DEFINE:

1. INCOME TESTS IN SYLLABUS

Realization Test – unless the income is deemed “realized,” there is no taxable income.
Economic Benefit Test, Doctrine of Proprietary Interest – flow of wealth realized is
taxable only to the extent that the taxpayer is economically benefitted
Severance Test - as capital or investment is not income subject to tax, the gain or profit
derived from the exchange or transaction of said capital by the taxpayer for his separate
use, benefit and disposal is income subject to tax
2. BIR RULINGS, RMC/RMOS
BIR Rulings are the official position of the Bureau to queries raised by taxpayers
and other stakeholders relative to clarification and interpretation of tax laws.
Revenue Memorandum Circular (RMCs) are issuances that publish pertinent
and applicable portions, as well as amplifications, of laws, rules, regulations and
precedents issued by the BIR and other agencies/offices
Revenue Memorandum Orders (RMOs) are issuances that provide directives
or instructions; prescribe guidelines; and outline processes, operations, activities,
workflows, methods and procedures necessary in the implementation of stated policies,
goals, objectives, plans and programs of the Bureau in all areas of operations, except
auditing.
3. BEST EVIDENCE OBTAINABLE RULE
When a report required by law as a basis for the assessment of any national
internal revenue tax shall not be forthcoming within the time fixed by laws or rules and
regulations or when there is reason to believe that any such report is false, incomplete
or erroneous, the Commissioner shall assess the proper tax on the best evidence
obtainable.
In case a person fails to file a required return or other document at the time
prescribed by law, or willfully or otherwise files a false or fraudulent return or other
document, the Commissioner shall make or amend the return from his own knowledge
and from such information as he can obtain through testimony or otherwise, which shall
be prima facie correct and sufficient for all legal purposes.
(Sec. 6B NIRC)
4. IAET (NOTE THAT PRESCRIPTIVE PERIOD FOR ASSESSMENT DOES NOT
APPLY)
IMPROPERLY ACCUMULATED EARNINGS TAX is a tax imposed upon every
corporation formed or availed for the purpose of avoiding the income tax with respect to
its shareholders or the shareholders of any other corporation, by permitting earnings
and profits to accumulate instead of being divided or distributed. Tax Rate: 10% of
improperly accumulated taxable income (in addition to other taxes)
Exceptions. – The improperly accumulated earnings tax as provided for under
this Section shall not apply to:
(a) Publicly-held corporations;
(b) Banks and other non-bank financial intermediaries; and
(c) Insurance companies
5. NOLCO - NET OPERATING LOSS CARRY OVER
The net operating loss of the business or enterprise for any taxable year
immediately preceding the current t axable year, which had not been previously offset
as deduction from gross income shall be carried over as a deduction from gross income
for the next three (3) consecutive taxable years immediately following the year of such
loss: Provided, however, That any net loss incurred in a taxable year during which the
taxpayer was exempt from income tax shall not be allowed as a deduction under this
Subsection: Provided, further, That a net operating loss carry-over shall be allowed only
if there has been no substantial change in the ownership of the business or enterprise in
that –
(i) Not less than seventy-five percent (75%) in nominal value of outstanding
issued shares, if the business is in the name of a corporation, is held by or on behalf of
the same persons; or

(ii) Not less than seventy-five percent (75%) of the paid up capital of the
corporation, if the business is in the name of a corporation, is held by or on behalf of the
same persons.
For purposes of this subsection, the term ‘net operating loss’ shall mean the
excess of allowable deduction over gross income of the business in a taxable year.
Provided, That for mines other than oil and gas wells, a net operating loss
without the benefit of incentives provided for under Executive Order No. 226, as
amended, otherwise known as the Omnibus Investments Code of 1987, incurred in any
of the first ten (10) years of operation may be carried over as a deduction from taxable
income for the next five (5) years immediately following the year of such loss. The entire
amount of the loss shall be carried over to the first of the five (5) taxable years following
the loss, and any portion of such loss which exceeds the taxable income of such first
year shall be deducted in like manner from the taxable income of the next remaining
four (4) years.
6. LETTER OF AUTHORITY
 An official document that empowers a Revenue Officer to examine and scrutinize
a taxpayer’s books of accounts and other accounting records, in order to determine the
taxpayer’s correct internal revenue tax liabilities.
7. TRANSITIONAL INPUT TAX (Sec 111)
Who may avail: (i) By a person who becomes VAT-liable for the 1st time, or (ii)
any person who elects to be a VAT-registered person Rate: 2% Input VAT of the value
of the beginning inventory on hand or actual VAT paid on such, goods, materials and
supplies, whichever is HIGHER, which amount shall be creditable against the output tax
of VAT registered person.
Tax base: The value allowed for income tax purposes on inventories shall be the
basis for the computation of the 2% transitional input tax, EXCLUDING goods that are
exempt from VAT under Sec. 109 of the Tax Code. (RR 162005)
Note: A real estate dealer is entitled to claim transitional input VAT based on the
value of the entire (including the value of the land and the improvements thereon) real
property sold regardless of whether there was in fact actual payment of VAT on the
purchase of the real property. At the time the purchase was made, there was still no
VAT imposed. (Fort Bonifacio Development Corp. v. CIR) (Source: Dimaampao)

8. CTA JURISDICTION (DIVISION, EN BANC)

1. Decisions of the Commissioner of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising under the National Internal
Revenue or other laws administered by the Bureau of Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relations thereto, or other matters arising under the National Internal Revenue Code or
other laws administered by the Bureau of Internal Revenue, where the National Internal
Revenue Code provides a specific period of action, in which case the inaction shall be
deemed a denial;
3. Decisions, orders or resolutions of the Regional Trial Comis in local tax cases
originally decided or resolved by them in the exercise of their original or appellate
jurisdiction;
4. Decisions of the Commissioner of Customs in cases involving liability for
customs duties, fees or other money charges, seizure, detention or release of property
affected, fines, forfeitures or other penalties in relation thereto, or other matters arising
under the Customs Law or other laws administered by the Bureau of Customs;
 5. Decisions of the Central Board of Assessment Appeals in the exercise of its
appellate jurisdiction over cases involving the assessment and taxation of real property
originally decided by the provincial or city board of assessment appeals;
6. Decisions of the Secretary of Finance on customs cases elevated to him
automatically for review from decisions of the Commissioner of Customs which are
adverse to the Government under Section 2315 of the Tariff and Customs Code;
7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural
product, commodity or article, and the Secretary of Agriculture in the case of agricultural
product, commodity or article, involving dumping and countervailing duties under
Section 301 and 302, respectively, of the decision to impose or not to impose said
duties.
(Basis: Section 7 of RA 1125,22 as amended by RA 9282)
DISTINGUISH:
9. INDIRECT V. WITHHOLDING TAXES
When the tax is an indirect tax, the incidence or liability for the payment falls on
one person but the burden thereof can be shifted or passed on to another. Withholding
tax, on the other hand, is a tax to be paid by the payer of the income rather than by the
recipient, it is thus withheld or deducted from the income due to the latter.
10. FINAL V. CREDITABLE WITHHOLDING TAX
FINAL WITHHOLDING TAX AT SOURCE Under the final withholding tax
system, the amount of income tax withheld by the withholding agent is constituted as a
full and final payment of the income tax due from payee on the said income (e.g.,
interest on deposits, royalties, etc.). The liability for payment of the tax rests primarily on
the payor as a withholding agent. Thus, in case of the withholding agent’s failure to
withhold the tax or in case of under-withholding, the deficiency tax shall be collected
from him. The payee is not required to file an income tax return for the particular
income, nor is he liable for the payment of the tax. [Sec. 2.57, RR No. 2-98]

CREDITABLE WITHHOLDING TAX Taxes withheld on certain income payments

are intended to equal or at least approximate the tax due of the payee on the income.
The income recipient is still required to file his income tax return as prescribed in
Section 51 of the NIRC, wither to report the income and/or pay the difference between
the tax withheld and the tax due on the income.
11. AVOIDANCE V. EVASION
Tax avoidance and tax evasion are the two most common ways used by
taxpayers in escaping from taxation. Tax avoidance is the tax saving device within the
means sanctioned by law. This method should be used by the taxpayer in good faith
and at arms length.
Tax evasion, on the other hand, is a scheme used outside of those lawful means
and when availed of, it usually subjects the taxpayer to further or additional civil or
criminal liabilities.
(Note: An example of tax avoidance is when a taxpayer avails of deductions
allowed by law.)
12. AMNESTY V. EXEMPTION, CONDONATION
A tax amnesty is a general pardon or intentional overlooking by the State of its
authority to impose penalties on persons otherwise guilty of evasion or violation of a
revenue or tax. REPUBLIC V. IAC [196 SCRA 335]
Tax Amnesty Tax Exemption
immunity from all criminal, civil and immunity from civil liability only
administrative liabilities arising from
nonpayment of taxes

applies only to past tax has prospective application

13. FRINGE BENEFITS V. DE MINIMIS

Fringe Benefits – any good, service, or other benefit furnished or granted by an
employer, in cash or in kind, in addition to basic salaries of an individual employee [Sec.
33, NIRC]
De Minimis – privileges of relatively small value as given by the employer to his
employees.
Fringe Benefits and De Minimis are not considered compensation subject to
income tax and withholding tax.
14. STATUTORY CONSTRUCTION RULES (START WITH “WHEN A TAX LAW IS
CLEAR” BEFORE INTERPRETATION RULES)
a. When a tax law is clear, apply the law in accordance to its plain and simple tenor.
b. In case of doubt, it is construed most strongly against the Government and
liberally in favor of the taxpayer.
c. A statute will not be construed as imposing a tax unless it does so clearly,
expressly and unambiguously.
d. Provisions of a taxing act are not to be extended by implication.
e. Tax laws operate prospectively unless the purpose of the legislature to give
retrospective effect is expressly declared or may be implied from the language
used.
 f. Tax laws are special laws and prevail over general law.
g. Public purpose is always presumed.
15. ORDINARY V. CAPITAL ASSET (NATURE, TAX CONSEQUENCE)

16. PAN V. FAN

The Preliminary Assessment Notice is a communication issued by the
Regional Assessment Division, or any other concerned BIR Office, informing a
Taxpayer who has been audited of the findings of the Revenue Officer, following the
review of these findings. If the Taxpayer disagrees with the findings stated in the PAN,
he shall then have fifteen (15) days from his receipt of the PAN to file a written reply
contesting the proposed assessment.
A Preliminary Assessment Notice shall not be required in any of the
following cases, in which case, issuance of the formal assessment notice for the
payment of the taxpayer’s deficiency tax liability shall be sufficient:
* When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax appearing on the face of the tax return filed by the
taxpayer; or
* When a discrepancy has been determined between the tax withheld and the
amount actually remitted by the withholding agent; or
* When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and
automatically applied the same amount claimed against the estimated tax
liabilities for the taxable quarter or quarters of the succeeding taxable year; or
* When the excise tax due on excisable articles has not been paid; or
 * When an article locally purchased or imported by an exempt person, such as,
but not limited to, vehicles, capital equipment, machineries and spare parts, has
been sold, traded or transferred to non-exempt persons.
ENUMERATE:
17. INHERENT LIMITATIONS - (KEY: SPINE)
a. Situs of Taxation
However broad the power of taxation may be as to its character and no matter
how searching it is in its extent, such power is necessarily limited only to
persons, property or businesses within its jurisdiction.
b. Public Purpose
The right of taxation can only be used in aid of a public purpose. In
PASCUAL V. SECRETARY OF PUBLIC WORKS [110 SCRA 331], the Supreme
Court explained that the right of the legislature to appropriate public funds is
correlative with its right to tax and as such the power of taxation may only be
exercised for public purposes. In that case, the appropriation of public funds for
the construction of feeder roads on land owned by a private person is invalid for
being made for other than a public purpose.
c. International Comity
The property or income of a foreign state or government may not be the
subject of taxation by another.
d. Non-delegability of taxing power
e) Exemption of government entities, agencies, and instrumentalities
Q: Is the State subject to tax?
Generally, the State may not be subject to taxation. However, while this
may be so, sovereignty being absolute and taxation being an act of high
sovereignty, the State may tax itself including its political subdivisions.
Q: Are GOCCs subject to local government taxes?
Yes. Exemptions of GOCCs from local government taxes have been
withdrawn by the the Local Government Code.

18. CONSTITUTIONAL LIMITATIONS

a. Due process of law;
b. Equal protection of the laws ;
 c. Uniformity;
d. Progressive system of taxation;
e. Non-impairment of contracts;
f. Non-imprisonment for non-payment of poll tax;
g. Appropriation, revenue and tariff bills must originate exclusively in the House
of Representatives;
h. Presidential veto;
i. Presidential power to fix tariff rates;
j. Freedom of the press and of speech;
k. Freedom of religion;
l. Exemption from property tax of properties of religious, educational, and
charitable institutions;
m. Tax exemptions granted to non-stock, non-profit education institutions;
n. No public money or property used for a particular sect, priest, religious
minister, etc.
o. Grant of tax exemptions;
p. Grant of power of taxation to local government units;
q. Money collected for a special purpose shall be considered a special fund;
r. Exclusive appellate jurisdiction of the Supreme Court over judgments of lower
courts involving the legality of taxes, imports, assessment, fees, penalty.
(Source: Dimaampao)
19. FUNCTIONS OF BIR (Sec.2 NIRC as amended)
Assessment and collection of all national internal revenue taxes, fees, and
charges
1. Enforcement of all forfeitures, penalties, and fines connected therewith
2. Execution of judgments in all cases decided in its favor by the Court of Tax
Appeals (CTA) and the ordinary courts
3. Give effect to and administer the supervisory and police powers conferred to it
by the Code or other laws
20. POWERS AND AUTHORITIES OF CIR
 1. Power to interpret tax laws and to decide tax cases; (Sec.4, NIRC as
amended)
2. Power to obtain information, and to summon, examine, and take testimony of
persons; (Sec.5, NIRC)
3. Power to make assessments and prescribe additional requirements for tax
administration and enforcement; (Sec.6, NIRC)
4. Authority to delegate power; (Sec.7, NIRC)
5. Duty to ensure the provision and distribution of forms, receipts, certificates,
and appliances, and the acknowledgment of payment of taxes. (Sec.8, NIRC)
21. POWER TO MAKE ASSESSMENTS AND PRESCRIPTIONS
National Internal Revenue Code:
1. If a tax return is filed the prescriptive period for assessment is within three (3)
years from the last day prescribed by law for the filing of the return or if filed
after the last day, within three days from the date of filing.
2. If no return is filed or if the return filed is false or fraudulent, the period to
assess is within ten (10) years from the discovery of the omission, fraud or
falsity.
Local Government Code:
1. Local taxes, fees or charges shall be assessed within five (5) years from the
date they become due.
2. In case of fraud or intent to evade the payment of taxes, fees or charges, the
same may be assessed within ten (10) years from discovery of the fraud or
intent to evade payment.
Tariff and Customs Code:
1. The code does not express any general statute of limitation, it provided,
however, that “when articles have entered and passed free of duty or final
adjustment of duties made, with subsequent delivery, such entry and passage
free of duty or settlement of duties will, after the expiration of one (1) year,
from the date of the final payment of duties, in the absence of fraud or protest
be final and conclusive upon all parties, unless the liquidation of import entry
was merely tentative.
22. PHASES OF TAXATION (LEVY, ASSESSMENT AND COLLECTION, PAYMENT)
A. Levy or Imposition - refers to the enactment of tax laws or statutes.
B. Assessment and Collection
 The act of assessing and collecting taxes is administrative in character, and
therefore can be delegated. Nonetheless, the legislative body has laid down certain
rules governing the assessment and collection of taxes in order to prevent its abuse.
First: the tax law must designate which agency will collect the taxes. Usually,
the BIR and/or the Secretary of Finance wield this power.
Second: the circulars or regulations issued by the Secretary of Finance or the
Commissioner of the Internal Revenue must be in accordance with the tax measures
imposed by Congress.
C. Payment - this signifies an act of compliance by the taxpayer. (Source:
Dimaampao)
23. REQUIREMENTS IN THE ZONAL VALUATION OF REAL PROPERTY

24. REQUISITES FOR DEDUCTIBILITY

1. There must be a specific provision of law allowing the deductions, since
deductions do not exist by implication
2. The requirements of deductibility must be met
3. There must be proof of entitlement to the deductions
4. The deductions must not have been waived
5. The withholding and payment of the tax required must be shown
25. REQUISITES FOR TAX-FREE EXCHANGES (SEC. 40(C)(2))
Tax-free exchanges refer to those instances enumerated in Section 40(C)(2) of
the National Internal Revenue Code (NIRC) of 1997 that are not subject to Income Tax,
Capital Gains Tax, Documentary Stamp Tax and/or Value-added Tax, as the case may
be.
In general, there are two kinds of tax-free exchange: (1) transfer to a controlled
corporation; and, (2) merger or consolidation.
In the first instance, no gain or loss shall be recognized if property is transferred
to a corporation by a person in exchange for stock or unit of participation in such
corporation of which as a result of such exchange said person, alone or together with
others, not exceeding four persons, gains control of said corporation.
In the second instance, no gain or loss shall be recognized if in pursuance of a
plan of merger or consolidation --- (a) a corporation, which is a party to a merger or
consolidation, exchanges property solely for stock in a corporation, which is a party to
the merger or consolidation; or, (b) a shareholder exchanges stock in a corporation,
which is a party to the merger or consolidation, solely for the stock of another
corporation also a party to the merger or consolidation; or, (c) a security holder of a
corporation, which is a party to the merger or consolidation, exchanges his securities in
such corporation, solely for stock or securities in another corporation, a party to the
merger or consolidation.
26. REQUISITES TO AVAIL OF CGT EXEMPTION FOR PRINCIPAL RESIDENCE
Conditions for the Exemption of Certain Individuals from the Capital Gains Tax on
the Sale or Disposition of a Principal Residence:
a. Sale or disposition of the old principal residence;
b. By natural persons - citizens or aliens provided that they are residents taxable under
Sec. 24 of the Code (does not include an estate or a trust);
c. The proceeds of which is fully utilized in (a) acquiring or (b) constructing a new
principal residence within eighteen (18) calendar months from date of sale or
disposition;
d. Notify the Commissioner within thirty (30) days from the date of sale or disposition
through a prescribed return of his intention to avail the tax exemption;
e. Can only be availed of only once every ten (10) years;
f. The historical cost or adjusted basis of his old principal residence sold, exchanged or
disposed shall be carried over to the cost basis of his new principal residence;
g. If there is no full utilization, the portion of the gains presumed to have been realized
shall be subject to capital gains tax.

27. REQUISITES TO CLAIM INPUT VAT

In general (CIR v. Seagate Technology, G.R. No. 153866, February 11, 2005):
1. The claimant is a VAT registered entity;
2. The input taxes paid on the capital goods of respondent are duly supported by
VAT invoices and have not been offset against any output taxes; and
3. The claim has been filed within the two-year prescriptive period.
For zero-rated or effectively zero-rated sale (CIR v. Team Sual Corporation, G.R.
No. 205055, July 18, 2014):

1. That there must be zero-rated or effectively zero-rated sales;

2. That input taxes were incurred or paid;

3. That such input taxes are attributable to zero-rated sales or effectively zero-rated
sales;

4. That the input taxes were not applied against any output VAT liability; and

5. That the claim for refund was filed within the two-year prescriptive period.
28. INSTANCES WHERE RUNNING OF PRESCRIPTION IS SUSPENDED
(1) When the treasurer is legally prevented from making the assessment or
collection
(2) When taxpayer requests for reinvestigation and executes a waiver in writing
before lapse of the period for assessment or collection.
(3) When the taxpayer is out of the country or otherwise cannot be located [Sec.
194 (d), LGC]
29. PRINCIPLES OF RPT
A. FUNDAMENTAL PRINCIPLES (CAPUE)
(1) Current fair market value is the basis for assessment All real property,
whether taxable or exempt, shall be appraised at the CURRENT AND FAIR MARKET
VALUE prevailing in the locality where the property is situated. [Sec. 201, LGC]
(2) Actual use shall be the basis of classification for assessment (a) Real
property shall be classified, valued and assessed on the basis of its actual use
regardless of where located, whoever owns it, and whoever uses it. (b) Actual Use-
refers to the purpose for which the property is principally or predominantly utilized by the
person in possession thereof [Sec. 199 (b), LGC] (c) MCIAA v. Marcos [G.R. No.
120082, Sept. 11, 1996]: “Usage means direct, immediate and actual application of the
property
(3) Private persons cannot be left to the appraisal, assessment, levy and collection of
real property tax. (4) uniform classification within each local government unit shall be
observed. (5) equitable appraisal and assessment is required. [Sec. 197, LGC]
30. EXEMPTIONS FROM RPT
(1) Owned by the Republic of the Philippines or any of its political subdivisions
except when beneficial use is granted for a consideration or to a taxable person.
(2) Charitable institutions, churches, parsonages, or convents appurtenant
thereto, mosques, non-profit or religious cemeteries, and all lands, buildings, and
improvements actually, directly and exclusively used for religious, charitable, or
educational purposes.
(3) Machinery and equipment actually, directly and exclusively used by local
Water utilities and GOCCs engaged in the supply and distribution of water and/or
generation and transmission of electric power.
(4) Real property owned by duly registered cooperatives as provided for under
Republic Act No. 6938 [Cooperative Code of the Philippines].
(5) Machinery and equipment used for pollution control and Environmental
protection. [Sec. 234, LGC]
 Provincial Assessor of Marinduque v. CA [G.R. No. 170532, Apr. 30, 2009]:A
claim for exemption under Sec. 234 (e) should be supported by evidence that the
property sought to be exempt is actually, directly and exclusively used for pollution
control and environmental protection.
31. SPECIAL LEVIES (SPECIAL EDUCATION FUND, IDLE LANDS, SPECIAL
ASSESSMENT)
IMPOSITION OF REAL PROPERTY TAX C.1. COVERAGE FOR A PROVINCE,
OR A CITY OR MUNICIPALITY WITHIN METRO MANILA (1) Land (2) Building (3)
Machinery (4) Other improvements not specifically exempted [Sec. 232, LGC]
The rate shall be as follows: Province: not exceeding one percent (1%) of the
assessed value of real property; and City or municipality within Metro Manila: not
exceeding two percent (2%) of the assessed value of real property. [Sec. 233, LGC]
SPECIAL LEVY ON IDLE LANDS : A province, or city or municipality within
Metro Manila may levy an annual tax on idle lands at the rate not exceeding five percent
[5%] of the assessed value of the property in addition to the basic tax
Lands covered (1) Agricultural Lands More than one hectare in area suitable for
cultivation, dairying, inland fishery, and other agricultural uses, one-half of which remain
uncultivated or unimproved (2) Other than Agricultural More than one thousand square
meters in area one half of which remain unutilized or unimproved [Sec. 236 and 237,
LGC]
Exempt Idle Lands Lands exempt by reason of force majeure, civil disturbance,
natural calamity or any cause or circumstance which physically or legally prevents
improving, utilizing or cultivating the same. [Sec. 238, LGC]

SPECIAL LEVY FOR PUBLIC WORKS A tax ordinance shall describe with
reasonable accuracy the nature, extent and location of the public works to be
undertaken, the estimated cost, the metes and bounds by monuments and lines and the
number of annual installments which should not be less than 5 nor more than 10 years.
The sanggunian may fix different rates for different parts or sections thereof, depending
on whether such land is more or less benefited by the proposed work. [Sec. 241, LGC]

SPECIAL EDUCATION FUND (SEF) A province, or city or municipality within

Metro Manila may levy and collect an annual tax of one percent (1%) on the assessed
value of real property which shall be in addition to the basic real property tax.
32. KINDS OF LOCAL TAXES A PROVINCE AND MUNICIPALITY MAY IMPOSE
(ENUMERATE 5)
Province may Levy on:
 a. Transfer of Real Property Ownership
b. Business of Printing and Publication
c. Franchise Tax
d. Tax on Sand, Gravel and other Quarry Resources
e. Professional Tax
Municipality may levy:
a. Business Tax
b. Fees and charges on regulation, licensing of business and occupation
c. For sealing and licensing of weights and measures
d. Fishery rentals, Fees and Charges
e. Community Tax
33. SHARING OF LGUS - EX. PROVINCE (35%), MUNICIPALITY (40%), BARANGAY
(25%)
34. REQUISITES OF A VALID WAIVER (CF. NEXT MOBILE FOR ESTOPPEL/PARI
DELICTO)
The waiver may not necessarily be in the form prescribed by RMO 20-90 or RDAO 05-
01 provided that the following conditions are complied with:
a. The waiver is executed before the expiration of the period to assess or to
collect taxes;
b.The waiver is signed by the taxpayer himself, his duly authorized
representative, or by any of the responsible officials for corporations;
c. The expiry date of the period agreed upon to assess/collect the tax is
indicated.
d. The waiver need not specify the taxes to be assessed nor the amount thereof
except in cases of waiver for collection of taxes.
e. The taxpayer has the burden to ensure that the waiver is validly executed by
its authorized representative. The waiver cannot thereafter be invalidated on the
ground that the taxpayer’s representative who participated in the conduct of the
audit is not authorized to sign the waiver.
f. Notarization of the waiver is now optional.
 g. The waiver can be accepted by the Commissioner’s authorized representative
as prescribed in existing regulations, the revenue district officer, or the group
supervisor designated in the Letter of Authority for the audit.
h. To be valid, there are only two dates that need to be present on the waiver,
namely (1) the date of execution, and (2) the expiry date of the period the
taxpayer waives the statute of limitations.
In the recent case of Commissioner of Internal Revenue vs. Next Mobile, Inc.
(G.R. No. 212825 promulgated on December 7, 2015), the Supreme Court held that a
taxpayer who is in bad faith cannot impugn the validity of the waiver.
CHECK THE FF. CONCEPTS:
REMEDIES
35. PRESUMPTIVE GROSS RECEIPTS
Authority to Conduct Inventory-taking, Surveillance and to Prescribe Presumptive Gross
Sales and Receipts. – The Commissioner may, at any time during the taxable year,
order inventory-taking of goods of any taxpayer as a basis for determining his internal
revenue tax liabilities, or may place the business operations of any person, natural or
juridical, under observation or surveillance if there is reason to believe that such person
is not declaring his correct income, sales or receipts for internal revenue tax purposes.
The findings may be used as the basis for assessing the taxes for the other months or
quarters of the same or different taxable years and such assessment shall be deemed
prima facie correct.
When it is found that a person has failed to issue receipts and invoices in violation of the
requirements of Sections 113 and 237 of this Code, or when there is reason to believe
that the books of accounts or other records do not correctly reflect the declarations
made or to be made in a return required to be filed under the provisions of this Code,
the Commissioner, after taking into account the sales, receipts, income or other taxable
base of other persons engaged in similar businesses under similar situations or
circumstances or after considering other relevant information may prescribe a minimum
amount of such gross receipts, sales and taxable base, and such amount so prescribed
shall be prima facie correct for purposes of determining the internal revenue tax
liabilities of such person. (Sec. 6c NIRC)
36. DOCTRINE OF WILFUL BLINDNESS - A PERSON, GIVEN HIS EXPERIENCES
IN HIS BUSINESS OR INDUSTRY, COMMITS AN ACT OR OMISSION
TANTAMOUNT TO GROSS NEGLIGENCE IN ATTENDING TO HIS OR HER TAX
OBLIGATIONS
“Willful blindness” is defined in Black’s Law Dictionary as “deliberate
avoidance of knowledge of a crime, especially by failing to make a reasonable inquiry
about suspected wrongdoing, despite being aware that it is highly probable.” A “willful
act” is described as one done intentionally, knowingly and purposely, without justifiable
excuse.
“Willful” in tax crimes means voluntary, intentional violation of a known legal
duty, and bad faith or bad purpose need not be shown. It is a state of mind that may be
inferred from the circumstances of the case; thus, proof of willfulness may be, and
usually is, shown by circumstantial evidence alone. Therefore, to convict the accused
for willful failure to file ITR or submit accurate information, it must be shown that the
accused was (1) aware of his/her obligation to file annual ITR or submit accurate
information, but that (2) he/she, or his/her supposed agent, nevertheless voluntarily,
knowingly and intentionally failed to file the required returns or submit accurate
information. Bad faith or intent to defraud need not be shown.
(People v. Kintanar, CTA EB Crim. No. 006, Dec. 3, 2010)
37. ACCOUNTING PERIODS, WHEN CHANGEABLE
This applies only to corporate taxpayers. If the corporate taxpayer wishes to
change his accounting period from fiscal to calendar year, from calendar year to fiscal
year, or from one fiscal year to another, the net income shall, with the approval of the
CIR, be computed on the basis of such new accounting period. (see Section 46, Tax
Code)
38. UNREGISTERED PARTNERSHIP
When our Internal Revenue Code includes "partnerships" among the entities
subject to the tax on "corporations", said Code must allude, therefore, to organizations
which are not necessarily "partnerships", in the technical sense of the term… Likewise,
as defined in… said Code, "the term corporation includes partnerships, no matter how
created or organized." This qualifying expression clearly indicates that a joint venture
need not be undertaken in any of the standard forms, or in conformity with the usual
requirements of the law on partnerships, in order that one could be deemed constituted
for purposes of the tax on corporations. Again, pursuant to said section, the term
"corporation" includes, among others, "joint accounts, (cuentas en participacion)" and
"associations", none of which has a legal personality of its own, independent of that of
its members. Accordingly, the lawmaker could not have regarded that personality as a
condition essential to the existence of the partnerships therein referred to… The opinion
went on to summarize the matter aptly: "For purposes of the tax on corporations, our
National Internal Revenue Code, include these partnerships — with the exception only
of duly registered general co-partnerships within the purview of the term "corporation." It
is, therefore, clear to our mind that petitioners herein constitute a partnership, insofar as
said Code is concerned, and are subject to the income tax for corporations." (Florencio
Reyes v. CIR, G.R. Nos. L-24020-21 July 29, 1968)
39. JEOPARDY ASSESSMENT refers to a tax assessment which was made without
the benefit of complete or partial audit by an authorized revenue officer who has the
reason to believe that the assessment and collection of a deficiency tax will be
jeopardized by delay because of the taxpayer's failure to comply with audit and
investigation requirements to present his book of accounts and/or pertinent records or to
substantiate all or any of the deductions, exemptions or credits claimed in his return.
40. PAYMENT UNDER PROTEST REQ. IN RPT, EXCEPTION IS WHEN WHAT IS
PROTESTED IS THE VALIDITY OF THE ASSSESSMENT
Sec. 62. Payment under protest. — (a) When a taxpayer desires for any reason to pay
his tax under protest, he shall indicate the amount or portion thereof he is contesting
and such thereon the words "paid under protest". Verbal protests shall be confirmed in
writing, with a statement of the ground, therefor, within thirty days. The tax may be paid
under protest, and in such case it shall be the duty of the Provincial, City or Municipal
Treasurers to annotate the ground or grounds therefor on the receipt.
(b) In case of payments made under protest, the amount or portion of the tax contested
shall be held in trust by the treasurer and the difference shall be treated as revenue.
(c) In the event that the protest is finally decided in favor of the government, the amount
or portion of the tax held in trust by the treasurer shall accrue to the revenue account,
but if the protest shall be decided finally in favor of the protestant, the amount or portion
of the tax protested against may either be refunded to the protestant or applied as tax
credit to any other existing or future tax liability of the said protestant. (Section 62, R.A.
No. 464)