DOMONDONs CUT AND PASTE

1

T A X A T I O N
Ver. 2004
Analysis of re!io"s #ar $"es%ions s&o's %&a% %&ere are f"n(a)en%al
(o*%rines %&a% are ri*& so"r*es of #ar $"es%ions. +% is for %&is reason '&y %&e
a"%&or (e*i(e( %o *raf% so)e sen%en*es an( &rases '&i*& %&e #ar *an(i(a%e
)ay *"% an( as%e %o &is ans'ers %o %&e #ar ,"es%ions. T&is 'o"l( also ser!e
as a rea(y referen*e for o-.e*%i!e %ye of ,"es%ions s"*& as (efini%ions/
en")era%ions/ (is%in*%ions/ e%*. T&e )a%erials 'ere *"lle( fro) areas '&ere
re!io"s #ar $"es%ions 'ere so"r*e( an( fro) sele*%e( ."risr"(en*e " %o
0"ne 2001.
T&e "ser of %&ese *"% an( as%e )a%erials s&o"l( -e 'arne( %&a% %&e
sen%en*es s&o"l( -e a(."s%e( %o )ee% %&e a*%"al re,"ire)en%s of se*ifi* #ar
$"es%ions/ an( no% %o -e 'ri%%en !er-a%i) as %&e ans'ers.
T&e "ser s&o"l( *on*en%ra%e on %&e i%e)s )ar2e( BAR -e*a"se %&ey are
%&e (o*%rines fro) '&ere #ar ,"es%ions 'ere (eri!e( for %&e erio( 1331 %o
2001.
WARNING: So)e of %&e *on*e%s in!ol!in4 %&e Co"r% of Ta5 Aeals
s&o"l( -e rea( in rela%ion %o %&e ro!isions of 6e"-li* A*% No. 3272 '&i*& %oo2
effe*% on Aril 21/ 2004.
T&is !ersion is for %&e e5*l"si!e "se of re!ie'ees '&o &a!e a%%en(e( %&e
re!ie' le*%"res of Prof. A-elar(o T. Do)on(on, an( o%&er re!ie'ees '&o 'ere
ersonally a"%&ori8e( -y &i). Una"%&ori8e( "sers s&all -e s"-.e*% %o %&e la' of
2ar)a/ s"*& %&a% %&ey 'ill no% ass %&e #ar E5a)s an( if %&ey (o so 'o"l( -e
"n&ay an( "ns"**essf"l in life.
6EV+E9EES MUST 6EP6ODUCE O6 P6+NT T:+S AT T:E+6 E;PENSE
#ECAUSE T:ESE NOTES A6E NOT A PA6T O< T:E :ANDOUTS =+VEN
<O6 <6EE #> >OU6 6EV+E9 CENTE6. T:ESE A6E E;T6A :ANDOUTS
NOT PA6T O< 9:AT >OU PA+D <O6.
GENERAL PRINCIPLES OF TAXATION
Ta5es are %&e life-loo( of %&e 4o!ern)en% for 'i%&o"% %a5es/ %&e
4o!ern)en% *an nei%&er e5is% nor en("re. A rin*ial a%%ri-"%e of so!erei4n%y/ %&e
e5er*ise of %a5in4 o'er (eri!es i%s so"r*e fro) %&e !ery e5is%en*e of %&e s%a%e
'&ose so*ial *on%ra*% 'i%& *i%i8ens o-li4es i% %o ro)o%e "-li* in%eres% an(
*o))on 4oo(. (National Power Corporation v. City of Cabanatuan, G. R. No.
149110, April 9, 2003
BAR: 1. T&e %&eory -e&in( %&e e5er*ise of %&e o'er %o %a5 e)ana%es
fro) ne*essi%y/ 'i%&o"% %a5es/ 4o!ern)en% *anno% f"lfill i%s )an(a%e of ro)o%in4
%&e 4eneral 'elfare an( 'ell?-ein4 of %&e eole. (National Power Corporation
v. City of Cabanatuan, G. R. No. 149110, April 9, 2003
1
Coyri4&%e( -y Prof. A#E@A6DO T.DOMONDON
T&e o'er %o %a5 in*l"(es %&e o'er %o (es%roy/ '&ere %&e %a5 la' is !ali(
-e*a"se a %a5ayer *o"l( no% see2 %&e n"llifi*a%ion of a !ali( %a5 la' solely "on
%&e re)ise %&a% %&e *olle*%ion of %&e %a5 'ill i)o!eris& &i).
T&e e5er*ise of %&e o'er %o %a5 is no% (es%r"*%i!e of a %a5ayers roer%y
'&ere %&e so"r*e is an in!ali( %a5 la'/ '&i*& !iola%es %&e in&eren% or
*ons%i%"%ional li)i%a%ion -e*a"se %&ere is a sy)a%&e%i* *o"r% %&a% s&all *o)e %o
%&e s"**or of %&e %a5ayer an( (e*lare s"*& %a5 la' as n"ll an( !oi(. +% 'o"l(
no% %&"s -e %&e so"r*e of %&e o'er %o (es%roy.
+n *ase of (o"-%/ %a5 la's )"s% -e *ons%r"e( s%ri*%ly a4ains% %&e S%a%e an(
li-erally in fa!or of %&e %a5ayer -e*a"se %a5es/ as -"r(ens '&i*& )"s% -e
en("re( -y %&e %a5ayer/ s&o"l( no% -e res")e( %o 4o -eyon( '&a% %&e la'
e5ressly an( *learly (e*lares. (!in"oln P#ilippine !ife $n%uran"e Co&pany,
$n"., et"., v. Court of Appeal%, et al., 293 'CRA 92, 99
Ta5 e5e)%ions are s%ri*%ly *ons%r"e( a4ains% %&e %a5ayer an( li-erally in
fa!or of %&e S%a%e an( )"s% -e *learly s&o'n an( -ase( on lan4"a4e in %&e la'
%oo lain %o -e )is%a2en ((avao Gulf !u&ber Corporation v. Co&&i%%ioner of
$nternal Revenue, et al., 293 'CRA )*, ++, -e*a"se %a5es are ne*essary for %&e
*on%in"e( e5is%en*e of %&e S%a%e.
A re!ersal of a #+6 r"lin4 fa!ora-le %o a %a5ayer 'o"l( no% ne*essarily
*rea%e a ere%"al e5e)%ion in &is fa!or/ for af%er all %&e 4o!ern)en% is ne!er
es%oe( fro) *olle*%in4 %a5es -e*a"se of )is%a2es or errors on %&e ar% of i%s
a4en%s. (!in"oln P#ilippine !ife $n%uran"e Co&pany, $n"., et"., v. Court of
Appeal%, et al., 293 'CRA 92, 99
BAR: 2. As a 4eneral r"le/ %&e ri4&% of %&e 4o!ern)en% %o *olle*% %a5es
is i)res*ri%i-le -e*a"se %&e !ery e5is%en*e of %&e s%a%e (een(s "on %&e
e5er*ise of %&is o'er.
:o'e!er/ s%a%"%es )ay ro!i(e for res*ri%i!e erio(s for %&e *olle*%ion of
ar%i*"lar 2in(s of %a5es.
BAR: 3. As a 4eneral r"le/ No *o"r% s&all &a!e %&e a"%&ori%y %o 4ran%
an in."n*%ion %o res%rain %&e *olle*%ion of any na%ional in%ernal re!en"e %a5/ fee or
*&ar4e. ASe*. 217/ N+6CB
:o'e!er/ %&e Co"r% of Ta5 Aeals is e)o'ere( %o en.oin %&e *olle*%ion
of %a5es %&ro"4& a()inis%ra%i!e re)e(ies '&en *olle*%ion *o"l( .eoar(i8e %&e
in%eres% of %&e 4o!ern)en% or %a5ayer. ASe*. 11/ 6e. A*% No. 112CB
BAR: 4. T&e o'er %o %a5 is an in&eren% o'er of %&e s%a%e e5er*ise(
%&ro"4& %&e le4isla%"re i)osin4 -"r(ens "on s"-.e*%s an( o-.e*%s 'i%&in i%s
."ris(i*%ion %o raise re!en"es in or(er %o )ee% %&e le4i%i)a%e o-.e*%s of
4o!ern)en%.
+%s na%"re is %&a% i% is -o%& an in&eren% o'er of 4o!ern)en% an( an
e5er*ise of le4isla%i!e o'er.
T&e %&ree "roses for %&e e5er*ise of %&e %a5in4 o'er areD AaB %&e
re!en"e "roseE A-B %&e s")%"ary "roseE an( A1B %&e *o)ensa%ory
"rose.
One of %&e "roses of %a5a%ion is %o raise re!en"es %o )ee% %&e
re*o4ni8e( o-.e*%s of "roses of 4o!ern)en%.
T&e s")%"ary "rose of %a5a%ion is %o ro%e*% %&e &eal%&/ safe%y or
)orals of %&e in&a-i%an%s. T&is is in .oin% e5er*ise of %&e o'er of %a5a%ion an(
oli*e o'er '&ere re4"la%ory %a5es are *olle*%e(.
2
T&e *o)ensa%ory "rose of %a5a%ion is %o i)le)en% %&e so*ial ."s%i*e
ro!isions of %&e *ons%i%"%ion %&ro"4& %&e ro4ressi!e sys%e) of %a5a%ion/ '&i*&
'o"l( res"l% %o e,"al (is%ri-"%ion of 'eal%&/ e%*.
BAR: 5. +n re*en% years/ %&e in*reasin4 so*ial *&allen4es of %&e %i)es
e5an(e( %&e s*oe of s%a%e a*%i!i%y/ an( %a5a%ion &as -e*o)e a %ool %o reali8e
so*ial ."s%i*e an( %&e e,"i%a-le (is%ri-"%ion of 'eal%&/ e*ono)i* ro4ress an( %&e
ro%e*%ion of lo*al in("s%ries as 'ell as "-li* 'elfare an( si)ilar o-.e*%i!es.
ANa%ional Po'er Corora%ion !. Ci%y of Ca-ana%"an/ =. 6. No. 143110/ Aril 3/
2001B
T&e follo'in4 are %&e (is%in*%ions -e%'een a %a5 an( a li*ense feeD
a. PU6POSED A %a5 is i)ose( for re!en"e "roses 9:+@E a li*ense
fee is i)ose( for re4"la%ory "roses. AUnless i% is a .oin% e5er*ise of -o%& %&e
oli*e o'er an( %&e o'er of %a5a%ionB
-. #AS+SD A %a5 is i)ose( "n(er %&e o'er of %a5a%ion 9:+@E a li*ense
fee is i)ose( "n(er oli*e o'er.
*. AMOUNTD T&ere is no li)i% as %o %&e a)o"n% of a %a5 9:+@E %&e
a)o"n% of li*ense fee %&a% *o"l( -e *olle*%e( is li)i%e( %o %&e *os% of %&e li*ense
an( %&e e5enses of oli*e s"r!eillan*e an( re4"la%ion.
(. T+ME O< PA>MENTD Ta5es are nor)ally ai( af%er %&e s%ar% of a
-"siness 9:+@E a li*ense fee -efore %&e *o))en*e)en% of -"siness.
e. E<<ECT O< NON?PA>MENTD <ail"re %o ay a %a5 (oes no% )a2e %&e
-"siness ille4al 9:+@E fail"re %o ay a li*ense fee )a2es %&e -"siness ille4al.
f. SU66ENDE6D Ta5es -ein4 %&e life-loo( of %&e s%a%e/ *anno% -e
s"rren(ere( e5*e% for la'f"l *onsi(era%ion 9:+@E a li*ense fee )ay -e
s"rren(ere( 'i%& or 'i%&o"% *onsi(era%ion.
T&e S"4ar A(."s%)en% A*% '&i*& in*rease( e5is%in4 %a5es on s"4ar 'as
ena*%e( %o s%a-ili8e %&e s"4ar in("s%ry %o reare i% for %&e loss of i%s ,"o%a in
%&e U.S. )ar2e% 'as le!ie( for a re4"la%ory "rose %o ro%e*% an( ro)o%e %&e
s"4ar in("s%ry '&i*& is also for a "-li* "rose. (!ut, v. Araneta, 9+ P#il. 14+
T&e P&ils"4in f"n(/ an i)osi%ion on s"4ar/ %o raise f"n(s %o *on("*%
resear*& for %&e i)ro!e)en% of %&e s"4ar in("s%ry/ is for %&e "rose of
s%a-ili8in4 %&e s"4ar in("s%ry '&i*& one of %&e illars of %&e P&iliine e*ono)y
'&i*& affe*%s %&e 'elfare of %&e S%a%e. T&e le!y is no% so )"*& an e5er*ise of %&e
o'er of %a5a%ion/ nor %&e i)osi%ion of a se*ial le!y/ -"% %&e e5er*ise of oli*e
o'er '&i*& is for %&e 4eneral 'elfare of %&e en%ire *o"n%ry/ %&erefore for a "-li*
"rose. (Republi" v. -a"olo./0ur"ia Co., et al., G.R. No. !/19+24, 1uly 9,
19**
Mo%or !e&i*le re4is%ra%ion fees are no' *onsi(ere( re!en"e or %a5
)eas"res. Conse,"en%ly/ en%i%ies en.oyin4 %a5 e5e)%ions are also e5e)% fro)
ayin4 )o%or !e&i*le re4is%ra%ion fees. APA! v. 2.u, G.R. No. !/413+3, Au3u%t
14, 19++
T&e %a5 i)os% on !i(eo4ra) es%a-lis&)en%s is no% only re4"la%ory -"% a
re!en"e )eas"re -e*a"se %&e earnin4s of s"*& es%a-lis&)en%s &a!e no% -een
s"-.e*% %o %a5 (eri!in4 %&e 4o!ern)en% of an a((i%ional so"r*e of in*o)e. T&e
is no o!er re4"la%ion as a res"l% of %&e i)osi%ion of %&e %a5 -e*a"se of %&e nee(
for re4"la%in4 a ne' in("s%ry. (5io v. 6i.eo3ra& Re3ulatory -oar., 141 'CRA
20+
T&e OPS< (esi4ne( %o rei)-"rse 4asoline *o)anies for in*reases in %&e
ri*e of *r"(e oil res"l%in4 fro) 'orl( ri*e )o!e)en%s an( e5*&an4e
fl"*%"a%ions are %a5es *olle*%e( in %&e e5er*ise of %&e oli*e o'er in or(er %o
s%a-ili8e ri*es of 4asoline an( o%&er e%role") ro("*%s. (7%&ena v. 7rbo%,
G.R. No. 99++*, 0ar"# 31, 1993
3
T&e in&eren% an( *ons%i%"%ional li)i%a%ions %o %&e o'er of %a5a%ion are
safe4"ar(s '&i*& 'o"l( re!en% a-"se in %&e e5er*ise of %&is o%&er'ise
"nli)i%e( an( lenary o'er.
BAR: 6. T&e in&eren% li)i%a%ions are AaB "-li* "roseE A-B no
i)roer (ele4a%ion of le4isla%i!e a"%&ori%y %o %a5E A*B %erri%oriali%yE A(B
re*o4ni%ion of 4o!ern)en% e5e)%ionsE an( AeB o-ser!an*e of %&e rin*ile of
*o)i%y.
So)e a"%&ori%ies in*l"(e no (o"-le %a5a%ion.
T&e %a5 re!en"es are for a "-li* "rose if "%ili8e( for %&e -enefi% of %&e
*o))"ni%y in 4eneral. An al%erna%i!e )eanin4 is %&a% %a5 ro*ee(s s&o"l( -e
"%ili8e( only %o a%%ain %&e o-.e*%i!es of 4o!ern)en%.
T&e o'er of %a5a%ion is e5er*ise( -y %&e le4isla%"re '&ose )e)-ers are
%&e )ere (ele4a%es of %&e eole &en*e %&e o'er *o"l( no% %&erefore -e
(ele4a%e( -y %&e le4isla%"re %o o%&er (ear%)en%s of 4o!ern)en%/ li2e %&e
e5e*"%i!e.
(ele3ata pote%ta% non pote%t .ele3ari. A (ele4a%e( o'er *anno% -e
f"r%&er (ele4a%e(.
T&e o'er %o %a5 s&o"l( -e e5er*ise( only 'i%&in %&e %erri%orial -o"n(aries
of %&e %a5in4 a"%&ori%y. +n %&eory/ i% is only 'i%&in a s%a%es %erri%orial -o"n(aries
%&a% a s%a%e *o"l( 4i!e ro%e*%ion/ &en*e i% is only 'i%&in %&a% %erri%ory %&a% i% *o"l(
(e)an( s"or% in %&e for) of %a5es.
$n par pare&, non #abet i&periu&. As -e%'een e,"als %&ere is no
so!erei4n/ &en*e forei4n so!erei4ns are no% %o -e s"-.e*% %o %&e so!erei4n
o'er of %a5a%ion.
Co)i%y is %&e rese*% a**or(e( %o o%&er so!erei4n na%ions. T&"s/
roer%ies of o%&er so!erei4n na%ions 'i%&in %&e %erri%ory of %&e %a5in4 a"%&ori%y
s&o"l( no% -e s"-.e*% %o %a5a%ion as a )eas"re of rese*% %o a *o?e,"al.
=o!ern)en% e5e)%ion s&o"l( -e re*o4ni8e( in or(er %o re("*e %&e
a)o"n% of )oney %&e 4o!ern)en% is &an(lin4. T&ere is !eri%y in %&e )a5i)/ <or
%&e 4o!ern)en%/ e5e)%ion is %&e r"le an( %a5a%ion is %&e e5*e%ion.
BAR: 7. Si%"s of %a5a%ion is %&e la*e or %&e a"%&ori%y %&a% &as %&e
o'er %o *olle*% %a5es. +% is re)ise( "on %&e sy)-io%i* rela%ion -e%'een %&e
%a5ayer an( %&e S%a%e.
T&e la*e %&a% 4i!es ro%e*%ion is %&e la*e %&a% &as %&e ri4&% %o (e)an(
%&a% i% -e s"or%e( in %&e for) of %a5es so i% *o"l( *on%in"ally 4i!e ro%e*%ion.
T&e si%"s of real roer%y %a5es is %&e la*e '&ere %&e roer%y is lo*a%e(
-e*a"se i% is %&a% la*e %&a% 4i!es ro%e*%ion. T&e ali*a-le *on*e% is le8 %itu%
or le8 rei %itae.
T&e si%"s of %a5a%ion of %an4i-le ersonal roer%y is %&e la*e '&ere %&e
o'ner is lo*a%e( -e*a"se i% is %&a% la*e %&a% 4i!es ro%e*%ion %o %&e o'ner '&i*&
ro%e*%ion e5%en(s %o %&e %an4i-le ersonal roer%y. T&e ali*a-le *on*e% is
&obilia %e9uuntur per%ona&.
+n%an4i-le ersonal roer%y )ay &a!e o-%aine( a -"siness si%"s in a
ar%i*"lar la*e e!en if lo*a%e( else'&ere. T&"s/ %&e (i!i(en(s earne( fro)
4
(o)es%i* *orora%ions are *onsi(ere( as in*o)e fro) 'i%&in/ irrese*%i!e '&ere
%&e s&ares of s%o*2 of s"*& (o)es%i* *orora%ion is lo*a%e(.
T&e si%"s of in*o)e %a5a%ion is (e%er)ine( -y %&e na%ionali%y/ resi(en*e of
%&e %a5ayer an( so"r*e of in*o)e. Please refer %o 4eneral rin*iles of in*o)e
%a5a%ion "n(er in*o)e %a5a%ion.
T&e si%"s of e5*ise %a5es is %&e la*e '&ere %&e ri!ile4e is e5er*ise(
-e*a"se i% is %&a% la*e %&a% 4i!es ro%e*%ion.
T&e si%"s of %ransfer %a5es/ s"*& as es%a%e an( (onors %a5es/ is
(e%er)ine( -y %&e na%ionali%y an( resi(en*e of %&e %a5ayer an( %&e la*e '&ere
%&e roer%y is lo*a%e(. Please refer %o es%a%e an( (onors %a5es.
T&e si%"s of %a5a%ion of a *on%ra*% for a ro.e*% '&i*& in*l"(e( %&e
*ons%r"*%ion an( ins%alla%ion in %&e P&iliines of e,"i)en% (esi4ne(/ fa-ri*a%e(
an( )an"fa*%"re( in 0aan is %&e P&iliine for %&e *ons%r"*%ion an( ins%alla%ion
'or2 an( for %&e ie*es of e,"i)en% an( 0aan for s"lies '&i*& 'ere
*o)le%ely (esi4ne( an( en4ineere( in 0aan. (Co&&i%%ioner of $nternal
Revenue v. 0arubeni Corporation, G.R. No. 13)3)), (e"e&ber 1+, 2001
T&e 4eneral or in(ire*% *ons%i%"%ional li)i%a%ions as 'ell as %&e
se*ifi* or (ire*% *ons%i%"%ional li)i%a%ions.
BAR: 8. T&e 4eneral or in(ire*% *ons%i%"%ional li)i%a%ions are %&e
follo'in4D
a. D"e ro*ess *la"seE
-. E,"al ro%e*%ion *la"seE
*. <ree(o) of %&e ressE
(. 6eli4io"s free(o)E
e. Non?i)air)en% *la"seE
f. @a'?)a2in4 ro*essD
1B #ill s&o"l( e)-ra*e only one s"-.e*% e5resse( in %&e %i%le
%&ereofE
2B T&ree A1B rea(in4s on %&ree seara%e (aysE
1B Prin%e( *oies in final for) (is%ri-"%e( %&ree A1B (ays -efore
assa4e.
4. Presi(en%ial o'er %o 4ran% rerie!es/ *o))"%a%ions an( ar(ons an(
re)i%%al of fines an( forfei%"re af%er *on!i*%ion -y final ."(4)en%.
BAR: 9. T&e se*ifi* or (ire*% *ons%i%"%ional li)i%a%ions are %&e follo'in4D
a. No i)rison)en% for non?ay)en% of a oll %a5E
-. Ta5a%ion s&all -e "nifor) an( e,"i%a-leE
*. Con4ress s&all e!ol!e a ro4ressi!e sys%e) of %a5a%ionE
(. All aroria%ion/ re!en"e or %ariff -ills s&all ori4ina%e e5*l"si!ely in %&e
:o"se of 6eresen%a%i!es/ -"% %&e Sena%e )ay roose an( *on*"r 'i%&
a)en()en%sE
e. T&e Presi(en% s&all &a!e %&e o'er %o !e%o any ar%i*"lar i%e) or i%e)s
in an aroria%ion/ re!en"e/ or %ariff -ill/ -"% %&e !e%o s&all no% affe*% %&e i%e) or
i%e)s %o '&i*& &e (oes no% o-.e*%E
f. Dele4a%e( o'er of %&e Presi(en% %o i)ose %ariff ra%es/ i)or% an(
e5or% ,"o%as/ %onna4e an( '&arfa4e ("esD
1B Dele4a%ion -y Con4ress
2B T&ro"4& a la'
1B S"-.e*% %o Con4ressional li)i%s an( res%ri*%ions
4B 9i%&in %&e fra)e'or2 of na%ional (e!elo)en% ro4ra).
4. Ta5 e5e)%ion of *&ari%a-le ins%i%"%ions/ *&"r*&es/ arsona4es an(
*on!en%s a"r%enan% %&ere%o/ )os,"es/ an( all lan(s/ -"il(in4s an(
5
i)ro!e)en%s of all 2in(s a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for reli4io"s/
*&ari%a-le or e("*a%ional "rosesE
&. No %a5 e5e)%ion 'i%&o"% %&e *on*"rren*e of )a.ori%y !o%e of all
)e)-ers of Con4ressE
i. No "se of "-li* )oney or roer%y for reli4io"s "roses e5*e% if
ries% is assi4ne( %o %&e ar)e( for*es/ enal ins%i%"%ions/ 4o!ern)en% or&ana4e
or lerosari")E
.. Money *olle*%e( on %a5 le!ie( for a se*ial "rose %o -e "se( only for
s"*& "rose/ -alan*e if any/ %o 4eneral f"n(sE
2. T&e S"re)e Co"r%Fs o'er %o re!ie' ."(4)en%s or or(ers of lo'er
*o"r%s in all *ases in!ol!in4 %&e le4ali%y of any %a5/ i)ose/ assess)en% or %oll or
%&e le4ali%y of any enal%y i)ose( in rela%ion %o %&e a-o!eE
l. A"%&ori%y of lo*al 4o!ern)en% "ni%s %o *rea%e %&eir o'n so"r*es of
re!en"e/ %o le!y %a5es/ fees an( o%&er *&ar4es s"-.e*% %o 4"i(elines an(
li)i%a%ions i)ose( -y Con4ress *onsis%en% 'i%& %&e -asi* oli*y of lo*al
a"%ono)yE
). A"%o)a%i* release of lo*al 4o!ern)en%Fs ."s% s&are in na%ional %a5esE
n. Ta5 e5e)%ion of all re!en"es an( asse%s of non?s%o*2/ non?rofi%
e("*a%ional ins%i%"%ions "se( a*%"ally/ (ire*%ly an( e5*l"si!ely for e("*a%ional
"rosesE
o. Ta5 e5e)%ion of all re!en"es an( asse%s of rorie%ary or *ooera%i!e
e("*a%ional ins%i%"%ions s"-.e*% %o li)i%a%ions ro!i(e( -y la' in*l"(in4
res%ri*%ions on (i!i(en(s an( ro!isions for rein!es%)en% of rofi%sE
. Ta5 e5e)%ion of 4ran%s/ en(o')en%s/ (ona%ions or *on%ri-"%ions "se(
a*%"ally/ (ire*%ly an( e5*l"si!ely for e("*a%ional "roses s"-.e*% %o *on(i%ions
res*ri-e( -y la'.
BAR: 10. E,"al ro%e*%ion of %&e la' *la"se is s"-.e*% %o reasona-le
*lassifi*a%ion. +f %&e 4ro"in4s are *&ara*%eri8e( -y s"-s%an%ial (is%in*%ions %&a%
)a2e real (ifferen*es/ one *lass )ay -e %rea%e( an( re4"la%e( (ifferen%ly fro)
ano%&er. T&e *lassifi*a%ion )"s% also -e 4er)ane %o %&e "rose of %&e la' an(
)"s% aly %o all %&ose -elon4in4 %o %&e sa)e *lass. (5iu, et al., v. Court of
Appeal%, et al., G.R. No. 12)410, 1anuary 20, 1999
BAR: 11. Classifi*a%ion/ %o -e !ali(/ )"s% AaB res% on s"-s%an%ial
(is%in*%ions/ A-B -e 4er)ane %o %&e "rose of %&e la'/ A*B no% -e li)i%e( %o
e5is%in4 *on(i%ions only/ an( A(B aly e,"ally %o all )e)-ers of %&e sa)e *lass.
(5iu, et al., v. Court of Appeal%, et al., G.R. No. 12)410, 1anuary 20, 1999
A le4isla%i!e r"le '&i*& is in %&e na%"re of s"-or(ina%e le4isla%ion/
(esi4ne( %o i)le)en% a ri)ary le4isla%ion -y ro!i(in4 %&e (e%ails %&ereof. +n
%&e sa)e 'ay %&a% la's )"s% &a!e %&e -enefi% of "-li* &earin4/ i% is 4enerally
re,"ire( %&a% -efore a le4isla%i!e r"le is a(o%e( %&ere )"s% -e a &earin4 an(
"-li*a%ion as re,"ire( "n(er %&e A()inis%ra%i!e Co(e. (Co&&i%%ioner of
$nternal Revenue v. Court of Appeal%, et al., 2*1 'CRA 23*
+n *ase of an in%erre%a%i!e r"le no &earin4 or "-li*a%ion is re,"ire( sin*e
an in%erre%a%i!e r"le is (esi4ne( )erely %o ro!i(e 4"i(elines of %&e la' '&i*&
%&e a()inis%ra%i!e a4en*y is in *&ar4e of enfor*in4. (Co&&i%%ioner of $nternal
Revenue v. Court of Appeal%, et al., 2*1 'CRA 23*

BAR: 12. E,"ali%y an( "nifor)i%y of %a5a%ion )ay )ean %&e sa)e as
e,"al ro%e*%ion. +n s"*& a *ase/ %&e %er)s 'o"l( )ean %&a% all s"-.e*%s an(
o-.e*%s of %a5a%ion '&i*& are si)ilarly si%"a%e( s&all -e s"-.e*% %o %&e sa)e
-"r(ens an( 4ran%e( %&e sa)e ri!ile4es 'i%&o"% any (is*ri)ina%ion '&a%soe!er.
Unifor)i%y )ay &a!e a res%ri*%i!e )eanin4 (ifferen% fro) e,"ali%y an(
e,"al ro%e*%ion. +% 'o"l( )ean %&en %&a% %&e sa)e ra%e s&all -e i)ose( for %&e
sa)e s"-.e*%s an( o-.e*%s 'i%&in %&e %erri%orial -o"n(aries of a %a5in4 a"%&ori%y.
6
A %rial *o"r% is no% %&e roer for") for %&e !en%ila%ion of %&e iss"es '&ere
i% is %&e le4isla%"re %o '&i*& relief )"s% -e so"4&%/ -e*a"se 'i%& %&e le4isla%"re
ri)arily lies %&e (is*re%ion %o (e%er)ine AaB %&e na%"re A2in(B/ A-B o-.e*%
A"roseB/ A*B e5%en% Ara%eB/ A(B *o!era4e As"-.e*%sB an( AeB %itu% Ala*eB of
%a5a%ion. ACo&&i%%ioner of $nternal Revenue, et al., v. 'anto%, et al., 2)) 'CRA
*1)
+% is in&eren% in %&e o'er %o %a5 %&a% %&e S%a%e -e free %o sele*% %&e
s"-.e*%s of %a5a%ion/ an( i% &as -een reea%e(ly &el( %&a%/ Gine,"ali%ies '&i*&
res"l% fro) a sin4lin4 o"% of one ar%i*"lar *lass of %a5a%ion/ or e5e)%ion/
infrin4e no *ons%i%"%ional li)i%a%ion.G (Co&&i%%ioner of $nternal Revenue, et al.,
v. 'anto%, et al., 2)) 'CRA *1)

BAR: 13. A fi5e( ann"al li*ense fee on %&ose en4a4e( in %&e -"siness
of 4eneral en%errise '&i*& also i)ose( on %&e sale of -i-les -y a reli4io"s
se*%. is %&is !ali( !iola%es %&e *ons%i%"%ionally 4"aran%ee( free(o) of %&e ress/
an( of reli4ion..
As a li*ense fee is fi5e( in a)o"n% an( "nrela%e( %o %&e re*ei%s of %&e
%a5ayer/ s"*& a li*ense fee/ '&en alie( %o a reli4io"s se*% is a*%"ally i)ose(
as a *on(i%ion for %&e free e5er*ise of reli4ion. A li*ense fee res%rains in
a(!an*e %&ose *ons%i%"%ional li-er%ies of ress an( reli4ion an( ine!i%a-ly %en(s
%o s"ress %&eir e5er*ise.
T&e P1/000.00 VAT re4is%ra%ion fee i)ose( on non?VAT en%errises
'&i*& in*l"(es a)on4 o%&ers/ reli4io"s se*%s '&i*& sells an( (is%ri-"%es
reli4io"s li%era%"re is no% !iola%i!e of reli4io"s free(o)/ al%&o"4& a fi5e( a)o"n%
is no% i)ose( for %&e e5er*ise of a ri!ile4e -"% only for %&e "rose of
(efrayin4 ar% of %&e *os% of re4is%ra%ion.
T&e re4is%ra%ion fee is %&"s )ore of an a()inis%ra%i!e fee/ one no%
i)ose( on %&e e5er*ise of a ri!ile4e/ )"*& less a *ons%i%"%ional ri4&%.
(5olentino v. 'e"retary of :inan"e, et al., an. "o&panion "a%e%, 234 'CRA *30
Ar%i*le ;++/ Se*. 11 of %&e Cons%i%"%ion ro!i(es %&a% %&e 4ran% of a
fran*&ise for %&e oera%ion of a "-li* "%ili%y is s"-.e*% %o a)en()en%. al%era%ion
or reeal -y Con4ress '&en %&e *o))on 4oo( re,"iresE
BAR: 14. A la'f"l %a5 on a ne' s"-.e*%/ or an in*rease( %a5 on an ol(
one/ (oes no% in%erfere 'i%& a *on%ra*% or i)airs i%s o-li4a%ion/ 'i%&in %&e
)eanin4 of %&e *ons%i%"%ion. E!en %&o"4& s"*& %a5a%ion )ay affe*% ar%i*"lar
*on%ra*%s/ as i% )ay in*rease %&e (e-% of one erson an( lessen %&e se*"ri%y of
ano%&er/ or )ay i)ose a((i%ional -"r(ens "on one *lass an( release %&e
-"r(ens of ano%&er/ s%ill %&e %a5 )"s% -e ai( "nless ro&i-i%e( -y %&e
*ons%i%"%ion/ nor *an i% -e sai( %&a% i% i)airs %&e o-li4a%ions of any e5is%in4
*on%ra*% in i%s %r"e an( le4al sense. (5olentino v. 'e"retary of :inan"e, et al., an.
"o&panion "a%e%, 234 'CRA *30

BAR: 15. 9&ile %&e S"re)e Co"r% &as/ no% %oo infre,"en%ly/ referre(
%o %a5 e5e)%ions *on%aine( in se*ial fran*&ises as -ein4 in %&e na%"re of
*on%ra*%s an( a ar% of %&e in("*e)en% for *arryin4 o"% %&e fran*&ise/ %&ese
e5e)%ions/ ne!er%&eless are far fro) -ein4 s%ri*%ly *on%ra*%"al in na%"re.
Cons%i%"%ional %a5 e5e)%ions/ in %&e real sense of %&e %er) an( '&ere %&e
non?i)air)en% *la"se of %&e Cons%i%"%ion *an ri4&%ly -e in!o2e(/ are %&ose
a4ree( %o -y %&e %a5in4 a"%&ori%y in *on%ra*%s/ s"*& as %&ose *on%aine( in
4o!ern)en% -on(s or (e-en%"res/ la'f"lly en%ere( in%o -y %&e) "n(er ena-lin4
la's in '&i*& %&e 4o!ern)en%/ a*%in4 in i%s ri!a%e *aa*i%y s&e(s i%s *loa2 of
a"%&ori%y an( 'ai!es i%s 4o!ern)en% i))"ni%y. (0anila 2le"tri" Co&pany v.
Provin"e of !a3una, et al., G.R. No. 131349, 0ay 4, 1999
7
Do"-le %a5a%ion in i%s 4eneri* sense/ %&is )eans %a5in4 %&e sa)e s"-.e*%
or o-.e*% %'i*e ("rin4 %&e sa)e %a5a-le erio(.
+n i%s ar%i*"lar sense/ i% )ay )ean (ire*% ("li*a%e %a5a%ion/ '&i*& is
ro&i-i%e( "n(er %&e *ons%i%"%ion -e*a"se i% !iola%es %&e *on*e% of e,"al
ro%e*%ion/ "nifor)i%y an( e,"i%a-leness of %a5a%ion. +n(ire*% ("li*a%e %a5a%ion
is no% ana%&e)a%i8e( -y %&e a-o!e *ons%i%"%ional li)i%a%ions.
BAR: 16. T&e ele)en%s of (ire*% ("li*a%e %a5a%ion areD
a. Sa)e
1B S"-.e*% or o-.e*% is %a5e( %'i*e
2B Ta5in4 a"%&ori%y
1B Ta5in4 "rose
4B Ta5in4 erio(
-. Ta5in4 all of %&e s"-.e*%s or o-.e*%s for %&e firs% %i)e 'i%&o"% %a5in4 all
of %&e) for %&e se*on( %i)e.
+f any of %&e ele)en%s are a-sen% %&en %&ere is in(ire*% ("li*a%e %a5a%ion
'&i*& is no% ro&i-i%e( -y %&e *ons%i%"%ion.
BAR: 17. Do"-le %a5a%ion a !ali( (efense a4ains% %&e le4ali%y of a %a5
)eas"re if %&e (o"-le %a5a%ion is (ire*% ("li*a%e %a5a%ion/ -e*a"se i% 'o"l(
!iola%e %&e e,"al ro%e*%ion *la"se of %&e *ons%i%"%ion.
9&en an i%e) of in*o)e is %a5e( in %&e P&iliines an( %&e sa)e in*o)e
is %a5e( in ano%&er *o"n%ry/ %&is 'o"l( -e 2no'n as in%erna%ional ."ri(i*al (o"-le
%a5a%ion '&i*& is %&e i)osi%ion of *o)ara-le %a5es in %'o or )ore s%a%es on %&e
sa)e %a5ayer in rese*% of %&e sa)e s"-.e*% )a%%er an( for i(en%i*al 4ro"n(s.
(Co&&i%%ioner of $nternal Revenue v. '.C. 1o#n%on an. 'on, $n"., et al., G.R.
No. 12)104, 1une 24, 1999
Do"-le %a5a%ion "s"ally %a2es la*e '&en a erson is a resi(en% of a
*on%ra*%in4 s%a%e an( (eri!es in*o)e fro) or o'ns *ai%al in/ %&e o%&er
*on%ra*%in4 s%a%e an( -o%& s%a%es i)ose %a5 on %&a% in*o)e or *ai%al.
(Co&&i%%ioner of $nternal Revenue v. '.C. 1o#n%on an. 'on, $n"., et al., G.R.
No. 12)104, 1une 24, 1999
BAR: 18. T&e follo'in4 are %&e )e%&o(s of a!oi(in4 (o"-le %a5a%ionD
a. Ta5 %rea%ies '&i*& e5e)%s forei4n na%ionals fro) lo*al %a5a%ion an(
lo*al na%ionals fro) forei4n %a5a%ion "n(er %&e rin*ile of re*iro*i%y.
-. Ta5 *re(i%s '&ere forei4n %a5es are allo'e( as (e("*%ions fro) lo*al
%a5es %&a% are ("e %o -e ai(.
*. Allo'in4 forei4n %a5es as a (e("*%ion fro) 4ross in*o)e.
P"rose of %a5 %rea%ies. To re*on*ile %&e na%ional fis*al le4isla%ion of %&e
*on%ra*%in4 ar%ies in or(er %o &el %&e %a5ayer a!oi( si)"l%aneo"s %a5a%ion in
%'o (ifferen% ."ris(i*%ions. More re*isely/ %&e %a5 *on!en%ions are (raf%e( 'i%& a
!ie' %o'ar(s %&e eli)ina%ion of in%erna%ional ."ri(i*al (o"-le %a5a%ion.
(Co&&i%%ioner of $nternal Revenue v. '.C. 1o#n%on an. 'on, $n"., et al., G.R.
No. 12)104, 1une 24, 1999
6a%ionale for a!oi(in4 in%erna%ional ."ri(i*al (o"-le %a5a%ion. To
en*o"ra4e %&e free flo' of 4oo(s an( ser!i*es an( %&e )o!e)en% of *ai%al/
%e*&nolo4y an( ersons -e%'een *o"n%ries/ *on(i%ions (ee)e( !i%al in *rea%in4
ro-"s% an( (yna)i* e*ono)ies. <orei4n in!es%)en%s 'ill only %&ri!e in a fairly
re(i*%a-le an( reasona-le in%erna%ional in!es%)en% *li)a%e an( %&e ro%e*%ion
a4ains% (o"-le %a5a%ion is *r"*ial in *rea%in4 s"*& a *li)a%e. (Co&&i%%ioner of
$nternal Revenue v. '.C. 1o#n%on an. 'on, $n"., et al., G.R. No. 12)104, 1une
24, 1999

8
T&e )an(a%e %o Con4ress is no% %o res*ri-e -"% %o e!ol!e a ro4ressi!e
sys%e) of %a5a%ion. O%&er'ise/ sales %a5es '&i*& er&as are %&e ol(es% for) of
in(ire*% %a5es/ 'o"l( &a!e -een ro&i-i%e( 'i%& %&e ro*la)a%ion of %&e
*ons%i%"%ional ro!ision. Sales %a5es are also re4ressi!e. (5olentino v. 'e"retary
of :inan"e an. "o&panion "a%e%, 249 'CRA *2+
T&e Cons%i%"%ion (oes no% really ro&i-i% %&e i)osi%ion of in(ire*% %a5es
'&i*&/ li2e %&e VAT/ are re4ressi!e. T&e *ons%i%"%ional ro!ision )eans si)ly
%&a% in(ire*% %a5es s&o"l( -e )ini)i8e(.
6esor% %o in(ire*% %a5es s&o"l( -e )ini)i8e( -"% no% a!oi(e( en%irely
-e*a"se i% is (iffi*"l%/ if no% i)ossi-le/ %o a!oi( i)osin4 s"*& %a5es a**or(in4
%o %&e %a5ayers a-ili%y %o ay. (5olentino v. 'e"retary of :inan"e an. "o&panion
"a%e%, 249 'CRA *2+
+n %&e *ase of VAT/ %&e la' )ini)i8es %&e re4ressi!e effe*%s of %&is
i)osi%ion -y ro!i(in4 for 8ero ra%in4 of *er%ain %ransa*%ions '&ile 4ran%in4
e5e)%ions %o o%&er %ransa*%ions. T&e %ransa*%ions '&i*& are s"-.e*% %o VAT are
%&ose '&i*& in!ol!e 4oo(s an( ser!i*es '&i*& are "se( or a!aile( of )ainly -y
&i4&er in*o)e 4ro"s. (5olentino v. 'e"retary of :inan"e an. "o&panion "a%e%,
249 'CRA *2+
T&e Cons%i%"%ion re,"ires %&a% all re!en"e -ills s&all ori4ina%e e5*l"si!ely
fro) %&e :o"se of 6eresen%a%i!es. T&e Cons%i%"%ion si)ly )eans %&a% %&e
ini%ia%i!e for filin4 re!en"e/ %ariff or %a5 -ills )"s% *o)e fro) %&e :o"se of
6eresen%a%i!es on %&e %&eory %&a%/ ele*%e( as %&ey are fro) %&e (is%ri*%s/ %&e
Me)-ers of %&e :o"se *an -e e5e*%e( %o -e )ore sensi%i!e %o %&e lo*al nee(s
an( ro-le)s. (5olentino v. 'e"retary of :inan"e an. "o&panion "a%e%, 249
'CRA *2+
+% is no% %&e la' ? -"% %&e re!en"e -ill ? '&i*& is re,"ire( -y %&e
Cons%i%"%ion %o ori4ina%e e5*l"si!ely in %&e :o"se of 6eresen%a%i!es -e*a"se
a -ill ori4ina%in4 in %&e :o"se )ay "n(er4o s"*& e5%ensi!e *&an4es in %&e
Sena%e %&a% %&e res"l% )ay -e a re'ri%in4 of %&e '&ole/ an( a (is%in*% -ill )ay -e
ro("*e(. (5olentino v. 'e"retary of :inan"e an. "o&panion "a%e%, 234 'CRA
*30

To insis% %&a% a re!en"e s%a%"%e ? no% only %&e -ill '&i*& ini%ia%e( %&e
le4isla%i!e ro*ess *"l)ina%in4 in %&e ena*%)en% of %&e la' ? )"s% s"-s%an%ially
-e %&e sa)e as %&e :o"se -ill 'o"l( -e %o (eny %&e Sena%es o'er no% only %o
*on*"r 'i%& a)en()en%s -"% also %o roose a)en()en%s. +% 'o"l( -e %o
!iola%e %&e *oe,"ali%y of le4isla%i!e o'er of %&e %'o &o"ses of Con4ress an( in
fa*% )a2e %&e :o"se s"erior %o %&e Sena%e.
=i!en %&e o'er of %&e Sena%e %o roose a)en()en%s/ i% *an roose i%s
o'n !ersion e!en 'i%& rese*% %o -ills '&i*& are re,"ire( -y %&e Cons%i%"%ion %o
ori4ina%e in %&e :o"se. (5olentino v. 'e"retary of :inan"e an. "o&panion "a%e%,
249 'CRA *2+
Nor (oes %&e Cons%i%"%ion ro&i-i% %&e filin4 in %&e Sena%e of a s"-s%i%"%e
-ill in an%i*ia%ion of i%s re*ei% of %&e -ill fro) %&e :o"se/ so lon4 as a*%ion -y
%&e Sena%e as a -o(y is 'i%&&el( en(in4 re*ei% of %&e :o"se -ill. ATolen%ino !.
Se*re%ary of <inan*e an( *o)anion *ases/ 21C SC6A H10B

%&e Presi(en% s&all &a!e %&e o'er %o !e%o any ar%i*"lar i%e) or i%e)s
in an aroria%ion/ re!en"e/ or %ariff -ill/ -"% %&e !e%o s&all no% affe*% %&e i%e) or
i%e)s %o '&i*& &e (oes no% o-.e*%.
An i%e) in a re!en"e -ill (oes no% refer %o an en%ire se*%ion i)osin4 a
ar%i*"lar 2in( of %a5/ -"% ra%&er %o %&e s"-.e*% of %&e %a5 an( %&e %a5 ra%e. +n %&e
9
or%ion of a re!en"e -ill '&i*& a*%"ally i)oses a %a5/ a se*%ion i(en%ifies %&e %a5
an( en")era%es %&e ersons lia-le %&erefore 'i%& %&e *orreson(in4 %a5 ra%e.
To *ons%r"e %&e 'or( i%e) as referrin4 %o %&e '&ole se*%ion 'o"l( %ie %&e
Presi(en%s &an( in *&oosin4 ei%&er %o aro!e %&e '&ole se*%ion a% %&e e5ense
of also aro!in4 a ro!ision %&erein '&i*& &e (ee)s "na**e%a-le or !e%o %&e
en%ire se*%ion a% %&e e5ense of fore4oin4 %&e *olle*%ion of %&e 2in( of %a5
al%o4e%&er.
BAR: 19. Ta5 e5e)%ions s&all -e 4ran%e( only "on )a.ori%y !o%e of
all %&e )e)-ers of Con4ress.
E;CEPT+ONSD
a. 9&ere %&e %a5 e5e)%ion is 4ran%e( %&ro"4& a %rea%yE
-. Ta5 e5e)%ions 4ran%e( -y lo*al 4o!ern)en% "ni%sE
*. Ta5 e5e)%ions 4ran%e( '&en %&e Presi(en% e5er*ises &is o'ers
"n(er %&e fle5i-le %ariff *la"se '&en ro%e*%i!e %ariffs are re)o!e(.
BAR: 20. C&ari%a-le ins%i%"%ions/ *&"r*&es an( arsona4es or *on!en%s
a"r%enan% %&ere%o/ )os,"es/ non?rofi% *e)e%eries/ an( all an(s/ -"il(in4s an(
i)ro!e)en%s %&a% are a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for reli4io"s/
*&ari%a-le or e("*a%ional "roses are e5e)% fro) %a5a%ion. ISe*.27 A1B Ar%i*le
V+/ 137J Cons%i%"%ionB
T&e *ons%i%"%ional %a5 e5e)%ions refer only %o real roer%y %&a% are
a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for reli4io"s/ *&ari%a-le or e("*a%ional
"roses/ an( %&a% %&e only *ons%i%"%ionally re*o4ni8e( e5e)%ion fro) %a5a%ion
of re!en"es are %&ose earne( -y non?rofi%/ non?s%o*2 e("*a%ional ins%i%"%ions
'&i*& are a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for e("*a%ional "roses.
(Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 29+ 'CRA +3
BAR: 21. All re!en"es an( asse%s of non?s%o*2/ non?rofi% e("*a%ional
ins%i%"%ions %&a% are a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for e("*a%ional
"roses s&all -e e5e)% fro) %a5a%ion.
6e!en"es an( asse%s of rorie%ary e("*a%ional ins%i%"%ions/ in*l"(in4
%&ose '&i*& are *ooera%i!ely o'ne(/ )ay -e en%i%le( %o e5e)%ions s"-.e*% %o
li)i%a%ions ro!i(e( -y la' in*l"(in4 res%ri*%ions on (i!i(en(s an( ro!isions for
rein!es%)en%s.
T&e N+6C re*o4ni8es %&e e5e)%ion fro) %a5 of %&e in*o)es of *i!i*
lea4"es or or4ani8a%ions no% or4ani8e( for rofi% -"% oera%e( e5*l"si!ely for %&e
ro)o%ion of so*ial 'elfare/ as 'ell as *l"-s or4ani8e( an( oera%e( e5*l"si!ely
for leas"re/ re*rea%ion/ an( o%&er non?rofi%a-le "roses '&ere no ar% of %&e
ne% in*o)e in"res %o %&e -enefi% of any ri!a%e s%o*2&ol(er or )e)-er.
T&e %a5 e5e)%ion so re*o4ni8e( (oes no% flo' %o in*o)e of '&a%e!er
2in( an( *&ara*%er of %&e fore4oin4 or4ani8a%ions fro) any of %&eir roer%ies/
real or ersonal/ or fro) any of %&eir a*%i!i%ies *on("*%e( for rofi%/ re4ar(less of
%&e (isosi%ion )a(e of s"*& in*o)e/ '&i*& s&all -e s"-.e*% %o in*o)e %a5es.
(Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 29+ 'CRA +3
Ta5 a)nes%y (is%in4"is&e( fro) %a5 e5e)%ionD
a. Ta5 a)nes%y is an i))"ni%y fro) all *ri)inal/ *i!il an( a()inis%ra%i!e
lia-ili%ies arisin4 fro) nonay)en% of %a5es APeople v. Ca%tane.a, G.R. No. !/
4*++1, 'epte&ber 14, 19++ 9:+@E a %a5 e5e)%ion is an i))"ni%y fro) *i!il
lia-ili%y only. +% is an i))"ni%y or ri!ile4e/ a free(o) fro) a *&ar4e or -"r(en %o
'&i*& o%&ers are s"-.e*%e(. (:lorer v. '#eri.an, 13) $n.. 2+, 3* N2 3*4
-. Ta5 a)nes%y alies only %o as% %a5 erio(s/ &en*e of re%roa*%i!e
ali*a%ion (Ca%tane.a, %upraB 9:+@E %a5 e5e)%ion &as rose*%i!e
ali*a%ion.
10
A %a5 a)nes%y is a 4eneral ar(on or in%en%ional o!erloo2in4 -y %&e S%a%e
of i%s a"%&ori%y %o i)ose enal%ies on ersons o%&er'ise 4"il%y of e!asion or
!iola%ion of a re!en"e or a %a5 la'. (Co&&i%%ioner of $nternal Revenue v.
0arubeni Corporation, G.R. No. 13)3)), (e"e&ber 1+, 2001B
T&e "rose of %a5 a)nes%y is %o AaB 4i!e %a5 e!a(ers '&o 'is& %o relen%
a *&an*e %o s%ar% a *lean sla%e/ an( %o A-B 4i!e %&e 4o!ern)en% a *&an*e %o
*olle*% "n*olle*%e( %a5 fro) %a5 e!a(ers 'i%&o"% &a!in4 %o 4o %&ro"4& %&e %e(io"s
ro*ess of a %a5 *ase. (-ana%, 1r. v. Court of Appeal%, et al., G.R. No. 1029*),
:ebruary 10, 2000
BAR: 22. Ta5 a!oi(an*e is %&e "se of le4ally er)issi-le )eans %o
re("*e %&e %a5 '&ile %a5 e!asion is %&e "se of ille4al )eans %o es*ae %&e
ay)en% of %a5es.
BAR: 23. T&e (ifferen*es -e%'een %&e %a5 a!oi(an*e an( %a5 e!asion
are %&e follo'in4D
a. Ta5 a!oi(an*e is le4al '&ile %a5 e!asion is ille4al.
-. T&e o-.e*%i!e of %a5 a!oi(an*e in )os% ins%an*es is )erely %o re("*e
%&e %a5 %&a% is ("e '&ile is %a5 e!asion %&e o-.e*% is %o en%irely es*ae %&e
ay)en% of %a5es.
BAR: 24. 6easons '&y na%ional %a5es *anno% -e %&e s"-.e*% of
*o)ensa%ion an( se%?off 'i%& (e-%sD
a. T&e life-loo( %&eoryE
-. Ta5es are no% *on%ra*%"al o-li4a%ions -"% arise o"% of a ("%y %o/ an( are
%&e osi%i!e a*%s of 4o!ern)en%/ %o %&e )a2in4 an( enfor*in4 of '&i*& %&e
ersonal *onsen% of %&e in(i!i("al %a5ayer is no% re,"ire(. (Republi" v.
0a&bulao !u&ber Co., 4'CRA *22
*. T&e 4o!ern)en% an( %&e %a5ayer are no% )"%"ally *re(i%ors an(
(e-%ors of ea*& o%&er an( a *lai) for %a5es is no s"*& (e-%/ (e)an(/ *on%ra*% or
."(4)en% as is allo'e( %o -e se%?off. (Calte8 P#ilippine%, $n". v. Co&&i%%ion on
Au.it, 20+ 'CRA )2*, )4*
Co)ensa%ion %a2es la*e -y oera%ion of la'/ '&ere %&e lo*al
4o!ern)en% an( %&e %a5ayer are in %&eir o'n ri4&% re*iro*ally (e-%ors an(
*re(i%ors of ea*& o%&er/ an( %&a% %&e (e-%s are -o%& ("e an( (e)an(a-le/ in
*onse,"en*e of Ar%i*les 12J7 an( 12J3 of %&e Ci!il Co(e. ((o&in3o v. Garlito%,
+ 'CRA 443
+n *ase of a %a5 o!eray)en%/ '&ere %&e #+6s o-li4a%ion %o ref"n( or se%?
off arises fro) %&e )o)en% %&e %a5 'as ai( "n(er %&e rin*ile of %olutio
in.ebeti. (Co&&i%%ioner of $nternal Revenue v. 2%%o 'tan.ar. 2a%tern, $n", 1)2
'RCA 3*4
#"% no%e Ne%tle P#il. v. Court of Appeal%, et al., G.R. No. 134114, 1uly *,
2001 '&i*& &el( %&a% in or(er for %&e r"le on %olutio in.ebeti %o aly i% is an
essen%ial *on(i%ion %&a% %&e e%i%ioner )"s% firs% s&o' %&a% i%s ay)en% of %&e
*"s%o)s ("%ies 'as in e5*ess of '&a% 'as re,"ire( -y %&e la' a% %&e %i)e %&e
s"-.e*% 1H i)or%a%ions of )il2 an( )il2 ro("*%s 'ere )a(e. Unless s&o'n
o%&er'ise/ %&e (is"%a-le res")%ion of re4"lari%y of erfor)an*e of ("%y lies in
fa!or of %&e Colle*%or of C"s%o)s.
BAR: 25. +n*o)e %a5/ es%a%e an( (onors %a5es are (ire*% %a5es 9:+@E
!al"e?a((e( %a5/ e5*ise %a5/ o%&er er*en%a4e %a5es an( (o*")en%ary s%a) %a5
are in(ire*% %a5es.
T&e )ain (ifferen*e -e%'een (ire*% %a5es an( in(ire*% %a5es is %&a% %&e
-"r(en of (ire*% %a5es *o"l( no% -e s&if%e( -y %&e %a5ayer %o ano%&er '&ile %&e
-"r(en of in(ire*% %a5es *o"l( -e s&if%e( %o ano%&er erson/ s"*& %&e -"r(en
11
!al"e?a((e( %a5es -ein4 s&if%e( or %ransferre( -y %&e %a5ayer/ %&e seller/ %o %&e
-"yer.
THE COURT OF TAX APPEALS AND TAX
REMEDIES
T&e Co"r% of Ta5 Aeals is %&e se*ial %a5 *o"r% *rea%e( "n(er 6e"-li*
A*% No. 112C/ as a)en(e( -y 6. A. No. 3272/ an( is *o)ose( of a Presi(in4
0"s%i*e an( fi!e Asso*ia%e 0"s%i*es/ or4ani8e( in%o %'o (i!isions.
T&e Co"r% of Ta5 Aeals 'as *rea%e(D
a. To re!en% (elay in %&e (isosi%ion of %a5 *ases -y %&e %&en Co"r%s of
<irs% +ns%an*e Ano' 6TCsB/ in !ie' of %&e -a*2lo4 of *i!il/ *ri)inal/ an( *a(as%ral
*ases a**")"la%in4 in %&e (o*2e%s of s"*& *o"r%sE an(
-. To &a!e a -o(y 'i%& se*ial 2no'le(4e '&i*& or(inary 0"(4es of %&e
%&en Co"r%s of <irs% +ns%an*e Ano' 6TCsB/ are no% li2ely %o ossess/ %&"s
ro!i(in4 for an a(e,"a%e re)e(y for a see(y (e%er)ina%ion of %a5 *ases.
T&e fa*%"al (e%er)ina%ion of %&e Co"r% of Ta5 Aeals/ '&en s"or%e( -y
s"-s%an%ial e!i(en*e/ 'ill no% -e re!erse( on aeal "nless i% is *lear %&a% sai(
*o"r% &as *o))i%%e( 4ross error in %&e ro*ess. ARepubli" of t#e P#ilippine%
repre%ente. by t#e Co&&i%%ioner of Cu%to&% v. 5#e Court of 5a8 Appeal%, et
al., G.R. No. 139040, 7"tober 2, 2001
T&e le4al re)e(ies "n(er %&e N+6C of 133J an( o%&er la's a!aila-le %o
an a44rie!e( %a5ayer )ay -e *lassifie( in%o %&e %a5 re)e(ies 'i%& rese*% %o
assess)en% an( *olle*%ion/ an( %&ose 'i%& rese*% %o ref"n( of in%ernal re!en"e
%a5es.
T&e re)e(ies )ay also -e *lassifie( in%o %&e a()inis%ra%i!e or %&e ."(i*ial
re)e(ies.
BAR: 26. T&e le4al re)e(ies "n(er %&e N+6C of 133J a!aila-le %o an
a44rie!e( %a5ayer a% %&e a()inis%ra%i!e an( ."(i*ial le!els 'i%& rese*% %o
assess)en% an( *olle*%ion of in%ernal re!en"e %a5es are %&e follo'in4D
a. Uon re*ei% of a re?assess)en% no%i*e/ %&e %a5ayer s&all reson( %o
%&e sa)e 'i%&in fif%een A1CB (ays fro) re*ei% '&i*& is %&e erio( ro!i(e( for -y
i)le)en%in4 r"les an( re4"la%ions. I1
r(
ar./ Se*. 227 AeB/ N+6C of 133JK
-. Uon %&e iss"an*e of an assess)en% no%i*e/ %&e %a5ayer s&all ro%es%
a()inis%ra%i!ely -y filin4 a re,"es% for re*onsi(era%ion or rein!es%i4a%ion 'i%&in
%&ir%y A10B (ays fro) re*ei% of %&e assess)en% in s"*& for) an( )anner as )ay
-e res*ri-e( -y i)le)en%in4 r"les an( re4"la%ions.
*. 9i%&in si5%y AH0B (ays fro) %&e filin4 of %&e ro%es%/ all rele!an%
s"or%in4 (o*")en%s s&all -e s"-)i%%e(E o%&er'ise %&e assess)en% s&all
-e*o)e final. A4
%&
ar./ $bi..B
(. +f %&e ro%es% is (enie( in '&ole or in ar%/ or
e. is no% a*%e( "on 'i%&in one &"n(re( ei4&%y A170B (ays fro)
s"-)ission of (o*")en%s/
f. %&e %a5ayer a(!ersely affe*%e( -y %&e (e*ision or ina*%ion )ay aeal
%o %&e Co"r% of Ta5 Aeals 'i%&in %&ir%y A10B (ays fro) re*ei% of %&e sai(
(e*ision/ or fro) %&e lase of %&e one &"n(re( ei4&%y A170B L (ay erio(E
o%&er'ise/ %&e (e*ision s&all -e*o)e final/ e5e*"%ory an( (e)an(a-le. Ilas%
ar./ Se*. 227 AeB/ N+6C of 133JK
4. On aeal/ %&e %a5ayer s&o"l( aly for %&e iss"an*e of a 'ri% of
reli)inary in."n*%ion %o en.oin %&e #+6 fro) *olle*%in4 %&e %a5 s"-.e*% of %&e
aeal.
&. A (e*ision of a (i!ision of %&e Co"r% of Ta5 Aeals a(!erse %o %&e
%a5ayer or %&e 4o!ern)en% )ay -e %&e s"-.e*% of a )o%ion for re*onsi(era%ion or
12
ne' %rial/ a (enial of '&i*& is aeala-le %o %&e Co"r% of Ta5 Aeals en ban"
-y )eans of a e%i%ion for re!ie'. .
i. A (e*ision of %&e Co"r% of Ta5 Aeals en ban" a(!erse %o %&e %a5ayer
or %&e 4o!ern)en% )ay -e aeale( %o %&e S"re)e Co"r% %&ro"4& a e%i%ion for
re!ie' on *er%iorari file( 'i%& fif%een A1CB (ays fro) no%i*e/ an( e5%en(i-le for
."s%ifia-le reasons for %&ir%y A10B (ays only.
BAR: 27. T&e le4al re)e(ies "n(er %&e N+6C of 133J a!aila-le %o an
a44rie!e( %a5ayer a% %&e a()inis%ra%i!e an( ."(i*ial le!els 'i%& rese*% %o ref"n(
or re*o!ery of %a5 erroneo"sly or ille4ally *olle*%e(/ is %o
a. file a *lai) for ref"n( or *re(i% 'i%& %&e Co))issioner of +n%ernal
6e!en"e. A1
s%
ar./ Se*. 223/ N+6C of 133JB
-. filin4 of a s"i% or ro*ee(in4 'i%& %&e Co"r% of Ta5 Aeals
1B -efore %&e e5ira%ion of %'o A2B years fro) %&e (a%e of ay)en%
of %&e %a5 re4ar(less of any s"er!enin4 *a"se %&a% )ay arise af%er
ay)en% A2
n(
ar./ Se*. 223/ N+6C of 133JEB/ or
2B 'i%&in %&ir%y A10B (ays fro) re*ei% of %&e (enial -y %&e
Co))issioner of %&e ali*a%ion for ref"n( or *re(i%. ASe*. 11/ 6.A. No.
112CB
T&e %'o A2B year erio( an( %&e %&ir%y A10B (ay erio( s&o"l( -e alie(
on a '&i*&e!er *o)es firs% -asis. T&"s/ if %&e 10 (ays is 'i%&in %&e 2 years/ %&e
10 (ays alies/ if %&e 2 year erio( is a-o"% %o lase -"% %&ere is no (e*ision ye%
-y %&e Co))issioner '&i*& 'o"l( %ri44er %&e 10?(ay erio(/ %&e %a5ayer s&o"l(
file an aeal/ (esi%e %&e a-sen*e of a (e*ision. (Co&&i%%ioner%, et". v. Court
of 5a8 Appeal%, et al., G.R.No. +2*1+, 0ar"# 1*, 19+9, unrep.
*. A (e*ision of a (i!ision of %&e Co"r% of Ta5 Aeals a(!erse %o %&e
%a5ayer or %&e 4o!ern)en% )ay -e %&e s"-.e*% of a )o%ion for re*onsi(era%ion or
ne' %rial/ a (enial of '&i*& is aeala-le %o %&e Co"r% of Ta5 Aeals en ban"
-y )eans of a e%i%ion for re!ie'. .
(. A (e*ision of %&e Co"r% of Ta5 Aeals en ban" a(!erse %o %&e
%a5ayer or %&e 4o!ern)en% )ay -e aeale( %o %&e S"re)e Co"r% %&ro"4& a
e%i%ion for re!ie' on *er%iorari file( 'i%& fif%een A1CB (ays fro) no%i*e/ an(
e5%en(i-le for ."s%ifia-le reasons for %&ir%y A10B (ays only.
9&ere %&e %a5ayer is a *orora%ion %&e %'o year res*ri%i!e erio( fro)
(a%e of ay)en% for ref"n( of in*o)e %a5es s&o"l( -e %&e (a%e '&en %&e
*orora%ion file( i%s final a(."s%)en% re%"rn no% on %&e (a%e '&en %&e %a5es 'ere
ai( on a ,"ar%erly -asis. (P#ilippine -an; of Co&&uni"ation% v. Co&&i%%ioner
of $nternal Revenue, et al., G.R. No. 112024, 1anuary 2+, 1999
=enerally sea2in4 i% is %&e <inal A(."s%)en% 6e%"rn/ in '&i*& a)o"n%s of
%&e 4ross re*ei%s an( (e("*%ions &a!e -een a"(i%e( an( a(."s%e(/ '&i*& is
refle*%i!e of %&e res"l%s of %&e oera%ions of a -"siness en%errise. +% is only
'&en %&e re%"rn/ *o!erin4 %&e '&ole year/ is file( %&a% %&e %a5ayer 'ill -e a-le %o
as*er%ain '&e%&er a %a5 is s%ill ("e or ref"n( *an -e *lai)e( -ase( on %&e
a(."s%e( an( a"(i%e( fi4"res. (-an; of t#e P#ilippine $%lan.% v. Co&&i%%ioner of
$nternal Revenue, G.R. No. 144*43, Au3u%t 2+, 2001B
O"%line of %a5 re)e(ies of a %a5ayer an( %&e 4o!ern)en% rela%i!e %o
ASSESSMENT of in%ernal re!en"e %a5es.
a. T&e %a5ayer files &is %a5 re%"rn.
-. A @e%%er of A"%&ori%y is iss"e( a"%&ori8in4 #+6 e5a)iner %o a"(i% or
e5a)ine %&e %a5 re%"rn an( (e%er)ines '&e%&er %&e f"ll an( *o)le%e %a5es &a!e
-een ai(.
*. +f %&e e5a)iner is sa%isfie( %&a% %&e %a5 re%"rn is %r"ly refle*%i!e of %&e
%a5a-le %ransa*%ion an( all %a5es &a!e -een ai(/ %&e ro*ess en(s. :o'e!er/ if
%&e e5a)iner is no% sa%isfie( %&a% %&e %a5 re%"rn is %r"ly refle*%i!e of %&e %a5a-le
%ransa*%ion an( %&a% %&e %a5es &a!e no% -een f"lly ai(/ a No%i*e of +nfor)al
13
Conferen*e is iss"e( in!i%in4 %&e %a5ayer %o e5lain '&y &e s&o"l( no% -e
s"-.e*% %o a((i%ional %a5es.
(. +f %&e %a5ayer a%%en(s %&e infor)al *onferen*e an( %&e e5a)iner is
sa%isfie( 'i%& %&e e5lana%ion of %&e %a5ayer/ %&e ro*ess is a4ain en(e(.
+f %&e %a5ayer i4nores %&e in!i%a%ion %o %&e infor)al *onferen*e/ or if %&e
e5a)iner is no% sa%isfie( 'i%& %a5ayers e5lana%ion// an( &e -elie!es %&a%
roer %a5es s&o"l( -e assesse(/ %&e Co))issioner of +n%ernal 6e!en"e or &is
("ly a"%&ori8e( reresen%a%i!e s&all %&en no%ify %&e %a5ayer of %&e fin(in4s in %&e
for) of a re?assess)en% no%i*e. T&e re?assess)en% no%i*e re,"ires %&e
%a5ayer %o e5lain 'i%&in fif%een A1CB (ays fro) re*ei% '&y no no%i*e of
assess)en% an( le%%er of (e)an( for a((i%ional %a5es s&o"l( -e (ire*%e( %o &i).
e. +f %&e Co))issioner is sa%isfie( 'i%& %&e e5lana%ion of %&e %a5ayer/
%&en %&e ro*ess is a4ain en(e(.
+f %&e %a5ayer i4nores %&e re?assess)en% no%i*e -y no% reson(in4 or
&is e5lana%ions are no% a**e%e( -y %&e Co))issioner/ %&en a no%i*e of
assess)en% an( a le%%er of (e)an( is iss"e(.
T&e no%i*e of assess)en% )"s% -e iss"e( -y %&e Co))issioner %o %&e
%a5ayer 'i%&in a erio( of %&ree A1B years fro) %&e %i)e %&e %a5 re%"rn 'as file(
or s&o"l( &a!e -een file( '&i*&e!er is %&e la%er of %&e %'o e!en%s. 9&ere %&e
%a5ayer (i( no% file a %a5 re%"rn or '&ere %&e %a5 re%"rn file( is false or
fra"("len%/ %&en %&e Co))issioner &as a erio( of %en A10B years fro) (is*o!ery
of %&e fail"re %o file a %a5 re%"rn or fro) (is*o!ery of %&e fra"( 'i%&in '&i*& %o
iss"e an assess)en% no%i*e. T&e r"nnin4 of %&e a-o!e res*ri%i!e erio(s )ay
&o'e!er -e s"sen(e( "n(er *er%ain ins%an*es.
T&e no%i*e of assess)en% )"s% -e iss"e( 'i%&in %&e res*ri%i!e erio(
an( )"s% *on%ain %&e fa*%s/ la' an( ."risr"(en*e relie( "on -y %&e
Co))issioner. O%&er'ise i% 'o"l( no% -e !ali(.
f. T&e %a5ayer s&o"l( %&en file an a()inis%ra%i!e ro%es% -y filin4 a
re,"es% for re*onsi(era%ion or rein!es%i4a%ion 'i%&in %&ir%y A10B (ays fro) re*ei%
of %&e assess)en% no%i*e.
T&e %a5ayer *o"l( no% i))e(ia%ely in%erose an aeal %o %&e Co"r% of
Ta5 Aeals -e*a"se %&ere is no (e*ision ye% of %&e Co))issioner %&a% *o"l( -e
%&e s"-.e*% of a re!ie'.
To -e !ali( %&e a()inis%ra%i!e ro%es% )"s% -e file( 'i%&in %&e res*ri%i!e
erio(/ )"s% s&o' %&e error of %&e #"rea" of +n%ernal 6e!en"e an( %&e *orre*%
*o)"%a%ions s"or%e( -y a s%a%e)en% of fa*%s/ an( %&e la' an( ."risr"(en*e
relie( "on -y %&e %a5ayer. T&ere is no nee( %o ay "n(er ro%es%. +f %&e
ro%es% 'as no% seasona-ly file( %&e assess)en% -e*o)es final an( *olle*%i-le
an( %&e #"rea" of +n%ernal 6e!en"e *o"l( "se i%s a()inis%ra%i!e an( ."(i*ial
re)e(ies in *olle*%in4 %&e %a5.
4. 9i%&in si5%y AH0B (ays fro) filin4 of %&e ro%es%/ all rele!an% s"or%in4
(o*")en%s s&all -e s"-)i%%e(/ o%&er'ise %&e assess)en% s&all -e*o)e final an(
*olle*%i-le an( %&e #+6 *o"l( "se i%s a()inis%ra%i!e an( ."(i*ial re)e(ies %o
*olle*% %&e %a5.
On*e an assess)en% &as -e*o)e final an( *olle*%i-le/ no% e!en %&e #+6
Co))issioner *o"l( *&an4e %&e sa)e. T&"s/ %&e %a5ayer *o"l( no% ay %&e %a5/
%&en aly for a ref"n(/ an( if (enie( aeal %&e sa)e %o %&e Co"r% of Ta5
Aeals.
&. +f %&e ro%es% is (enie( in '&ole or in ar%/ or is no% a*%e( "on 'i%&in
one &"n(re( ei4&%y A170B (ays fro) %&e s"-)ission of (o*")en%s/ %&e %a5ayer
a(!ersely affe*%e( -y %&e (e*ision or ina*%ion )ay aeal %o %&e Co"r% of Ta5
Aeals 'i%&in %&ir%y A10B (ays fro) re*ei% of %&e a(!erse (e*ision/ or fro) %&e
lase of %&e one &"n(re( ei4&%y A170?B (ay erio(/ 'i%& an ali*a%ion for %&e
iss"an*e of a 'ri% of reli)inary in."n*%ion %o en.oin %&e #+6 fro) *olle*%in4 %&e
%a5 s"-.e*% of %&e aeal.
+f %&e %a5ayer fails %o so aeal/ %&e (enial of %&e Co))issioner or %&e
ina*%ion of %&e Co))issioner 'o"l( res"l% %o %&e no%i*e of assess)en% -e*o)in4
final an( *olle*%i-le an( %&e #+6 *o"l( %&en "%ili8e i%s a()inis%ra%i!e an( ."(i*ial
re)e(ies %o *olle*% %&e %a5.
14
i. A (e*ision of a (i!ision of %&e Co"r% of Ta5 Aeals a(!erse %o %&e
%a5ayer or %&e 4o!ern)en% )ay -e %&e s"-.e*% of a )o%ion for re*onsi(era%ion or
ne' %rial/ a (enial of '&i*& is aeala-le %o %&e Co"r% of Ta5 Aeals en ban"
-y )eans of a e%i%ion for re!ie'. .
T&e Co"r% of Ta5 Aeals/ &as a erio( of %'el!e A12B )on%&s fro)
s"-)ission of %&e *ase for (e*ision 'i%&in '&i*& %o (e*i(e.
.. +f %&e (e*ision of %&e Co"r% of Ta5 Aeals en ban" affir)s %&e (enial of
%&e ro%es% -y %&e Co))issioner or %&e assess)en% in *ase of fail"re -y %&e
Co))issioner %o (e*i(e %&e %a5ayer )"s% file a e%i%ion for re!ie' on *er%iorari
'i%& %&e S"re)e Co"r% 'i%&in fif%een A1CB (ays fro) no%i*e of %&e ."(4)en% on
,"es%ions of la'. An e5%ension of %&ir%y A10B (ays )ay for ."s%ifia-le reasons -e
4ran%e(. +f %&e %a5ayer (oes no% so aeal/ %&e (e*ision of %&e Co"r% of Ta5
Aeals 'o"l( -e*o)e final an( %&is &as %&e effe*% of )a2in4 %&e assess)en%
also final an( *olle*%i-le. T&e #+6 *o"l( %&en "se i%s a()inis%ra%i!e an( ."(i*ial
re)e(ies %o *olle*% %&e %a5
0"ris(i*%ion of %&e Co"r% of Ta5 AealsD
a. E5*l"si!e aella%e ."ris(i*%ion %o re!ie' -y aeal
-. 0"ris(i*%ion o!er *ri)inal offenses
1B E5*l"si!e ori4inal ."ris(i*%ion
2B E5*l"si!e aella%e ."ris(i*%ion
*. 0"ris(i*%ion o!er %a5 *olle*%ion *ases
1B E5*l"si!e ori4inal ."ris(i*%ion
2B E5*l"si!e aella%e ."ris(i*%ion
E5*l"si!e aella%e ."ris(i*%ion of CTA %o re!ie' -y aeal
a. De*isions of %&e Co))issioner of +n%ernal 6e!en"e
-. +na*%ion -y %&e Co))issioner of +n%ernal 6e!en"e
*. De*isions/ or resol"%ions of %&e 6e4ional Trial Co"r%s
(. De*isions of %&e Co))issioner of C"s%o)s
e. De*isions of %&e Cen%ral #oar( of Assess)en% Aeals
f. De*isions of %&e Se*re%ary of <inan*e
4. De*isions of %&e Se*re%ary of Tra(e an( +n("s%ry an( %&e Se*re%ary
of A4ri*"l%"re. ASe*. J/ 6. A. No. 112C/ as a)en(e( -y 6. A. No. 3272B
BAR: 28. T&e ."ris(i*%ion of %&e Co"r% of Ta5 AealsD
a. E5*l"si!e aella%e ."ris(i*%ion %o re!ie' -y aeal/ as &erein
ro!i(e(D
1. De*isions of %&e Co))issioner of +n%ernal 6e!en"e in *ases
in!ol!in4 (is"%e( assess)en%s/ ref"n(s of in%ernal re!en"e %a5es/ fees or
o%&er *&ar4es/ enal%ies/ in rela%ion %&ere%o/ or o%&er )a%%ers arisin4 "n(er
%&e Na%ional +n%ernal 6e!en"e Co(e or o%&er la's a()inis%ere( -y %&e
#"rea" of +n%ernal 6e!en"eE
2. +na*%ion -y %&e Co))issioner of +n%ernal 6e!en"e in *ases
in!ol!in4 (is"%e( assess)en%s/ ref"n(s or in%ernal re!en"e %a5es/ fees or
o%&er *&ar4es/ enal%ies in rela%ion %&ere%o/ or o%&er )a%%er arisin4 "n(er %&e
Na%ional +n%ernal 6e!en"e Co(e or o%&er la's a()inis%ere( -y %&e #"rea" of
+n%ernal 6e!en"e/ '&ere %&e Na%ional +n%ernal 6e!en"e Co(e ro!i(es a
se*ifi* erio( of a*%ion/ in '&i*& *ase %&e ina*%ion s&all -e (ee)e( a
(enialE
15
1. De*isions/ or(ers or resol"%ions of %&e 6e4ional Trial Co"r%s in
lo*al %a5 *ases ori4inally (e*i(e( or resol!e( -y %&e) in %&e e5er*ise of %&eir
ori4inal or aella%e ."ris(i*%ionE
4. De*isions of %&e Co))issioner of C"s%o)s in *ases in!ol!in4
lia-ili%y for *"s%o)s ("%ies/ fees or o%&er )oney *&ar4es/ sei8"re/ (e%en%ion
or release of roer%y affe*%e(/ fines/ forfei%"res or o%&er enal%ies in rela%ion
%&ere%o/ or o%&er )a%%ers arisin4 "n(er %&e C"s%o)s @a' or o%&er la's
a()inis%ere( -y %&e #"rea" of C"s%o)sE
C. De*isions of %&e Cen%ral #oar( of Assess)en% Aeals in %&e
e5er*ise of i%s aella%e ."ris(i*%ion o!er *ases in!ol!in4 %&e assess)en%
an( %a5a%ion of real roer%y ori4inally (e*i(e( -y %&e ro!in*ial or *i%y -oar(
of assess)en% aealsE
H. De*isions of %&e Se*re%ary of <inan*e on *"s%o)s *ases ele!a%e(
%o &i) a"%o)a%i*ally for re!ie' fro) (e*isions of %&e Co))issioner of
C"s%o)s '&i*& are a(!erse %o %&e =o!ern)en% "n(er Se*%ion 211C of %&e
Tariff an( C"s%o)s Co(eE
J. De*isions of %&e Se*re%ary of Tra(e an( +n("s%ry/ in *ase of
nona4ri*"l%"ral ro("*%/ *o))o(i%y or ar%i*le/ an( %&e Se*re%ary of
A4ri*"l%"re in %&e *ase of a4ri*"l%"ral ro("*%/ *o))o(i%y or ar%i*le/ in!ol!in4
(")in4 an( *o"n%er!ailin4 ("%ies "n(er Se*%ion 101 an( 102/ rese*%i!ely/
of %&e Tariff an( C"s%o)s Co(e/ an( safe4"ar( )eas"res "n(er 6e"-li* A*%
No. 7700/ '&ere ei%&er ar%y )ay aeal %&e (e*ision %o i)ose or no% %o
i)ose sai( ("%ies.
-. 0"ris(i*%ion o!er *ases in!ol!in4 *ri)inal offenses as &erein
ro!i(e(D
1. E5*l"si!e ori4inal ."ris(i*%ion o!er all *ri)inal *ases arisin4 fro)
!iola%ions of %&e na%ional +n%ernal 6e!en"e Co(e or Tariff an( C"s%o)s Co(e
an( o%&er la's a()inis%ere( -y %&e #"rea" of +n%ernal 6e!en"e or %&e
#"rea" of C"s%o)sD Provi.e., #owever, T&a% offenses or felonies )en%ione(
in %&is ara4ra& '&ere %&e rin*ial a)o"n% of %a5es an( fees/ e5*l"si!e of
*&ar4es an( enal%ies *lai)e(/ is less %&an One )illion esos
AP1/000/000.00B or '&ere %&ere is no se*ifie( a)o"n% *lai)e( s&all -e %rie(
-y %&e re4"lar Co"r%s an( %&e ."ris(i*%ion of %&e CTA s&all -e aella%e. Any
ro!ision of la' or %&e 6"les of Co"r% %o %&e *on%rary no%'i%&s%an(in4/ %&e
*ri)inal a*%ion an( %&e *orreson(in4 *i!il a*%ion for %&e re*o!ery of *i!il
lia-ili%y for %a5es an( enal%ies s&all a% all %i)es -e si)"l%aneo"sly ins%i%"%e(
'i%&/ an( .oin%ly (e%er)ine( in %&e sa)e ro*ee(in4 -y %&e CTA/ %&e filin4 of
%&e *ri)inal a*%ion -ein4 (ee)e( %o ne*essarily *arry 'i%& i% %&e filin4 of %&e
*i!il a*%ion/ an( no ri4&% %o reser!e %&e filin4 of s"*& *i!il a*%ion seara%ely
fro) %&e *i!il a*%ion 'ill -e re*o4ni8e(.
2. E5*l"si!e aella%e ."ris(i*%ion in *ri)inal offensesD
a. O!er aeals fro) %&e ."(4)en%s/ resol"%ions or or(ers of %&e
6e4ional Trial Co"r%s in %a5 *ases ori4inally (e*i(e( -y %&e)/ in %&eir
rese*%i!e %erri%orial ."ris(i*%ion.
-. O!er e%i%ions for re!ie' of %&e ."(4)en%s/ resol"%ions
or(ers of %&e 6e4ional Trial Co"r%s in %&e e5er*ise of %&eir aella%e
."ris(i*%ion o!er %a5 *ases ori4inally (e*i(e( -y %&e Me%rooli%an Trial
Co"r%s/ M"ni*ial Trial Co"r%s an( M"ni*ial Cir*"i% Trial Co"r%s in %&eir
rese*%i!e ."ris(i*%ion.
*. 0"ris(i*%ion o!er %a5 *olle*%ion *asesD
1. E5*l"si!e ori4inal ."ris(i*%ion in %a5 *olle*%ion *ases in!ol!in4 final
an( e5e*"%ory assess)en%s for %a5es/ fees/ *&ar4es an( enal%iesD
Provi.e., #owever, T&a% *olle*%ion *ases '&ere %&e rin*ial a)o"n% of
%a5es an( fees/ e5*l"si!e of *&ar4es an( enal%ies/ *lai)e( is less %&an One
16
)illion esos AP1/000/000B s&all -e %rie( -y %&e roer M"ni*ial Trial Co"r%/
Me%rooli%an Trial Co"r% an( 6e4ional Trial Co"r%.
2. E5*l"si!e aella%e ."ris(i*%ion in %a5 *olle*%ion *asesD
a. O!er aeals fro) ."(4)en%s/ resol"%ions/ or or(ers of %&e
6e4ional Trial Co"r%s in %a5 *olle*%ion *ases ori4inally (e*i(e( -y %&e)/
in %&eir rese*%i!e %erri%orial ."ris(i*%ion.
-. O!er e%i%ions for re!ie' of %&e ."(4)en%s/ resol"%ions or
or(ers of %&e 6e4ional Trial Co"r%s in %&e e5er*ise of %&eir aella%e
."ris(i*%ion o!er %a5 *olle*%ion *ases ori4inally (e*i(e( -y %&e
Me%rooli%an Trial Co"r%s/ M"ni*ial Trial Co"r%s an( M"ni*ial Cir*"i%
Trial Co"r%s/ in %&eir rese*%i!e ."ris(i*%ion. ASe*. J/ 6. A. No. 112C/ as
a)en(e( -y 6. A. No. 3272/ e)&asis s"lie(B
E5*l"si!e aella%e ."ris(i*%ion of Co"r% of Ta5 Aeals %o re!ie' -y aeal
(e*isions of %&e Co))issioner of +n%ernal 6e!en"e.
a. Cases in!ol!in4D
1) Dis"%e( assess)en%sE
1B 6ef"n(s of in%ernal re!en"e %a5es/ fees or o%&er *&ar4esE
2) Penal%ies i)ose( in rela%ion %&ere%o.
-. O%&er )a%%ers arisin4 "n(erD
1B T&e Na%ional +n%ernal 6e!en"e Co(e/ or
2B O%&er la's a()inis%ere( -y %&e #"rea" of +n%ernal 6e!en"e. ASe*. J/
6. A. No. 112C/ as a)en(e( -y 6. A. No. 3272B.
T&e Co"r% of Ta5 Aeals &as ."ris(i*%ion o!er (e*isions of %&e
Co))issioner of C"s%o)s o!erD
a. Cases in!ol!in4D
1B @ia-ili%y for *"s%o)s ("%ies/ fees or o%&er )oney *&ar4es/
2B Sei8"res/ (e%en%ion or release of roer%y affe*%e(/
1B <ines/ forfei%"res an( o%&er enal%ies i)ose( in rela%ion
%&ere%oE
-. O%&er )a%%ers arisin4 "n(erD
1B %&e *"s%o)s la'/ or
2B O%&er la' or ar% of la' a()inis%ere( -y %&e #"rea" of C"s%o)s
E5*l"si!e aella%e ."ris(i*%ion of Co"r% of Ta5 Aeals %o re!ie' -y
aeal (e*isions/ or(ers or resol"%ions of %&e 6e4ional Trial Co"r%s
a. +n lo*al %a5 *ases ori4inally (e*i(e( or resol!e( -y %&e) in %&e
e5er*ise of %&eir ori4inal or aella%e ."ris(i*%ion. ASe*. J/ 6. A. No. 112C/ as
a)en(e( -y 6. A. No. 3272B
-. O!er aeals fro) %&e ."(4)en%s/ resol"%ions or or(ers of %&e
6e4ional Trial Co"r%s in %a5 *olle*%ion *ases (e*i(e( -y %&e)/ in %&eir rese*%i!e
%erri%orial ."ris(i*%ion. A$bi..B
*. O!er e%i%ions for re!ie' of %&e ."(4)en%s/ resol"%ions or or(ers of
%&e 6e4ional Trial Co"r%s in %&e e5er*ise of %&eir aella%e ."ris(i*%ion o!er %a5
*olle*%ion *ases ori4inally (e*i(e( -y %&e Me%rooli%an Trial Co"r%s/ M"ni*ial
Trial Co"r%s an( M"ni*ial Cir*"i% Trial Co"r%s/ in %&eir rese*%i!e ."ris(i*%ion.
A$bi..B
E5*l"si!e ori4inal ."ris(i*%ion of 6e4ional Trial Co"r%s in %a5 *olle*%ion
*ases. Ci!il a*%ions for %a5 *olle*%ion '&ere %&e rin*ial a)o"n% of %a5es an(
fees/ e5*l"si!e of *&ar4es an( enal%ies *lai)e( e5*ee(s T'o &"n(re(
%&o"san( esos AP200/000.00B/ or in Me%ro Manila '&ere %&e a)o"n% of %&e
(e)an( e5*ee(s <o"r &"n(re( %&o"san( esos AP400/000.00B/ ro!i(e( %&a%
17
%&e a)o"n% *lai)e( is less %&an One )illion esos AP1/000/000.00B. ASe*. 13/
#.P .#l4. 123/as a)en(e( -y 6. A. No. JH31 in rela%ion %o Se*. C/ 6.A. No. JH31
an( Se*. J/ 6. A. No. 112C as a)en(e( -y 6. A. No. 3272B
NOTED Ta5 *olle*%ion *ases %&a% are -elo' %&e %&res&ol( a)o"n%s of
P200/000.00 an( P400/000.00 fall 'i%&in %&e ."ris(i*%ion of %&e M"ni*ial Trial
Co"r%s/ %&e M"ni*ial Trial Co"r%s in Ci%ies/ %&e M"ni*ial Cir*"i% Trial Co"r%s/ or
%&e Me%rooli%an Trial Co"r%s. 9&ere %&e a)o"n% e5*ee(s P1 )illion/ e5*l"si!e
ori4inal ."ris(i*%ion is !es%e( 'i%& %&e Co"r% of Ta5 Aeals.
E5*l"si!e aella%e ."ris(i*%ion of 6e4ional Trial Co"r%s in %a5 *olle*%ion
*ases. 6e4ional Trial Co"r%s s&all e5er*ise aella%e ."ris(i*%ion o!er all *ases
(e*i(e( -y Me%rooli%an Trial Co"r%s/ M"ni*ial Trial Co"r%s an( M"ni*ial
Cir*"i% Trial Co"r%s in %&eir rese*%i!e %erri%orial ."ris(i*%ion. ASe*. 22/ #. P. #l4.
123B
E5*l"si!e aella%e ."ris(i*%ion of %&e Co"r% of Ta5 Aeals %o re!ie' -y
aeal (e*isions of Co))issioner of C"s%o)sD
a. +n *ases in!ol!in4D
1B @ia-ili%y for *"s%o)s ("%ies/ fees or o%&er )oney *&ar4esE
2B Sei8"re/ (e%en%ion or release of roer%y affe*%e(E
1B <ines/ forfei%"res or o%&er enal%ies i)ose( in rela%ion %&ere%oE
-. O%&er )a%%ers arisin4 "n(erE
1B %&e C"s%o)s @a'/ or
2) O%&er la's a()inis%ere( -y #"rea" of C"s%o)s. ASe*. J/ 6. A .
No. 112C/ as a)en(e( -y Se*. J.a.4/ 6. A. No. 3272B
BAR: 29. T&e follo'in4 are %&e a*%s of #+6 Co))issioner *onsi(ere(
as (enial of a ro%es% '&i*& ser!e as -asis for aeal %o %&e Co"r% of Ta5
AealsD
a. <ilin4 -y %&e #+6 of a *i!il s"i% for *olle*%ion of %&e (efi*ien*y %a5 is
*onsi(ere( a (enial of %&e re,"es% for re*onsi(era%ion. ACo&&i%%ioner of
$nternal Revenue v. <nion '#ippin3 Corporation, 1+4 'CRA 44)
-. An in(i*a%ion %o %&e %a5ayer -y %&e Co))issioner in *lear an(
"ne,"i!o*al lan4"a4e of &is final (enial no% %&e iss"an*e of %&e 'arran% of
(is%rain% an( le!y. 9&a% is %&e s"-.e*% of %&e aeal is %&e final (e*ision no% %&e
'arran% of (is%rain%. (Co&&i%%ioner of $nternal Revenue v. <nion '#ippin3
Corporation, 1+4 'CRA 44)
*. A #+6 (e)an( le%%er sen% %o %&e %a5ayer af%er &is ro%es% of %&e
assess)en% no%i*e is *onsi(ere( as %&e final (e*ision of %&e Co))issioner on
%&e ro%es%. ('uri3ao 2le"tri" Co., $n". v. Court of 5a8 Appeal%, et al., 4) 'CRA
423
A le%%er of %&e #+6 Co))issioner rei%era%in4 %o a %a5ayer &is re!io"s
(e)an( %o ay an assess)en% is *onsi(ere( a (enial of %&e re,"es% for
re*onsi(era%ion or ro%es% an( is aeala-le %o %&e Co"r% of Ta5 Aeals.
(Co&&i%%ioner v. Ayala 'e"uritie% Corporation, )0 'CRA 204
T&e a*%"al iss"an*e of a 'arran% of (is%rain% an( le!y in *er%ain *ases
*anno% -e *onsi(ere( a final (e*ision on a (is"%e( assess)en%. T&e %a5ayer
s&o"l( aeal/ -y 'ay of a e%i%ion for re!ie'/ %o %&e Co"r% of Ta5 Aeals no% on
%&e 4ro"n( of %&e (enial of %&e ro%es% -"% on o%&er )a%%er arisin4 "n(er %&e
ro!isions of %&e Na%ional +n%ernal 6e!en"e Co(e. <"r%&er)ore/ an ali*a%ion
s&o"l( li2e'ise -e )a(e for %&e iss"an*e of an in."n*%i!e 'ri% %o en.oin %&e #+6
fro) *olle*%in4 ("rin4 %&e en(en*y of %&e e%i%ion. (Co&&i%%ioner of $nternal
Revenue v. <nion '#ippin3 Corp., 1+4 'CRA 44)
18
<inal no%i*e -efore sei8"re *onsi(ere( as *o))issioners (e*ision of
%a5ayers re,"es% for re*onsi(era%ion '&o re*ei!e( no o%&er resonse.
Co&&i%%ioner of $nternal Revenue v. $%abela Cultural Corporation, G.R. No.
134210, 1uly 11, 2001 &el( %&a% no% only is %&e No%i*e %&e only resonse
re*ei!e(D i%s *on%en% an( %enor s"or%s %&e %&eory %&a% i% 'as %&e C+6s final a*%
re4ar(in4 %&e re,"es% for re*onsi(era%ion. T&e !ery %i%le e5ressly in(i*a%e( %&a%
i% 'as a final no%i*e rior %o sei8"re of roer%y. T&e le%%er i%self *learly s%a%e(
%&a% %&e %a5ayer 'as -ein4 4i!en %&is @AST OPPO6TUN+T> %o ayE o%&er'ise/
i%s roer%ies 'o"l( -e s"-.e*%e( %o (is%rain% an( le!y.
To a !ali( (e*ision on a (is"%e( assess)en%/ %&e (e*ision of %&e
Co))issioner or &is ("ly a"%&ori8e( reresen%a%i!e s&all AaB s%a%e %&e fa*%s/ %&e
ali*a-le la'/ r"les an( re4"la%ions/ or ."risr"(en*e on '&i*& s"*& (e*ision is
-ase(/ o%&er'ise/ %&e (e*ision s&all -e !oi(/ in '&i*& *ase %&e sa)e s&all no% -e
*onsi(ere( a (e*ision on %&e (is"%e( assess)en%E an( A-B %&a% %&e sa)e is &is
final (e*ision. ASe*. 1.1.H/ 6e!. 6e4s. 12?33B
As a 4eneral r"le/ %&ere )"s% al'ays -e a (e*ision of %&e Co))issioner
of +n%ernal 6e!en"e or Co))issioner of C"s%o)s -efore %&e Co"r% of Ta5
Aeals/ 'o"l( &a!e ."ris(i*%ion. +f %&ere is no s"*& (e*ision/ %&e 'o"l( -e
(is)isse( for la*2 of ."ris(i*%ion "nless %&e *ase falls "n(er any of %&e follo'in4
e5*e%ions.
+ns%an*es '&ere %&e Co"r% of Ta5 Aeals 'o"l( &a!e ."ris(i*%ion e!en if
%&ere is no (e*ision ye% -y %&e Co))issioner of +n%ernal 6e!en"eD
a. 9&ere %&e Co))issioner &as no% a*%e( on %&e (is"%e( assess)en%
af%er a erio( of 170 (ays fro) s"-)ission of *o)le%e s"or%in4 (o*")en%s/
%&e %a5ayer &as a erio( of 10 (ays fro) %&e e5ira%ion of %&e 170 (ay erio(
'i%&in '&i*& %o aeal %o %&e Co"r% of Ta5 Aeals. Alas% ar./ Se*. 227 AeB/ N+6C
of 133J= Co&&i%%ioner of $nternal Revenue v. $%abela Cultural Corporation, G.R.
No. 134210, 1uly 11, 2001
-. 9&ere %&e Co))issioner &as no% a*%e( on an ali*a%ion for ref"n( or
*re(i% an( %&e %'o year erio( fro) %&e %i)e of ay)en% is a-o"% %o e5ire/ %&e
%a5ayer &as %o file &is aeal 'i%& %&e Co"r% of Ta5 Aeals -efore %&e
e5ira%ion of %'o years fro) %&e %i)e %&e %a5 'as ai(.
+% is (is&ear%enin4 eno"4& %o a %a5ayer %o -e 2e% 'ai%in4 for an in(efini%e
erio( for %&e r"lin4/. +% 'o"l( )a2e )a%%ers )ore e5asera%in4 for %&e %a5ayer
if %&e (oors of ."s%i*e 'o"l( -e *lose( for s"*& a relief "n%il af%er %&e
Co))issioner/ 'o"l( &a!e/ a% &is ersonal *on!enien*e/ 4i!en &is 4o si4nal.
(Co&&i%%ioner of Cu%to&%, et al, v. Court of 5a8 Appeal%, et al., G.R. No. +2*1+,
0ar"# 1*, 19+9, unrep.
+ns%an*es '&ere %&e Co"r% of Ta5 Aeals 'o"l( &a!e ."ris(i*%ion e!en if
%&ere is no (e*ision of %&e Co))issioner of C"s%o)sD
a. De*isions of %&e Se*re%ary of Tra(e an( +n("s%ry or %&e Se*re%ary of
A4ri*"l%"re in an%i?(")in4 an( *o"n%er!ailin4 ("%y *ases are aeala-le %o %&e
Co"r% of Ta5 Aeals 'i%&in %&ir%y A10B (ays fro) re*ei% of s"*& (e*isions.
-. +n *ase of a"%o)a%i* re!ie' -y %&e Se*re%ary of <inan*e in sei8"re or
forfei%"re *ases '&ere %&e !al"e of %&e i)or%a%ion e5*ee(s PC )illion or '&ere
%&e (e*ision of %&e Colle*%or of C"s%o)s '&i*& f"lly or ar%ially releases %&e
s&i)en% sei8e( is affir)e( -y %&e Co))issioner of C"s%o)s.
*. +n *ase of a"%o)a%i* re!ie' -y %&e Se*re%ary of <inan*e of a (e*ision
of a Colle*%or of C"s%o)s a*%in4 fa!ora-ly "on a *"s%o)s ro%es%.
T&e %a5a-le in*o)e s&all -e *o)"%e( "on %&e -asis of %&e %a5ayers
ann"al a**o"n%in4 erio( Afis*al year or *alen(ar year/ as %&e *ase )ay -eB in
a**or(an*e 'i%& %&e )e%&o( of a**o"n%in4 re4"larly e)loye( in 2eein4 %&e
-oo2s of s"*& %a5ayerE -"% if no s"*& )e%&o( of a**o"n%in4 &as -een so
e)loye(/ or if %&e )e%&o( e)loye( (oes no% *learly refle*% %&e in*o)e/ %&e
19
*o)"%a%ion s&all -e in a**or(an*e 'i%& s"*& )e%&o( as in %&e oinion of %&e
Co))issioner *learly refle*%s %&e in*o)e. ASe*. 41/ N+6C of 133JB
9&en a reor% re,"ire( -y la' as a -asis for %&e assess)en% of any
na%ional in%ernal re!en"e %a5 s&all no% -e for%&*o)in4 'i%&in %&e %i)e fi5e( -y
la's or r"les an( re4"la%ions or '&en %&ere is reason %o -elie!e %&a% any s"*&
reor% is false/ in*o)le%e or erroneo"s/ %&e Co))issioner s&all assess %&e
roer %a5 on %&e -es% e!i(en*e o-%aina-le.
+n *ase a erson fails %o file a re,"ire( re%"rn or o%&er (o*")en% a% %&e
%i)e res*ri-e( -y la'/ or 'illf"lly or o%&er'ise files a false or fra"("len% re%"rn
or o%&er (o*")en%/ %&e Co))issioner s&all )a2e or a)en( %&e re%"rn fro) &is
o'n 2no'le(4e an( fro) s"*& infor)a%ion as &e *an o-%ain %&ro"4& %es%i)ony or
o%&er'ise/ '&i*& s&all -e pri&a fa"ie *orre*% an( s"ffi*ien% for all le4al
"roses. ISe*. H A#B/ N+6C of 133JK

BAR: 30. T&e follo'in4 are %&e 4eneral )e%&o(s (e!eloe( -y %&e
#"rea" of +n%ernal 6e!en"e for re*ons%r"*%in4 a %a5ayers in*o)e '&ere %&e
re*or(s (o no% s&o' %&e %r"e in*o)ne or '&ere no re%"rn 'as file( or '&a% 'as
file( 'as a false an( fra"("len% re%"rn AaB Per*en%a4e )e%&o(E A-B Ne% 'or%&
)e%&o(.E A*B #an2 (eosi% )e%&o(E A(B Cas& e5en(i%"re )e%&o(E AeB Uni% an(
!al"e )e%&o(E AfB T&ir( ar%y infor)a%ion or a**ess %o re*or(s )e%&o(E A4B
S"r!eillan*e an( assess)en% )e%&o(. AC&a%er ;+++. +n(ire*% Aroa*& %o
+n!es%i4a%ion/ :an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ .
H7?J4B
Un(er %&e er*en%a4e )e%&o(/ %&e *o)"%e( a)o"n% of re!en"es -ase(
on %&e er*en%a4e *o)"%a%ion is *o)are( %o %&e a)o"n% of re!en"es refle*%e(
on %&e re%"rn. T&e er*en%a4es "se( )ay -e o-%aine( fro) %&e %a5ayer/
in("s%ry "-li*a%ion/ rior years a"(i% res"l%s/ or %&ir( ar%ies. T&e *o)arison
'ill ro!i(e an in(i*a%ion on %&e ossi-ili%y of re!en"e -ein4 "n(ers%a%e(.
A)on4 %&e si4nifi*an% ra%ios an( %ren(s %o -e analy8e( are %&e er*en%a4e
)ar2?"/ 4ross rofi%s ra%io or 4ross )ar4in er*en%a4e/ rofi% )ar4in/ %o%al
asse%s %"rno!er/ an( in!en%ory %"rno!er. AC&a%er ;+++. +n(ire*% Aroa*& %o
+n!es%i4a%ion/ :an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ .
H7?J4B
T&e ne% 'or%& )e%&o( is a )e%&o( of re*ons%r"*%in4 in*o)e '&i*& is
-ase( on %&e %&eory %&a% if %&e %a5ayers ne% 'or%& &as in*rease( in a 4i!en year
in an a)o"n% lar4er %&an &is reor%e( in*o)e/ &e &as "n(ers%a%e( &is in*o)e for
%&a% year. T&e ne% 'or%& on a fi5e( s%ar%in4 (a%e is *o)are( 'i%& %&e ne% 'or%&
on a fi5e( en(in4 (a%e. Any in*rease in ne% 'or%& is res")e( %o -e in*o)e no%
(e*lare( for %a5 "roses. AC&a%er ;+++. +n(ire*% Aroa*& %o +n!es%i4a%ion/
:an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ . H7?J4B
T&e (iffi*"l%y of es%a-lis&in4 %&e oenin4 ne% 'or%& of a %a5 ayer &as le(
%o %&e Co&an 6"le '&i*& is %&e "se of es%i)a%es or aro5i)a%ions of %&e
a)o"n% of *as& an( o%&er asser%s '&ere %&e %a5ayer la*2s a(e,"a%e re*or(s.
AC&a%er ;+++. +n(ire*% Aroa*& %o +n!es%i4a%ion/ :an(-oo2 on A"(i% Pro*e("res
an( Te*&ni,"es L Vol")e +/ . H7?J4B
Un(er %&e -an2 (eosi% )e%&o(/ %&e -an2 re*or(s of %&e %a5ayer are
analy8e( an( %&e #+6 es%i)a%es in*o)e on %&e -asis of %&e %o%al -an2 (eosi%s
af%er eli)ina%in4 non?in*o)e i%e)s. T&is )e%&o( s%an(s on %&e re)ise %&a%
(eosi%s reresen% %a5a-le in*o)e "nless o%&er'ise e5laine( as -ein4 non?
%a5a-le i%e)s. T&is )e%&o( )ay -e "se( only '&ere %&e #+6 &as -een le4ally
allo'e( a**ess %o %&e %a5ayers -an2 re*or(s. AC&a%er ;+++. +n(ire*% Aroa*&
%o +n!es%i4a%ion/ :an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ .
H7?J4B
20
T&e *as& e5en(i%"re )e%&o( ass")es %&a% %&e e5*ess of a %a5ayers
e5en(i%"res ("rin4 %&e %a5 erio( o!er &is reor%e( in*o)e for %&a% erio( is
%a5a-le %o %&e e5%en% no% (isro!e( o%&er'ise. AC&a%er ;+++. +n(ire*% Aroa*& %o
+n!es%i4a%ion/ :an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ .
H7?J4B

Un(er %&e "ni% an( !al"e )e%&o(/ %&e (e%er)ina%ion or !erifi*a%ion of
4ross re*ei%s )ay -e *o)"%e( -y alyin4 ri*e an( rofi% fi4"res %o %&e
2no'n as*er%aina-le ,"ali%y of -"siness of %&e %a5ayer. AC&a%er ;+++. +n(ire*%
Aroa*& %o +n!es%i4a%ion/ :an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L
Vol")e +/ . H7?J4B
<or e5a)le/ in or(er %o (e%er)ine %&e 4ross re*ei%s of a i88a arlor/
)"l%ily %&e o"n(s of flo"r "se( -y %&e n")-er of i88as er o"n( '&i*& in
%"rn 'o"l( %&en -e )"l%ilie( -y %&e a!era4e ri*e er i88a.
BAR: 31. T&ir( ar%y infor)a%ion or a**ess %o re*or(s )e%&o(. T&e
#+6 )ay re,"ire %&ir( ar%ies/ "-li* or ri!a%e %o s"ly infor)a%ion %o %&e #+6/
an( %&"s/ o-%ain on a re4"lar -asis fro) any erson o%&er %&an %&e erson
'&ose in%ernal re!en"e %a5 lia-ili%y is s"-.e*% %o a"(i% or in!es%i4a%ion/ or fro)
any offi*e or offi*er of %&e na%ional an( lo*al 4o!ern)en%s/ 4o!ern)en% a4en*ies
an( ins%r")en%ali%ies in*l"(in4 %&e #an42o Sen%ral n4 Piliinas an( 4o!ern)en%?
o'ne( or L*on%rolle( *orora%ions/ any infor)a%ion s"*& as/ -"% no% li)i%e( %o/
*os%s an( !ol")e of ro("*%ion/ re*ei%s or sales an( 4ross in*o)es of
%a5ayers/ an( %&e na)es / a((resses/ an( finan*ial s%a%e)en%s of *orora%ions/
)"%"al f"n( *o)anies/ ins"ran*e *o)anies/ re4ional oera%in4 &ea(,"ar%ers
or )"l%ina%ional *o)anies/ .oin% a**o"n%s/ asso*ia%ions/ .oin% !en%"res or
*onsor%ia an( re4is%ere( ar%ners&is/ an( %&eir )e)-ersE 555 ISe*. C A#B/
N+6C of 133JB
A re?assess)en% no%i*e is a le%%er sen% -y %&e #"rea" of +n%ernal
6e!en"e %o a %a5ayer as2in4 &i) %o e5lain 'i%&in a erio( of fif%een A1CB (ays
fro) re*ei% '&y &e s&o"l( no% -e %&e s"-.e*% of an assess)en% no%i*e. +% is ar%
of %&e ("e ro*ess ri4&%s of a %a5ayer.
As a 4eneral r"le/ %&e #+6 *o"l( no% iss"e an assess)en% no%i*e 'i%&o"%
firs% iss"in4 a re?assess)en% no%i*e -e*a"se i% is ar% of %&e ("e ro*ess ri4&%s
of a %a5ayer %o -e 4i!en no%i*e in %&e for) of a re?assess)en% no%i*e/ an( for
&i) %o e5lain '&y &e s&o"l( no% -e %&e s"-.e*% of an assess)en% no%i*e.
BAR: 32. +ns%an*es '&ere a re?assess)en% no%i*e is no% re,"ire(
-efore a no%i*e of assess)en% is sen% %o %&e %a5ayer.
a. 9&en %&e fin(in4 for any (efi*ien*y %a5 is %&e res"l% of )a%&e)a%i*al
error in %&e *o)"%a%ion of %&e %a5 as aearin4 on %&e fa*e of %&e re%"rnE or
-. 9&en a (is*rean*y &as -een (e%er)ine( -e%'een %&e %a5 'i%&&el(
an( %&e a)o"n% a*%"ally re)i%%e( -y %&e 'i%&&ol(in4 a4en%E or
*. 9&en a %a5ayer o%e( %o *lai) a ref"n( or %a5 *re(i% of e5*ess
*re(i%a-le 'i%&&ol(in4 %a5 for a %a5a-le erio( 'as (e%er)ine( %o &a!e *arrie(
o!er an( a"%o)a%i*ally alie( %&e sa)e a)o"n% *lai)e( a4ains% %&e es%i)a%e(
%a5 lia-ili%ies for %&e %a5a-le ,"ar%er or ,"ar%ers of %&e s"**ee(in4 %a-le yearE or
(. 9&en %&e e5*ess %a5 ("e on e5*isa-le ar%i*les &as no% -een ai(E or
e. 9&en an ar%i*le lo*ally "r*&ase( or i)or%e( -y an e5e)% erson/
s"*& as/ -"% no% li)i%e( %o !e&i*les/ *ai%al e,"i)en%/ )a*&ineries an( sare
ar%s/ &as -een sol(/ %ra(e or %ransferre( %o non?e5e)% ersons. ASe*. 227/
N+6C of 133JB
<or in%ernal re!en"e %a5a%ion assess)en% as layin4 a %a5. T&e "l%i)a%e
"rose of an assess)en% %o s"*& a *onne*%ion is %o as*er%ain %&e a)o"n% %&a%
ea*& %a5ayer is %o ay. (Co&&i%%ioner of $nternal Revenue v. Pa%"or Realty
an. (evelop&ent Corporation, et al., G.R. No. 12+314, 1une 29, 1999
21
T&e 'or( assess)en% '&en "se( in *onne*%ion 'i%& %a5a%ion/ )ay &a!e
)ore %&an one )eanin4.. More *o))only %&e 'or( assess)en% )eans %&e
offi*ial !al"a%ion of a %a5ayers roer%y for "rose of %a5a%ion. T&e a-o!e
(efini%ion of assess)en% fin(s ali*a%ion "n(er %ariff an( *"s%o)s %a5a%ion as
'ell as lo*al 4o!ern)en% %a5a%ion.
<or real roer%y %a5a%ion/ %&ere )ay -e a se*ial )eanin4 %o %&e -"r(ens
%&a% are i)ose( "on real roer%ies %&a% &a!e -een -enefi%e( -y a "-li*
'or2s e5en(i%"re of a lo*al 4o!ern)en%. +% is so)e%i)es *alle( a se*ial
assess)en% or a se*ial le!y. (Co&&i%%ioner of $nternal Revenue v. Pa%"or
Realty an. (evelop&ent Corporation, et al., G.R. No. 12+314, 1une 29, 1999
An assess)en% is a no%i*e ("ly sen% %o %&e %a5ayer '&i*& is (ee)e(
)a(e only '&en %&e #+6 releases/ )ails or sen(s s"*& no%i*e %o %&e %a5ayer.
(Co&&i%%ioner of $nternal Revenue v. Pa%"or Realty an. (evelop&ent
Corporation, et al., G.R. No. 12+314, 1une 29, 1999
An affi(a!i%?reor% of %&e e5a)iners "se( %o s"or% a *ri)inal *o)lain%
for %a5 e!asion (oes no% *ons%i%"%e an assess)en% %&a% )ay -e %&e s"-.e*% of a
)o%ion for re*onsi(era%ionMrein!es%i4a%ion. T&e affi(a!i%?reor% )erely *on%ains a
*o)"%a%ion of %&e lia-ili%ies. +% (oes no% s%a%e a (e)an( or a erio( for ay)en%.
+% is no% a((resse( %o %&e %a5ayers -"% %o %&e Dear%)en% of 0"s%i*e. Clearly/ i%
'as no% )ean% %o -e a no%i*e of %&e %a5 ("e an( a (e)an( for %&e ay)en%
%&ereof. (Co&&i%%ioner of $nternal Revenue v. Pa%"or Realty an. (evelop&ent
Corporation, et al., G.R. No. 12+314, 1une 29, 1999
BAR: 33. T&e res*ri%i!e erio(s for )a2in4 assess)en%s areD
a. %&ree A1B years fro) %&e las% (ay 'i%&in '&i*& %o file a re%"rn or '&en
%&e re%"rn 'as a*%"ally file(/ '&i*&e!er is la%erE
-. %en years fro) (is*o!ery of %&e fail"re %o file %&e %a5 re%"rn or
(is*o!ery of falsi%y or fra"( in %&e re%"rnE or
*. 'i%&in %&e erio( a4ree( "on -e%'een %&e 4o!ern)en% an( %&e
%a5ayer '&ere %&ere is a 'ai!er of %&e res*ri%i!e erio( for assess)en%.
A .eoar(y assess)en% is a (elin,"en*y %a5 assess)en% '&i*& 'as
assesse( 'i%&o"% %&e -enefi% of *o)le%e or ar%ial a"(i% -y an a"%&ori8e(
re!en"e offi*er/ '&o &as reason %o -elie!e %&a% %&e assess)en% an( *olle*%ion of
a (efi*ien*y %a5 'ill -e .eoar(i8e( -y (elay -e*a"se of %&e %a5ayers fail"re %o
*o)ly 'i%& %&e a"(i% an( in!es%i4a%ion re,"ire)en%s %o resen% &is -oo2s of
a**o"n%s an(Mor er%inen% re*or(s/ or %o s"-s%an%ia%e all or any of %&e (e("*%ions/
e5e)%ions/ or *re(i%s *lai)e( in &is re%"rn. ISe*. 1.1 AaB/ 6e!. 6e4s. No. H?
2000B
0eoar(y assess)en% is an in(i*a%ion of %&e (o"-%f"l !ali(i%y of %&e
assess)en%/ &en*e i% )ay -e s"-.e*% %o a *o)ro)ise. ISe*. 1.1 AaB/ 6e!. 6e4s.
No. H?2000K
6e,"ire)en%s for !ali(i%y of for)al le%%er of (e)an( an( assess)en%
no%i*eD
a. T&ere )"s% &a!e -een re!io"sly iss"e( a re?assess)en% no%i*e "n%il
e5*e%e(E
-. +% )"s% &a!e -een iss"e( rior %o %&e res*ri%i!e erio(E an(
*. T&e le%%er of (e)an( *allin4 for ay)en% of %&e %a5ayers (efi*ien*y
%a5 or %a5es s&all s%a%e %&e fa*%s/ %&e la'/ r"les an( re4"la%ions/ or ."risr"(en*e
on '&i*& %&e assess)en% is -ase(/ o%&er'ise/ %&e for)al le%%er of (e)an( an(
assess)en% no%i*e s&all -e !oi(. ASe*. 1.1.4/ 6e!. 6e4s. No. 12?33B
BAR: 34. T&e &ol(in4 in Co&&i%%ioner of $nternal Revenue v. Court of
Appeal%, et al., G.R. No. 114)12, :ebruary 24, 1999 ACarna%ion *aseB %&a% %&e
22
'ai!er of %&e erio( for assess)en% )"s% -e in 'ri%in4 an( &a!e %&e 'ri%%en
*onsen% of %&e #+6 Co))issioner is s%ill (o*%rinal -e*a"se of %&e ro!isions of
Se*. 221/ N+6C of 133J '&i*& ro!i(es for %&e s"sension of %&e res*ri%i!e
erio(D
a. 9&en %&e Co))issioner is ro&i-i%e( fro) )a2in4 %&e assess)en%/ or
-e4innin4 (is%rain%/ or le!y or ro*ee(in4 in *o"r% an( for si5%y AH0B (ays
%&ereaf%erE
-. 9&en %&e %a5ayer re,"es%s for an( is 4ran%e( a rein!es%i4a%ion -y %&e
*o))issionerE
*. 9&en %&e %a5ayer *o"l( no% -e lo*a%e( in %&e a((ress 4i!en -y &i) in
%&e re%"rn file( "on '&i*& %&e %a5 is -ein4 assesse( or *olle*%e(E
(. 9&en %&e 'arran% of (is%rain% an( le!y is ("ly ser!e( "on %&e
%a5ayer/ &is a"%&ori8e( reresen%a%i!e/ or a )e)-er of &is &o"se&ol( 'i%&
s"ffi*ien% (is*re%ion/ an( no roer%y *o"l( -e lo*a%e(E an(
e. 9&en %&e %a5ayer is o"% of %&e P&iliines.
T&e si4na%"res of -o%& %&e Co))issioner an( %&e %a5ayer/ are re,"ire(
for a 'ai!er of %&e res*ri%i!e erio(/ %&"s a "nila%eral 'ai!er on %&e ar% of %&e
%a5ayer (oes no% s"sen( %&e res*ri%i!e erio(. (Co&&i%%ioner of $nternal
Revenue v. Court of Appeal%, et al., G.R. No. 114)12, :ebruary 24, 1999
(Carnation "a%e
BAR: 36. T&e follo'in4 are %&e re,"ire)en%s for %&e !ali(i%y of a
%a5ayers ro%es%D
a. +% )"s% -e file( 'i%&in %&e re4le)en%ary erio( of %&ir%y A10B (ays fro)
re*ei% of %&e no%i*e of assess)en%.
-. T&e %a5ayer )"s% s&o' %&e errors of %&e #"rea" of +n%ernal 6e!en"e
as 'ell as %&e *orre*% *o)"%a%ion %&ro"4&
1B A s%a%e)en% of %&e fa*%s/ %&e ali*a-le la'/ r"les an(
re4"la%ions/ or ."risr"(en*e on '&i*& %&e %a5ayers ro%es% is -ase(/
2B +f %&ere are se!eral iss"es in!ol!e( in %&e (is"%e( assess)en%
an( %&e %a5ayer fails %o s%a%e %&e fa*%s/ %&e ali*a-le la'/ r"les an(
re4"la%ions/ or ."risr"(en*e in s"or% of &is ro%es% a4ains% so)e of %&e
se!eral iss"es on '&i*& %&e assess)en% is -ase(/ %&e sa)e s&all -e
*onsi(ere( "n(is"%e( iss"e or iss"es/ in '&i*& *ase/ %&e %a5ayer s&all
-e re,"ire( %o ay %&e *orreson(in4 (efi*ien*y %a5 or %a5es a%%ri-"%a-le
%&ere%o. ASe*. 1.1.C/ 6e!. 6e4s. 12?33B
*. 9i%&in si5%y AH0B (ays fro) filin4 of %&e ro%es%/ %&e %a5ayer s&all
s"-)i% all rele!an% s"or%in4 (o*")en%s. I4
%&
ar./ Se*. 227 AeB/ N+6C of 133JK
@a's on res*ri%ion s&o"l( -e li-erally *ons%r"e( in fa!or of %&e
%a5ayer. <or %&e "rose of safe4"ar(in4 %a5ayers fro) an "nreasona-le
e5a)ina%ion/ in!es%i4a%ion or assess)en%/ o"r %a5 la' ro!i(es a s%a%"%e of
li)i%a%ion on %&e *olle*%ion of %a5es.
T&e res*ri%i!e erio( 'as re*isely in%en(e( %o 4i!e %&e %a5ayers
ea*e of )in(. (Co&&i%%ioner of $nternal Revenue v. -.:. Goo.ri"# P#il%., $n".,
et al., G.R. No. 1041)1, :ebruary 24, 1999
Assess)en% an( ref"n( *ases *o"l( no% -e *onsoli(a%e(. 6easonD
@ife-loo( (o*%rine. +f %&ere a en(in4 assess)en%/ ref"n( s&o"l( no% -e
4ran%e(.
Assess)en% no% ne*essary -efore a %a5ayer )ay -e rose*"%e( for
'illf"lly a%%e)%in4 in any )anner %o e!a(e or (efea% any %a5 i)ose( -y %&e
+n%ernal 6e!en"e Co(e.
A *ri)inal *&ar4e for %a5 e!asion is (ifferen% fro) a %a5 assess)en%D
23
a. Cri)inal *&ar4e nee( only -e s"or%e( -y a pri&a fa"ie s&o'in4 of
fail"re %o file a re,"ire( re%"rn 9:+@E %&e fa*% of fail"re %o file a re%"rn nee( no%
-e ro!en -y an assess)en%.
-. #efore an assess)en% is iss"e(/ %&ere is/ -y ra*%i*e/ a re?
assess)en% no%i*e sen% %o %&e %a5ayer 9:+@E s"*& is no% so 'i%& a *ri)inal
*&ar4e. T&e *&ar4e is file( (ire*%ly 'i%& %&e Dear%)en% of 0"s%i*e.
*. A *ri)inal *o)lain% is ins%i%"%e( no% %o (e)an( ay)en%/ -"% %o
enali8e %&e %a5ayer for !iola%ion of %&e Ta5 Co(e 9:+@E %&e "rose of %&e
iss"an*e of an assess)en% is %o *olle*% %&e %a5. (Co&&i%%ioner of $nternal
Revenue v. Pa%"or Realty an. (evelop&ent Corporation, et al., G.R. No.
12+314, 1une 29, 1999
T&e (o*%rines in Co&&i%%ioner of $nternal Revenue v. Court of Appeal%,
et al., G.R. No. 119322, 1une 4, 199*/ Co&&i%%ioner of $nternal Revenue v.
Pa%"or Realty an. (evelop&ent Corporation, et al., G.R. No. 12+314, 1une 29,
1999 an( Un4a- !. C"si/ 3J SC6A 7JJ/ are (ifferen% fro) one ano%&er.
+n <n3ab/ %&ere 'as a pri&a fa"ie a%%e)% %o e!a(e %a5es -e*a"se of %&e
%a5ayers fail"re %o (e*lare in &is in*o)e %a5 re%"rn &is in*o)e (eri!e( fro)
-anana salin4s &en*e %&e *ase 'as file( (esi%e %&e a-sen*e of a no%i*e of
assess)en%.
+n %&e :ortune 5oba""o *ase no *ri)inal *ase 'as file(/ -e*a"se %&e
re4is%ere( '&olesale ri*e of %&e 4oo(s/ aro!e( -y %&e #+6 is res")e( %o -e
%&e a*%"al '&olesale ri*e/ %&erefore/ no% fra"("len% an( "nless an( "n%il %&e #+6
&as )a(e a final (e%er)ina%ion of '&a% is s"ose( %o -e %&e *orre*% %a5es/ %&e
%a5ayer s&o"l( no% -e la*e( in %&e *r"*i-le of *ri)inal rose*"%ion.
9&ile i% is %r"e as s%a%e( on Co&&i%%ioner v. Pa%"or Realty an.
(evelop&ent Corporation/ %&a% a *ri)inal *o)lain% is ins%i%"%e( no% %o (e)an(
ay)en%/ -"% %o enali8e %&e %a5ayer for !iola%ion of %&e Ta5 Co(e/ T&e
."(4)en% in %&e *ri)inal *ase s&all no% only i)ose %&e enal%y -"% s&all also
or(er ay)en% of %&e %a5es s"-.e*% of %&e *ri)inal *ase as finally (e*i(e( -y %&e
Co))issioner. I1
r(
ar./ Se*. 20C A-B/ N+6C of 133JK
A *o)ro)ise is a *on%ra*% '&ere-y %&e ar%ies/ %&ro"4& )"%"al
a4ree)en% an( -y )a2in4 re*iro*al *on*essions/ a!oi( a li%i4a%ion or "% an
en( %o one alrea(y *o))en*e(. AAr%. 2027/ Ci!il Co(eB
BAR: 37. A *o)ro)ise enal%y *o"l( no% -e i)ose( -y %&e #+6/ if %&e
%a5ayer (i( no% a4ree. A *o)ro)ise -ein4/ -y i%s na%"re/ )"%"al in essen*e
re,"ires a4ree)en%. T&e ay)en% )a(e "n(er ro%es% *o"l( only si4nify %&a%
%&ere 'as no% a4ree)en% %&a% &a( effe*%i!ely -een rea*&e( -e%'een %&e ar%ies.
A6.a. .e 'an A3u%tin, et al., v. Co&&i%%ioner of $nternal Revenue, G.R.No.
13+4+4, 'epte&ber 10, 2001
BAR: 38. T&e follo'in4 *ases )ay/ "on %a5ayers *o)lian*e 'i%&
%&e -asis for *o)ro)ise/ -e %&e s"-.e*% )a%%er of *o)ro)ise se%%le)en%D
a. Delin,"en% a**o"n%sE
-. Cases "n(er a()inis%ra%i!e ro%es% af%er iss"an*e of %&e <inal
Assess)en% No%i*e %o %&e %a5ayer '&i*& are s%ill en(in4 in %&e 6e4ional
Offi*es/ 6e!en"e Dis%ri*% Offi*es/ @e4al Ser!i*e/ @ar4e Ta5ayer Ser!i*e A@TSB/
Colle*%ion Ser!i*e/ Enfor*e)en% Ser!i*e an( o%&er offi*es in %&e Na%ional Offi*eE
*. Ci!il %a5 *ases -ein4 (is"%e( -efore %&e *o"r%sE
(. Colle*%ion *ases file( in *o"r%sE
e. Cri)inal !iola%ions/ o%&er %&an %&ose alrea(y file( in *o"r%/ or %&ose
in!ol!in4 *ri)inal %a5 fra"(. ASe*. 2/ 6e!. 6e4s. No. 10?2002B
57. Ta5 *ases '&i*& *o"l( no% -e %&e s"-.e*% of *o)ro)iseD
24
a. 9i%&&ol(in4 %a5 *ases "nless %&e ali*an%?%a5ayer in!o2es
ro!isions of la' %&a% *as% (o"-% on %&e %a5ayers o-li4a%ion %o 'i%&&ol(.E
-. Cri)inal %a5 fra"( *ases/ *onfir)e( as s"*& -y %&e Co))issioner of
+n%ernal 6e!en"e or &is ("ly a"%&ori8e( reresen%a%i!eE
*. Cri)inal !iola%ions alrea(y file( in *o"r%E
(. Delin,"en% a**o"n%s 'i%& ("ly aro!e( s*&e("le of ins%all)en%
ay)en%sE
e. Cases '&ere final reor%s of rein!es%i4a%ion or re*onsi(era%ion &a!e
-een iss"e( res"l%in4 %o re("*%ion in %&e ori4inal assess)en% an( %&e %a5ayer is
a4reea-le %o s"*& (e*ision -y si4nin4 %&e re,"ire( a4ree)en% for) for %&e
"rose. On %&e o%&er &an(/ o%&er ro%es%e( *ases s&all -e &an(le( -y %&e
6e4ional E!al"a%ion #oar( A6E#B or %&e Na%ional E!al"a%ion #oar( ANE#B on a
*ase %o *ase -asisE
f. Cases '&i*& -e*o)e final an( e5e*"%ory af%er final ."(4)en% of a *o"r%
'&ere *o)ro)ise is re,"es%e( on %&e 4ro"n( of (o"-%f"l !ali(i%y of %&e
assess)en%E an(
4. Es%a%e %a5 *ases '&ere *o)ro)ise is re,"es%e( on %&e 4ro"n( of
finan*ial in*aa*i%y of %&e %a5ayer. ASe*. 2/ 6e!. 6e4s. No. 10?2002B
58. T&e Co))issioner )ay *o)ro)ise %&e ay)en% of any in%ernal
re!en"e %a5 '&enD
a. A reasona-le (o"-% as %o %&e !ali(i%y of %&e *lai) a4ains% %&e %a5ayer
e5is%s ro!i(e( %&a% %&e )ini)") *o)ro)ise en%ere( in%o is e,"i!alen% %o for%y
er*en% A40NB of %&e -asi* %a5E or
-. T&e finan*ial osi%ion of %&e %a5ayer (e)ons%ra%es a *lear ina-ili%y %o
ay %&e assesse( %a5 ro!i(e( %&a% %&e )ini)") *o)ro)ise en%ere( in%o is
e,"i!alen% %o %en er*en% A10NB of %&e -asi* assesse( %a5
+n %&e a-o!e ins%an*es %&e Co))issioner is allo'e( %o en%er in%o a
*o)ro)ise only if %&e -asi* %a5 in!ol!e( (oes no% e5*ee( One )illion esos
AP1/000/000.00B/ an( %&e se%%le)en% offere( is no% less %&an %&e res*ri-e(
er*en%a4es. ISe*. 204 AAB/ N+6C of 133JK
+n ins%an*es '&ere %&e Co))issioner is no% a"%&ori8e(/ %&e *o)ro)ise
s&all -e s"-.e*% %o %&e aro!al of %&e E!al"a%ion #oar( *o)ose( of %&e
Co))issioner an( %&e fo"r A4B De"%y Co))issioners.
BAR: 39. T&e Co))issioner of +n%ernal 6e!en"e is a"%&ori8e( %o a-a%e
or *an*el a %a5 lia-ili%y/ '&enD
a. T&e %a5 or any or%ion %&ereof aears %o -e "n."s%ly or e5*essi!ely
assesse(E or
-. T&e a()inis%ra%ion an( *olle*%ion *os%s in!ol!e( (o no% ."s%ify %&e
*olle*%ion of %&e a)o"n% ("e. ISe*. 204 A#B/ N+6C of 133JK
T&e offer %o *o)ro)ise a (elin,"en% a**o"n% or (is"%e( assess?)en%
on %&e 4ro"n( of reasona-le (o"-% as %o %&e !ali(i%y of %&e assess)en% )ay -e
a**e%e( '&en i% is s&o'n %&a%D
a. T&e (elin,"en% a**o"n% or (is"%e( assess)en% is one res"l%in4 fro) a
.eoar(y assess)en%. or
-. T&e assess)en% see)s %o -e ar-i%rary in na%"re/ aearin4 %o -e
-ase( on res")%ions an( %&ere is reason %o -elie!e %&a% i% is la*2in4 in le4al
an(Mor fa*%"al -asisE or
*. T&e %a5ayer faile( %o file an a()inis%ra%i!e ro%es% on a**o"n% of %&e
alle4e( fail"re %o re*ei!e no%i*e of assess)en% an( %&ere is reason %o -elie!e
%&a% %&e assess)en% is la*2in4 in le4al an(Mor fa*%"al -asisE or
(. T&e %a5ayer faile( %o file a re,"es% for rein!es%i4a%ionMre*onsi(era%ion
'i%&in 10 (ays fro) re*ei% of final assess)en% no%i*e an( %&ere is reason %o
-elie!e %&a% %&e assess)en% is la*2in4 in le4al an(Mor fa*%"al -asisE or
e. T&e %a5ayer faile( %o ele!a%e %o %&e Co"r% of Ta5 Aeals ACTAB an
a(!erse (e*ision of %&e Co))issioner/ or &is a"%&ori8e( reresen%a%i!e/ in so)e
25
*ases/ 'i%&in 10 (ays fro) re*ei% %&ereof an( %&ere is reason %o -elie!e %&a% %&e
assess)en% is la*2in4 in le4al an(Mor fa*%"al -asisE or
f. T&e assess)en%s 'ere iss"e( on or af%er 0an"ary 1/ 1337/ '&ere %&e
(e)an( no%i*e alle4e(ly faile( %o *o)ly 'i%& %&e for)ali%ies "n(er Se*. 227 of
%&e Na%ional +n%ernal 6e!en"e Co(e of 133JE or
4. Assess)en%s )a(e -ase( on %&e #es% E!i(en*e O-%aina-le 6"le an(
%&ere is reason %o -elie!e %&a% %&e sa)e *an -e (is"%e( -y s"ffi*ien% an(
*o)e%en% e!i(en*eE or
&. T&e assess)en% 'as iss"e( 'i%&in %&e res*ri%i!e erio( for
assess)en% as e5%en(e( -y %&e %a5ayers e5e*"%ion of 9ai!er of %&e S%a%"%e of
@i)i%a%ions %&e !ali(i%y or a"%&en%i*i%y of '&i*& is -ein4 ,"es%ione( or a% iss"e
an( %&ere is s%ron4 reason %o -elie!e an( e!i(en*e %o ro!e %&a% i% is no%
a"%&en%i*. ASe*. 1/ 1/ 6e!. 6e4s. No. 10?1002B
T&e offer %o *o)ro)ise -ase( on finan*ial in*aa*i%y )ay -e a**e%e(
"on s&o'in4 %&a%D
a. T&e *orora%ion *ease( oera%ion or is alrea(y (issol!e( Pro!i(e(/
%&a% %a5 lia-ili%ies *orreson(in4 %o %&e S"-s*ri%ion 6e*ei!a-le or Asse%s
(is%ri-"%e(M(is%ri-"%a-le %o %&e s%o*2&ol(ers reresen%in4 re%"rn of *ai%al a% %&e
%i)e of *essa%ion of oera%ion or (issol"%ion of -"siness s&all no% -e *onsi(ere(
for *o)ro)iseE or
-. T&e %a5ayer/ as refle*%e( in i%s la%es% #alan*e S&ee% s"ose( %o -e
file( 'i%& %&e #"rea" of +n%ernal 6e!en"e/ is s"fferin4 fro) s"rl"s or earnin4s
(efi*i% res"l%in4 %o i)air)en% in %&e ori4inal *ai%al -y a% leas% C0N/ ro!i(e(
%&a% a)o"n%s aya-le %o ("e %o s%o*2&ol(ers o%&er %&an -"siness?rela%e(
%ransa*%ions '&i*& are roerly inel"(i-le in %&e re4"lar a**o"n%s aya-le are
-y fi*%ion of la' *onsi(ere( as ar% of *ai%al an( no% lia-ili%y/ an( ro!i(e(
f"r%&er %&a% %&e %a5ayer &as no s"ffi*ien% li,"i( asse% %o sa%isfy %&e %a5 lia-ili%yE or
*. T&e %a5ayer is s"fferin4 fro) a ne%'or%& (efi*i% A%o%al lia-ili%ies e5*ee(
%o%al asse%sB *o)"%e( -y (e("*%in4 %o%al lia-ili%ies Ane% of (eferre( *re(i%s an(
a)o"n%s aya-le %o s%o*2&ol(ersMo'ners refle*%e( as lia-ili%ies/ e5*e% -"siness?
rela%e( %ransa*%ionsB fro) %o%al asse%s Ane% of reai( e5enses/ (eferre(
*&ar4es/ re?oera%in4 e5enses/ as 'ell as araisal in*reases in fi5e( asse%sB
%a2en fro) %&e la%es% a"(i%e( finan*ial s%a%e)en%s/ ro!i(e( %&a% in %&e *ase of an
in(i!i("al %a5ayer/ &e &as no o%&er le!ia-le roer%ies "n(er %&e la' o%&er %&an
&is fa)ily &o)eE or
(. T&e %a5ayer is a *o)ensa%ion in*o)e earner 'i%& no o%&er so"r*e of
in*o)e an( %&e fa)ilys 4ross )on%&ly *o)ensa%ion in*o)e (oes no% e5*ee(/ if
sin4le/ P10/C00 or less/ or if )arrie(/ '&ose salary %o4e%&er 'i%& &is so"se is
P21/000 er )on%&/ or less/ an( i% aears %&a% %&e %a5ayer ossesses no o%&er
le!ia-leM(is%raina-le asse%s o%&er %&an &is fa)ily &o)eE or
e. T&e %a5ayer &as -een (e*lare( -y any *o)e%en% %ri-"nalM
a"%&ori%yM-o(yM4o!ern)en% a4en*y as -an2r"% or insol!en%. ASe*. 1. 2/ 6e!. in
rela%ion %o Se*.4.1.1 -o%& of 6e4s. No. 10?1002B
BAR: 40. T&e filin4 of an a()inis%ra%i!e *lai) for ref"n( 'i%& %&e #+6/
-efore filin4 a *ase 'i%& %&e Co"r% of Ta5 Aeals/ is ne*essary for %&e follo'in4
reasonsD
a. To affor( %&e Co))issioner an oor%"ni%y %o *orre*% &is errors or %&a%
of s"-or(ina%e offi*ers. (Gon,ale% v. Court of 5a8 Appeal%, et al., 14 'CRA )9
-. To no%ify %&e =o!ern)en% %&a% s"*& %a5es &a!e -een ,"es%ione( an(
%&e no%i*e s&o"l( -e -orne in )in( in es%i)a%in4 %&e re!en"e a!aila-le for
e5en(i%"res. (-er&e>o v. Colle"tor, G.R. No. !/302+, 1uly 2+, 1940
BAR: 41. T&e fail"re %o firs% file a 'ri%%en *lai) for ref"n( or *re(i% is no%
fa%al %o a e%i%ion for re!ie' in!ol!in4 a (is"%e( assess)en%.
To &ol( %&a% %&e %a5ayer &as no' los% %&e ri4&% %o aeal fro) %&e r"lin4
on %&e (is"%e( assess)en% an( re,"ire &i) %o file a *lai) for a ref"n( of %&e
%a5es ai( as a *on(i%ion re*e(en% %o &is ri4&% %o aeal/ 'o"l( in effe*% re,"ire
26
of &i) %o 4o %&ro"4& a "seless an( nee(less *ere)ony %&a% 'o"l( only (elay
%&e (isosi%ion of %&e *ase/ for %&e Co))issioner 'o"l( *er%ainly (isallo' %&e
*lai) for ref"n( in %&e sa)e 'ay as &e (isallo'e( %&e ro%es% a4ains% %&e
assess)en%. T&e la'/ s&o"l( no% -e in%erre%e( as %o res"l% in a-s"r(i%ies. (v.a.
.e 'an A3u%tin., et".,v. Co&&i%%ioner of $nternal Revenue, G.R. No. 13+4+4,
'epte&ber 10, 2001 *i%in4 Ro&an Cat#oli" Ar"#bi%#op of Cebu v. Colle"tor of
$nternal Revenue, 4 'CRA 2)9
6e*on*ilia%ion -e%'een no. 40 an( 41. An ali*a%ion for ref"n( or *re(i%
"n(er Se*. 223 of %&e N+6C of 133J is re,"ire( '&ere %&e *ase file( -efore %&e
CTA is a ref"n( *ase/ '&i*& is no% re)ise( "on a (is"%e( assess)en%. T&ere
is no nee( for a rior ali*a%ion for ref"n( or *re(i%/ if %&e ref"n( is )erely a
*onse,"en*e of %&e resol"%ion of %&e #+6s (enial of a ro%es%e( assess)en%.
Se*. H3 of %&e 13JJ N+6C Ano' Se*. JH of %&e N+6C of 133JB ro!i(es
%&a% any e5*ess of %&e %o%al ,"ar%erly ay)en%s o!er %&e a*%"al in*o)e %a5
*o)"%e( in %&e a(."s%)en% or final *orora%e in*o)e %a5 re%"rn/ s&all ei%&er AaB
-e ref"n(e( %o %&e *orora%ion/ or A-B )ay -e *re(i%e( a4ains% %&e es%i)a%e(
,"ar%erly in*o)e %a5 lia-ili%ies for %&e ,"ar%ers of %&e s"**ee(in4 %a5a-le year.
To ease %&e a()inis%ra%ion of %a5 *olle*%ion/ %&ese re)e(ies are in %&e al%erna%i!e
an( %&e *&oi*e of one re*l"(es %&e o%&er. Sin*e %&e #an2 &as *&osen %&e %a5
*re(i% aroa*& i% *anno% any)ore a!ail of %&e %a5 ref"n(. (P#ilippine -an; of
Co&&uni"ation% v. Co&&i%%ioner of $nternal Revenue, et al., G.R. No. 112024,
1anuary 2+, 1999
T&e %i)ely ser!i*e of a 'arran% of (is%rain% or le!y s"sen(s %&e r"nnin4
of %&e erio( %o *olle*% %&e %a5 (efi*ien*y in %&e sense %&a% %&e (isosi%ion of %&e
a%%a*&e( roer%ies )i4&% 'ell %a2e %i)e %o a**o)lis&/ e5%en(in4 e!en af%er %&e
lase of %&e s%a%"%ory erio( for *olle*%ions. (A.verti%in3 A%%o"iate%, $n"., v.
Court of Appeal%, 133 'CRA )*4= Palan"a v. Co&&i%%ioner of $nternal Revenue,
114 P#il. 203
T&e enfor*e)en% of %a5 *olle*%ion %&ro"4& s"))ary ro*ee(in4s )ay -e
*arrie( o"% -eyon( %&e s%a%"%ory erio(. (Republi" of t#e P#ilippine%, et". v.
?i,on, G.R. No. 1304, (e"e&ber 13, 1999 T&e s%a%"%ory erio( for *olle*%ion
alies only '&ere a *o"r% s"i% is a!aile( of for *olle*%ion.
BAR: 42. Ci!il an( *ri)inal a*%ions an( ro*ee(in4s ins%i%"%e( in -e&alf
of %&e =o!ern)en% "n(er %&e a"%&ori%y of %&e N+6C of 133J or o%&er la' enfor*e(
-y %&e #"rea" of +n%ernal 6e!en"e s&all -e -ro"4&% in %&e na)e of %&e
=o!ern)en% of %&e P&iliines an( s&all -e *on("*%e( -y le4al offi*ers of %&e
#"rea" of +n%ernal 6e!en"e -"% no *i!il or *ri)inal a*%ion for %&e re*o!ery of
%a5es or %&e enfor*e)en% of any fine/ enal%y or forfei%"re "n(er %&e N+6C of
133J s&all -e file( in *o"r% 'i%&o"% %&e aro!al of %&e Co))issioner of +n%ernal
6e!en"e. ASe*. 220/ N+6C of 133JB
T&e %'o year erio( alies only %o re*o!ery of %a5es or enal%ies NOT %o
%a5 *re(i%s a!ail)en%. A-sen% a se*ifi* ro!ision in %&e Ta5 Co(e or se*ial la's/
%&e erio( 'o"l( -e 10 years. A0"s%i*e Vi%"4/ *on*"rrin4 in Co))issioner of
+n%ernal 6e!en"e !. T&e P&iliine @ife +ns"ran*e Co./ e% al. =.6. No. 10C207/
May 23/ 133C rei%era%in4 %&e TM; *aseB
9&ere a *orora%ion is (issol!e( +% -e*o)es ne*essary for %&e -an2 %o
file i%s in*o)e %a5 re%"rn 'i%&in 10 (ays af%er aro!al -y %&e SEC of i%s lan or
resol"%ion of (issol"%ion. +n(ee(/ i% 'o"l( -e a-s"r( for %&e -an2 %o 'ai% "n%il %&e
fif%een%& (ay of Aril/ af%er i% *ease( i%s oera%ions/ -efore filin4 i%s in*o)e %a5
re%"rn.
T&"s/ %&e %'o?year res*ri%i!e erio( s&o"l( -e *o"n%e( fro) 10 (ays
af%er %&e aro!al -y %&e SEC of i%s lan for (issol"%ion. T&ere is no nee( %o file
27
a <inal A(."s%)en% 6e%"rn -e*a"se %&ere is no%&in4 %o a(."s% or %o a"(i%. Af%er
%&e *orora%ion *ease( oera%ion i%s %a5a-le year 'o"l( -e s&or%ene(. (-an; of
t#e P#ilippine $%lan.% v. Co&&i%%ioner of $nternal Revenue, G.R. No. 144*43,
Au3u%t 2+, 2001B
A si)"l%aneo"s filin4 of %&e ali*a%ion 'i%& %&e #+6 for ref"n(M*re(i% an(
%&e ins%i%"%ion of %&e *o"r% s"i% 'i%& %&e CTA is allo'e(. T&ere is no nee( %o 'ai%
for a #+6 (enial. 6EASONSD
a. T&e osi%i!e re,"ire)en% of Se*%ion 210 N+6C Ano' Se*. 223/ N+6C of
133JBE
-. T&e (o*%rine %&a% (elay of %&e Co))issioner in ren(erin4 (e*ision
(oes no% e5%en( %&e ere)%ory erio( fi5e( -y %&e s%a%"%eE
*. T&e la' fi5e( %&e sa)e erio( %'o years for filin4 a *lai) for ref"n(
'i%& %&e Co))issioner "n(er Se*. 204/ ar. 1/ N+6C Ano' Se*. 204 ICK/ N+6C of
133JB/ an( for filin4 s"i% in *o"r% "n(er Se*. 210/ N+6C Ano' Se*. 223/ N+6C of
133JB/ "nli2e in ro%es%s of assess)en%s "n(er Se*. 223 Ano' Se*. 227/ N+6C
of 133JB/ '&i*& fi5e( %&e erio( A%&ir%y (ays fro) re*ei% of (e*isionB for
aealin4 %o %&e *o"r%/ %&"s *learly i)lyin4 %&a% %&e rior (e*ision of %&e
Co))issioner is ne*essary %o %a2e *o4ni8an*e of %&e *ase. (Co&&i%%ioner of
$nternal Revenue v. -an; of P#ilippine $%lan.%, et". et al., CA/G.R. 'P No.
34102, 'epte&ber 9, 1994= Gibb% v. Colle"tor of $nternal Revenue, et al., 10)
P#il, 232= 1o#n%ton !u&ber Co. v. C5A, 101 P#il. 141
T&e r"le is %&a% no in%eres% on ref"n( of %a5 *an -e a'ar(e( "nless
a"%&ori8e( -y la' or %&e *olle*%ion of %&e %a5 'as a%%en(e( -y ar-i%rariness. An
a*%ion is no% ar-i%rary '&en e5er*ise( &ones%ly an( "on ("e *onsi(era%ion
'&ere %&ere is roo) for %'o oinions/ &o'e!er )"*& i% )ay -e -elie!e( %&a% an
erroneo"s *on*l"sion 'as rea*&e(. Ar-i%rariness res"oses ine5*"sa-le or
o-s%ina%e (isre4ar( of le4al ro!isions. (P#ile8 0inin3 Corporation v.
Co&&i%%ioner of $nternal Revenue, et al., G.R. No. 120324, April 21, 1999
T&e ins%i%"%ion or *o))en*e)en% -efore a roer *o"r% of *i!il an(
*ri)inal a*%ions an( ro*ee(in4s arisin4 "n(er %&e Ta5 6efor) A*% / s"*& as
re*o!ery of %a5es or %&e enfor*e)en% of any fine/ enal%y or forfei%"re/ s&all -e
*on("*%e( -y le4al offi*ers of %&e #"rea" of +n%ernal 6e!en"e 'i%& %&e aro!al
of %&e Co))issioner.
On %&e o%&er &an(/ i% is %&e Soli*i%or =eneral '&o &as %&e ri)ary
resonsi-ili%y %o aeal for %&e 4o!ern)en% in aella%e ro*ee(in4s.
(Co&&i%%ioner of $nternal Revenue v. !a 'uerte Ci3ar an. Ci3arette :a"tory, G.
r. No. 144942, 1uly 4, 2002
NATIONAL INTERNAL REVENUE CODE
THE BUREAU OF INTERNAL REVENUE
Any in%ernal re!en"e offi*er in %&e (is*&ar4e of &is offi*ial ("%ies )ay
en%er any &o"se/ -"il(in4 or la*e '&ere ar%i*les s"-.e*% %o e5*ise %a5es are
ro("*e( or 2e%/ or are -elie!e( -y &i) "on reasona-le 4ro"n(s %o -e
ro("*e( or 2e% so far as )ay -e ne*essary %o e5a)ine/ (is*o!er or sei8e %&e
sa)e. A1s% ar./ Se*. 1J1/ N+6C of 133JB
+n%ernal re!en"e offi*ers s&all &a!e a"%&ori%y %o )a2e arres%s an( sei8"res
for !iola%ion of any enal la' or re4"la%ion a()inis%ere( -y %&e #"rea" of
+n%ernal 6e!en"e. Any erson so arres%e( s&all for%&'i%& -e -ro"4&% -efore a
*o"r%/ %&ere %o -e (eal% 'i%& a**or(in4 %o la'. ASe*. 11/ N+6C of 133JB
No sear*& 'arran% or 'arran% of arres% is re,"ire( "n(er %&e (o*%rine of
ri)ary ."ris(i*%ion '&i*& osi%s %&a% in %e*&ni*al )a%%ers '&ere %&e
28
a()inis%ra%i!e -o(ies &a!e o-%aine( e5er%ise/ %&e *o"r%s 'ill (efer. T&is is
li2e'ise re)ise( on %&e life-loo( %&eory '&i*& )an(a%es %&e i))e(ia%e
*olle*%ion of %a5es %o ens"re %&e *on%in"e( e5is%en*e of %&e S%a%e.
T&ere are %'o 2in(s of r"lin4s %&e #+6 )ay iss"e ? in%erre%a%i!e r"lin4s
an( le4isla%i!e r"lin4s.
+n%erre%a%i!e r"les are (esi4ne( %o ro!i(e 4"i(elines %o %&e la' '&i*&
%&e a()inis%ra%i!e a4en*y is in *&ar4e of enfor*in4. No no%i*e/ &earin4 or
"-li*a%ion is re,"ire(/ as %&ey are iss"e( )erely for %&e 4"i(an*e of
a()inis%ra%i!e offi*ers. +ll"s%ra%ionD 6e!en"e Me)oran(") Cir*"lar No. 4J?31
*lassifyin4 *ora as an a4ri*"l%"ral non?foo( i%e) (e*larin4 i% e5e)% fro) VAT
only if %&e sale is )a(e -y %&e ri)ary ro("*er. A0i%a&i% 7riental A%%o"iation of
Co"o 5ra.er%, $n". v. (epart&ent of :inan"e 'e"retary, et al., 23+ 'CRA *3
@1994A
@e4isla%i!e r"les are in %&e na%"re of s"-or(ina%e le4isla%ion/ (esi4ne( %o
i)le)en% a ri)ary le4isla%ion -y ro!i(in4 %&e (e%ails %&ereof. T&ey are iss"e(
"n(er %&e ,"asi?le4isla%i!e a"%&ori%y of %&e #+6 Co))issioner. T&ere is a
re,"ire)en% for no%i*e/ &earin4 an( "-li*a%ion. +ll"s%ra%ionD 6e!en"e
Me)oran(") Cir*"lar No. 1J?31 '&i*& la*e( :oe @"5"ry/ Pre)i") More an(
C&a)ion *i4are%%es 'i%&in %&e s*oe of %&e a)en(a%ory la' 6.A. No. JHC4 an(
s"-.e*%e( %&e) %o %&e in*rease( %a5 ra%e re,"ires no%i*e/ &earin4 an(
"-li*a%ion. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 2*1
'CRA 23*

T&e r"lin4s an( *ir*"lars ro)"l4a%e( -y %&e Co))issioner (o no% &a!e
re%roa*%i!e ali*a%ion if %&e re!o*a%ion/ )o(ifi*a%ion/ or re!ersal 'o"l( -e
re."(i*ial %o %&e %a5ayers. ('e". 24*, N$RC of 199)= Co&&i%%ioner of $nternal
Revenue v. Court of Appeal%, et al., 2*) 'CRA 44)
+ns%an*es '&en re!en"e r"lin4s an( re4"la%ions &a!e re%roa*%i!e effe*%
e!en if re."(i*ial %o %&e %a5ayerD
a. 9&ere %&e %a5ayer (eli-era%ely )iss%a%es or o)i%s )a%erial fa*%s fro)
&is re%"rn or in any (o*")en% re,"ire( of &i) -y %&e #+6E
-. 9&ere %&e fa*%s s"-se,"en%ly 4a%&ere( -y %&e #+6 are )a%erially
(ifferen% fro) %&e fa*%s on '&i*& %&e r"lin4 is -ase(/ or
*. 9&ere %&e %a5ayer a*%e( in -a( fai%&. ASe*. 24H/ N+6C of 133JB
9. T&e Co))issioner or &is a"%&ori8e( reresen%a%i!e is e)o'ere( %o
s"sen( %&e -"siness oera%ions an( %e)orarily *lose %&e -"siness
es%a-lis&)en% of any erson for any of %&e follo'in4 !iola%ionsD
a. +n *ase of a VAT?re4is%ere( ersonD
1B <ail"re %o iss"e re*ei%s or in!oi*esE
2B <ail"re %o file a VAT re%"rn as re,"ire( "n(er %&e Ta5 Co(eE
1B Un(ers%a%e)en% of %a5a-le sales or re*ei%s -y 10N or )ore of
&is *orre*% %a5a-le sales or re*ei%s for %&e %a5a-le ,"ar%er.
-. <ail"re %o re4is%er "n(er %&e VAT ro!isions of %&e Ta5 Co(e. T&e
%e)orary *los"re of %&e es%a-lis&)en% s&all for %&e ("ra%ion of no% less %&an fi!e
ACB (ays an( s&all -e lif%e( only "on *o)lian*e 'i%& '&a%e!er re,"ire)en%s
res*ri-e( -y %&e Co))issioner in %&e *los"re or(er. (Atla% Con%oli.ate.
0inin3 B (evelop&ent Corporation v. Co&&i%%ioner of $nternal Revenue, G.R.
No. 1344*), Nove&ber 1), 1999
T&e Co))issioner of +n%ernal 6e!en"e is a"%&ori8e( "n(er %&e Ta5 Co(e
%o (ele4a%e %&e o'ers !es%e( in &i) "n(er %&e er%inen% ro!isions of %&e Ta5
Co(e %o any s"-or(ina%e offi*ial 'i%& %&e ran2 e,"i!alen% %o a (i!ision *&ief or
&i4&er.
29
T&e follo'in4 are so)e of %&e o'ers %&a% %&e Co))issioner of +n%ernal
6e!en"e *o"l( no% (ele4a%eD
a. T&e o'er %o re*o))en( %&e r"les an( re4"la%ions -y %&e Se*re%ary of
<inan*eE
-. T&e o'er %o iss"e r"lin4s of firs% i)ression or %o re!erse/ re!o2e/ or
)o(ify any e5is%in4 r"lin4 of %&e #"rea"E
*. T&e o'er %o *o)ro)ise or a-a%e/ any %a5 (efi*ien*y/ Pro!i(e(/
&o'e!er/ %&a% assess)en%s iss"e( -y %&e 6e4ional Offi*es in!ol!in4 -asi*
(efi*ien*y %a5es of PC00/000.00 or less/ an( )inor *ri)inal !iola%ions as )ay -e
(e%er)ine( -y r"les an( re4"la%ions %o -e ro)"l4a%e( -y %&e Se*re%ary of
<inan*e/ "on %&e re*o))en(a%ion of %&e Co))issioner/ (is*o!ere( -y re4ional
an( (is%ri*% offi*ials/ )ay -e *o)ro)ise( -y a re4ional e!al"a%ion -oar( '&i*&
s&all -e *o)ose( of %&e 6e4ional Dire*%or as C&air)an/ %&e Assis%an% 6e4ional
Dire*%or/ &ea(s of %&e @e4al/ Assess)en% an( Colle*%ion Di!isions an( %&e
6e!en"e Dis%ri*% Offi*er &a!in4 ."ris(i*%ion o!er %&e %a5ayer/ as )e)-ersE an(
(. T&e o'er %o assi4n or reassi4n in%ernal re!en"e offi*ers %o
es%a-lis&)en%s '&ere ar%i*les s"-.e*% %o e5*ise %a5 are ro("*e( or 2e%. ASe*.
J/ N+6C of 133J *i%e( in Republi" of t#e P#ilippine%, et". v. ?i,on, G.R. No.
130430, (e"e&ber 13, 1999B
T&e Co))issioner of +n%ernal 6e!en"e &as %&e o'er %o o-%ain on a
re4"lar -asis fro) any erson o%&er %&an %&e erson '&ose in%ernal re!en"e %a5
lia-ili%y is s"-.e*% %o a"(i% or in!es%i4a%ion/ an infor)a%ion s"*& as/ -"% no% li)i%e(
%o/ *os%s an( !ol")e of ro("*%ion/ re*ei%s or sales an( 4ross in*o)e
%a5ayers/ a)on4 o%&ers. ISe*. C A#B/ N+6C of 133JK
BAR: 43. 6e. A*% No. 140C/ %&e #an2 Deosi%s Se*re*y @a' ro&i-i%s
in,"iry in%o -an2 (eosi%s. As e5*e%ions %o 6e. A*% No. 140C/ %&e
Co))issioner of +n%ernal 6e!en"e is only a"%&ori8e( %o in,"ire in%o %&e -an2
(eosi%s ofD
a. a (e*e(en% %o (e%er)ine &is 4ross es%a%eE an(
-. any %a5ayer '&o &as file( an ali*a%ion for *o)ro)ise of &is %a5
lia-ili%y -y reason of finan*ial in*aa*i%y %o ay &is %a5 lia-ili%y. ISe*. C A<B/ N+6C
of 133JK
*. A %a5ayer '&o a"%&ori8es %&e Co))issioner %o in,"ire in%o &is -an2
(eosi%s.
INCOME TAATION
T&e Ta5 Co(e &as in*l"(e( "n(er %&e %er) *orora%ion ar%ners&is/ no
)a%%er &o' *rea%e( or or4ani8e(/ .oin%?s%o*2 *o)anies/ .oin% a**o"n%s A"uenta%
en parti"ipa"ionB/ asso*ia%ions/ or ins"ran*e *o)anies. ISe*. 24 no' Se*. 24
A#B of %&e N+6C of 133JK
+n 2van3eli%ta v. Colle"tor, 102 P#il. 140, %&e S"re)e Co"r% &el( *i%in4
Mer%ens %&a% %&e %er) ar%ners&i in*l"(es a syn(i*a%e/ 4ro"/ ool/ .oin% !en%"re
or o%&er "nin*orora%e( or4ani8a%ion/ %&ro"4& or -y )eans of '&i*& any
-"siness/ finan*ial oera%ion/ or !en%"re is *arrie( on.
Cer%ain -"siness or4ani8a%ions (o no% fall "n(er %&e *a%e4ory of
*orora%ions "n(er %&e Ta5 Co(e/ an( %&erefore no% s"-.e*% %o %a5 as
*orora%ions/ in*l"(eD
a. =eneral rofessional ar%ners&isE
-. 0oin% !en%"re or *onsor%i") for)e( for %&e "rose of "n(er%a2in4
*ons%r"*%ion ro.e*%s en4a4in4 in e%role")/ *oal/ 4eo%&er)al/ an( o%&er ener4y
oera%ions/ "rs"an% %o an oera%ion or *onsor%i") a4ree)en% "n(er a ser!i*e
*on%ra*% 'i%& %&e =o!ern)en%. I1
s%
sen%en*e/ Se*. 22 A#B/ #+6C of 133JK
30
BAR: 44. Co?&eirs '&o o'n in&eri%e( roer%ies '&i*& ro("*e in*o)e
s&o"l( no% a"%o)a%i*ally -e *onsi(ere( as ar%ners of an "nre4is%ere(
*orora%ion s"-.e*% %o in*o)e %a5 for %&e follo'in4 reasonsD
a. %&e s&arin4 of 4ross re%"rns (oes no% of i%self es%a-lis& a ar%ners&i/
'&e%&er or no% %&e ersons s&arin4 %&e) &a!e a .oin% or *o))on ri4&% or in%eres%
in any roer%y fro) '&i*& %&e re%"rns are (eri!e(. T&ere )"s% -e an
"n)is%a2a-le in%en%ion %o for) a ar%ners&i or .oin% !en%"re. (7billo%, 1r. v.
Co&&i%%ioner of $nternal Revenue, 139 'CRA 43*
-. T&ere is no *on%ri-"%ion or in!es%)en% of a((i%ional *ai%al %o in*rease
or e5an( %&e in&eri%e( roer%ies/ )erely *on%in"in4 %&e (e(i*a%ion of %&e
roer%y %o %&e "se %o '&i*& i% &a( -een "% -y %&eir fore-ears. A$bi..B
*. Persons '&o *on%ri-"%e roer%y or f"n(s %o a *o))on en%errise an(
a4ree %o s&are %&e 4ross re%"rns of %&a% en%errise in roor%ion %o %&eir
*on%ri-"%ion/ -"% '&o se!erally re%ain %&e %i%le %o %&eir rese*%i!e *on%ri-"%ion/ are
no% %&ere-y ren(ere( ar%ners. T&ey &a!e no *o))on s%o*2 *ai%al/ an( no
*o))"ni%y of in%eres% as rin*ial rorie%ors in %&e -"siness i%self fro) '&i*&
%&e ro*ee(s 'ere (eri!e(. AEle)en%s of %&e @a' of Par%ners&i -y <loy( 6.
Me*&e)/ 2
n(
E(./ Se*. 71/ . J4 *i%e( in Pa%"ual v. Co&&i%%ioner of $nternal
Revenue, 1** 'CRA 4*0B
5. +n or(er %o *ons%i%"%e a ar%ners&i inter %e%e %&ere )"s% -eD
a. an in%en% %o for) %&e sa)eE
-. 4enerally ar%i*ia%in4 in -o%& rofi%s an( lossesE
*. an( s"*& a *o))"ni%y of in%eres%/ as far as %&ir( ersons are
*on*erne( as ena-les ea*& ar%y %o )a2e a *on%ra*%/ )ana4e %&e -"siness/ an(
(isose of %&e '&ole roer%y. A0uni"ipality Pavin3 Co. v. ?errin3, 140 7. 10*),
40 $ll. 4)0/ *i%e( in Pa%"ual v. Co&&i%%ioner of $nternal Revenue, 1** 'CRA
4*0B
BAR: 45. T&e *o))on o'ners&i of roer%y (oes no% i%self *rea%e a
ar%ners&i -e%'een %&e o'ners/ %&o"4& %&ey )ay "se i% for "rose of )a2in4
4ains/ an( %&ey )ay/ 'i%&o"% -e*o)in4 ar%ners/ are a)on4 %&e)sel!es as %o
%&e )ana4e)en% an( "se of s"*& roer%y an( %&e ali*a%ion of %&e ro*ee(s
%&erefro).. A'purlo"; v,. Cil%on, 142 '.C. 3*3, 1*0 No. App. 14/ *i%e( in
Pa%"ual v. Co&&i%%ioner of $nternal Revenue, 1** 'CRA 4*0B
T&e in*o)e fro) %&e ren%al of %&e &o"se/ -o"4&% fro) %&e earnin4s of *o?
o'ne( roer%ies/ s&all -e %rea%e( as %&e in*o)e of an "nre4is%ere( ar%ners&i
%o -e %a5a-le as a *orora%ion -e*a"se of %&e *lear in%en%ion of %&e -ro%&ers %o
.oin %o4e%&er in a !en%"re for )a2in4 )oney o"% of ren%als.
9&ere %&e lain%iff/ &is -ro%&er an(/ an( ano%&er a4ree( %o -e*o)e
o'ners of a sin4le %ra*% of real%y &ol(in4 as %enan%s in *o))on/ an( %o (i!i(e %&e
rofi%s of (isosin4 of i%/ %&e -ro%&er an( %&e o%&er no% -ein4 en%i%le( %o s&are in
lain%iffs *o))issions/ no ar%ners&i e5is%e( as -e%'een %&e %&ree ar%ies/
'&a%e!er %&eir rela%ion )ay &a!e -een as %o %&ir( ar%ies. A0a3ee v. 0a3ee,
123 N.2. *)3, 233 0a%%. 341 *i%e( in Pa%"ual v. Co&&i%%ioner of $nternal
Revenue, 1** 'CRA 4*0B
+n*o)e is an a)o"n% of )oney *o)in4 %o a erson 'i%&in a se*ifie( %i)e/
'&e%&er ay)en% for ser!i*es/ in%eres%/ or rofi% fro) in!es%)en%. +% )eans *as&
or i%s e,"i!alen%.
+n*o)e is 4ain (eri!e( an( se!ere( fro) *ai%al/ fro) la-or or fro) -o%&
*o)-ine(. <or e5a)le/ %o %a5 a s%o*2 (i!i(en( 'o"l( -e %o %a5 a *ai%al
in*rease ra%&er %&an %&e in*o)e. (Co&&i%%ioner of $nternal Revenue v. Court of
Appeal%, et al., G.R. No. 10+4)*, 1anuary 20, 1999
Dis%in*%ions -e%'een 'eal%& an( in*o)e.
31
a. Cai%al is 'eal%& or f"n(/ 9:+@E in*o)e is rofi% or 4ain fro) %&e flo'
of 'eal%&. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R.
No. 10+4)*, 1anuary 20, 1999
-. Cai%al is a f"n( of roer%y e5is%in4 a% an ins%an% of %i)e 9:+@E
in*o)e is %&a% flo' of ser!i*es ren(ere( -y %&a% *ai%al -y %&e ay)en% of )oney
fro) i% or any o%&er -enefi% ren(ere( -y a f"n( of *ai%al in rela%ion %o s"*& f"n(
%&ro"4& a erio( of %i)e.
*. Cai%al is 'eal%& 9:+@E in*o)e is %&e ser!i*e of 'eal%&E an(
(. Cai%al is %&e %ree 9:+@E in*o)e is %&e fr"i%. (0a.ri3al v. Rafferty, 3+
P#il. 414
6eali8a%ion is (e%er)ina%i!e of earnin4 ro*ess res"l%in4 %o in*o)e.
9i%&o"% reali8a%ion/ %&ere is no in*o)e.
T&e (e%er)inin4 fa*%or for %&e i)osi%ion of in*o)e %a5 is '&e%&er any
4ain or rofi% 'as (eri!e( fro) %&e %ransa*%ion. +n %&e )e%a&or of 2i%ner v.
0a"o&ber, 242 <.'. 42*/ in*o)e is no% (ee)e( reali8e( "n%il %&e fr"i% &as
-een l"*2e( fro) %&e %ree.
BAR: 46. T&e %er) %a5a-le in*o)e )eans %&e er%inen% i%e)s of 4ross
in*o)e se*ifie( in %&e Ta5 Co(e/ less %&e (e("*%ions an(Mor ersonal an(
a((i%ional e5e)%ions/ if any/ a"%&ori8e( for s"*& %yes of in*o)e -y %&e Ta5
Co(e or o%&er se*ial la's. ASe*. 11/ N+6C of 133JB
BAR: 47. T&e *an*ella%ion an( for4i!eness of in(e-%e(ness )ay
a)o"n% %o AaB ay)en% of in*o)eE A-B 4if%E or %o a A*B *ai%al %ransa*%ion
(een(in4 "on %&e *ir*")s%an*es.
+f an in(i!i("al erfor)s ser!i*es for a *re(i%or '&o/ in *onsi(era%ion
%&ereof/ *an*els %&e (e-%/ i% is in*o)e %o %&e e5%en% of %&e a)o"n% reali8e( -y %&e
(e-%or as *o)ensa%ion for &is ser!i*es.
An insol!en% (e-%or (oes no% reali8e %a5a-le in*o)e fro) %&e *an*ella%ion
or for4i!eness. (Co&&i%%ioner v. 'i&&on% Gin Co., 43 :. 32) CCA 10
t#

T&e insol!en% (e-%or reali8es in*o)e res"l%in4 fro) %&e *an*ella%ion or

for4i!eness of in(e-%e(ness '&en &e -e*o)es sol!en%. (!a;elan. Gro"ery Co.,
v. Co&&i%%ioner 3* -5A (: 2+9
+f a *re(i%or )erely (esires %o -enefi% a (e-%or an( 'i%&o"% any
*onsi(era%ion %&erefor *an*els %&e a)o"n% of %&e (e-% i% is a 4if% fro) %&e *re(i%or
%o %&e (e-%or an( nee( no% -e in*l"(e( in %&e la%%ers in*o)e.
+f a *orora%ion %o '&i*& a s%o*2&ol(er is in(e-%e( for4i!es %&e (e-%/ %&e
%ransa*%ion &as %&e effe*% of ay)en% of a (i!i(en(. ASe*. C0/ 6e!.6e4s. No. 2B
T&e =lo-al sys%e) of in*o)e %a5a%ion is a sys%e) e)loye( '&ere %&e %a5
sys%e) !ie's in(ifferen%ly %&e %a5 -ase an( 4enerally %rea%s in *o))on all
*a%e4ories of %a5a-le in*o)e of %&e in(i!i("al. (5an v. .el Ro%ario, 1r., 23)
'CRA 324, 331
T&e S*&e("lar sys%e) of in*o)e %a5a%ion is a sys%e) e)loye( '&ere %&e
in*o)e %a5 %rea%)en% !aries an( is )a(e %o (een( on %&e 2in( or *a%e4ory of
%a5a-le in*o)e of %&e %a5ayer. (5an v. .el Ro%ario, 1r., 23) 'CRA 324, 331
Un(er %&e Na%ional +n%ernal 6e!en"e Co(e %&e 4lo-al sys%e) is
ali*a-le %o %a5a-le *orora%ions an( %&e s*&e("lar %o in(i!i("als.
32
BAR: 48. T&e 4eneral rin*iles of in*o)e %a5a%ion in %&e P&iliines
O6 %&e si%"s of in*o)e %a5a%ion in %&e P&iliines O6 %&e so"r*e r"le of in*o)e
%a5a%ion as alie( in %&e P&iliines.
a. A *i%i8en of %&e P&iliines resi(in4 %&erein is %a5a-le on all in*o)e
(eri!e( fro) so"r*es 'i%&in an( 'i%&o"% %&e P&iliines.
-. A nonresi(en% *i%i8en is %a5a-le only on in*o)e (eri!e( fro) so"r*es
'i%&in %&e P&iliines.
*. An in(i!i("al *i%i8en of %&e P&iliines '&o is 'or2in4 an( (eri!in4
in*o)e fro) a-roa( as an o!erseas *on%ra*% 'or2er is %a5a-le only on in*o)e
fro) so"r*es 'i%&in %&e P&iliinesD Pro!i(e(/ T&a% a sea)an '&o is a *i%i8en of
%&e P&iliines an( '&o re*ei!es *o)ensa%ion for ser!i*es ren(ere( a-roa( as
a )e)-er of %&e *o)le)en% of a !essel en4a4e( e5*l"si!ely in in%erna%ional
%ra(e s&all -e %rea%e( as an o!erseas *on%ra*% 'or2er.
(. An alien in(i!i("al/ '&e%&er resi(en% or no% of %&e P&iliines/ is
%a5a-le only on in*o)e (eri!e( fro) so"r*es 'i%&in %&e P&iliines.
e. A (o)es%i* *orora%ion is %a5a-le on all in*o)e (eri!e( fro) so"r*es
'i%&in an( 'i%&o"% %&e P&iliines.
f. A forei4n *orora%ion/ '&e%&er en4a4e( or no% in %ra(e or -"siness in
%&e P&iliines/ is %a5a-le only on in*o)e (eri!e( fro) so"r*es 'i%&in %&e
P&iliines. ASe*. 21/ N+6C of 133JB
BAR: 49. Co)ensa%ion in*o)e is *onsi(ere( as &a!in4 -een earne(
in %&e la*e '&ere %&e ser!i*e 'as ren(ere( an( no% *onsi(ere( as so"r*e(
fro) %&e la*e of ori4in of %&e )oney.
BAR: 50. Pay)en% for ser!i*es/ o%&er %&an *o)ensa%ion in*o)e/ is
*onsi(ere( as &a!in4 -een earne( a% %&e la*e '&ere %&e )oney ori4ina%e( an(
no% a% %&e la*e '&ere %&e a*%i!i%y or ser!i*e 'as erfor)e(.
A non?resi(en% alien/ '&o &as s%aye( in %&e P&iliines for an a44re4a%e
erio( of )ore %&an 170 (ays ("rin4 %&e *alen(ar year 2001/ s&all -e
*onsi(ere( as a non?resi(en% alien (oin4 -"siness in %&e P&iliines.
Conse,"en%ly/ &e s&all -e s"-.e*% %o in*o)e %a5 on &is in*o)e (eri!e( fro)
so"r*es fro) 'i%&in %&e P&iliines. ISe*. 2C AAB A1B/ N+6CK
:e is allo'e( %o a!ail of %&e i%e)i8e( (e("*%ions in*l"(in4 %&e ersonal
an( a((i%ional e5e)%ions s"-.e*% %o %&e r"le on re*iro*i%y.
+)roerly a**")"la%e( earnin4s are %&e earnin4s or rofi%s of a
*orora%ion '&i*& are er)i%%e( %o a**")"la%e ins%ea( of -ein4 (i!i(e( -y a
*orora%ion %o i%s s&are&ol(ers for %&e "rose of a!oi(in4 %&e in*o)e %a5 on
(i!i(en(s 'i%& rese*% %o i%s s&are&ol(ers or %&e s&are&ol(ers of ano%&er
*orora%ion. +f %&e in*o)e 'ere (i!i(e( an( (is%ri-"%e(/ %&ey 'o"l( &a!e -een
%a5e( as (i!i(en(s.
+n a((i%ion %o o%&er in*o)e %a5es/ %&ere is i)ose( for ea*& %a5a-le year
on %&e i)roerly a**")"la%e( %a5a-le in*o)e of ea*& *orora%ion/ an
i)roerly a**")"la%e( earnin4s %a5 e,"al %o 10N of %&e i)roerly
a**")"la%e( %a5a-le in*o)e. ISe*. 23 AAB/ N+6C of 133JK
E!ery *orora%ion for)e( or a!aile( for %&e "rose of a!oi(in4 in*o)e
%a5 'i%& rese*% %o i%s s&are&ol(ers or %&e s&are&ol(ers of ano%&er *orora%ion/
-y er)i%%in4 earnin4s an( rofi%s %o a**")"la%e ins%ea( of -ein4 (i!i(e( or
(is%ri-"%e(. ISe*. 23 A#B A1B/ N+6C of 133JK
Corora%ions e5e)% fro) %&e i)roerly a**")"la%e( earnin4s %a5D
a. P"-li*ly?&el( *orora%ionsE
-. #an2s an( o%&er non-an2 finan*ial in%er)e(iariesE an(
*. ns"ran*e *o)anies. ISe*. 23 A#B A2B/ N+6C of 133JK
33
T&e fa*% %&a% %&e earnin4s or rofi%s of a *orora%ion are er)i%%e( %o
a**")"la%e( -eyon( %&e reasona-le nee(s of %&e -"siness s&all -e
(e%er)ina%i!e of %&e "rose %o a!oi( %&e %a5 "on i%s s&are&ol(ers or )e)-ers
"nless %&e *orora%ion/ -y *lear reon(eran*e of e!i(en*e/ s&all ro!e %&e
*on%rary. ISe*. 23 ACB A2B/ N+6C of 133JK
6easona-le nee(s of -"siness in*l"(es %&e reasona-ly an%i*ia%e( nee(s
of %&e -"siness. ISe*. 23 AEB/ N+6C of 133JK
+n or(er %o (e%er)ine '&e%&er rofi%s are a**")"la%e( for %&e reasona-le
nee(s of %&e -"siness %o a!oi( %&e s"r%a5 "on s&are&ol(ers/ i% )"s% -e s&o'n
%&a% %&e *on%rollin4 in%en%ion of %&e %a5ayer is )anifes%e( a% %&e %i)e of %&e
a**")"la%ion/ no% in%en%ions (e*lare( s"-se,"en%ly/ '&i*& are )ere
af%er%&o"4&%s. <"r%&er)ore/ %&e a**")"la%e( rofi%s )"s% -e "se( 'i%&in a
reasona-le %i)e af%er %&e *lose of %&e %a5a-le year. (Cyana&i. P#ilippine%, $n".
v. Court of Appeal%, et al., G.R. No. 10+0*), 1anuary 20, 2000
T&e %es%s %o (e%er)ine ."s%ifie( a**")"la%ion of earnin4s/ an( no% s"-.e*%
%o %a5 are AaB %&e i))e(ia*y %es%E A-B %&e 2 %o 1 ra%ioE an( %&e A*B %&e #ar(a&l
for)"la.
Un(er %&e i))e(ia*y %es%/ reasona-le nee(s of %&e -"siness )eans
%&e i))e(ia%e nee(s of %&e -"siness/ an( i% 'as 4enerally &el( %&a% if %&e
*orora%ion (i( no% ro!e an i))e(ia%e nee( for %&e a**")"la%ion of %&e
earnin4s an( rofi%s/ %&e a**")"la%ion 'as no% for %&e reasona-le nee(s of %&e
-"siness an( %&e enal%y %a5 'o"l( aly. ACyana&i. P#ilippine%, $n". v. Court of
Appeal%, et al., G.R. No. 10+0*), 1anuary 20, 2000 *i%in4 0anila Cine
0er"#ant%, $n". v. Co&&i%%ioner of $nternal Revenue in %"rn *i%in4 Mer%ensB
Un(er %&e 2 %o 1 r"le/ %&e ra%io of *"rren% asse%s %o *"rren% lia-ili%ies is
"se( %o (e%er)ine %&e s"ffi*ien*y of 'or2in4 *ai%al. +(eally/ %&e 'or2in4 *ai%al
s&o"l( e,"al %&e *"rren% lia-ili%ies an( %&ere )"s% -e 2 "ni%s of *"rren% asse%s for
e!ery "ni% of *"rren% lia-ili%y/ &en*e %&e so?*alle( 2 %o 1 6"le. ACyana&i.
P#ilippine%, $n". v. Court of Appeal%, et al., G.R. No. 10+0*), 1anuary 20, 2000
*i%in4 0anila Cine 0er"#ant%, $n". v. Co&&i%%ioner of $nternal Revenue in %"rn
*i%in4 Mer%ensB
T&e #ar(a&l for)"la allo's re%en%ion as 'or2in4 *ai%al reser!e/
s"ffi*ien% a)o"n%s of li,"i( asse%s %o *arry %&e *o)any %&ro"4& one oera%in4
*y*le. T&e for)"la re,"ires an e5a)ina%ion of '&e%&er %&e %a5ayer &as
s"ffi*ien% li,"i( asse%s %o ay all i%s *"rren% lia-ili%ies an( any e5%raor(inary
e5enses reasona-ly an%i*ia%e(/ l"s eno"4& %o oera%e %&e -"siness ("rin4
one oera%in4 *y*le. ACyana&i. P#ilippine%, $n". v. Court of Appeal%, et al., G.R.
No. 10+0*), 1anuary 20, 2000 *i%in4 0anila Cine 0er"#ant%, $n". v.
Co&&i%%ioner of $nternal Revenue in %"rn *i%in4 Mer%ensB
Al%&o"4& %&e #ar(a&l for)"la is 'ell?es%a-lis&e( an( ro"%inely alie(
-y %&e *o"r%s/ i% is no% a re*ise r"le. +% is "se( only for a()inis%ra%i!e
*on!enien*e. ACyana&i. P#ilippine%, $n". v. Court of Appeal%, et al., G.R. No.
10+0*), 1anuary 20, 2000 *i%in4 0anila Cine 0er"#ant%, $n". v. Co&&i%%ioner
of $nternal Revenue in %"rn *i%in4 Mer%ensB
T&e oera%in4 *y*le is %&e erio( of %i)e i% %a2es %o *on!er% *as& in%o ra'
)a%erials/ ra' )a%erials in%o in!en%ory/ an( in!en%ory in%o sales/ in*l"(in4 %&e
%i)e i% %a2es %o *olle*% ay)en% for %&e sales. T&ere are !aria%ions in %&e
ali*a%ion of %&e #ar(a&l for)"la/ s"*& as a!era4e oera%in4 *y*le or ea2
oera%in4 *y*le. +n %i)es '&en %&ere is no re*"rren*e of a -"siness *y*le/ %&e
'or2in4 *ai%al nee(s *anno% -e re(i*%e( 'i%& a**"ra*y. ACyana&i. P#ilippine%,
$n". v. Court of Appeal%, et al., G.R. No. 10+0*), 1anuary 20, 2000 *i%in4 0anila
34
Cine 0er"#ant%, $n". v. Co&&i%%ioner of $nternal Revenue in %"rn *i%in4
Mer%ensB
T&e %'o A2B rin*ial a**o"n%in4 )e%&o(s for re*o4ni%ion of in*o)e are
%&e AaB a**r"al )e%&o(E an( %&e A-B *as& )e%&o(.
Un(er %&e a**r"al )e%&o( of a**o"n%in4/ in*o)e is reor%a-le '&en all
%&e e!en%s &a!e o**"rre( %&a% fi5 %&e %a5ayers ri4&% %o re*ei!e %&e in*o)e/ an(
%&e a)o"n% *an -e (e%er)ine( 'i%& reasona-le a**"ra*y. T&"s i% is %&e ri4&% %o
re*ei!e in*o)e/ an( no% %&e a*%"al re*ei%/ %&a% (e%er)ines '&en %o in*l"(e %&e
a)o"n% in 4ross in*o)e. (:ilipina% :iber Corporation v. Court of Appeal%, et al.,
G.R. No%. 11+49+ B 1243)), 7"tober 12, 1999
T&e re,"isi%es of %&e a**r"al )e%&o( of in*o)e re*o4ni%ionD
a. T&a% %&e ri4&% %o re*ei!e %&e in*o)e )"s% -e !ali(/ "n*on(i%ional an(
enfor*ea-le/ i.e. no% *on%in4en% "on f"%"re %i)eE
-. T&e a)o"n% )"s% -e reasona-ly s"s*e%i-le of a**"ra%e es%i)a%eE an(
*. T&ere )"s% -e a reasona-le e5e*%a%ion %&a% %&e a)o"n% 'ill -e ai( in
("e *o"rse. (:ilipina% :iber Corporation v. Court of Appeal%, et al., G.R. No%.
11+49+ B 1243)), 7"tober 12, 1999
Un(er %&e *as& )e%&o( in*o)e is %o -e *ons%r"e( as in*o)e for %a5
"roses only "on a*%"al re*ei% of %&e *as& ay)en%. +% is also referre( %o as
%&e *as& re*ei%s an( (is-"rse)en%s )e%&o( -e*a"se -o%& %&e re*ei% an(
(is-"rse)en%s are *onsi(ere(. T&"s/ in*o)e is re*o4ni8e( only "on a*%"al
re*ei% of %&e *as& ay)en% -"% no (e("*%ions are allo'e( fro) %&e *as& in*o)e
"nless a*%"ally (is-"rse( %&ro"4& an a*%"al ay)en% in *as&.
T&e o%&er )e%&o(s of a**o"n%in4 are AaB %&e *o)le%ion of *on%ra*% -asis
Ano% re*o4ni8e( "n(er %&e N+6C of 133JBE A-B %&e er*en%a4e of *o)le%ion
)e%&o(E an( A*B %&e ins%all)en% )e%&o(.
T&e ins%all)en% -asis is a )e%&o( *onsi(ere( '&en *olle*%ions e5%en(
o!er rela%i!ely lon4 erio(s of %i)e an( %&ere is a s%ron4 ossi-ili%y %&a% f"ll
*olle*%ion 'ill no% -e )a(e. As *"s%o)ers )a2e ins%all)en% ay)en%s/ %&e seller
re*o4ni8es %&e 4ross rofi% on sale in roor%ion %o %&e *as& *olle*%e(. AC&a%er
++/ A**o"n%in4 Me%&o(s/ :an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L
Vol")e +/ 6e!ision 2000/ . 1?4B
BAR: 51. T&e frin4e -enefi%s %a5 is a final 'i%&&ol(in4 %a5 i)ose( on
%&e 4rosse(?" )one%ary !al"e of frin4e -enefi%s f"rnis&e(/ 4ran%e( or ai( -y
%&e e)loyer %o %&e e)loyee/ e5*e% ran2 an( file e)loyees. I1
s%
ar./ Se*.
2.11 AAB/ 6e!. 6e4s. No. 1?37K +% is %&e e)loyer %&a% ays %&e %a5.
<or "roses of %a5a%ion/ frin4e -enefi% )eans any 4oo(/ ser!i*e/ or o%&er
-enefi% f"rnis&e( or 4ran%e( in *as& or in 2in( -y an e)loyer %o an in(i!i("al
e)loyee Ae5*e% ran2 an( file e)loyeesB/ s"*& as -"% no% li)i%e( %oD
a. :o"sin4E
-. E5ense a**o"n%E
*. Ve&i*le of any 2in(E
(. :o"se&ol( ersonnel/ s"*& as )ai(/ (ri!er an( o%&ersE
e. +n%eres% on loan a% less %&an )ar2e% ra%e %o %&e e5%en% of %&e (ifferen*e
-e%'een %&e )ar2e% ra%e an( a*%"al ra%e 4ran%e(E
f. Me)-ers&i fees/ ("es an( o%&er e5enses -orne -y %&e e)loyer for
%&e e)loyee in so*ial an( a%&le%i* *l"-s or o%&er si)ilar or4ani8a%ionsE
4. E5enses for forei4n %ra!elE
&. :oli(ay an( !a*a%ion e5ensesE
i. E("*a%ional assis%an*e %o %&e e)loyee or &is (een(en%sE an(
35
.. @ife or &eal%& ins"ran*e an( o%&er non?life ins"ran*e re)i")s or
si)ilar a)o"n%s in e5*ess of '&a% %&e la' allo's. ISe*. 11 A#B/ N+6C of 133JE 1
s%
ar./ Se*. 2.11 A#B/ 6e!. 6e4s. No. 1?37K
BAR: 52. <rin4e -enefi%s %&a% are no% s"-.e*% %o %&e frin4e -enefi%s %a5D
a. 9&en %&e frin4e -enefi% is re,"ire( -y %&e na%"re of/ or ne*essary %o
%&e %ra(e/ -"siness or rofession of %&e e)loyerE or
-. 9&en %&e frin4e -enefi% is for %&e *on!enien*e or a(!an%a4e of %&e
e)loyer. ISe*. 12AAB/ N+6C of 133JE 1
s%
ar./ Se*. 2.11 AAB/ 6e!. 6e4s. No. 1?
37K
*. <rin4e -enefi%s '&i*& are a"%&ori8e( an( e5e)%e( fro) in*o)e %a5
"n(er %&e Ta5 Co(e or "n(er any se*ial la'E
(. Con%ri-"%ions of %&e e)loyer for %&e -enefi% of %&e e)loyee %o
re%ire)en%/ ins"ran*e an( &osi%ali8a%ion -enefi% lansE
e. #enefi%s 4i!en %o %&e ran2 an( file e)loyees/ '&e%&er 4ran%e( "n(er a
*olle*%i!e -ar4ainin4 a4ree)en% or no%E an(
f. (e &ini&i% -enefi%s as (efine( in %&e r"les an( re4"la%ions %o -e
ro)"l4a%e( -y %&e Se*re%ary of <inan*e "on re*o))en(a%ion of %&e
Co))issioner of +n%ernal 6e!en"e. I1
s%
ar./ Se*. 12 ACB/ N+6C of 133JE Se*.
2.11 ACB/ 6e!. 6e4s. No. 1?37K
(e &ini&i% -enefi%s are fa*ili%ies an( ri!ile4es As"*& as en%er%ain)en%/
)e(i*al ser!i*es/ or so?*alle( *o"r%esy (is*o"n%s on "r*&asesB/ f"rnis&e( or
offere( -y an e)loyer %o &is e)loyees. T&ey are no% *onsi(ere( as
*o)ensa%ion s"-.e*% %o in*o)e %a5 an( *onse,"en%ly %o 'i%&&ol(in4 %a5/ if s"*&
fa*ili%ies are offere( or f"rnis&e( -y %&e e)loyer )erely as a )eans of
ro)o%in4 %&e &eal%&/ 4oo('ill/ *on%en%)en%/ or effi*ien*y of &is e)loyees.
ISe*. 2.J7/1 AAB A1B/ 6e!. 6e4s. 2?37 as a)en(e( -y 6e!. 6e4s. No. 7?2000K
BAR: 53. T&e follo'in4 s&all -e *onsi(ere( as .e &ini&i% -enefi%s no%
s"-.e*% %o 'i%&&ol(in4 %a5 on *o)ensa%ion in*o)e of -o%& )ana4erial an( ran2
an( file e)loyeesD
a. Mone%i8e( "n"se( !a*a%ion lea!e *re(i%s of e)loyees no% e5*ee(in4
%en A10B (ays ("rin4 %&e yearE
-. Me(i*al *as& allo'an*e %o (een(en%s of e)loyees no% e5*ee(in4
PJC0.00 er e)loyee er se)es%er or P12C er )on%&E
*. 6i*e s"-si(y of P1/000.00 or one A1B sa*2 of C0?24. ri*e er )on%&
a)o"n%in4 %o no% )ore %&an P1/000.00E
(. Unifor)s an( *lo%&in4 allo'an*e no% e5*ee(in4 P1/000.00 er ann")E
e. A*%"al yearly )e(i*al -enefi%s no% e5*ee(in4 P10/000.00 er ann")E
f. @a"n(ry allo'an*e no% e5*ee(in4 P100 er )on%&E
4. E)loyees a*&ie!e)en% a'ar(s/ e.4. for len4%& of ser!i*e or safe%y
a*&ie!e)en%/ '&i*& )"s% -e in %&e for) of a %an4i-le ersona roer%y o%&er
%&an *as& or 4if% *er%ifi*a%e/ 'i%& an ann"al )one%ary !al"e no% e5*ee(in4
P10/000.00 re*ei!e( -y an e)loyee "n(er an es%a-lis&e( 'ri%%en lan '&i*&
(oes no% (is*ri)ina%e in fa!or of &i4&ly ai( e)loyeesE
&. =if%s 4i!en ("rin4 C&ris%)as an( )a.or anni!ersary *ele-ra%ions no%
e5*ee(in4 PC/000 er e)loyee er ann")E
i. <lo'ers/ fr"i%s/ -oo2s/ or si)ilar i%e)s 4i!en %o e)loyees "n(er
se*ial *ir*")s%an*es/ e.4. on a**o"n% of illness/ )arria4e/ -ir%& of a -a-y/ e%*.E
an(
.. Daily )eal allo'an*e for o!er%i)e 'or2 no% e5*ee(in4 %'en%y fi!e
er*en% A2CNB of %&e -asi* )ini)") 'a4e.
T&e a)o"n% of .e &ini&i% -enefi%s *onfor)in4 %o %&e *eilin4 &erein
res*ri-e( s&all no% -e *onsi(ere( in (e%er)inin4 %&e P10/000 *eilin4 of o%&er
-enefi%s ro!i(e( "n(er Se*%ion 12 A#BAJBAeB of %&e Co(e. :o'e!er/ if %&e
e)loyer ays )ore %&an %&e *eilin4 res*ri-e( -y %&ese re4"la%ions/ %&e e5*ess
s&all -e %a5a-le %o %&e e)loyee re*ei!in4 %&e -enefi%s only if s"*& e5*ess is
-eyon( %&e P10/000.00 *eilin4/ ro!i(e(/ f"r%&er/ %&a% any a)o"n% 4i!en -y %&e
36
e)loyer as -enefi%s %o i%s e)loyees/ '&e%&er *lassifie( as .e &ini&i% -enefi%s
or frin4e -enefi%s/ s&all *ons%i%"%e as (e("*%i-le e5ense "on s"*& e)loyer.
ISe*. 2.J7.1 AAB A1B/ 6e!. 6e4s. 2?37 as a)en(e( -y 6e!. 6e4s. No. 7?2000K
51. +n*o)e s"-.e*% %o final %a5 refers %o an in*o)e *olle*%e( %&ro"4& %&e
'i%&&ol(in4 %a5 sys%e).
T&e ayor of %&e in*o)e 'i%&&ol(s %&e %a5 an( re)i%s i% %o %&e 4o!ern)en%
as a final se%%le)en% of %&e in*o)e %a5 as a final se%%le)en% of %&e in*o)e %a5 ("e
on sai( in*o)e. T&e re*iien% is no lon4er re,"ire( %o in*l"(e %&e in*o)e
s"-.e*%e( %o a final %a5 as ar% of &is 4ross in*o)e in &is in*o)e %a5 re%"rn.
T'o e5a)les of in*o)e s"-.e*% %o final %a5 are in%eres% fro) -an2
(eosi%s an( royal%ies.
BAR: 54. 6oyal%ies s"-.e*% %o final %a5 in*l"(es %e*&ni*al a(!i*e/
assis%an*e or ser!i*es ren(ere( in *onne*%ion 'i%& %e*&ni*al )ana4e)en% or
a()inis%ra%ion of any s*ien%ifi*/ in("s%rial or *o))er*ial "n(er%a2in4/ !en%"re/
ro.e*% or s*&e)e/ s"*& as *ons"l%an*y an( %e*&ni*al ser!i*es ren(ere(
in*i(en%al %o %&e (is%ri-"%ion/ s"or% an( "se of *o)"%er sys%e)s.
BAR: 55. S%o*2 (i!i(en(s are "nreali8e( 4ains an( *anno% -e s"-.e*%
%o in*o)e %a5 "n%il %&e 4ains &a!e -een reali8e(. #efore reali8a%ion/ s%o*2
(i!i(en(s are no%&in4 -"% a reresen%a%ion of an in%eres% in %&e *orora%e
roer%ies. As *ai%al/ i% is no% ye% s"-.e*% %o in*o)e %a5. (Co&&i%%ioner of
$nternal Revenue v. Court of Appeal%, et al., G.R. No. 10+4)*, 1anuary 20, 1999
An e5a)le of reali8a%ion 'o"l( -e sales of %&e s%o*2 (i!i(en(s/ or '&ere
%&e iss"an*e res"l%s %o a roor%iona%e *&an4e in o'ners&i.
E5*l"sions (is%in4"is&e( fro) (e("*%ionsD
a. E5*l"sions fro) 4ross in*o)e refer %o a flo' of 'eal%& %o %&e %a5ayer
'&i*& are no% %rea%e( as ar% of 4ross in*o)e for "roses of *o)"%in4 %&e
%a5ayers %a5a-le in*o)e/ ("e %o %&e follo'in4 reasonsD A1B +% is e5e)%e( -y
%&e f"n(a)en%al la'E A2B +% is e5e)%e( -y s%a%"%eE an( A1B +% (oes no% *o)e
'i%&in %&e (efini%ion of in*o)e ASe*. H1/ 6e!. 6e4s. No. 2B 9:+@E (e("*%ions
are %&e a)o"n%s '&i*& %&e la' allo's %o -e s"-%ra*%e( fro) 4ross in*o)e in
or(er %o arri!e a% ne% in*o)e.
-. E5*l"sions er%ain %o %&e *o)"%a%ion of 4ross in*o)e 9:+@E
(e("*%ions er%ain %o %&e *o)"%a%ion of ne% in*o)e.
*. E5*l"sions are so)e%&in4 re*ei!e( or earne( -y %&e %a5ayer '&i*& (o
no% for) ar% of 4ross in*o)e 9:+@E (e("*%ions are so)e%&in4 sen% or ai( in
earnin4 4ross in*o)e.
An e5a)le of an e5*l"sion fro) 4ross in*o)e are life ins"ran*e
ro*ee(s/ an( an e5a)le of a (e("*%ion are losses.
BAR: 56. T&e follo'in4 are e5*l"(e( fro) 4ross in*o)eD
a. Pro*ee(s of life ins"ran*e oli*ies ai( %o %&e &eirs or -enefi*iaries
"on %&e (ea%& of %&e ins"re( '&e%&er in a sin4le s") or o%&er'ise.
-. A)o"n%s re*ei!e( -y %&e ins"re( as a re%"rn of re)i")s ai( -y &i)
"n(er life ins"ran*e/ en(o')en% or ann"i%y *on%ra*%s ei%&er ("rin4 %&e %er)/ or
a% )a%"ri%y of %&e %er) )en%ione( in %&e *on%ra*%/ or "on s"rren(er of %&e
*on%ra*%.
*. Val"e of roer%y a*,"ire( -y 4if%/ -e,"es%/ (e!ise/ or (es*en%.
(. A)o"n%s re*ei!e(/ %&ro"4& a**i(en% or &eal%& ins"ran*e or 9or2)ens
Co)ensa%ion A*%s as *o)ensa%ion for ersonal in."ries or si*2ness/ l"s %&e
a)o"n%s of any (a)a4es re*ei!e( on '&e%&er -y s"i% or a4ree)en% on a**o"n%
of s"*& in."ries or si*2ness.
e. +n*o)e of any 2in( %o %&e e5%en% re,"ire( -y any %rea%y o-li4a%ion
-in(in4 "on %&e =o!ern)en% of %&e P&iliines.
f. 6e%ire)en% -enefi%s re*ei!e( "n(er 6e"-li* A*% No. JH41. 6e%ire)en%
re*ei!e( fro) reasona-le ri!a%e -enefi% lan af%er *o)lian*e 'i%& *er%ain
37
*on(i%ions. A)o"n%s re*ei!e( for -eyon( *on%rol seara%ion. <orei4n so*ial
se*"ri%y/ re%ire)en% 4ra%"i%ies/ ensions/ e%*. USVA -enefi%s/ SSS -enefi%s an(
=S+S -enefi%s.
BAR: 57. Con(i%ions for e5*l"(in4 re%ire)en% -enefi%s fro) 4ross
in*o)e/ &en*e %a5?e5e)%D
a. 6e%ire)en% -enefi%s re*ei!e( "n(er 6e"-li* A*% No. JH41 an( %&ose
re*ei!e( -y offi*ials an( e)loyees of ri!a%e fir)s/ '&e%&er in(i!i("al or
*orora%e/ in a**or(an*e 'i%& %&e e)loyers reasona-le ri!a%e -enefi% lan
aro!e( -y %&e #+6.
-. 6e%irin4 offi*ial or e)loyee
1B +n %&e ser!i*e of %&e sa)e e)loyer for a% leas% %en A10B yearsE
2B No% less %&an fif%y AC0B years of a4e a% %i)e of re%ire)en%E
1B A!aile( of %&e -enefi% of e5*l"sion only on*e. ISe*. 12 A#B AHB
AaB/ N+6C of 133JK T&e re%irin4 offi*ial or e)loyee s&o"l( no% &a!e
re!io"sly a!aile( of %&e ri!ile4e "n(er %&e re%ire)en% lan of %&e sa)e
or ano%&er e)loyer. I1
s%
ar./ Se*. 2.J7 A#B A1B/ 6e!. 6e4s. No. 2?37K
BAR: 58. Seara%ion Are%ire)en%B ay e5*l"(e( fro) 4ross in*o)e/
&en*e %a5?e5e)%D
a. Any a)o"n% re*ei!e( -y an offi*ial/ e)loyee or -y &is &eirs/
-. <ro) %&e e)loyer
*. As a *onse,"en*e of seara%ion of s"*& offi*ial or e)loyee fro) %&e
ser!i*e of %&e e)loyer -e*a"se of
1B Dea%&/ si*2ness or o%&er &ysi*al (isa-ili%yE or
2B <or any *a"se -eyon( %&e *on%rol of sai( offi*ial or e)loyee
ISe*. 12 A#B AHB A-B/ N+6C of 133JK/ s"*& as re%ren*&)en%/ re("n(an*y
an( *essa%ion of -"siness. I1
s%
ar./ Se*. 2.J7 A#B/ A1B A-B/ 6e!. 6e4s. No.
2?37K
BAR: 59. Pri8es %&a% are e5*l"(e( fro) 4ross in*o)e/ &en*e no%
%a5a-leD
a. Pri8es an( a'ar(s )a(e ri)arily in re*o4ni%ion of reli4io"s/
*&ari%a-le/ s*ien%ifi*/ e("*a%ional/ ar%is%i*/ li%erary/ or *i!i* a*&ie!e)en% -"% only if
1B T&e re*iien% 'as sele*%e( 'i%&o"% any a*%ion on &is ar% %o
en%er %&e *on%es% or ro*ee(in4E an(
2B T&e re*iien% is no% re,"ire( %o ren(er s"-s%an%ial f"%"re
ser!i*es as a *on(i%ion %o re*ei!in4 %&e ri8e or a'ar(. ISe*. 12 A#B OJP
O*P/ N+6C of 133JK
-. All ri8es an( a'ar(s
1B =ran%e( %o a%&le%es
2B +n lo*al an( in%erna%ional sor%s %o"rna)en%s an( *o)e%i%ions
1B 9&e%&er &el( in %&e P&iliines or a-roa(/ an(
4B San*%ione( -y %&eir na%ional sor%s asso*ia%ions ISe*. 12A#B OJP
O(P/ N+6C of 133JK/ '&i*& er #+6 r"lin4 is a**re(i%a%ion 'i%& %&e
P&iliine Oly)i* Co))i%%ee. No%e %&a% %&e e5e)%ion refers only %o
a)a%e"r sor%s. <or rofessional -o5in4/ a se*ial la' 4ran%s %&e
e5e)%ion no% %&e N+6C.
Only resi(en% *i%i8ens an( resi(en% alien in(i!i("als are allo'e( %o (e("*%
%&e o%ional s%an(ar( (e("*%ion on %&eir 4ross in*o)e o%&er %&an assi!e or
*o)ensa%ion in*o)e.
Nonresi(en% in(i!i("als/ es%a%es/ %r"s%s or *orora%ions are no% allo'e( %o
a!ail of %&is (e("*%ion.
BAR: 60. +%e)i8e( (e("*%ions fro) 4ross in*o)e an( '&o )ay a!ailD
a. O!"#$%!& %$" $'('))%!& %ra(e/ -"siness or rofessional '*+'$)').
-. T&e a)o"n% of #$,'!'), ai( or in*"rre( 'i%&in a %a5a-le year on
in(e-%e(ness in *onne*%ion 'i%& %&e %a5ayers rofession/ %ra(e or -"siness.
38
6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien
in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es
o%&er fro) *o)ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5enses.
Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5ense.
Nonresi(en% *i%i8ens an( forei4n *orora%ions on %&eir 4ross in*o)es fro) 'i%&in
)ay also (e("*% %&is e5ense.
Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e
P&iliines are no% allo'e( %o (e("*% %&is e5ense.
*. T%*') ai( or in*"rre( 'i%&in %&e %a5a-le year in *onne*%ion 'i%& %&e
%a5ayers rofession.
6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien
in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es
o%&er fro) *o)ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5enses.
Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5ense.
Nonresi(en% *i%i8ens an( forei4n *orora%ions on %&eir 4ross in*o)es fro) 'i%&in
)ay also (e("*% %&is e5ense.
Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e
P&iliines are no% allo'e( %o (e("*% %&is e5ense.
(. Or(inary -.))')/ losses fro) *as"al%y/ %&ef% or e)-e88le)en%E an( ne%
oera%in4 losses.
6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien
in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es
o%&er fro) *o)ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5enses.
Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5ense.
Nonresi(en% *i%i8ens an( forei4n *orora%ions on %&eir 4ross in*o)es fro) 'i%&in
)ay also (e("*% %&is e5ense.
Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e
P&iliines are no% allo'e( %o (e("*% %&is e5ense.
e. B%" "'/,) ("e %o %&e %a5ayer/ a*%"ally as*er%aine( %o -e 'or%&less
an( *&ar4e( off 'i%&in %&e %a5a-le year/ *onne*%e( 'i%& rofession/ %ra(e or
-"siness/ no% s"s%aine( -e%'een rela%e( ar%ies.
6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien
in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es
o%&er fro) *o)ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5enses.
Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5ense.
Nonresi(en% *i%i8ens an( forei4n *orora%ions on %&eir 4ross in*o)es fro) 'i%&in
)ay also (e("*% %&is e5ense.
Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e
P&iliines are no% allo'e( %o (e("*% %&is e5ense.
f. 0'+!'(#%,#.$ or a reasona-le allo'an*e for %&e e5&a"s%ion/ 'ear an(
%ear Ain*l"(in4 reasona-le allo'an*e for o-soles*en*eB of roer%y "se( in %ra(e
or -"siness.
6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien
in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es
o%&er fro) *o)ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5enses.
Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5ense.
Nonresi(en% *i%i8ens an( forei4n *orora%ions on %&eir 4ross in*o)es fro) 'i%&in
)ay also (e("*% %&is e5ense.
Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e
P&iliines are no% allo'e( %o (e("*% %&is e5ense.
4. 0'+-',#.$ or (e("*%ion arisin4 fro) %&e e5&a"s%ion of a non?
rela*ea-le asse%/ "s"ally a na%"ral reso"r*e.
6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien
in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es
o%&er fro) *o)ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5enses.
Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5ense.
Nonresi(en% *i%i8ens an( forei4n *orora%ions on %&eir 4ross in*o)es fro) 'i%&in
)ay also (e("*% %&is e5ense.
39
Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e
P&iliines are no% allo'e( %o (e("*% %&is e5ense.
&. C1%!#,%/-' an( o%&er (.$,!#/2,#.$). 6esi(en% *i%i8ens/ resi(en% alien
in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an(
-"siness/ on %&eir 4ross in*o)es o%&er fro) *o)ensa%ion in*o)e are allo'e(
%o (e("*% %&ese e5enses. Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also
(e("*% %&is e5ense. Nonresi(en% *i%i8ens an( forei4n *orora%ions on %&eir
4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5ense.
Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e
P&iliines are no% allo'e( %o (e("*% %&is e5ense.
i. R')'%!(1 %$" "'3'-.+4'$, e5en(i%"res %rea%e( as (eferre(
e5enses ai( or in*"rre( -y %&e %a5ayer in *onne*%ion 'i%& &is %ra(e/ -"siness
or rofession/ no% (e("*%e( as e5enses an( *&ar4ea-le %o *ai%al a**o"n% -"%
no% *&ar4ea-le %o roer%y of a *&ara*%er '&i*& is s"-.e*% %o (ere*ia%ion or
(ele%ion.
6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien
in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es
o%&er fro) *o)ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5enses.
Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5ense.
Nonresi(en% *i%i8ens an( forei4n *orora%ions on %&eir 4ross in*o)es fro) 'i%&in
)ay also (e("*% %&is e5ense.
Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e
P&iliines are no% allo'e( %o (e("*% %&is e5ense.
.. C.$,!#/2,#.$) ,. +'$)#.$ ,!2),). 6esi(en% *i%i8ens/ resi(en% alien
in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an(
-"siness/ on %&eir 4ross in*o)es o%&er fro) *o)ensa%ion in*o)e are allo'e(
%o (e("*% %&ese e5enses. Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also
(e("*% %&is e5ense. Nonresi(en% *i%i8ens an( forei4n *orora%ions on %&eir
4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5ense.
Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e
P&iliines are no% allo'e( %o (e("*% %&is e5ense.
2. I$)2!%$(' +!'4#24) for &eal%& an( &osi%ali8a%ion. 6esi(en% *i%i8ens/
resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in
%ra(e an( -"siness/ on %&eir 4ross in*o)es o%&er fro) *o)ensa%ion in*o)e
are allo'e( %o (e("*% %&ese e5enses. Nonresi(en% *i%i8ens an( nonresi(en%
alien in(i!i("al en4a4e( in %ra(e or -"siness in %&e P&iliine on %&eir 4ross
in*o)es fro) 'i%&in )ay also (e("*% %&ese re)i")s.
Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e
P&iliines are no% allo'e( %o (e("*% %&ese re)i")s.
l. 5'!).$%- %$" %""#,#.$%- '*'4+,#.$). 6esi(en% *i%i8ens/ an( resi(en%
alien on %&eir 4ross in*o)es an( fro) *o)ensa%ion in*o)e are allo'e( %o
(e("*% %&ese re)i")s. Nonresi(en% *i%i8ens on %&eir 4ross in*o)es fro) 'i%&in
)ay also (e("*% %&is e5ense. Nonresi(en% alien in(i!i("als en4a4e( in %ra(e
or -"siness in %&e P&iliines are allo'e( %o (e("*% %&ese e5e)%ions "n(er
re*iro*i%y.
Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e
P&iliines are no% allo'e( %o (e("*% %&is e5ense.
E5%raor(inary (e("*%ions
a. T&ose allo'e( %o ins"ran*e *o)anies
-. De("*%ions allo'e( %o es%a%es an( %r"s%s a!ailin4 of i%e)i8e(
(e("*%ions of in*o)e *"rren%ly (is%ri-"%e( %o -enefi*iaries.
*. @osses fro) 'as& sales of s%o*2s or se*"ri%ies.
(. Cer%ain *ai%al losses -"% only fro) *ai%al 4ains.
Or(inary e5enses are %&ose '&i*& are *o))on %o in*"r in %&e %ra(e or
-"siness of %&e %a5ayer 9:+@E *ai%al e5en(i%"res are %&ose in*"rre( %o
i)ro!e asse%s an( -enefi%s for )ore %&an one %a5a-le year. Or(inary e5enses
40
are "s"ally in*"rre( ("rin4 a %a5a-le year an( -enefi%s s"*& %a5a-le year.
Ne*essary e5enses are %&ose '&i*& are aroria%e or &elf"l %o %&e -"siness.
BAR: 61. T&e follo'in4 are %&e re,"isi%es for (e("*%i-ili%y of -"siness
e5ensesD
a. Co)lian*e 'i%& %&e -"siness %es%D
1B M"s% -e or(inary an( ne*essaryE
2B M"s% -e ai( or in*"rre( 'i%&in %&e %a5a-le yearE
1B M"s% -e ai( or in*"rre( in *arryin4 on a %ra(e or -"siness.
4B M"s% no% -e -ri-es/ 2i*2-a*2s or o%&er ille4al e5en(i%"res
-. Co)lian*e 'i%& %&e s"-s%an%ia%ion %es%. Proof -y e!i(en*e or re*or(s
of %&e (e("*%ions allo'e( -y la' in*l"(in4 *o)lian*e 'i%& %&e -"siness %es%.
BAR: 62. A(!er%isin4 e5enses no% (esi4ne( %o s%i)"la%e %&e f"%"re
sale of )er*&an(ise are no% (e("*%i-le T&ese are e5en(i%"res in or(er %o
*rea%e or )ain%ain so)e for) of 4oo('ill. T&ese e5en(i%"res are %o -e srea(
o!er a reasona-le erio( of %i)e -e*a"se %&ey are *onsi(ere( %&a% a *ai%al
asse% '&i*& &as a (e%er)ina-le life &as -een a*,"ire(. (General :oo.% @P#il%.A,
$n". v. Co&&i%%ioner of $nternal Revenue, C5A Ca%e No. 43+*, :ebruary +,
1994
E5enses in*"rre( %o *rea%e a fa!ora-le i)a4e for %&e *orora%ion %o
4enera%e sales of i%s s&ares of s%o*2 *ons%i%"%e *ai%al in!es%)en% -e*a"se %&e
ar%i*"lar a(!er%isin4 e5ense 'as in*"rre( in rela%ion %o %&e *ai%al asse% or
e,"i%y of %&e *o)any (Atla% Con%oli.ate. 0inin3 an. (evelop&ent
Corporation v. Co&&i%%ioner of $nternal Revenue, 102 'CRA 24*, an( are %o-e
*ai%ali8e( or srea( o!er a reasona-le erio(.
6e,"isi%es of (e("*%i-ili%y of En%er%ain)en%/ A)"se)en% an( 6e*rea%ion
E5ensesD
a. +% )"s% -e a reasona-le allo'an*e for en%er%ain)en%/ a)"se)en% an(
re*rea%ion e5enses ISe*. 14 AAB A1B Ai!B/ N+6C of 133JKE
-. +% )"s% -e ai( or in*"rre( ("rin4 %&e %a5a-le yearE
*. +% )"s% -e
1B (ire*%ly *onne*%e( %o %&e (e!elo)en%/ )ana4e)en% an(
oera%ion of %&e %ra(e/ -"siness or rofession of %&e %a5ayer/ or
2B (ire*%ly rela%e( %o or in f"r%&eran*e of %&e *on("*% of i%s %ra(e/
-"siness or e5er*ise of a rofessionE
(. +% )"s% no% -e *on%rary %o la'/ )orals/ 4oo( *"s%o)s/ "-li* oli*y or
"-li* or(erE
e. +% )"s% no% &a!e -een ai(/ (ire*%ly or in(ire*%ly/ %o an offi*ial or
e)loyee of %&e na%ional 4o!ern)en%/ or any lo*al 4o!ern)en% "ni%/ or of any
4o!ern)en%?o'ne( or *on%rolle( *orora%ion A=OCCB/ or of a forei4n
4o!ern)en%/ or %o a ri!a%e in(i!i("al/ or *orora%ion/ or 4eneral rofessional
ar%ners&i A=PPB/ or a si)ilar en%i%y/ if i% *ons%i%"%es a -ri-e/ 2i*2-a*2 or o%&er
si)ilar ay)en%E
f. +% )"s% -e ("ly s"-s%an%ia%e( -y a(e,"a%e roof. T&e offi*ial re*ei%s/
or in!oi*es/ or -ills or s%a%e)en%s of a**o"n%s s&o"l( -e in %&e na)e of %&e
%a5ayer *lai)in4 %&e (e("*%ionE an(
4. T&e aroria%e a)o"n% of 'i%&&ol(in4 %a5/ if ali*a-le/ s&o"l( &a!e
'i%&&el( %&erefro) an( ai( %o %&e #"rea" of +n%ernal 6e!en"e. ASe*. 4/ 6e!.
6e4s. No. 10?2002B
i. +% )"s% *onfor) %o %&e follo'in4 *eilin4sD
1B in an a)o"n% e,"i!alen% %o %&e a*%"al en%er%ain)en%/
a)"se)en% an( re*rea%ion e5ense ai( or in*"rre( 'i%&in %&e %a5a-le
year -y %&e %a5ayer/
2B -"% in no *ase s&all s"*& (e("*%ion e5*ee( 0.C0 er*en% A.CNB
of ne% sales Ai.e. 4ross sales less sales re%"rnsMallo'an*es an( sales
(is*o"n%sB for %a5ayers en4a4e( in sale of 4oo(s or roer%iesE or
41
1B 1.00 er*en% A1NB of ne% re!en"e Ai.e./ 4ross re!en"e less
(is*o"n%sB for %a5ayers en4a4e( in sale of ser!i*es/ in*l"(in4 e5er*ise of
rofession an( "se or lease of roer%ies.
4B :o'e!er/ if %&e %a5ayer is (eri!in4 in*o)e fro) -o%& sale of
4oo(sMroer%ies an( ser!i*es/ %&e allo'a-le en%er%ain)en%/ a)"se)en%
an( re*rea%ion e5ense s&all in all *ases -e (e%er)ine( -ase( on an
aor%ion)en% for)"la %a2in4 in%o *onsi(era%ion %&e er*en%a4e of %&e ne%
salesMne% re!en"e %o %&e %o%al ne% salesMne% re!en"e/ -"% '&i*& in no *ase
s&all e5*ee( %&e )a5i)") er*en%a4e *eilin4. ASe*. C/ $bi..B
9&o are allo'e( %o (e("*% en%er%ain)en%/ a)"se)en% an( re*rea%ion
e5ensesD
a. +n(i!i("als en4a4e( in %ra(e or -"siness/ in*l"(in4 %a5a-le es%a%es
an( %r"s%sE
-. +n(i!i("als en4a4e( in %&e ra*%i*e of rofessionE
*. Do)es%i* *orora%ionsE
(. 6esi(en% forei4n *orora%ionsE
e. =eneral rofessional ar%ners&is.
En%er%ain)en%/ A)"se)en% an( 6e*rea%ion E5enses/ in*l"(e
reresen%a%ion e5enses an(Mor (ere*ia%ion or ren%al e5ense rela%in4 %o
en%er%ain)en% fa*ili%ies. A1
s%
ar./ Se*. 2/ 6e!. 6e4s. 110?2002B
6eresen%a%ion e5enses/ s&all refer %o e5enses in*"rre( -y a
%a5ayer in *onne*%ion 'i%& %&e *on("*% of &is %ra(e/ -"siness or e5er*ise of
rofession/ in en%er%ainin4/ ro!i(in4 a)"se)en% an( re*rea%ion %o/ or )ee%in4
'i%& a 4"es% or 4"es%s a% a (inin4 la*e/ la*e of a)"se)en%/ *o"n%ry *l"-/
%&ea%er/ *on*er%/ lay/ sor%in4 e!en%/ an( si)ilar e!en%s or la*es. A2
n(
ar./
Se*. 2/ 6e!. 6e4s. 10?2002B
6eresen%a%ion e5enses s&all no% refer %o fi5e( reresen%a%ion
allo'an*es %&a% are s"-.e*% %o 'i%&&ol(in4 %a5 on 'a4es "rs"an% %o aroria%e
re!en"e re4"la%ions. A$bi..B
Cl"- ("es/ '&en frin4e -enefi%s an( '&en reresen%a%ion e5enses. +n
%&e *ase ar%i*"larly of a *o"n%ry/ 4olf/ sor%s *l"-/ or any o%&er si)ilar *l"-
'&ere %&e e)loyee or offi*er of %&e %a5ayer is %&e re4is%ere( )e)-er an( %&e
e5enses in*"rre( in rela%ion %&ere%o are ai( for -y %&e %a5ayer/ %&ere s&all -e
a res")%ion %&a% s"*& e5enses are frin4e -enefi%s s"-.e*% %o frin4e -enefi%s
%a5 "nless %&e %a5ayer *an ro!e %&a% %&ese are a*%"ally reresen%a%ion
e5enses. <or "rose of ro!in4 %&a% %&e sai( e5ense is a reresen%a%ion
e5ense an( no% frin4e -enefi%s/ %&e %a5ayer s&o"l( )ain%ain re*ei%s an(
a(e,"a%e re*or(s %&a% in(i*a%e
aB %&e a)o"n% of e5ense
-B (a%e an( la*e of e5ense
*B "rose of e5ense
(B rofessional or -"siness rela%ions&i of e5ense
(B rofessional or -"siness rela%ions&i of e5ense
eB na)e of erson an( *o)any en%er%aine( 'i%& *on?%a*% (e%ails. A2
n(
ar./ Se*. 2/ 6e!. 6e4s. 10?2002B
D"es ai( -y *o)any offi*ers %o any one *l"- (e("*%i-le -y e)loyer as
-"siness e5ense -"% no% as reresen%a%ion or en%er%ain)en%D
a. D"es ai( %o any one so*ial/ a%&le%i*/ or sor%in4 *l"- or or4ani8a%ion
er offi*er )ay -e (e("*%i-le as a -"siness e5ense. :o'e!er/ "r*&ase of
rorie%ary s&ares an( layin4 ri4&%s an( e5enses in %&e sai( *l"- or
or4ani8a%ion )ay -e (e("*%i-le only if sai( e5ense *o)lies 'i%& %&e r"les on
s"-s%an%ia%ion. D"es on *o)any )e)-ers&i *ons%i%"%e (e("*%i-le e5ense.
ANo. 1.4.2/ 6AMO No. 1?7JB
42
-. D"es or fees ai( %o rofessional or -"siness or4ani8a%ions an( *i!i*
*l"-s s"*& as @ions/ 6o%ary/ Diwani% s&all -e (e("*%i-le %o %&e e)loyer %o %&e
e5%en% of one *l"-. ANo. 1.4.1/ 6AMO No. 1?7JB
T&e a-o!e ro!isions of 6AMO No. 1?7J are %o -e rea( in rela%ion %o %&e
ro!isions of 6e!. 6e4s. No. 10?2002. +f *onsi(ere( as a frin4e -enefi% s"-.e*%
%o %&e frin4e -enefi%s %a5 "n(er Se*. 11/ N+6C of 133J/ )ay -e (e("*%i-le fro)
%&e e)loyerFs 4ross in*o)e.
En%er%ain)en% fa*ili%ies s&all refer %o A1B a ya*&%/ !a*a%ion &o)e or
*on(o)ini")E an( 2B any si)ilar i%e) of real or ersonal roer%y "se( -y %&e
%a5ayer ri)arily for %&e en%er%ain)en%/ a)"se)en%/ or re*rea%ion of 4"es%s or
e)loyees. To -e *onsi(ere( an en%er%ain)en% fa*ili%y/ s"*& ya*&%/ !a*a%ion
&o)e or *on(o)ini")/ or i%e) of real or ersonal roer%y )"s% -e o'ne( or
for) ar% of %&e %a5ayers %ra(e/ -"siness or rofession/ or ren%e( -y s"*&
%a5ayer/ for '&i*& %&e %a5ayer *lai)s a (ere*ia%ion or ren%al e5ense. A ya*&%
s&all -e *onsi(ere( an en%er%ain)en% fa*ili%y if i%s "se is in fa*% no% res%ri*%e( %o
se*ifie( offi*ers or e)loyees or osi%ions in s"*& a )anner as %o )a2e %&e
sa)e a frin4e -enefi% for "roses of i)osin4 %&e frin4e -enefi%s %a5. A4%& ar./
Se*. 2/ 6e!. 6e4s. 10?2002B
="es%s s&all )ean ersons or en%i%ies 'i%& '&i*& %&e %a5ayer &as (ire*%
-"siness rela%ions/ s"*& as -"% no% li)i%e( %o/ *lien%sM*"s%o)ers or rose*%i!e
*lien%sM*"s%o)ers. T&e %er) s&all no% in*l"(e e)loyees/ offi*ers/ ar%ners/
(ire*%ors/ s%o*2&ol(ers/ or %r"s%ees of %&e %a5ayer. Alas% ar./ Se*. 2/ 6e!.
6e4s. No. 10?2002B
E5enses no% *onsi(ere( as en%er%ain)en%/ a)"se)en% an( re*rea%ional
e5ensesD
a. E5enses '&i*& are %rea%e( as *o)ensa%ion or frin4e -enefi%s for
ser!i*es ren(ere( "n(er an e)loyer?e)loyee rela%ions&iE
-. E5enses for *&ari%a-le or f"n( raisin4 e!en%sE
*. E5enses for -ona fi(e -"siness )ee%in4 of s%o*2?&ol(ers/ ar%ners or
(ire*%orsE
(. E5enses for a%%en(in4 or sonsorin4 an e)loyee %o a -"siness
lea4"e or rofessional or4ani8a%ional )ee%in4E
e. E5enses or4ani8e( for ro)o%ion/ )ar2e%in4 an( a(!er%isin4
in*l"(in4 *on*er%s/ *onferen*es/ se)inars/ 'or2s&os/ *on!en%ions/ an( o%&er
si)ilar e!en%sE
f. O%&er e5enses of si)ilar na%"re.
No%'i%&s%an(in4 %&e fore4oin4 s"*& i%e)s of e5*l"sions )ay/ none%&eless
,"alify as i%e)s of (e("*%ion "n(er Se*%ion 14 of %&e Ta5 Co(e of 133J/ s"-.e*%
%o *on(i%ions for (e("*%i-ili%y s%a%e( %&erein. ASe*. 1/ 6e!. 6e4s. No. 10?2002B
6ei)-"rse)en%s for e5enses rela%in4 %o en%er%ain)en% s&all -e
(e("*%i-le -y %&e e)loyer if
a. Use( ri)arily for %&e f"r%&eran*e of e)loyers %ra(e or -"siness
-. Only %o %&e e5%en% allo'a-le/ %&e sa)e is (ire*%ly rela%e( %o %&e a*%i!e
*on("*% of %&e e)loyers %ra(e or -"siness an(
*. S"-.e*% %o %&e r"le of s"-s%an%ia%ion.. ANo. 1.4.1/ 6AMO No. 1?7JB
+f *onsi(ere( as a frin4e -enefi% s"-.e*% %o %&e frin4e -enefi%s %a5 "n(er
Se*. 11/ N+6C of 133J/ )ay -e (e("*%i-le fro) %&e e)loyerFs 4ross in*o)e.
6efer %o re!io"s (is*"ssion for li)i%a%ions.
6eresen%a%ion e5enses fall "n(er %&e *a%e4ory of -"siness e5enses
'&i*& are allo'a-le (e("*%ions/ if %&ey are or(inary an( ne*essaryE ai( or
in*"rre( in *arryin4 on a %ra(e or -"sinessE an( %&ey are reasona-le. (Ea&ora
v. Col. of $nt. Revenue, + 'CRA 1*3 "ite. in Para&ount $n%uran"e Corporation v.
Co&&i%%ioner of $nternal Revenue, C5A Ca%e No. 4+44,. 1une ), 199*
43
+f %rea%e( as a frin4e -enefi%/ s"-.e*% %o %&e frin4e -enefi%s %a5 "n(er Se*.
11/ N+6C of 133J/ i% )ay -e allo'e( as a (e("*%ion fro) %&e e)loyerFs 4ross
in*o)e.
6eresen%a%ion e5enses no% s"or%e( -y offi*ial re*ei%s s&o"l( -e
(isallo'e(. Mere re*ei%s '&en si4ne( -y %&e *o)any offi*ers %&e)sel!es are
no% s"ffi*ien%/ for '&ile %&ey )ay s&o' %&a% %&ey re*ei!e( %&e a)o"n% fro) %&e
*o)any/ %&ey (o no% ro!e ay)en% of %&e alle4e( reresen%a%ion e5enses %o
%&e en%i%y in '&i*& %&e sa)e 'ere in*"rre(. <"r%&er)ore/ %&e a-sen*e of
in!oi*es re*ei%s or !o"*&ers/ ar%i*"larly la*2 of roof of %&e i%e)s *ons%i%"%in4
%&e e5ense is fa%al %o %&e allo'an*e of %&e (e("*%ion. (Para&ount $n%uran"e
Corporation v. Co&&i%%ioner of $nternal Revenue, C5A Ca%e No. 4+44, 1une ),
199* "itin3 Colle"tor of $nternal Revenue v. Goo.ri"# $nt. Rubber Co., 21 'CRA
133* an. Gan"ay"o v. Colle"tor of $nternal Revenue, 1 'CRA 9+0
BAR: 63. Preferre( s&ares are *onsi(ere( *ai%al re4ar(less of %&e
*on(i%ions "n(er '&i*& s"*& s&ares are iss"e( an( (i!i(en(s or in%eres%s ai(
%&ereon are no% allo'e( as (e("*%ions fro) %&e 4ross in*o)e of *orora%ions.
A6e!en"e Me)oran(") Cir*"lar No. 1J?J1B
+n a((i%ion %o %&e e5enses allo'a-le as (e("*%ions a ri!a%e e("*a%ional
ins%i%"%ion/ )ay a% i%s o%ion ele*% ei%&erD
a. To (e("*% e5en(i%"res o%&er'ise *onsi(ere( as *ai%al o"%lays of
(ere*ia-le asse%s in*"rre( ("rin4 %&e %a5a-le year for %&e e5ansion of s*&ool
fa*ili%ies/ or
-. To (e("*% allo'an*e for (ere*ia%ion %&ereof. ISe*. 14 AAB A2B/ N+6C of
133JK
<inan*ial s%a%e)en%s a"(i%e( -y in (een(en% e5%ernal a"(i%ors *ons%i%"%e
%&e nor)al )e%&o( of roof of %&e rofi% an( loss erfor)an*e of a *o)any. A
*o)ara%i!e s%a%e)en% of re!en"e an( e5enses for %'o years/ -y i%self/ is no%
*on*l"si!e roof of serio"s -"siness losses. (-o3o/0e.ellin 'u3ar"ane
Planter% A%%o"iation, $n". v. N!RC, et al., 29* 'CRA 10+, 121
#a( (e-%s are %&ose '&i*& res"l% fro) %&e 'or%&lessness or
"n*olle*%i-ili%y/ in '&ole or in ar%/ of a)o"n%s ("e %&e %a5ayer -y o%&ers/ arisin4
fro) )oney len% or fro) "n*olle*%i-le a)o"n%s of in*o)e fro) 4oo(s sol( or
ser!i*es ren(ere(. ASe*. 2.a/ 6e!. 6e4s. C?33B
T&e follo'in4 are rela%e( ar%iesD
a. Me)-ers of %&e sa)e fa)ily. T&e fa)ily of an in(i!i("al s&all in*l"(e
only &is -ro%&ers an( sis%ers A'&e%&er -y %&e '&ole or &alf?-loo(B/ so"se/
an*es%ors/ an( lineal (es*en(an%sE
-. An in(i!i("al an( a *orora%ion )ore %&an fif%y er*en% AC0NB in !al"e
of %&e o"%s%an(in4 s%o*2 of '&i*& is o'ne(/ (ire*%ly or in(ire*%ly/ -y or for s"*&
in(i!i("alE
*. T'o *orora%ions )ore %&an fif%y er*en% AC0NB in !al"e of %&e
o"%s%an(in4 s%o*2 of '&i*& is o'ne(/ (ire*%ly or in(ire*%ly/ -y or for %&e sa)e
in(i!i("alE
(. A 4ran%or an( a fi("*iary of any %r"s%E or
e. T&e fi("*iary of a %r"s% an( %&e fi("*iary of ano%&er %r"s% if %&e sa)e
erson is a 4ran%or 'i%& rese*% %o ea*& %r"s%E or
f. A fi("*iary of a %r"s% an( a -enefi*iary of s"*&. ISe*. 1H A#B/ N+6C of
133JK
BAR: 64. 6e,"isi%es for !ali( (e("*%ion of -a( (e-%s fro) 4ross
in*o)eD
a. T&ere )"s% -e an e5is%in4 in(e-%e(ness ("e %o %&e %a5ayer '&i*&
)"s% -e !ali( an( le4ally (e)an(a-leE
44
-. T&e sa)e )"s% -e *onne*%e( 'i%& %&e %a5ayers %ra(e/ -"siness or
ra*%i*e of rofessionE
*. T&e sa)e )"s% no% -e s"s%aine( in a %ransa*%ion en%ere( in%o -e%'een
rela%e( ar%iesE
(. T&e sa)e )"s% -e a*%"ally *&ar4e( off %&e -oo2s of a**o"n%s of %&e
%a5ayer as of %&e en( of %&e %a5a-le yearE an(
e. T&e (e-% )"s% -e a*%"ally as*er%aine( %o -e 'or%&less an(
"n*olle*%i-le ("rin4 %&e %a5a-le yearE
f. T&e (e-%s are "n*olle*%i-le (esi%e (ili4en% effor% e5er%e( -y %&e
%a5ayer. ISe*. 14 AEB A1B/ N+6C of 133JE Se*. 1/ 6e!. 6e4s. No. C?33 rei%era%e(
in 6e!. 6e4s. No. 2C?2002E P#ilippine Refinin3 Corporation v. Court of Appeal%,
et al., 24* 'CRA **)K
4. M"s% &a!e -een reor%e( as re*ei!a-les in %&e in*o)e %a5 re%"rn of %&e
*"rren% or rior years. ASe*. 101/ 6e!. 6e4s. No. 2B
D
6eser!e for -a( (e-%s are no% (e("*%i-le fro) 4ross in*o)e -e*a"se %&e
(e-%s &a!e no% ye% -een as*er%aine( %o -e -a( (e-%s.
T&e !al"e of 'or%&less se*"ri%ies are no% allo'e( %o -e (e("*%i-le fro)
4ross in*o)e -e*a"se %&ey are *onsi(ere( as *ai%al losses an( )ay -e
(e("*%e( only fro) *ai%al 4ains.
BAR: 65. T&e %a5 -enefi% r"le osi%s %&a% %&e re*o!ery of -a( (e-%s
re!io"sly allo'e( as (e("*%ion in %&e re*e(in4 year or years s&all -e in*l"(e(
as ar% of %&e %a5ayers 4ross in*o)e in %&e year of s"*& re*o!ery %o %&e e5%en%
of %&e in*o)e %a5 -enefi% of sai( (e("*%ion.
+f in %&e year %&e %a5ayer *lai)e( (e("*%ion of -a( (e-%s 'ri%%en?off/ &e
reali8e( a re("*%ion of %&e in*o)e %a5 ("e fro) &i) on a**o"n% of %&e sai(
(e("*%ion/ &is s"-se,"en% re*o!ery %&ereof fro) &is (e-%or s&all -e %rea%e( as a
re*ei% of reali8e( %a5a-le in*o)e. ASe*. 4/ 6e!. 6e4s. C?33B
+f %&e sai( %a5ayer (i( no% -enefi% fro) %&e (e("*%ion of %&e sai( -a( (e-%
'ri%%en?off -e*a"se i% (i( no% res"l% %o any re("*%ion of &is in*o)e %a5 in %&e year
of s"*& (e("*%ion Ai.e. '&ere %&e res"l% of &is -"siness oera%ion 'as a ne% loss
e!en 'i%&o"% (e("*%ion of %&e -a( (e-%s 'ri%%en?offB/ %&en &is s"-se,"en%
re*o!ery %&ereof s&all -e %rea%e( as a )ere re*o!ery or a re%"rn of *ai%al/
&en*e/ no% %rea%e( as re*ei% of reali8e( %a5a-le in*o)e. ASe*. 4/ 6e!. 6e4s. C?
33B
Dere*ia%ion is %&e 4ra("al (i)in"%ion in %&e "sef"l !al"e of %an4i-le
roer%y res"l%in4 fro) or(inary 'ear an( %ear an( fro) nor)al o-soles*en*e.
T&e %er) is also alie( %o a)or%i8a%ion of %&e !al"e of in%an4i-le asse%s %&e "se
of '&i*& in %&e %ra(e or -"siness is (efini%ely li)i%e( in ("ra%ion.
T&e )e%&o(s of (ere*ia%ion are %&e follo'in4D
a. S%rai4&% line )e%&o(E
-. De*linin4 -alan*e )e%&o(E
*. S") of years (i4i%s )e%&o(E an(
(. Any o%&er )e%&o( res*ri-e( -y %&e Se*re%ary of <inan*e "on %&e
re*o))en(a%ion of %&e Co))issioner of +n%ernal 6e!en"eD
1B Aor%ion)en% %o "ni%s of ro("*%ionE
2B :o"rs of ro("*%i!e "seE
1B 6e!al"a%ion )e%&o(E an(
4B sin2in4 f"n( )e%&o(.
T&e s&ares of %&e *orora%ion are *onsi(ere( as *ai%al asse%s '&ere %&e
&ol(er is no% a (ealer in se*"ri%ies. 9&ere %&e s&ares are lis%e( an( %ra(e( in
45
%&e s%o*2 e5*&an4e %&e &ol(er s&all -e s"-.e*% %o %&e %ransa*%ion %a5/ of Q of 1N
of %&e 4ross sellin4 ri*e/ '&i*& is in lie" of in*o)e %a5.
Cai%al asse%s s&all refer %o all real roer%ies &el( -y a %a5ayer/ '&e%&er
or no% *onne*%e( 'i%& &is %ra(e or -"siness/ an( '&i*& are no% in*l"(e( a)on4
%&e real roer%ies *onsi(ere( as or(inary asse%s. ASe*. 2.a/ 6e!. 6e4s. No. J?
2001B
BAR: 66. T&e %er) *ai%al asse%s )eans roer%y &el( -y %&e
%a5ayer A'&e%&er or no% *onne*%e( 'i%& &is %ra(e or -"sinessB/ #UT DOES NOT
+NC@UDED
a. S%o*2 in %ra(e of %&e %a5ayer/ or
-. O%&er roer%y of a 2in( '&i*& 'o"l( roerly -e in*l"(e( in %&e
in!en%ory of %&e %a5ayer if on &an( a% %&e *lose of %&e %a5a-le year/ or
*. Proer%y &el( -y %&e %a5ayer ri)arily for sale %o *"s%o)ers in %&e
or(inary *o"rse of &is %ra(e or -"siness/ or
(. Proer%y "se( in %&e %ra(e or -"siness/ of a *&ara*%er '&i*& is s"-.e*% %o %&e
allo'an*e for (ere*ia%ionE or real roer%y "se( in %&e %ra(e or -"siness of %&e
%a5ayer. ISe*. 13 AAB A1B/ N+6C of 133J/ *ai%ali8e( 'or(s/ n")-erin4 an(
arran4e)en% s"lie(E Se*. 2.a/ 6e!. 6e4s. No. J?2001K

T&e s%a%"%ory (efini%ion of *ai%al asse%s is ne4a%i!e in na%"re. +f %&e asse%
is no% a)on4 %&e e5*e%ions/ i% is a *ai%al asse%E *on!ersely/ asse%s fallin4 'i%&in
%&e e5*e%ions are or(inary asse%s. An( ne*essarily/ any 4ain res"l%in4 fro) %&e
sale or e5*&an4e of an asse% is a *ai%al 4ain or an or(inary 4ain (een(in4 on
%&e 2in( of asse% in!ol!e( in %&e %ransa*%ion. (Cala%an, v. Co&&i%%ioner of
$nternal Revenue, et al= 144 'CRA **4, **9/*)0
E5a)les of *ai%al asse%sD
a. S%o*2 an( se*"ri%ies &el( -y %a5ayers o%&er %&an (ealers in se*"ri%iesE
-. 0e'elry no% "se( for %ra(e an( -"sinessE
*. 6esi(en%ial &o"ses an( lan(s o'ne( an( "se( as s"*&E
(. A"%o)o-iles no% "se( in %ra(e an( -"sinessE
e. Pain%in4s/ s*"l%"res/ s%a) *olle*%ions/ o-.e*%s of ar%s '&i*& are no%
"se( in %ra(e or -"sinessE
f. +n&eri%e( lar4e %ra*%s of a4ri*"l%"ral lan( '&i*& 'ere s"-(i!i(e(
"rs"an% %o %&e 4o!ern)en% )an(a%e "n(er lan( refor)/ %&en sol( %o %enan%s.
(Ro8a% v. Court of 5a8 Appeal%, et". !/24043, April 2*, 19*+
4. 6eal roer%y "se( -y an e5e)% *orora%ion in i%s e5e)%
oera%ions/ s"*& as a *orora%ion in*l"(e( in %&e en")era%ion of Se*%ion 10 of
%&e Co(e/ s&all no% -e *onsi(ere( "se( for -"siness "roses/ an( %&erefore
*onsi(ere( as *ai%al asse%. Alas% sen%en*e/ 1
r(
ar./ Se*. 1.-/ 6e!. 6e4s. No. J?
2001B
&. 6eal roer%y/ '&e%&er sin4le (e%a*&e(/ %o'n&o"se/ or *on(o)ini")
"ni%/ no% "se( in %ra(e or -"siness as e!i(en*e( -y a *er%ifi*a%ion fro) %&e
#aran4ay C&air)an or fro) %&e &ea( of a()inis%ra%ion/ in *ase of *on(o)ini")
"ni%/ %o'n&o"se or aar%)en%/ an( as !ali(a%e( fro) %&e e5is%in4 a!aila-le
re*or(s of %&e #"rea" of +n%ernal 6e!en"e/ o'ne( -y an in(i!i("al en4a4e( in
-"siness/ s&all -e %rea%e( as *ai%al asse%. Alas% ar./ Se*. 1.-./ 6e!. 6e4s. No.
J?2001B
Or(inary asse%s s&all refer %o all real roer%ies se*ifi*ally e5*l"(e( fro)
%&e (efini%ion of *ai%al asse%s/ na)elyD
a. S%o*2 in %ra(e of a %a5ayer or o%&er real roer%y of a 2in( '&i*&
'o"l( roerly -e in*l"(e( in %&e in!en%ory of a %a5ayer if on &an( a% %&e *lose
of %&e %a5a-le yearE or
-. 6eal roer%y &el( -y %&e %a5ayer ri)arily for sale %o *"s%o)ers in
%&e or(inary *o"rse of &is %ra(e or -"sinessE or
46
*. 6eal roer%y "se( in %ra(e or -"siness Ai.e. -"il(in4s an(Mor
i)ro!e)en%sB/ of a *&ara*%er '&i*& is s"-.e*% %o %&e allo'an*e for (ere*ia%ionE
or
(. 6eal roer%y "se( in %ra(e or -"siness of %&e %a5ayer. ASe*. 2. -/
6e!. 6e4s. No. J?2001B
6eal roer%ies a*,"ire( -y -an2s %&ro"4& fore*los"re sales are
*onsi(ere( %&eir or(inary asse%s. :o'e!er/ -an2s s&all no% -e *onsi(ere( as
&a-i%"ally en4a4e( in %&e real es%a%e -"siness for "roses of (e%er)inin4 %&e
ali*a-le ra%e of 'i%&&ol(in4 %a5. ASe*. 2. -/ 6e!. 6e4s. No. J?2001B
A roer%y "r*&ase( for f"%"re "se in %&e -"siness/ e!en %&o"4& %&is
"rose is la%er %&'ar%e( -y *ir*")s%an*es -eyon( %&e %a5ayers *on%rol/ (oes
no% lose i%s *&ara*%er as an or(inary asse%. Nor (oes a )ere (is*on%in"an*e of
%&e a*%i!e "se of %&e roer%y *&an4e i%s *&ara*%er re!io"sly es%a-lis&e( as a
-"siness roer%y. Alas% sen%en*e/ Se*. 1.a.4/ 6e!. 6e4s. No. J?2001B
E5a)les of or(inary asse%s &en*e no% *ai%al asse%sD
a. T&e )a*&inery an( e,"i)en% of a )an"fa*%"rin4 *on*ern s"-.e*% %o
(ere*ia%ionE
-. T&e %ra*%ors/ %railers an( %r"*2s of a &a"lin4 *o)anyE
*. T&e *on(o)ini") -"il(in4 o'ne( -y a real%y *o)any %&e "ni%s of
'&i*& are for ren% or for saleE
(. T&e 'oo(/ ain%/ !arnis&/ nails/ 4l"e/ e%*. '&i*& are %&e ra' )a%erials
of a f"rni%"re fa*%oryE
e. +n&eri%e( ar*els of lan( of s"-s%an%ial areas lo*a%e( in %&e &ear% of
Me%ro Manila/ '&i*& 'ere s"-(i!i(e( in%o s)aller lo%s %&en sol( on ins%all)en%
-asis af%er in%ro("*in4 *o)ara%i!ely !al"a-le i)ro!e)en%s no% for %&e "rose
of si)ly li,"i(a%in4 %&e es%a%e -"% %o )a2e %&e) )ore salea-le E %&e
e)loy)en% of an a%%orney?in?fa*% for %&e "rose of (e!eloin4/ )ana4in4/
a()inis%erin4 an( sellin4 %&e lo%sE sales )a(e 'i%& fre,"en*y an( *on%in"i%yE
ann"al sales in*o)e fro) %&e sales 'as *onsi(era-leE an( %&e &eir 'as no% a
s%ran4er %o %&e real es%a%e -"siness. (5ua,on, 1r. v. !in3a., 4+ 'CRA 1)0
f. +n&eri%e( a4ri*"l%"ral roer%y i)ro!e( -y in%ro("*%ion of 4oo( roa(s/
*on*re%e 4"%%ers/ (raina4e an( li4&%in4 sys%e)s *on!er%s %&e roer%y %o an
or(inary asse%. T&e roer%y for)s ar% of %&e s%o*2 in %ra(e of %&e o'ner/ &en*e
an or(inary asse%. T&is is so/ as %&e o'ner is no' en4a4e( in %&e -"siness of
s"-(i!i(in4 real es%a%e. ACala%an, v. Co&&i%%ioner of $nternal Revenue, 144
'CRA at p. *)2
BAR: 67. Cai%al asse%s (is%in4"is&e( fro) or(inary asse%sD
a. Cai%al asse%s are no% "se( in %ra(e or -"siness '&ile or(inary ase%s
are "se( in %ra(e or -"siness.
-. @osses fro) *ai%al asse%s are allo'e( %o -e (e("*%e( only fro)
*ai%al 4ains '&ile fro) *ai%al 4ains (eri!e( fro) (isosi%ion of ersonal
roer%y o%&er %&an s&ares of s%o*2 )ay -e (e("*%e( or(inary losses res"l%in4
fro) losses in*"rre( in or(inary asse% %ransa*%ions.
*. T&e *on*e% of *ai%al asse% %ransa*%ions )ay in*l"(e %&e &ol(in4
erio( '&ile %&is is no% so 'i%& or(inary asse% %ransa*%ions.
BAR: 68. +% is ro&i-i%e( %o (e("*% *ai%al losses fro) or(inary 4ains in
or(er %o re!en% %a5 lea2a4es arisin4 fro) %&e s&if%in4 of (e("*%ions fro) 4ains
s"-.e*% %o lo'er %a5 ra%esAs"*& as *ai%al 4ainsB/ %o %&ose s"-.e*% %o &i4&er %a5
ra%es As"*& as or(inary 4ainsB.
Ta5 %rea%)en% of real roer%ies %&a% &a!e -een %ransferre(. 6eal
roer%ies *lassifie( as *ai%al or or(inary asse% in %&e &an(s of %&e
sellerM%ransferor )ay *&an4e %&eir *&ara*%er in %&e &an(s of %&e -"yerM%ransferee.
T&e *lassifi*a%ion of s"*& roer%y in %&e &an(s of %&e -"yerM%ransferee s&all -e
(e%er)ine( in a**or(an*e 'i%& %&e follo'in4 r"lesD
47
a. 6eal roer%y %ransferre( %&ro"4& s"**ession or (ona%ion %o %&e &eir or
(onee '&o is no% en4a4e( in %&e real es%a%e -"siness 'i%& rese*% %o %&e real
roer%y in&eri%e( or (ona%e(/ an( '&o (oes no% s"-se,"en%ly "se s"*& roer%y
in %ra(e or -"siness/ s&all -e *onsi(ere( as a *ai%al asse% in %&e &an(s of %&e
&eir or (onee.
-. 6eal roer%y re*ei!e( as (i!i(en( -y s%o*2&ol(ers '&o are no%
en4a4e( in %&e real es%a%e -"siness an( '&o no% s"-se,"en%ly "se s"*& real
roer%y in %ra(e or -"siness s&all -e %rea%e( as *ai%al asse%s in %&e &an(s of
%&e re*iien% e!en if %&e *orora%ion '&i*& (e*lare( %&e real roer%y (i!i(en( is
en4a4e( in real es%a%e -"siness.
*. T&e real roer%y re*ei!e( in an e5*&an4e s&all -e %rea%e( as or(inary
asse% in %&e &an(s of %&e %ransferee in %&e *ase of a %a5?free e5*&an4e -y
%a5ayer no% en4a4e( in real es%a%e -"siness %o a %a5ayer '&o is en4a4e( in
real es%a%e -"siness/ or %o a %a5ayer '&o/ e!en if no% en4a4e( in real es%a%e
-"siness/ 'ill "se in -"siness %&e roer%y re*ei!e( in %&e e5*&an4e. ASe*. 1.f./
6e!. 6e4s. No. J?2001B
<a*%ors *onsi(ere( as &elf"l 4"i(es in (e%er)inin4 '&e%&er asse% is
or(inary or *ai%alD
a. T&e "rose for '&i*& %&e roer%y 'as ini%ially a*,"ire(E
-. T&e "rose for '&i*& %&e roer%y 'as s"-se,"en%ly &el(E
*. T&e e5%en% %o '&i*& %&e i)ro!e)en%s/ if any/ 'ere )a(e -y %&e
%a5ayerE
(. T&e fre,"en*y/ n")-er an( *on%in"i%y of salesE
e. T&e e5%en% an( na%"re of %&e %ransa*%ions in!ol!e(E
f. T&e or(inary -"siness of %&e %a5ayerE
4. T&e e5%en% of a(!er%isin4/ ro)o%ion/ or o%&er a*%i!i%ies "se( in
soli*i%in4 -"yers for %&e sale of %&e roer%yE
&. T&e lis%in4 of roer%y/ 'i%& -ro2ersE an(
i. T&e "rose for '&i*& %&e roer%y 'as &el( a% %&e %i)e of sale.
I2lu&ba, et al. v. 5#e ?onorable Co&&i%%ioner of $nternal Revenue, C5A Ca%e
No. 4103, Au3u%t 1*, 199*= Dlar;ow%;i, 5C0 19*4/32+, affir&e. 3+4 :. 2. (CA/
), 19*)BK
.. 6eal roer%ies a*,"ire( -y -an2s %&ro"4& fore*los"re sales are
*onsi(ere( as %&eir or(inary asse%s. :o'e!er/ -an2s s&all no% -e *onsi(ere( as
&a-i%"ally en4a4e( in %&e real es%a%e -"siness for "roses of (e%er)inin4 %&e
ali*a%ion ra%e of 'i%&&ol(in4 %a5 i)ose( "n(er 6e!en"e 6e4"la%ions. Alas%
ar./ Se*. 2.-/ 6e!. 6e4s. No. J?2001B
Mone%ary *onsi(era%ion or %&e resen*e or a-sen*e of rofi% in %&e
oera%ion of %&e roer%y is no% si4nifi*an% in %&e *&ara*%eri8a%ion of %&e roer%y.
So lon4 as %&e roer%y is or &as -een "se( for -"siness "roses/ '&e%&er for
%&e -enefi% of %&e o'ner or nay of i%s )e)-ers or s%o*2&ol(ers/ i% s&all -e
*onsi(ere( as an or(inary asse%. A1
s%
an( 2
n(
sen%en*es/ 1
r(
ar./ Se*. 1.-./ 6e!.
6e4s. No. J?2001B
Ta5ayers en4a4e( in %&e real es%a%e -"siness s&all refer *olle*%i!ely %o
real es%a%e (ealers/ real es%a%e (e!eloers/ an(Mor real es%a%e lessors. ASe*. 2.4/
6e!. 6e4s. No. J?2001B
T&e %er) %a5ayers no% en4a4e( in %&e real es%a%e -"siness s&all refer %o
ersons o%&er %&an real es%a%e (ealers/ real es%a%e (e!eloers an(Mor real es%a%e
lessors. A %a5ayer '&ose ri)ary "rose of en4a4in4 in -"siness/ or '&ose
Ar%i*les of +n*orora%ion s%a%es %&a% i%s ri)ary "rose is %o en4a4e in %&e real
es%a%e -"siness s&all -e (ee)e( %o -een en4a4e( in %&e real es%a%e -"siness.
ASe*. 2.4/ 6e!. 6e4s. No. J?2001B

T&e %a5 is i)ose( "on *ai%al 4ains res")e( %o &a!e -een reali8e(
fro) %&e sale/ e5*&an4e/ or o%&er (isosi%ion of real roer%y lo*a%e( in %&e
48
P&iliines/ *lassifie( as *ai%al asse%s. ISe*. 24 ADB A1RB/ N+6C of 133JK
6e!en"e 6e4"la%ions No. J?2001 &as (efine( real roer%y as &a!in4 %&e sa)e
)eanin4 a%%ri-"%e( %o %&a% %er) "n(er Ar%i*le 41C of 6e"-li* A*% No. 17H/
o%&er'ise 2no'n as %&e SCivil Co.e of t#e P#ilippine%.F ASe*. 2.*/ 6e!. 6e4s. No.
J?2001B
Proer%y )"s% -e lo*a%e( in %&e P&iliines for "roses of *ai%al 4ains
%a5a%ion. . ISe*. 24 ADB A1B/ N+6C of 133JK
Ta5 %rea%)en% '&ere roer%y is no% lo*a%e( in %&e P&iliines. =ains
reali8e( fro) %&e sale/ e5*&an4e/ or o%&er (isosi%ion of real roer%y/ no%
lo*a%e( in %&e P&iliines/ re4ar(less of *lassifi*a%ion -y resi(en% *i%i8ens or
(o)es%i* *orora%ions s&all -e s"-.e*% %o or(inary in*o)e %a5a%ion. I1
s%
sen%en*e/ Se*. 4.f./ 6e!. 6e4s. No. J?2001E Se*. 24 AAB A1B/ or Se*. 2J AAB or AEB/
all of %&e N+6C of 133JK
S"*& in*o)e )ay -e e5e)% in %&e *ase of non?resi(en% *i%i8ens/ alien
in(i!i("als an( forei4n *orora%ions. I1
s%
sen%en*e/ Se*. 4.f./ 6e!. 6e4s. No. J?
2001E Se*. 21 A#B/ ADB an( A<B of %&e N+6C of 133JK
BAR 69. Transa*%ions *o!ere( -y %&e res")e( *ai%al 4ains %a5 on
real roer%yD
a. sale/
-. e5*&an4e/
*. or o%&er (isosi%ion/ in*l"(in4 pa"to .e retro sales an( o%&er for)s of
*on(i%ional sales. ISe*. 24 ADB A1B/ N+6C of 133J/ n")-erin4 an( arran4e)en%
s"lie(K
Sale/ e5*&an4e/ or o%&er (isosi%ion in*l"(es %a2in4 -y %&e 4o!ern)en%
%&ro"4& *on(e)na%ion ro*ee(in4s. (Gutierre, v. Court of 5a8 Appeal%, et al.,
101 P#il. )13= Gon,ale% v. Court of 5a8 Appeal%, et al., 121 P#il. +*1
Transfers %&a% )ay *&an4e %&e *&ara*%er of %&e *lassifi*a%ion of real
roer%ies in%o or(inary or *ai%alD
a. s"**ession or (ona%ionE
-. a (i!i(en( (e*lara%ionE an(
*. e5*&an4e.
66eal roer%y %ransferre( %&ro"4& s"**ession or (ona%ion %o %&e &eir or
(onor '&o is no% en4a4e( in %&e real es%a%e -"siness 'i%& rese*% %o %&e real
roer%y in&eri%e( or (ona%e(/ an( '&o (oes no% s"-se,"en%ly "se s"*& roer%y
in %ra(e or -"siness/ s&all -e *onsi(ere( as a *ai%al asse% in %&e &an(s of %&e
&eir or (onee. ASe*. 1.f.1/ 6e!. 6e4s. No. J?2001B
6eal roer%y re*ei!e( as (i!i(en(s -y s%o*2&ol(ers '&o are no%
en4a4e( in %&e real es%a%e -"siness an( '&o (o no% s"-se,"en%ly "se s"*& real
roer%y in %ra(e or -"siness s&all -e %rea%e( as *ai%al asse%s in %&e &an(s of
%&e re*iien%s e!en if %&e *orora%ion '&i*& (e*lare( %&e real roer%y (i!i(en(
is en4a4e( in real es%a%e -"siness. ASe*. 1.f.2/ 6e!. 6e4s. No. J?2001/
ara&rasin4 s"lie(B
T&e real roer%y re*ei!e( in an e5*&an4e s&all -e %rea%e( as or(inary
asse% in %&e &an(s of %&e %ransferee in %&e *ase of a %a5?free e5*&an4e -y
%a5ayer no% en4a4e( in real es%a%e -"siness %o a %a5ayer '&o is en4a4e( in
real es%a%e -"siness/ or %o a %a5ayer '&o/ e!en if no% en4a4e( in real es%a%e
-"siness/ 'ill "se in -"siness %&e roer%y re*ei!e( in %&e e5*&an4e. ASe*.
1.f.1/ 6e!. 6e4s. No. J?2001/ ara&rasin4 s"lie(B
+n %&e *ase of in!ol"n%ary %ransfers of real roer%ies/ in*l"(in4
e5roria%ion or fore*los"re sale/ %&e in!ol"n%ariness of s"*& sale s&all &a!e no
49
effe*% on %&e *lassifi*a%ion of s"*& real roer%y in %&e &an(s of %&e in!ol"n%ary
seller/ ei%&er as *ai%al asse% or or(inary asse% as %&e *ase )ay -e. ASe*. 1.4/
6e!. 6e4s. No. J?2001B
+n *ase %&e )or%4a4or e5er*ises &is ri4&% of re(e)%ion 'i%&in one A1B
year fro) %&e iss"an*e of %&e *er%ifi*a%e of sale/ in a fore*los"re of )or%4a4e
sale of real roer%y/ no *ai%al 4ains %a5 s&all -e i)ose( -e*a"se no *ai%al
4ains &as -een (eri!e( -y %&e )or%4a4or an( no sale or %ransfer of real roer%y
'as reali8e(. ISe*. 1 A1B/ 6e!. 6e4s. No. 4?33K
+n *ase of non?re(e)%ion of %&e roer%y sol( "on a fore*los"re of
)or%4a4e sale/ %&e res")e( *ai%al 4ains %a5 s&all -e i)ose(/ -ase( on %&e
-i( ri*e of %&e &i4&es% -i((er -"% only "on %&e e5ira%ion of %&e one year
erio( of re(e)%ion ro!i(e( for "n(er Se*. H of A*% No. 111C/ as a)en(e( -y
A*% No. 4117/ an( s&all -e ai( 'i%&in %&ir%y A10B (ays fro) %&e e5ira%ion of %&e
sai( one?year re(e)%ion erio(. ISe*. 1 A2B/ 6e!. 6e4s. No. 4?33K

6eal roer%ies a*,"ire( -y -an2s %&ro"4& fore*los"re sales are
*onsi(ere( as %&eir or(inary asse%s. :o'e!er/ -an2s s&all no% -e *onsi(ere( as
&a-i%"ally en4a4e( in %&e real es%a%e -"siness for "roses of (e%er)inin4 %&e
ali*a%ion ra%e of 'i%&&ol(in4 %a5 i)ose( "n(er 6e!en"e 6e4"la%ions. Alas%
ar./ Se*. 2.-/ 6e!. 6e4s. No. J?2001B
BAR: 70. T&e -asis for %&e final res")e( *ai%al 4ains %a5 of si5 er
*en% AHNB is '&i*&e!er is %&e &i4&er of %&e
a. 4ross sellin4 ri*e/ or
-. %&e *"rren% fair )ar2e% !al"e as (e%er)ine( -elo'D
1B %&e fair )ar2e% !al"e or real roer%ies lo*a%e( in ea*& 8one or
area as (e%er)ine( -y %&e Co))issioner of +n%ernal 6e!en"e af%er
*ons"l%a%ion 'i%& *o)e%en% araisers -o%& fro) %&e ri!a%e an( "-li*
se*%orsE or
2B %&e fair )ar2e% !al"e as s&o'n in %&e s*&e("le of !al"es of %&e
Pro!in*ial an( Ci%y Assessors. ISe*. 24 ADB A1B in rela%ion %o Se*. H AEB/
-o%& of %&e N+6C of 133JK
:ol(in4 erio( no% alie( %o %&e %a5a%ion of %&e res")e( *ai%al 4ains
(eri!e( fro) %&e sale of real roer%y *onsi(ere( as *ai%al asse%s.
T&e %a5 lia-ili%y/ of in(i!i("al %a5ayers Ano% *orora%eB/ if any/ on 4ains
fro) sales or o%&er (isosi%ions of real roer%y/ *lassifie( as *ai%al asse%s/ %o
%&e 4o!ern)en% or any of i%s oli%i*al s"-(i!isions or a4en*ies or %o 4o!ern)en%
o'ne( or *on%rolle( *orora%ions s&all -e (e%er)ine(/ a% %&e o%ion of %&e
%a5ayer/ -y in*l"(in4 %&e ro*ee(s as ar% of 4ross in*o)e %o -e s"-.e*%e( %o
%&e allo'a-le (e("*%ions an(Mor ersonal an( a((i%ional e5e)%ions/ %&en %o %&e
s*&e("lar %a5 ISe*. 24 ADB A1B/ in rela%ion %o Se*. 24 AAB A1B/ -o%& of %&e N+6C of
133JK or %&e final res")e( *ai%al 4ains %a5 of si5 er*en% AHNB. ISe*. 24 ADB
A1B in rela%ion %o Se*. H AEB/ -o%& of %&e N+6C of 133JK
T&e in%eres% a% %&e le4al ra%e on %&e !al"e of e5roria%e( lan( s&o"l( -e
%a5e( as or(inary in*o)e/ an( no% as *ai%al 4ains. (Gon,ale% v. Court of 5a8
Appeal%, et al., 121 P#il. +*1
T&e seller of %&e real roer%y/ *lassifie( as a *ai%al asse%/ ays %&e
res")e( *ai%al 4ains %a5 '&e%&erD
a. an in(i!i("al ISe*. 24 ADB A1B/ N+6C of 133JKE
1B Ci%i8en/ '&e%&er resi(en% or no% I$bi..KE
2B 6esi(en% alien I$bi..KE
50
1B Nonresi(en% alien en4a4e( in %ra(e or -"siness in %&e
P&iliines ISe*. 2C AAB A1B in rela%ion %o Se*. 24 ADB A1B/ -o%& of %&e N+6C
of 133JKE
4B Nonresi(en% alien no% en4a4e( in %ra(e or -"siness in %&e
P&iliines ISe*. 2C A#B in rela%ion %o Se*. 24 ADB A1B/ -o%& of %&e N+6C of
133JKE
-. an es%a%e or %r"s% A$bi..BE
*. a (o)es%i* *orora%ion. ISe*. 2J ADB ACB/ N+6C of 133JK

T&e ro*ee(s of sale of real roer%y/ *lassifie( as *ai%al asse%s/ -y
forei4n *orora%ions s&all -e s"-.e*% %o or(inary in*o)e %a5a%ion of '&i*&e!er is
&i4&er -e%'een %&e re("*e( ra%e of 12N an( %&e )ini)") *orora%e in*o)e %a5
ISe*. 27 AAB A1B A2B in rela%ion %o Se*. 2J AEB/ -o%& of %&e N+6C of 133JK
+n %&e ins%an*es '&ere non?resi(en% aliens are ,"alifie( %o o'n real
roer%y in %&e P&iliines Ali2e *on(o)ini") "ni%s/ or -"il(in4s/ or o%&er
i))o!a-les as (efine( "n(er Ar%. 41C of 6e. A*% No. 17H/ %&e Ci!il Co(e of %&e
P&iliinesB/ an( %&ese are *onsi(ere( as *ai%al in *&ara*%er/ %&ey are %o -e
s"-.e*% %o %a5 in %&e sa)e )anner as *i%i8ens an( resi(en% aliens. ISe*. 2C AAB
A1B an( Se*. 2C A#B in rela%ion %o Se*. 24 ADB/ all of %&e N+6C of 133JK
BAR: 71. E5*e%e( fro) %&e ay)en% of %&e res")e( *ai%al 4ains %a5
are %&ose res")e( %o &a!e -een reali8e( fro) %&e (isosi%ion -y na%"ral
ersons of %&eir rin*ial la*e of resi(en*e
a. %&e ro*ee(s of '&i*& is f"lly "%ili8e( in a*,"irin4 or *ons%r"*%in4 a
ne' rin*ial resi(en*eE
-. 'i%&in ei4&%een A17B *alen(ar )on%&s fro) %&e (a%e of sale or
(isosi%ion
*. %&e #+6 Co))issioner s&all &a!e -een ("ly no%ifie( -y %&e %a5ayer
'i%&in %&ir%y A10B (ays fro) %&e (a%e of sale or (isosi%ion %&ro"4& a res*ri-e(
re%"rn of &is in%en%ion %o a!ail of %&e %a5 e5e)%ionE an(
(. %&e sai( %a5 e5e)%ion *an only -e a!aile( of on*e e!ery %en A10B
years. ISe*. 24 ADB A2B/ N+6C of 133JK
T&e &is%ori*al *os% or a(."s%e( -asis of %&e real roer%y sol( or (isose(
s&all -e *arrie( o!er%o %&e ne' rin*ial resi(en*e &"il% or a*,"ire(/ ro!i(e(
%&a% if %&ere is no f"ll "%ili8a%ion of %&e ro*ee(s of sale or (isosi%ion/ %&e or%ion
of %&e 4ain res")e( %o &a!e -een reali8e( fro) %&e sale or (isosi%ion s&all -e
s"-.e*% %o *ai%al 4ains %a5. ISe*. 24 ADB A2B/ N+6C of 133JK
Ne% loss *arry?o!er )eans %&e (e("*%ion fro) ne% *ai%al 4ains of a
s"**ee(in4 year %&e ne% *ai%al loss s"ffere( ("rin4 %&e rior year. Ne%
oera%in4 loss *arry?o!er is %&e (e("*%ion fro) 4ross in*o)e for %&e ne5% %&ree
A1B *onse*"%i!e %a5a-le years follo'in4 %&e year of s"*& loss/ %&e e5*ess of
allo'a-le (e("*%ion o!er %&e 4ross in*o)e. ASe*. 13 IDK/ N+6C of 133JB
Dis%in*%ions -e%'een ne% loss *arry?o!er an( ne% oera%in4 loss *arry?
o!er. So"r*eD T&e so"r*e of ne% loss *arry?o!er are *ai%al losses only 9:+@E
%&e so"r*e of ne% oera%in4 loss *arry?o!er are fro) %&e or(inary %ra(e an(
-"siness of %&e %a5ayer. 9&o )ay en.oy %&e *arry?o!erD Only %a5ayers o%&er
%&an *orora%ions )ay en.oy ne% loss *arry?o!er 9:+@E only *orora%ions )ay
en.oy %&e ne% oera%in4 loss *arry?o!er. ASe*. 13 IDK/ N+6C of 133JB
Any %a5ayer/ o%&er %&an a *orora%ion Ain(i!i("als in*l"(in4 %r"s%s an(
es%a%esB/ '&o s"s%ains in any %a5a-le year a ne% *ai%al loss fro) *ai%al
%ransa*%ions in!ol!in4 *ai%al asse%s Ao%&er %&an real roer%y or s&ares of s%o*2
no% lis%e( or %ra(e( in %&e s%o*2 e5*&an4eB/ is allo'e( %o %rea% ("rin4 %&e
s"**ee(in4 year s"*& ne% *ai%al loss as a loss fro) %&e sale or e5*&an4e of a
*ai%al asse% Ao%&er %&an real roer%y or s&ares of s%o*2 no% lis%e( an( %ra(e( in
51
%&e s%o*2 e5*&an4eB/ &el( for )ore %&an %'el!e )on%&s. ASe*. 13 IDK/ N+6C of
133JB

BAR: 72. T&e e,"i%y in!es%)en% -y a -an2 in ano%&er *orora%ion is
*ai%al in *&ara*%er/ %&e loss of '&i*& *o"l( -e (e("*%i-le only fro) *ai%al
4ains/ an( no% fro) any o%&er in*o)e of %&e %a5ayer. (C#ina -an;in3
Corporation v. Court of Appeal%, et al., G.R. No. 1240+, 1uly 19, 2000
A *ai%al 4ain or a *ai%al loss nor)ally re,"ires %&e *on*"rren*e of %'o
*on(i%ions for i% %o res"l%D
a. T&ere is a sale or e5*&an4eE an(
-. T&e %&in4 sol( or e5*&an4e( is a *ai%al asse%.
9&en se*"ri%ies -e*o)e 'or%&less %&ere is s%ri*%ly no sale or e5*&an4e
-"% %&e la' (ee)s %&e loss any'ay %o -e a loss fro) %&e sale or e5*&an4e of
*ai%al asse%s. (C#ina -an;in3 Corporation v. Court of Appeal%, et al., G.R. No.
1240+, 1uly 19, 2000
Se*"ri%ies/ (efine( for (e("*%i-ili%y of -a( (e-%s are s&ares of s%o*2 in a
*orora%ion an( ri4&%s %o s"-s*ri-e for or %o re*ei!e s"*& s&ares. T&e %er)
in*l"(es -on(s/ (e-en%"res/ no%es or *er%ifi*a%es/ or o%&er e!i(en*e of
in(e-%e(ness/ iss"e( -y any *orora%ion/ in*l"(in4 %&ose iss"e( -y a
4o!ern)en% or oli%i*al s"-(i!ision %&ereof/ 'i%& in%eres% *o"ons or in re4is%ere(
for). ASe*. 2.-/ 6e!. 6e4s. No. C?33B
=eneral r"leD +f se*"ri%ies/ &el( as *ai%al asse%/ are as*er%aine( %o -e
'or%&less an( *&ar4e( off 'i%&in %&e %a5a-le year/ %&e loss res"l%in4 %&erefro)
s&all -e *onsi(ere( as a loss fro) %&e sale or e5*&an4e of *ai%al asse% )a(e
on %&e las% (ay of s"*& %a5a-le year. T&e %a5ayer/ &o'e!er/ &as %o ro!e
%&ro"4& *lear an( *on!in*in4 e!i(en*e %&a% %&e se*"ri%ies are in fa*% 'or%&less.
ASe*. C/ 6e!. 6e4s. No. C?33B
T&e a-o!e r"le/ &o'e!er/ is no% %r"e in %&e *ase of -an2s or %r"s%
*o)anies in*orora%e( "n(er %&e la's of %&e P&iliines/ a s"-s%an%ial ar% of
'&ose -"siness is %&e re*ei% of (eosi%s. ASe*. C/ 6e!. 6e4s. No. C?33B
BAR: 73. Non?s%o*2 non rofi% ins%i%"%ions are e5e)% fro) in*o)e
%a5a%ion only on %&eir in*o)e fro) ri)ary so"r*es no% on %&eir in*o)e fro)
se*on(ary so"r*es irrese*%i!e of "%ili8a%ion.
T&"s/ reli4io"s so*ie%ies are e5e)% only fro) in*o)e res"l%in4 fro) %&eir
reli4io"s a*%i!i%ies s"*& as *olle*%ion la%es/ -a%is)al/ )arria4es an( (ea%&
fees -"% no% fro) %&eir in*o)e 4enera%in4 ren%al roer%ies.
T&e r"le is (ifferen% 'i%& rese*% %o non?rofi%/ non?s%o*2 e("*a%ional
ins%i%"%ions '&i*& (e!o%e %&eir re!en"es a*%"ally/ /(ire*%ly an( e5*l"si!ely %o
e("*a%ional "roses. T&e *ons%i%"%ional e5e)%ion (oes no% (is%in4"is& 'i%&
rese*% %o so"r*e an( no% %o ori4in &en*e %&e li)i%a%ion in Se*. 10 of %&e N+6C of
133J (oes no% aly.
TRAN7FER TAE7
BAR: 74. T&e 4ross es%a%e for "roses of es%a%e %a5a%ion of <iliino
*i%i8ens/ '&e%&er resi(en%s or nonresi(en%s an( resi(en% alien in*l"(es %&e !al"e
a% %&e %i)e of &is (ea%& of all &is real roer%y/ '&ere!er si%"a%e(/ ersonal
roer%y/ '&e%&er %an4i-le/ in%an4i-le or )i5e(/ '&ere!er si%"a%e(/ %o %&e e5%en%
of %&e in%eres% e5is%in4 %&erein of %&e (e*e(en% a% %&e %i)e of &is (ea%&.
BAR: 75. T&e 4ross es%a%e for "roses of es%a%e %a5a%ion of non?
resi(en% aliens in*l"(es %&e !al"e a% %&e %i)e of &is (ea%& of all %&e real roer%y
si%"a%e( in %&e P&iliines/ ersonal roer%y '&e%&er %an4i-le/ in%an4i-le or
52
)i5e(/ si%"a%e( in %&e P&iliines/ %o %&e e5%en% of %&e in%eres% %&erein of %&e
(e*e(en% a% %&e %i)e of &is (ea%&.
BAR: 76. @ife ins"ran*e ro*ee(s in*l"(e( as ar% of %&e 4ross es%a%e
of a (e*e(en%D
a. T&e ins"ran*e 'as %a2en -y %&e (e*e(en% on &is o'n life an( %&e
-enefi*iary
1B is &i)self/ &is es%a%e/ &is e5e*"%or or a()inis%ra%or.
2B irrese*%i!e of '&e%&er %&e (esi4na%ion is re!o*a-le or
irre!o*a-le.
-. T&e ins"ran*e 'as %a2en -y %&e (e*e(en% on &is o'n life an( %&e
(esi4na%e( -enefi*iary is no% &i)self/ &is es%a%e/ &is e5e*"%or or a()inis%ra%or
As"*& as &is 'ife/ *&il(/ aren%/ or o%&er rela%i!e/ frien(/ e%*.B -"% %&e (esi4na%ion
is re!o*a-le.
*. T&e ins"ran*e 'as %a2en -y one '&o is no% %&e (e*e(en% As"*& as an
e)loyer/ a rela%i!e/ e%*.B/ an( %&e (esi4na%e( -enefi*iary is %&e (e*e(en%/ &is
es%a%e/ a()inis%ra%or or e5e*"%or/ '&e%&er %&e (esi4na%ion is re!o*a-le or
irre!o*a-le.
BAR: 77. @ife ins"ran*e ro*ee(s no% in*l"(e( as ar% of %&e 4ross
es%a%e of a (e*e(en%D
a. T&e ins"ran*e 'as %a2en -y %&e (e*e(en% on &is o'n life an( %&e
(esi4na%e( -enefi*iary is no% &i)self/ &is es%a%e/ &is e5e*"%or or a()inis%ra%or
As"*& as &is 'ife/ *&il(/ aren%/ or o%&er rela%i!e/ frien(/ e%*.B -"% %&e (esi4na%ion
is irre!o*a-le.
-. T&e ins"ran*e 'as %a2en -y one '&o is no% %&e (e*e(en% As"*& as an
e)loyer/ a rela%i!e/ e%*.B/ an( %&e (esi4na%e( -enefi*iary is no% %&e (e*e(en%/
&is es%a%e/ a()inis%ra%or or e5e*"%or/ '&e%&er %&e (esi4na%ion is re!o*a-le or
irre!o*a-le.
+%e)s (e("*%i-le fro) %&e 4ross es%a%e of a resi(en% or nonresi(en%
<iliino (e*e(en% or resi(en% alien (e*e(en%D
a. E5enses/ losses/ *lai)s/ in(e-%e(ness an( %a5esE
-. Proer%y re!io"sly %a5e(E
*. Transfers for "-li* "seE
(. T&e <a)ily :o)e " %o a !al"e no% e5*ee(in4 P1 )illionE
e. S%an(ar( (e("*%ion of P1 )illionE
f. Me(i*al e5enses no% e5*ee(in4 PC00/000.00E
4. A)o"n% of e5e)% re%ire)en% re*ei!e( -y %&e &eirs "n(er 6e. A*% Mo.
431JE
&. Ne% s&are of %&e s"r!i!in4 so"se in %&e *on."4al ar%ners&i.
T&e no%arial fee ai( for %&e e5%ra."(i*ial se%%le)en% is *learly a (e("*%i-le
e5ense sin*e s"*& se%%le)en% effe*%e( a (is%ri-"%ion of %&e es%a%e %o &is la'f"l
&eirs/ Si)ilarly/ %&e a%%orneys fees for a 4"ar(ian of %&e roer%y ("rin4 %&e
(e*e(en%s life%i)e s&o"l( also -e *onsi(ere( as a (e("*%i-le a()inis%ra%ion
e5ense. T&e 4"ar(ian 4i!es a (e%aile( a**o"n%in4 of (e*e(en%s roer%y an(
4i!es a(!i*e as %o %&e roer se%%le)en% of %&e es%a%e/ a*%s '&i*& *on%ri-"%e(
%o'ar(s %&e *olle*%ion of (e*e(en%s asse%s an( %&e s"-se,"en% se%%le)en% of %&e
*ase. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R. No.
12320*, 0ar"# 22, 2000
0"(i*ial e5enses are e5enses of a()inis%ra%ion. A()inis%ra%ion
e5enses/ as an allo'a-le (e("*%ion fro) 4ross es%a%e of %&e (e*e(en% for
"roses of arri!in4 a% %&e !al"e of %&e ne% es%a%e/ &a!e -een *ons%r"e( %o
in*l"(e all e5enses essen%ial %o %&e *olle*%ion of %&e asse%s/ ay)en% of (e-%s
or %&e (is%ri-"%ion of %&e roer%y %o %&e ersons en%i%le( %o i%. +n o%&er 'or(s/
%&e e5enses )"s% -e essen%ial %o %&e roer se%%le)en% of %&e es%a%e.
53
No% (e("*%i-le are e5en(i%"res in*"rre( for %&e in(i!i("al -enefi% of %&e
&eirs/ (e!isees or le4a%ees. T&"s/ in @oren8o !. Posa(as/ %&e Co"r% *ons%r"e(
%&e &rase ."(i*ial e5enses of %&e %es%a)en%ary or in%es%a%e ro*ee(in4s as
no% in*l"(in4 %&e *o)ensa%ion ai( %o a %r"s%ee of %&e (e*e(en%s es%a%e '&en i%
aeare( %&a% s"*& %r"s%ee 'as aoin%e( for %&e "rose of )ana4in4 %&e
(e*e(en%s real roer%y for %&e -enefi% of %&e %es%a)en%ary &eir. +n ano%&er
*ase/ %&e Co"r% (isallo'e( %&e re)i")s ai( on %&e -on( file( -y %&e
a()inis%ra%or as an e5ense of a()inis%ra%ion sin*e %&e 4i!in4 of a -on( is in %&e
na%"re of a ,"alifi*a%ion for %&e offi*e/ an( no% ne*essary in %&e se%%le)en% of %&e
es%a%e. Nei%&er )ay a%%orneys fees in*i(en% %o li%i4a%ion in*"rre( -y %&e &eirs in
asser%in4 %&eir rese*%i!e ri4&%s -e *lai)e( as a (e("*%ion fro) %&e 4ross es%a%e.
(Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R. No. 12320*,
0ar"# 22, 2000
No% e!ery in%er?!i!os %ransfer in an%i*ia%ion of (ea%& is *onsi(ere(
%ransfer in *on%e)la%ion of (ea%& for "roses of (e%er)inin4 %&e roer%y %o
-e in*l"(e( in %&e 4ross es%a%e of a (e*e(en%.
BAR: 78. To -e *onsi(ere( a %ransfer in *on%e)la%ion of (ea%& %&e
(e*e(en% &as a% any %i)e )a(e a %ransfer/ -y %r"s% or o%&er'ise/ in *on%e)la%ion
of or in%en(e( %o %a2e effe*% in ossession or en.oy)en% a% or af%er (ea%& ISe*.
7C A#B/ N+6C of 133JK. +% is *lear %&a% %&e roer%ies are no% %ransferre( in
*on%e)la%ion of or in%en(e( %o %a2e effe*% in ossession or en.oy)en% a% or af%er
(ea%&.
T&ere is no %ransfer in *on%e)la%ion of (ea%& if %&ere is no s&o'in4 %&e
%ransferor re%aine( for &is life or for any erio( '&i*& (oes no% in fa*% en(
-efore &is (ea%&D A1B %&e ossession or en.oy)en% of/ or %&e ri4&% %o %&e in*o)e
fro) %&e roer%y/ or A2B %&e ri4&%/ ei%&er alone or in *on."n*%ion 'i%& any erson/
%o (esi4na%e %&e erson '&o s&all ossess or en.oy %&e roer%y or %&e in*o)e
%&erefro). ISe*. 7C A#B/ N+6C of 133JK
T&e aro!al of %&e *o"r% si%%in4 in ro-a%e/ or as a se%%le)en% %ri-"nal
o!er %&e es%a%e of %&e (e*ease( is no% a )an(a%ory re,"ire)en% for %&e *olle*%ion
of %&e es%a%e. T&e ro-a%e *o"r% is (e%er)inin4 iss"es '&i*& are no% a4ains% %&e
roer%y of %&e (e*e(en%/ or a *lai) a4ains% %&e es%a%e as s"*&/ -"% is a4ains%
%&e in%eres% or roer%y ri4&% '&i*& %&e &eir/ le4a%ee/ (e!isee/ e%*. &as in %&e
roer%y for)erly &el( -y %&e (e*e(en%.
T&e no%i*es of le!y 'ere re4"larly iss"e( 'i%&in %&e res*ri%i!e erio(.
T&e %a5 assess)en% &a!in4 -e*o)e final/ e5e*"%ory an( enfor*ea-le/ %&e
sa)e *an no lon4er -e *on%es%e( -y )eans of a (is4"ise( ro%es%. (0ar"o%, $$
v. Court of Appeal%, et al., 2)3 'CRA 4)
BAR: 80. 9&en %&e (onee or -enefi*iary is a s%ran4er/ %&e %a5 aya-le
-y %&e (onor s&all -e 10N of %&e ne% 4if%s.
BAR: 81. <or "roses of %&e (onors %a5/ a s%ran4er is erson '&o is
no% aD
A1B #ro%&er/ sis%er A'&e%&er -y '&ole or &alf?-loo(B/ so"se/ an*es%or
an( lineal (es*en(an%E or
A2B 6ela%i!e -y *onsan4"ini%y in %&e *olla%eral line 'i%&in %&e fo"r%&
(e4ree of rela%ions&i. ISe*. 33 A#B/ N+6C of 133JK
BAR: 82. T&e a)o"n% of P100/000.00 (ona%e( ("rin4 a *alen(ar year
is e5e)% fro) (onors %a5. ISe*. 33 AAB/ N+6C of 133JK
T&"s/ a P200/000.00 (eosi% *o"l( -e sli%%e( in *alen(ar years %o a!ail
of %&e%a5 e5e)%ion.
54
T&e (ona%ion of a ri8e %o an a%&le%e in an in%erna%ional sor%s %o"rna)en%
&el( a-roa( an( san*%ione( -y %&e na%ional sor%s asso*ia%ion is e5e)% fro)
(onors %a5. ASe*. 1/ 6e. A*% No. JC43B
BAR: 83. Any ro!ision of la' %o %&e *on%rary no%'i%&s%an(in4/ any
*on%ri-"%ion in *as& or in 2in( %o any *an(i(a%e or oli%i*al ar%y or *oali%ion of
ar%ies for *a)ai4n "roses/ ("ly reor%e( %o %&e Co))ission on Ele*%ions/
s&all no% -e s"-.e*% %o %&e ay)en% of any 4if% %a5. Alas% ar./ Se*. 11/ 6. A. No.
J1HHB
A non?resi(en% *i%i8en or alien is e5e)% only fro) %&e ay)en% of (onors
%a5es if &is 4if%s are )a(e %o or for %&e "se of %&e Na%ional =o!ern)en% or any
en%i%y *rea%e( -y any of i%s a4en*ies '&i*& is no% *on("*%e( for rofi%/ or %o any
oli%i*al s"-(i!ision of %&e sai( =o!ern)en%.
BAR: 84. A non?resi(en% *i%i8en or alien is s"-.e*% %o (onors %a5 '&ere
%&e 4if% is no% )a(e in fa!or of an e("*a%ional an(Mor *&ari%a-le/ reli4io"s/
*"l%"ral or so*ial 'elfare *orora%ion/ ins%i%"%ion/ fo"n(a%ion/ %r"s% or
&ilan%&roi* or4ani8a%ion or resear*& ins%i%"%ion or *orora%ion '&i*& (oes no%
"se )ore %&an 10N of %&e (ona%ion for a()inis%ra%ion "roses.
RETURN7 AN0 WITHHOL0ING
+n*o)e %a5 re%"rns -ein4 "-li* (o*")en%s/ "n%il *on%ro!er%e( -y
*o)e%en% e!i(en*e/ are *o)e%en% e!i(en*e/ are pri&a fa"ie *orre*% 'i%&
rese*% %o %&e en%ries %&erein. (Ropali 5ra.in3 v. N!RC, et al., 29* 'CRA 309,
31)
BAR: 85. Marrie( in(i!i("als/ '&e%&er *i%i8ens/ resi(en% or non?
resi(en% aliens/ '&o (o no% (eri!e in*o)e "rely fro) *o)ensa%ion s&all file a
re%"rn for %&e %a5a-le year %o in*l"(e %&e in*o)e of -o%& so"ses/ -"% '&ere i% is
i)ra*%i*a-le for %&e so"ses %o file one re%"rn/ ea*& so"se )ay file a seara%e
re%"rn of in*o)e -"% %&e re%"rns so file( s&all -e *onsoli(a%e( -y %&e #"rea" for
"roses of !erifi*a%ion Se*%ion C1 ADB of %&e N+6C of 133J T&ere is no
s&o'in4 in %&e ro-le) %&a% i% is i)ra*%i*a-le for #ill an( :illary %o file one
re%"rn/ &en*e %&ey s&o"l( file a sin4le re%"rn.
BAR: 86. +n(i!i("als re,"ire( %o file an in*o)e %a5 re%"rn.
a. E!ery <iliino *i%i8en resi(in4 in %&e P&iliinesE
-. E!ery <iliino *i%i8en resi(in4 o"%si(e %&e P&iliines on &is in*o)e
fro) so"r*es 'i%&in %&e P&iliinesE
*. E!ery alien resi(in4 in %&e P&iliines on in*o)e (eri!e( fro) so"r*es
'i%&in %&e P&iliinesE an(
(. E!ery nonresi(en% alien en4a4e( in %ra(e or -"siness or in %&e
e5er*ise of rofession in %&e P&iliines. ISe*. C1 AAB A1B/ N+6C of 133JK
BAR: 87. +n(i!i("als '&o are no% re,"ire( %o file an in*o)e %a5 re%"rn.
a. An in(i!i("al '&ose 4ross in*o)e (oes no% e5*ee( &is %o%al ersonal
an( a((i%ional e5e)%ions for (een(en%s/ Provi.e., T&a% a *i%i8en of %&e
P&iliines an( any alien in(i!i("al en4a4e( in -"siness or ra*%i*e of
rofession 'i%&in %&e P&iliines s&all file an in*o)e %a5 re%"rn re4ar(less of %&e
a)o"n% of 4ross in*o)eE
-. An in(i!i("al 'i%& rese*% %o "re *o)ensa%ion in*o)e for ser!i*es in
'&a%e!er for) ai(/ in*l"(in4/ -"% no% li)i%e( %o fees/ salaries/ 'a4es/
*o))issions/ an( si)ilar i%e)s/ (eri!e( fro) so"r*es 'i%&in %&e P&iliines/ %&e
in*o)e %a5 on '&i*& &as -een *orre*%ly 'i%&&el(/ Provi.e., T&a% an in(i!i("al
(eri!in4 *o)ensa%ion *on*"rren%ly fro) %'o or )ore e)loyers a% any %i)e
("rin4 %&e %a5a-le year s&all file an in*o)e %a5 re%"rnD Provi.e., furt#er, T&a% an
55
in(i!i("al '&ose "re *o)ensa%ion in*o)e (eri!e( fro) so"r*es 'i%&in %&e
P&iliines e5*ee(s Si5%y %&o"san( esos APH0/000.00B/ s&all also file an
in*o)e %a5 re%"rnE
*. An in(i!i("al '&ose sole in*o)e &as -een s"-.e*% %o final 'i%&&ol(in4
%a5E
(. An in(i!i("al '&o is e5e)% fro) in*o)e %a5 "rs"an% %o %&e ro!isions
of %&e N+6C of 133J/ an( o%&er la's/ 4eneral or se*ial. ISe*. C1 AAB A2B/ N+6C
of 133JK
An in(i!i("al '&o is no% re,"ire( %o file an in*o)e %a5 re%"rn )ay
ne!er%&eless -e re,"ire( %o file an infor)a%ion re%"rn. ISe*. C1 AAB A1B/ N+6C of
133JK
A *orora%ion files i%s in*o)e %a5 re%"rn an( ays i%s in*o)e %a5 fo"r A4B
%i)es ("rin4 a sin4le %a5a-le year. $"ar%erly re%"rns are re,"ire( %o -e file( for
%&e firs% %&ree ,"ar%ers/ %&en a final a(."s%)en% re%"rn is file( *o!erin4 %&e %o%al
%a5a-le in*o)e for %&e '&ole %a5a-le year/ -e i% *alen(ar or fis*al.
An in(i!i("al earnin4 fro) %&e ra*%i*e of &is rofession or '&o en4a4es
in %ra(e or -"siness files &is in*o)e %a5 re%"rn an( ays &is in*o)e %a5 fo"r A4B
%i)es ("rin4 a sin4le %a5a-le year. $"ar%erly re%"rns are re,"ire( %o -e file( for
%&e firs% %&ree ,"ar%ers/ %&en an ann"al in*o)e %a5 re%"rn is file( *o!erin4 %&e
%o%al %a5a-le in*o)e for %&e '&ole of %&e re!io"s *alen(ar year.
T&e "rose of %&e a-o!e fo"r A4B %i)es a year re,"ire)en% is %o )a2e
a!aila-le s"ffi*ien% f"n(s %o )ee% %&e -"(4e%ary re,"ire)en%s/ on a ,"ar%erly
-asis %&ere-y in*reasin4 4o!ern)en% li,"i(i%y. +% also eases &ar(s&is on %&e
ar% of in(i!i("als '&o are re,"ire( %o )a2e %&is fo"r %i)e re%"rn. T&"s/ %&e
%a5ayer (oes no% &a!e %o raise lar4e s")s of )oney in or(er %o ay %&e %a5.
An in(i!i("al earnin4 "rely *o)ensa%ion in*o)e files only one ann"al
in*o)e %a5 re%"rn *o!erin4 %&e %o%al %a5a-le *o)ensa%ion in*o)e for %&e '&ole
of %&e re!io"s *alen(ar year.
Un(er %&e 'i%&&ol(in4 %a5 sys%e)/ %a5es i)ose( or res*ri-e( -y %&e
N+6C of 133J are %o -e (e("*%e( an( 'i%&&el( -y %&e ayors fro) ay)en%s
)a(e %o ayees for %&e for)er %o ay (ire*%ly %o %&e #"rea" of +n%ernal 6e!en"e.
+% is also 2no'n as *olle*%ion of %&e %a5 a% so"r*e.
A 'i%&&ol(in4 a4en% is e5li*i%ly )a(e ersonally lia-le "n(er %&e Ta5
Co(e for %&e ay)en% of %&e %a5 re,"ire( %o -e 'i%&&el(/ in or(er %o *o)el %&e
'i%&&ol(in4 a4en% %o 'i%&&ol( %&e %a5 "n(er any an( all *ir*")s%an*es. +n effe*%/
%&e resonsi-ili%y for %&e *olle*%ion of %&e %a5 as 'ell as %&e ay)en% %&ereof is
*on*en%ra%e( "on %&e erson o!er '&o) %&e =o!ern)en% &as ."ris(i*%ion.
A<iliinas Syn%&e%i* <i-er Corora%ion !. Co"r% of Aeals/ e% al./ =.6. Nos.
117437 T 1241JJ/ O*%o-er 12/ 1333B T&e sys%e) fa*ili%a%es %a5 *olle*%ion.
T&e %'o A2B %yes of 'i%&&ol(in4 a% so"r*e are %&e 1B final 'i%&&ol(in4 %a5E
an( 2B *re(i%a-le 'i%&&ol(in4 %a5.
Un(er %&e final 'i%&&ol(in4 %a5 sys%e) %&e a)o"n% of in*o)e %a5 'i%&&el(
-y %&e 'i%&&ol(in4 a4en% is *ons%i%"%e( as a f"ll an( final ay)en% of %&e in*o)e
("e fro) %&e ayee on %&e sai( in*o)e. I1
s%
sen%en*e/ 1
s%
ar./ Se*. 2.CJ AAB/
6e!. 6e4s. No. 2?37K
T&e lia-ili%y for ay)en% of %&e %a5 res%s ri)arily on %&e ayor or %&e
'i%&&ol(in4 a4en%.. T&"s/ in *ase of &is fail"re %o 'i%&&ol( %&e %a5 or in *ase of
"n(er 'i%&&ol(in4/ %&e (efi*ien*y %a5 s&all -e *olle*%e( fro) %&e ayor
'i%&&ol(in4 a4en%. T&e ayee is no% re,"ire( %o file an in*o)e %a5 re%"rn for %&e
ar%i*"lar in*o)e.
56
Un(er %&e *re(i%a-le 'i%&&ol(in4 %a5 sys%e)/ %a5es 'i%&&el( on *er%ain
in*o)e ay)en%s are in%en(e( %o e,"al or a% leas% aro5i)a%e &e %a5 ("e fro)
%&e ayee on %&e sai( in*o)e. T&e in*o)e re*iien% is s%ill re,"ire( %o file an
in*o)e %a5 re%"rn an(Mor ay %&e (ifferen*e -e%'een %&e %a5 'i%&&el( an( %&e %a5
("e on %&e in*o)e. I1
s%
an( 2
n(
sen%en*es/ Se*. 2CJA#B/ 6e!. 6e4s. No. 2?37K
T&e %'o 2in(s of *re(i%a-le 'i%&&ol(in4 %a5es are AaB %a5es 'i%&&el( on
in*o)e ay)en%s *o!ere( -y %&e e5an(e( 'i%&&ol(in4 %a5E an( A-B %a5es
'i%&&el( on *o)ensa%ion in*o)e.
Pay)en%s %o %&e follo'in4 are e5e)% fro) %&e re,"ire)en% of 'i%&&ol(in4
or '&en no 'i%&&ol(in4 %a5es re,"ire(D
a. Na%ional =o!ern)en% an( i%s ins%r")en%ali%ies in*l"(in4 ro!in*ial/ *i%y/
or )"ni*ial 4o!ern)en%sE
-. Persons en.oyin4 e5e)%ion fro) ay)en% of in*o)e %a5es "rs"an% %o
%&e ro!isions of any la'/ 4eneral or se*ial/ s"*& as -"% no% li)i%e( %o %&e
follo'in4D
1B Sales of real roer%y -y a *orora%ion '&i*& is re4is%ere( 'i%&
an( *er%ifie( -y %&e :@U6# or :UDCC as en4a4e( in so*iali8e( &o"sin4
ro.e*% '&ere %&e sellin4 ri*e of %&e &o"se an( lo% or only %&e lo% (oes no%
e5*ee( P170/000.00 in Me%ro Manila an( o%&er &i4&ly "r-ani8e( areas
an( P1C0/000.00 in o%&er areas or s"*& a(."s%e( a)o"n% of sellin4 ri*e
for so*iali8e( &o"sin4 as )ay la%er -e (e%er)ine( an( a(o%e( -y %&e
:@U6#E
2B Corora%ions re4is%ere( 'i%& %&e #oar( of +n!es%)en%s an(
en.oyin4 e5e)%ions fro) in*o)e "n(er %&e O)ni-"s +n!es%)en% Co(e of
133JE
1B Corora%ions e5e)% fro) in*o)e %a5 "n(er Se*. 10/ of %&e Ta5
Co(e/ li2e %&e SSS/ =S+S/ %&e PCSO/ e%*. :o'e!er/ in*o)e ay)en%s
arisin4 fro) any a*%i!i%y '&i*& is *on("*%e( for rofi% or in*o)e (eri!e(
fro) real or ersonal roer%y s&all -e s"-.e*% %o a 'i%&&ol(in4 %a5. ASe*.
CJ.C/ 6e!. 6e4s. No. 2?37B
BAR: 88. +n ali*a%ions for ref"n(/ %&e 'i%&&ol(in4 a4en% is a %a5ayer
(Co&&i%%ioner of $nternal Revenue v. Pro"ter B Ga&ble P#ilippine
0anufa"turin3 Corporation, 204 'CRA 3)), 3+3/3+*, -"% for %a5 a)nes%y
"roses/ &e is no%. ACo&&i%%ioner of $nternal Revenue v. Court of Appeal%, et
al., G.R. No. 10+4)*, 1anuary 20, 1999, t#e An%"or "a%e
BAR: 89. @e4al re,"ire)en%s for *lai)in4 %a5 re'ar(s for in%ernal
re!en"e %a5esD
a. T&e infor)an% s&o"l( !ol"n%arily file a *onfi(en%ial infor)a%ion "n(er
oa%& 'i%& %&e @a' Di!ision of %&e #"rea" of +n%ernal 6e!en"e alle4in4 %&erein %&e
se*ifi* !iola%ions *ons%i%"%in4 fra"(E
-. T&e infor)a%ion )"s% no% ye% -e in %&e ossession of %&e #"rea" of
+n%ernal 6e!en"e/ or refer %o a *ase alrea(y en(in4 or re!io"sly in!es%i4a%e(
-y %&e #"rea" of +n%ernal 6e!en"eE
*. T&e infor)an% )"s% no% -e a 4o!ern)en% e)loyee or a rela%i!e of a
4o!ern)en% e)loyee 'i%&in %&e si5%& (e4ree of *onsan4"ini%yE an(
(. T&e infor)a%ion )"s% res"l% %o *olle*%ions of re!en"e an(Morfines.
5ENALTIE7, INTERE7T7 AN0 7URCHARGE7
S"r%a5 or s"r*&ar4e/ also 2no'n as %&e *i!il enal%ies/ are %&e a)o"n%s
i)ose( in a((i%ion %o %&e %a5 re,"ire(.
T&ey are in %&e na%"re of enal%ies an( s&all -e *olle*%e( a% %&e sa)e
%i)e/ in %&e sa)e )anner/ an( as ar% of %&e %a5. ISe*.247 AAB/ N+6C of 133JK
57
T&e %'o A2B 2in(s of *i!il enal%ies are AaB %&e 2CN s"r*&ar4e for la%e
filin4 or la%e ay)en% ISe*. 247 AAB/ N+6C of 133JK Aalso 2no'n as %&e
(elin,"en*y s"r*&ar4eB/ an( %&e C0N 'illf"l ne4le*% or fra"( s"r*&ar4e. ISe*.
247 A#B/ $bi..K
Defi*ien*y in*o)e %a5 is %&e a)o"n% -y '&i*& %&e %a5 i)ose( "n(er %&e
N+6C of 133J e5*ee(s %&e a)o"n% s&o'n as %&e %a5 ("e -y %&e %a5ayer "on
&is re%"rn. ISe*. CH A#B A1B/ N+6C of 133JK
Defi*ien*y in%eres% is %&e in%eres% assesse( an( *olle*%e( on any "nai(
a)o"n% of %a5 a% %&e ra%e of 20N er ann") or s"*& &i4&er ra%e as )ay -e
res*ri-e( -y re4"la%ions/ fro) %&e (a%e res*ri-e( for ay)en% "n%il %&e a)o"n%
is f"lly ai(. ISe*. 243 AAB A#B/ N+6C of 133JK
Delin,"en*y in%eres% is %&e in%eres% assesse( an( *olle*%e( on %&e "nai(
a)o"n% "n%il f"ll"y ai( '&ere %&ere is fail"re on %&e ar% of %&e %a5ayer %o ay
%&e a)o"n% (ie on any re%"rn re,"ire( %o -e file(E or %&e a)o"n% of %&e %a5 ("e
for '&i*& no re%"rn is re,"ire(E or a (efi*ien*y %a5/ or any s"r*&ar4e or in%eres%
%&ereon/ on %&e (a%e aearin4 in %&e no%i*e an( (e)an( -y %&e Co))issioner
of +n%ernal 6e!en"e. ISe*.243 A*B/ N+6C of 133JK
Co)ro)ise enal%y is %&e a)o"n% a4ree( "on -e%'een %&e %a5ayer
an( %&e =o!ern)en% %o -e ai( as a enal%y in *ases of a *o)ro)ise.
T&e fi!e year res*ri%i!e erio( for %&e filin4 of *ri)inal a*%ion for
!iola%ion of %&e Ta5 Co(e Aassess)en% *asesB s%ar%s %o r"n '&en %&e assess)en%
&as -e*o)e final an( "naeala-le.
TARIFF AND CUSTOMS CODE
+)or%a%ion -e4ins '&en %&e *on!eyin4 !essel or air*raf% en%ers %&e
."ris(i*%ion of %&e P&iliines 'i%& in%en%ion %o "nla(e %&erein. ASe*. 1202/
TCCPB
+)or%a%ion is (ee)e( %er)ina%e( "on ay)en% of %&e ("%ies/ %a5es an(
o%&er *&ar4es ("e "on %&e a4en*ies/ or se*"re( %o -e ai(/ a% %&e or% of en%ry
an( %&e le4al er)i% for 'i%&(ra'al s&all &a!e -een 4ran%e(.
+n *ase %&e ar%i*les are free of ("%ies/ %a5es an( o%&er *&ar4es/ "n%il %&ey
&a!e le4ally lef% %&e ."ris(i*%ion of %&e *"s%o)s. ASe*. 1202/ TCCPB
BAR: 90. T&e fle5i-le %ariff *la"se is a ro!ision in %&e Tariff an(
C"s%o)s Co(e/ '&i*& i)le)en%s %&e *ons%i%"%ionally (ele4a%e( o'er of %&e
Presi(en% of %&e P&iliines/ in %&e in%eres% of na%ional e*ono)y/ 4eneral 'elfare
an(Mor na%ional se*"ri%y "on re*o))en(a%ion of %&e NEDA AaB %o in*rease/
re("*e or re)o!e e5is%in4 ro%e*%i!e ra%es of i)or% ("%y/ ro!i(e( %&a%/ %&e
in*rease s&o"l( no% -e &i4&er %&an 100N a( !alore)E A-B %o es%a-lis& i)or%
,"o%a or %o -an i)or%s of any *o))o(i%y/ an( A*B %o i)ose a((i%ional ("%y on
all i)or%s no% e5*ee(in4 10N a( !alore)/ a)on4 o%&ers.
C"s%o)s ("%ies is %&e na)e 4i!en %o %a5es on %&e i)or%a%ion an(
e5or%a%ion of *o))o(i%ies/ %&e %ariff or %a5 assesse( "on )er*&an(ise
i)or%e( fro)/ or e5or%e( %o/ a forei4n *o"n%ry. ANes%le P&ils. !. Co"r% of
Aeals/ e% al./ =.6. No. 114114/ 0"ly H/ 2001B
Se*ial *"s%o)s ("%ies are a((i%ional i)or% ("%ies i)ose( on se*ifi*
2in(s of i)or%e( ar%i*les "n(er *er%ain *on(i%ions. T&e se*ial *"s%o)s ("%ies
are %&e an%i?(")in4 ("%y/ %&e *o"n%er!ailin4 ("%y/ %&e (is*ri)ina%ory ("%y an(
%&e )ar2in4 ("%y.
58
T&e se*ial *"s%o)s ("%ies are i)ose( for %&e ro%e*%ion of *ons")ers
an( )an"fa*%"rers/ as 'ell as P&iliine ro("*%s.
BAR: 91. D")in4 ("%y is an a((i%ional se*ial ("%y a)o"n%in4 %o %&e
(ifferen*e -e%'een %&e e5or% ri*e an( %&e nor)al !al"e of s"*& ro("*%/
*o))o(i%y or ar%i*le ASe*. 101 AsB A1B/ TCC/ as a)en(e( -y 6e. A*% No. 7JC2/
An%i?D")in4 A*% of 1333.B i)ose( on %&e i)or%a%ion of a ro("*%/
*o))o(i%y or ar%i*le of *o))er*e in%o %&e P&iliines a% less %&an i%s nor)al
!al"e '&en (es%ine( for (o)es%i* *ons")%ion in %&e e5or%in4 *o"n%ry '&i*& is
*a"sin4 or is %&rea%enin4 %o *a"se )a%erial in."ry %o a (o)es%i* in("s%ry/ or
)a%erially re%ar(in4 %&e es%a-lis&)en% of a (o)es%i* in("s%ry ro("*in4 %&e li2e
ro("*%. ISe*. 101 AsB ACB/ TCC/ as a)en(e( -y 6e. A*% No. 7JC2/ An%i?
D")in4 A*% of 1333K
T&e an%i?(")in4 ("%y is i)ose(
a. 9&ere a ro("*%/ *o))o(i%y or ar%i*le of *o))er*e is e5or%e( in%o
%&e P&iliines a% a ri*e less %&an i%s nor)al !al"e '&en (es%ine( for (o)es%i*
*ons")%ion in %&e e5or%in4 *o"n%ry/
-. an( s"*& e5or%a%ion is *a"sin4 or is %&rea%enin4 %o *a"se )a%erial
in."ry %o a (o)es%i* in("s%ry/ or )a%erially re%ar(s %&e es%a-lis&)en% of a
(o)es%i* in("s%ry ro("*in4 %&e li2e ro("*%. ISe*. 101 AaB/ TCC/ as a)en(e(
-y 6e. A*% No. 7JC2/ An%i?D")in4 A*% of 1333K

Nor)al !al"e for "roses of i)osin4 %&e an%i?(")in4 ("%y is %&e
*o)ara-le ri*e a% %&e (a%e of sale of li2e ro("*%/ *o))o(i%y/ or ar%i*le in %&e
or(inary *o"rse of %ra(e '&en (es%ine( for *ons")%ion in %&e *o"n%ry of e5or%.
ISe*. 101 AsB A1 B/ TCC/ as a)en(e( -y 6e. A*% No. 7JC2/ An%i?D")in4 A*% of
1333K
A (")e( i)or%e( ro("*% is any ro("*%/ *o))o(i%y or ar%i*le of
*o))er*e in%ro("*e( in%o %&e P&iliines a% an e5or% ri*e less %&an i%s nor)al
!al"e in %&e or(inary *o"rse of %ra(e/ for %&e li2e ro("*%/ *o))o(i%y or ar%i*le
(es%ine( for *ons")%ion in %&e e5or%in4 *o"n%ry/ '&i*& is *a"sin4 or is
%&rea%enin4 %o *a"se )a%erial in."ry %o a (o)es%i* in("s%ry/ or )a%erially re%ar(in4
%&e es%a-lis&)en% of a (o)es%i* in("s%ry ro("*in4 %&e li2e ro("*%. ISe*. 101
AsB ACB/ TCC/ as a)en(e( -y 6e. A*% No. 7JC2/ An%i?D")in4 A*% of 1333K
T&e i)osin4 a"%&ori%y for %&e an%i?(")in4 ("%y is %&e Se*re%ary of Tra(e
an( +n("s%ry in %&e *ase of non?a4ri*"l%"ral ro("*%/ *o))o(i%y/ or ar%i*le or %&e
Se*re%ary of A4ri*"l%"re/ in %&e *ase of a4ri*"l%"ral ro("*%/ *o))o(i%y or ar%i*le/
af%er for)al in!es%i4a%ion an( affir)a%i!e fin(in4 of %&e Tariff Co))ission. ISe*.
101 AaB/ TCC/ as a)en(e( -y 6e. A*% No. 7JC2/ An%i?D")in4 A*% of 1333K
E!en '&en all %&e re,"ire)en%s for %&e i)osi%ion &a!e -een f"lfille(/ %&e
(e*ision on '&e%&er or no% %o i)ose a (efini%i!e an%i?(")in4 ("%y re)ains %&e
rero4a%i!e of %&e Tariff Co))ission. ISe*. 101 AaB/ TCC/ as a)en(e( -y 6e.
A*% No. 7JC2/ An%i?D")in4 A*% of 1333K
+n %&e (e%er)ina%ion of '&e%&er %o i)ose %&e an%i?(")in4 ("%y/ %&e Tarrif
Co))ission/ )ay *onsi(er a)on4 o%&ers/ %&e effe*% of i)osin4 an an%i?(")in4
("%y on %&e 'elfare of %&e *ons")ers an(Mor %&e 4eneral "-li*/ an( o%&er
rela%e( lo*al in("s%ries. ASe*. 101 AaB/ TCC/ as a)en(e( -y 6e. A*% No. 7JC2/
An%i?D")in4 A*% of 1333B
T&e a)o"n% of an%i?(")in4 ("%y %&a% )ay -e i)ose( is %&e (ifferen*e
-e%'een %&e e5or% ri*e an( %&e nor)al !al"e of s"*& ro("*%/ *o))o(i%y or
ar%i*le. ASe*. 101 AsB A1B/ TCC/ as a)en(e( -y 6e. A*% No. 7JC2/ An%i?
D")in4 A*% of 1333B
59
T&e an%i?(")in4 ("%y s&all -e e,"al %o %&e )ar4in of (")in4 on s"*&
ro("*%/ *o))o(i%y or ar%i*le %&ereaf%er i)or%e( %o %&e P&iliines "n(er si)ilar
*ir*")s%an*es/ in a((i%ion %o or(inary ("%ies/ %a5es an( *&ar4es i)ose( -y la'
on %&e i)or%e( ro("*%/ *o))o(i%y or ar%i*le/
BAR: 92. Co"n%er!ailin4 ("%ies are a((i%ional *"s%o)s ("%ies i)ose(
on any ro("*%/ *o))o(i%y or ar%i*le of *o))er*e '&i*& is 4ran%e( (ire*%ly or
in(ire*%ly -y %&e 4o!ern)en% in %&e *o"n%ry of ori4in or e5or%a%ion/ any 2in( or
for) of se*ifi* s"-si(y "on %&e ro("*%ion/ )an"fa*%"re or e5or%a%ion of s"*&
ro("*% *o))o(i%y or ar%i*le/ an( %&e i)or%a%ion of s"*& s"-si(i8e( ro("*%/
*o))o(i%y/ or ar%i*le &as *a"se( or %&rea%ens %o *a"se )a%erial in."ry %o a
(o)es%i* in("s%ry or &as )a%erially re%ar(e( %&e 4ro'%& or re!en%s %&e
es%a-lis&)en% of a (o)es%i* in("s%ry. ASe*. 102/ TCCP as a)en(e( -y Se*%ion
1/ 6.A. No. 7JC1B
T&e i)osin4 a"%&ori%y for %&e *o"n%er!ailin4 ("%ies is %&e Se*re%ary of
Tra(e an( +n("s%ry in %&e *ase of non?a4ri*"l%"ral ro("*%/ *o))o(i%y/ or ar%i*le
or %&e Se*re%ary of A4ri*"l%"re/ in %&e *ase of a4ri*"l%"ral ro("*%/ *o))o(i%y or
ar%i*le/ af%er for)al in!es%i4a%ion an( affir)a%i!e fin(in4 of %&e Tariff Co))ission.
E!en '&en all %&e re,"ire)en%s for %&e i)osi%ion &a!e -een f"lfille(/ %&e
(e*ision on '&e%&er or no% %o i)ose a (efini%i!e an%i?(")in4 ("%y re)ains %&e
rero4a%i!e of %&e Tariff Co))ission. ASe*. 101 AaB/ TCC/ as a)en(e( -y 6e.
A*% No. 7JC2/ An%i?D")in4 A*% of 1333B
T&e *o"n%er!ailin4 ("%y is e,"i!alen% %o %&e !al"e of %&e se*ifi* s"-si(y.
BAR: 93. Mar2in4 ("%ies are %&e a((i%ional *"s%o)s ("%ies i)ose( on
forei4n ar%i*les Aor i%s *on%ainers if %&e ar%i*le i%self *anno% -e )ar2e(B/ no%
)ar2e( in any offi*ial lan4"a4e in %&e P&iliines/ in a *onsi*"o"s la*e as
le4i-ly/ in(eli-ly an( er)anen%ly in s"*& )anner as %o in(i*a%e %o an "l%i)a%e
"r*&aser in %&e P&iliines %&e na)e of %&e *o"n%ry of ori4in.

T&e Co))issioner of C"s%o)s i)oses %&e )ar2in4 ("%y.
T&e )ar2in4 ("%y is e,"i!alen% %o fi!e er*en% ACNB a( !alore).
BAR: 94. A (is*ri)ina%ory ("%y is a ne' an( a((i%ional *"s%o)s ("%y
i)ose( "on ar%i*les '&olly or in ar% %&e 4ro'%& or ro("*% of/ or i)or%e( in a
!essel/ of any forei4n *o"n%ry '&i*& i)oses/ (ire*%ly or in(ire*%ly/ "on %&e
(isosi%ion or %ransor%a%ion in %ransi% %&ro"4& or re?e5or%a%ion fro) s"*&
*o"n%ry of any ar%i*le '&olly or in ar% %&e 4ro'%& or ro("*% of %&e P&iliines/
any "nreasona-le *&ar4e/ e5a*%ion/ re4"la%ion or li)i%a%ion '&i*& is no% e,"ally
enfor*e( "on li2e ar%i*les of e!ery forei4n *o"n%ry/ or (is*ri)ina%es a4ains% %&e
*o))er*e of %&e P&iliines/ (ire*%ly or in(ire*%ly/ -y la' or a()inis%ra%i!e
re4"la%ion or ra*%i*e/ -y or in rese*% %o any *"s%o)s/ %onna4e/ or or% ("%y/ fee/
*&ar4e/ e5a*%ion/ *lassifi*a%ion/ re4"la%ion/ *on(i%ion/ res%ri*%ion or ro&i-i%ion/ in
s"*& )anner as %o la*e %&e *o))er*e of %&e P&iliines a% a (isa(!an%a4e
*o)are( 'i%& %&e *o))er*e of any forei4n *o"n%ry.
T&e Presi(en% of %&e P&iliines i)oses %&e (is*ri)ina%ory ("%ies.
BAR: 95. 6e%"rnin4 resi(en% s are na%ionals '&o &a!e s%aye( in a
forei4n *o"n%ry for a erio( of a% leas% si5 AHB )on%&s.
BAR: 96. 9&en a r"lin4 or (e*ision of %&e *olle*%or is )a(e '&ere-y
lia-ili%y for ("%ies/ %a5es/ fees/ or o%&er *&ar4es are (e%er)ine(/ e5*e% %&e fi5in4
of fines in sei8"re *ases/ %&e ar%y a(!ersely affe*%e( )ay ro%es% s"*& r"lin4 or
(e*ision
60
a. -y resen%in4 %o %&e Colle*%or a% %&e %i)e '&en ay)en% is )a(e/ or
'i%&in fif%een A1CB (ays %&ereaf%er/
-. a 'ri%%en ro%es% se%%in4 for%& &is o-.e*%ion %o %&e r"lin4 or (e*ision in
,"es%ion/ %o4e%&er 'i%& &is reasons %&erefor. No ro%es% s&all -e *onsi(ere(
"nless ay)en% of %&e a)o"n% ("e af%er final li,"i(a%ion &as firs% -een )a(e an(
%&e *orreson(in4 (o*2e% fee. ASe*. 2107/ TCC n")-erin4 an( arran4e)en%
s"lie(B
Pro%es% E5*l"si!e 6e)e(y in Pro%es%a-le Cases. +n all *ases s"-.e*% %o
ro%es%/ %&e in%eres%e( ar%y '&o (esires %o &a!e %&e a*%ion of %&e *olle*%or
re!ie'e(/ s&all )a2e a ro%es%/ o%&er'ise %&e a*%ion of %&e *olle*%or s&all -e final
an( *on*l"si!e a4ains% &i). ASe*. 2103/ TCCB
BAR: 97. T&e -asis of ("%ia-le !al"e of )er*&an(ise %&a% is s"-.e*% %o
a( !alore) *"s%o)s ("%ies is %&e %ransa*%ion !al"e/ '&i*& s&all -e %&e ri*e
a*%"ally ai( or aya-le for %&e 4oo(s '&en sol( for e5or% %o %&e P&iliines/
a(."s%e( -y a((in4 *er%ain *os% ele)en%s %o %&e e5%en% %&a% %&ey are in*"rre( -y
%&e -"yer -"% are no% in*l"(e( in %&e ri*e a*%"ally ai( or aya-le for %&e
i)or%e( 4oo(s/ an( )ay in*l"(e %&e follo'in4D
a. Cos% of *on%ainers an( a*2in4/
-. +ns"ran*e/ an(
*. <rei4&%. ASe*. 201/ TCC as a)en(e( -y Se*. 1/ 6e. A*% No. 311CB
T&e a-o!e %ransa*%ion !al"e is %&e ri)ary )e%&o( of (e%er)inin4
("%ia-le !al"e. +f %&e %ransa*%ion !al"e of %&e i)or%e( ar%i*le *o"l( no% -e
(e%er)ine( "sin4 %&e a-o!e/ %&e follo'in4 al%erna%i!e )e%&o(s s&o"l( -e "se(
one af%er %&e o%&erD
a. Transa*%ion !al"e of i(en%i*al 4oo(s
-. Transa*%ion !al"e of si)ilar 4oo(s
*. De("*%i!e )e%&o(
(. Co)"%e( )e%&o(
e. <all-a*2 )e%&o(
T&ere is a )is%a2en -elief %&a% *lai)s for ref"n( are 4o!erne( -y %&e r"le
on ,"asi?*on%ra*% of %olutio in.ebeti '&i*& res*ri-es in si5 AHB years "n(er
Ar%i*le 114C of %&e Ci!il Co(e.
+n or(er for %&e r"le on %olutio in.ebeti %o aly i% is an essen%ial *on(i%ion
%&a% %&e e%i%ioner )"s% firs% s&o' %&a% i%s ay)en% of %&e *"s%o)s ("%ies 'as in
e5*ess of '&a% 'as re,"ire( -y %&e la' a% %&e %i)e %&e s"-.e*% 1H i)or%a%ions of
)il2 an( )il2 ro("*%s 'ere )a(e. Unless s&o'n o%&er'ise/ %&e (is"%a-le
res")%ion of re4"lari%y of erfor)an*e of ("%y lies in fa!or of %&e Colle*%or of
C"s%o)s. (Ne%tle P#il. v. Court of Appeal%, et al., G.R. No. 134114, 1uly *, 2001
T&ere is no a"%o)a%i* 4ran% of ref"n(. +n (e%er)inin4 '&e%&er Nes%le is
en%i%le( %o ref"n( of alle4e( o!eray)en% of *"s%o) ("%ies/ i% is ne*essary %o
(e%er)ine e5a*%ly &o' )"*& %&e =o!ern)en% is en%i%le( %o *olle*% as *"s%o)s
("%ies. Un%il %&ere is s"*& a (e%er)ina%ion -y %&e Colle*%or an( affir)e( or
re.e*%e( -y %&e Co))issioner/ %&en %&e Co"r% of Ta5 Aeals (oes no% &a!e
."ris(i*%ion. T&e CTAs ."ris(i*%ion "n(er %&e Tariff an( C"s%o)s Co(e is no%
*on*"rren% 'i%& %&a% of %&e Co))issioner of C"s%o)s ("e %o %&e a-sen*e of any
*er%ifi*a%ion fro) %&e Colle*%or of C"s%o)s of Manila %&a% s"*& i)or% ("%ies
s&o"l( -e ref"n(e(. Conse,"en%ly/ %&e fin(in4 -y %&e CTA in ano%&er *ase of
o!eray)en% of in%ernal re!en"e %a5es is no% ne*essarily a fin(in4 %&a% %&ere 'as
o!eray)en% of *"s%o)s ("%ies. (Ne%tle P#il. v. Court of Appeal%, et al., G.R.
No. 134114, 1uly *, 2001
All *lai)s for ref"n( of ("%ies s&all -e )a(e in 'ri%in4 an( for'ar(e( %o
%&e Colle*%or of C"s%o)s %o '&o) s"*& ("%ies are ai(/ '&o "on re*ei% of
s"*& *lai)/ s&all !erify %&e sa)e -y %&e re*or(s of &is Offi*e/ an( if fo"n( %o -e
61
*orre*% an( in a**or(an*e 'i%& la'/ s&all *er%ify %&e sa)e %o %&e Co))issioner of
C"s%o)s 'i%& &is re*o))en(a%ion %o4e%&er 'i%& all ne*essary aers an(
(o*")en%s. Uon re*ei% -y %&e Co))issioner of s"*& *er%ifie( *lai) &e s&all
*a"se %&e sa)e %o -e ai( if fo"n( *orre*%. ASe*. 1J07/ TCCB
BAR: 98. Un(er %&e (o*%rine of ri)ary ."ris(i*%ion/ %&e #"rea" of
C"s%o)s &as e5*l"si!e a()inis%ra%i!e ."ris(i*%ion %o *on("*% sear*&es/ sei8"res
an( forfei%"res of *on%ra-an( 'i%&o"% in%erferen*e fro) %&e *o"r%s. +% *o"l(
*on("*% sear*&es an( sei8"res 'i%&o"% nee( of a ."(i*ial 'arran% e5*e% if %&e
sear*& is %o -e *on("*%e( in a ('ellin4 la*e.
T&e (o*%rine of e5*l"si!e *"s%o)s ."ris(i*%ion o!er *"s%o)s *ases %o %&e
e5*l"sion of %&e 6TCs is an*&ore( "on %&e oli*y of la*in4 no "nne*essary
&in(ran*e on %&e 4o!ern)en%s (ri!e/ no% only %o re!en% s)"44lin4 an( o%&er
fra"(s "on C"s%o)s/ -"% )ore i)or%an%ly/ %o ren(er effe*%i!e an( effi*ien% %&e
*olle*%ion of i)or% an( e5or% ("%ies ("e %&e S%a%e/ '&i*& ena-les %&e
4o!ern)en% %o *arry o"% %&e f"n*%ions i% &as -een ins%i%"%e( %o erfor). (1ao, et
al., v. Court of Appeal%, et al., an. "o&panion "a%e, 249 'CRA 34, 43
T&e Colle*%or of C"s%o)s si%%in4 in sei8"re an( forfei%"re ro*ee(in4s &as
e5*l"si!e ."ris(i*%ion %o &ear an( (e%er)ine all ,"es%ions %o"*&in4 on %&e sei8"re
an( forfei%"re of ("%ia-le 4oo(s. 6TCs are re*l"(e( fro) ass")in4 *o4ni8an*e
o!er s"*& )a%%ers e!en %&ro"4& e%i%ions of *er%iorari/ ro&i-i%ion or )an(a)"s.
(5#e -ureau of Cu%to&%, et al., v. 73ario, et al., G.R. No. 13+0+1, 0ar"# 20,
2000
6e4ional Trial Co"r%s &a!e no ."ris(i*%ion %o rele!in a roer%y '&i*& is
s"-.e*% %o sei8"re an( forfei%"re ro*ee(in4s for !iola%ion of %&e Tariff an(
C"s%o)s Co(e o%&er'ise/ a*%ions for forfei%"re of roer%y for !iola%ion of %&e
C"s%o)s la's *o"l( easily -e "n(er)ine( -y %&e si)le (e!i*e of rele!in. A(e
la :uente v. (e 6eyra, et al., 120 'CRA 444
T&e *"s%o)s a"%&ori%ies (o no% &a!e %o ro!e %o %&e sa%isfa*%ion of %&e
*o"r% %&a% %&e ar%i*les on -oar( a !essel 'ere i)or%e( fro) a-roa( or are
in%en(e( %o -e s&ie( a-roa( -efore %&ey )ay e5er*ise %&e o'er %o effe*%
*"s%o)s sear*&es/ sei8"res/ or arres%s ro!i(e( -y la' an( *on%in"e 'i%& %&e
a()inis%ra%i!e &earin4s. (5#e -ureau of Cu%to&%, et al., v. 73ario, et al., G.R.
No. 13+0+1, 0ar"# 20, 2000
T&e Tariff an( C"s%o)s Co(e allo's %&e #"rea" of C"s%o)s %o resor% %o
%&e a()inis%ra%i!e re)e(y of sei8"re/ s"*& as -y enfor*in4 %&e %a5 lien on %&e
i)or%e( ar%i*le '&en %&e i)or%e( ar%i*les *o"l( -e fo"n( an( -e s"-.e*% %o
sei8"re an( forfei%"re.
T&e Tariff an( C"s%o)s Co(e allo's %&e #"rea" of C"s%o)s %o resor% %o
%&e ."(i*ial re)e(y of filin4 an a*%ion in *o"r% '&en %&e i)or%e( ar%i*les *o"l(
no% any)ore -e fo"n(.
+ns%an*es '&ere %&ere is no ri4&% of re(e)%ion of sei8e( an( forfei%e(
ar%i*lesD
a. T&ere is fra"(E
-. T&e i)or%a%ion is a-sol"%ely ro&i-i%e(/ or
*. T&e release of %&e roer%y 'o"l( -e *on%rary %o la'. (5ran%3lobe
$nternational, $n". v. Court of Appeal%, et al., G.R. No. 12**34, 1anuary 24,
1999
+n A,nar v. Court of 5a8 Appeal%, 4+ 'CRA 419/ rei%era%e( in :arolan, 1r.
v. Court of 5a8 appeal%, et al., 21) 'CRA 29+/ %&e S"re)e *o"r% *larifie( %&a%
%&e fra"( *on%e)la%e( -y la' )"s% -e a*%"al an( no% *ons%r"*%i!e. +% )"s% -e
62
in%en%ional/ *onsis%in4 of (e*e%ion/ 'illf"lly an( (eli-era%ely (one or resor%e( %o
in or(er %o in("*e ano%&er %o 4i!e " so)e ri4&%.
<ra"( )"s% -e ro!e( %o ."s%ify forfei%"re. +% )"s% -e a*%"al/ a)o"n%in4 %o
in%en%ional 'ron4?(oin4 'i%& %&e *lear "rose of a!oi(in4 %&e %a5. <orfei%"re is
no% fa!ore( in la' nor in e,"i%y. Mere ne4li4en*e is no% e,"i!alen% %o %&e fra"(
*on%e)la%e( -y la'. An &ones% )is%a2e/ 'ill no% (eri!e %&e 4o!ern)en% of i%s
ri4&% %o *olle*% %&e roer %a5. (Republi", et"., v. 5#e Court of Appeal%, et al.,
G.R. No. 139040, 7"tober 2, 2001
6e,"isi%es for forfei%"re of i)or%e( 4oo(sD
a. 9ron4f"l )a2in4 -y %&e o'ner/ i)or%er/ e5or%er or *onsi4nee of any
(e*lara%ion or affi(a!i%/ or %&e 'ron4f"l )a2in4 or (eli!ery -y %&e sa)e erson of
any in!oi*e/ le%%er or aer L all %o"*&in4 on %&e i)or%a%ion or e5or%a%ion of
)er*&an(ise.
-. %&e falsi%y of s"*& (e*lara%ion/ affi(a!i%/ in!oi*e/ le%%er or aerE an(
*. an in%en%ion on %&e ar% of %&e i)or%erM*onsi4nee %o e!a(e %&e
ay)en% of %&e ("%ies ("e. (Republi", et"., v. 5#e Court of Appeal%, et al., G.R.
No. 139040, 7"tober 2, 2001
<orfei%"re of sei8e( 4oo(s in %&e #"rea" of C"s%o)s is in %&e na%"re of a
ro*ee(in4 in re&/ i.e. (ire*%e( a4ains% %&e re% or i)or%e( 4oo(s an( en%ails a
(e%er)ina%ion of %&e le4ali%y of %&eir i)or%a%ion. +n %&is ro*ee(in4/ i% is in le4al
*on%e)la%ion %&e roer%y i%self '&i*& *o))i%s %&e !iola%ion an( is %rea%e( as
%&e offen(er/ 'i%&o"% referen*e '&a%soe!er %o %&e *&ara*%er or *on("*% of %&e
o'ner.
T&e iss"e is li)i%e( %o '&e%&er %&e i)or%e( 4oo(s s&o"l( -e forfei%e( an(
(isose( of in a**or(an*e 'i%& la' for !iola%ion of %&e Tariff an( C"s%o)s Co(e.
.(5ran%3lobe $nternational, $n". v. Court of Appeal%, et al., G.R. No. 12**34,
1anuary 24, 1999
T&e one?year res*ri%i!e erio( for forfei%"re ro*ee(in4s alies only in
%&e a-sen*e of fra"(. (Co&&i%%ioner of Cu%to&% v. Court of 5a8 Appeal%, et al.,
G.R. No. 132929, 0ar"# 2), 2000
BAR: 99. T&e Colle*%or of C"s%o)s "on ro-a-le *a"se %&a% %&e
ar%i*les are i)or%e( or e5or%e(/ or are a%%e)%e( %o -e i)or%e( or e5or%e(/ in
!iola%ion of %&e %ariff an( *"s%o)s la's s&all iss"e a 'arran% of sei8"re. ASe*. H/
Ti%le +++/ CAO No. 3?31B
+f %&e sear*& an( sei8"re is %o -e *on("*%e( in a ('ellin4 la*e/ %&en a
sear*& 'arran% s&o"l( -e iss"e( -y %&e re4"lar *o"r%s no% %&e #"rea" of
C"s%o)s.
T&ere )ay -e ins%an*es '&ere no 'arran%s iss"e( -y %&e #"rea" of
C"s%o)s or %&e re4"lar *o"r%s is re,"ire(/ as in sear*& an( sei8"res of )o%or
!e&i*les an( !essels.
LOCAL TAXATION
BAR: 100. T&e f"n(a)en%al rin*iles of lo*al %a5a%ion areD
a. Unifor)i%yE
-. Ta5es/ fees/ *&ar4es an( o%&er i)osi%ions s&all -e e,"i%a-le an(
-ase( on a-ili%y %o ay/ for "-li* "roses/ no% "n."s%/ e5*essi!e/ oressi!e or
*onfis*a%ory/ no% *on%rary %o la'/ "-li* oli*y/ na%ional e*ono)i* oli*y or in
res%rain% of %ra(eE
*. T&e le!y an( *olle*%ion s&all no% -e le% %o any ri!a%e ersonE
63
(. +n"res solely %o %&e lo*al 4o!ern)en% "ni% le!yin4 %&e %a5E
e. T&e ro4ressi!i%y rin*ile )"s% -e o-ser!e(.
Un(er %&e no' re!ailin4 Cons%i%"%ion/ '&ere %&ere is nei%&er a 4ran% nor
ro&i-i%ion -y s%a%"%e/ %&e %a5in4 o'er of lo*al 4o!ern)en%s )"s% -e (ee)e( %o
e5is% al%&o"4& Con4ress )ay ro!i(e s%a%"%ory li)i%a%ions an( 4"i(elines in or(er
%o safe4"ar( %&e !ia-ili%y an( self?s"ffi*ien*y of lo*al 4o!ern)en% "ni%s -y
(ire*%ly 4ran%in4 %&e) 4eneral an( -roa( %a5 o'ers. ACity Govern&ent of 'an
Pablo, !a3una, et al., v. Reye%, et al., G.R. No. 12))0+, 0ar"# 24, 1999
BAR: 101. T&e ara(i4) s&if% %o %&e 4ran% of %&e o'er of %a5a%ion %o
lo*al 4o!ern)en% "ni%s res"l%s fro) %&e reali8a%ion %&a% 4en"ine (e!elo)en% *an
-e a*&ie!e( only -y s%ren4%&enin4 lo*al a"%ono)y an( ro)o%in4
(e*en%rali8a%ion of 4o!ernan*e.
<or alon4 %i)e/ %&e *o"n%rys &i4&ly *en%rali8e( 4o!ern)en% s%r"*%"re &as
-re( a *"l%"re of (een(en*e a)on4 lo*al 4o!ern)en% lea(ers "on %&e
na%ional lea(ers&i. +% &as also (a)ene( %&e siri% of ini%ia%i!e/ inno!a%ion an(
i)a4ina%i!e resilien*e in )a%%ers of lo*al (e!elo)en% on %&e ar% of lo*al
4o!ern)en% lea(ers.
T&e only 'ay %o s&a%%er %&is *"l%"re of (een(en*e is %o 4i!e %&e @=Us a
'i(er role in %&e (eli!ery of -asi* ser!i*es an( *onfer %&e) s"ffi*ien% o'ers %o
4enera%e %&eir o'n so"r*es of re!en"e for %&e "rose. (National Power
Corporation v. City of Cabanatuan, G. R. No. 149110, April 9, 2003
BAR: 102. T&e @o*al =o!ern)en% Co(e e5li*i%ly a"%&ori8es ro!in*es
an( *i%ies/ no%'i%&s%an(in4 any e5e)%ion 4ran%e( -y any la' or o%&er se*ial
la' %o i)ose a %a5 on -"sinesses en.oyin4 a fran*&ise. +n(i*a%i!e of %&e
le4isla%i!e in%en% %o *arry o"% %&e *ons%i%"%ional )an(a%e of !es%in4 -roa( %a5
o'ers %o lo*al 4o!ern)en% "ni%s/ %&e @o*al =o!ern)en% Co(e &as 'i%&(ra'n
%a5 e5e)%ions or in*en%i!es %&ere%ofore en.oye( -y *er%ain en%i%ies. (City
Govern&ent of 'an Pablo, !a3una, et al., v. Reye%, et al., G.R. No. 12))0+,
0ar"# 24, 1999
@=Us s"*& as %&e ro!in*e or %&e *i%y *an i)ose fran*&ise %a5
no%'i%&s%an(in4 any e5e)%ion 4ran%e( -y la' or o%&er se*ial la'. T&e
le4isla%i!e "rose %o 'i%&(ra' %a5 e5e)%ion ri!ile4es "n(er e5is%in4 la' or
*&ar%er is *learly )anifes%e( -y %&e lan4"a4e "se( *a%e4ori*ally 'i%&(ra'in4
s"*& e5e)%ion s"-.e*% only %o %&e e5*e%ions en")era%e(.
Sin*e i% 'o"l( -e no% only %e(io"s an( i)ra*%i*al %o a%%e)% %o en")era%e
all %&e e5is%in4 s%a%"%es ro!i(in4 for se*ial %a5 e5e)%ions or ri!ile4es %&e
@o*al =o!ern)en% Co(e ro!i(e( for an e5ress/ al-ei% 4eneral/ 'i%&(ra'al of
s"*& e5e)%ions or ri!ile4es. No )ore "ne,"i!o*al lan4"a4e *o"l( &a!e -een
"se(. (National Power Corporation v. City of Cabanatuan, G. R. No. 149110,
April 9, 2003
6a%ionale for -lan2e% 'i%&(ra'al of lo*al 4o!ern)en% %a5 e5e)%ionsD
Do"-%less %&e o'er %o %a5 is %&e )os% effe*%i!e ins%r")en% %o raise nee(e(
re!en"es %o finan*e an( s"or% )yria( a*%i!i%ies of %&e @=Us for %&e (eli!ery of
-asi* ser!i*es essen%ial %o %&e ro)o%ion of %&e 4eneral 'elfare an( %&e
en&an*e)en% of ea*e/ ro4ress an( roseri%y of %&e eole.
T&e ori4inal reasons for %&e 'i%&(ra'al of lo*al 4o!ern)en% %a5
e5e)%ions %o 4o!ern)en% o'ne( or *on%rolle( *orora%ions an( all o%&er "ni%s
of 4o!ern)en% 'ere %&a% s"*& ri!ile4e res"l%e( in serio"s %a5 -ase erosion an(
(is%or%ion in %&e %a5 %rea%)en% of si)ilarly si%"a%e( en%errises.
9i%& %&e a((e( -"r(en of (e!ol"%ion/ i% is e!en )ore i)era%i!e for
4o!ern)en% en%i%ies %o s&are in %&e re,"ire)en%s of (e!elo)en%/ fis*al or
o%&er'ise/ -y ayin4 %a5es or o%&er *&ar4es ("e fro) %&e). (National Power
Corporation v. City of Cabanatuan, G. R. No. 149110, April 9, 2003
64
P#ilippine !on3 (i%tan"e 5elep#one Co&pany, $n"., v. City of (avao, et
al., et".,G.R.No. 143+*), Au3u%t 22, 2001/ "&el( %&e a"%&ori%y of %&e Ci%y of
Da!ao/ a lo*al 4o!ern)en% "ni%/ %o i)ose an( *olle*% a lo*al fran*&ise %a5
-e*a"se %&e @o*al =o!ern)en% &as 'i%&(ra'n all %a5 e5e)%ions re!io"sly
en.oye( -y all ersons an( a"%&ori8e( lo*al 4o!ern)en% "ni%s %o i)ose a %a5 on
-"siness en.oyin4 a fran*&ise %a5 no%'i%&s%an(in4 %&e 4ran% of %a5 e5e)%ion %o
%&e).
Po'er of lo*al 4o!ern)en%s %o %a5 is only a (ele4a%e( o'er. @o*al
4o!ern)en%s (o no% &a!e %&e in&eren% o'er %o %a5 e5*e% %o %&e e5%en% %&a%
s"*& o'er )i4&% -e (ele4a%e( %o %&e) ei%&er -y %&e -asi* la' or s%a%"%e.
Presen%ly/ "n(er Ar%i*le ; of %&e 137J Cons%i%"%ion a 4eneral (ele4a%ion of %&a%
o'er &as -een 4i!en in fa!or of lo*al 4o!ern)en% "ni%s. A0anila 2le"tri"
Co&pany v. Provin"e of !a3una, et al., G.R. No. 131349, 0ay 4, 1999
T&e f"n(a)en%al la' (i( no% in%en( %&e (ele4a%ion %o lo*al 4o!ern)en%
"ni%s %o -e a-sol"%e an( "n*on(i%ional/ %&e *ons%i%"%ional o-.e*%i!e o-!io"sly is
%o ens"re %&a%/ '&ile lo*al 4o!ern)en% "ni%s are -ein4 s%ren4%&ene( an( )a(e
)ore a"%ono)o"s/ %&e le4isla%"re )"s% s%ill see %o i% %&a%D
a. %&e %a5ayer 'ill no% -e o!er?-"r(ene( or sa((le( 'i%& )"l%ile an(
"nreasona-le i)osi%ionsE
-. ea*& lo*al 4o!ern)en% "ni% 'ill &a!e i%s fair s&are of a!aila-le
reso"r*esE
*. %&e reso"r*es of %&e na%ional 4o!ern)en% 'ill -e "n("ly (is%"r-e(E an(
(. lo*al %a5a%ion 'ill -e fair/ "nifor) an( ."s%. (0anila 2le"tri" Co&pany v.
Provin"e of !a3una, et al., G.R. No. 131349, 0ay 4, 1999
T&e 'i%&(ra'al of a %a5 e5e)%ion s&o"l( no% -e *ons%r"e( as ro&i-i%in4
f"%"re 4ran%s of e5e)%ion fro) all %a5es. +n(ee(/ %&e 4ran% of %a5in4 o'ers %o
lo*al 4o!ern)en% "ni%s "n(er %&e @o*al =o!ern)en% Co(e (oes no% affe*% %&e
o'er of Con4ress %o 4ran% e5e)%ions %o *er%ain ersons/ "rs"an% %o a
(e*lare( na%ional oli*y. T&e le4al effe*% of %&e *ons%i%"%ional 4ran% %o lo*al
4o!ern)en%s si)ly )eans %&a% in in%erre%in4 s%a%"%ory ro!isions on )"ni*ial
%a5in4 o'ers/ (o"-%s )"s% -e resol!e( in fa!or of )"ni*ial *orora%ions.
(P#ilippine !on3 (i%tan"e 5elep#one Co&pany, $n"., v. City of (avao, et al.,
et".,G.R. No. 143+*), Au3u%t 22, 2001
S)ar% an( =lo-e are e5e)% fro) lo*al %a5es Ain*l"(in4 %&e fran*&ise %a5B
-e*a"se %&eir fran*&ises '&i*& 'ere 4ran%e( af%er %&e effe*%i!i%y of %&e @=C
e5e)%e( %&e) fro) %&e ay)en% of lo*al fran*&ise an( -"siness %a5es.
(P#ilippine !on3 (i%tan"e 5elep#one Co&pany, $n"., v. City of (avao, et al.,
et".,G.R. No. 143+*), Au3u%t 22, 2001
9&en Con4ress aro!e( a ro!ision %&a%/ Any a(!an%a4e/ fa!or/
ri!ile4e/ e5e)%ion/ or i))"ni%y 4ran%e( "n(er e5is%in4 fran*&ises/ or )ay
&ereaf%er -e 4ran%e(/ s&all iso fa*%o -e*o)e ar% of re!io"sly 4ran%e(
%ele*o))"ni*a%ions fran*&ises an( s&all -e a**or(e( i))e(ia%ely an(
"n*on(i%ionally %o %&e 4ran%ees of s"*& fran*&isesD Pro!i(e(/ &o'e!er/ T&a% %&e
fore4oin4 s&all nei%&er aly %o nor affe*% ro!isions of %ele*o))"ni*a%ions
fran*&ises *on*ernin4 %erri%ory *o!ere( -y %&e fran*&ise/ %&e life san of %&e
fran*&ise/ or %&e %ye of ser!i*e a"%&ori8e( -y %&e fran*&ise. AUn(ers*orin4
s"lie(B %&ere 'as no in%en%ion for i% %o oera%e as a -lan2e% %a5 e5e)%ion %o all
%ele*o))"ni*a%ions en%i%ies. Alyin4 %&e r"le of s%ri*% *ons%r"*%ion of la's
4ran%in4 %a5 e5e)%ions an( %&e r"le %&a% (o"-%s s&o"l( -e resol!e( in fa!or of
)"ni*ial *orora%ions in in%erre%in4 s%a%"%ory ro!isions on )"ni*ial %a5a%ion/
i% 'as &el( %&a% sai( ro!isions *anno% -e *onsi(ere( as e5%en(in4 i%s
ali*a%ion %o fran*&ises s"*& as %&a% of P@DT. (P#ilippine !on3 (i%tan"e
5elep#one Co&pany, $n"., v. City of (avao, et al., et".,G.R.No. 143+*), Au3u%t
22, 2001
65
BAR: 103. A la' '&i*& (eri!es lo*al 4o!ern)en% "ni%s of %&eir o'er
%o %a5 'o"l( -e "n*ons%i%"%ional. T&e *ons%i%"%ion &as (ele4a%e( %o lo*al
4o!ern)en%s %&e o'er %o le!y %a5es/ fees an( o%&er *&ar4es. T&is
*ons%i%"%ional (ele4a%ion )ay only -e re)o!e( -y a *ons%i%"%ional a)en()en%.
BAR: 104. T&e o'er of lo*al 4o!ern)en%s %o %a5 an( raise %&eir o'n
so"r*es of re!en"e is e5er*ise( %&ro"4& %a5 or(inan*es asse( -y %&e lo*al
San44"nian4s an( aro!e( -y %&e @=U C&ief E5e*"%i!e.
T&e a"%&ori%y "n(er %&e @o*al =o!ern)en% Co(e %o *olle*% %a5es on
,"arry reso"r*es alies only %o %&ose e5%ra*%e( fro) "-li* lan(s. ASe*. 114 in
rela%ion %o Se*. 117/ @o*al =o!ern)en% Co(eB
T&e @o*al =o!ern)en% Co(e ro&i-i%s lo*al 4o!ern)en% "ni%s fro)
*olle*%in4 e5*ise %a5es on ar%i*les en")era%e( "n(er %&e N+6C/ an( %a5es/ fees
or *&ar4es on e%role") ro("*%s. ASe*. 111 I&K/ @o*al =o!ern)en% Co(e in
rela%ion %o %&e Ta5 Co(eK 9&ile %&e Ta5 Co(e le!ies a %a5 on all ,"arry
reso"r*es/ re4ar(less of ori4in/ '&e%&er e5%ra*%e( fro) "-li* or ri!a%e lan(s/
%&e @o*al =o!ern)en% Co(e a"%&ori8es %&e lo*al 4o!ern)en% "ni% %o i)ose
s"*& %a5es on %&ose %a2en fro) "-li* lan(s. T&"s/ ,"arry reso"r*es e5%ra*%e(
fro) ri!a%e lan(s are %a5a-le "n(er %&e N+6C an( no% -y lo*al 4o!ern)en%
"ni%s. A5#e Provin"e of -ula"an, et al., v. 5#e Court of Appeal%, et"., et al., 299
'CRA 442
BAR: 105. Professional -as2e%-all 4a)es s&o"l( ay %&e a)"se)en%
%a5es *olle*%e( -y %&e #+6 an( no% %&e a)"se)en% %a5es *olle*%e( -y %&e lo*al
4o!ern)en%s. T&e a)"se)en% %a5 '&i*& ro!in*es an( *i%ies are allo'e( %o
*olle*% "n(er Se*. 140 of %&e @o*al =o!ern)en% Co(e/ refers %o an a)"se)en%
%a5 %o -e *olle*%e( fro) rorie%ors/ lessees/ or oera%ors of %&ea%ers/ *ine)as/
*on*er% &alls/ *ir*"ses/ -o5in4 s%a(ia/ an( o%&er la*es of a)"se)en%. T&e
a"%&ori%y %o %a5 rofessional -as2e%-all 4a)es is no% in*l"(e( %&erein -e*a"se i%
is a na%ional %a5 ro!i(e( for "n(er Se*. 12C of %&e 133J Ta5 Co(e '&i*&
ro!i(es %&a%/ T&ere s&all -e *olle*%e( fro) %&e rorie%or/ lessee or oera%or of
*o*2i%s/ *a-are%s/ ni4&% or (ay *l"-s/ -o5in4 e5&i-i%ions/ rofessional -as2e%-all
4a)es/ 0ai?Alai an( ra*e%ra*2s/ a %a5 e,"i!alen% %oD 5555 A(B <if%een er*en%
A1CNB in %&e *ase of rofessional -as2e%-all 4a)es en!isione( in Presi(en%ial
De*ree No. 3J1D Provi.e., #owever, T&a% %&e %a5 &erein s&all -e in lie" of all
o%&er er*en%a4e %a5es of '&a%e!er na%"re an( (es*ri%ionE 555 (P#ilippine
-a%;etball A%%o"iation v. Court of Appeal%, et al., G.R. No. 119122, Au3u%t +,
2000
BAR: 106. T&e re)e(y %o i)"4n %&e *ons%i%"%ionali%y of a lo*al %a5
or(inan*e is an aeal %o %&e Se*re%ary of 0"s%i*e 'i%&in a erio( of %&ir%y A10B
(ays fro) effe*%i!i%y. T&e Se*re%ary &as a erio( of H0 (ays 'i%&in '&i*& %o
(e*i(e. S&o"l( %&e SO0 fail %o (e*i(e 'i%&in %&a% erio(/ or if %&e (e*ision is
a(!erse %o %&e %a5ayer or %o %&e 4o!ern)en%/ %&e ar%y )ay aeal %o %&e 6TC
'i%&in a erio( of 10 (ays fro) %&e e5ira%ion of %&e H0 (ay erio( 'i%&in '&i*&
%o (e*i(e or 'i%&in 10 (ays fro) re*ei% of %&e a(!erse ."(4)en%.
REAL PROPERTY TAXATION
BAR: 107. T&e f"n(a)en%al rin*iles of real roer%y %a5a%ion areD
a. Araisal a% *"rren% an( fair )ar2e% !al"eE
-. Classifi*a%ion for assess)en% on %&e -asis of a*%"al "seE
*. Assess)en% on %&e -asis of "nifor) *lassifi*a%ionE
(. Araisal/ assess)en%/ le!y an( *olle*%ion s&all no% -e le% %o a ri!a%e
ersonE
66
e. Araisal an( assess)en% s&all -e e,"i%a-le.
T&e reasona-le )ar2e% !al"e is (e%er)ine( -y %&e assessor in %&e for) of
a s*&e("le of fair )ar2e% !al"es. T&e s*&e("le is %&en ena*%e( -y %&e lo*al
%an33unian.
T&e assess)en% le!el is fi5e( -y or(inan*es of %&e aroria%e
%an33unian.
T&e %a5 ra%e is also fi5e( -y or(inan*es of %&e aroria%e %an33unian.
BAR: 108. Personal roer%y "n(er %&e *i!il la' )ay -e *onsi(ere( as
real roer%y for "roses of %a5es '&ere %&e roer%y is essen%ial %o %&e *on("*%
of %&e -"siness. Un(er4ro"n( %an2s are essen%ial %o %&e *on("*% of %&e -"siness
of a 4asoline s%a%ion 'i%&o"% '&i*& i% 'o"l( no% -e oera%ional. (Calte8 P#il%.,
$n". v. Central -oar. of A%%e%%&ent Appeal%, et al., 114 'CRA 29*
@i4&% 6ail Transi% A@6TB i)ro!e)en%s s"*& as -"il(in4s/ *arria4e'ays/
assen4er %er)inals s%a%ions/ an( si)ilar s%r"*%"res (o no% for) ar% of %&e
"-li* roa(s sin*e %&e for)er are *ons%r"*%e( o!er %&e la%%er in s"*& a 'ay %&a%
%&e flo' of !e&i*"lar %raffi* 'o"l( no% -e i)aire(. T&e *arria4e'ays an(
%er)inals ser!e a f"n*%ion (ifferen% fro) %&e "-li* roa(s. <"r%&er)ore/ %&ey are
no% oen %o "se -y %&e 4eneral "-li* &en*e n% e5e)% fro) real roery %a5es.
A!i3#t Rail 5ran%it Aut#ority v. Central -oar. of A%%e%%&ent Appeal%, et al., G. R.
No. 12)31*, 7"tober 12, 2000
E!en 4ran%in4 %&a% %&e na%ional 4o!ern)en% o'ns %&e *arria4e'ays an(
%er)inal s%a%ions/ %&e roer%y is no% e5e)% -e*a"se %&eir -enefi*ial "se &as
-een 4ran%e( %o @6TA a %a5a-le en%i%y. (!i3#t Rail 5ran%it Aut#ority v. Central
-oar. of A%%e%%&ent Appeal%, et al., G. R. No. 12)31*, 7"tober 12, 2000
BAR: 109. Proer%y e5e)% fro) %&e ay)en% of real roer%y %a5D
a. 6eal roer%y o'ne( -y %&e 6e"-li* of %&e P&iliines or any of i%s
oli%i*al s"-(i!isions e5*e% '&en %&e -enefi*ial "se %&ereof &as -een 4ran%e( %o
a %a5a-le erson for a *onsi(era%ion or o%&er'iseE
-. C&ari%a-le ins%i%"%ions/ *&"r*&es/ arsona4es or *on!en%s a"r%enan%
%&ere%o/ )os,"es/ non?rofi% or reli4io"s *e)e%eries/ an( all lan(s/ -"il(in4s an(
i)ro!e)en%s a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for reli4io"s/ *&ari%a-le an(
e("*a%ional "rosesE
*. Ma*&ineries an( e,"i)en%/ a*%"ally/ (ire*%ly an( e5*l"si!ely "se( -y
lo*al 'a%er (is%ri*%sE an( 4o!ern)en% o'ne( an( *on%rolle( *orora%ions
en4a4e( in %&e s"ly an( (is%ri-"%ion of 'a%er an( 4enera%ion an( %rans)ission
of ele*%ri* o'erE
(. 6eal roer%y o'ne( -y ("ly re4is%ere( *ooera%i!esE
e. Ma*&inery an( e,"i)en% "se( for oll"%ion *on%rol an( en!iron)en%al
ro%e*%ion.
T&e res%ri*%ion "on %&e o'er of *o"r%s %o i)ea*& %a5 assess)en%
'i%&o"% a rior ay)en%/ "n(er ro%es%/ of %&e %a5es assesse( is *onsis%en% 'i%&
%&e (o*%rine %&a% %a5es are %&e life-loo( of %&e na%ion/ an( as s"*& %&eir *olle*%ion
*anno% -e *"r%aile( -y in."n*%ion or any li2e a*%ionE o%&er'ise/ %&e s%a%e or/ in %&is
*ase/ %&e lo*al 4o!ern)en% "ni%/ s&all -e *rile( in (isensin4 %&e nee(e(
ser!i*es %o %&e eole/ an( i%s )a*&inery 4ra!ely (isa-le(. (0anila 2le"tri"
Co&pany v. -arli%, G.R. No. 114231, 0ay 1+, 2001
T&"s/ %&e %rial *o"r% &as no ."ris(i*%ion %o en%er%ain a e%i%ion for
ro&i-i%ion a-sen% ay)en% "n(er ro%es% of %&e %a5 assesse(. A$bi..
BAR: 110. Unai( real%y %a5es a%%a*& %o %&e roer%y an( is *&ar4ea-le
a4ains% %&e erson '&o &a( a*%"al or -enefi*ial "se an( ossession of i%
67
re4ar(less of '&e%&er or no% &e is %&e o'ner. To i)ose %&e real roer%y %a5 on
%&e s"-se,"en% o'ner '&i*& 'as nei%&er %&e o'ner no% %&e -enefi*ial "ser of %&e
roer%y ("rin4 %&e (esi4na%e( erio(s 'o"l( no% only -e *on%rary %o la' -"%
also "n."s%.
Conse,"en%ly/ ME6A@CO %&e for)er o'nerM"ser of %&e roer%y 'as
re,"ire( %o ay %&e %a5 ins%ea( of %&e ne' o'ner NAPOCO6. (0anila 2le"tri"
Co&pany v. -arli%, G.R. No. 114231, 0ay 1+, 2001
BAR: 111. T&e a()inis%ra%i!e re)e(ies %&a% are ro!i(e( for "n(er %&e
ro!isions of 6e. A*% No. J1H0/ %&e @o*al =o!ern)en% Co(e/ -efore resor% %o
*o"r%s is )a(e rela%i!e %o real roer%y %a5es.
a. A %a5ayer )ay ,"es%ion %&e *ons%i%"%ionali%y or le4ali%y of a %a5
or(inan*e on aeal 'i%&in %&ir%y A10B (ays fro) effe*%i!i%y %&ereof/ %o %&e
Se*re%ary of 0"s%i*e. T&e %a5ayer af%er fin(in4 %&a% &is assess)en% is "n."s%/
*onfis*a%ory/ or e5*essi!e/ )"s% -rin4 %&e *ase -efore %&e Se*re%ary of 0"s%i*e
for ,"es%ions of le4ali%y or *ons%i%"%ionali%y of a *i%y or(inan*e.
-. An o'ner of real roer%y '&o is no% sa%isfie( 'i%& %&e assess)en% of
&is roer%y )ay/ 'i%&in si5%y AH0B (ays fro) no%i*e of assess)en%/ aeal %o %&e
@o*al #oar( of Assess)en% Aeals.
*. S&o"l( %&e %a5ayer ,"es%ion %&e e5*essi!eness of %&e a)o"n% of %a5/
&e )"s% firs% ay %&e a)o"n% ("e. T&en/ &e )"s% re,"es% %&e anno%a%ion of %&e
&rase ai( "n(er ro%es% an( a**or(in4ly aeal %o %&e @o*al #oar( of
Assess)en% Aeals -y filin4 a e%i%ion "n(er oa%& %o4e%&er 'i%& *oies of %&e
%a5 (e*lara%ions an( affi(a!i%s or (o*")en%s %o s"or% &is aeal . (!ope, v.
City of 0anila, et al., G.R. No. 12)139, :ebruary 19, 1999
Se*re%ary of 0"s%i*e *an %a2e *o4ni8an*e of a *ase in!ol!in4 %&e
*ons%i%"%ionali%y or le4ali%y of %a5 or(inan*es '&ere %&ere are fa*%"al iss"es
in!ol!e(. (:i3uerre% v. Court of Appeal%, et al., G.R. No. 1191)2, 0ar"# 24,
1999
Ta5ayer files aeal %o %&e Se*re%ary of 0"s%i*e/ 'i%&in 10 (ays fro)
effe*%i!i%y %&ereof. +n *ase %&e Se*re%ary (e*i(es %&e aeal/ a erio( also of 10
(ays is allo'e( for an a44rie!e( ar%y %o 4o %o *o"r%. #"% if %&e Se*re%ary (oes
no% a*% %&ereon/ af%er %&e lase of H0 (ays/ a ar%y *o"l( alrea(y see2 relief in
*o"r%.
T&ese %&ree seara%e erio(s are *learly 4i!en for *o)lian*e as a
rere,"isi%e -efore see2in4 re(ress in a *o)e%en% *o"r%. S"*& s%a%"%ory
erio(s are se% %o re!en% (elays as 'ell as en&an*e %&e or(erly an( see(y
(is*&ar4e of ."(i*ial f"n*%ions. <or %&is reason %&e *o"r%s *ons%r"e %&ese
ro!isions of s%a%"%es as )an(a%ory. (Reye%, et al., v. Court of Appeal%, et al.,
G.R. No. 11+233, (e"e&ber 10, 1999
A Ci%y Assessor *anno% -e *o))an(e( -y )an(a)"s %o *lassify a
ar%i*"lar roer%y as e5e)% fro) real roer%y %a5a%ion -e*a"se %&is is an
e5er*ise of &is f"n*%ion of assessin4 roer%ies for %a5a%ion "roses. 9&ile i% is
&is ("%y %o *on("*% assess)en%s is a )inis%erial f"n*%ion/ %&e a*%"al e5er*ise
%&ereof is ne*essarily (is*re%ionary.
<"r%&er)ore/ re*o"rse %o *o"r%s 'ill !iola%e %&e (o*%rine of e5&a"s%ion of
a()inis%ra%i!e re)e(ies -e*a"se %&e a*%ion of %&e Ci%y Assessor is aeala-le %o
%&e @o*al #oar( of Assess)en% Aeals/ %&en*e %o %&e Cen%ral #oar( of
Assess)en% Aeals ('y%te&% Plu% Co&puter Colle3e of Caloo"an City v. !o"al
Govern&ent of Caloo"an City, et al., G. R. No. 14*3+2, Au3u%t ), 2003
P"-li* &earin4s are )an(a%ory rior %o aro!al of %a5 or(inan*e/ -"% %&is
s%ill re,"ires %&e %a5ayer %o a(("*e e!i(en*e %o s&o' %&a% no "-li* &earin4s
e!er %oo2 la*e. (Reye%, et al., v. Court of Appeal%, et al., G.R. No. 11+233,
(e"e&ber 10, 1999
68
'olutio in.ebeti an( iss"es rela%i!e %o !ali(i%y (o no% re,"ire ay)en%
"n(er ro%es%.
T&e *on*"rren% an( si)"l%aneo"s re)e(ies affor(e( lo*al 4o!ern)en%
"ni%s in enfor*in4 *olle*%ion of real roer%y %a5esD
a. Dis%rain% of ersonal roer%yE
-. Sale of (elin,"en% real roer%y/ an(
*. Colle*%ion of real roer%y %a5 %&ro"4& or(inary *o"r% a*%ion.
T&e re)e(y of le!y *an -e "rs"e( -y "%%in4 " for sale %&e real
roer%y s"-.e*% of %a5/ i.e./ %&e (elin,"en% roer%y "on '&i*& %&e %a5 lien
a%%a*&es/ re4ar(less of %&e resen% o'ner or ossessor %&ereof. :o'e!er %&is
re)e(y is only one of %&e o%&er re)e(ies. (0anila 2le"tri" Co&pany v. -arli%,
G.R. No. 114231, 0ay 1+, 2001
T&e @=U *o"l( also a!ail of %&e re)e(y of (is%rain% an( le!y of ersonal
roer%y s"-.e*%in4 any ersonal roer%y of %&e %a5ayer %o e5e*"%ion. %&"s/ %&e
iss"an*e of %&e 'arran%s of 4arnis&)en% o!er ME6A@COs -an2 (eosi%s 'as
no% i)roer or irre4"lar. (0anila 2le"tri" Co&pany v. -arli%, et al., G.R. No.
114231, 0ay 1+, 2001
BAR: 112. +% is %r"e %&a% %&e "nai( %a5 a%%a*&es %o %&e roer%y an( is
*&ar4ea-le a4ains% %&e erson '&o &as a*%"al or -enefi*ial "se an( ossession
of i% re4ar(less of '&e%&er or no% &e is %&e o'ner. :o'e!er/ %o i)ose %&e real
roer%y %a5 on %&e s"-se,"en% o'ner '&i*& 'as nei%&er %&e o'ner nor %&e
-enefi*ial "ser of %&e roer%y ("rin4 %&e (esi4na%e( erio(s 'o"l( no% only -e
*on%rary %o la' -"% also "n."s%. A(0anila 2le"tri" Co&pany v. -arli%, et al., G.R.
No. 114231, 0ay 1+, 2001 *i%in4 5e%tate 2%tate of Con"or.ia 5. !i& v. City of
0anila, 1+2 'CRA 4+2B T&"s ME6A@CO %&e for)er o'ner/ no% NAPOCO6/ %&e
resen% o'ner/ is lia-le for %&e ay)en% of %&e -a*2 %a5es on %&e a-o!e
roer%ies.
No%i*e an( "-li*a%ion/ as 'ell as %&e le4al re,"ire)en%s for a %a5
(elin,"en*y sale/ are )an(a%ory/ an( %&e fail"re %o *o)ly %&ere'i%& *an
in!ali(a%e %&e sale. T&e res*ri-e( no%i*es )"s% -e sen% %o *o)ly 'i%& %&e
re,"ire)en%s of ("e ro*ess. ((e Dne"#t, et al,. v. Court of Appeal%= (e Dne"#t,
et al., v. ?onorable 'ayo, 290 'CRA 223,23*
T&e reason -e&in( %&e no%i*e re,"ire)en% is %&a% %a5 sales are
a()inis%ra%i!e ro*ee(in4s '&i*& are in per%ona& in na%"re. (Pu,on v. Abellera,
1*9 'CRA )+9, )94= (e A%i% v. $.A.C., 1*9 'CRA 314
S%es %o -e follo'e( for %&e )an(a%ory *on("*% of =eneral 6e!ision of
6eal Proer%y Assess)en%sD
a. Preara%ion of S*&e("le of <air Mar2e% Val"esE
- . Ena*%)en% of Or(inan*esD
1B @e!yin4 an ann"al a( !alore) %a5 on real roer%y an( an
a((i%ional %a5 a**r"in4 %o %&e Se*ial E("*a%ion <"n(E
2B <i5in4 %&e assess)en% le!els %o -e alie( %o %&e )ar2e% !al"es
of real roer%iesE
1B Pro!i(in4 %&e ne*essary aroria%ions %o (efray e5enses
in*i(en% %o 4eneral re!ision of real roer%y assess)en%s/E an(
4B A(o%in4 %&e S*&e("le of <air Mar2e% Val"es reare( -y %&e
assessors. A!ope, v. City of 0anila, et al., G.R. No. 12)139, :ebruary 19,
1999
Preara%ion of fair )ar2e% !al"esD
a. T&e *i%y or )"ni*ial assessor s&all reare a s*&e("le of fair )ar2e%
!al"es for %&e (ifferen% *lasses of real roer%y si%"a%e( in %&eir rese*%i!e @o*al
69
=o!ern)en% Uni%s for %&e ena*%)en% of an or(inan*e -y %&e %an33unian
*on*erne(E an(
-. T&e s*&e("le of fair )ar2e% !al"es s&all -e "-lis&e( in a ne'saer
of 4eneral *ir*"la%ion in %&e ro!in*e/ *i%y or )"ni*iali%y *on*erne( or %&e
os%in4 in %&e ro!in*ial *ai%ol or o%&er la*es as re,"ire( -y la'. (!ope, v. City
of 0anila, et al., G.R. No. 12)139, :ebruary 19, 1999
Proose( fair )ar2e% !al"es of real roer%y in a lo*al 4o!ern)en% "ni% as
'ell as %&e or(inan*e *on%ainin4 %&e s*&e("le )"s% -e "-lis&e( in f"ll for %&ree
A1B *onse*"%i!e (ays in a ne'saer of lo*al *ir*"la%ion/ '&ere a!aila-le/ 'i%&in
%en A10B (ays of i%s aro!al/ an( os%e( in a% lease %'o A2B ro)inen% la*es in
%&e ro!in*ial *ai%ol/ *i%y/ )"ni*ial or baran3ay &all for a )ini)") of %&ree A1B
*onse*"%i!e 'ee2s. (:i3uerre% v. Court of Appeal%, et al,. G.R. No. 1191)2,
0ar"# 24, 1999
A se*ial le!y or se*ial assess)en% is an i)osi%ion -y a ro!in*e/ a *i%y
or a )"ni*iali%y 'i%&in %&e Me%rooli%an Manila Area "on real roer%y se*ially
-enefi%e( -y a "-li* 'or2s e5en(i%"re of %&e @=U %o re*o!er no% )ore %&an
H0N of s"*& e5en(i%"re.
T&e real roer%y %a5es %&a% )ay -e *olle*%e( -y ro!in*es/ *i%ies an(
)"ni*iali%ies 'i%&in %&e Me%ro Manila area are %&e -asi* real roer%y %a5/ %&e
se*ial e("*a%ion f"n(/ an( %&e a( !alore) %a5 on i(le lan(s.
GOOD LUCK AND PRAYERS
FOR YOUR PASSING THE BAR.
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