CLWTAXN: Taxation

Salud, Voltaire Borja | Academic Year 2 - Term 2

things imported into the

MODULE 1: GENERAL PRINCIPLES OF TAXATION Philippines.
PART 1
Documentary ➔​ Tax on documents, instruments,
●​ Taxation
Stamp Tax papers evidencing the acceptance,
○​ It is the power by which the sovereign,
assignment, sale or transfer of an
through its law-making body, raises
obligation, rights, or property
income to defray the necessary expenses
incident thereto.
of government.
○​ It is merely a way or apportioning the cost
of government among those who in some
measure are privileged to enjoy its benefits THEORIES ON TAXATION
and, therefore, must bear its burdens. ●​ Necessity Theory (Existence of government)
○​ The existence of government is a
necessity. It cannot continue without
means to pay its expenses and for these
means it has the right to compel all its
citizens and property within its limits to
contribute.
●​ Benefits-Received Principle (Reciprocal duties of
protection and support between the state and
inhabitants).
○​ Share in the form of Taxes
○​ In return for his contribution, the taxpayer
■​ National Taxes
receives the general advantages and
■​ Local Taxes
protection which the government affords
the taxpayer and his property.
NATIONAL INTERNAL REVENUE TAXES ●​ Symbiotic Relationship Doctrine.
○​ The Supreme Court described taxation as
Income Tax ➔​ Tax on the net income or the entire a symbiotic relationshi whereby in
income received realized in one exchange for the protection that the
taxable year. citizens get from the Government, taxes
are paid.
Estate Tax ➔​ Tax on the right of the deceased to ●​ Lifeblood Theory.
transmit his estate to his lawful ○​ Taxes are the lifeblood of the nation
heirs or beneficiaries and certain through which the government agencies
transfer by the decedent during his continue to operate and with which the
lifetime which are made by law the State effects its functions for the welfare of
equivalent of testamentary its constituents.
dispositions. ○​ Since taxes are the lifeblood of the
government, they should be collected
Donor’s Tax ➔​ Tax imposed on gift or the transfer without unnecessary hindrance.
without consideration of property
between 2 or more persons who NATURE OF POWER TAXATION
are living at the time the transfer is
made. ●​ It is inherent in sovereignty.
○​ No need for any constitutional grant before
Value-added ➔​ Tax on consumption levied on the a State may exercise power of taxation.
Tax sale, barter, exchange or lease of ○​ Constitutional provisions relating to
goods or properties and services in taxation do not operate as constitutional
the Philippines and on importation grant, but merely constitute limitations
of goods into the Philippines. upon a power which would otherwise be
practically without limit.
●​ It is legislative in character.
Percentage Tax ➔​ Tax measured by certain
○​ Primarily vested in Congress
percentage of the gross selling
○​ For local legislative bodies, they can
price or gross value in money of
exercise by virtue of a constitutional grant
goods sold barter, exchanged, or
(Section 5, Article X, Constitution) and a
imported, or gross receipts or
law (Local Government Code or Rep. Act
earnings derived by person
No. 7610)
engaged in sale of services.
●​ It is subject to inherent and constitutional
limitations.
Excise Tax ➔​ Tax imposed on certain specified
○​ Inherent limitations – those which spring
goods or articles manufactured or
from the nature of the taxing power itself.
produced in the Philippines for
○​ Constitutional limitations – those
domestic sale or consumption or
specifically provided in the Constitution or
for any other disposition and to
implied therefrom.

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 pay. (Ability-To-Pay Principle)
●​ Administrative Feasibility – tax laws should be
ASPECTS OF TAXATION AND EXTENT OF
capable of convenient, just and effective
LEGISLATIVE POWER OF TAX
administration.
●​ Aspects of Taxation
○​ Levying or Imposition of Tax (legislative
TAXES
act)
○​ Assessment and Collection (administrative ●​ Taxes
in character) ○​ Enforced proportional and pecuniary
○​ Payment (taxpayer’s compliance with tax contributions from persons and property
laws) levied by the law-making body of the state
○​ Refund (taxpayer’s availment of remedy in having jurisdiction over the subject of the
case of overpayment) burden for the support of the government
●​ Extent of Legislative Taxing Power and all public needs.
○​ Subjects or objects to be taxed (Persons,
properties and privileges)
ESSENTIAL CHARACTERISTICS OF TAX
○​ Purpose or object of the tax, should be for
public purpose ●​ It is an enforced contribution.
○​ Amount or rate of the tax ●​ It is proportionate in character.
■​ “THE POWER TO TAX ●​ It is generally payable in money.
INVOLVES POWER TO ●​ It is levied on persons or property.
DESTROY.” – CJ MARSHALL ●​ It is levied by the state which has jurisdiction over
■​ “THE POWER TO TAX IS NOT the person or property.
THE POWER TO DESTROY ●​ It is levied by the law-making body of the state.
WHILE THIS COURT ●​ It is levied for public purpose or purposes.
(SUPREME COURT) SITS” – CJ ●​ It is commonly required to be paid at regular periods
HOLMES or intervals
○​ Kind of tax to be collected
○​ Apportionment of the tax
○​ Situs of taxation CLASSIFICATION OF TAXES
○​ Manner, means and agencies of collection 1.​ As to subject matter or object
of the tax ○​ Personal, poll or capitation – tax of a
fixed amount imposed on persons residing
PURPOSES OF TAXATION within a specified territory. E.g. community
tax
●​ Revenue ○​ Property – Tax imposed on property,
○​ The primary purpose is to generate funds whether real or personal, in proportion
for the State to finance the needs of the either to its value, or in accordance with
citizens and to advance the common weal. some other reasonable methods of
●​ Non-Revenue Purposes or Objectives apportionment. E.g. real property tax
○​ Taxes may be imposes for a regulatory ○​ Excise – charge imposed upon
purpose. (Regulation) performance of an act, the enjoyment of a
○​ Taxes on imports may be increased to privilege, or the engaging in an occupation.
protect local industries against foreign E,g income tax, estate tax, donor’s tax.
competition (Protectionism) VAT
○​ Taxes may be levied to reduce inequalities 2.​ As to who bears the burden
in wealth and incomes (Reduction of ○​ Direct – Tax which is demanded from the
Social Inequality) person who also shoulders the burden of
○​ Taxation may be used as an implement of the tax. E.g. Income tax, donor’s tax
police power (Promotion of General ○​ Indirect – Tax which is demanded from
Welfare) one person in the expectation and
○​ Tax provisions may provide incentives to intention that he shall indemnify himself at
encourage investments in productive the expense of another, falling finally upon
assets or facilities. (Encourage Economic the ultimate purchaser or consumer. E.g.
Growth) VAT
○​ Taxation can strengthen anemic 3.​ As to determination of amount
enterprises or provide incentive to greater ○​ Specific – tax of a fixed amount imposed
production through tax exemption by the head or number, or by some
○​ Taxes on imported goods may be used as standard of weight or​ measurement.
a bargaining tool. Eg. Excise tax on cigars, cigarettes
○​ Taxes may be increased to halt inflation or ○​ Ad valorem – tax of a fixed proportion of
lowered to ward off depression. the value of the property with respect to
which the tax is assessed. E.g. Real
BASIC PRINCIPLES OF A SOUND TAX SYSTEM property tax, Excise tax on motor vehicles
4.​ As to purpose
●​ Fiscal Adequacy – sources of revenue should be ○​ General, fiscal or revenue – tax imposed
sufficient to meet the demands of public for general purposes of government
expenditure. ○​ Special or regulatory – tax imposed for
●​ Equality or theoretical Justice – tax burden special purpose. E.g. Protective tariffs or
should be in proportion to the taxpayer’s ability to customs duties

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 5.​ As to scope
○​ National – tax imposed by the national based wholly on benefit.
government. E.g. national internal revenue ●​ In tax personal liability attaches to the person
taxes assessed in case of non-payment while in special
○​ Municipal or local – tax imposed by assessment, it is not.
municipal corporations or local government
units. E.g. community tax, professional tax 3.​ License Fee
6.​ As to graduation or rate ○​ A charge imposed under the police power
○​ Proportional – tax based on a fixed for purposes of regulation
percentage of the amount of the property,
receipts or other basis to be taxed. E.g
VAT, percentage tax. Distinctions between Tax and License Fee
○​ Progressive or graduated – tax the rate
of which increases as the tax base or ●​ License fee is the legal compensation or reward of an
bracket increases. E.g. income tax officer for specific services while tax is an enforced
○​ Regressive – tax the rate of which contribution assessed to defray public expenses.
decreases as the tax base or bracket ●​ It is imposed for regulation, while tax is levied for
increases. revenue
7.​ As to Ability to Pay ●​ It involves an exercise of police power while tax
○​ Progressive – according to one’s ability to involves the exercise of the taxing power
pay. E.g. income tax ●​ Its amount is limited to the necessary expenses of
○​ Regressive – opposite of progressive tax. inspection and regulation while there is no limit on the
E.g. VAT amount of tax may be imposed.
●​ It is imposed on the right to exercise a privilege while a
tax is imposed also on person and property
DISTINCTIONS ●​ Failure to pay a license fee makes the act or business
1.​ Toll illegal while failure to pay a tax does not necessarily
○​ A sum of money for the use of something, make the act or business illegal.
generally applied to the consideration
which is paid for the use of a road, bridge 4.​ Debt
or the like, of a public nature.
○​ Question: Can the Government Impose
VAT on Toll? Distinctions between Tax and Debt
○​ Answer: Yes, because toll is not a tax.
●​ A debt is generally based on contract while tax is
based on law
Distinctions between Tax and Toll ●​ Debt is assignable while tax is not.
●​ Debt may be paid in kind while tax is payable in
●​ A toll is demand of proprietorship, while tax is demand money.
of sovereignty ●​ Debt may be the subject of set-off or compensation
●​ A toll is paid for the use of another’s property, while tax while tax is not
is paid for the support of the government ○​ Taxes cannot be the subject of compensation
●​ The amount of toll depends upon the cost of because the government and taxpayer are not
construction or maintenance of the public improvement mutually creditors and debtors of each other
used, while their is generally no limit on the amount of and a claim for taxes is not such a debt,
tax that may be imposed. demand or contract or judgment as is allowed to
●​ A toll may be imposed by the government or private be set-off (Caltex Philippines, Inc. vs.
individuals or entities, while a tax may be imposed only Commission on Audit, G.R. No. 92858, May 8,
by the government. (see Diaz vs. Secretary of 1992)
Finance, G.R. No. 193007, July 19, 2011) ●​ A person cannot be imprisoned for non-payment of
debt while imprisonment is the penalty for non-
2.​ Special Assessment or Special Levy payment of tax except poll tax.
○​ An enforced proportional contribution from ●​ Debt is governed by ordinary periods of prescription
owners of lands especially or peculiarly while tax is governed by special prescriptive period.
benefited by public improvements. ●​ A debt draws interest when stipulated or when there is
○​ It is allowed to be collected by local default while tax does not draw interest unless when
government units under the Local delinquent.
Government Code.

Distinctions between Tax and Special Assessment

SIMILARITIES AND DISTINCTIONS AMONG THE
●​ Tax is levied upon persons, properties or rights while INHERENT POWERS OF THE STATE
special assessment is levied only on land.
●​ Tax is imposed for the use and support of government ●​ Other Fundamental or Inherent Powers of the
while special assessment is imposed to recover the State
cost of public improvements. (up to 60% of the cost) ○​ Taxes
●​ Tax has general application while special assessment ○​ Power of Eminent Domain – the power of
is exceptional both as to the time and place. the state or those to whom the power has
●​ Tax is based on necessity while special assessment is been delegated to take private property for
public use upon payment of just

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 compensation. ○​ In taxation, there is generally no limit on
○​ Police Power – power of the state to the tax that may be imposed.
enact such laws in relation to persons and ○​ In eminent domain, there is no amount
property as may promote public health, imposed.
public morals, public safety and the ○​ In police power, the amount imposed
general prosperity and welfare of its should not be more than sufficient to cover
inhabitants. the cost of the license and necessary
expenses of police surveillance and
inspection, examination or regulation.
SIMILARITIES AMONG THE THREE POWERS OF THE
7.​ As to relationship to the Constitution
STATE
○​ The taxing power is subject to certain
1.​ They all rest upon necessity because there can be constitutional limitations including the
no effective government without them. prohibition against the impairment of the
2.​ They all underlie and exist independently of the obligation of contracts.
Constitution. ○​ Eminent domain is also inferior to the
3.​ They are ways by which the state interferes with impairment prohibition.
private rights and property. ○​ Police power is relatively free from
4.​ They are legislative in nature and character. constitutional limitations and is superior to
5.​ They all presuppose an equivalent compensation the impairment provisions.
received, directly or indirectly, by the person
affected by the exercise of these powers by the
MODULE 2: GENERAL PRINCIPLES OF TAXATION
government.
PART 2
●​ Limitations on Power of Taxation
DISTINCTIONS AMONG THE THREE POWERS
○​ The power of taxation is NOT absolute.
1.​ As to the Exercising Authority ○​ It is subject to certain limitations or
○​ Taxation and police power may be restrictions.
exercised only by the government or its
political subdivision. TYPES OF LIMITATIONS
○​ Exercise of power of eminent domain may
be granted to public service companies or
public utilities. INHERENT LIMITATIONS CONSTITUTIONAL
2.​ As to Purpose LIMITATIONS
○​ In taxation, the property is taken for the
support of government. ➔​ Those which spring from ➔​ Those that are
○​ In eminent domain, the property is taken the nature of the taxing specifically provided in
for public use or benefit. power itself although the Constitution or
○​ In police power, the use of property is they may or may not be implied therefrom.
regulated for the purpose of promoting the provided in the
general welfare. Constitution.
3.​ As to Persons Affected
○​ Taxation and police power operate upon a 1.​ Public Purpose 1.​ Due process clause
community or class of entities or 2.​ Non-Delegation of 2.​ Equal protection clause
individuals. Taxing Power 3.​ Freedom of the press
○​ Eminent domain operates on an entity or 3.​ Exemption of the 4.​ Religious freedom
individual as the owner of a particular Government 5.​ Non-impairment clause
property. 4.​ Territoriality / Situs
4.​ As to Effect 5.​ International Comity
○​ In taxation, the money contributed in the
concept of taxes becomes part of the
public funds. INHERENT LIMITATIONS
○​ In eminent domain, there is a transfer of
1.​ Public Purpose
the right whether ownership or a lesser
right. ○​ Purpose affecting the inhabitants of the
○​ In police power, there is no transfer of title. state or taxing district as a community and
5.​ As to Benefits Received not merely as individuals
○​ In taxation, it is assumed the person ○​ Not longer confined to the traditional notion
affected receives the equivalent of the tax of use by the public but held synonymously
in the form of protection and benefits with public interest, public benefit, public
received from the government.
welfare and public convenience.
○​ In eminent domain, the person affected
receives the market value of the property
taken.
Other Details
○​ In police power, the person receives no
direct and immediate benefit but only such
Reasons ➔​ A tax levied for a private, not
as may arise from maintenance of a
public purpose constitutes a
healthy economic standard of society
taking of property without due
(damnum absque injuria or damage
process of law as it is beyond
without injury).
the power of the government to
6.​ As to Amount of Imposition

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 impose. government agencies the
➔​ Public funds can only be spent authority to tax.
for public purpose. ➔​ Presently, local government
units can exercise taxing power
Instances of ➔​ Financing of educational pursuant to a direct
Public Purpose activities and programs constitutional grant:
➔​ Promotion of science ◆​ “Each local government
➔​ Building and maintenance of unit shall have the power
hospitals, roads, bridge and to create its own sources
piers of revenues and to levy
➔​ Aid for victims of a public taxes, fees and charges
calamity subject to such guidelines
➔​ Relief for the poor and the and limitations as the
unemployed and to provide for Congress may provide,
unemployment benefits consistent with the basic
➔​ Payment of pensions and policy of local autonomy.
bonuses for services rendered Such taxes, fees, and
by public officers or employees. charges shall accrue
exclusively to the local
Effect of ➔​ Still for public purpose governments. (Section 5,
Incidental ➔​ The test is not as to who Article X, 1987
Benefit to receives the money, but the Constitution); and by
Private Interest character of the purpose for virtue of a law – Republic
which it is expended. Act No. 7160 or The Local
Government Code
Taxpayer’s suit ➔​ A case where the law or act
complained of directly involves Delegation to ➔​ Power to value property for
the illegal disbursement of administrative taxation purposes pursuant to
public funds derived from bodies fixed rules.
taxation. Delegable ➔​ Power to assess and collect the
powers taxes
➔​ Power to perform any of the
2.​ Non-Delegation of Taxing Power innumerable details of
○​ Principle of Separation of Powers ordains computation, appraisement, and
that each of the 3 great branches of adjustment, and the delegation
government has exclusive cognizance of of such details.
and is supreme in matters falling within its
own constitutionally allocated sphere. 3.​ Exemption of the Government from Taxes
○​ Corollary to the Doctrine of Separation of
Powers is the principle of non-delegation
Other Details
of powers as expressed in the Latin
maxim: potestas delegata non delegari
Reason ➔​ To levy a tax upon public
potest which means “what has been property would render
delegated, cannot be delegated.” necessary new taxes on other
public property for the payment
of the tax so laid and thus,
Other Details government would be taxing
itself to raise money to pay over
Exceptions: to itself.
➔​ Notwithstanding the immunity of
Delegation of ➔​ “The Congress may, by law, the government from Taxes, the
tariff powers to authorize the President to fix principle is also well recognized
the President within specified limits, and that the government may tax
under Section 28 subject to such limitations and itself as there is no
(2) of Article VI restrictions as it may impose, constitutional prohibition against
of the Constitution tariff rates, import and export the government taxing itself.
which reads: quotas, tonnage and wharfage
dues, and other duties or Governmental or ➔​ Those pertaining to the
imposts within the framework of Sovereign administration of government
the national development Functions and are treated as absolute
program of the Government.” obligation on the part of the
State to perform.
Delegation to ➔​ Justified by necessary ➔​ Gen. Rule: Tax-Exempt
local implication that the power to ➔​ Exception: Taxable by Law
governments create political corporations
carries with it the power to Proprietary ➔​ Those that are undertaken only
confer on such local Functions (SSS, by way of advancing the

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Pag-Ibig, etc.) general interest of society and latter.
merely optional. 3.​ Foreign Government
➔​ Gen. Rule: Taxable may not be sued
➔​ Exception: Tax-Exempt by without its consent.
Law

CONSTITUTIONAL LIMITATIONS
4.​ Territoriality
●​ Constitution
Other Details ○​ A written instrument by which the
fundamental powers of government are
Limitation of ➔​ Territoriality / Situs or Place of established, limited and defined and by
Territiorial Taxation which these powers are distributed among
Jurisdiction ◆​ A state may not tax the several departments (like executive,
property lying outside its judicial and legislative departments) for
borders or lay an excise or their safe and useful exercise for the
privilege tax upon the
benefit of the body politic.
exercise or enjoyment of a
right or privilege derived ○​ The basic law to which all others laws,
from laws of another state whether domestic or international, must
and therein exercised and conform.
enjoyed. ○​ When the courts declared a law to be
◆​ Protection is a basic inconsistent with the Constitution, the
consideration that justifies
former shall be VOID and the latter shall
the situs of taxation.
◆​ Exception: govern.
●​ A person may be ○​ Administrative or executive acts, orders
taxed where there is and regulations shall be valid only when
between him and the they are not contrary to the laws or the
taxing state, a privity Constitution. (Article 7, Civil Code of the
of relationship Philippines)
justifying the levy. In
○​ A legislative or executive act that is
this case, the basis
of the power to tax is declared void for being unconstitutional
dependent upon his generally cannot give rise to any right or
relation as a citizen obligation
to the state. ■​ 1987 Constitution – Current
constitution ratified by the people
●​ International Comity through a plebiscite on February
2, 1987

Other Details
1.​ Due Process Clause
Limitation of ➔​ International Comity ○​ Basis: “No person shall be deprived of life,
International ◆​ Courteous and friendly liberty, or property without due process of
Comity agreement and interaction law, x x x.” [Sec. 1, Article III, (Bill of
between nations. Rights), 1987 Constitution]
◆​ A property of a foreign ○​ Meaning of Due Process – no precise
state may not be taxed by definition.
another.
◆​ Grounds:
1.​ Sovereign Equality ○​ Essence of Due Process – an opportunity
Among States – one to be heard or to hear the other side of the
state cannot argument before making a judgment.
exercise its
sovereign powers
over another.
2.​ Usage among State Other Details
– when a state
enters the territory of Aspects of Due Process
another, state there
is an implied Substantive due ➔​ Refers to the intrinsic validity of
understanding that process the law that interferes with the
the former does not rights of a person to his
intend to degrade its property or the deprivation must
dignity by placing be under the authority of a law
itself under the that is valid or of the
jurisdiction of the Constitution itself.

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Procedural due ➔​ After compliance with fair and
process reasonable methods of 4.​ Religious Freedom
procedure prescribed by law. ○​ Basis: “No law shall be made respecting
◆​ E.g. an establishment of religion, or prohibiting
●​ Due Process the free exercise thereof. The free exercise
Requirement in the and enjoyment of religious profession and
Issuance of a worship, without discrimination or
Deficiency Tax
preference, shall forever be allowed. No
Assessment;
●​ Assessment without religious test shall be required for the
Pre-Assessment exercise of civil or political rights. [Sec. 5,
Notice is null and Article III, (Bill of Rights), 1987
void Constitution]

(READ: Commissioner vs. Metro

Star Superama, Inc., G.R. No. Other Details
185371, December 8, 2010)
Imposition of ➔​ Unconstitutional because it is
License Fee actually in the nature of a
2.​ Equal Protection Clause
condition or permit for the
○​ Basis: “X x x, nor shall any person be exercise of the right or lays a
denied the equal protection of the laws.” prior restraint on the said right.
[Sec. 1, Article III, (Bill of Rights), 1987
Constitution] Imposition of ➔​ Constitutional as it is imposed
○​ Meaning – All persons subject to Tax purely for revenue purposes.
legislation shall be treated alike under like
circumstances and conditions both in the 5.​ Non-Impairement Clause
privileges conferred and liabilities imposed. ○​ Basis: “No law impairing the obligation of
■​ It does not demand absolute contracts shall be passed. [Sec. 10, Article
equality. III, (Bill of Rights), 1987 Constitution]
■​ Equal treatment neither requires ○​ Meaning of Impairment of Obligation of
universal application of laws to all Contract
persons without distinction, nor ■​ The obligation of a contract is
intends to prohibit legislation by impaired when its terms or
limiting the object to which it is conditions are changed by law or
directed or by the territory in by a party without the consent of
which it is to operate. the other, thereby weakening the
position or rights of the latter.
Other Details
Other Details
Requisites of a 1.​ Rest on substantial distinctions;
Valid 2.​ Germane to the purpose of the Application ➔​ If contract is changed or
Classification law; revoked by law –
under Equal 3.​ Not limited to existing conditions Unconstitutional
Protection only; and ➔​ If franchise is revoked by law –
Clause 4.​ Apply equally to all members of Constitutional as franchise is
To be VALID, the same class. subject to amendment,
Classification alteration or repeal” by
must: (READ: ORMOC SUGAR Congress (Sec. 11, Article XII,
COMPANY, INC., vs. THE 1987 Constitution)
TREASURER OF ORMOC CITY,
THE MUNICIPAL BOARD OF
ORMOC CITY, HON. ESTEBAN C. SPECIFIC OR DIRECT CONSTITUTIONAL
CONEJOS as Mayor of Ormoc City LIMITATIONS
and ORMOC CITY, G.R. No.
L-23794, February 17, 1968) ●​ Taxation shall be uniform and equitable.
●​ Progressive system of taxation.
3.​ Freedom of the Press ●​ Non-imprisonment for non-payment of poll tax.
○​ Basis: “No law shall be passed abridging ●​ Origin of revenue or tariff bills.
the freedom of speech, of expression, or of ●​ Delegated authority of the President to impose tariff
the press, or the right of the people rates, import and export quotas, tonnage and
peaceably to assemble and petition the wharfage dues.
government for redress of grievances. ●​ Tax exemption of religious, charitable and
[Sec. 4, Article III, (Bill of Rights), 1987 educational entities
Constitution] ●​ Grant of authority to local government units

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 ●​ Tax exemption granted to non-stock non-profit citizens or not, without regard to
educational institutions their property, occupation or
●​ Voting requirement with respect to tax exemption business. An example of a poll
●​ Power of the president to veto any particular item or tax is community tax.
items in a revenue or tariff bills ■​ Imposition of surcharge in the
●​ Non-impairment of jurisdiction of the Supreme Court form of interest is allowed. The
in tax cases interest is 2% per month or 24%
●​ Non-appropriation of public funds for religious per annum.
purposes. ■​ In case of falsification of
community tax certificate, penalty
of imprisonment may be imposed.
1.​ Taxation shall be uniform and equitable.
○​ Basis: “ The rule of taxation shall be 4.​ Origin of Revenue/Tariff Bills
uniform and equitable. x x x. [Sec. 28 (1), ○​ Basis: “All appropriation, revenue or tariff
Article VI, (Legislative Department), 1987 bills, bills authorizing increase of the public
Constitution] debt, bills of local application, and private
○​ Meaning of Uniformity in Taxation All bills shall originate exclusively in the
taxable articles or properties of the same House of Representatives, but the Senate
class shall be taxed at the same rate. may propose or concur with amendments.
■​ The rule requires the uniform ” [Sec. 24, Article VI, (Legislative
application and operation, without Department), 1987 Constitution]
discrimination, of the tax in every ○​ General Rule: If it is an ordinary bill, it
place where the subject of it is may originate either in the House of
found. Representatives or the Senate.
■​ Uniformity implies equality in ○​ Exception: Sec. 24, Article VI, (Legislative
burden, not equality in amount. Department), 1987 Constitution.

(READ: Sison, Jr. vs. Ancheta, G.R. No. L-5941, July 25, 5.​ Tax Exemption of Religious, Charitable and
1984) Educational Entities
○​ Basis: “Charitable institutions, churches
and parsonages or convents appurtenant
Other Details
thereto, mosques, non-profit cemeteries,
Meaning of ➔​ It requires that the and all lands, buildings, and
Equity in apportionment of tax burden be improvements, actually, directly, and
Taxation more or less just in the light of exclusively used for religious, charitable, or
the taxpayer’s ability to shoulder educational purposes shall be exempt from
the tax burden (in terms of taxation.” [Sec. 28 (3), Article VI,
property, wealth and income). (Legislative Department), 1987
➔​ Its cornerstone is the ability to
Constitution]
pay.
○​ Application
■​ Coverage - Property tax only
2.​ Progressive System of Taxation (real property tax).
○​ Basis: “ X x x. The Congress shall evolve ■​ Test of Exemption – Use of
a progressive system of taxation. [Sec. 28 property and not ownership.
(1), Article VI, (Legislative Department), ■​ Nature of Use – the real property
1987 Constitution] must be actually, directly and
○​ Interpretation used for religious, charitable or
■​ Direct taxes are to be preferred educational purposes.
and as much as possible, indirect ●​ Solely is synonymous
taxes should be minimized. with exclusively.
●​ (READ: LUNG CENTER
3.​ Non-imprisonment for Non-Payment of Poll Tax OF THE PHILIPPINES,
○​ Basis: “No person shall be imprisoned for vs. QUEZON CITY and
debt or non-payment of a poll tax. [Sec. CONSTANTINO P.
20, Article III, (Bill of Rights), 1987 ROSAS, G.R. No.
Constitution] 144104, June 29, 2004)
○​ Application ●​ The exemption also
■​ It applies only to poll tax or tax of applies to incidental use.
a fixed amount imposed on (e.g. a vegetable garden
persons residing within a adjacent to a convent)
specified territory, whether

CLWTAXN | Erin Lomio 8

 6.​ Tax Exemption Granted to Non-Stock Non-Profit
Educational Institutions 9.​ Power of the President to Veto any Particular
○​ Basis: “All revenues and assets of Item or Items in Revenue or Tax Bills
non-stock, non-profit educational ○​ Basis: “The President shall have the
institutions used actually, directly, and power to veto any particular item or items
exclusively for educational purposes shall in an appropriation, revenue, or tariff bill,
be exempt from taxes and duties. Upon but the veto shall not affect the item or
the dissolution or cessation of the items to which he does not object. [Section
corporate existence of such institutions, 27 (2), Article VI (Legislative Department),
their assets shall be disposed of in the 1987 Constitution]
manner provided by law.” (Section 4 (3), ○​ Application
Article XIV, 1987 Constitution) ■​ General Rule: If the President
○​ Requirements (READ: Commissioner vs. exercises his veto power, the
DLSU, G.R. No. 196596, November 9, entire bill is rejected.
2016) ■​ Exception: Item veto is allowed
1.​ It is a non-stock non-profit in appropriation, revenue or tariff
educational institution bill.
2.​ Income, whether from educational
activities or not, is used actually, 10.​ Non-impairment of Jurisdiction of Supreme
directly and exclusively for Court in Tax Cases
educational purposes. ○​ Basis: “The Congress shall have the
power to define, prescribe and apportion
the jurisdiction of the various courts but
Other Details
may not deprive the Supreme Court of its
Proprietary ➔​ Subject to 1% based on net jurisdiction over cases enumerated in
Educational income tax. If the gross income Section 5 hereof. [Section 2, Article VIII
Institutions from unrelated trade, business (Judicial Department), 1987 Constitution]
or other activity exceeds 50% of ○​ The Supreme Court has the following
the total gross income derived powers: Review, revise, reverse, modify or
by such educational institutions, affirm on appeal or certiorari as the law or
the 20%/ 25% income tax shall
the Rules of Court may
be imposed on their taxable
income. ○​ provide, final judgements and orders of
lower courts in: All cases involving the
legality of any tax, impost, assessment or
7.​ Grant of Authority to Local Government Units toll or any penalty imposed in relation
○​ Basis: “Each local government unit shall thereto. [Section 5 (2b), Article VIII
have the power to create its own sources (Judicial Department), 1987 Constitution]
of revenues and to levy taxes, fees and
charges subject to such guidelines and 11.​ Non-Appropriation of Public Funds for the
limitations as the Congress may provide, Benefit of any Church, Sect or System of
consistent with the basic policy of local Religion
autonomy. Such taxes, fees, and charges ○​ Basis:
shall accrue exclusively to the local ○​ General Rule: “No public money or
governments. (Section 5, Article X, 1987 property shall be appropriated, applied,
Constitution)” paid, or employed, directly or indirectly, for
the use, benefit, or support of any sect,
8.​ Voting Requirement with respect to Tax church, denomination, sectarian institution,
Exemption or system of religion, or of any priest,
○​ Basis: “No law granting any tax exemption preacher, minister, or other religious
shall be passed without the concurrence of teacher, or dignitary as such,
a majority of all the Members of the ○​ Exception:
Congress. [Section 28 (4), Article VI ■​ except when such priest,
(Legislative Department), 1987 preacher, minister, or dignitary is
Constitution] assigned to the armed forces, or
○​ Application to any penal institution, or
■​ General Rule: Relative majority government orphanage or
is required (Majority of those leprosarium. [Section 29 (2),
present provided there is a Article VI (Legislative
quorum.) Department), 1987 Constitution]
■​ Exception: Tax Exemption –
Absolute majority or majority of all
members of Congress.
CLWTAXN | Erin Lomio 9
 MODULE 3: GENERAL PRINCIPLES OF TAXATION 6.)​Business, ➔​ Situs is the place where the
PART 3 occupations business is done, or the occupation
●​ Situs of Taxation – Place of Taxation and is engaged in, or the transaction
○​ The basic rule is that the state where the transactions took place. E.g. VAT, percentage
subject to be taxed has a situs may tax.
rightfully levy and collect the tax; and the
situs is necessarily in the state which has 7.)​Gratuitous ➔​ Factors that affect situs: a)
jurisdiction or which exercises dominion transfer citizenship or nationality of the
over the subject in question. property donor or deceased; b) domicile or
○​ Protection is the basic consideration that residence of the donor or
justifies situs of taxation. deceased; and c) place where the
property is located. E.g. estate tax,
donor’s tax.
SITUS OF SUBJECTS OF TAXATION

1.)​Persons ➔​ A state may levy a personal tax

upon persons (inhabitants or
residents) subject of its
sovereignty. E.g. community tax

2.)​Real ➔​ Taxable in the state in which it is

Property located whether the owner is a
resident or non-resident. (Rule of
Lex Rei Sitae)

3.)​Tangible ➔​ Taxable in the state where it has

personal actual situs or where it is physically DOUBLE TAXATION
property located. (Lex Rei Sitae)
●​ Double Taxation
4.)​Intangible ➔​ The general rule is that the situs is ○​ Taxing the same property twice when it
personal at the domicile of the owner in should be taxed but once.
property accordance with the principle of ○​ Taxing the same person twice by the same
mobilia sequuntur personam. jurisdiction over the same thing.
➔​ Exception: when it is consistent
with express provisions of the
KINDS OF DOUBLE TAXATION
statute or when justice does not
demand that it should be, as where
1.)​Direct ➔​ Double taxation in the
the property has in fact a situs
Duplicate objectionable or prohibited sense
elsewhere. E.g. shares of stock in
Taxation (obnoxious).
a domestic corporation of a
➔​ Two taxes must be imposed:
non-resident foreigners are taxable
a.​ on the same subject matter
in the Philippines.
b.​ for the same purpose
c.​ by the same taxing authority
5.)​Income ➔​ Factors that affect situs: a)
d.​ within the same jurisdiction
citizenship or nationality of the
e.​ during the same taxing period
person taxed; b) domicile or
f.​ of the same kind or character
residence of the person taxed; and
➔​ E.g. The taxpayer was being
c) source of income taxed.
required to pay two taxes under
Manila City Tax Ordinance No.
7794, namely:
◆​ Sec. 14 – Tax on
Manufacturers, Assemblers
and Other Processors
◆​ Sec. 21 – Tax on Businesses
Subject to Excise,VAT or
Percentage under the
National Internal Revenue
Code

Issue: Is there double taxation?

Held: Yes, there is indeed double

taxation. The taxpayer is subjected to
the taxes under both Sections 14 and
21 of the Tax Ordinance No. 7794,
since these are being imposed:
a.​ on the same subject matter –
the privilege of doing

CLWTAXN | Erin Lomio 10

 business in the City of Manila Illustration:
b.​ for the same purpose – to
make persons conducting The domestic corporation had the following data for
business in the City if Manila taxable year 2021:
contribute to city revenues
c.​ by the same taxing authority Philippines Country X
– City of Manila Gross Income P20,000,000 P10,000,000
d.​ within the same jurisdiction – Deductions P7,000,000 P3,00,0000
within the territorial Income tax paid P1,750,000
jurisdiction of the City of
Manila
e.​ during the same taxing period
– per calendar year
f.​ of the same kind or character
– local business tax imposed
on gross sales or receipts of
business.

(City of Manila vs. Coca-Cola Bottlers

Philippines, Inc., G.R. No. 181845,
August 4, 200

2.)​Indirect ➔​ Double taxation other than direct

Duplicate duplicate. It extends to all cases in
Taxation which there is a burden of two or
(Broadest more pecuniary impositions. The
sense) absence of any one of the FORMS OF ESCAPE FROM TAXATION
elements of direct duplicate
taxation will make it indirect ●​ No Loss of Revenue to Government
duplicate taxation which is not ○​ Shifting
legally objectionable. ○​ Capitalization
➔​ E.g. ○​ Transformation
a.​ Taxes imposed upon same ●​ Resulting in Loss of Revenue
property by 2 different states ○​ Evasion
(International double taxation) ○​ Avoidance
b.​ Taxes imposed upon same ○​ Exemption
income by 2 different states
(international double taxation) NO LOSS OF REVENUE TO GOVERNMENT
c.​ Taxes imposed upon sales by
the local government and
1.)​Shifting ➔​ Is the transfer of tax burden by
national government
the statutory taxpayer (impact of
(domestic double taxation)
taxation) to another or someone
else (incidence of taxation).
➔​ Relations among Impact,
MEANS EMPLOYED TO AVOID OR MINIMIZE THE Shifting and Incidence
HARSH EFFECTS OF DOUBLE TAXATION ◆​ Impact of Taxation – point
1.​ Tax Credit – amount that can be deducted from tax on which tax is originally
due in order to get the tax still due or payable. imposed. (Initial
a.​ E.g. foreign income tax paid may be phenomenon)
claimed as a tax credit against Philippine ◆​ Shifting – immediate
income tax due. process
2.​ Tax deduction – amount that can be subtracted ◆​ Incidence of Taxation –
from gross income in order to arrive at taxable point on which the tax
income. burden finally rests or
a.​ E.g. foreign income tax paid may be settles down. (Result)
claimed as a tax deduction instead of tax ➔​ Kinds of Shifting
credit. ◆​ Forward shifting - when
3.​ Tax exemption – immunity from taxation to which tax burden is transferred
others are subjected. from a factor of production
a.​ E.g. Under the Tax Code, income earned through the factors of
from outside the Philippines by a distribution until it finally
non-resident citizen is not subject to settles on the ultimate
Philippine income tax purchaser or consumer.
4.​ Tax treaty with other states – entered into to ●​ E.g. From Retailer
reconcile the national fiscal legislations of the to Consumer, the
contracting parties and in turn help the taxpayer gross selling price
avoid simultaneous taxations in two different of the goods is
jurisdictions (international double taxation). P100,000. The
buyer who absorbs

CLWTAXN | Erin Lomio 11

 the VAT will pay which is evil, in bad faith, willful
P112,000 since the or deliberate and not accidental.
VAT is P12,000 ◆​ A course of action or failure of
◆​ Backward shifting - when action which is unlawful.
tax burden is transferred ➔​ E.g.
from consumer through ◆​ Substantial underdeclaration of
factors of distribution to the sales, receipts or income or;
factors of production. ◆​ Substantial overstatement of
●​ E.g. From deductions;
Consumer to ◆​ Substantial underdeclaration or
Retailer, the amount overstatement
to be paid by the – more than 30% of the
buyer is just declared or reported
P100,000 and not sales, receipts or income ,
P112,000. In this or;
case, the retailer – more than 30% of the
absorbs the VAT actual deductions.
which is P10,714.29
(P100,000/1.12 x 2.)​Tax ➔​ The use by the taxpayer of legally
12%) Avoidance permissible alternative tax rates or
◆​ Onward shifting - when methods of assessing taxable
the tax is shifted two or property or income, in order to avoid
more times either forward or reduce tax liability
or backward. ➔​ E.g. interest derived from bank
●​ E.g. From deposit
manufacturer to ◆​ if savings deposit, the interest is
retailer to ultimate subject to 20% final tax
consumer. ◆​ if time deposit with maturity of
not less than 5 years –
2.)​Capitalization ➔​ A reduction in the price of the tax-exempt sale of shares of
taxed object equal to the stock in a domestic corporation
capitalized value of future taxes ◆​ thru the stock exchange –
which the purchaser expects to subject to stock transaction tax
be called upon to pay. of 6/10 of 1% of the gross
➔​ E.g. The selling price of the real selling price
property is P1,000,000 and the ◆​ not thru the stock exchange –
real property tax thereon for five subject to capital gains tax of
years is P50,000. If the buyer 15% on the capital gain
pays P950,000 only, the seller in
effect shoulders the real
property tax burden of the buyer. Capital Gains Tax vs Stock
Transaction Tax (Tax Avoidance)
3.)​Transformation ➔​ The manufacturer or producer
upon whom the tax has been
imposed, fearing the loss of his
market if he should add the tax
to the price, pays the tax and
endeavors to recoup himself by
improving his process of
production, thereby turning out
his units at a lower cost.

DISTINCTIONS BETWEEN TAX EVASION AND TAX

AVOIDANCE

●​ As to Validity
○​ Tax evasion is illegal and subject to
criminal penalty.
○​ Tax avoidance is legal and thus not
RESULTING IN LOSS OF REVENUE subject to criminal penalty.
●​ As to Effect
○​ Tax evasion results in absence of
1.)​Tax ➔​ The use by the taxpayer of illegal
taxation.
Evasion means to defeat or lessen the
○​ Tax avoidance results in tax
payment of tax.
minimization.
➔​ Factors in Tax Evasion
◆​ The end to be achieved.
◆​ An accompanying state of mind 3.)​Tax ➔​ Grant of immunity to particular
Exemption persons or corporations from tax

CLWTAXN | Erin Lomio 12

 persons and corporations generally all taxes like non-stock,
within the same state or taxing district non-profit educational
are obliged to pay. institutions.
➔​ E.g. Exemptions under the b.​ Partial – exempted from
Constitution, Tax Code and Special certain taxes like minimum
laws. wage earners.
➔​ Nature of Power to Grant Tax 3.​ As to Object
Exemption a.​ Personal – those granted
1.​ National Government – directly in favor of such
Inherent as power to tax implies persons
the power to prescribe who or b.​ Impersonal – those
what shall not be taxed. granted directly in favor of
2.​ Local Governments – don’t a certain class of property.
have the inherent power to
exempt from taxation. ➔​ Exemptions under the Constitution
◆​ From Real Property Tax – real
➔​ Grounds for Tax Exemption properties actually, directly and
1.​ Based on Contract – exclusively used for religious,
government is supposed to charitable or educational
receive a full equivalent purposes.
therefor. ◆​ From Taxes and Duties –
2.​ Based on Some Ground of revenues and assets of
Public Policy – gov’t need not non-stock, non-profit
receive any consideration in educational institutions actually,
return for the tax exemption. direct and exclusive used for
3.​ Created in a Treaty on educational purposes.
Grounds of Reciprocity – to
lessen the rigors of international ➔​ Exemptions under the Tax Code
double or multiple exemption. ◆​ From Income Tax – income
derived from tax-exempt activity
➔​ Nature of Tax Exemption by non-stock corporations or
1.​ It is a mere personal privilege of associations organized and
the grantee. operated exclusively for
2.​ It is generally revocable by the religious, charitable, scientific,
government unless the athletic or cultural purposes.
exemption is founded on a
contract. (BUT, income from property or from any
3.​ It implies a waiver on the part of activity conducted for profit, regardless of
the Government of its right to disposition, is subject to income tax)
collect. Hence, it exists only by
virtue of an express grant and ◆​ From Income Tax – minimum
must be strictly construed. wage, overtime pay, holiday
4.​ It is not necessary pay, night-shift differential and
discriminatory so long as the hazard pay received by a
exemption has a reasonable minimum wage earner.
foundation or rational basis. ◆​ From VAT – monthly rent of
residential unit not exceeding
➔​ Kinds of Tax Exemption P15,000.
1.​ As to Manner of Creation ◆​ From VAT – sale or importation
a.​ Express or affirmative of agricultural and marine food
exemption – when certain products in the original state.
persons, property or
transactions are, by ➔​ Exemptions under Special Laws
express provision, ◆​ From Income Tax – income
exempted from all or from operations of Barangay
certain taxes like Micro Business Enterprise
exemptions under the (BMBE) (RA No. 9178), but
Constitution, Tax Code and subject to other taxes.
special laws. ◆​ BMBE – business enterprise
b.​ Implied exemption or engaged in the production,
exemption by omission – processing or manufacturing of
tax is levied on certain products, including agro-
classes without mentioning processing, as well as trading
the other classes. Those and services, with total assets
not mentioned are deemed of not more than P3 million.
tax-exempt. ◆​ Such assets shall include those
2.​ As to Scope or Extent arising from loans but not the
a.​ Total – exempted, land on which the plant and
expressly or impliedly, from equipment are located.

CLWTAXN | Erin Lomio 13

 ◆​ The term “services” shall TAX LAWS
exclude those rendered by any
one, who is duly licensed by the
government after having NATURE
passed a government licensure
examination. I.​ Not Political in Nature – deemed to be the laws of
◆​ From Income Tax – benefit the occupied territory and not of the occupying
payments to members by GSIS enemy.
(PD No. 1146) and SSS (RA A.​ E.g. Philippine tax laws continued in force
No. 1161, as amended) during the period of Japanese occupation
and were actually enforced by the
occupation government. II.
II.​ Civil in Nature – not penal, although penalties are
DISTINGUISHED FROM TAX AMNESTY
provided for their violation. The purpose in imposing
●​ Tax Amnesty penalties for delinquencies is to compel the timely
○​ It is a general pardon or intentional payment of taxes or to punish evasion or neglect of
overlooking by the State of its authority to duty.
impose penalties on persons otherwise
guilty of tax evasion or violation of revenue CONSTRUCTION
or tax law.
○​ It partakes an absolute forgiveness or I.​ Legislative Intention Must be Considered
waiver by the government of its right to A.​ Tax laws are to receive a reasonable
collect what is due it and to give tax construction or interpretation with a view to
evaders who wish to relent a chance to carrying out their purpose and intent.
start with a clean slate. B.​ Should not be construed as to permit the
○​ E.g. Estate Tax Amnesty until June 14, taxpayer easily to evade the payment of
2021 now until 2023 – net estate of the tax. Thus, good faith is not a valid defense
deceased who died prior to January 1, to justify non-payment of tax or surcharge.
2018 subject to 6% amnesty rate without II.​ Where there is No Doubt
surcharge, interest and penalty. A.​ Where the language of the tax stature is
■​ If will not avail of the amnesty, the plain and there is no doubt as to the
net estate is subject to 0%-20% legislative intent, the words are to be given
estate tax, plus surcharge, their ordinary meaning.
interest and penalty. III.​ Where there is Doubt
A.​ Tax statutes are construed strictly against
Estate Tax Amnesty – Extended until June 14, 2023 the government and liberally in favor of the
taxpayer as taxes are not to be presumed
beyond what the statute expressly and
clearly declares.
B.​ In case of tax exemptions and refunds,
they are construed strictly against the
person claiming exemption or refund and
liberally in favor of the government. The
reason is that taxation is the rule, and
exemption is the exception.
1.​ Exceptions:
a)​ When the law itself
expressly provides for a
liberal construction – In
case of doubt, it shall be
resolved in favor of
exemption.
b)​ When the exemption is
in favor of the
government itself, or its
agencies, or of religious,
charitable and education
institutions.
IV.​ Where There is Conflict with Other Laws
●​ Differences between Tax Exemption and Tax
A.​ National Internal Revenue Code, being a
Amnesty
special law, it prevails over a general law
○​ In tax amnesty, the taxpayer is immune
like the Civil Code of the Philippines.
from civil, criminal and administrative
liabilities, while in tax exemption, the
taxpayer is immune from civil liability only. APPLICATION
○​ Tax amnesty applies to prior tax periods or
retroactively, while tax exemption applies ●​ General Rule: Prospective in operation
prospectively. ●​ Exception: Retroactive provided it is expressly
declared or is clearly the legislative intent.
●​ Exception to the Exception: Not to be given
retroactive application when it would be harsh and

CLWTAXN | Erin Lomio 14

 oppressive, for in such case, the constitutional ○​ Necessary to the proper enforcement of
limitation of due process would be violated. the law.
●​ Mandatory Provisions – intended for the security ○​ Must not be contract to law and the
of the citizens (like those requiring previous notice Constitution.
to taxpayer of public sale of his property for tax ○​ Must be published in the Official Gazette
delinquency) or which are designed to insure (the Official Publication of the
equality of taxation or certainty as to the nature and Government) or a newspaper of general
amount of each person’s tax (Like those prescribing circulation.
tax rates). ○​ Copies thereof must be filed with the
●​ Directory Provisions – designed merely for the University of the Philippine Law Center
information or direction of officers or to secure (Office of the National Administrative
methodical and systematic modes of proceedings. Register – the official repository of all the
●​ Distinction: Omission to follow Mandatory implementing rules and regulations)
Provisions renders invalid the act or proceeding to Effectivity.
which it relates while the omission to follow ○​ 15 days from the date of filling with the UP
Directory Provisions does not involve such Law Center unless a different date is fixed
consequence. by law, or specified in the rule in cases of
imminent danger to public health, safety
and welfare.
SOURCES
●​ Force and Effect of Regulations
1.​ Constitution – ratified by the people. ○​ Have the force and effect of the law
2.​ Tax Codes (National Internal Revenue Code, Tariff ○​ Binding as if the regulations had been
and Customs Code and portions of the Local written in the law itself.
Government Code) – enacted by Congress ○​ In case of conflict with the law or the
3.​ Statutes like RA 1125 as amended (An Act Creating Constitution, administrative rules and
the Court of Tax Appeals), RA 8794 (Law imposing regulations are null and void.
Motor Vehicle User’s Charge), PD No. 118, as ●​ Administrative Interpretations and Opinions
amended (Law imposing Travel Tax) – enacted by ○​ The power to interpret the provisions of the
Congress Tax Code and other tax laws is under the
4.​ Presidential decrees – issued by the President exclusive original jurisdiction of the
during martial law. Commissioner of Internal Revenue subject
5.​ Executive orders – issued by the President under to review by the Secretary of Finance.
the Provisional Government and pursuant to the (Sec. 4, Tax Code)
legislative power possessed by the President before ●​ Regulations – formal interpretation of the provision
the convening of Congress on July 27, 1987. of the Tax Code and other laws by the Secretary of
6.​ Court decision (forms part of the legal system of Finance upon recommendation of the
the Philippines) Commissioner of Internal Revenue.
7.​ Revenue regulation promulgated by the Dept. of ●​ Circular or Memorandum – issuances that publish
Finance pertinent and applicable portions, as well as
8.​ Administrative issuances of the BIR Like Revenue amplifications of laws, rules, regulations and
Memorandum Circulars and those of the Bureau of precedents issued by the BIR and other
Customs like Customs Memorandum Orders agencies/offices.
9.​ BIR rulings ●​ Rulings – less general interpretations of tax laws at
10.​ Local tax ordinances – enacted by local legislative the administrative level issued by tax officials in the
bodies. performance of their assessment functions.
11.​ Tax treaties and conventions with foreign countries ○​ BIR Rulings – official position of the BIR
– entered into for the avoidance of international to queries raised by the taxpayers and
double taxation. They have the same force and other stakeholders relative to clarification
effect as statutes. and interpretation of tax laws.
●​ Opinions of Secretary of Justice – rulings in the
●​ Revenue Regulations – issuances signed by the form of opinions on tax questions given by the
Secretary of Finance, upon recommendation of the Secretary of Justice who is the chief legal officer of
Commissioner of Internal Revenue, that specify, the government.
prescribe or define rules and regulations for the ●​ Weight Given to Administrative Interpretation
effective enforcement of the National Internal ○​ Entitled to great respect by court.
Revenue Code and related statutes. ○​ But, NOT conclusive and binding upon the
●​ Nature of Power to Make Regulations under courts and will be ignored if judicially found
Section 244 of the Tax Code to be erroneous.
○​ Legitimately exercised only for the purpose ●​ Power of Secretary of Finance to Revoke
of implementing the law or putting it into Rulings of Predecessor
effect. ○​ Rulings of predecessors are not binding
○​ The statute which is being administered upon the Secretary of Finance and if
may not be altered or added to by the thereafter the Secretary becomes satisfied
exercise of a power to make regulations. that a different construction should be
○​ Regulations cannot increase or decrease given.
the requirements of the law, nor embrace ●​ Non-retroactivity of Repeal of Regulations or
matter not covered or intended to be Rulings
covered by the statute, otherwise, they are ○​ General Rule: Not given retroactive
INVALID for being in conflict with the law. application when such revocation,
●​ Validity of Regulations Requisites: modification or reversal will be prejudicial

CLWTAXN | Erin Lomio 15

 to the taxpayer. (PROSPECTIVE)
○​ Exceptions (RETROACTIVE):
1.​ When taxpayer deliberately
misstates or omits material facts
from his return or in any
document required of him by the
BIR.
2.​ Where the facts subsequently
gathered by the BIR are
materially different from facts on
which the ruling is based.
3.​ Where the taxpayer acted in bad
faith.
●​ Decisions of Supreme Court and Court of Tax
Appeals
○​ Binding on all subordinate courts and have
the force and effect of a law pursuant to
Article 8, Civil Code of the Philippines,
which reads:
○​ “Judicial decisions applying or interpreting
the laws or the Constitution shall form a
part of the legal system of the Philippines.”
○​ Decisions of Court of Tax Appeals are
appealable to the Supreme Court.

CLWTAXN | Erin Lomio 16