIR DENYING THE CLAIM is appealable to
the CTA WITHIN 30 DAYS from receipt thereof OR WITHIN 2
YEARS from the date of payment, WHICHEVER COMES FIRST,
regardless of any supervening cause that may arise after
payment; otherwise theCOMPROMISE,
claim is barred,
ABATEMENT
(REASON: the 2-year period OF
and REFUND ofTAXESCOMPROMISE,
limitation for filing a claim for
refund is not only a limitation for pursuing the claim in the
ABATEMENT
administrative level, butand also a limitation
REFUND OF TAXES for filing a judicial
claim with the CTA) COMPROMISE, ABATEMENT
(5) Thus, if no decision isand REFUND
made byOF TAXES
the CIR, the aggrieved party
must consider the INACTION of the CIR as a DENIAL and file an
appeal to the CTA before the lapse of the 2-year period counted
from the date of payment of the tax.
The options of tax refund and tax credit are mutually exclusive
such that resort to one bars the application of the other.
 The claim for refund of erroneously paid DST must
be within 2 years from the date of payment of the
DST.
 The rule is that the date of payment is when the
tax liability falls due.
 The liability for the payment of the DST falls due
only upon the occurrence of a taxable
transaction. PBC v. CIR, 794 SCRA 84 (2016)
 Claims for tax refunds are in the nature of tax exemptions
which result in loss of revenue for the government.
 Upon the person claiming an exemption from tax
payments rests the burden of justifying the exemption by
words too plain to be mistaken and too categorical to be
misinterpreted; it is never presumed nor be allowed solely
on the ground of equity.
 In addition, one who claims that he is entitled to a tax
refund must not only claim that the transaction subject of
tax is clearly and unequivocally not subject to tax - the
amount of the claim must still be proven in the normal
course, in accordance with the prescribed rules on
evidence.
 Fortune Tobacco Corp. v. CIR, GR 192024, July 1, 2015
 Claims for tax refunds are in the nature of tax
exemptions which result in loss of revenue for the
government.
 Upon the person claiming an exemption from tax
payments rests the burden of justifying the exemption
by words too plain to be mistaken and too categorical
to be misinterpreted; it is never presumed nor be
allowed solely on the ground of equity.
 In addition, one who claims that he is entitled to a tax
refund must not only claim that the transaction
subject of tax is clearly and unequivocally not subject
to tax - the amount of the claim must still be proven in
the normal course, in accordance with the prescribed
rules on evidence.
 Fortune Tobacco Corp. v. CIR, GR 192024, July 1, 2015
 Tax refunds are based on the general premise that
taxes have either been erroneously or excessively
paid.
 Though the Tax Code recognizes the right of
taxpayers to request the return of such
excess/erroneous payments from the government,
they must do so within a prescribed period.
 Further, "a taxpayer must prove not only his
entitlement to a refund, but also his compliance with
the procedural due process as non-observance of the
prescriptive periods within which to file the
administrative and the judicial claims would result in
the denial of his claim.
 CIR v. MERALCO, GR 181459, June 9, 2014
 The self-assessing and voluntarily paying taxpayer, however,
may later find that he or she has erroneously paid taxes.
 Erroneously paid taxes may come in the form of
 (1) amounts that should NOT have been paid, or
 (2) in the form of tax payments for the wrong category of tax.
 In these instances, the taxpayer may ask for a refund.
 If the BIR fails to act on the request for refund, the TP may
bring the matter to the CTA.
 CTA may acquire jurisdiction over cases even if they do not
involve BIR assessments or decisions, SUCH AS IN A CLAIM
FOR REFUND where the CIR had failed to act (INACTION) on
its claim for refund of erroneously paid taxes.

 SMI-ED Philippine Technology, Inc. v. CIR, G.R.

175410. Nov. 12, 2014
 The primary purpose of filing an administrative claim for refund is to serve as a
notice or warning to the CIR that court action would follow unless the tax or
penalty alleged to have been collected erroneously or illegally is refunded.
 It simply means that the CIR shall be given an opportunity to consider his
mistake, if mistake has been committed, before he is sued,
 Nowhere and in no wise does the law imply that the CIR must act upon the
claim, or that the taxpayer shall not go to court before he is notified of the
CIR’s action.
 It does not mean that the taxpayer must await the final resolution of its
administrative claim, since doing so would be tantamount to the taxpayer's
forfeiture of his right to seek judicial recourse should the 2-year prescriptive
period expire without the appropriate judicial claim being filed.
 It is only required that an administrative claim should BE PRIORLY FILED.
 If a TP chooses to await for the decision of the CIR knowing fully well that the
prescriptive period is about to lapse, it would resultantly forfeit its right to seek a
judicial review of its claim, thereby suffering irreparable damage.
 CIR v. Goodyear Phis. Inc., G.R. 216130. Aug. 3, 2016
 Yes. The withholding agent has authority to file a claim for
refund on behalf of the principal taxpayer because the
withholding agent is considered the statutory taxpayer and
he is an agent of the principal taxpayer.
 The person entitled to claim the refund is the taxpayer, and
the taxpayer is the person subject to the tax imposed.
 A WHA is held personally liable for the tax withheld, and
ensures that the same is remitted to the BIR.
 As such, the WHA is considered the statutory taxpayer. .
 Corollary thereto, the refund claimed belongs to the
principal and therefore, must be return to him.
 CIR v. Smart Communications, GR 179045-46, Aug. 25,
2010, DEL CASTILLO, J.
 Par. 5(2) of the Exchange of Notes provides for a tax
assumption provision whereby the Govt. of the Republic of
the Phils will, itself or thru the Executing Agency, assume all
fiscal levies or taxes imposed in the Republic on Japanese
firms and nationals operating as suppliers, contractors or
consultants on and/or in connection with any income that
may accrue from the supply of products of Japan and
services of Japanese nationals to be provided under the
Loan.
 The Phil. Govt’s assumption of all fiscal levies and taxes
which includes the subject taxes, is clearly a form of
concession given to Japanese suppliers, contractrors or
consultants in consideration of the OECF Loan, which
proceeds were used for the implementation of the project.
 Considering the petitioner paid the subject taxes in
the aggregate amount of P53 Million, which it was not
required to pay, the BIR erroneously collected such
amount. Accordingly, petitioner is entitled to its
refund.
 The NIRC vests upon the CIR, being the head of the
BIR, the authority to credit or refund taxes which are
erroneously collected by the government.
 Item B3 of RMC 42-99, an administrative issuance
directing petitioner to claim the refund from the NPC,
cannot prevail over Sec. 204 and 229 of the NIRC,
which provide that claims for refund of erroneously
collected taxes must be filed with the CIR. Mitsubishi
Corp. v. CIR, 725 SCRA 332 (20917)
 No. When a TP has already filed his administrative
claim for refund within 2 years from the payment of
the tax, it does not mean that he should await
forever for the decision of the CIR even if the 2-year
period is about to expire, since doing so would be
tantamount to his forfeiture of his right to seek
judicial recourse should the 2-year prescriptive period
expire without the appropriate judicial claim being
filed. CIR v. Goodyear Phils., GR 216130, Aug. 3, 2016
[Per J. Perlas-Bernabe, First Div.]
ADDITIONS TO THE TAX
 SEC. 249. Interest. -

 (A) In General. - There shall be assessed and collected on any
unpaid amount of tax, interest at the rate of double the legal
interest rate for loans or forbearance of any money in the
absence of an express stipulation as set by the BSP from the
date prescribed for payment until the amount is fully paid:
Provided, That in no case shall the deficiency and the
delinquency interest prescribed under Subsecs. (B) and (C )
hereof be imposed simultaneously.

 (B) Deficiency Interest. - Any deficiency in the tax due, as the term
is defined in this Code, shall be subject to the interest prescribed
in Subsec. (A) hereof, which interest shall be assessed and
collected from the date prescribed for its payment until the full
payment thereof, or upon issuance of a notice and demand by
the CIR, whichever comes earlier.
(C) Delinquency Interest. - In case of failure to pay:
(1) The amount of the tax due on any return required to be filed, or
(2) The amount of the tax due for which no return is required, or
(3) A deficiency tax, or any surcharge or interest thereon on the due date appearing
in the notice and demand of the Commissioner, there shall be assessed and collected
on the unpaid amount, interest at the rate prescribed in Subsection (A) hereof until
the amount is fully paid, which interest shall form part of the tax.
(D) Interest on Extended Payment. - If any person required to pay the tax is qualified
and elects to pay the tax on installment under the provisions of this Code, but fails to
pay the tax or any installment hereof, or any part of such amount or installment on or
before the date prescribed for its payment, or where the Commissioner has
authorized an extension of time within which to pay a tax or a deficiency tax or any
part thereof, there shall be assessed and collected interest at the rate hereinabove
prescribed on the tax or deficiency tax or any part thereof unpaid from the date of
notice and demand until it is paid.
 The rule is that no interest on refund of tax can be awarded
unless authorized by law or the collection of the tax was
attended by arbitrariness.
 An action is not arbitrary when exercised honestly and upon
due consideration where there is room for two opinions,
however much it may be believed that an erroneous
conclusion was reached.
 Interest was granted in case where patent arbirariness on the
part of the revenue authorities has been shown or where the
collection of tax was illegal.
 Arbitrariness presupposes inexcusable or obstinate disregard
of legal provisions.
 Due to the Bureau of Treasury's unjustified refusal to release the
funds to be deposited in escrow, in utter disregard of the orders
of the Court, it is held liable to pay legal interest of 6% p.a.
representing the 20% final withholding tax on the PEACe Bonds.
BDO v. Republic, 800 SCRA 392 (2016)
 As to whether St. Luke’s is liable for
compromise penalty under Sec. 248A of the
NIRC for its alleged failure to file its quarterly
income tax returns, this has also been resolved
in GR 195909 and 195960. CIR v. St. Luke’s
Medical Center, Inc. 682 SCRA 66 (2012), where
the imposition of surcharges and interest under
Sec. 248 and 249 of the 1997 NIRC were deleted
on the basis of good faith and honest belief on
the part of SLMC that it is not subject to tax. CIR
v. St. Luke’s Medical Center, Inc. 817 SCRA 347
(2017)
 LOCAL TAXES
 In Pimentel v. Aguirre, 336 SCRA 201 (2000), fiscal autonomy was defined
as “the power of LGUs to create their own sources of revenues in
addition to their equitable share in the national taxes released by the
national government, as well as the power to allocate their resources in
accordance with their own priorities. It extends to the preparation of
their budgets, and local officials in turn have to work within the
constraints thereof.
 Under the present Constitution, where there is neither a grant nor a
prohibition by statute, the tax power of municipal corporation must be
deemed to exist although Congress may provide statutory limitations
and guidelines.
 In conformity to the dictate of the fundamental law for the legislature to
“enact a LGC which shall provide for a more responsive and accoduntable
local govt structure instituted thru a system of decentralization”,
consistent with the basic policy of local autonomy, Congress enacted the
LGC, Book II of which governs local taxation and fiscal matters and set
forth the guidelines and limitations for the exercise of this power. FDCP
v. Colon Heritage, 758 SCRA 536 (2015)
 A LGU may exercise its residual power to tax when
there is neither a grant nor a prohibition by statute;
or when such t axes, fees, or charges are not
otherwise specifically enumerated in the LGC,
NIRC, or other applicable laws. Alta Vista Golf and
Country Club v. City of Cebu, 781 SCRA 335.
 Altho the power to tax is inherent in the State, the same is not true for
LGUs because although the mandate to impose taxes granted to LGUs is
categorical and long established in the 1987 Constitution, the same is not
all encompassing as it is subject to limitations as explicitly stated in Sec. 5,
Art. X of the 1087 Constitution. Batangas City v. Pilipinas Shell, 762 SCRA
153 (2015)
 The LGC of 1991 is specific in providing that the power to impose a tax,
fee, or charge, or to generate revenue shall be exercised by the
sanggunian of the LGU concerned thru an appropriate ordinance.
 The tax is not a pure exercise of taxing power or merely to raise revenue;
it is levied with a regulatory purpose.
 The public purpose of a tax may legally exist even if the motive which
impelled the legislature to impose the tax was to favor one over another.
 Not being a tax, the contention that the garbage fee under Ordinance SP
2235 violates the rule on double taxation must necessarily fail. Ferrer v.
Bautista, 760 SCRA 652 (2015)
 The power to impose a tax, fee, or charge or to generate
revenue shall be exercised by the Sanggunian of the LGU
concerned through an appropriate ordinance.
 This simply means that the LGU cannot solely rely on the
statutory provision (LGC) granting specific taxing powers,
such as the authority to levy franchise tax.
 The enactment of an ordinance is indispensable for it is
the legal basis of the imposition and collection of taxes
upon covered taxpayers.
 Without the ordinance, there is nothing to enforce by way of
assessment and collection.
 However, an ordinance must pass muster the test of
constitutionality and the test of consistency with the
prevailing laws. Otherwise, it shall be void. City of Pasig v.
Meralco, GR 181710, March 7, 2018, J. Martires.
 Public hearings shall be conducted for the purpose prior to
the enactment thereof:
 Any question on the constitutionality or legality of tax
ordinances or revenue measures may be raised on appeal
within 30 days from the effectivity thereof to the Secretary
of Justice who shall render a decision within 60 days from
the date of receipt of the appeal:
 But such appeal shall not have the effect of suspending the
effectivity of the ordinance and the accrual and payment of
the tax, fee, or charge levied therein:
 Within 30 days after receipt of the decision or the lapse of
the 60-day period without the Secretary of Justice acting
upon the appeal, the aggrieved party may file appropriate
proceedings with a court of competent jurisdiction. (Sec.
187, LGC)
 Under the LGC of 1991, a municipality is bereft of
authority to levy and impose franchise tax on
franchise holders within its territorial jurisdiction.
 That authority belongs to provinces and cities
only.
 A franchise tax levied by a municipality is, thus,
null and void. The nullity is not cured by the
subsequent conversion of the municipality into a
city. Neither does it authorize the collection of the
tax under said ordinance. City of Pasig v. Meralco,
GR 181710, March 7, 2018, J. Martires.
 Sec. 137 is categorical in stating that franchise tax
can only be imposed on businesses enjoying a
franchise.
 Power generation is no longer considered a public
utility operation, and companies which shall engage
in power generation and supply of electricity are no
longer required to secure a national franchise.
 Electric Power Industry Reform Act (EPIRA)
effectively removed power generation from the
ambit of local franchise taxes. NPC v. Prov. Govt. of
Bataan, 819 SCRA 173 (2017)
The tax privileges granted to electric cooperatives registered with NEA under PD 269 were
validly withdrawn and only those registered with the CDA under RA 6938 may continue to
enjoy the tax privileges under the Cooperative Code.
The power of the LGUs to impose and collect taxes is derived from the Constitution itself
which grants them “the power to create its own sources of revenues and to levy taxes,
fees and charges subject to such guidelines and limitations as the Congress may provide.
A franchise tax is a tax on the privilege of transacting business in the state and exercising
corporate franchises granted by the state.
To be liable for local franchise tax, the following requisites should concur
(1) that one has a “franchise” in the sense of a secondary or special franchise; and
(2) that it is exercising its rights or privileges under their franchise within the territory of the
pertinent local government unit.
Franchise tax shall be based on gross receipts precisely because it is a tax on business,
rather than on persons or property. City of Iriga v. CASURECO III, G.R. 192945, Sept. 5, 2012
(680 SCRA 236), PERLAS BERNABE, J.
 “Amusement places,” under Sec. 131(c ), LGC,
“include theaters, cinemas, concert halls, circuses
and other places of amusement where one seeks
admission to entertain oneself by SEEING or
VIEWING THE SHOW OR PERFORMANCE.”
 Indeed, theaters, cinemas, concert halls, circuses,
and boxing stadia are bound by a common typifying
characteristic in that they are all venues primarily
for the staging of spectacles or the holding of public
shows, exhibitions, performances, and other events
meant to be viewed by an audience.
 Alta Vista Golf and Country Club v. The City of Cebu,
G.R. No. 180235. Jan. 20, 2016
 Although petroleum products are subject to
excise tax, the same is specifically excluded from
the broad power granted to LGUs undere Sec.
143h of the LGC to impose business taxes.
 Strictly speaking, as long as the subject matter of
the taxing powers of the LGUs is the petroleum
products per se or even the activity or privilege
related to the petroleum products, such as
manufacturing and distribution of said products, it
is covered by the said limitation and thus, no levy
can be imposed. Batangas City v. Pilipinas Shell,
762 SCRA 153 (2015)
 When a municipality or city has already imposed a business tax
on manufacturers, etc. of liquors, distilled spirits, wines, and any
other article of commerce, pursuant to Sec. 143(a), LGC, said
municipality or city may no longer subject the same
manufacturers, etc. to a business tax under Sec. 143(h) of the
same Code.
 Section 143(h) may be imposed only on businesses that are
subject to excise tax, VAT, or percentage tax under the NIRC, and
that are "not otherwise specified in preceding paragraphs."
 In the same way, businesses such as respondent's, already subject
to a local business tax under Sec. 14 of Tax Ordinance No. 7794
[which is based on Section 143(a) of the LGC], can no longer be
made liable for local business tax under Sec. 21 of the same Tax
Ordinance [which is based on Section 143(h) of the LGC]. City of
Manila v. Cosmos Bottling, G.R. 196681, June 27, 2018,
MARTIRES, J.
 The computation of local business tax is based on
gross sales or receipts of the preceding calendar
year. Sec. 143(a), LGC. City of Manila v. Cosmos
Bottling, G.R. 196681, June 27, 2018,
MARTIRES, J.
 Local business taxes are payable for every separate or
distinct establishment or place where business subject to
the tax is conducted, which must be paid by the person
conducting the same.
 There is basis to presume correct the location stated in
the Certificate of Title and to rely thereon for purposes of
determining the situs of local taxation until it is cancelled
or amended.
 The basis for determining which LGU has the apparent
right to collect local taxes is the location as appearing on
the certificate of title, unless an amendment thereto is
duly made.
 Sec. 146 of the LGC expressly provides that the tax on a
business must be paid by the person conducting the
same. Mun. of Cainta v. City of Pasig, 828 SCRA 257 (2017)
 Under Sec. 133(n) of the LGC, the taxing power of
LGUs shall not extend to the levy of taxes, fees, or
charges on duly registered coops under the
Cooperative Code of the Phils. Prov. Assessor of
Agusan v. Filipinas Palm Oil, 805 SCRA 112 (2016)
  TAXPAYER’S REMEDIES
 1. Exhaust first the administrative remedies
before bringing the approriate action in
court.
 When the local treasurer or his duly authorized representative finds that
correct taxes, fees, or charges have not been paid, he shall issue a notice
of assessment stating the nature of the tax, fee, or charge, the amount of
deficiency, the surcharges, interests and penalties.
 Within 60 days from the receipt of the notice of assessment, the TP may
file a WRITTEN PROTEST WITH THE LOCAL TREASURER contesting the
assessment; otherwise, the assessment shall become final and
executory.
 The local treasurer shall decide the protest within 60 days from the time
of its filing.
 If the local treasurer finds the protest to be wholly or partly meritorious, he
shall issue a notice cancelling wholly or partially the assessment.
 However, if the local treasurer finds the assessment to be wholly or partly
correct, he shall deny the protest wholly or partly with notice to the
taxpayer.
 The taxpayer shall have 30 days from the receipt of the denial of the
protest or from the lapse of the 60-day period within which to appeal with
the court of competent jurisdiction otherwise the assessment becomes
conc lusive and unappealable.
 When a TP is assessed a deficiency local tax, fee or charge, he may protest
it even without making payment of such assessed tax, fee or. charge.
 This is because the law on local government taxation, save in the case of
real property tax, does not expressly require ''payment under protest" as
a procedure prior to instituting the appropriate proceeding in court.
 This implies that the success of a judicial action questioning the validity or
correctness of the assessment is not necessarily hinged on the previous
payment of the tax under protest.
 Needless to say, there is nothing to prevent the TP from paying the tax
under protest or simultaneous to a protest.
 There are compelling reasons why a taxpayer would prefer to pay while
maintaining a protest against the assessment.
 For instance, a taxpayer who is engaged in business would be hard-
pressed to secure a business permit unless he pays an assessment for
business tax and/or regulatory fees.
 Also, a taxpayer may pay the assessment in order to avoid further
penalties, or save his properties from levy and distraint proceedings.
 No case or proceeding shall be maintained in any
court for the recovery of any tax, fee, or charge
erroneously or illegally collected until a WRITTEN
CLAIM FOR REFUND OR CREDIT has been ·filed
WITH THE LOCAL TREASURER.
 No case or proceeding shall be entertained in any
court after the expiration of 2 years from the
date of the payment of such tax, fee, or charge, or
from the date the taxpayer is entitled to a refund
or credit.
 No. Section 196 does not expressly mention an assessment
made by the local treasurer.
 This simply means that its applicability does not depend
upon the existence of an assessment notice.
 By consequence, a taxpayer may proceed to the remedy of
refund of taxes even without a prior protest against an
assessment that was not issued in the first place.
 This is not to say that an application for refund can never be
precipitated by a previously issued assessment, for it is
entirely possible that the taxpayer, who had received a
notice of assessment, paid the assessed tax, fee or charge
believing it to be erroneous or illegal.
 Thus, under such circumstance, the taxpayer may
subsequently direct his claim pursuant to Section 196 of the
LGC.
 REAL PROPERTY TAXES
1. Basic Real Property Tax
2. Additional levy on real property for the Special
Education Fund. - 1%
3. Additional ad valorem tax on idle lands. - 5%
4. Special levy or assessment. – not to exceed 60%
of the actual cost of the improvement.
(a) Real property owned by the RP or any of its political subdivisions EXCEPT when
the beneficial use thereof has been granted, for consideration of otherwise, to
a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, nonprofit 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 LWDs and engaged in the supply and distribution of water and GOCCs
engaged in the generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under
R.A. 9520; and
(e) Machinery and equipment used for pollution control and environmental
protection.
Except as provided herein, any exemption from payment of RPT previously
granted to, or presently enjoyed by, all persons, whether natural or iuridical,
including all GOCCs are hereby withdrawn upon the effectivity of this Code.
Capwire v. the ProvincialTreasurer of Batangas et al., GR 180110, May 30, 2016
 Clearly, Sec. 234 of the LGC lists down the instances
of exemption in real property taxation and very
apparent is the fact that the enumeration is
EXCLUSIVE in character in view of the wordings in
the last paragraph.
 Applying the maxim “Expressio Unius est Exclusio
Alterius”, we can say that “Where the statute
enumerates those who can avail of the exemption,
it is construed as excluding all others not mentioned
therein”.
 MERALCO v. City Assessor and City Treasurer of
Lucena City, GR 166102, Aug. 5, 2015
 Every person by whom or for whom real property is
declared, who shall claim tax exemption for such property
from RPT shall file with the provincial, city or municipal
assessor within 30 days from the date of the declaration of
real property sufficient documentary evidence in support of
such claim. Capwire v. Prov. Of Batangas, 791 SCRA 272
(2016)
 Sec. 9 of RA 9511 clearly stated that the NGCP’s in lieu of all
taxes clause includes taxes imposed by the local govt on
properties used in connection with NGCP’s franchise.
NGCP’s payment of franchise tax exempts it from payment
of real property taxes on properties used in connection with
its franchise. NGCP v. Oliva, 800 SCRA 142 (2016)
 The roads that respondent constructed within the leased
area should not be assessed with RPT. Prov. Assessor of
Agusan v. Filipinas Palm Oil, 805 SCRA 112 (2016)
 MCIAA is an instrumentality of the govt; thus, its properties
actually, solely and exclusively used for public purposes,
consisting of the airport terminal building, airfield, runway,
taxiway and the lots on which they are situated, are not
subject to RPT and respondent City is not justified in
collecting taxes from petitioner over said properties.
 The SC in the 2006 MIAA case cited Sec. 234a, LGCand held
that said provision exempts from RPT any “real property
owned by the Republic.
 Like in MIAA, the airport, lands, and buildings of MCIAA are
properties of public dominion because they are intended for
public use. As properties of public dominion, they
indisputably belong to the State or the Republic, and are
outside the commerce of men. MCIAA v. City of Lapulapu,
757 SCRA 323 (2015)
 Not being among the recognized exemptions from
RPT in Sec. 234, then the exemption of the t
ransformers, electric posts, transmission lines,
insulators and electric meters of MERALCO from RPT
granted under its franchise was among the
exemptions withdrawn upon the effectivity of the LGC
on Jan. 1, 1998.
 Under Sec. 199a of the LGC, machinery, to be deemed
RP subject to RPT, need no longer be annexed to the
land or building as these “may or may not be attached,
permanently or temporarily to the real property,” and
in fact, such machinery may even be mobile.
MERALCO v. City Assessor, 765 SCRA 52 (2015)
 Submarine or undersea communications cables are akin
to electric transmission lines which are no longer
exempted from real property tax and may qualify as
“machinery” subject to real property tax under the LGC
to the extent that the equipment’s location is
determinable to be within the “municipal waters” or
taxing authorities jurisdiction. Capwire v. the Prov. Treasurer of
Batangas, the Prov. Assessor of Batangas, and the Assessor of
Nasugbu, Batangas, GR 180110, May 30, 2016
 Transformers, electric posts, transmission lines, insulators, and
electric meters of MERALCO are no longer exempted from real
property tax and may qualify as “machinery” subject to real
property tax under the LGC.
 MERALCO v. City Assessor and City Treasurer of Lucena City, GR
166102, Aug. 5, 2015
 However, under the same provision, if MIAA leases its real
property to a taxable person, the specific property leased
becomes subject to real property tax.
 Thus, portions of the Airport Lands and Buildings that MIAA
leases to private entities are not exempt from real estate tax.
 For ex., the land area occupied by hangars that MIAA leases
to private corporations is subject to real estate tax.
 In such a case, MIAA has granted the beneficial use of such
land area for a consideration to a taxable person and
therefore such land area is subject to real estate tax.
 MIAA v. City of Pasay, 583 SCRA 234 (2009); Rep. v. City of
Paranaque, 677 SCRA 246 (2012)
 The LGC defines “appraisal” as the “act or process of
determining the value of property as of a specific date for a
speific purpose.” “Assessment” is the act or process of
determining the value of a property, or proportion thereof
subject to tax, including the discovery, listing, classification,
and apprisal of the properties.
 Every machinery must be individually appraised and
assessed depending on its acquisition cost, remaining
economic life, estimated economic life, replacement or
reproduction cost, and depreciation.
 A notice of assessment, which stands as the first instance
the t axpayer is officially made aware of the pending tax
liability, should be sufficiently informative to apprise the ta
xpayer the legal basis of the tax. MERALCO v. City
Assessor, 765 SCRA 52 (2015)
Proper remedy depends on whether

A. The assessment was erroneous; or

B. The assessment was illegal

 An “erroneous assessment” presupposes that the taxpayer is
subject to the tax but is disputing the correctness or
reasonableness of the amount assessed.
 Here, the taxpayer claims that the local assessor erred in
determining any of the items for computing the real property tax,
i.e., the value of the real property or the portion thereof subject
to tax and the proper assessment levels.
 In case of an erroneous assessment, the taxpayer must exhaust
the administrative remedies before resorting to judicial action.
 Hence, this should require “payment under protest” before an
appeal can be filed with the LBAA and CBAA, and later to the
CTA.
 City of Lapu-lapu v. PEZA, GR 187583, November 26, 2014
 NPC v. The Provincial Treasurer of Benguet, G.R. No. 209303, Nov. 14, 2016,
PERALTA, J.
 On the other hand, an assessment is illegal if it
was made without authority under the law.
 In other words, there is an illegal assessment if
the issue involved is a “question of law.”
 In case of an illegal assessment, the taxpayer may
directly resort to judicial action without paying
under protest the assessed tax and filing an
appeal with the LBAA and CBAA Appeals.

 City of Lapu-lapu v. PEZA, GR 187583,

November 26, 2014
 Tax declaration cannot be validly considered as a
notice of assessment. Pucyutan v. Meralco, 789
SCRA 601 (2016)
 Collection of RPT- RPTes are collected by the
Local Treasurer, not by the BIR in charge of
collecting national internal revenue taxes, fees,
and charges. Salva v . Magpile, 844 SCRA 586
(2017)
 Sec. 235, LGC allows provinces and cities, as well
as municipalities in Metro Manila, to collect, on
top of the basic annual real property tax, an
additional levy which shall exclusively accrue to
the special education fund. Demaala v. Coa, 750
scra 612 (2015)
 Under Part VI, Art 79 of the UNCLOS, the Phils clearly
has jurisdiction with respect to cables laid in the
territory that are utilized in support of other
installations and structures under its jurisdiction.
 The jurisdiction or authority over such part of the
subject submarine cable system lying within Phil
jurisdiction includes the authority to tax the same, for
taxation is one of the 3 basic and necessary attributes
ofr sovereignty, and such authority has been
delegated by the national legislature to the LGUs with
respect to real property taxation.Capwire v. Prov. Of
Batangas, 791 SCRA 272 (2016)
 A. Payment under protest. In disputes involving real property taxation, the GR is to require
the taxpayer to PAY THE TAX UNDER PROTEST (Sec. 252, LGC) before availing the
admin remedies and judicial remedies, EXCEPT when the assessment itself is alleged to be
illegal or is made without legal authority. Capwire v. Prov. Of Batangas, 791 SCRA 272
(2016)
 By posting a surety bond, MERALCO may be considered to have substantially complied
with Sec. 252 of the LGC for the said bond already guarantees the payment to the
Office of the City Treasurer of the total amount of RPTes and penalties due thereon.
MERALCO v. City Assessor, 765 SCRA 52 (2015)
 Should the real property owner question the excessiveness or reasonableness of the
assessment, Sec. 252 of the LGC directs that the taxpayer should first pay the tax due
before his protest can be entertained. NPC v. Prov. Treasurer of Benguet, 808 SCRA 595
(2016)
 B. File protest with Local Treasurer. It is only after the TP has paid the tax due that he
may file a protest in writing within 30 days from payment of the tax to the Provincial,
City or Municipal Treasurer, who shall decide the protest within 60 days from receipt.
NPC v. Prov. Treas. Of Benguet, 808 SCRA 595 (2016)
 C. Direct court action is permitted when only the legality, power, validity or authority
of the assessment itself is in question. Stated differently, the general rule of a
prerequisite recourse to administrative remedies applies when questions of fact are
raised, but the exception of direct court action is allowed when purely questions of law
are involved. NPC v. Mun. Government of Navotas. G.R. No. 192300, November 24, 2014,
 No.
 First, a TD is issued pursuant to Sec. 204 of the " while a notice of
assessment mandates the "assessor xxx to give written notice within
thirty days of such assessment, to the person in whose name the
property is declared."
 Second, a tax declaration is mandated by Section 22 of P.D. No. 464 to
be issued "upon discovery" by the assessor of the "real property" to be
appraised and assessed, while a "written notice of assessment" as
required by Section 27 of the same law has to be issued by the assessor
"within thirty days" from "such assessment."
 Third, no tax accrues as a result of the assessor's issuance of a tax
declaration, for at that time, the assessor is merely tasked by the law "to
determine the assessed value of the property, meaning, the value placed
on taxable property for ad valorem tax purposes." On the other hand,
the written notice of assessment is what ripens into a demandable tax.
 City of Muntinlupa v. MERALCO, GR 197136, April 18, 2016
 A claim for exemption from the 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.
Npc V. Prov. Treas. Of Benguet, 808 SCRA 595
(2016)
 If the property is current in its realty tax or not realty tax delinquent, then it should not be the subject of a sale at public
auction as contemplated in Sec. 267.
 The required deposit under Sec. 267, Title II of the LGC becomes jurisdictional only if there is no dispute that the real
property is tax delinquent.
 If there is competent evidence that the realty tax due on the property subject of the tax sale has been seasonably and
fully paid, then the deposit requirement under Sec. 267 of the LGC does not serve its intended purpose and ceases to be
jurisdictional. Beaumont Holdings Corp. v. Reyes, 834 SCRA 477 (2017)
 Sec. 267 of RA 7160 explicitly provides that a court shall not entertain any action assailing the validity or sale at public
auction of real property unless the taxpayer deposits with the court the amount for which the real property was sold,
together with interest of two percent (2%) per month from the date date of sale to the time of the institution of the
action. Gamilla v. Burgundy Realty, 760 SCRA 237 (2015)
 As an exception to the rule that administrative proceedings are presumed to be regular, there can be no presumption of
the regularity of any administrative action which results in depriving a taxpayer of the property through a tax sale.
 Under Sec. 258, the warrant of levy must be mailed to or served upon the delinquent OWNER of the real property or
person having legal interest thereto, or in case he is out of the country or cannot be located, to the administrator or
occupant of the property.
 Sec. 260 of the LGC requires that within 30 days after service of the warrant of levy, the local treasurer shall proceed to
publicly advertise for sale or auction the property or a usable portion thereof as may be necessary to satisfy the tax
delinquency and expenses of sales. Salva v. Magpile, 844 SCRA 586 (2017)
 That the delinquent taxpayer /REGISTERED OWNER must be actually notified thru a Notice of Sale (so that it may
exercise its right to redeem) such warrant is implied from Sec. 258 of the LGC which explicitly directs the levying officer
to submit a report on the levy to the sanggunian concerned within 10 days after receipt of the warrant by the owner of
the property or person having legal interest therein. Lukban v. Optimum Devt Bank, 781 SCRA 494 (2016)
 Strict adherence to the statutes governing tax sales is imperative not only for the protection of the taxpayers, but also to
allay any possible suspicion of collusion between the buyer and the public officials called upon to enforce the laws. Salva
v. Magpile, 844 SCRA 586 (2017)
 It is incumbent upon the City Treasurer to convey the notice of delinquency to the t axpayer. Gamilla v. Burgundy Realty
760 SCRA 237 (2015)
 CTA JURISDICTION and RULES
(a) Exclusive original or appellate jurisdiction to review by appeal the following:
(1) Decisions of the CIR in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters
arising under the NIRC or other laws administered by the BIR;CIR v. CTA, 763 scra
123 (2015)
(2) Inaction by the CIR in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other matters
arising under the NIRC or other laws administered by the BIR, where the NIRC or
other applicable law provides a specific period for action:
Provided, that in case of disputed assessments, the inaction of the CIR within the
180 day-period shall be deemed a denial for purposes of allowing the TP to appeal
his case to the Court and does not necessarily constitute a formal decision of the CIR
on the tax case; Provided, further, that should the TP opt to await the final decision
of the CIR on the disputed assessments beyond the 180 day-period , the TP may
appeal such final decision to the Court under Sec. 3(a), Rule 8 of these Rules; and
Provided, still further, that in the case of claims for refund of taxes erroneously or
illegally collected, the TP must file a petition for review with the Court prior to the
expiration of the 2-year period under Sec. 229 of the NIRC;
(3) Decisions, resolutions or orders of the RTCs in local tax cases decided or
resolved by them in the exercise of their original jurisdiction; Mitsubishi Motors v.
BoXm 759 AXE 306 2015)
(4) Decisions of the CoC in cases involving liability for customs duties, fees or other
money charges, seizure, detention or release of property affected, fines, forfeitures
of other penalties in relation thereto, or other matters arising under the Customs
Law or other laws administered by the Bureau of Customs;
(5) Decisions of the Sec. of Finance on customs cases elevated for automatic
review from decisions of the CoC adverse to the Govt under Section 2315 of the
CMTA; and
(6) Decisions of the Sec. of Trade and Industry, in the case of nonagricultural
product, commodity or article, and the Sec. of Agriculture, in the case of agricultural
product, commodity or article, involving dumping and countervailing duties under
SecS. 301 and 302, respectively, of the CMTA, and safeguard measures under RA
8800, where either party may appeal the decision to impose or not to impose said
duties;
 With the passage of RA 9282, the authority to
exercise either original or appellate jurisdiction
over local tax cases dependent on the amount of
the claim. CBC v. City Treasurer of Manila, 761
SCRA 238 (2015)
 The CTA did not err in its ruling that it has
jurisdiction over cases asking for the cancellation
and withdrawal of a warrant of distraint and/or
levy as provided under Sec. 7(a)(2) of RA 9282.
CIR v. BPI, G.R. 224327. June 11, 2018, Peralta, J.
(b) Exclusive jurisdiction over cases involving criminal offenses,
to wit:
(1) Original jurisdiction over all criminal offenses arising from
violations of the NIRC or the CMTA and other laws administered by
the BIR or the BOC, where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is P1 Million or more;
and
(2) Appellate jurisdiction over appeals from the judgments,
resolutions or orders of the RTCs in their original jurisdiction in
criminal offenses arising from violations of the NIRC or the CMTA
and other laws administered by the BIR or the BOC, where the
principal amount of taxes and fees, exclusive of charges and
penalties, claimed is less than P1 Million or where there is no
specified amount claimed
Exclusive jurisdiction over tax collections cases, to wit:
(1) Original jurisdiction in tax collection cases involving
final and executory assessments for taxes, fees,
charges and penalties, where the principal amount of
taxes and fees, exclusive of charges and penalties,
claimed is P1 million or more; and
(2) Appellate jurisdiction over appeals from the
judgments, resolutions or orders of the RTCs in tax
collection cases originally decided by them within their
respective territorial jurisdiction.
Rule 4, Sec. 3, RRCTA
 The CTA is a highly specialized body specifically
created for the purpose of reviewing tax cases,
hence, its findings of fact are to be accorded
utmost respect. M/V Don Martin Voy 047 v. Sec. of
Finance, 762 SCRA 607 (2015)
 CIVIL ACTIONS
 Any party adversely affected by a decision, ruling or
inaction of the CIR may file an appeal with the CTA
within 30 days after the receipt of such decision or
ruling or after the expiration of the period fixed by
law for action as referred to in Sec. 7(a)(2)4, RA 1125..
 Appeal shall be made by filing a petition for review
under a procedure analogous to that provided for
under Rule 42 of the 1997 Rules of Civil Procedure with
the CTA within 30 days from the receipt of the
decision or ruling or in the case of inaction as herein
provided, from the expiration of the period fixed by
law to act thereon. Sec. 11, RA 1125
 Sec. 11 of RA 1125, as amended by RA 9282, embodies the rule
that an appeal to the CTA from the decision of the CIR will NOT
suspend the payment, levy, distraint, and/or sale of any property
of the taxpayer for the satisfaction of his tax liability as provided
by existing law. Pacquiao v. CTA, First Div., 789 SCRA 19 (2016)
 But CTA may order the suspension of the collection of taxes
provided that the taxpayer either (1) deposits the amount
claimed; or (2) files a surety bond for not more than double
the amount.
 The req of the bond as a condition precedent to suspension of
the collection applies only in cases where the processes by
which the collection sought to be made by means thereof are
carried out in consonance with the law, not when the
processes are in plain violation of the law that they have to be
suspended for jeopardizing the interests of the taxpayer.
Tridharma v. CTA 2nd Div., 794 SCRA 126 (2016)
 EXCEPTION: The determination of whether the
methods employed by the CIR in its assessment
jeopardized the interests of a taxpayer for being
patently in violation of the law is a question of fact
that calls for the reception of evidence which would
serve as basis.
 In the conduct of its preliminary hearing, the CTA
must balance the scale between the inherent power
of the State to tax and its right to prosecute perceived
transgressors of the law, on one side, and the
constitutional rights of petitioners to due process of
law and the equal protection of the laws, on the other.
Pacquiao v. CTA, First Div., 789 SCRA 19 (2016)
 CRIMINAL ACTIONS
 The necessary component of the Executive's power to
faithfully execute the laws of the land is the State's self-
preserving power to prosecute violators of its penal laws.
 This responsibility is primarily lodged with the DOJ, as the
principal law agency of the government.
 The prosecutor has the discretionary authority to determine
whether facts and circumstances exist meriting reasonable
belief that a person has committed a crime.
 The question of whether or not to dismiss a criminal complaint
is necessarily dependent on the sound discretion of the
investigating prosecutor and, ultimately, of the Secretary (or
Undersecretary acting for the Secretary) of Justice.
 Who to charge with what crime or none at all is basically the
prosecutor's call.
 In cases within the jurisdiction of the Court, the criminal
action and the corresponding civil action for the recovery
of civil liability for taxes and penalties shall be deemed
jointly instituted in the same proceeding.
 The filing of the criminal action shall necessarily carry
with it the filing of the civil action.
 No right to reserve the filing of such civil action
separately from the criminal action shall be allowed or
recognized.
 It is well-settled that the taxpayer's obligation to pay the
tax is an obligation that is created by law and does not
arise from the offense of tax evasion, as such, the same is
not deemed instituted in the criminal case.
 46 Proton Pilipinas Corp. v. Republic of the Phils., 535 Phil.
521, 533 (2006).
 For cases before the CT A, a decision rendered by a division of the CT A is appealable to
the CT A En Banc as provided by Section 18 of R.A. No. 1125, as amended by R.A. No.
9282. It reads as follows:
 SEC. 18. Appeal to the CTA En Banc. -No civil proceeding involving matter arising under
the NIRC, the CMTA or the LGC shall be maintained, except as herein provided, until and
unless an appeal has been previously filed with the CTA and disposed of in accordance
with the provisions of this Act.
 A party adversely affected by a resolution of a Division of the CT A on a motion for
reconsideration or new trial, may file a petition for review with the CTA En Banc.
 Section 2 of Rule 4 of the RRCCTA also states that the CT A En Banc has exclusive
appellate jurisdiction relative to the review of the court divisions' decisions or
resolutions on motion for reconsideration or new trial, in cases arising from
administrative agencies such as the BIR.
 SEC. 2. Cases within the jurisdiction of' the Court En Banc. -The Court En Banc shall
exercise exclusive appellate jurisdiction to review by appeal the following:
 (a) Decisions or resolutions on motions for reconsideration or new trial of the Court in
Divisions in the exercise of its exclusive appellate jurisdiction over:
 ( 1) Cases arising from administrative agencies Bureau of lnternal Revenue, Bureau of
Customs. BIR v. Ernesto Acosta, GR 195320. April 23, 2018, REYES, JR., J.
 Under Sec. 3, Rule 14 of the Rev. rules of the CTA,
an amended decision is issued when there is any
action modifying or reversing a decision of the CTA
en Banc or in Division. CE Luzon v. CIR, 768 SCRA
269 (2015)
 No. The jurisdiction of the CTA is not limited only to cases
which involve decisions or inactions of the CIR on matters
relating to assessments or refunds but also includes other
cases arising from the NIRC or related laws administered
by the BIR.
 The issue on whether the RO who had conducted the
examination on Lancaster exceeded their authority
pursuant to the LOA may be considered as covered by the
terms "other matters" under Sec. 7, R.A. 1125, as
amended.
 The authority to make an examination or assessment,
being a matter provided for by the NIRC, is well within
the exclusive and appellate jurisdiction of the CTA. CIR v.
Lancaster Phils, GR 183408, July 12, 2017 [Per J. Martires,
Second Div.]
 Yes. Under Section 1, Rule 14, RRCTA, the CT A is not
bound by the issues specifically raised by the parties
but may also rule upon related issues necessary to
achieve an orderly disposition of the case.
 The CTA Division was, therefore, well within its
authority to consider in its decision the question on
the scope of authority of the ROs who were named in
the LOA even though the parties had not raised the
same in their pleadings or memoranda.
 The CTA En Banc was likewise correct in sustaining
the CTA Division's view concerning such matter.
 No. The assessment is void since the ROs acted in excess or
outside of the authority granted to them under the LOA.
 A valid LOA does not necessarily clothe validity to an
assessment issued on it, as when the ROs designated in the
LOA act in excess or outside of the authority granted them
under said LOA, i.e. the LOA covered a taxable period
EXCEEDING ONE TAXABLE YEAR.
 The taxable year covered by the assessment being outside of
the period specified in the LOA, the assessment issued
against Lancaster is, therefore, void.
 This point alone would have sufficed to invalidate the
subject deficiency income tax assessment, thus, obviating
any further necessity to resolve the issue on whether
Lancaster erroneously claimed the expenses as deductions
against income for FY 1999.
 Sec. 19 of RA 1125, as amended, provides that
parties adversely affected by a decision or ruling of
the CTA En Banc may file before the SC a verified
peition for review on certiorari pursuant to Rule 45
of the 1997 Rules of Civil Procedure. Silicon v. CIR,
785 SCRA 361 (2016)
 Good Luck,
Pray hard…..Study hard
and
May God Bless all of you!