+
AMDG
… CDC imposed on Chevron a royalty fee of P0.50 per liter on fuel deliveries made
to customers inside the CSEZ. Chevron protested stating that the imposition is a
tax which CDC has no power to impose.
??? Is the royalty fee a tax or a regulatory measure?
!!! It is a REGULATORY FEE. The royalty fee was deemed imposed primarily for
regulatory purposes and not for generation of income which is the primary feature
of a tax levy. The Court mentioned that the oil industry is “greatly imbued with
public interest” and that the highly combustible product “poses serious threat to
life and property”. It also upheld the reasonable relation between the fee and the
regulation sought to be attained given the high volume of fuel entering the CSEZ
and the fact that the increasing administrative costs were triggered by security
risks arising from possible terrorist strikes. Thus, CDC was authorized to impose
the fee.
+
AMDG
… Petitioner is a non-stock, non-profit educational foundation. It received a
Building Permit Fee assessment for the construction of the AUF Medical Center
but claimed exemption from the same as well as from other permits and fees by
virtue of Republic Act 6055. Respondent disputed the claimed exemption by
stating that the impositions are regulatory in nature and not taxes from which
Petitioner is exempt under the said law.
??? Is the building permit fee a tax from which Petitioner is exempt?
!!! It is a REGULATORY FEE. The DPWH has in fact issued implementing rules which
provide the bases for the assessment of fees and Petitioner has failed to show that
they were arbitrarily determined or unrelated to the activity being regulated.
Neither has there been proof that the fee was unreasonable or in excess of the
cost of regulation or inspection. The Court added that even if there was incidental
revenue, the same is deemed not to change the nature of the charge. Thus, the
City of Angeles was justified in its assessment.
+
AMDG
… Shell filed a claim for refund for excise taxes it paid on sales of gas and fuel oils
to various international carriers.
??? Is Shell entitled to refund the excise taxes given the earlier decisions in the
Silkair and Exxonmobil cases?
!!! NO. Excise tax on manufactured petroleum products are paid upon withdrawal
of the goods. Thus, the excise tax payments made by Shell can not be considered
as having been an “erroneous or illegal tax”. The Court also pointed out that the
only provision which allows refunds of excise taxes paid is that which relate to
goods actually exported.
Section 135 of the Tax Code which provides exemption from excise tax on
petroleum products sold to international carriers is construed as prohibiting the
manufacturers-sellers from passing on the tax to the carriers by incorporating the
excise tax into the selling price or effectively shifting the tax burden. This is
consistent with the ruling in the Philippine Acetylene case which stated that the
“tax exemption being enjoyed by the buyer cannot be the basis of a claim for tax
exemption by the manufacturer”.
+
AMDG
… BOCEA questions R.A. 9335 (Attrition Act of 2005) and states that the law
violates their rights to (1) due process; (2) equal protection of the laws; and (3)
security of tenure. They likewise claim that the same is an undue delegation of
legislative power and is a bill of attainder.
??? Is the law unconstitutional?
!!! NO.
(1) Given the clear parameters on revenue targets, rewards, removal levels, etc.,
R.A. 9335 is complete in all its essential terms and conditions and contains
sufficient standards that negate a claim of undue delegation.
(2) BOC and BIR are both revenue-generating agencies that are both under the
DOF. Such substantial distinction Is germane and related to the purpose of the
law.
(3) The law does not deny the BOC employees their right to be heard and they still
can not be arbitrarily removed.
(4) It is not a bill of attainder as the same does not seek to punish without a
judicial trial as all it does is lays down the grounds for possible termination.
+
AMDG
… R.A. 8240 took effect on January 1, 1997 and a shift from ad valorem to specific
taxes on cigarettes was implemented. The amending law separately provided that
(i) the specific tax due from any brand of cigarette within the next 3 years (i.e., the
transition period) shall not be lower than the tax due before the new law and (2)
the rates of specific tax shall be increased by 12% on January 1, 2000. The BIR
then issued RR 17-99 to implement the law increasing the rate and substantially
echoed R.A. 8240 except that it additionally stipulated that the specific tax to be
paid shall not be lower than the tax actually paid before January 1, 2000. The CIR,
in defending the RR, opined that “the adoption of the “higher tax rule” during the
transition period shows the intent of Congress not to lessen the excise tax
collection”.
??? Is RR 17-99 valid to the extent that it carries the “higher tax rule” for the
January 1, 2000 increase?
+
AMDG
!!! NO. The “higher tax rule” clearly only applies to the transition period. As such,
the RR was deemed an invalid act of administrative legislation. The CIR can not
state that the sole purpose for the shift to specific tax was to increase revenue
since there were other reasons for the same such as to curb corruption, simplify
tax administration, etc. Likewise, the rule of uniformity was deemed violated since
brands belonging to the same category would be imposed with different tax rates
if the “higher tax rule” were to be implemented. Finally, the Court pointed out
that the rule of strictly interpreting tax exemption laws will not apply to the instant
tax refund since the refund of the Petitioner is not premised on legislative grace
but on the principle of solution indebiti given that the government is put in a
position to unjustly enrich itself due to a mistake in law.
+
AMDG
!!!
Serves as a learning institution for tax collectors and
administrators of the government and selected applicants from the
private sector.
!!!
It shall handle all trainings, continuing education programs and
other courses for all officials and personnel of the BIR, BOC, and BLGF. All
existing officials and personnel of the said agencies shall be required to
undergo the re-tooling and enhancement seminars and training programs.
!!!
The Board of Trustees will be composed of representatives from
the DOF (ex officio Chairman), BIR, BOC, BLGF, and 3 representatives from
the academe with at least 5 years of teaching experience. The first 3 will
be Presidential appointees.
+
AMDG
??? Is Republic Act 9337 constitutional insofar as it excluded PAGCOR from the
enumeration of GOCCs exempt from the payment of corporate income tax?
!!! YES. The original exemption of PAGCOR from corporate income tax was not
made pursuant to a valid classification based on substantial distinctions so that
the law may operate only on some and not on all. Instead, the same was merely
granted due to the acquiescence of the House Committee on Ways and Means to
the request of PAGCOR.
The argument that the withdrawal of the exemption also violates the nonimpairment clause will not hold since any franchise is subject to amendment,
alteration or repeal by Congress.
However, the Court made it clear that PAGCOR remains exempt from payment of
indirect taxes and as such its purchases remain not subject to VAT, reiterating the
rule laid down in the Acesite case.
+
AMDG
… Petitioner was assessed for deficiency withholding taxes on interest from
savings and time deposits of its members. The CTA ruled against the Petitioner and
said that the withholding of tax on income payments subject to final withholding
tax includes the said interest as "interest from x x x similar arrangements . . ." .
??? Is Petitioner liable for the deficiency WT?
!!! NO. The BIR had earlier ruled without any qualification that since interest from
any Philippine currency bank deposit and yield or any other monetary benefit
from deposit substitutes are paid by banks, other entities such as cooperatives are
not required to withhold the corresponding tax on the interest from savings and
time deposits of their members. The fact that “similar arrangements” is preceded
by banking terms means that that those subject to withholding must have deposit
peculiarities. This is also consistent with the preferential treatment accorded to
members of cooperatives who are exempt in the same way as the cooperatives
themselves.
+
AMDG
… Filinvest Development Corporation extended advances in favor of its affiliates
and supported the same with instructional letters and cash and journal vouchers.
The BIR assessed Filinvest for deficiency income tax by unilaterally imputing an
“arm’s length” interest rate on its advances to affiliates. Filinvest disputed this by
saying that the CIR lacks the authority to impute theoretical interest and that the
rule is that interests cannot be demanded in the absence of a stipulation to that
effect.
??? Can the CIR unilaterally impute theoretical interest on the advances made by
Filinvest to its affiliates?
!!! NO. Despite the seemingly broad power of the CIR to distribute, apportion and
allocate gross income under (now) Section 50 of the Tax Code, the same does not
include the power to impute theoretical interests even with regard to controlled
taxpayers’ transactions. This is true even if the CIR is able to prove that interest
expense (on FDC’s own loans) was in fact claimed by FDC.
+
AMDG
The term in the definition of gross income that even those income “from whatever
source derived” is covered still requires that there must be actual or at least
probable receipt or realization of the item of gross income sought to be
apportioned, distributed, or allocated. Finally, the rule under the Civil Code that
“no interest shall be due unless expressly stipulated in writing” was also applied in
this case.
The Court also ruled that the instructional letters, cash and journal vouchers
qualify as loan agreements that are subject to DST.
+
AMDG
… CREBA assails the imposition of the minimum corporate income tax (MCIT) as
being violative of the due process clause as it levies income tax even if there is no
realized gain. They also question the creditable withholding tax (CWT) on sales of
real properties classified as ordinary assets stating that (1) they ignore the
different treatment of ordinary assets and capital assets; (2) the use of gross
selling price or fair market value as basis for the CWT and the collection of tax on a
per transaction basis (and not on the net income at the end of the year) are
inconsistent with the tax on ordinary real properties; (3) the government collects
income tax even when the net income has not yet been determined; and (4) the
CWT is being levied upon real estate enterprises but not on other enterprises,
more particularly those in the manufacturing sector.
??? Are the impositions of the MCIT on domestic corporations and CWT on income
from sales of real properties classified as ordinary assets unconstitutional?
+
AMDG
!!! NO. MCIT does not tax capital but only taxes income as shown by the fact that
the MCIT is arrived at by deducting the capital spent by a corporation in the sale of
its goods, i.e., the cost of goods and other direct expenses from gross sales.
Besides, there are sufficient safeguards that exist for the MCIT: (1) it is only
imposed on the 4th year of operations; (2) the law allows the carry forward of any
excess MCIT paid over the normal income tax; and (3) the Secretary of Finance can
suspend the imposition of MCIT in justifiable instances.
The regulations on CWT did not shift the tax base of a real estate business’ income
tax from net income to GSP or FMV of the property sold since the taxes withheld
are in the nature of advance tax payments and they are thus just installments on
the annual tax which may be due at the end of the taxable year. As such the tax
base for the sale of real property classified as ordinary assets remains to be the
net taxable income and the use of the GSP or FMV is because these are the only
factors reasonably known to the buyer, at the time of sale, in connection with the
performance of his duties as a withholding agent. The use of the GSP/FMV as basis
to determine the withholding taxes is evidently for purposes of practicality and
convenience.
Neither is there violation of equal protection even if the CWT is levied only on the
real industry as the real estate industry is, by itself, a class on its own and can be
validly treated differently from other businesses.
+
AMDG
… Mercury Drug granted 20% sales discount to qualified senior citizens on their
purchases of medicines. They subsequently filed a refund for taxable years 1993
and 1994 given that the then prevailing rule allowed that the sales discounts be
claimed as tax credits.
??? Is the claim for tax credit to be based on the full amount of the 20% senior
citizen discount or the acquisition cost of the item sold?
!!! The tax credit should be equivalent to the actual 20% sales discount granted to
the senior citizens. The previous ruling of the CTA that the tax credit is based only
on the “cost of the discount” which was interpreted to cover only direct
acquisition cost, excluding administrative and other incremental costs, was struck
down by the Court.
Note: The case of M.E. Holdings Corporation vs. CIR & CTA clarified that the rule
will be -- (i) prior to March 21, 2004 (effectivity of Expanded Senior Citizens Act)
the discounts are treated as tax credit; (ii) after March 21, 2004 the same are
+
treated as deductions.
AMDG
… Far East Bank filed a claim for refund of overpaid creditable withholding taxes
which included CWT on rental income allegedly earned by the Petitioner as lessor.
??? Can a claim for refund be granted notwithstanding claimant’s failure to show in
the return that that income upon which the creditable taxes withheld were based
was in fact reported?
!!! NO. The 3 essential requirements for a claim for refund of this nature to
prosper are (1) filing the same within the 2-year period; (2) establishing the fact of
withholding with copies of the CWT certificates; and (3) showing that the income
received was declared as part of gross income. Here the Petitioner failed to prove
(3) as the return in fact showed “Not Applicable” under the portion referring to
Rental Income. In addition, some certificates were likewise not submitted as
evidence.
+
AMDG
… Asiaworld filed its 2001 ITR stating that a portion of the amount representing
Prior Year’s Excess Credits was the 1999 excess creditable withholding tax which it
is now seeking to refund. The said 1999 excess payment was previously treated as
having been carried over to 2000. Asiaworld posits its claim on the portion of the
provision which states that the “such option shall be considered irrevocable for
that taxable period” in that the same refers to only a one-year prohibition for the
action of the claim for refund.
??? Is the irrevocability rule under Section 76 of the Tax Code only applicable to the
next taxable year which in this case was the year 2000?
!!! NO. The option to carry-over is not limited to the following taxable year of
2000 but will apply to the succeeding taxable years until the whole amount of the
1999 creditable withholding tax overpayment is fully utilized.
+
AMDG
… Smart entered into an Agreement with Prism, a nonresident foreign corporation
domiciled in Malaysia, whereby Prism will provide programming and consultancy
services to Smart. Thinking that the payments to Prism were royalties, Smart
withheld 25% under the RP-Malaysia Tax Treaty. Smart then filed a refund with the
BIR alleging that the payments were not subject to Philippine withholding taxes
given that they constituted business profits paid to an entity without a permanent
establishment in the Philippines.
??? Does Smart have the right to file the claim for refund?
!!! YES. The Court reiterated the ruling in Procter & Gamble stating that a person
“liable for tax” has sufficient legal interest to bring a suit for refund of taxes he
believes were illegally collected from him. Since the withholding agent is an agent
of the beneficial owner of the payments (i.e., nonresident), the authority as agent
is held to include the filing of a claim for refund. The Silkair case was held
inapplicable as it involved excise taxes and not withholding taxes.
+
AMDG
Smart was granted a refund given that only a portion of its payments represented
royalties since it is only that portion over which Prism maintained intellectual
property rights and the rest involved full transfer of proprietary rights to Smart
and were thus treated as business profits of Prism.
+
AMDG
… Supreme Transliner took out a loan from respondent but was unable to pay the
same. The respondent bank extrajudicially foreclosed the collateral and, before
the expiration of the one-year redemption period, the mortgagors notified the
bank of its intention to redeem the property.
??? Is the mortgagee-bank liable to pay the capital gains tax upon the execution of
the certificate of sale and before the expiry of the redemption period?
!!! NO. It is clear that in foreclosure sale there is no actual transfer of the
mortgaged real property until after the expiration of the one-year period and title
is consolidated in the name of the mortgagee in case of non-redemption. This is
because before the period expires there is yet no transfer of title and no profit or
gain is realized by the mortgagor.
Note: Remember that in extrajudicial foreclosures, the mortgagee-bank is the
statutory seller who is liable for the CGT.
+
AMDG
… PAL paid the 10% Overseas Communications Tax (OCT) for overseas telephone
calls made through PLDT. It then later filed with the BIR a claim for refund of the
amount paid as OCT, claiming that other than being liable for basic corporate
income tax or the franchise tax, whichever was lower, it was exempted from all
other taxes by virtue of the "in lieu of all taxes" clause in its charter.
??? Is PAL liable for the OCT?
!!! NO. The language of PAL’s franchise is clearly all-inclusive --- the basic corporate
income tax or franchise tax paid by respondent shall be "in lieu of all other taxes”
except only real property tax. It is not the fact of tax payment that exempts it, but
the exercise of its option. In the event that respondent incurs a net loss, it shall
have zero liability for basic corporate income tax, the lowest possible tax liability.
There being no qualification to the exercise of its options, then Respondent is free
to choose basic corporate income tax, even if it would have zero liability.
+
AMDG
!!! The taxable net income of REITs is the gross income under Section 32 less (a)
the deductions under Section 34 AND (b) dividends distributed by the REIT out of
its distributable income provided it (a) maintains its status as a public company;
(b) maintains the listed status of the investor securities (shares issued by the REIT);
and (c) distributes at least 90% of its distributable income.
* Dividends should be distributed before the last day of the 5th month
after the close of the taxable year
* Public company defined as 1,000 public shareholders owning at least
50 shares each and owning an aggregate of 40% of the capital stock
(increased to 67% from 3 years after listing)
* Failure to observe the above rules will result to disallowance of
dividends as additional deduction (Note: The RR provides a curing period
of 30 days)
+
AMDG
!!! Other tax rules:
•Not subject to the MCIT
•Income payments to REIT are subject to a lower CWT of 1%
•Sale of real property to REITs subject to DST reduction of 50%
•Dividends received by an OFW from the REIT is exempt from the 10% WT for the
first 7 years of the law.
•VAT is imposed on sale of real property by the REIT but not of its securities as it is
not considered a dealer in securities
+
AMDG
!!! The following transactions with senior citizens are exempt from VAT (on top of
the 20% discount):
•
•
•
•
•
•
•
•
Professional fees of physicians, licensed health workers
Purchase of medicines
Medical and dental services and laboratory fees
Fare for any land transportation
Fare for domestic air and sea services
Utilization of hotels and similar lodging establishments
Admission fees on theaters, concert halls, circuses, etc.
Funeral and burial services
+
AMDG
!!! Discounts given by establishments, sellers are still considered as tax deductions
and NOT tax credits
!!! Employment of senior citizens will entitle employer to additional tax deduction
of 15% of total amount paid as salaries and wages to senior citizens provided that
the employment lasts for at least 6 months
!!! Realty tax holiday for the first 5 years is granted to those establishing foster
care facilities
+
AMDG
!!! Local water districts are now exempt from income taxes under Section 27
provided that the amount saved by virtue of the exemption is to be used for
capital equipment expenditure to expand water services coverage
!!! All unpaid taxes starting August 13, 1996 are condoned provided (1) the BIR
establishes financial incapacity of the LWD and (2) the LWD submits to Congress a
program of internal reforms.
+
AMDG
… There were claims against the estate which the BIR contested stating that lower
amounts were paid as compromise payments during the settlement of the estate
and these are amounts that should be considered as deductions in arriving at the
net estate.
??? Will the compromise amounts be the amounts considered as deductions to the
gross estate?
!!! NO. The deductions allowable are the amounts determined at the time of
death. Post-death developments are not material in determining the amount of
deduction. Thus, the Court applied the “date-of-death valuation rule” which is the
US rule on deductions and which is applicable also in the Philippines. The amount
deductible is the debt which could have been enforced against the deceased in his
lifetime.
+
AMDG
… Sony Philippines was ordered examined for “the period 1997 and unverified
prior years” as indicated in the Letter of Authority . The audit yielded assessments
against Sony Philippines for deficiency VAT and FWT, viz: (1) late remittance of
FWT on royalties for the period January to March 1998 and (2) deficiency VAT on
reimbursable received by Sony Philippines from its offshore affiliate, Sony
International Singapore (SIS).
??? (1) Is Petitioner liable for deficiency VAT?
(2) Was the investigation of its 1998 FWT return valid?
!!! (1) NO. Sony Philippines did in fact incur expenses supported by valid VAT
invoices when it paid for certain advertising costs. This is sufficient to accord it the
benefit of input VAT credits and where the money came from to satisfy said
advertising billings is another matter but does not alter the VAT effect. In the same
way, Sony Philippines can not be deemed to have received the reimbursable as a
fee for a VAT-taxable activity.
+
AMDG
The reimbursable was couched as an aid for Sony Philippines by SIS in view of the
company’s “dire or adverse economic conditions”. More importantly, the absence
of a sale, barter or exchange of goods or properties supports the non-VAT nature
of the reimbursement. This was distinguished from the COMASERCO case where
even if there was similarly a reimbursement-on-cost arrangement between
affiliates, there was in fact an underlying service. Here, the advertising services
were rendered in favor of Sony Philippines not SIS.
!!! (2) NO. A Letter of Authority should cover a taxable period not exceeding one
year and to indicate that it covers ‘unverified prior years’ should be enough to
invalidate it. In addition, even if the FWT was covered by Sony Philippines’ fiscal
year ending March 1998, the same fell outside of ‘the period 1997’ and was thus
not validly covered by the LOA.
+
AMDG
??? Are the gross receipts derived by operators or proprietors of cinema/theater
houses from admission tickets subject to VAT?
!!! NO. While (1) the enumeration under Section 108 on the VAT-taxable services
is not exhaustive and (2) the said list includes “the lease of motion picture films,
films, tapes and discs”, the said activity however is not the same as showing or
exhibition of motion pictures or films. Thus, since the showing or exhibition of
motion pictures or films is not in the enumeration, the CIR must show that it falls
under the phrase “similar services”.
The repeal of the Local Tax Code by the LGC of 1991 is not a legal basis for the
imposition of VAT on the gross receipts of cinema/theater operators or proprietors
derived from admission tickets. The removal of the prohibition (on the national
government to tax certain activities) under the Local Tax Code did not grant nor
restore to the national government the power to impose amusement tax on
cinema/theater operators or proprietors. Neither did it expand the coverage of
VAT.
+
AMDG
??? Are toll fees collected by tollway operators subject to VAT?
!!! YES.
(1) VAT is imposed on “all kinds of services” and tollway operators who are
engaged in constructing, maintaining, and operating expressways are no
different from lessors of property, transportation contractors, etc.
(2) Not only do they fall under the broad term under (1) but also come under
those described as “all other franchise grantees” which is not confined only to
legislative franchise grantees since the law does not distinguish. They are also
not a franchise grantee under Section 119 which would have made them
subject to percentage tax and not VAT.
(3) Neither are the services part of the enumeration under Section 109 on VATexempt transactions.
+
AMDG
(4) The toll fee is not a user’s tax and thus it is permissible to impose a VAT on the
said fee. The MIAA case does not apply and the Court emphasized that toll fees
are not taxes since they are not assessed by the BIR and do not go the general
coffers of the government. Toll fees are collected by private operators as
reimbursement for their costs and expenses with a view to a profit while taxes are
imposed by the government as an attribute of its sovereignty. Even if the toll fees
were treated as user’s tax, the VAT can not be deemed as a ‘tax on tax’ since the
VAT is imposed on the tollway operator and the fact that it might pass-on the
same to the tollway user, it will not make the latter directly liable for VAT since the
shifted VAT simply becomes part of the cost to use the tollways.
(5) The assertion that the VAT imposed is not administratively feasible given the
manner by which the BIR intends to implement the VAT (i.e., rounding off the toll
rates and putting any excess collection in an escrow account) is not enough to
invalidate the law. Non-observance of the canon of administrative feasibility will
not render a tax imposition invalid “except to the extent that specific
constitutional or statutory limitations are impaired”.
+
AMDG
… Petitioner was assessed for deficiency VAT and DST on the premise that, for the
VAT, it was engaged in the sale of services.
??? (1) Is Petitioner liable for the VAT?
(2) Can the imposition of surcharge and interest be waived on the imposition of
deficiency DST?
!!! (1) NO. Since Petitioner is considered a non-bank financial intermediary, it is
subject to 10% VAT for the tax years 1996 to 2002 but since the collection of VAT
from non-bank financial intermediaries was specifically deferred by law for that
period, Petitioner is not liable for VAT during these tax years. With the full
implementation of the VAT system on non-bank financial intermediaries starting
January 1, 2003, Petitioner is liable for 10% VAT for said tax year. Beginning 2004
up to the present, by virtue of R.A. No. 9238, Petitioner is no longer liable for VAT
but it is subject to percentage tax on gross receipts from 0% to 5%, as the case
may be.
+
AMDG
!!! (2) YES. Petitioner's argument against liability for surcharges and interest —
that it was in good faith in not paying documentary stamp taxes, it having relied
on the rulings of respondent CIR and the CTA that pawn tickets are not subject to
documentary stamp taxes — was found to be meritorious. Good faith and honest
belief that one is not subject to tax on the basis of previous interpretations of
government agencies tasked to implement the tax law are sufficient justification to
delete the imposition of surcharges and interest.
+
AMDG
… Petitioner was engaged by DPWH for the construction of roads and bridges. In
turn, LVM subcontracted construction of one of the projects to Respondent’s Joint
Venture. After completing the project, the Joint Venture demanded full payment
to which Petitioner responded that they discovered that no deductions for EVAT
were made on previous payments and as such they were going to deduct 8.5%
from the payments still due. Respondent disputed this and said that all the
receipts issued to Petitioner would have made them (Respondent) subject to VAT
and, consequently, Petitioner can thus claim the input tax thereon.
??? Can Petitioner rightfully deduct the amount representing withholding VAT due
on its transaction with the DPWH?
!!! NO. As the entity which dealt directly with the government insofar as the main
contract was concerned, LVM was itself required by law to pay the 8.5% (now 5%)
VAT which was withheld by DPWH. Given that (1) the Joint Venture complied with
their own obligation when they paid their VAT from their own gross receipts and
+
AMDG
(2) the fact that the contract between LVM and Joint Venture did not stipulate any
obligation on LVM assuming the VAT, LVM has no basis to withhold payments .
Although the burden to pay an indirect tax like the VAT can be passed on, the
liability to pay the same remains with the seller. In this case, both LVM and Joint
Venture are liable for their respective VAT obligations as respective sellers.
+
AMDG
… Kepco filed a claim for refund of unutilized input VAT based on its zero-rated
sale of power to NPC. A substantial portion of the claim was disallowed for having
been supported by VAT invoices which only had the TIN-VAT stamped and not
printed. There were also certain sales by Kepco which failed to indicate the words
“zero-rated”. Lastly, they also alleged that invoices and receipts are
interchangeable and either should suffice as proof of purchase and consequently
as support for a claim for refund.
??? Is Petitioner entitled to the claim for refund on the disallowed portion?
!!! NO. The requirement that the TIN be imprinted and not merely stamped is a
reasonable requirement imposed by the BIR. More importantly, the requirement
of the appearance of the words “zero-rated” on the face of the invoice prevents
buyers from falsely claiming input VAT from their purchases when no VAT was
actually paid. The failure to adhere to the said rules will not only expose the
taxpayer to penalties but should also serve to disallow the claim. Finally, the Court
disagreed with the position that invoices and receipts are interchangeable since
the former clearly refers to sales of goods while the latter to services.
+
AMDG
… Petitioner was a real estate developer that bought from the national
government a parcel of land that used to be the Fort Bonifacio military
reservation. At the time of the said sale there was as yet no VAT imposed so
Petitioner did not pay any VAT on its purchase. Subsequently, Petitioner sold two
parcels of land to Metro Pacific Corp. In reporting the said sale for VAT purposes
(because the VAT had already been imposed in the interim), Petitioner claimed
transitional input VAT corresponding to its inventory of land. The BIR disallowed
the claim of presumptive input VAT and thereby assessed Petitioner for deficiency
VAT.
??? Is Petitioner entitled to claim the transitional input VAT on its sale of real
properties given its nature as a real estate dealer and if so (i) is the transitional
input VAT applied only to the improvements on the real property or is it applied on
the value of the entire real property and (ii) should there have been a previous tax
payment for the transitional input VAT to be creditable?
+
AMDG
!!! YES. Petitioner is entitled to claim transitional input VAT based on the value of
not only the improvements but on the value of the entire real property and
regardless of whether there was in fact actual payment on the purchase of the
real property or not.
The amendments to the VAT law do not show any intention to make those in the
real estate business subject to a different treatment from those engaged in the
sale of other goods or properties or in any other commercial trade or business. On
the scope of the basis for determining the available transitional input VAT, the CIR
has no power to limit the meaning and coverage of the term "goods" in Section
105 of the Tax Code without statutory authority or basis. The transitional input tax
credit operates to benefit newly VAT-registered persons, whether or not they
previously paid taxes in the acquisition of their beginning inventory of goods,
materials and supplies.
+
AMDG
… An investigation was conducted against LMCEC for taxable years 1997 to 1999.
The assessments that came out of the said investigation was disputed by the
taxpayers on the grounds that (i) the assessment notices issued were invalid for
not bearing serial numbers and (ii) the examinations made on the books of
accounts and other records were done more than once in the relevant taxable
years.
??? Are the assessments invalid?
!!! NO. The formality of a control number in the assessment notice is not a
requirement for its validity but rather it is the contents which should inform the
taxpayer of the deficiency and which should contain the facts and the laws on the
which the assessment is based. Likewise, this case is an exception to the general
rule of having the books examined only once in a year. Section 235 of the Tax
Code allows the multiple examinations when (a) there is fraud or irregularity; (b)
the taxpayer requests for reinvestigation; (c) there is a required verification of
compliance with withholding taxes and capital gains tax liabilities.
+
AMDG
??? Whether a taxpayer, by paying the other tax assessments covered by a Waiver
of the Statute of Limitations, is consider estopped from questioning the validity of
the said waiver (on the basis that the CIR did not sign it) with respect to the other
covered but unsettled assessments?
!!! YES. RCBC is considered estopped through its partial payment of the revised
assessments within the extended period provided in the said waivers. Thus, it had
impliedly admitted the validity of the said waivers. Had it believed that the waiver
was invalid and that the period to assess had effectively prescribed, RCBC could
have refused to make any payment based on any assessment against it.
+
AMDG
… Metro Star Superama was audited for taxable year 1999 and received a
Preliminary 15-day Letter on November 15, 2001. On April 11, 2002, it received a
Formal Letter of Demand dated April 3, 2002. Denying that it received a PAN and
thus not accorded due process, Metro Star Superama filed a Petition with the CTA.
??? Was the Petitioner accorded the required due process?
!!! NO. Since the Petitioner denied receipt of the PAN, the burden of proving the
same shifts to the BIR. To raise the presumption of receipt, it must be shown that
(a) the letter was properly addressed with postage prepaid and (b) that it was
mailed. If receipt is denied, the BIR must then show actual receipt through
presentation of the registry receipt or, if the same cannot be located, at least a
certification from the Bureau of Posts.
The Court likewise added that the issuance of a PAN is a mandatory requirement
save only on specified instances. The old rule laid down in CIR vs. Menguito that
only the FAN is mandatory no longer applies since the same was ruled upon based
on the old provision.
+
AMDG
… Fluor Daniel was initially assessed for deficiency EWT on its software
maintenance fees paid to an offshore affiliate. In response to Petitioner’s protest,
the CIR issued a Final Decision on Disputed Assessment (FDDA) cancelling the
deficiency EWT assessment but issuing an assessment for FWT on the same
software fees albeit using a lower 15% rate under the RP-US Tax Treaty.
??? Was the Petitioner deprived of due process when the FDDA changed the
assessment from deficiency EWT to deficiency FWT?
!!! YES. The change of the assessment in the FDDA itself constituted a new
assessment. As such, the taxpayer should have been given the chance to dispute
the same via the process laid down in the Tax Code which is by way of filing a
protest. Given that this was not complied with as what was issued was already an
FDDA, the circumstances certainly deprived the Petitioner of a reasonable
opportunity to be heard and submit evidence in support of its defense which is a
clear violation of due process requirements.
+
AMDG
… The BIR assessed Enron which countered by filing a Petition for Review with the
CTA stating that the assessment disregarded the provisions of the Tax Code and of
RR No. 12-99, when the assessment failed to provide the legal and factual bases of
the assessment. The CTA and CA ruled that the assessment notice must not only
refer to the supporting revenue laws or regulations for the assessment but must
also justify their applicability to the factual milieu of the assessment.
??? Is the disputed assessment valid?
!!! NO. The assessment is not valid. Although the revenue examiners discussed
their findings with Respondent’s representative during the pre-assessment stage,
the same, together with the Preliminary Five-Day Letter and Petitioner’s Annex G,
were not sufficient to comply with the procedural requirement of due process.
The Tax Code provides that a taxpayer shall be informed (and not merely
“notified” as was the requirement before) in writing of the law and the facts on
which the assessment is made; otherwise, the assessment shall be void. The use
of the word “shall” indicates the mandatory nature of the requirement.
+
AMDG
… CIR issued assessment notices against Respondent for deficiency income tax,
VAT and documentary stamp tax on deposit on subscription and on pawn tickets.
Respondent filed its written protest on the assessments. When the CIR did not act
on the protest during the 180-day period (reckoned from the filing of the protest),
respondent filed a petition before the CTA.
??? Has the assessment become final and unappealable given that no supporting
documents were submitted during the 60-day period?
!!! NO. The assessment against Respondent has not become final and
unappealable. It cannot be said that respondent failed to submit relevant
supporting documents that would render the assessment final because when
Respondent submitted its protest, Respondent attached all the documents it felt
were necessary to support its claim. Further, CIR cannot insist on the submission
of proof of DST payment because such document does not exist as Respondent
claims that it is not liable to pay (and in fact has not paid) the DST on the deposit
on subscription.
+
AMDG
!!! The term "relevant supporting documents" are those documents necessary to
support the legal basis in disputing a tax assessment as determined by the
taxpayer. The BIR can only inform the taxpayer to submit additional documents
and cannot demand what type of supporting documents should be submitted.
Otherwise, a taxpayer will be at the mercy of the BIR, which may require the
production of documents that a taxpayer cannot submit. Since the taxpayer is
deemed to have submitted all supporting documents at the time of filing of its
protest, the 180-day period likewise started to run on that same date.
+
AMDG
… Lascona Land appealed a decision by the CIR holding that the assessment
against it has become final and executory for failure to appeal to the CTA within 30
days from the lapse of the 180-day period provided for under the Tax Code.
??? In cases of inaction on disputed assessments, can the taxpayer still file an
appeal with the CTA even after the lapse of the 180-day period?
!!! YES. In case the CIR fails to act on a disputed assessment within the 180-day
period from the submission of documents, the taxpayer can either (a) file an
appeal with the CTA within 30 days after the expiry of the 180-day period or (b)
await the final decision of the CIR and then appeal the same within 30 days.
These options are mutually exclusive and resort to one bars the application of the
other. A taxpayer can not be prejudiced if he chooses to wait for the final decision
of the CIR as this is the normal expectation when a protest is filed. Thus, an appeal
filed within the 30-day period from the receipt of the decision, even if made after
the 180-day period, is still considered as having been filed on time.
+
AMDG
… Allied Banking Corporation received a PAN from the BIR which it timely
disputed. In response, the BIR issued a Formal Letter of Demand with Assessment
Notices. Instead of protesting the FAN, the petitioner filed a Petition for Review
with the CTA. The CTA dismissed the Petition stating that it is neither the
assessment nor the formal demand letter itself that is appealable before it but
instead it should be the decision of the CIR on the disputed assessment.
??? Can the Formal Letter of Demand be construed as the final decision of the CIR
appealable to the CTA under Republic Act 9282?
+
AMDG
!!! YES. This is considered an exception to the general rule on exhaustion of
administrative remedies since the CIR is considered estopped from claiming the
same principle applies in its case. The tenor of the demand letter is clear that the
CIR had already made a final decision and that the remedy of the Petitioner was to
appeal the same within 30 days of receipt. This can be gleaned from the use of the
terms “final decision” and “appeal” which were deemed unequivocal language
pointing to the finality of the decision. While the Court cited the rules relative to
(a) protesting the FAN and not the PAN and (b) counting the 30 day period to
appeal to the CTA from receipt of the decision of the CIR and not issuance of the
assessment, this particular case was deemed a clear exception in view of the CIR’s
own actions.
+
AMDG
… The assessment against Hambrecht & Quist had become final and unappelable
since there was a failure to protest the same within the 30-day period provided by
law. However, the CTA held that the BIR failed to collect within the prescribed time
and thus ordered the cancellation of the assessment notice. The CIR disputed the
jurisdiction of the CTA arguing that since the assessment had become final and
unappealable, the taxpayer can no longer dispute the correctness of the
assessment even before the CTA.
??? Can the CTA still take cognizance of an assessment case which has become
‘final and unappealable’ for failure of the taxpayer to protest within the 30-day
protest period?
+
AMDG
!!! YES. The appellate jurisdiction of the CTA is not limited to cases which involve
decisions of the CIR on matters relating to assessments or refunds. The CTA law
clearly bestows jurisdiction to the CTA even on “other matters arising under the
National Internal Revenue Code”. Thus, the issue of whether the right of the CIR to
collect has prescribed, collection being one of the duties of the BIR, is considered
covered by the term “other matters”. The fact that assessment has become final
for failure to protest only means that the validity or correctness of the assessment
may no longer be questioned on appeal. However, this issue is entirely distinct
from the issue of whether the right to collect has in fact prescribed.
The Court ruled that the right to collect has indeed prescribed since there was no
proof that the request for reinvestigation was in fact granted/acted upon by the
CIR. Thus, the period to collect was never suspended.
+
AMDG
… Makati City was assessed by the Regional Director of BIR Makati and the latter
sent its FDDA to the taxpayer. Acting on a request by the taxpayer, the case was
reopened for reinvestigation upon approval by the Deputy Commissioner based
on the recommendation by a Revenue Officer.
??? Was the decision of the Regional Director contained in the FDDA the appealable
decision to the CTA?
!!! YES. The subsequent reopening/reinvestigation did not in any way reverse the
finality of the decision by the Regional Director. It is the Commissioner who has
the power to reverse, revoke or modify any existing ruling of the authorized
officers and such power can not be delegated. As such, the reinvestigation
approved by the Deputy Commissioner did not have any effect and as such the
Regional Director’s FDDA became final and ripe for appeal to the CTA.
+
AMDG
??? Is the FDDA issued by the Revenue District Officer (RDO) appealable to the CTA?
!!! NO. The RDO’s decision can not be considered as the CIR’s decision appealable
to the CTA in the absence of any proof that the RDO was authorized to decide and
act on behalf of the CIR on the protest of a taxpayer. This is notwithstanding the
fact that Section 7 of the Tax Code allows the CIR to delegate her vested powers
(except those specifically enumerated as non-delegable) to any subordinate
official with the rank equivalent to a division chief or higher. Lastly, Sections 11
and 13 of the Tax Code which enumerate the duties and authority of the RDO do
not, by themselves, provide that an RDO can issue decisions that are appealable to
the CTA.
Note: The RDO has a rank of Division Chief.
+
AMDG
… A deficiency tax assessment was issued against Petitioners relating to their
payment of capital gains tax and VAT on their sale of shares of stock and parcels of
land. Subsequent to the preliminary conference, the CIR filed with the Department
of Justice her Affidavit of Complaint against Petitioners. The Court of Appeals
ultimately ruled that, in a criminal prosecution for tax evasion, assessment of tax
deficiency is not required because the offense of tax evasion is complete or
consummated when the offender has knowingly and willfully filed a fraudulent
return with intent to evade the tax.
??? (1) Has the CIR issued an assessment?
(2) Must a criminal prosecution for tax evasion be preceded by a deficiency tax
assessment?
(3) Does the CTA have jurisdiction on the case?
+
AMDG
!!! (1) NO. The recommendation letter of the Commissioner cannot be considered
a formal assessment as (a) it was not addressed to the taxpayers; (b) there was no
demand made on the taxpayers to pay the tax liability, nor a period for payment
set therein; (c) the letter was never mailed or sent to the taxpayers by the
Commissioner. It was only an affidavit of the computation of the alleged liabilities
and thus merely served as prima facie basis for filing a criminal information.
(2) NO. When fraudulent tax returns are involved as in the cases at bar, a
proceeding in court after the collection of such tax may be begun without
assessment considering that upon investigation of the examiners of the BIR, there
was a preliminary finding of gross discrepancy in the computation of the capital
gains taxes due from the transactions. The Tax Code is clear that the remedies may
proceed simultaneously.
(3) NO. While the laws governing the CTA have expanded the jurisdiction of the
Court, they did not change the jurisdiction of the CTA to entertain an appeal only
from a final decision of the Commissioner, or in cases of inaction within the
prescribed period. Since in the cases at bar, the Commissioner has not issued an
assessment of the tax liability of the Petitioners, the CTA has no jurisdiction.
+
AMDG
… The spouses Kintanar were charged under Section 255 of the Tax Code for
alleged tax evasion and non-filing of income tax returns. Gloria Kintanar’s defense
was that she did not have personal knowledge of the actual filing of the said
returns since it was her husband who filed their ITRs. The husband in turn alleged
that their ITRs were in fact prepared by their accountant and that they necessarily
just relied on the said accountant. These facts supposedly contradicted the claim
that their failure to file the returns was willful.
??? Was the defendant guilty of tax evasion?
!!! YES. The elements of a violation under Section 255 have been satisfied. These
are (1) that the accused is a person required to make or file a return; (2) that the
accused failed to file the return at the time required by law; and (3) that the
failure to file was willful. For (1), as income-generating spouses, they were
obviously covered by the filing requirements. For (2), the BIR witnesses presented
showed sufficient proof that indeed no returns were filed in the RDOs where they
should have filed.
+
AMDG
For (3), the Court said that the mere fact of having an accountant prepare one’s
returns is not enough to show that that there was no voluntary, intentional or
deliberate failure to file. The Court added that the fact of her being a
businesswoman presupposes that she ought to know and understand all matters
concerning her business including the filing of returns, citing Rule 131 on the Rules
on Evidence which states that “it is presumed that a person takes ordinary care of
his concern”. More importantly, the Court found no affirmative acts on the part of
defendant to make sure her obligation to file ITRs had been fully complied with
given that she testified that she does not even know how much her tax liabilities
were. This neglect or omission was considered tantamount to “deliberate
ignorance” or “conscious avoidance”. Lastly, the Court noted that the accountant
himself was not even presented as witness.
+
AMDG
… CIR assessed Kudos Metal Corporation for taxable year 1998. A Waiver of the
Statute of Limitations was executed on December 2001. The CTA issued a
Resolution canceling the assessment notices issued against Petitioner for having
been issued beyond the prescriptive period as the waiver purportedly failed to (a)
have the valid officer execute the same (i.e., only the Assistant Commissioner
signed it and not the CIR); (b) the date of acceptance was not indicated; (c) the
fact of receipt by the taxpayer was not indicated in the original copy.
??? Has the CIR’s right to assess prescribed?
+
AMDG
!!! YES. The requirements for a valid waiver as laid down in RMO 20-90 and RDAO
No. 5-01 are mandatory to give effect to Section 222 of the Tax Code. Specifically,
the flaws in the waiver executed by Kudos Metal were as follows: (a) there was no
notarized written authority in favor of the signatory for the company; (b) there is
no stated date of acceptance by the Commissioner or his representative; and (c)
the fact of the receipt of the copy was not indicated in the original waivers.
Neither can it be said that by merely executing the waiver the taxpayer is already
estopped from disputing an action by the CIR beyond the statutory 3-year period
since the exception under the Suyoc case (i.e., when the delays were due to
taxpayer’s acts) does not apply.
Note: Requisites of a valid waiver: (i) acceptance date; (ii) expiry date; (iii) signed
by authorized officer of taxpayer and BIR; (iv) notarized; (v) fact of receipt must be
indicated in the copies
+
AMDG
… On September 30, 2004, Aichi Forging filed a claim for refund/credit of input
VAT attributable to its zero-rated sales for the period July 1, 2002 to September 30,
2002 with the CIR through the DOF One-Stop Shop. On the same day, Aichi Forging
filed a Petition for Review with the CTA for the same action. The BIR disputed the
claim and alleged that the same was filed beyond the two-year period given that
2004 was a leap year and thus the claim should have been filed on September 29,
2004. The CIR also raised issues related to the reckoning of the 2-year period and
the simultaneous filing of the administrative and judicial claims.
??? (1) Was the Petitioner’s administrative claim filed out of time?
(2) Was the filing of the judicial claim premature?
+
AMDG
!!! (1) NO. The right to claim the refund must be reckoned from the “close of the
taxable quarter when the sales were made” – in this case September 30, 2004.
The Court added that the rules under Sections 204 (C) and 229 as cross-referred to
Section 114 do not apply as they only cover erroneous payments or illegal
collections of taxes which is not the case for refund of unutilized input VAT. Thus,
the claim was filed on time even if 2004 was a leap year since the sanctioned
method of counting is the number of months.
(2) YES. Section 112 mandates that the taxpayer filing the refund must either wait
for the decision of the CIR or the lapse of the 120-day period provided therein
before filing its judicial claim. Failure to observe this rule is fatal to a claim. Thus,
Section 112 (A) was interpreted to refer only to claims filed with the CIR and not
appeals to the CTA given that the word used is “application”. Finally, the Court said
that applying the 2-year period even to judicial claims would render nugatory
Section 112 (D) which already provides for a specific period to appeal to the CTA -- i.e., (a) within 30 days after a decision within the 120-day period and (b) upon
expiry of the 120-day without a decision.
+
AMDG
… United Airlines was formerly an online carrier and stopped being such in 1998 at
which time it appointed a sales agent in the Philippines. They filed a claim for
refund in 2002 covering alleged overpaid income taxes on gross passenger
revenues arising from the years after it became an offline carrier. While the CTA
agreed that the Petitioner can no longer be taxed for gross passenger revenues
starting 1999, it also found that Petitioner erroneously deducted items from its
gross cargo revenues which was not consistent with the Tax Code. The CTA thus
disallowed the refund by pointing out that Petitioner in fact underpaid its taxes on
cargo revenues by P31 million which amount was higher than the P5 million being
claimed for refund.
??? Can the Court, without violating the general principle against offsetting of
taxes, disallow a claim for refund on the ground that its (Court’s) finding of a
deficiency assessment against the same claimant is even higher than that sought
to be refunded?
+
AMDG
!!! YES. Section 72 of the Tax Code states that “When an assessment is made in
case of any list, statement or return, which in the opinion of the Commissioner
was false or fraudulent or contained any statement or undervaluation, no tax
collected under such assessment shall be recovered by any suit, unless it is proved
that said list, statement or return was not false nor fraudulent and did not contain
any understatement or undervaluation”. While the Court reiterated and
recognized the rule against offsetting of tax claims upheld in previous cases, it
brought up the point that “the grant of a refund is founded on the assumption
that the tax return is valid”. It also said that the practical benefit of dispensing of
the issues on the proper assessment in the same claim for refund case likewise
avoids a multiplicity of proceedings or suits.
Note: The Court apparently did not find it relevant that the Tax Code provision
refers to the Commissioner having such an opinion/finding since in this case it was
the CTA which first brought up the issue of the tax return not being relied upon.
+
AMDG
… Petron was an assignee of several Tax Credit Certificates (TCCs) from BOIregistered entities. The said transfers were approved by the DOF’s One Stop Shop
Inter-Agency Tax Credit and Duty Drawback Center composed of representatives
from DOF, BOI, BOC, and BIR. The said TCCs were then used by Respondent to pay
its excise tax liabilities. Subsequently, the BIR issued an assessment against Petron
on the ground that the TCCs utilized have been cancelled for having been
fraudulently issued and transferred. As such, the excise taxes due against Petron
were deemed unpaid.
??? Can the assessment against Petron prosper on the basis that the TCCs are
void?
+
AMDG
!!! NO. Petron is deemed a transferee in good faith and for value of the TCCs used.
This is apparent from the fact that the transfer of the TCCs undergo a very
stringent process. In addition, it was stipulated by the parties that Petron did not
participate in the procurement and issuance of the TCCs. The Court also upheld
the earlier pronouncement in Shell that TCCs are valid and effective upon issuance
and that the effectivity of the same are not subject to a suspensive condition
premised on the conduct of a post-audit. Finally, it was stated that while the
general rule is that estoppel does not apply to the government especially on
matters of taxation, an equally applicably principle is that the exception to this
rule is if its application would work injustice against an innocent party.
+
AMDG
??? Does the CTA have jurisdiction to set aside a ruling issued by the CIR even if the
issuance of the same has not been appealed with the DOF?
!!! NO. While R.A. 9282 vests the CTA with jurisdiction over “decisions” of the CIR
on “other matters arising under the Tax Code”, the same Tax Code specifically
states that the CIR’s power to interpret provisions of the Tax Code is subject to
review by the Secretary of Finance. In addition, DOF Department Order 23-01
provides the guidelines with regard to appeals filed with the DOF on adverse
rulings issued by the CIR. The failure to observe the aforementioned processes
will be deemed as a failure to exhaust administrative remedies which affects the
taxpayer’s right of recourse with the CTA.
+
AMDG
??? Is a Motion for Reconsideration from the decision of a division of the CTA
mandatory prior to elevating the case to the CTA en banc
!!! YES. The use of the term “must” clearly indicates that the requirement is
mandatory and not merely directory. There is no exigent and persuasive reason
(such as relieving a litigant of injustice) to relax the rules in this case.
+
AMDG
… Petitioner was assessed for income tax, VAT and withholding tax. After CIR
issued a Final Decision on Disputed Assessment, Petitioner filed a Letter of
Reconsideration with the CIR instead of appealing the same to the CTA within 30
days. The CIR then issued a Preliminary Collection Letter which prompted the
Petitioner to file its Petition with the CTA. CIR argued that the Petition with the
CTA was filed out of time.
??? Did the filing of a Reconsideration toll the running of the 30-day period to
appeal to the CTA?
!!! NO. A Motion for Reconsideration of the denial of the administrative protest
filed with the CIR does not toll the 30-day period to appeal to the CTA.
+
AMDG
… Aquafresh Seafoods sold two parcels of located at Barrio Banica in Roxas City
and paid the corresponding CGT and DST due on the sale. However, the BIR
assessed Aquafresh Seafoods based on its conclusion that the lots were classified
as commercial and not residential as claimed by the taxpayer. Aquafresh Seafood’s
defense was that there was already a pre-defined zonal value for the said lots and
thus the BIR could not reclassify the same to be commercial lots.
??? Is the requirement (under Section 6 of the Tax Code) of consultation with
competent appraisers both from the public and private sectors in determining fair
market value applicable in this case?
+
AMDG
!!! YES. The BIR’s position that the requirement of consultation with appraisers is
mandatory only when formulating or making changes in the schedule of zonal
values is wrong. The Court held that the BIR’s act of classifying the subject
properties involved a re-classification and revision of the prescribed zonal values.
It was likewise added that the application of the rule of assigning zonal values
based on the ‘predominant use of property’ only applies when the property is
located in an area or zone where the properties are not yet classified and their
zonal values are not yet determined. If a determination has already been made,
the BIR has no discretion as regards its classification and/or valuation.
+
AMDG
!!! The Commissioner can now inquire into bank deposits and other related
information held by financial institutions of “a specific taxpayer or taxpayers
subject of a request for supply of tax information from a foreign tax authority
pursuant to an international convention or agreement on tax matters to which the
Philippines is a signatory or a party”. The information may be used by the BIR for
tax assessment, verification, audit, and enforcement purposes. The exchange of
information shall be done in a secure manner to ensure confidentiality.
!!! The provision of information to a foreign tax authority requires that the
requesting foreign tax authority has provided relevant information such as the
identity of the taxpayer, the tax purpose, statement that the foreign authority has
exhausted all means, etc.
!!! If the subject of the request are income tax returns, the same shall be open to
inspection upon the order of the President of the Philippines.
+
AMDG
!!! The authority to order the opening for inspection of the income tax returns of
specific taxpayers for exchange of information by a foreign tax authority is
delegated to the Secretary of Finance.
!!! Any information received by the foreign tax authority as a result of the opening
of the income tax returns are absolutely confidential and shall be disclosed only to
persons or authorities involved in the assessment or collection of, or enforcement
or prosecution in respect of the taxes covered by such conventions/agreements.
+
AMDG
!!! Allows qualified VAT-registered taxpayers to receive cash equivalent of their
outstanding TCCs either --a. by collecting in advance from a trustee bank a discounted cash value
of their TCCs; or
b. collect full cash value of their TCCs upon a certain maturity date to be
determined by the BIR and BOC (per DOF Joint Circular 2-2012, the
monetization will start in 2012 for TCCs issued prior to 2004 while those
issued in 2011 and 2012 will be monetized in 2016)
!!! Only covers VAT refunds under Section 112 (A) of the Tax Code (zero-rated
sales) and Section 106 (e) of the TCCP (drawbacks)
!!! Period of implementation is from 2012 to 2016 but those who do not enroll can
continue using/revalidating their TCCs
!!! Beginning 2012, the BIR and BOC shall no longer issue TCCs for VAT refund,
unless applied for by the VAT taxpayer, under the aforesaid sections
+
AMDG
… Three rulings issued in 2001 all confirmed that the discount or interest income
arising from the issuance of the PEACe Bonds are not subject to the 20% final
withholding tax primarily because the said Bonds were not considered to be
“public” borrowing (hence not treated as deposit substitutes) since at the time of
issuance or origination the bonds were issued only to a single entity, RCBC. It was
determined, however, that after the original issuance, RCBC will sell the bonds to
CODE-NGO which entity could not have acquired the same upon issuance for not
being an accredited government securities dealer. RCBC Capital, in turn,
subsequently purchased the bonds from CODE-NGO albeit on its own account and
not for the account, or as agent of, any other buyer.
In 2004, another ruling to cover the Bureau of Treasury’s other issuances of
treasury bills was issued stating that since the actual number of bondholders or
investors may be, at maturity date, more than 20, the direct lenders (origination)
and indirect investors (secondary market) are deemed to be what constitute
“public”. This ruling was reiterated in two subsequent rulings.
??? Are the 2001 rulings effectively and validly reversed in view of the 2004 ruling
and if so can the reversal be made retroactive?
+
AMDG
!!! YES. The BIR stated that the issuances of the office must not override but must
instead remain consistent and in harmony with the they law they seek to apply
and implement. CODE-NGO may not invoke the principle of non-retroactivity since
Section 246 of the Tax Code allows retroactive application of rulings in instances
“where the facts subsequently gathered by the Bureau of Internal Revenue are
materially different from the facts on which the ruling is based.” The reference was
made by the BIR to the involvement of the secondary market which fact was only
subsequently gathered. It also stated that there are no vested rights which are
based on the wrong interpretation of the law. Thus, the ruling was reversed to
state that the BTr shall withhold the final tax due on interest income derived from
the PEACe Bonds prior to its payment on the date of maturity.
+
AMDG
… Lepanto Consolidated Mining had a mining lease contract for a mining claim in
Benguet. They used the sand and gravel mined to construct and maintain concrete
structures needed in its mining operations such as a tailings dam, access roads,
and offices. The provincial treasurer of Benguet then asked Lepanto Consolidated
Mining to pay sand and gravel tax for the quarry materials extracted from the
mining site. The counterargument was that the said tax applied only to
commercial extractions and since Lepanto did not supply other users for some
profit, the tax should not apply.
??? Is Lepanto liable for the tax imposed by Benguet on the sand and gravel that it
extracted from within the area of its mining claim used exclusively in its mining
operations?
+
AMDG
!!! YES. The CTA erred in applying the provision of the Local Government Code
(Section 138) since the basis of Benguet province emanates from the Revised
Benguet Revenue Code itself. This notwithstanding, the provincial revenue
measure still did not distinguish between commercial and non-commercial
extractions.
In addition, the Petitioner’s argument that when a company is taxed on its main
business it can no longer be taxable for engaging in an activity that is but part of,
incidental to, and necessary to such main business, was held to be inapplicable.
The Court said that the cases where the above principle has been applied involved
business taxes and thus the incidental activities could not be treated as separate
and distinct from the main business. Here the tax being imposed was an excise tax
levied on the privilege of extracting gravel and sand.
+
AMDG
… The City Treasurer of Paranaque City issued Warrants of Levy on PRA’s reclaimed
properties within the city’s jurisdiction.
??? Is the PRA subject to real property tax?
!!! NO. PRA, much like MIAA, PPA, UP, PFDA, GSIS, and BSP, is considered a
government instrumentality exercising corporate powers but which are not
considered as GOCCs as they are neither a stock (for not having the authority to
distribute dividends) nor a non-stock (for not having members) corporation. In
addition, the Constitution likewise provides that a GOCC is created under two
conditions: (a) established for a common good and (b) meets the test of economic
viability. While test (a) is complied with, the PRA was undoubtedly not created to
engage in economic or commercial activities as it is the only entity engaged in
reclamation which was described as essentially a public service. Thus, the
exemptions under Sections 234 (a) and 133(o) of the LGC apply.
+
AMDG
… MPLDC owned two parcels of land in Pasig City. In 1986, Jose Y. Campos, the
registered owner of MPLDC, voluntarily surrendered MPLDC to the government.
From 2002-2005, Pasig City sent notices of assessment to MPLDC to demand
payment of real property taxes. PCGG filed with the RTC a petition for prohibition
with a prayer for issuance of a TRO claiming ownership over the said properties.
??? Are the properties owned by PCGG subject to real property taxes?
!!! Only those portions of the properties leased to taxable entities are subject to
real estate taxes for the period of such leases and may also be sold at public
auctioned to satisfy the tax delinquency. While it was established that the owner
of the properties is now clearly the Republic of the Philippines given the voluntary
surrender, the Local Government Code clearly states that the exemption will not
apply “when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person”. The Court cited several cases to support the
decision such as Philippine Fisheries, GSIS, MIAA, and Lung Center.
+
AMDG
… The Provincial Assessor issued an assessment against Marcopper for real
property taxes supposedly due on the siltation dam and decant system.
Respondent submitted a DENR certification stating that the dam is a structure
intended primarily for pollution control of silted materials and hence exempt from
real property taxes.
??? Are the properties exempt from real property tax?
!!! NO. While Section 234 (e) exempts from the real property tax “machinery and
equipment used for pollution control”, the Court found that during the period
covered by the assessment, no evidence was presented that the property was
used actually, directly, and exclusively for pollution control purposes. In addition,
the DENR itself characterized the property as a ‘structure’ rather than as
machinery or equipment which thus takes it away from the exempting provision.
+
AMDG
Note: The assessment was for years before the law expanded the definition of
“pollution control device” to include infrastructure or improvement. However, the
Court said that the owner can not get the benefit of a retroactive application of
the amendment.
+
AMDG
… NPC is a GOCC that entered into an Energy Conversion Agreement (ECA) under a
build-operate-transfer (BOT) arrangement with Mirant Pagbilao Corp. Under the
agreement, Mirant will build and finance a thermal power plant in Quezon, and
operate and maintain the same for 25 years, after which, Mirant will transfer the
power plant to the Respondent without compensation. NPC also undertook to pay
all taxes that the government may impose on Mirant. Quezon then assessed
Mirant real property taxes on the power plant and its machineries.
???(1) Can Petitioner (NPC) file the protest against the real property tax
assessment?
(2) Can Petitioner claim exemption from the RPT given the BOT arrangement
with Mirant?
(3) Is payment under protest required before an appeal to the LBAA is made?
+
AMDG
!!! (1) NO. The two entities vested with personality to contest an assessment are
(a) the owner or (b) the person with legal interest in the property. NPC is neither
the owner nor the possessor/user of the subject machineries even if it will acquire
ownership of the plant at the end of 25 years. The Court said that legal interest
should be an interest that is actual and material, direct and immediate, not simply
contingent or expectant. While the Petitioner does indeed assume responsibility
for the taxes due on the power plant and its machineries, the tax liability referred
to is the liability arising from law that the local government unit can rightfully and
successfully enforce, not the contractual liability that is enforceable between the
parties to a contract. The local government units cannot be compelled to
recognize the protest of a tax assessment from the Petitioner, an entity against
whom it cannot enforce the tax liability.
+
AMDG
!!! (2) NO. To successfully claim exemption under Section 234 (c) of the LGC, the
claimant must prove two elements: a) the machineries and equipment are
actually, directly, and exclusively used by local water districts and governmentowned or controlled corporations; and b) the local water districts and
government-owned and controlled corporations claiming exemption must be
engaged in the supply and distribution of water and/or the generation and
transmission of electric power. Since neither the Petitioner nor Mirant satisfies
both requirements, the claim for exemption must fall.
(3) YES. If a taxpayer disputes the reasonableness of an increase in a real property
tax assessment, he is required to "first pay the tax" under protest. The case of Ty
does not apply as it involved a situation where the taxpayer was questioning the
very authority and power of the assessor, acting solely and independently, to
impose the assessment and of the treasurer to collect the tax. A claim for tax
exemption, whether full or partial, does not question the authority of local
assessors to assess real property tax.
+
AMDG
??? Can the RTC issue an injunction against the collection of real property taxes if
there is a pending appeal with the LBAA ?
!!! YES. Petron was granted the injunction which suspended the collection of taxes
given that it was able to show a clear and unmistakable right to refuse or hold in
abeyance the payment of taxes. This conclusion was arrived at after Petron
showed that the assessments covered more than 10 years, the assessment
included items which should properly be excluded, and that the subject
assessment should take effect on January 1st the following year. The filing of a
bond was also deemed to have been in compliance with Section 11 of Republic Act
9282.
+
AMDG
… An auction sale of the properties of RCBC was conducted in May 30, 2003. The
Certificate of Sale of Delinquent Property was registered with the Register of
Deeds of Quezon City on February 10, 2004. Respondent tendered payment on
June 10, 2004 but the Treasurer of Quezon City refused on the ground that the
one-year redemption period has lapsed.
??? Did the Respondent still have the right to redeem?
!!! YES. While the LGC provides that the one year begins from the date of sale on
which date the delinquent tax and other fees are paid (in this case May 30, 2003),
the local ordinance of Quezon City provides that the period is reckoned from the
date of annotation of the sale (in this case February 10, 2004). To reconcile the
conflicting provisions, the Court applied the rule laid down in the special law or
the Quezon City ordinance.
+
AMDG
!!! Based on the case of NPC vs. Province of Quezon, Quezon Province was allowed
to impose RPT on machineries and equipment under a BOT agreement. Given that
the payment of the same RPT has been contractually assumed by NPC/PSALM
which are GOCCs, the President reduced all RPT liabilities based on an assessment
level of 15% .
!!! All fines, penalties, and interest on all deficiencies were likewise condoned.
!!! The reduction was made effective for all years up to 2011.
+
AMDG
… On September 29, 2001, a shipment described as “agricultural product” arrived
at Subic Bay Freeport Zone. On October 23, the BOC issued a Memorandum
stating that upon examination the shipment was found to contain rice. The
representative of the importer then stated that there was a “misshipment” and
manifested willingness to pay appropriate duties and taxes. The BOC then issued a
Hold Order on October 25, 2001. Despite several certifications for its clearance,
Petitioner SBMA refused to allow the release of the rice shipment. Hence, on June
11, 2002, the respondent-importers filed with the RTC of Olongapo City a
complaint for Injunction and Damages against SBMA.
??? Did the RTC have jurisdiction over the case?
+
AMDG
!!! NO. The Collector of Customs has exclusive jurisdiction over seizure and
forfeiture proceedings and the regular courts can not interfere nor can it enjoin
these proceedings. This is the rule the moment the imported goods are in the
possession or control of the Customs authorities even if no warrant for seizure or
detention had previously been issued. The actions of the BOC are then only
appealed to the CTA. The Court also said that this rule, which is anchored upon the
policy of placing no unnecessary hindrance on the government’s drive to prevent
smuggling and fraud and to collect correct duties, is absolute.
+
AMDG
… Philippine British Assurance Company was an insurance company which
regularly issued customs bonds to its clients in favor of the BOC. The bonds secure
the release of imported goods in order that the goods may be released without
prior payment of duties and taxes. Under these bonds, Petitioner and its clients
jointly bind themselves to pay BOC the value of the bonds in the event that the
bonds expire without the imported goods being re-exported or the proper duties
being paid. BOC then filed a collection case alleging that Petitioner had
unliquidated customs bonds. The RTC decided in favor of BOC but the appeal filed
with the Court of Appeals was dismissed as the CA claimed lack of jurisdiction and
said that the appeal lies with the CTA as a case for collection of taxes.
??? Did the CA, not the CTA, have jurisdiction over the appeal filed from the RTC?
+
AMDG
!!! YES. An action to collect on a bond used to secure the payment of taxes is not a
tax collection case but rather a simple case for enforcement of contractual liability.
This was the same ruling in Mambulao Lumber where to satisfy its deficiency sales
tax, the parties agreed for the taxpayer to pay in installments and as a security a
bond was executed. Upon default, the government proceeded against the bond
while the taxpayer argued that the 5-year period to collect had set in. The Court
also ruled that the prescription rules under the Tax Code do not apply and instead
those under the Civil Code apply.
+
AMDG
(1) Which of the following is a conclusive
characteristic of a tax?
a. it is imposed and monitored by a regulatory agency
b. its imposition incidentally raises revenue
c. the imposition is reasonably related to the cost of
inspection
d. none of the above
+
AMDG
(1) Which of the following is a conclusive
characteristic of a tax?
a. it is imposed and monitored by a regulatory agency
b. its imposition incidentally raises revenue
c. the imposition is reasonably related to the cost of
inspection
d.none of the above
+
AMDG
(2) Which of the following is exempt from
corporate income tax?
a.
b.
c.
d.
National Power Corporation
Philippine Reclamation Authority
Philippine Amusement and Gaming Corporation
Philippine Health Insurance Corporation
+
AMDG
(2) Which of the following is exempt from
corporate income tax?
a. National Power Corporation
b. Philippine Reclamation Authority
c. Philippine Amusement and Gaming Corporation
d.Philippine Health Insurance Corporation
+
AMDG
(3) All of the following are essential requisites
to claim overpaid CWT except--a. filing within the 2-year period
b. not previously selecting the option to “carry-over”
c. showing that the income received was declared as part
of gross income
d. the same must be filed by the withholding agent
+
AMDG
(3) All of the following are essential requisites
to claim overpaid CWT except--a. filing within the 2-year period
b. not previously selecting the option to “carry-over”
c. showing that the income received was declared as part
of gross income
d.the same must be filed by the
withholding agent
+
AMDG
(4) The REIT--a. is subject to MCIT
b. is allowed to deduct dividend payments made to OFWs
c. is required to be publicly-owned to the extent of 40%
at all times
d. is not subject to VAT
+
AMDG
(4) The REIT--a. is subject to MCIT
b.is allowed to deduct dividend payments
made to OFWs
c. is required to be publicly-owned to the extent of 40%
at all times
d. is not subject to VAT
+
AMDG
(5) Mr. C died on September 1, 2012. Prior to his
death, he owed Mr. D P1,000,000. After Mr. C’s
death, the heirs of Mr. C were able to convince Mr.
D for them to just pay P200,000 of the outstanding
debt of the deceased. How much will be
considered as a deduction against Mr. C’s gross
estate?
a. P1,000,000
b. P200,000
c. P800,000
d. P1,200,000
+
AMDG
(5) Mr. C died on September 1, 2012. Prior to his
death, he owed Mr. D P1,000,000. After Mr. C’s
death, the heirs of Mr. C were able to convince Mr.
D for them to just pay P200,000 of the outstanding
debt of the deceased. How much will be
considered as a deduction against Mr. C’s gross
estate?
a. P1,000,000
b. P200,000
c. P800,000
d. P1,200,000
+
AMDG
(6) Which of the following is subject to VAT?
a.
b.
c.
d.
gross receipts of cinema houses
toll fees
gross receipts of pawnshops
service fees paid for by a 3rd party on behalf of another
on a reimbursement-of-cost basis
+
AMDG
(6) Which of the following is subject to VAT?
a. gross receipts of cinema houses
b.toll fees
c. gross receipts of pawnshops
d. service fees paid for by a 3rd party on behalf of another
on a reimbursement-of-cost basis
+
AMDG
(7) The Waiver of the Statute of Limitations --a. is no longer subject to dispute as to its validity if the
taxpayer who executed the same has made partial
payments
b. need not be notarized
c. can only be valid if the same has a control number
d. can be signed in any instance by any BIR officer as the
signing of the same is a delegable power of the CIR
+
AMDG
(7) The Waiver of the Statute of Limitations --a.is no longer subject to dispute as to its
validity if the taxpayer who executed the
same has made partial payments
b. need not be notarized
c. can only be valid if the same has a control number
d. can be signed in any instance by any BIR officer as the
signing of the same is a delegable power of the CIR
+
AMDG
(8) In case the BIR fails to act on a protest --a. the taxpayer’s only option is to appeal the inaction
within 30 days after the lapse of the 180-day period
b. the assessment becomes final and unappealable
c. the taxpayer can either wait for the decision or appeal
the inaction
d. the taxpayer can compel them via mandamus to issue a
decision
+
AMDG
(8) In case the BIR fails to act on a protest --a. the taxpayer’s only option is to appeal the inaction
within 30 days after the lapse of the 180-day period
b. the assessment becomes final and unappealable
c. the taxpayer can either wait for the
decision or appeal the inaction
d. the taxpayer can compel them via mandamus to issue a
decision
+
AMDG
(9) If there is a tax criminal case --a. the same must have always been preceded by an
assessment
b. the element of the act being willful can be supported
by mere proof that there was deliberate ignorance
c. the CTA does not have jurisdiction
d. The taxpayer is given the same 60-day period to
provide supporting documents
+
AMDG
(9) If there is a tax criminal case --a. the same must have always been preceded by an
assessment
b.the element of the act being willful can
be supported by mere proof that there
was deliberate ignorance
c. the CTA does not have jurisdiction
d. The taxpayer is given the same 60-day period to
provide supporting documents
+
AMDG
(10) Which of the following is TRUE in the case
of VAT refunds arising from unutilized
input VAT?
a. The administrative claim must always precede the
judicial claim
b. The taxpayer need not wait for the decision or the
expiry of the 120-day period if the 2-year period to
appeal is about to lapse
c. The legal bases for the claim are Sections 204 and
229 of the Tax Code based in erroneous payment
d. All of the above
+
AMDG
(10) Which of the following is TRUE in the case
of VAT refunds arising from unutilized
input VAT?
a. The administrative claim must always
precede the judicial claim
b. The taxpayer need not wait for the decision or the
expiry of the 120-day period if the 2-year period to
appeal is about to lapse
c. The legal bases for the claim are Sections 204 and
229 of the Tax Code based in erroneous payment
d. All of the above
+
AMDG
(11) A BIR ruling --a. may be reversed anytime
b. may be modified if facts subsequently gathered by
the BIR are substantially different from the facts on
which the ruling is based
c. cannot be reversed
d. can be appealed to the CTA
+
AMDG
(11) A BIR ruling --a. may be reversed anytime
b. may be modified if facts
subsequently gathered by the BIR are
substantially different from the facts on
which the ruling is based
c. cannot be reversed
d. can be appealed to the CTA
+
AMDG
(12) Which of the following is subject to real
property tax?
a. machineries owned and operated by NPC
b. infrastructure used for pollution control
c. land owned by the national government leased out
to an independent power producer
d. Sunken Garden of UP
+
AMDG
(12) Which of the following is subject to real
property tax?
a. machineries owned and operated by NPC
b. infrastructure used for pollution control
c. land owned by the national
government leased out to an
independent power producer
d. Sunken Garden of UP
+
AMDG
GOOD
LUCK!