Bar Review Institute

University of the Philippines College of Law

LAST MINUTE TIPS IN

TAXATION LAW
BAR 2020/2021
I. BASIC PRINCIPLES A3: Under the Local Government Code, the following
fundamental principles shall govern the exercise of the

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Q1: What are the limitations on the power to tax? taxing and other revenue-raising powers of local
government units:
A1: The limitations are either inherent, or those that (a) Taxation shall be uniform in each local

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exist without written legal mandate, or constitutional, government unit;
those that are expressly embodied in the Philippine (b) Taxes, fees, charges and other impositions shall:
Constitution. (i) be equitable and based as far as
practicable on the taxpayer's ability to
Inherent limitations mean that the tax must be for a pay;

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public purpose, non-delegable, territorial, exempts (ii) be levied and collected only for public
government from tax if devoted to public uses, and purposes;
observes the principle of international comity. (PNTEI) (iii) not be unjust, excessive, oppressive, or
confiscatory;
Constitutional limitations mean that (a) taxation laws (iv) not be contrary to law, public policy,
must observe due process and equal protection; (b)
taxation laws must respect religious freedom; (c)
taxation laws must not violate the non-impairment
clause; (d) taxation laws must observe the prohibition
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of trade;
(c) The collection of local taxes, fees, charges and
other impositions shall in no case be let to any
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on imprisonment for non-payment of poll tax; (e) private person;
taxation laws must be uniform, equitable and (d) The revenue collected pursuant to the provisions
progressive; (f) the power of taxation may be delegated of this Code shall inure solely to the benefit of,
to the President to impose tariff rates; (g) taxation laws and be subject to disposition by, the local
must observe the prohibition against real property government unit levying the tax, fee, charge or
taxation of churches, convents and non-profit other imposition unless otherwise specifically
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cemeteries; (h) taxation laws must observe the provided herein; and
prohibition against taxation of non-stock, non-profit (e) Each local government unit shall, as far as
educational institutions; (i) tax exemptions may only be practicable, evolve a progressive system of
granted upon majority vote of Congress; (j) taxation taxation.
laws must observe the prohibition on the use of tax
levied for special purpose; (k) tax bills originate only
from the House of Representatives; (l) taxation laws are Q4: May taxes be offset or subject of sef-off or
subject to the item veto power of the President; (m) compensation against claims that individuals may
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taxation laws are subject to judicial power to review have against the government?
legality of tax; and (n) the power of taxation may be
delegated to LGUs to create own sources of revenue. A4: General Rule: Taxes and claims for refund cannot
be the subject of set-off for the reason that the
government and the taxpayer are not creditors of each
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Q2: Differentiate taxes and license fees. other. [Republic v. Mamburao Lumber, G.R. No. L-17725
(1962)]
A2: A tax is imposed for revenue purposes. It is an
exercise of the taxing power of the State. A license fee is Exception: If the claims against the government have
imposed for regulatory purposes. It is an exercise of the been recognized and an amount has already been
police power of the State. appropriated for that purpose. Where both claims have
already become (1) due (2) demandable, and (3) fully
liquidated. [Domingo v. Garlitos (1963)]
Q3: What are the fundamental principles of local
government taxation?
Q5: What are the common limitations to the local
government’s power to tax?
Q6: What is the nature of the taxing power of the
A5: Under the Local Government Code, unless provinces, municipalities and cities? How will the
expressly provided, the exercise of the taxing powers of local government units be able to exercise their taxing
provinces, cities, municipalities, and barangays shall powers?
not extend to the levy of the following:
(1) Income tax, except when levied on banks and A6: The local governments’ taxing power is not
other financial institutions; inherent, but is granted by the Constitution subject to
(2) Documentary stamp tax; such guidelines and limitations as the Congress may
(3) Taxes on estates, inheritance, gifts, legacies and provide. (Sec. 5 Article X, 1987 Constitution)

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other acquisitions mortis causa;
(4) Customs duties, registration fees of vessel and Through ordinances passed by their respective
wharfage on wharves, tonnage dues, and all Sanggunian, each local government unit shall exercise

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other kinds of customs fees, charges and dues its power to create its own sources of revenue and to
except wharfage on wharves constructed and levy taxes, fees, and charges subject to the provisions of
maintained by the local government unit; the Local Government Code, consistent with the basic
(5) Taxes, fees and charges and other impositions policy of local autonomy. Such taxes, fees, and charges
upon goods carried into or out of, or passing shall accrue exclusively to the local government units.

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through, the territorial jurisdictions of local
government units in the guise of charges for II. INCOME TAX
wharfage, tolls for bridges or otherwise, or other
taxes, fees or charges in any form whatsoever Q7: What are general principles of income taxation in
upon such goods or merchandise; the Philippines as provided in Section 23 of the
(6) Taxes, fees or charges on agricultural and
aquatic products when sold by marginal farmers
or fishermen;
(7) Taxes on business enterprises certified to by the
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NIRC?

A7: The general principles of income taxation are:

(a) A Filipino citizen residing in the Philippines is
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BOI as pioneer or non-pioneer for a period of six taxable on all income derived from sources
(6) and four (4) years, respectively from the date within and without the Philippines;
of registration; (b) A nonresident citizen is taxable only on income
(8) Excise taxes on articles enumerated under the derived from sources within the Philippines;
NIRC, as amended, and taxes, fees or charges on (c) A nonresident citizen working and deriving
petroleum products; income from abroad as an overseas contract
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(9) Percentage or value-added tax (VAT) on sales, worker is taxable only on income from sources
barters or exchanges or similar transactions on within the Philippines;
goods or services except as otherwise provided (d) An alien individual, whether a resident or not of
herein; the Philippines, is taxable only on income
(10) Taxes on the gross receipts of transportation derived from sources within the Philippines;
contractors and persons engaged in the (e) A domestic corporation is taxable on all income
transportation of passengers or freight by hire derived from sources within and without the
and common carriers by air, land, or water; Philippines; and
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(11) Taxes on premiums paid by way of reinsurance (f) A foreign corporation, whether engaged or not
or retrocession; in trade or business in the Philippines, is taxable
(12) Taxes, fees or charges for the registration of only on income derived from sources within the
motor vehicles and for the issuance of all kinds Philippines.
of licenses or permits for the driving thereof,
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except tricycles;
(13) Taxes, fees, or other charges on Philippine Q8: A, the sole employer of B, has correctly withheld
products actually exported; the taxes of B for taxable year 2018. Is still B required
(14) Taxes, fees, or otherges, on duly, registered to file his income tax return for 2018 on or before
Countryside and Barangay Business Enterprises April 15, 2019?
and cooperatives under Cooperatives Code of
the Philippines; and A8: No, B is no longer required to file his 2018 income
(15) Taxes, fees or charges of any kind on the tax return. Under [Sec. 51-A of] the National Internal
National Government, its agencies and Revenue Code, as amended by the TRAIN Act,
instrumentalities, and local government units. individual taxpayers receiving purely compensation

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income, regardless of amount, from only one employer partnership? (ii) differentiate a co-ownership from an
in the Philippines for the calendar year, the income tax unregistered partnership. (iii) Does the sharing of
of which has been withheld correctly by the said profits or the pooling of funds automatically
employer (tax due equals tax withheld) shall not be denominate a transaction among persons in an
required to file an annual income tax return. The unregistered partnership? (iv) In the instant case,
certificate of withholding filed by the respective what is the nature of the transaction of father and
employers, duly stamped “received‟ by the BIR, shall son?
be tantamount to the substituted filing of income tax
returns by said employees. A11:
(i) Income earned by an unregistered partnership is
generally taxed as dividends because a partnership, no

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Q9: N, a resident Filipino citizen engaged in the matter how created or organized, falls under the term
practice of his profession, projects that his income for “corporation” under Section 22(B) of the National
the taxable year will be less than PhP3Million. He is a Internal Revenue Code, as amended.

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non-VAT registered taxpayer. What are his options for (ii) Co-ownership is the ownership of one asset by two
paying his taxes, and what taxes are payable for each or more persons. On the other hand, the essential
option? elements of a partnership are two, namely: (a) an
agreement to contribute money, property or industry to
A9: N may opt to be taxed either: a common fund, and (b) the purpose or primary

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(a) At 8% of gross sales or gross receipts and other purpose must be to obtain profits and divide the same
non-operating income in excess of Two hundred among the parties.
fifty thousand pesos (₱250,000), in lieu of the (iii) No, the sharing of profits or the pooling of funds
graduated income tax rates applicable to does not automatically denominate a transaction
resident Filipino citizens and the percentage tax among persons as an unregistered partnership. In order
under the NIRC; or;
(b) At the graduated income tax rates applicable to
resident Filipino citizens, based on his taxable
(net) income. In which case, he will also be
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to constitute a partnership there must be: a) An intent
to form the same; b) generally participating in both
profits and losses; and c) such a community of interest,
as far as third persons are concerned as enables each
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subject to percentage tax. party to make contract, manage the business, and
dispose of the whole property. Thus, in the 2018 case of
N must indicate his option to be taxed at 8% of gross Pascual and Dragon v. CIR, the Supreme Court held
sales or gross receipts in his first quarter income tax that two isolated transactions whereby the parties
return; otherwise, he shall be deemed to have opted to purchased properties and sold the same a few years
be taxed at the graduated income tax rates. thereafter did not thereby make them partners. (Pascual
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and Dragon v. CIR, G.R. No. 78133 October 18, 1988)

(iv) Father and son had an unregistered partnership
Q10: What is the 8% Simplified Taxation for engaged in the business of real estate leasing. Their
Self-Employed Individuals? intention to engage in real estate transactions for profit,
and then divide the same among themselves, is
A10: Under the TRAIN Law, this rate of tax is applied apparent from the fact that they appointed a property
in lieu of the graduated tax (0 to 35%) and 1%/3% manager to manage the property and collect rentals.
percentage tax, which is available only to those Thus, the affairs relative to said property have been
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individuals whose gross sales or receipts and other handled as if the same belonged to a corporation or
non-operating income do not exceed Php 3 million. If business enterprise operated for profit. [Pascual and
the option is not exercised, the graduated income tax Dragon v. CIR, G.R. No. 78133 October 18, 1988; citing
rates shall apply. Take note that the first Php250,000 is Evangelista v. Collector, G.R. No. 9996, Oct. 15,1957,102
not subject to tax. Phil. 140]
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Q11: Father and son bought a parcel of land and a Q12: When does an unregistered partnership arise
building from their common fund. They appointed a and become subject to corporate income tax?
property manager to collect lease rentals and manage
the property. Father and son divided the income A12: An unregistered partnership would arise and be
equally. Later the BIR assessed them for alleged subject to income tax when: (a) there is an agreement
deficiency income taxes as an unregistered by two or more persons to contribute money, property
partnership. Questions: (i) What is the tax or industry to a common fund; and (b) there is an intent
consequence of the income earned by an unregistered to divide the profits and losses among the contracting

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parties. [Ona v. CIR, G.R. No. L-19342 (1972)] (4) Exempt corporations (GSIS, SSS, Philhealth and
local water districts)

Q13: How to compute the taxable income of

individuals and corporations? Q16: What is a fringe benefit?

A13: Gross Income – Deductions = Taxable Income A16: A fringe benefit means any good, service, or other
Note: Even income from illegal sources forms part of Gross benefit furnished or granted in cash or in kind by an
Income employer to a managerial or supervisory [Sec. 33,
NIRC] It is a final withholding tax imposed on the
Gross Income does not include: grossed up monetary value of fringe benefits provided

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1. Income already subjected to Final Withholding by the employer to a managerial or supervisory
Taxes employee.
2. Exclusions from Gross Income

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3. Exempt Income
4. Return of Capital Q17: What is the tax base for computing fringe
benefit tax?
Types of Deductions from Gross Income
1. Itemized Deductions A17: The tax base, upon which 35% shall be imposed, is

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2. Optional Standard Deductions the grossed-up monetary value of the fringe benefit
3. Additional Deductions to Special Corporations granted to the employee. [Sec. 33, NIRC]
and/or Entities
4. Deductions under Special Laws
Q18: What are the requisites for a benefit to be

Q14: What is the tax benefit rule?

A14: This is a general principle in taxation which states

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subject to fringe benefit tax of 35%?

A18: The fringe benefit:

(1) Must be granted to a managerial or supervisory
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that if a taxpayer deducted an item on his income tax employee;
return and thereby enjoyed a tax benefit (i.e. reduced (2) Must not have been granted for the convenience
his income tax payable), and in a subsequent year or advantage of the employer or necessary to the
recovers all or part of that item, he will recognize gross business or required by its nature. [Sec. 33,
income in the year the deducted item is recovered. NIRC]
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3 deductions in Sec. 34 which makes reference to Tax

Benefit Rule are the following: Q19: When is fringe benefit not subject to fringe
1. Taxes [Sec 34(C)(1)] benefit tax?
2. Abandonment Losses [Sec 34 (D)(7)(b)] A19: The following are not taxable:
3. Bad Debts [Sec 34(E)(1)] (1) Fringe benefit which are authorized and
exempted from tax under special laws;
(2) Contributions of the employer for the benefit of
Q15: What are the exceptions to the 25% regular the employee to retirement, insurance [Note that
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corporate income tax rate for domestic corporations this is not automatically income to the employee
(RCIT)? but subject to separate rules, see Section 32
(B)(6)]
A15: The exceptions are: (3) Benefits given to rank and file employees,
(1) Corporations whose Proprietary educational whether granted under a CBA or not;
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institutions and non-profit hospitals (10%); (4) Benefits granted for the convenience of the
(a) EXC: If unrelated income exceeds 50%, employer;
then the RCIT applies to the unrelated (5) De minimis benefits.
income
(2) Corporations enumerated in Sec. 30 of the NIRC;
(a) EXC: if engaged in activity for profit, Q20: What are the different accounting periods and
then income arising from profitable methods?
activities will be subject to RCIT
(3) Regional or Area Headquarters (not subject to A20: An accounting period may either be a calendar
income tax) year or fiscal year. A calendar year applies to an

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individual taxpayer whose accounting period is other Q23: Upon the successful establishment and
than the fiscal year, or when the taxpayer has no implementation of an enhanced VAT refund system
accounting period or does not keep books of accounts. that grants refunds of creditable input tax within
On the other hand, a fiscal year applies to corporations ninety (90) days from the filing of the VAT refund
only. application with the Bureau, which of the VAT
zero-rated services will already be subject to 12%
As a general rule, an accounting period covers 12 VAT?
months, except when the taxpayer dies, a corporation is
newly incorporated, a corporation changes its A23: The following VAT zero-rated services will
accounting period, or a corporation is dissolved, in already be subject to 12% VAT upon the successful
which case the accounting period shall be less than 12 establishment and implementation of an enhanced

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months. VAT refund system:
(a) Processing, manufacturing or repacking goods
The most popular accounting methods are the cash or for other persons doing business outside the

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accrual method. In the cash method, income is reported Philippines which goods are subsequently
in the year of receipt of the payments while expenses exported, where the services are paid for in
are deducted in the years paid. In the accrual method, acceptable foreign currency and accounted for in
income is reported in the year earned and expenses are accordance with the rules and regulations of the
deducted in the year incurred regardless of cash receipt Bangko Sentral ng Pilipinas; and

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or disbursement. (b) Services performed by subcontractors and/or
contractors in processing, converting, or
manufacturing goods for an enterprise whose
III. VAT export sales exceed seventy percent (70%) of
total annual production.
Q21: What is the difference between Input VAT and
Output VAT?

A21: Input VAT is VAT paid by a VAT-registered person

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The following VAT zero-rated sale of goods will already
be subject to 12% VAT, and no longer considered export
sales, upon the successful establishment and
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in the course of trade or business or importation of implementation of an enhanced VAT refund system:
goods or local purchases of goods or services while (a) Sale of raw materials or packaging materials to a
output VAT is VAT due on the sale of goods or services nonresident buyer for delivery to a resident local
or lease of taxable properties by a VAT-registered export- oriented enterprise to be used in
person. manufacturing, processing, packing or
repacking in the Philippines of the said buyer’s
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If output VAT is greater than input VAT, then VAT is goods and paid for in acceptable foreign
payable by the seller. If output VAT is lesser than input currency and accounted for in accordance with
VAT, then VAT may be subject to carry over or refund the rules and regulations of the Bangko Sentral
in favor of the seller. [CE Luzon Geothermal Power ng Pilipinas (BSP);
Company, Inc. v. Commissioner of Internal Revenue, G.R. (b) Sale of raw materials or packaging materials to
No. 197526, July 26, 2017] export-oriented enterprise whose export sales
exceed seventy percent (70%) of total annual
production;
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Q22: What is the tax base for VAT on importation of (c) Those considered export sales under Executive
goods? Order No. 226, otherwise known as the
A22: Under [Section 107 of] the NIRC, as amended by Omnibus Investment Code of 1987, and other
the TRAIN Act, the VAT on importation of goods is special laws.
12% based on the total value used by the Bureau of
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Customs in determining tariff and customs duties, plus

customs duties, excise taxes, if any, and other charges, Q24: What are the requisites for a taxpayer engaged in
such tax to be paid by the importer prior to the release zero-rated or effectively zero-rated transactions to
of such goods from customs custody: Provided, That claim a refund or tax credit certificate for excess input
where the customs duties are determined on the basis tax credits?
of the quantity or volume of the goods, the
value-added tax shall be based on the landed cost plus A24: A taxpayer engaged in zero-rated or effectively
excise taxes, if any. zero-rated transactions may claim a refund or tax credit
certificate for excess input tax credits upon compliance
with the following requisites:

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 (1) That the taxpayer must be VAT -registered; follows:
(2) That the claim for refund was filed within the (1) The taxpayer must first file an initial
two-year prescriptive period; administrative claim with the BIR. This claim for
(3) That there must be zero-rated or effectively refund or tax credit must be filed within two
zero-rated sales; years after the close of the taxable quarter when
(4) That input taxes were incurred or paid; the sales were made.
(5) That such input VAT payments are directly (2) The CIR is given a period of 90 days from the
attributable to zero-rated sales or effectively submission of complete documents in support of
zero-rated sales; and the application to either grant or deny the claim.
(6) That the input VAT payments were not applied (3) If the claim is denied by the CIR or the latter has
against any output VAT liability. [CIR v. Taganito not acted on it within the 90-day period, the

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Mining (CTA EB No. 1404, June 11, 2018)] taxpayer-claimant is then given a period of 30
days to file a judicial claim via petition for
review with the CTA.

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Q25: Are invoices and official receipts as evidence in
a claim for refund of unutilized input VAT
interchangeable? IV. DONOR’S TAX

A25: No, invoices and official receipts are not Q28: Y owns 1,000 shares of stock in A Corporation,

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interchangeable as evidence in a claim for refund of which has a fair market value of PhP5Million. Y
unutilized input VAT. posted it for sale in all his social media accounts for a
period of one month, and J’s offer to purchase for
In a claim for a refund of unutilized or excess input PhP4Million was the highest offer; thus Y sold his
VAT, the purchase of goods or properties must be shares of stock to J. The BIR subsequently assessed Y
supported by VAT invoices, while the purchase of
services must be supported by VAT official receipts.
[Republic of the Philippines v. Team Energy Corporation, ,
G.R. No. 197663, March 14, 2018]
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Donors Tax of PhP60,000, computed at 6% of the
PhP1Million difference between the FMV of the
shares and Y’s selling price to J. Is the BIR correct in
assessing Y?
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A28: No, the BIR is not correct because the transaction
Q26: Distinguish “excess input VAT” and an was arms-length.
“excessively collected tax.” Does proof of excess input
VAT entitle a taxpayer to a tax refund or credit? Under Section 100 of the NIRC, as amended by the
TRAIN Act, a sale, exchange, or other transfer of
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A26: The term “excess input VAT” means that the input property made in the ordinary course of business (a
VAT available as credit exceeded the output VAT; transaction which is a bona fide, at arm’s length, and
whereas “excessively collected tax” is a result of error free from any donative intent) will be considered as
or mistake in payment or collection of taxes. made for an adequate and full consideration in money
or money‟s worth.
The mere fact that a taxpayer has proved its excess
input VAT does not entitle it as a matter of right to a tax The sale transaction between Y and J is an arms-length
refund or credit. A claim for input VAT refund or credit transaction and free from any intent to donate, as
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is in the nature of tax exemption; and thus construed shown by the fact that the sale was made to the highest
strictly against the taxpayer. There must be strict bidder. The PhP4Million purchase price is thus
compliance with the prescriptive periods and considered adequate and full consideration for the
substantive requirements set by law before a claim for shares of stock, and no Donors Tax is due on the
tax refund or credit of excess input VAT may prosper. transaction.
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[Team Energy Corp. v. Commissioner of Internal Revenue,

G.R. Nos. 197663 & 197770, [March 14, 2018]]
Q29: Y sold his beach house for PhP10Million
because he has been unable to use it often, and the
Q27: What are the requirements and procedure for a maintenance cost is too high. The fair market value of
taxpayer to file a VAT refund? the property (highest of zonal and FMV of assessor) is
PhP15Million. The BIR assessed Y for donor’s tax on
A27: Under Section 112, Subsections (A) and (C) of the the difference between his selling price of
NIRC, the procedure to be followed in claiming a PhP10Million and the FMV of PhP15Million. Is the
refund or tax credit of unutilized input VAT is as BIR correct?

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 of Customs which are adverse to the
A29: No, the BIR is not correct because the sale of real Government under the Tariff and Customs
property held as capital asset is expressly excluded Code;
from the coverage of Section 100 of the NIRC on (g) Decisions of the Secretary of Trade and Industry,
transfers for less than adequate and full consideration. in the case of nonagricultural product,
commodity or article, and the
Considering that the beach house falls under the NIRC Secretary of Agriculture in the case of
definition of capital asset, the sale for less than FMV agricultural product, commodity or article,
will not result in any donor’s tax liability. involving dumping and
countervailing duties under the Tariff and
Customs Code, as amended, and safeguard

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V. REMEDIES measures under Republic Act No. 8800,
where either party may appeal the decision to
Q30: What cases fall under the exclusive appellate impose or not to impose said duties.

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jurisdiction of the Court of Tax Appeals to review by
appeal?
Q31: What cases involving criminal offenses fall
A30: Under Republic Act No. 9282, the CTA shall under the jurisdiction of the Court of Tax Appeals?
exercise exclusive appellate jurisdiction to review by

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appeal: A31: Under Republic Act No. 9282, The following cases
(a) Decisions of the Commissioner of Internal involving criminal offenses fall under the jurisdiction of
Revenue in cases involving disputed the Court of Tax Appeals:
assessments, refunds of internal (A) Exclusive original jurisdiction over all criminal
revenue taxes, fees or other charges, penalties in offenses arising from violations of the NIRC and
relation thereto, or other matters arising under
the NIRC
administered by the BIR;
or other

(b) Inaction by the Commissioner of Internal

laws I2 Tariff and Customs Code, as amended, and
other laws administered by the BIR or the
Bureau of Customs: Provided, that offenses
or felonies where the principal amount of taxes
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Revenue in cases involving disputed and fees, exclusive of charges and penalties,
assessments, refunds of internal claimed is less than One million pesos
revenue taxes, fees or other charges, penalties in (P1,000,000.00) or where there is no specified
relations thereto, or other matters arising under amount claimed shall be tried by the regular
the NIRC or other laws administered by the Courts and the jurisdiction of the CTA shall be
BIR, where the NIRC provides a specific period appellate.
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of action, in which case the (B) Exclusive appellate jurisdiction in criminal

inaction shall be deemed a denial; offenses:
(c) Decisions, orders or resolutions of the RTC in (a) Over appeals from the judgments,
local tax cases originally decided or resolved by resolutions or orders of the Regional
them in the exercise of their Trial Courts in tax cases
original or appellate jurisdiction; originally decided by them, in their
(d) Decisions of the Commissioner of Customs in respected territorial jurisdiction.
cases involving liability for customs duties, fees (b) Over petitions for review of the
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or other money charges, seizure, detention or judgments, resolutions or orders of the

release of property affected, fines, Regional Trial Courts in the exercise of
forfeitures or other penalties in relation thereto, their appellate jurisdiction over tax
or other matters arising under the Customs Law cases originally decided by the
or other laws administered by the Bureau of Metropolitan Trial Courts, Municipal
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Customs; Trial Courts and Municipal Circuit Trial

(e) Decisions of the Central Board of Assessment Courts in their respective jurisdiction.
Appeals in the exercise of its appellate
jurisdiction over cases involving
the assessment and taxation of real property Q32: What tax collection cases fall under the
originally decided by the provincial or city jurisdiction of the Court of Tax Appeals?
board of assessment appeals;
(f) Decisions of the Secretary of Finance on customs A32: The CTA has jurisdiction over the following tax
cases elevated to him automatically for review collection cases:
from decisions of the Commissioner (A) Exclusive original jurisdiction in tax collection

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 cases involving final and executory assessments assessment and at the same time, seek a refund of the
for taxes, fees, charges and penalties the taxes.
principal amount of which, exclusive of charges
and penalties, is One million pesos (b) The remedies available to the taxpayer depend on
(P1,000,000.00) or more. If the amount claimed is whether or not payment of the assessed deficiency tax
less than One million pesos, it shall be tried by was made by the taxpayer. A taxpayer may:
the proper Municipal Trial Court, Metropolitan (1) If no payment was made, contest the assessment
Trial Court and Regional Trial Court. by filing a written protest before the local
(B) Exclusive appellate jurisdiction in tax collection treasurer within 60 days from receipt of
cases: assessment. The local treasurer has 60 days to
(a) Over appeals from the judgments, decide the protest. Should the local treasurer

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resolutions or orders of the Regional deny or ignore the protest, the taxpayer may
Trial Courts in tax collection appeal with the court of competent jurisdiction
cases originally decided by (Section 195 of the Local Government Code).

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them, in their respective territorial (2) If payment was made, file a written claim for
jurisdiction. refund before bringing a suit in court within two
(b) Over petitions for review of the years from the date of payment. The written
judgments, resolutions or orders of the claim for refund from the local treasurer must be
Regional Trial Courts in the exercise of initiated within a two-year prescriptive period,

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their appellate jurisdiction over tax but before the judicial action. A taxpayer may
collection cases originally decided by proceed to the remedy of refund even without a
the Metropolitan Trial Courts, Municipal prior protest against an assessment. (Section 196
Trial Courts and Municipal Circuit Trial of the Local Government Code)
Courts, in their respective jurisdiction. (City of Manila v. Cosmos Bottling Corporation,

Q33: On January 15, 2007, “X” Corporation received

an assessment from the City of Manila for deficiency
I2 G.R. No. 196681, June 27, 2018)

Q34: (a) If there is a finding by the BIR of a tax

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local business taxes. “X” Corporation protested the deficiency of a taxpayer for the taxable year since the
assessment in a letter dated January 18, 2008 and taxpayer had carried over to the taxable year the prior
tendered payment of an amount which they argued year‟s excess credits which have already been fully
was the correct computation of their local business applied against its income tax liability for the prior
tax. The City Treasurer refused to receive the payment taxable year, is the BIR required to issue both the
and denied “X” Corporation‟s protest, which denial preliminary assessment notice and the final
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was received on February 6, 2007. “X” Corporation assessment notice and demand to enforce the
was then constrained to pay the assessment and filed deficiency income tax liability of the taxpayer for the
a claim for refund with the City Treasurer raising the taxable year?
same grounds as discussed in its protest. “X”
Corporation filed its complaint for refund with the (b) When the two-year period is about to prescribe
Regional Trial Court of Manila on March 8, 2007. The and the claim for refund with the BIR Commissioner
City of Manila argues that the assessment against “X” has not been acted upon, what should the taxpayer
Corporation became final and executory when the do?
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latter effectively abandoned its protest and instead

sued in court for a refund of the assessed tax and A34: (a) No, a preliminary assessment notice is no
charges. longer required in this case; but a final assessment
(a) Is the City of Manila correct? notice and demand will still be required.
(b) What are the remedies of a taxpayer in case of
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an assessment for deficiency local taxes? Section 228 of the National Internal Revenue Code, as
amended, states that a pre-assessment notice shall no
A33: (a) No, the City of Manila‟s argument is wrong. longer be required when a taxpayer who opted to claim
As stated by the Supreme Court [in the 2018 case of a refund or tax credit of excess creditable withholding
City of Manila v. Cosmos Bottling Corporation], a tax for a taxable period was determined to have carried
taxpayer who protested and paid an assessment is not over and automatically applied the same amount
precluded from later instituting an action for refund or claimed against the estimated tax liabilities for the
credit. If the deficiency local tax assessment was paid, taxable quarter or quarters of the succeeding taxable
the taxpayer may maintain an action in court year.
questioning the validity and correctness of the

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However, the BIR is still required to issue a final The law provides for two scenarios before a judicial
assessment notice and demand letter to enforce the claim for refund may be filed with the CTA: (1) the full
deficiency income tax liability of the taxpayer. or partial denial of the claim within the 90-day period
(Commissioner of Internal Revenue v. Cebu Holdings, Inc., from the filing of the administrative claim for refund or
G.R. No. 189792, June 20, 2018) tax credit, or (2) the lapse of the said 90-day period
without the CIR having acted on the claim. The
(b) When the two-year period is about to prescribe and taxpayer-claimant may only file its judicial claim for
the claim for refund with the Commissioner of Internal refund or tax credit for unutilized input VAT upon the
Revenue (CIR) has not been acted upon, the taxpayer happening of any one of the two scenarios.
should file a Petition for Review with the CTA within
the said two-year period. The law fixed the same The failure of the taxpayer to observe the said period

1
period of two (2) years for filing an administrative renders the judicial claim premature, divesting the CTA
claim for refund with the CIR, and for filing a petition of jurisdiction to act on it. (See Team Sual Corporation vs.
with the CTA. (Mindanao II Geothermal Partnership v. Commissioner of Internal Revenue, G.R. Nos. 201225-26,

02
Commissioner of Internal Revenue, C.T.A. Case No. 8251, 201132, 201133, April 18, 2018)
[February 27, 2014]; NEC Logistics Phils., Inc. v.
Commissioner of Internal Revenue, C.T.A. Case No. 8533,
[December 18, 2014]) Q37: Chevron Philippines, Inc. (Chevron) filed an
administrative claim for refund or credit with the BIR

02
for alleged overpayment of taxes on imported
Q35: Can evidence not presented in the finished gasoline and diesel fuel. The BIR, however,
administrative claim for refund in the Bureau of did not act on Chevron's claim. Thus, Chevron
Internal Revenue be presented in the Court of Tax elevated the case to the CTA-Special First Division via
Appeals? a petition for review. The CTA-Special First Division

A35: Yes, new evidence not presented in the

administrative claim for refund may be presented to
the Court of Tax Appeals to support the claimant‟s case
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rendered its decision partly granting the petition. The
BIR moved for the reconsideration of this decision.
Chevron filed its opposition to the motion for
reconsideration and asserted that the BIR's motion for
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for tax refund. reconsideration was a pro forma motion because the
BIR failed to set the motion for hearing pursuant to
The power of the Court of Tax Appeals to exercise its Revised Rules of the CTA. The CTA-Special First
appellate jurisdiction under Republic Act No. 1125, as Division agreed with Chevron and denied the BIR's
amended by Republic Act No 9282, does not preclude it motion for reconsideration. The BIR once again
from considering evidence that was not presented in moved for a reconsideration of the resolution, which
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the administrative claim in the Bureau of Internal the CTA-Special First Division denied with finality.
Revenue. As evidence is considered and evaluated After having confirmed that the BIR did not elevate
again, the scope of the Court of Tax Appeals' review the issue before the CTA En Banc within the 15-day
covers factual findings. (Philippine Airlines, Inc. v. reglementary period to appeal, issued an entry of
Commissioner of Internal Revenue, G.R. Nos. 206079-80 & judgment. The BIR filed a special civil action for
206309, [January 17, 2018]) certiorari under Rule 65 of the Rules of Court with the
Supreme Court. Rule on the petition. Will the special
civil action for certiorari prosper?
PL

Q36: The taxpayer filed its administrative claim with

the BIR for the refund or tax credit of unutilized A37: No, the BIR’s petition should be dismissed.
input VAT within two-years after the close of the
taxable quarter when the sales were made. The For cases before the CTA, a decision rendered by a
taxpayer filed a judicial claim for refund with the division of the CTA is appealable to the CTA En Banc
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CTA when the Commissioner of Internal Revenue as provided by Section 18 of R.A. No. 1125, as amended
(CIR) failed to resolve the claim within the same by R.A. No. 9282. The appropriate remedy to challenge
two-year period. The CIR moved to dismiss the the resolution of the CTA Division is an ordinary
judicial claim on the ground that it was filed appeal to the CTA En Banc, not a petition for certiorari
prematurely. Is the CIR correct? with the Supreme Court. (Bureau of Internal Revenue v.
Acosta, G.R. No. 195320, [April 23, 2018])

A36: Yes, the CIR is correct that the judicial claim was
filed prematurely. Q38: The Philippine Ports Authority (PPA) received a
letter from the City Assessor of Davao for the

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assessment and collection of real property taxes claiming a refund, pursuant to its powers under
against its administered properties located at Sasa Republic Act No. 1125, as amended.
Port. PPA appealed the assessment through the Office
of the City Treasurer of Davao. The City Treasurer Further, the Supreme Court [in the 2018 case of Steel
forwarded the appeal to the Local Board of Corporation of the Philippines v. Bureau of Customs] has
Assessment Appeals (LBAA); which was eventually declared that the Court of Tax Appeals may likewise
appealed to the Central Board of Assessment Appeals take cognizance of cases directly challenging the
(CBAA), then to the CTA. While the case was constitutionality or validity of a tax law or regulation or
pending, the City of Davao posted a notice of sale of administrative issuance (revenue orders, revenue
delinquent real properties of PPA, and then sold the memorandum circulars, rulings).
said properties. Subsequently, PPA filed a petition for

1
certiorari with the Court of Appeals (CA), (b) Section 11, Paragraph 4 of R.A. No. 1125, as
questioning the City of Davao‟s taxation of its amended by R.A. No. 9282, provides that an appeal to
properties and the subsequent auction and sale of the the CTA will not suspend the payment, levy, distraint,

02
properties, which were without or in excess of its and/or sale of any property of the taxpayer for the
jurisdiction. The CA dismissed the petition, holding satisfaction of his tax liability as provided by existing
that the CTA had exclusive jurisdiction to determine law. However when, in the opinion of the CTA, the
the issues and that the PPA should have applied for collection may jeopardize the interest of the
the issuance of writ of injunction or prohibition Government and/or the taxpayer, it may suspend the

02
before the CTA. To this, PPA, filed a motion for said collection and require the taxpayer either to
reconsideration which was denied by the CA. Thus, deposit the amount claimed or to file a surety bond for
PPA filed a Petition for Review before the Supreme not more than double the amount. Further, the
Court. Does the CA have jurisdiction to issue the requirement of deposit or surety bond may be
injunctive relief prayed for by PPA? dispensed with by the CTA. (Steel Corporation of the

A38: No, the CA has no jurisdiction to issue the

injunctive relief prayed for by PPA.
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Philippines v. Bureau of Customs, G.R. No. 220502,
[February 12, 2018]; citing Pacquiao v. Court of Tax
Appeals, First Division (G.R. No. 213394, April 6, 2016,
789 SCRA 19)
BR
Republic Act No. 1125, as amended by Republic Act
No. 9282, provides that the Court of Tax Appeals has
exclusive appellate jurisdiction over decisions of the Q40: What are the remedies for excess creditable
CBAA in the exercise of its appellate jurisdiction over withholding taxes or overpayment?
cases involving the assessment and taxation of real
property originally decided by the provincial or city A40: The remedies are as follows:
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board of assessment appeal. Once a court acquires (1) They are allowed as automatic credit against the
jurisdiction over a case, it also has the power to issue all taxpayer‟s income tax due for the taxable
auxiliary writs necessary to maintain and exercise its quarters/years immediately succeeding the
jurisdiction, to the exclusion of all other courts. taxable quarters/years in which the excess credit
arose.
Thus, once the Court of Tax Appeals acquired (2) In lieu of the automatic application, apply for (a)
jurisdiction over petitioner's appeal, the Court of cash refund, or (b) tax credit certificate.
Appeals would have been precluded from taking
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cognizance of the case. (Philippine Ports Authority v. City

of Davao, G.R. No. 190324 , [June 6, 2018]) Q41: May a taxpayer revoke its choice to claim for a
refund, and instead, after having claimed for refund
in his return proceed to exercise the option to credit
Q39: (a) Does the CTA have jurisdiction to determine the tax in the succeeding taxable quarters/years?
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the constitutionality or validity of tax laws, rules and

regulations, and other administrative issuances? A41: No, the taxpayer may not revoke its claim for
refund and proceed to credit the tax in the succeeding
(b) In what cases does the CTA have authority to issue taxable quarters/years. In the 2018 case of Rhombus
injunctive writs to restrain the collection of tax? Energy Inc v. CIR, the Supreme Court clarified that the
irrevocability rule applies not only in the exercise of the
A39: (a) Yes, the Court of Tax Appeals has jurisdiction option to carry over but also in the exercise of the
to pass upon the constitutionality or validity of a tax option to claim for refund. (Rhombus Energy v. CIR, G.R.
law or regulation when raised by the taxpayer as a No. 206362, August 1, 2018. Note: it is important to cite
defense in disputing or contesting an assessment or the case of Rhombus if this question comes up because of a

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conflicting earlier ruling by the SC)

Q42: Erwin Santos was criminally charged for

violation of Sec. 255 of the Tax Code, or failure to pay
deficiency taxes for taxable year 2015 despite notice
and demand. Santos, the President of Asia-Pacific
Industrial Sales Corporation (APISC), pleaded “Not
Guilty” during arraignment. The CTA Third Division
dismissed the case and acquitted the accused for
failure of the prosecution to prove their guilt beyond

1
reasonable doubt. Upon denial of the Motion for
Reconsideration, the BIR filed a Petition for Review
at the CTA En Banc. The BIR contended that the

02
deficiency assessments have become final, executory,
and demandable for failure of Santos to protest. It
appeared that the revenue officer who investigated
the books of APISC did so with a mere referral letter
and not a “letter of authority”.

02
(a) Can the accused be held civilly liable for the
tax assessments despite his acquittal from the
criminal case?
(b) Is the BIR’s assessment valid?

A42: (a) Yes. Despite acquittal in a criminal case based

on reasonable doubt, a taxpayer can be held civilly
liable for a tax assessment when the prosecution proves
its case in the civil action by a preponderance of
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evidence. It is settled that the extinction of the penal
action does not carry with it the extinction of the civil
liability.

(b) No, the assessment is not valid. As the Supreme

Court held in Medicard Philippines, Inc. vs. CIR (GR
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222743, April 5, 2017), an examination of the taxpayer

may not be validly conducted without prior authority
from the Commissioner of Internal Revenue himself or
by his duly authorized representative, through a Letter
of Authority (LOA). Without an LOA, the assessment
issued by the BIR is void. (People of the Philippines vs.
Robert Sia and John Kenneth L. Ocampo, CTA (En Banc)
Criminal Case No. 045, December 12, 2018)
PL
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