Lascona Land Co. Inc. v.

Commissioner of Internal
Revenue, G.R. No. 171251, 05 March 2012
FACTS

The Commissioner of Internal Revenue (CIR) issued an assessment against Lascona Land Co., Inc.
(Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the amount
of P753,266.56. Consequently, on April 20, 1998, Lascona filed a letter protest, but was denied by
Norberto R. Odulio, Officer-in-Charge (OIC), Regional Director, Bureau of Internal Revenue, Revenue
Region No. 8, Makati City. On April 12, 1999, Lascona appealed the decision before the CTA. Lascona
alleged that the Regional Director erred in ruling that the failure to appeal to the CTA within thirty (30)
days from the lapse of the 180-day period rendered the assessment final and executory. The CIR,
however, maintained that Lascona’s failure to timely file an appeal with the CTA after the lapse of the
180-day reglementary period provided under Section 228 of the National Internal Revenue Code (NIRC)
resulted to the finality of the assessment.

ISSUE
Whether the subject assessment has become final, executory and demandable due to the failure of
petitioner to file an appeal before the CTA within thirty (30) days from the lapse of the One Hundred
Eighty (180)-day period pursuant to Section 228 of the NIRC.

HELD
NO.
[T]he Court has held that in case the Commissioner failed to act on the disputed assessment within the
180-day period from date of submission of documents, a taxpayer can either: (1) file a petition for review
with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or (2) await the
final decision of the Commissioner on the disputed assessments and appeal such final decision to the
Court of Tax Appeals within 30 days after receipt of a copy of such decision. These options are mutually
exclusive and resort to one bars the application of the other.

Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it
did not intend to limit it to a single remedy of filing of an appeal after the lapse of the 180-day prescribed
period. Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide
either positively or negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision
of the CIR on the protested assessment. More so, because the law and jurisprudence have always
contemplated a scenario where the CIR will decide on the protested assessment.

Commissioner of Internal Revenue vs Philippine Global Communication, Inc.

Taxation – Tax Collection – Prescriptive Period – Reconsideration vs Reinvestigation

In April 1991, Philippine Global Communication, Inc. (PGCI) filed its annual income tax return (ITR) for
the taxable year 1990. A tax audit was subsequently conducted by the Bureau of Internal Revenue (BIR)
and eventually a final assessment notice (FAN) was timely issued in April 1994. The FAN demanded PGCI
to pay P118 million in deficiency taxes inclusive of surcharge and interest. PGCI was able to file a protest
within the reglementary period. PGCI however refused to produce additional evidence. In October 2002,
eight years after the FAN was issued, the Commissioner of Internal Revenue (CIR) issued a final decision
denying the protest filed by PGCI. PGCI then filed a petition for review with the Court of Tax Appeals
(CTA). The CIR filed its answer in January 2003. The CTA ruled that the CIR can no longer collect because
it is already barred by prescription. The CIR argued that the prescriptive period has been extended
because PGCI asked for a reinvestigation.

ISSUE: Whether or not the CIR is barred by prescription.

HELD: Yes. Under the law, the CIR has 3 years from the issuance of the FAN to make its collection. The
FAN was issued in April 1994 and so the CIR has until April 1997 to make a collection. Within that period,
the CIR never issued a warrant of distraint/levy. Its earliest collection effort was only when it filed an
answer to the appeal filed by PGCI. CIR’s answer was filed in January 2003 which was way beyond the
three year prescriptive period to collect the assessed taxes.

The CIR cannot invoke that the protest filed by PGCI is in effect a request for reinvestigation. Under the
law, a request for reinvestigation shall toll the running of the prescriptive period to collect. However in
the case at bar, the protest filed by PGCI is not a request for reinvestigation but rather it was a request
for reconsideration. And in such case, it did not suspend the prescriptive period. The protest is a request
for reconsideration because PGCI did not adduce additional evidence or documents. PGCI merely sought
the CIR to review the existing records on file.

G.R. No. 215534, April 18, 2016

COMMISSIONER OF INTERNAL REVENUE COMMISSIONER OF INTERNAL REVENUE , Petitioner, v.

LIQUIGAZ PHILIPPINES LIQUIGAZ PHILIPPINES CORPORATION, CORPORATION,Respondent.

G.R. NO. 215557 G.R. NO. 215557

LIQUIGAZ PHILIPPINES CORPORATION LIQUIGAZ PHILIPPINES CORPORATION , Petitioner,

v.COMMISSIONER OF INTERNAL COMMISSIONER OF INTERNAL REVENUE REVENUE , Respondent.

FACTS:

Liquigaz Philippines Corporation ( L i q u i g a z ) is a corporation duly organized and existing under

Philippine laws. On July 11, 2006, it received a copy of Letter of Authority ( Letter of Authority ( LOA) )
No.0 0067824, dated July 4, 2006, issued by the CIR, the authorizing the investigation of all internal
revenue taxes for taxable year 2005. On April 9, 2008, it received an undated letter purporting to be a
Notice of Informal Conference (NIC), as well as the detailed computation of its supposed tax liability. On
May 28, 2008, it received a copy of Preliminary Assessment Notice (PAN), Notice (PAN), dated May 20,
2008, together with the attached details of discrepancies for the calendar year ending December 31,
2005. Upon investigation, Liquigaz was initially assessed with deficiency withholding tax liabilities,
inclusive of interest, in the aggregate amount ofP23,931,708.72. On June 25, 2008, it received a Formal
Letter of Demand ( Formal Letter of Demand ( FLD )/Formal )/Formal Assessment Notice ( Assessment
Notice (FAN) FAN) , together with its attached details of discrepancies, for the calendar year ending
December 31, 2005, with total deficiency withholding tax liabilities ofP24,332,347.20. On July 25, 2008,
Liquigaz filed its PROTEST against the FLD/FAN and subsequently submitted its supporting documents on
September 23, 2008. On July 1, 2010, it received a copy of the Final Decision on Disputed Assessment
(FDDA) covering the tax audit under LOA No. 00067824. As reflected in the FDDA, the CIR still found
Liquigaz liable for deficiency withholding tax liabilities, inclusive of interest, in the aggregate amount of
P22,380,025.19, which may be broken down as follows:

Expanded Withholding Tax (EWT) P 3,479,426.75

Withholding Tax on Compensation (WTC) P 4,508,025.93

Fringe Benefits Tax (FBT) P14,392,572.51

On July 29, 2010, Liquigaz filed its Petition for Review before the CTA Division assailing the validity of the
FDDA issued by the CIR. The CTA DIVISION RULING partially granted Liquigaz's petition cancelling the
EWT and FBT assessments but affirmed with modification the WTC assessments. Invalidated EWT and
FBT assessment because the FDDA did not provide for the facts on which the assessment was made
pursuant to Section 228 of the NIRC 1997 and RR No. 12-99, but sustained WTC assessment on the
ground that that the factual bases used in the FLD and FDDA with regard thereto were the same as the
difference in the amount merely resulted from the use of a different tax rate. The CTA EN BANC RULING
affirmed the assailed decision of the CTA Division. Both parties filed their respective petitions for review.
The ARGUMENT OF BOTH PARTIES Liquigaz that WTC assessment should have also been invalidated
because FDDA did not provide for the facts on which the assessment was based. It argues that it was
deprived of due process in not stating the factual basis of the assessment, the CIR did not consider the
defenses and supporting documents it presented. A VOID FDDA will lead to a void assessment b because
the FDDA ultimately determines the final tax liability of a taxpayer. CIR decided that EWT and FBT
liability should be upheld because the FDDA must be taken together with the PAN and FAN, where
details of the assessment were attached. That even if the FDDA would be declared VOID, it should NOT
result in the automatic abatement of tax liability especially because RR No. 12-99 merely states that a
void decision of the CIR or representative shall not be considered a decision of the assessment.

ISSUES:

1. Whether or not failure of the FDDA to state the facts ad law on which it is based renders the decision
VOID

2. What would be the effect of a void FDDA

HELD:
1. YES, 1. YES, but it does but it does not extend to the nullification of the not extend to the nullification
of the entire ASSESSMENT. entire ASSESSMENT. The assessment on deficiency Withholding Tax in
Compensation is upheld

2. It is tantamount to a denial by inaction by the CIR.

RATIO:

The requirement of providing the taxpayer with written notice of the factual ritten notice of the factual
and legal bases applies both to the FLD/FAN and the FDDA. Section 228 of NIRC and RR No. 12-99 lay out
the procedure to be followed on tax assessment. A taxpayer SHALL be informed in writing of the law and
the facts on which it is made, otherwise, the assessment shall be VOID. The use of the word “SHALL”
indicates that such requirement is MANDATORY. The written notice requirement for both the FLD and
FAN is in observance of DUE PROCESS - to afford the taxpayer adequate opportunity to file a protest on
the assessment and thereafter file an appeal in case of adverse decision. Section 228 is, however, silent
as with regards to a decision on a disputed assessment by the CIR. This void is filled by RR No. 12-99
where it is stated that failure of the FDDA to reflect the facts and law on which it is based with FDDA to
reflect the facts and law on which it is based will make the decision void. It, however, void. It, however,
does not extend to the nullification of the does not extend to the nullification of the entire assessment
entire assessment. A VOID FDDA does not ipso facto render the assessment VOID. A decision of the CIR
on a disputed assessment DIFFERS from the assessment itself. What is appealable to the CTA is the
“decision” of the CIR on d i s p u t e d a s s e s s m e n t and not the assessment itself. An assessment
becomes a d i s p u t e d a s s e s s m e n t after the taxpayer has filed its protest to the assessment in the
administrative level. CIR, then, either issues a decision on the disputed assessment or fails to act on it,
and is therefore considered denied. The taxpayer then appeal the decision on the disputed assessment
or the inaction of the CIR. Clearly, the FDDA is not the only means that the final tax liability of a taxpayer
is fixed, which may then be appealed by the taxpayer. Under the law, inaction on the part of the CIR may
likewise result in the finality of a taxpayer’s tax liability as it is deemed a denial of the protest filed by the
latter, which may also be appealed before the CTA. It is undisputed that the FDDA merely showed
Liquigaz’ tax liabilities without any details on the specific transactions which gave details on the specific
transactions which gave rise to its rise to its supposed tax deficiencies supposed tax deficiencies. While it
provided for the LEGAL bases of the assessment, it fell short of informing Liquigaz of the FACTUAL bases
thereof. Moreover, the amounts in the FAN and FDDA were DIFFERENT. Hence, it is even more
imperative that the FDDA contain details of the discrepancy. However, Liquigaz was effectively informed
in writing of the factual bases of its assessment for WTC because the basis for the FDDA, with regards to
the WTC, was identical with the FAN - which had a detail of discrepancy to it. The CTA erred, however, in
concluding that the assessment on EWT and FBT deficiency was void because the FDDA covering the
same was void. The assessment REMAIN VALID notwithstanding the nullity of the FDDA because the
assessment itself differs from a decision on the disputed assessment.

EFFECTS OF A VOID FDDA

As established, an FDDA that does not inform the taxpayer in writing of the facts and the law on which it
is based renders the decision void. Therefore, IT IS AS IF THERE WAS NO DECISION RENDERED BY THE
CIR. It is tantamount to a denial by inaction denial by inaction by the CIR, which may still be appealed
before the CTA and the assessment evaluated on the basis of the available evidence and documents.
THE CASE IS REMANDED TO THE COURT OF TAX APPEALS FOR THE ASSESSMENT ON DEFICIENCY
EXPANDED WITHHOLDING TAX AND FRINGE BENEFITS TAX.

SPOUSES EMMANUEL D. PACQUIAO AND JINKEE J. PACQUIAO PACQUIAO , Petitioners, v.THE THE
COURT OF TAX APPEALS –

FACTS:

On April 15, 2009, Pacquiao filed his 2008 ITR reporting his Philippine-sourced income. It was
subsequently amended to include his US-sourced income. On March 25, 2010, he received a Letter of
Authority Letter of Authority (March LA) from RDO No. 43 ( R D O ) of the BIR for the examination of his
books of accounts and other accounting records for the period covering January 1, 2008 to December
31, 2008. On April 15, 2010, Pacquiao filed his 2009 ITR, which although reflecting his Philippines-
sourced income, failed to include his income derived from his earnings in the US. He also failed to file his
VAT returns for the years 2008 and 2009. C I R issued another Letter of Authority, dated July 27,
2010(July LA), authorizing the BIR's National Investigation Division ( N I D ) to examine the books of
accounts and other accounting records of both Pacquiao and Jinkee for the last 15 years, from 1995 to
2009. Then, it replaced the July LA by issuing to both Pacquiao and Jinkee separate separate electronic
versions of the July LA electronic versions of the July LA pursuant to RMC No. 56-2010. Petitioners,
through counsel, wrote a letter questioning the propriety of the CIR investigation. That they were
already subjected to an earlier investigation by the BIR for the years prior to years prior to 2007, and no
fraud was ever found to have been committed. They added that pursuant to the March LA issued by the
RDO, they were already being investigated for the year 2008. The NID informed the counsel of the
petitioners that the July LA issued by the CIR had effectively cancelled and superseded the March LA
issued by its RDO. The CIR informed the petitioners that its reinvestigation of years prior to 2007 was
justified because the assessment thereof was pursuant to a "fraud investigation" against the petitioners
under the "Run After Tax Evaders" ( R A T E ) program of the BIR. Petitioners submitted various income
tax related documents for the years 2007-2009. As for the years 1995 to 2006, the petitioners explained
that they could not furnish the bureau with the books of accounts and other, tax related documents as
they had already been disposed in accordance with Section 235 of the Tax Code. CIR issued a subpoena
duces tecum, requiring the petitioners to submit additional income tax and VAT related documents for
the year 1995-2009. After conducting its own investigation, CIR made its INITIAL ASSESSMENT finding
that the petitioners were unable to fully settle their initial liabilities. It issued a Notice of Initial
Assessment - Informal Conference (NIC) directly addressed to the petitioners that based on the b e s t e
v i d e n c e o b t a i n a b l e , they were liable for deficiency income taxes in the amount of
P714,061,116.30 for 2008 and P1,446,245,864.33 for 2009. On February 20, 2012, it issued the
Preliminary Assessment Notice (PAN), informing the petitioners that based on t h i r d p a r t y i n f o r m
a t i o n a ll o w e d i n N I R C , they found the petitioners liable not only for the deficiency income taxes.
Petitioners filed their protest against the PAN which the BIR denied. BIR issued its Formal Letter of
Demand (FLD) Formal Letter of Demand (FLD) finding the petitioners liable for deficiency income tax and
VAT amounting to P766,899,530.62 for 2008 and P1,433,421,214.61 for 2009. Petitioner question such
findings. BIR issued its Final Decision on Disputed Assessment (FDDA) Final Decision on Disputed
Assessment (FDDA) addressed to P a c q u i a o o n l y , informing him that he is liable for deficiency
income tax and VAT for 2008 and 2009 amounting to P2,261,217,439.92. Seeking to collect the total
outstanding tax liabilities of the petitioners, BIR issued:

Preliminary Collection Letter (PCL) Preliminary Collection Letter (PCL)

Final Notice Before Seizure (FNBS) but also their non-payment of their VAT liabilities VAT liabilities
(P4,104,360.01 for 2008 and P24,901,276.77 for 2009)

Petitioners requested that they be allowed to pay the same in four quarterly installments. They had paid
a total P32,196,534.40. Aggrieved, they filed a petition for review with the CTA. Petitioner’s contention
that the assessment of the CIR was defective because it was predicated on its mere allegation that they
were guilty of fraud and that Jinkee was denied due process, as all previous communications and notices
from the CIR were addressed to both petitioners, the FDDA was void because it was only addressed to
Pacquiao. Thus, considering that the PCL and FNBS were based on the FDDA, the same should likewise
be void and that the CIR assessment which was not based on actual transactions but simply on “best
possible sources” was not sanctioned by the Tax Code, that the assessment failed to considered the
taxes paid by Pacquiao to the US authorities and also the deductions claimed by him from his expenses.
Pending appeal, petitioners sought the suspension of the issuance of warrants of distraint and/or levy
and warrants of garnishment. In a letter, BIR denied their request to defer the collection enforcement
action for lack of legal basis, with a warrant of distraint and/or levy against the petitioner. Aggrieved,
petitioner filed Urgent Motion for the CTA to lift the warrants of distraint, levy and garnishment and to
enjoin CIR from collecting the assessed deficiency taxes. The CTA ruled granted the petitioner’s urgent
motion, it noted that the amount sought to be collected was way beyond the petitioner’s net worth
which based on Pacquiao’s SALN, only amounted to P1,185,984,697.00. However, petitioners were
required to deposit the amount of P3,298,514,894.35 or post a bond in the amount of
P4,947,772,341.53. Procedural and Substantive errors raised by the petitioners:

1. CTA erred when it required them to make a cash deposit or post a bond. They insist that the fraud
assessment by the CIR could not be served as a basis for security

2. BIR failed to accord them procedural due process when it initiated summary collection remedies even
before the expiration of period allowed for them to pay the assessed deficiency taxes

3. The BIR only served the FDDA to Pacquiao, no similar notice to Jinkee

4. The amount assessed as deficiency taxes had already paid, albeit in installments

5. The posting of their required security is effectively an impossible condition given that their
undisputed net worth is only P1,185,984,697.00

ISSUE:
Whether or not petitioners are required to post cash deposit or bond as a condition to suspend the
collection of deficiency taxes

HELD:

Yes, as a general rule, but such requirement can be reduced or dispensed with when the collection may
jeopardize the interest of the Government and/or taxpayer as the collection when there is patently
violation of the law. The case is REMANDED to the CTA which is ordered to conduct a preliminary
hearing whether the dispensation of or reduction of the required cash deposit or bond is proper to
restrain the collection of deficiency taxes against the petitioner (since the issue calls for a question of
fact).

RATIO:

Appeal will not suspend the collection of tax; exception

General Rule: An appeal to the CTA from the decision of the CIR will not suspend the payment, levy,
distraint and/or sale of any property of the taxpayer for the satisfaction of his tax liability

(Sec 11 of RA 1125)

Exception: When, in view of the CTA, the collection may jeopardize the interest of the Government
and/or taxpayer, it MAY SUSPEND the said collection and require the taxpayer either to deposit the
amount claimed or to file a surety bond. Court’s Ruling in Avelino - “the courts were clothed with
authority to DISPENSE with the requirement (cash deposit or bond) if the method employed by the CIR
in the collection of tax is not sanctioned by law”. Thus,the Court still holds that the CTA has ample
authority to issue injuctive writs to restrain the collection of tax, and to even dispense with the deposit
of the amount claimed or the filing of the required bond, whenever the method employed by the CIR in
the collection jeopardizes the interests of a taxpayer for being patently in violation of the law. It is not
simply confined to cases where prescription has set in. The determination of whether the petitioner’s
case falls within the exception provided under Sec 11, RA no. 1125 CANNOT BE DETERMINED AT THIS
POINT is still behooved upon the CTA to properly determine, at least preliminary, whether the CIR, in its
assessment of the tax liability of the petitioners, and its effort to collect the same, complied with the law
and the pertinent issuances of the BIR itself. The CTA should have conducted a preliminary hearing and
received evidence so it could have properly determined whether the requirement of providing the
required security could be reduced or dispensed with pendente lite. The Court CANNOT make a
PRELIMINARY DETERMINATION on whether the CIR used methods sanctioned by law. Absent any
evidence and preliminary determination by the CTA, the COURT cannot make any factual finding and
settle the issue of whether the petitioners should comply with the security requirement under Sec 11 of
RA 1125. The determination of whether the methods, employed by the CIR in its assessment,
jeopardized the interests of a taxpayer for being patently in violation of the law is a question of fact that
calls for the reception of the evidence which would serve as basis. The CTA is in better position to
initiate this given time and resources. The remand of the case to the CTA on this question is therefore
more sensible and proper. Petition to be remanded to the CTA; to conduct preliminary hearing, The CTA
must take into account, among other, the following:

1. 1. Whether the requirement of a Notice of Informal Conference was complied with a NIC be first
accorded to the taxpayer

2. Whether the 15 year period subject of Whether the 15 year period subject of the CIR’s investigation is
arbitrary the CIR’s investigation is arbitrary and excessive and excessive

Tax Code provides a 3yr limit for the assessment of internal revenue taxes; it may be extended to 10yrs
in cases where there is false or fraudulent or non-filing of a tax return

3. Whether fraud was duly established, a preliminary investigation must first be conducted before a LA
was issued

4. Whether the FLD issued against the petitioners was irregular, The FLD allegedly stated the amounts
therein were “estimates based on best possible sources”. A taxpayer should be informed in writing of
the law and the facts on which the assessment is made, otherwise, the assessment is void.

5. Whether the FDDA, the PCL, the FNBS, and the warrants of Distraint and/ or Levy were validly issued.

The CTA must also determine if the following allegations of the petitioners have merit:

a. The FDDA and PCL were issued against Pacquiao only; the warrant of distraint and/or levy were made
against the assets of both petitioners;

b. The warrants of garnishment had been served on banks of both petitioners e v e n b e f o r e t h e p e t

itionersreceivedtheFDDAandPCL;

c. The Warrant of distraint and/or levy against the petitioners was allegedly made prior to the expiration
of the period allowed for the petitioners to pay the assessed deficiency taxes

d. That the deficiency VAT was already paid in full;

e. Petitioners were not given a copy of the Warrants

IN CASE, the petitioner SHOULD PROVIDE the necessary security, a RECOMPUTATION of the amount
thereof is in order. If there would be a need for a BOND or to REDUCE the same, the CTA should take
note that phrase “amount claimed” should be construed to refer to the principal amount of the
deficiency taxes, excluding penalties, interests and charges excluding penalties, interests and charges. In
view of the foregoing, the Resolutions of the CTA, in so far as it required the petitioners to deposit first a
cash bond or post a bond SHOULD BE FURTHER ENJOINED until the issues aforementioned are settled in
a preliminary hearing to be conducted by it.
ING Bank N.V. vs CIR, GR No. 167679, July 22, 2015

Fact:

ING Bank, "the Philippine branch of Internationale Nederlanden Bank N.V., a foreign banking
corporation incorporated in the Netherlands is duly authorized by the Bangko Sentral ng Pilipinas to
operate as a branch with full banking authority in the Philippines. On January 3, 2000, ING Bank received
a Final Assessment Notice dated December 3, 1999. The Final Assessment Notice also contained the
Details of Assessment and Assessment Notices issued by the Enforcement Service of the Bureau of
Internal Revenue through its Assistant Commissioner Percival T. Salazar. On February 2, 2000, ING Bank
paid the deficiency assessments for 1996 compromise penalty, 1997 deficiency documentary stamp tax
and 1997 deficiency final tax in the respective amounts of P1,000.00, P1,000.00 and P75,013.25 plus
additional interest. ING Bank, however, protested the remaining ten (10) deficiency tax assessments in
the total amount of P672,576,939.18. ING Bank filed a Petition for Review before the Court of Tax
Appeals on October 26, 2000. The Petition was filed to seek the cancellation and withdrawal of the
deficiency tax assessments for the years 1996 and 1997, including the alleged deficiency documentary
stamp tax on special savings accounts, deficiency onshore tax, and deficiency withholding tax on
compensation. After trial, the Court of Tax Appeals Second Division rendered its Decision, the
assessments for 1996 and 1997 were cancelled and withdrawn but the 1996 and 1997 deficiency
withholding tax on compensation, 1996 deficiency onshore tax and 1996 and 1997 deficiency
documentary stamp tax on special savings accounts were upheld. Then ING Bank filed its appeal but it
was denied due course and dismissed. Hence, ING Bank filed its Petition for Review to the Supreme
court. The Commissioner of Internal Revenue filed its Comment on October 5, 2005 and ING Bank its
Reply on December 14, 2005. Pursuant to the court's Resolution dated January 25, 2006, t0he
Commissioner of Internal Revenue filed its Manifestation and Motion on February 14, 2006, stating that
it is adopting its Comment as its Memorandum, and ING Bank filed its Memorandum30 on March 9,
2006.

Issue:

Whether the assessment for deficiency withholding tax on compensation is proper.

Held:

Yes, Petitioner ING Bank liable for deficiency withholding tax on compensation for the taxable years
1996 and 1997 in the total amount of P564,542.67 inclusive of interest. Petitioner ING Bank already
recognized a definite liability on its part considering that it had deducted as business expense from its
gross income the accrued bonuses due to its employees. Underlying its accrual of the bonus expense
was a reasonable expectation or probability that the bonus would be achieved. In this sense, there was
already a constructive payment for income tax purposes as these accrued bonuses were already allotted
or made available to its officers and employees. The tax on compensation income is withheld at source
under the creditable withholding tax system wherein the tax withheld is intended to equal or at least
approximate the tax due of the payee on the said income. It was designed to enable (a) the individual
taxpayer to meet his or her income tax liability on compensation earned; and (b) the government to
collect at source the appropriate taxes on compensation .Taxes withheld are creditable in nature. Thus,
the employee is still required to file an income tax return to report the income and/or pay the difference
between the tax withheld and the tax due on the income. For over withholding, the employee is
refunded. Therefore, absolute or exact accuracy in the determination of the amount of the
compensation income is not a prerequisite for the employer's withholding obligation to arise. Under the
National Internal Revenue Code, every form of compensation for personal services is subject to income
tax and, consequently, to withholding tax. Hence, petitioner ING Bank is liable for the withholding tax on
the bonuses since it claimed the same as expenses in the year they were accrued even if it was used for
travel and entertainment expenses of its officers and even bonuses were actually distributed only in the
succeeding years of their accrual (i.e., in 1997 and 1998) when the amounts were finally determined.
The obligation of the payor/employer to deduct and withhold the related withholding tax arises at the
time the income was paid, accrued, or recorded as an expense in the payor’s/employer’s books,
whichever comes first.

Cases:

5. Spouses Pacquiao vs. CTA, GR No. 213394, April 6, 2016

6. ING Bank N.V. vs CIR, GR No. 167679, July 22, 2015

7. Lascona Land vs. CIR GR No. 171251, April 24, 2007

8. CIR vs. Phil Global Communication, Inc., GR no. 167146, October 31, 2006

9. CIR vs. Liquigaz, GR Nos. 215534 and 215557, April 18, 2016