GROUP 4

TAX REVIEWER

MEMBERS:

SHAZAR CARLO PORRAS

JEZIEL ESTO

KRISTINE JANE DONGOGAN

ELAINE MAY ECHAVEZ

GLENN PAOLO SOMBREO

MIEGEN SAWAY
 TABLE OF CONTENTS

PART XI: STATUTORY OFFENSES AND PENALTIES............................................... 1

PART XII: The Court of Tax Appeals (RA 1125) and its Expanded Jurisdiction (RA 9282).... 3

PART XIII: TAX REMEDIES UNDER NIRC...................................................... 7

PART XIV: LOCAL TAXATION............................................................... 20

PART XV: COMMUNITY DEVELOPMENT TAX..................................................... 25

PART XVI: REAL PROPERTY TAXATION....................................................... 28

 BUKIDNON STATE UNIVERSITY - COLLEGE OF LAW

BASIC TAXATION LAW REVIEWER

Deficiency tax, or any surcharge on interest
thereon on the due date appearing in the notice and
demand of the CIR. (Sec. 249 (C), NIRC) NOTE:
PART XI: STATUTORY OFFENSES AND Deficiency interest on deficiency income tax
PENALTIES accrues and commences from the date of assessment
as shown in the assessment notice.

DELINQUENCY INTEREST AND DEFICIENCY INTEREST

4. Interest on Extended Payment - There shall be
KINDS OF INTEREST FOR TAX PURPOSES
assessed and collected interest at the rate of 20%
per annum on the tax or deficiency tax or any part
1. Interest in general – There shall be assessed and thereof unpaid from the date of notice and demand
collected on any unpaid amount of tax, interest at until it is paid:
the rate of double the legal interest rate for
loans or forbearance of any money in the absence a. If any person required to pay the tax is qualified
of an express stipulation as set by the BSP, from and elects to pay the tax on installment, but fails
the date prescribed for payment until the amount to pay the tax or any installment hereof, or any
is fully paid. (Sec. 249(A), NIRC) part of such amount or installment on or before the
date prescribed for its payment; or
2. Deficiency interest – Any deficiency in the tax
due shall be subject to interest at the rate of 12% b. Where the CIR has authorized an extension of time
per annum (double the legal interest rate prescribe within which to pay a tax or a deficiency tax or
in Sec. 249 (A), which interest shall be assessed any part thereof. (Sec. 249(D), NIRC)
and collected from the date prescribed for its
payment until the full payment thereof, or upon Tax Delinquency vs Tax Deficiency
issuance of a notice and demand by the CIR,
whichever comes earlier. (Sec. 249(B), NIRC) NOTE: Tax Deficiency - the amount still due and collectible
The new interest rate shall be applied only in from a taxpayer upon audit or investigation.
cases of deficiency taxes for 2018 onwards. If the
deficiency taxes were for earlier taxable period, Tax Delinquency - the failure of the taxpayer to pay
it shall be computed pro-rata i.e., 20% for 2017 the tax due on the date fixed by law or indicated in
and earlier (R.A. No. 8424) and the 12% for 2018 the assessment notice or letter of demand. (Takenaka
onwards (R.A. No. 10963). Corporation Philippine Branch v. CIR, CTA EB No. 745,
Sept. 4, 2012)
3. Delinquency interest – There shall be assessed and
collected on the unpaid amount, interest at the NOTE: Deficiency interest is assessed on the amount
rate of 20% per annum until the amount is fully still due and collectible from a taxpayer upon audit
paid, which interest shall form part of the tax, or investigation; whereas delinquency interest is
in case of failure to pay: a. Amount of tax due on assessed due to the failure of the taxpayer to pay
any return required to be filed, or b. Amount of the tax due on the date fixed by law or indicated in
tax due for which no return is required, or c. the assessment notice or letter of demand.

1
 CIR, whichever is
Deficiency Delinquency earlier
Exists when the amount Exists when: Rate
imposed by law (as (1) the self-assessed 12% (2x the legal rate 12% (2x the legal rate
determined by CIR or his tax is not paid at all or set by BSP) set by BSP)
authorized was only partially paid
representative) exceeds on the prescribed date;
SURCHARGE
amount shown as tax upon or
taxpayer’s return (2) when the deficiency
Definition
tax assessed by the BIR
NOTE: An amount is has become final and
A civil penalty, also known as surcharge, is imposed
determined by the BIR as executory.
by law as an addition to the basic tax required to be
a tax liability where
paid. (Sec. 248, NIRC) A surcharge is a civil
there is no amount
administrative sanction provided as a safeguard for
stated in the return.
the protection of the State revenue and to reimburse
To be collected, has to Can be immediately
the government for the expenses of investigation and
go through the collected
the loss resulting from the taxpayer’s fraud. A
assessment process.
surcharge added to the main tax is subject to
Filing of a civil action Filing of a civil action
interest.
during pendency of for the collection of
protest is a ground for taxes is the proper
Kinds of Civil Penalties
a motion to dismiss remedy
Subject to 25% Is subject to surcharges
1. 25% Surcharge: (F-T-O-P)
surcharge, although and administrative
subject to interest and penalties.
a. Failure to File any return and pay the tax due
compromise penalty.
thereon as required under the provisions of the
NIRC or rules and regulations on the date
Deficiency Interest Delinquency Interest
prescribed.; or
Amount still due and Failure to pay the tax
collectible from a due on the date fixed by
b. Failure to pay the deficiency tax within the
taxpayer upon audit or law or indicated in the
Time prescribed for its payment in the notice of
investigation assessment notice or
assessment.; or
letter of demand
Shortage of taxes paid Delay in payment of
NOTE: In cases of late payment of a deficiency tax
Taxes
assessed, taxpayer shall be liable for the
Tax Base
delinquency interest incident to late payment. (RR
Basic Tax Basic tax plus interest
No. 18-2013)
and surcharges
Reckoning Point
c. Unless otherwise authorized by the CIR, filing
From the date prescribed From the date appearing
a return with an internal revenue officer Other
until the full payment in the notice and demand
than those with whom the return is required to be
or upon issuance of by the CIR
filed.; or
notice and demand by the

2
 d. Failure to Pay the full or part of the amount fifty percent (50%) of the tax or of the deficiency
of tax shown on any return required to be filed tax, in case any payment has been made on the basis
under the provisions of the NIRC or rules and of such return before the discovery of the falsity or
regulations, or the full amount of tax due for fraud.
which no return is required to be filed, on or
before the date prescribed for its payment. (Sec. NOTE: Provided, that a substantial under declaration
248(A), NIRC) of taxable sales, receipts or income, or a substantial
overstatement of deductions, as determined by the
NOTE: There is no 25% surcharge when tax return is Commissioner pursuant to the rules and regulations to
filed on time and paid the full amount stated in the be promulgated by the Secretary of Finance, shall
return, but subsequently discovered that the return constitute prima facie evidence of a false or
filed, and the amount paid was erroneous. (Ingles, fraudulent return. Provided, further, that failure to
2015) report sales, receipts or income in an amount
exceeding thirty percent (30%) of that declared per
2. 50% Surcharge: return, and a claim of deductions in an amount
exceeding thirty percent (30%) of actual deductions,
a. Willful neglect to file the return within the shall render the taxpayer liable for substantial under
period prescribed.; or declaration of sales, receipts or income or for
overstatement of deductions, as mentioned herein.
NOTE: If the taxpayer voluntarily files the return (Sec. 248(B), NIRC)
without notice from BIR, only 25% surcharge shall be
imposed for late filing and late payment of tax. But
if the taxpayer files the return after prior notice PART XII: The Court of Tax Appeals (RA
in writing from BIR, then the 50% surcharge will be
1125) and its Expanded Jurisdiction (RA
imposed. Thus:
i. No demand from the BIR and the taxpayer pays,
9282)
albeit late, 25%
ii. With demand by the BIR, 50% (Ingles, 2015)
PURPOSES OF THE CREATION OF COURT OF TAX
b. False or fraudulent return is willfully made.
APPEALS
NOTE: The fraud contemplated by law is actual fraud,
 To entrust tax cases to specialized court
not constructive fraud. It must be intentional fraud,
composed of men technically qualified in the
consisting of deception willfully and deliberately
field of taxation;
done or resorted to. Negligence, whether slight or
 To expedite the disposition of tax cases,
gross, is not equivalent to fraud with intent to evade
hasten collection of taxes and provide
the tax contemplated by law. (Aznar vs. CTA, G.R. No.
adequate and speedy remedy of taxpayer;
L-20569, 23 Aug. 1974)
 It is presumably designed to act only on
protests of private persons adversely
Fraud Penalty
affected by the tax, customs duty or
assessment.
In case of willful neglect to file the return within
the period prescribed by this Code or by rules and
POWERS OF THE COURT OF TAX APPEALS
regulations, or in case a false or fraudulent return
is willfully made, the penalty to be imposed shall be
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  To administer oaths
SALIENT FEATURES OF R.A. 9282 (An Act Expanding the
 To receive evidence
 To summon witnesses by subpoena Jurisdiction of the CTA)
 To punish for contempt
 To require the production of papers or  Elevation of the CTA's Status

documents by subpoena duces tecum  Upgraded the Court of Tax Appeals from a

 To promulgate rules and regulations for the special court of limited jurisdiction to a

conduct of its business but is not governed collegiate court with the same level as the

strictly by the rules of evidence Court of Appeals.

 To assess damage against the appellant, if  Expansion of Membership

the appeal to the CTA is found to be  Increased the number of justices from 3 to 6

frivolous or dilatory (1 Presiding Justice and 5 Associate

 To suspend the collection of the tax pending Justices)

appeal  Allowed the CTA to sit en banc (all justices)

 To render decisions on cases brought before or in two divisions of three justices each.

it  Broadened Jurisdiction: The CTA now have

exclusive appellate jurisdiction over decisions

RULES GOVERNING THE CREATION AND JURISDICTION OF of (in addition to above-mentioned

jurisdiction):
COURT OF TAX APPEALS  Secretary of Finance on custom cases
 Regional Trial Courts in local tax cases in
1. R.A. 1125: An Act Creating the CTA (1954)
the exercise of its appellate jurisdiction
2. R.A. 9282: An Act Expanding the Jurisdiction of
 Secretary of Trade and Industry (e.g non-
the CTA (2004) agricultural products)
3. A.M. No. 05-11-07-CTA: Revised Rules of the CTA
(RRCTA) (2005) MOST IMPORTANTLY, the CTA has now Jurisdiction over

4. R.A. 9503: An Act Enlarging the Organizational cases involving criminal offenses:

Structure of the CTA (2008)

 Offenses arising from violations of the
National Internal Revenue Code or Tariff and
SALIENT FEATURES OF R.A 1125 (An Act Creating the
Customs Code and other laws administered by
CTA) the Bureau of Internal Revenue or the Bureau
of Customs, where the principal amount, taxes
 Creation of the Court of Tax Appeals (CTA) and fees, excluding penalties and charges is
 Composition of the Court: One Presiding Judge 1 million or more.
and two Associate Judges  Also has exclusive appellate jurisdiction
 Jurisdiction: Exclusive Appellate over appeals from the judgments, resolutions
Jurisdiction to review decisions of: or orders of the Regional Trial Courts in tax
 The Commissioner of Internal Revenue cases originally decided by them;
(e.g., tax assessments, refunds)  Over petitions for review of the judgments,
 The Commissioner of Customs (e.g., resolutions or orders of the Regional Trial
seizure of goods, customs duties). Courts in the exercise of their appellate
 Provincial or City Boards of Assessment jurisdiction
Appeals (e.g., taxation of real property  Tax collection cases

4
SALIENT FEATURES OF R.A. 9503 (An Act Enlarging the

Organizational Structure of the CTA)

 Further Expansion of the CTA's Composition

 Increased the number of Associate Justices
from five (5) to eight (8)
 Creation of Additional Divisions. Allowed the
CTA to operate in three (3) divisions, each
composed of three Justices.

SALIENT FEATURES OF A.M. No. 05-11-07-CTA: Revised

Rules of the CTA (RRCTA)

 Proceedings Before Divisions vs. En Banc

 Cases are initially heard by a Division
 Appeals from a Division's decision are
elevated to the CTA En Banc via a Motion for
Reconsideration or Petition for Review En
Banc
 En Banc rulings are final and appealable to
the Supreme Court via Rule 45

5
GUIDE ON HOW TO INITIATE APPEALS ON TAX CASES:

WHO MAY APPEAL TO THE COURT OF TAX APPEALS? CAN THE COURT ISSUE AN INJUCTION TO RESTRAIN THE TAX
COLLECTION?
ANS: Any person, association or corporation
adversely affected by a decision or ruling of the ANS: Generally, NO. The courts have no
CIR, CC, SF, CBAA involving land taxes in the authority to grant an injunction to restrain the
exercise of their original or appellate collection of any internal revenue tax since the
jurisdiction. government chiefly relies upon taxation to obtain
the means to carry its objectives and operations.
WHAT IS THE PERIOD OF APPEAL TO THE COURT OF TAX
APPEALS? EXCEPTIONS:

ANS: Appeals against the decision of CIR, CC  The injunction is an incident of a case over
or SF shall be brought to the CTA within 30 days which the CTA has jurisdiction
after receipt of such adverse decision or ruling  The collection pending appeal might
affecting the interest of the taxpayer. The counting jeopardize the interest of the government
of 30 days should commence from the date of receipt and/or the taxpayer
of the decision or ruling on the disputed  That the taxpayer shows that the appeal is
assessment, not from the date the assessment was not frivolous nor for the purpose merely to
issued. delay the collection of taxes
 The taxpayer is willing to deposit the amount
WHAT IS THE EFFECT OF FAILURE TO APPEAL WITHIN 30
claimed or file a surety bond for not more
DAYS TO THE CTA?
than double the amount of the tax with the
court when required.
ANS: The CTA may motu proprio dismiss an
appeal filed out of time. (NOTE: This reglementary
period is jurisdictional and non-extendible).

6
 o Remedies that are enforced through judicial
PART XIII: TAX REMEDIES UNDER NIRC action, which may be civil or criminal in
nature.

TAX REMEDIES DEFINED:

A tax remedy is an action available to either the EXAMPLES OF SUBSTANTIVE REMEDIES:

government or a taxpayer, whether judicial or extra- a) Imposition of withholding tax on certain

judicial, to: income payments – Sec. 57(B), NIRC
b) Issuance of revenue regulations by
 Government's perspective: Enforce collection
administrative agency – Secs. 244–245, NIRC
of taxes.
c) Failure to obey summons – Sec. 266, NIRC
 Taxpayer’s perspective: Prevent arbitrary
d) d) Declaration under penalties of perjury –
collection of taxes, abuses, or harassment by
Sec. 267, NIRC
those enforcing tax laws, and avoid payment
e) Failure to inform the taxpayer in writing of
of illegal taxes.
the legal and factual bases of assessment
renders it void – Sec. 228, NIRC
LEGAL BASIS OF TAX REMEDIES: f) Publication of Revenue Memorandum Circulars
a) Government – Lifeblood doctrine (RMC) or Revenue Memorandum Orders (RMO)

b) Taxpayer – Due process clause of the g) Preservation of books of accounts and

Constitution limitation of once-a-year examination for

income tax purposes – Sec. 235, NIRC

TAXPAYER’S REMEDIES (NIRC):

Note:
Administrative interpretations should be respected. The

CLASSIFICATION OF REMEDIES: interpretation given by the administrative officer (e.g.,

CIR) tasked to implement the statute should be given weight.
1. Summary Remedies

o Remedies at the administrative level or

EXAMPLES OF PROCEDURAL REMEDIES (RR NO. 12-99):
regulation that are executed without
ceremony or delay; they are expeditious, a) Notice of Discrepancy sent to the taxpayer

short, or concise. b) Informal Conference Letter

c) Preliminary Assessment Notice (PAN)
2. Substantive Remedies
d) Formal Letter of Demand and Assessment Notice
o Remedies provided for by law or regulation;
e) Decision on Disputed Assessment
essential or constituent parts of the law
relating to rights and obligations.
ADMINISTRATIVE REMEDIES OF A TAXPAYER
3. Procedural Remedies
A) Before Payment
o Remedies involving rules on pleading,
evidence, jurisdiction, and procedure in 1. Tax Minimization (Tax Avoidance)

handling tax cases. 2. Secure BIR Ruling or Opinion of the CIR

4. Administrative Remedies 3. Amendment of the Tax Return

o Remedies available at the level of the o Must be done within three (3) years

administrative agency (e.g., BIR) prior to from submission of the return to be

court involvement. amended, provided there is no

5. Judicial Remedies investigation/audit or assessment

yet.

7
 4. Disputing an Assessment o Tax Lien

5. Compromise of the Civil and/or Criminal B) Criminal Remedies

Liability
 Criminal Action Against Tax Officials
6. Abatement of Tax Liability
o For harassment, injury, and similar
7. Abandonment of Imported Goods offenses, filed in the ordinary
courts.

B) After Payment C) Special Remedies

1. Tax Refund 1. Appeal to the President of the Republic
2. Amendment of Return with Payment o Applicable in case of revocation of
o Must file a claim for refund or license to do business.
credit within two (2) years from 2. Secure Favorable Legislation by Participating
payment. in Public Hearings
3. Payment of the Assessed Tax Without Disputing 3. Publish Tax Views in the Media or Use of
the Same Broadcast Media

o Still may file for tax refund or 4. Lobbying in Congress

credit within two (2) years from 5. People’s Power or Initiatives
payment.
6. Use of Ballot Boxes
4. Question the Validity of Forfeiture
o Choose public officials sympathetic
5. Redemption of Real Property to taxpayers.
o Must be done within one (1) year from 7. Running for Congress
the date of sale or forfeiture.
o To influence the passage of revenue
bills.
JUDICIAL REMEDIES OF A TAXPAYER

(Cannot be availed of without exhaustion of

GOVERNMENT'S REMEDIES TO ENFORCE TAX COLLECTION
administrative remedies)

A) Civil Remedies

1. Appeal to the Court of Tax Appeals (CTA) 1) ADMINISTRATIVE OR EXTRAJUDICIAL REMEDIES

2. Secure Injunction Order from the CTA a) Assessment

b) Compromise
3. Appeal from CTA Division to CTA En Banc
c) Tax lien
4. Appeal from CTA En Banc to the Supreme Court
d) Distraint (Actual or Constructive)
(SC)
e) Levy
5. Sue Internal Revenue Officer for Damages
f) Garnishment
o For acts done arbitrarily in the
g) Forfeiture of property
performance of duties. h) Public sale of forfeited properties
6. Action to Contest Forfeiture of Chattel, i) Suspension of business operation for VAT law
Enjoin Its Sale, or Recover Proceeds of Sale violations
7. Action to Question the Validity of Sale of
Properties Under: j) Enforcement of administrative fines

o Distraint (surcharges and interest)

k) Requiring the filing of a bond to secure tax
o Levy
liability
o Garnishment

8
 l) Requiring proof of filing an income tax  General Rule:
return The issuance of a Letter of Authority is a
m) Deportation of aliens mandatory statutory requirement. Any tax
n) Use of the national tax registry assessment issued without an LOA is a
o) Use of authorized cash machines by business violation of the taxpayer’s right to due
establishments process and is therefore “inescapably void.”
p) Requiring printers to secure authority from
BIR to print receipts/invoices
A mere Letter of Notice is not enough.
q) Abatement
r) Inventory taking/Surveillance
 Exceptions:
The following cases need not be covered by a
s) Prescribing presumptive gross sales or gross
valid LOA:
receipts
t) Prescribing real estate values a. Cases involving civil or criminal tax

u) Termination of tax period fraud that fall under the jurisdiction of

v) Arrest, search, and seizure in certain cases the Tax Fraud Division of the Enforcement

w) Giving informer’s rewards Services; and

x) Inquiring into bank deposits in certain cases b. Policy cases under audit by the special
teams in the National Office. [RMO 36-99]

2) JUDICIAL REMEDIES

a) Civil cases STEP #2: INFORMAL CONFERENCE

 Court collection filed in court

After the initial report on the tax audit, the
 Hold-departure order against the erring
taxpayer will decide whether or not he agrees with
taxpayer
the findings. If he does not agree, he shall be
b) Criminal cases
informed of the amount of his deficiency taxes.
 Pursuing criminal prosecution of the taxpayer Then, they will proceed with the “informal
Note: conference” where he can present his side.

The government may use these remedies singly, independently

of each other, repeatedly, or simultaneously until full
The Notice for Informal Conference (NIC) is now
settlement of the taxpayer's liability is achieved.
replaced with the Notice of Discrepancy (NOD) under
Revenue Regulations No. 22-2020.

1. ASSESSMENT OF INTERNAL REVENUE TAXES  The taxpayer must respond to the NOD within 5
days from receipt thereof.

A. PROCEDURAL DUE PROCESS IN TAX ASSESSMENTS  If the taxpayer needs more time to submit
documents in his defense, he may submit them
after the discussion but within 30 days from
STEP #1: LETTER OF AUTHORITY (LOA) AND TAX AUDIT
the receipt of the NOD.

 The discussion shall not extend beyond the

A. Letter of Authority (LOA):
30-day period.
A Letter of Authority is an official document that
empowers a Revenue Officer to examine and scrutinize  Within 10 days from the end of the

a taxpayer's books of accounts and other accounting discussion, the investigating officer shall

records, in order to determine the taxpayer's endorse the case for review and request for

correct internal revenue tax liabilities. the issuance and approval of the Preliminary

9
 Assessment Notice (PAN) if the taxpayer is  The taxpayer must reply within 15 days from
still found to be liable for deficiency the date of receipt of the PAN.
taxes.
 If the taxpayer fails to respond, he is
considered in default, and a Formal Letter of
STEP #3: PRELIMINARY ASSESSMENT NOTICE (PAN) Demand/Final Assessment Notice (FLD/FAN)
shall be issued.

General Rule:  If the taxpayer responds but disagrees with

A Preliminary Assessment Notice (PAN) shall be the findings, an FLD/FAN shall be issued
issued if it is determined that there exists within 15 days from the filing/submission of
sufficient basis to assess the taxpayer for any the taxpayer’s response.
deficiency tax. It shall show in detail the facts
 The FLD/FAN shall call for payment of the
and the law on which the proposed assessment is
taxpayer’s deficiency tax liability,
based.
inclusive of the applicable penalties, if the
reply to the PAN was found to be without
Exceptions to the Issuance of a PAN: merit.
The Notice for Informal Conference (NIC) and the
Preliminary Assessment Notice (PAN) shall not be
STEP #4: FORMAL LETTER OF DEMAND (FLD) AND FINAL
required in any of the following cases. In such
ASSESSMENT NOTICE (FAN)
instances, a Formal Letter of Demand and Assessment
Notice (FLD/FAN) shall be issued outright:
The taxpayer shall be informed in writing of the law
a. The finding for any deficiency tax is the result
and the facts on which the assessment is made;
of mathematical error in the computation of the
otherwise, the assessment shall be void.
tax as appearing on the face of the return;
An assessment contains not only a computation of tax
b. A discrepancy has been determined between the
liabilities but also a demand for payment within a
tax withheld and the amount actually remitted by
certain period.
the withholding agent;
c. A taxpayer who opted to claim a refund or tax
STEP #5: DISPUTED ASSESSMENT
credit of excess creditable withholding tax for
a taxable period was determined to have carried
The taxpayer or his duly authorized representative
over and automatically applied the same amount
may protest administratively against the FLD/FAN
claimed against the estimated tax liabilities
within 30 days from the date of receipt thereof.
for the taxable quarter or quarters of the
succeeding taxable year;
d. The excise tax due on excisable articles has not The taxpayer protesting an assessment may file a

been paid; written request for reconsideration or

e. An article locally purchased or imported by an reinvestigation.

exempt person—such as, but not limited to,

vehicles, capital equipment, machineries, and STEP #6: ADMINISTRATIVE DECISION ON A DISPUTED
spare parts—has been sold, traded, or ASSESSMENT
transferred to a non-exempt person.
[Reference: Revenue Regulations No. 18-2013] The Commissioner of Internal Revenue (CIR) will then
decide whether to grant the protest or not.
Reply to PAN:

10
STEP #7: APPEAL FROM AN ADMINISTRATIVE DECISION ON legal interest
DISPUTED ASSESSMENT set by BSP;
thus, 6% X 2 =

If the CIR denies the protest, the taxpayer can 12% per

appeal the decision of the CIR. annum).

Compromise
penalty
B. Requisites of a Valid Assessment

a. Upon notice of discrepancies in a taxpayer's tax D. Prescriptive Period for Assessment

return, the tax examiner sends a Notice of

Discrepancy (NOD), giving the taxpayer an General Rule
opportunity to explain the discrepancies
 Within 3 years after the last day prescribed
discovered.
by law for the filing of the return, or from
b. If no agreement is reached during the informal
the date of actual filing, whichever comes
conference, a Pre-Assessment Notice (PAN) is
later.
issued. The taxpayer must be given 15 days to
[Sec. 203, NIRC]
reply/protest the PAN if they disagree.
c. The assessment must state the facts, law, rules,
Exception (FFF Cases - 10 Years)
and jurisprudence on which it is based.
Otherwise, the Formal Letter of Demand and  Within 10 years after the discovery of the

Assessment Notice shall be VOID. falsity, fraud, or omission in case of:

1. False return
C. Tax Delinquency and Tax Deficiency
2. Fraudulent return with intent to
evade tax
Comparison Delinquent Tax Deficient Tax 3. Failure to file a return

Amount not Entire amount Only a portion [Sec. 222, NIRC]

paid of the tax

liability Determining if Prescription Has Set In

The need for Not required Assessment in  The important date to remember is the date
Assessment in certain mandatory when the demand letter or notice is released,
cases mailed, or sent by the CIR to the taxpayer.

Remedy for Filing of a Collection may  Provided the release was effected BEFORE
Collection civil action be done prescription sets in, the assessment is
administratively deemed made on time, even if the taxpayer
or judicially actually receives it after the prescriptive

Start date of Due date of Date of demand period.

interest the tax

Additional 25% surcharge, No surcharge, Waiver of the Statute of Limitations

charges 20% interest only interest  The taxpayer and the CIR may agree in
per annum and a compromise writing, before the expiration of the time
(after TRAIN, penalty. prescribed in Sec. 203, to extend the period
times 2 of the of assessment.

11
 1. Date of execution of the waiver by the

Requisites for a Valid Waiver (Under RMO 14-2016) taxpayer or authorized representative.

1. Must be in writing, and the following must be 2. Expiry date of the period waived under the

complied with: statute of limitations.

o Executed before the expiration of the

Effect of Noncompliance with Requisites
prescriptive period.

 The date of execution shall be

General Rule:
indicated.
If the waiver does not comply with the requisites
o Signed by the taxpayer or authorized
for its validity, it is invalid and ineffective to
representative.
extend the prescriptive period.
 If a corporation, must be
signed by responsible
Exception:
officials.
If both the BIR and the taxpayer are in pari delicto
o The expiry date of the extended (in equal fault), it may be more equitable to uphold
period to assess/collect tax after the validity of the waiver, in recognition of the
the regular 3-year period must be principle that taxes are the lifeblood of the
indicated. government.
2. Tax specifics:

o Except for waiver of collection of i. Distinguish: false return, fraudulent

taxes (which must indicate the returns, and non-filing of returns
particular taxes assessed), the False Return Fraudulent Non-filing
waiver need not specify particular Returns Returns
taxes or amounts.
Contains Made with Omission to
o It may simply state: “all internal
wrong intent to file a
revenue taxes.” evade taxes return
information
o It may or may not be notarized. due to within the

3. BIR Acceptance: mistake, prescribed

carelessness, period
o The CIR or designated officials
(e.g., Revenue District Officer or or ignorance

Group Supervisor) must sign to Deviation may Intentional Omission

indicate acceptance before: or may not be or deceitful may or may

intentional not be
 The expiration of the original
intentional
period to assess/collect
taxes; or Not subject Subject to Not subject

to 50% 50% to 50%

 The lapse of the period agreed
surcharge, surcharge surcharge,
upon in a prior waiver.
except if except if
4. Retention Requirement:
done done
o The taxpayer has the duty to retain a
willfully willfully
copy of the accepted waiver.

ii. Suspension of Statute of Limitations

Two (2) Material Dates Required on the Waiver:

12
 The running of the statute of limitations for 1. Request for Reconsideration, or
assessment and collection of taxes is 2. Request for Reinvestigation
suspended in the following cases:
ii. Kinds of protest – request for reconsideration
or reinvestigation
a. When the Commissioner of Internal Revenue
(CIR) is prohibited from making the
Comparison Request for Request for
assessment or beginning distraint or levy
reconsideration reinvestigation
or a proceeding in court, and for 60 days
thereafter; As to nature It refers to a It refers to a
plea or re- plea of re-
b. When the taxpayer requests for a evaluation of evaluation of an
reinvestigation which is granted by the an assessment assessment on
CIR; on the basis of the basis of
existing newly discovered
c. When the taxpayer cannot be located in records without evidence that a
the address given by him in the return need of taxpayer intends
filed. additional to present in
evidence. It the
 Note: If the taxpayer informs the CIR may involve reinvestigation.
of any change in address, the running both a question It may also
of the statute of limitations shall of fact or law involve a
not be suspended; or both. question of fact
or law or both.
d. When the warrant of distraint or levy is
As to effect Shall not Shall be
duly served upon the taxpayer, his
on the suspend suspended only
authorized representative, or a member of
prescriptive if the request
his household with sufficient discretion,
period for
and no property is located;
reinvestigation
of granted by
e. When the taxpayer is out of the
the BIR.
Philippines.
As to counting From the From the
180-day period filling of the submission of
2. TAXPAYER’S REMEDIES for CIR to protest complete
decide documents
A. Protesting an Assessment [30-60-180-30 Rule]

i. Period to File Protest iii. Submission of Supporting Documents

o Period: Within 30 days  This is only applicable if the protest filed

o Reckoning Point: From the receipt of the is a request for reinvestigation.

Final Assessment Notice (FAN) or Formal  A request for reconsideration does not
Letter of Demand (FLD) require the submission of additional
supporting documents.

How to File a Protest:  Period: Within 60 days

The taxpayer may file either a:

13
  Reckoning point: From the filing of the 1. Filing a collection suit against the

protest taxpayer

iv. Effect of Failure to File a Protest 2. Issuance of warrant of distraint and

levy
 The assessment will become final, executory,
3. A final demand letter from BIR
and demandable.
(considered a FDDA)

4. Filing of a criminal action against

v. Action of the Commissioner on the Protest Filed
the taxpayer

3. Inaction — if not acted upon within 180 days,

a. Period to Act Upon or Decide on Protest Filed
inaction is deemed a denial

1. By the CIR’s duly authorized representative:

Remedies:
 In a request for reinvestigation: within
1. In Case of Denial of Protest:
180 days from submission of supporting
a. If denied (in whole or in part) by the CIR’s
documents
duly authorized representative, the taxpayer
 In a request for reconsideration: within may:
180 days from the date of filing of the
i. Appeal to the CTA within 30 days from
protest
receipt of the decision; OR

ii. Elevate the protest through a request

2. By the CIR: for reconsideration to the CIR within

 In case of protest: within 180 days from 30 days from receipt of the decision.

the filing of the protest

 In case of administrative appeal: within Note: No request for reinvestigation shall be

180 days from the filing of the appeal allowed in administrative appeal.
Only issues raised in the decision of the
CIR’s duly authorized representative shall be
Note:
entertained by the CIR (RR 18-2013).
An administrative appeal to the CIR may only be availed
of upon the denial of the protest to the FLD/FDDA by
the CIR’s duly authorized representative. Under RR 18- b. If denied (in whole or in part) by the CIR,
2013, there is no administrative appeal to the CIR for the taxpayer may appeal to the CTA within 30
inaction by the CIR’s representative. The remedy is to
days from receipt of the decision.
await the decision or file a petition for review with
the CTA within 30 days after the lapse of the 180-day
waiting period. Note: A motion for reconsideration of the
CIR’s denial shall not toll the 30-day period
for appeal to the CTA.
b. Remedies of the Taxpayer in Case of Denial or
Inaction by the Commissioner
Option 1: CIR’s rep decision – 30 days – CTA

Forms of Denial:

1. Direct Denial — through the issuance of a Option 2: CIR’s rep decision – 30 days – CIR

Final Decision on Disputed Assessment (FDDA) (has 180 days to decide) – 30 days CTA

2. Indirect Denial, such as:

2. In Case of Inaction Within the 180-Day Period:

14
  Appeal to the CTA within 30 days from the
lapse of the 180-day period, OR Irrevocability Rule (Carry-Over Option)

 Await the final decision of the CIR or his Once a taxpayer opts to carry over and apply the

representative and appeal to the CTA within excess income tax payments to succeeding quarters or

30 days after receipt of the decision. [RR years, such option is irrevocable for that taxable

18-2013] period.

 As a consequence, the taxpayer is barred from

securing a refund or tax credit certificate
for the same excess amount previously opted
c. Effect of Failure to Appeal
to be carried over.
 The decision or assessment becomes final,
executory, and demandable.
Requirements and Period for Filing a Claim for
 The taxpayer is barred from invoking defenses
Refund or Issuance of Tax Credit Certificate
that reopen the question of liability.
 When to file:
 The assessment is deemed correct and may be
A claim for refund must be filed within two
enforced through summary remedies or judicial
(2) years from the date of payment.
action.

 The taxpayer may raise only questions of

Note: Both the claim with the Bureau of Internal
jurisdiction, fraud, or collusion.
Revenue (BIR) and any appeal to the Court of Tax
 A final and executory assessment cannot be Appeals (CTA) must be filed within this 2-year
superseded by a new one. period.

Taxpayer’s Remedies
B. Recovery of Tax Erroneously or Illegally
Collected 1. If the Commissioner of Internal Revenue (CIR)
denies the claim:

o The taxpayer may appeal to the CTA

i. Grounds, requisites, and periods for filling a
within 30 days from receipt of the
clain for refund or issuance of a tax credit
CIR’s decision, but still within the
certificate
2-year period from the date of
payment.
Grounds for Filing a Claim for Tax Refund or Tax
2. If the CIR does not act on the claim and the
Credit Certificate
2-year period is about to lapse:
1. Tax is erroneously or illegally assessed or
o The taxpayer must file a claim with
collected:
the CTA before the lapse of the 2-
a. Erroneously paid taxes – when a
year period; otherwise, the claim
taxpayer pays under a mistake of
shall be barred.
fact, e.g., unaware of an existing
exemption at the time of payment.
ii. Proper party to file claim for refund or
b. Illegally collected taxes – when tax
tax credit – the statutory taxpaper himself
payments are made under duress.
even if he shifts the burden to another
2. Penalty is collected without authority.

3. Sum collected is excessive or in any manner

wrongfully collected.
15
 iii. Distinguish from input value-added tax involving basic taxes of ₱500,000 or less;
refund and
b. Minor criminal violations discovered by
regional and district officials.
Comparison Other Internal VAT (Sec. 112)
Revenue Taxes 2. The National Evaluation Board (NEB), when:

(Sec. 229) a. The basic tax exceeds ₱1,000,000; or

b. The settlement offered is less than the
Perid to 2 years from 2 years from the
prescribed minimum rates.
claim payment of the close of the taxable
tax quarter when the
sales were made How Much to Compromise?

Depends on the grounds for the compromise:

Period to Both the claim Only the claim is
appeal and appeal must required to be filed  Financial incapacity – Minimum of 10% of the
be filed within within the 2 yeat basic assessed tax
the 2 year period; the appeal  Reasonable doubt – Minimum of 40% of the
period may be filed beyond basic assessed tax
that
Cases Which Cannot Be Compromised:
Waiting If the 2 year There is a 90-day a. Withholding tax cases, unless the applicant-
period period is about waiting period for taxpayer invokes provisions of law that cast
to lapse and the CIR to decide on doubt on the obligation to withhold
the CIR has not the application for b. Criminal tax fraud cases confirmed as such by
acted on the tax refund or the CIR or his duly authorized representative
claim, the credit. c. Criminal violations already filed in court
taxpayer may d. Delinquent accounts with duly approved
already appeal Compliance with the schedule of installment payments
to the CTA 90-day waiting e. Cases where final reports of reinvestigation
without waiting or reconsideration have been issued,
period is mandatory
for the resulting in reduction of the original
and jurisdictional.
decision of the assessment and the taxpayer has agreed to
CIR such decision by signing the required
agreement form

C. Power of the Commissioner of Internal Revenue f. Cases which have become final and executory

(CIR) to Compromise after final judgment of a court, even if

compromise is requested on the ground of
doubtful validity of the assessment
General Rule:
g. Estate tax cases where compromise is
The CIR has the authority to compromise or abate any
requested on the ground of financial
tax liability.
incapacity of the taxpayer

Exception:
Reference: Section 2, Revenue Regulations No.
The power to compromise may be delegated to: 30-2002
1. The Regional Evaluation Board (REB), in case
of:
Comparison Compromise Abatement
a. Assessments issued by regional offices

16
 Who can CIR or REB/NEB CIR only
grant in certain B. Prescriptive Periods: Suspension of Running of
cases Statute of Limitations

Effect Reduction of Cancellation of the  General Rule: Taxes due must be collected
the tax entire tax within 5 years following the assessment of
liability liability the tax.

Grounds 1. Doubtful 1. Unjustly or  Exceptions:

validity excessively o In case of falsity, fraud, or

of assessed tax omission (FFF): A proceeding in court
assessment 2. Costs of for the collection of such tax
2. Financial Collection > without assessment may be made within
incapacity Benefits 10 years from discovery of the
falsity, fraud, or omission.

o When a waiver of the statute of

D. Non-retroactivity of rulings [Sec. 246] limitations is executed within the 5-

year period: Collection may be made
within the period agreed upon in the
General Rule (GR):
waiver.
BIR rulings shall not be given retroactive effect if
it is prejudicial to the taxpayer.
C. Administrative Remedies

Exception (XPN):
A ruling shall have retroactive effect even if i. Tax Lien

prejudicial to the taxpayer in the following cases:

1. The taxpayer deliberately misstates or omits A tax lien is a legal claim or charge on property,
material facts; whether real or personal, established by law as a

2. The facts subsequently gathered by the BIR source of security for the payment of tax

materially differ from those on which the obligations.

ruling was based;

3. The taxpayer is in bad faith. Nature and Extent of Tax Lien:

1. When a taxpayer neglects or refuses to pay

their internal revenue tax liability after
3. GOVERNMENT REMEDIES FOR COLLECTION OF
demand, the amount so demanded shall be a

DELINQUENT TAXES lien in favor of the government from the time

the assessment was made by the CIR until
A. Requisites
fully paid, including interests, penalties,
1. The government can initiate collection
and costs that may accrue.
administratively or judicially once the
2. The lien shall NOT be valid against any
assessment becomes final and executory.
mortgagee, purchaser, or judgment creditor
2. Assessment is not necessary before filing an
until notice of such lien shall be filed by
action in court in case of falsity, fraud, or
the CIR in the office of the Register of
omission (FFF).
Deeds of the province or city where the
3. Collection must be made within 5 years property of the taxpayer is located.
following the assessment of the tax.
17
 As to The BIR does not The personal
How to Enforce a Tax Lien: procedure take physical property in

 “Seizure to enforce tax lien” – property of possession of the actually taken

the taxpayer may be seized to satisfy the tax personal property

obligation. If delinquent tax

 Any excess from the proceeds shall be Require the is

returned to the property owner. possessor to sign

a receipt *More than 1M =

ii. Distraint and Levy CIR or rep

*If refuses or *Not more than 1M
fails to sign – = RDO
Distraint – A remedy where the collection of tax is
prepare a list;
enforced on the personal properties of the taxpayer.
leave a copy in
Distraining
 If the property is in the hands of a third the presence of 2
officer report =
party, the remedy is called “garnishment.” witnesses where
within 10 days
the property is
from receipt of
Levy – A remedy where the collection of tax is located
waiver of
enforced on the real properties of the taxpayer.
distraint
 Levy may be made before, simultaneously, or *Obligated to

after distraint. preserve and not

CIR or rep has
to dispose without
 If distraint is insufficient, a levy must be the power to lift
CIR authority
made within 30 days after execution of the order of
distraint. distraint
Taxpayer is not
 The CIR or his representative must issue a
necessarily
duly authenticated certificate, which
delinquent
includes the description of the property; it
may be enforced throughout the Philippines. As to Taxpayer is not Taxpayer is
basis necessarily actually
 The CIR or representative can lift warrants
delinquent delinquent
of levy.

Written notice of the levy must be given to: iii. Forfeiture of Real Property

 The Register of Deeds

Forfeiture implies a divestiture of property without
 The taxpayer
compensation in consequence of a default or offense.
 The agent, manager, or occupant of the The effect of forfeiture is to transfer the title of
property the specific thing from the owner to the government.

Instances when forfeiture is appropriate:

Comparison Kinds of Constraints 1. All chattels, machinery, and removable

Construction Actual Distraints fixtures of any sort used in the unlicensed

Distraints production of articles.

2. Dies and other equipment used for the

printing or making of any internal revenue

18
 stamp, label, or tag which is in imitation of General Rule:
or purports to be a lawful stamp, label, or No court shall have the authority to grant an
tag. injunction to restrain the collection of any

3. Goods subject to excise tax which are national internal revenue tax, fee, or charge

illegally stored or removed. imposed by the National Internal Revenue Code

(NIRC).
4. Liquor or tobacco shipped or removed under a
false name or brand.
Exception:

iv. Suspension of Business Operation When, in the opinion of the Court of Tax Appeals
(CTA), the collection of the tax may jeopardize the
interests of the government and/or the taxpayer, the
See discussion on OPLAN KANDADO.
CTA may suspend the collection and require the
taxpayer to deposit the amount claimed or file a
v. Judicial Remedies | Form and Mode of Proceeding
surety bond.
– Section 11, R.A. 1125, as amended
Civil and criminal actions and proceedings
instituted in behalf of the Government under the 4. CIVIL PENALTIES
authority of this Code or other law enforced by the
A. Delinquency Interest and Deficiency Interest
BIR:
 Old Rate: 20% per annum
a. Shall be brought in the name of the Government of
the Philippines;  New Rate: Double the legal interest rate for

b. Shall be conducted by legal officers of the BIR; loans and forbearance.

and o Legal interest = 6%

c. Shall be filed in court only with the approval of o Double = 12% per annum
the Commissioner of Internal Revenue (CIR).
B. Surcharge

 This is a civil penalty imposed in addition

Note:
to the tax required to be paid.
The judgment in the criminal case also includes an order for
the payment of the unpaid taxes. ([3rd paragraph, Sec. 205,  25% Penalty is imposed in the following
Tax Code]) instances:

o Failure to file return on deadline

Prescriptive Period for Criminal Action o Error in filing

o Late payment of deficiency taxes

All violations of any provision of the NIRC shall o Late payment of taxes due
prescribe after 5 years:
 50% Penalty applies in cases of willful
a. From the day of the commission of the violation,
failure (called fraud penalty)
or
o Presumption of willfulness arises
b. If not known at the time, from the discovery
when:
thereof and the institution of judicial proceedings
 There is substantial under-
for its investigation and punishment.
declaration or over-
declaration
D. No Injunction Rule; Exceptions
 Substantial = more than 30%
difference

19
C. Compromise Penalty
Congress cannot enact laws depriving LGU from
 A compromise penalty is an amount paid by a
exercising such power to tax but it may set guidelines
taxpayer to settle a tax violation in lieu of
and limitations for the exercise.
the BIR filing a criminal case.

 Note: All criminal violations may be

● Legal basis for local taxation:
compromised except:
a.) P.D. No. 231 (The Local Tax Code)
1. Cases already filed in court
b.) Sec. 5 Art X. 1987 Constitution
2. Cases involving fraud c.) Sec. 129, Book II of the Local Government
Code of 1991 (P.D. 231)

D. Fraud Penalty d.) Commonwealth Act 472 (1939)

e.) Charter of Cities
 Penalty is 50% of the tax or the deficiency
f.) The Revised Barangay/Barrio Charter
tax due.
g.) The Local Autonomy Act
 Imposed when the violation is willful and
fraudulent
Local Taxing Authority (Sec. 132, LGC)

Shall be exercised by the Sanggunian of the

1. To another assessment was issued. LGU concerned through an appropriate
2. Failure to appeal to the CTA En Banc within ordinance.
15 days from receipt of an adverse CTA
Division decision.
Province -Sangguniang Panlalawigan
3. Failure to appeal to the Supreme Court within
Municipality -Sangguniang Panlungsod
15 days from receipt of an adverse CTA En
City -Sangguniang Bayan
Banc decision.
Barangay -Sangguniang Barangay

PART XIV: LOCAL TAXATION The fundamental principles of local taxation are:

a. There must be an ordinance levying the taxes

or fees ;

Sec. 5, Article X of the 1987 Constitution and Sec. 129 b. Local taxes may be derived only from sources
authorized under the Local Tax Code;
of the Local Government Code
c. Local Taxes, fees, charges, and other
impositions shall;
Section 5. Each local government unit shall have
1. be equitable and based as far as
the power to create its own sources of revenues
practicable on the taxpayer’s ability to
and to levy taxes, fees and charges subject to pay.

such guidelines and limitations as the Congress 2.be levied and collected only for public
purpose
may provide, consistent with the basic policy of
d. The imposition should be within the taxing
local autonomy. Such taxes, fees, and charges authority of the local government
shall accrue exclusively to the local governments. e. Collection of local taxes shall not be let to
any private person or entity

20
 f. Should not be restraint of trade. Power to Adjust Local Tax Rate (Sec. 191, LGC)

g. Should not be oppressive, excessive, Adjustment of the tax rates as prescribed herein
discriminatory, unjust, confiscatory, and contrary should not be oftener than once every five (5)
to the declared national economic policy of the years, and in no case shall such adjustment exceed
government. ten percent (10%) of the rates fixed under the LGC.

h. Should be based on the ability-to-pay principle.

i. Should evolve a progressive scheme of taxation. Power to Grant Local Tax Exemptions (Sec. 192, LGC)

j. Should be uniform in all local political sub- Local government units may, through ordinances duly
units. approved, grant tax exemptions, incentives or

k. Collections shall inure and redound to local reliefs under such terms and conditions, as they may

welfare, interest, and benefits. deem necessary.

Requisites of local tax ordinance Elements of residual power of taxation:

a.It should satisfy the procedural and substantive due process a. The tax base or subject are not taxed under the
National Internal Revenue Code or other applicable
b.Public Hearing is required with quorom, voting and approval
laws.
and/or veto requirements complied with
b. The taxes, fees, or charges are not unjust,
c.Publication of ordinance within 10 days from approval for three (3)
excessive, confiscatory, oppressive, or contrary to
consecutive days in a newspaper of general circulation and/or
the declared national economic policy of the
posting in at least two (2) conspicious and publicly accessible
government
places
c. A public hearing has been conducted prior to the
enactment of the ordinance levying the taxes, fees,
Nature of the Taxing Power
or charges, and
a. Not inherent;
d. The procedures for the approval, effectivity and
b. Exercised only if delegated to them by law or
publication of tax ordinance have been complied with
Constitution;

a. Not absolute; subject to limitations provided for

Principle of Preemption-refers to an instance where the National
by law.

Government elects to tax a particular area, impliedly withholding from

Power to prescribe Penalties for Tax Violations and
the local government the delegated power to tax the same field. This
Limitations thereon (Sec. 516, LGC)

1. The Sanggunian is authorized to prescribe fines doctrine principally rests upon the intention of the Congress.
or other penalties for violations of tax ordinances.

a. in no case shall fines be less than P1,000

Municipaliti Cities Barangay
nor more than P5,000 Provinces es

b. nor shall the imprisonment be less than

one (1) month nor more than six (6) month. 1.Real 1.On store
property tax and retailers
2. Such fine or other penalty shall be imposed at
on transfer Tax on all of gross
the discretion of the court.
of kinds of sales/receipt
3. The Sangguniang Barangay may prescribe a fine of
ownership. of not more
not less than P100 nor more than P1,000. business All
than Php 50k
operating kinds
(in cities)

21
 2.Business within its of and Php 30k a.Constitutional Limitation
of printing territoria taxes (in a)Due process and equal protection clause
and l imposab Municipalitie
b)non-impairment of obligations of contracts
publication jurisdicti le by s)
c)non-imprisonment for non-payment of poll
3.Franchise on EXCEPT provinc 2.Service
tax
tax printing es and fees or
d)rule on uniformity in taxation
press and municip charges
4.Sand,
e)tax exemptions of religious and charitable
gravel and those that alities 3.Barangay
institutions
are
other quarry Clearance
already
resources 4.Other fees
levied by b.Inherent restrictions
5.Profession and charges-
a province a)public purpose
al tax breeding of
fighting b)territoriality
6.Tax on
vehicles cocks, c)direct double taxation

used for Community cockfights d)exemption of government or

delivery of Developmen and cockpits, instrumentalities from taxation

goods t Tax recreation,

Amusement billboards,
c.Statutory Limitations
tax signboards,
a)Due process and equal protection clause
outdoor ads
b)non-impairment of obligations of contracts
Public
c)non-imprisonment for non-payment of poll
Utility
tax
Charges- toll
d)rule on uniformity in taxation
fees on
roads, e)tax exemptions of religious and charitable

bridges, institutions

wharves,
piers D. Tax privelege granted by the government
under a valid contract limits the exercise of
the power of taxation within the terms and
All local government units are authorized to impose
conditionof the said contract
and collect the following fees and charges

1. Service fees and charges

2.Public utility charges

General Rules on the authority of the local
3.Toll fees or charges
government units to tax
4.Market fees
a. Each local government unit may create its
5.Slaughter fees
own sources of revenue and levy taxes, fees
6.Corral fees and charges, and other forms of revenue
7.Tuition fees measures through the Sanggunian.

8.Charges for holding benefits b. Local taxation is legislative in nature

9.License or Permit Fees and shall be exercised through an appropriate

tax ordinance and requires public hearing
prior to its enactment
Limitations and Restrictions

22
 c. Local governments are not authorized to Amusement tax – shared equally by the province and
condone or remit regulatory taxes but may municipality (Sec. 140)
grant tax incentives to new industries,
persons, or entities Community tax (in case the tax is collected by

d. Local governments cannot exempt persons or barangay treasurer)

entities from real property taxes, but they 50% - municipality

may condone liabilities on real property 50% - barangay

taxes
Section 133, which enumerates specific instances
e. Municipalities may levy taxes not
where an LGU cannot impose a tax which are the
otherwise levied by provinces
following;
f. Cities have the broadest tax powers,
1. Documentary stamp tax
embracing both such specific and general tax
2. Taxes on forest concessions; and forest products
powers as provinces and municipalities may
(not its sale) when sold domestically by the
impose.
concessionaire himself
g. Barangays may under certain conditions (1)
3. Taxes on estates, gifts, inheritance, legacies,
levy taxes on store and retailers, (2) fees
and other acquisitions mortis causa, except the ½ of
and charges on, billboards, signboards, and
1% tax on transfers of real property ownership that
cockpits, gemecocks, and cockfights, and (3)
may be imposed by provinces and cities.
impose service charges
4. Taxes on income of any kind whatsoever except
h. The interpretations of laws on the grant
when levied on banks and other financial
of tax powers to local governments is to be
institutions
liberally construed
5. Taxes on business inside the export processing
zones.
Internal Revenue Allotment (IRA)- Now called the
6. Taxes on the business of transportation
National Tax Allotment (NTA) due to the Mandanas-
contractors and persons engaged in the
Garcia ruling- is the share of Local Government
transportation of passengers or freight
Units (LGUs) from national internal revenue taxes.
7. Local governments may tax tricycle operation.

8. Taxes or fees for the registration of motor

Local government units shall receive:
vehicles and for the issuance of all kinds of
a. 30% on the first year of the effectivity of the
licenses or permits for driving except tricycles
Local Government Code
b. 35% on the second year 9. Custom duties, registration fees of vessels

c. 40% on the third year and thereafter except as otherwise provided in the LTC

10. Taxes on premiums paid by owners of property who

The 40% is divided accordingly: obtain insurance directly with foreign insurance
23% thereof to the provinces companies
23% thereof to the cities 11. Export taxes, fees or other levies on Philippine
34% thereof to municipalities, and finished, manufactured, or processed products
20% thereof to barangays
12. Taxes and other impositions upon goods carried
into or out of or passing through, the territorial
Tax on sand, gravel and other quarry resources
jurisdictions of local governments
30% - Province
30% - Component city/municipality
40% - barangay (Sec. 138)
23
13. Taxes or fees on agricultural or aquatic c. Fees for sealing and licensing of weights and
products when sold by the marginal farmer, measures (Sec. 148)
fisherman, poultry, or animal-raiser d. Fishery rentals, fees, and charges (Sec. 149)
14. Percentage tax or value-added tax on sales or
exchanges of goods and services
Taxing power of Cities
15. Taxes on mines; mining operations; and minerals, Cities except as otherwise provided in the LGC, the
mineral products, and their by-products city may levy taxes, fees, and charges which the
16. Taxes on countryside and barangay business province or municipality may impose. (Sec. 151)
enterprises and on registered cooperatives duly
organized and registered
-Franchise tax of up to 0.75% of a business gross
17. Taxes, fees, or charges of any kind on the receipts
national government, its agencies and
-may exceed by not more than 50% the tax rates
instrumentalities allowed to provinces and municipalities
18. Taxes on the business of persons engaged in the
-business tax of up to 3% of a business gross sales
printing and publication or receipts
19. Excise taxes on articles or goods enumerated -business tax imposable should not exceed 2% of the
under NIRC and taxes, fees, and charges on petroleum
gross receipts of the lease property
products

20. Taxes on business enterprises certified by the

Taxing power of Barangays
Board of Investments as pioneer or non-pioneer for a
Barangays – may levy, to the exclusion of the LGUs
period of 6 and 4 years
the following on those taxes, fees and charges which
shall exclusively accrue to them:
Taxing power of the Province
(a) Taxes - On stores or retailers with fixed
a. Tax on transfer of real property ownership business establishments with gross sales or receipts
(Sec. 135) of the preceding calendar year of Fifty thousand pesos
b. Tax on business of printing and publication (P50,000.00) or less, in the case of cities and Thirty

c. Franchise tax (Sec. 137) thousand pesos (P30,000.00) or less, in the case of
municipalities, at a rate not exceeding one percent
d. Tax on sand, gravel and other quarry resources
extracted from public land (Sec. 138) (1%) on such gross sales or receipts.

(b) Service Fees or Charges - barangays may collect

e. Professional tax (Sec. 139)
reasonable fees or charges for services rendered in
f. Amusement tax (Sec. 140)
connection with the regulation or the use of barangay-
g. Annual fixed tax for every delivery truck or van
owned properties or service facilities such as palay,
of manufacturers or producers, wholesalers of,
copra, or tobacco dryers.
dealers, or retailers in, certain products. (Sec.
(c) Barangay Clearance - No city or municipality may
141)
issue any license or permit for any business or
activity unless a clearance is first obtained from
Taxing power of the Municipal Government
the barangay where such business or activity is
Municipal Government may levy on those taxes, fees located or conducted. For such clearance, the
and charges NOT otherwise levied by provinces. sangguniang barangay may impose a reasonable fee.
a. Business taxes (Sec. 143)

b. Fees and charges (d) Other Fees and Charges - The barangay may levy
reasonable fees and charges:
24
 (i) On commercial breeding of fighting cocks, 2. After Assessment
cockfights and cockpits; -within 60 days from receipt of the assessment, the
(ii) On places of recreation which charge admission taxpayer may contest assessment by a written protest
fees; and 3. Before payment of the tax
(iii) On billboards, signboards, neon signs, and a. Suspension of the tax by Provincial of City
outdoor advertisements. Treasurer and by the Secretary of Finance

b. Formal Protest addressed to the Secretary of

LOCAL TAX REMEDIES: Finance on four grounds (Sec. 45, LTC)

Remedies of the LGU c. Formal Query addressed to the Provicial or

City Fiscal- on the grounds other than the four

I. Persuasive devices and safeguards d. Judicial action in ordinary courts (1)

A. Tax Lien declaratory relief before breach or violation of the

law, or (2) ask for injunction as an ancillary
B. Imposition or threat of (1) subcharges and
interest, (2) criminal penalties remedy

C. Examination of books by provincial or city

treasurer 4. After payment of tax

D. Cooperative functions or other offices Written claim for refund or credit addressed to the

-Register of Deeds requiring evidence of collecting officer - payment need not be under

payment of transfer of taxes protest. Written claim for refund may be filed
within 2 years from payment
-Employers to require employees to show
payment of occupation taxes 5.An action against erring local officials who acted
with malice or inexcusable negligence
-Require professional to show proof of payment
occupation tax

-Require community tax certificate to be B. Judicial Remedies;

exhibited in some instances Declaratory Relief

Injunction

II. Coercive Means to Collect Deliquent taxes Mandamus

A. Administrative Remedies Action for tax refund

-by distraint of persona properties of whatever Action for annulment of tax ordinance

character to enforce collection of deliquent taxes C. Special remedies such as personal appeal to and

-by judicial action persuading the authorities concerned or thru mass

B. Legal action in ordinary courts to enforce action or “people’s people” may be resorted to.

payments

PART XV: COMMUNITY DEVELOPMENT TAX

Remedies of the Taxpayer:

A. Administrative remedies Community Development Tax Defined:

1. Prior to Assessment Tax for being a resident and member of a community.

a. Administrative appeal to the Secretary of

Justice, and Governing law on Community Tax:

b. Action for declaratory relief when applicable

25
Sec. 38, Local Tax Code governs the levy,  owns real property with an aggregate assessed
collection, and administration of the residence tax value of 1 thousand pesos or more; or (The
through the BIR. owner is the one liable although the property
is held in usufruct by another.)

Nature of Community Tax  is required by law to file an income tax

Fixed amount imposed upon certain inhabitants of the return. (A non-resident alien is not an

Philippines “without regard to their property or on inhabitant. He is, therefore, not subject to

the occupation in which they may be engaged. tax whether required by the law to file an
income tax return.)

Inhabitant – any, irrespective of citizenship

Who are authorized to levy community tax?
or nationality, dwells or resides in the
 Cities
Philippines for a period exceeding 3 months.
 Municipalities
In the case of husband and wife, the
additional tax imposed shall be based upon
Composition of a community tax: the total property owned by them and the
 Tax proper or the basic tax (Class A) total gross receipts or earnings derived by them.

 additional Tax (Class B) (Sec. 157, LGC)

Under Philippine laws: B. Corporations no matter how created or organized,

1. Tax Proper (Class A)- basic tax imposed on whether domestic or resident foreigner, engaged in

individuals and corporations. For or doing business in the Philippines, including

individuals, the amount is fixed; for joint stock company, partnership, joint account,

corporations, it depends on their gross association, or insurance companies, but excluding

receipts or earnings. general professional partnership and joint ventures

for undertaking construction projects or engaging in
2. Additional Tax (Class B)- extra tax based on
energy operations under service contract with the
certain criteria, such as the individual's
government. (Class C of basic and C-1 for
income or the corporation's gross receipts
additional)
exceeding a specific threshold.
Under the Local Government Code of 1991 (Republic
Act No. 7160). Community Tax includes various
[NOTE: These taxes are collected by local government
components:
units and are used to fund community projects and
1. Basic Tax (Class C): This is a fixed amount
services.]
paid by individuals and corporations. For
[Prohibition against imprisonment for non-payment of
individuals, it is typically ₱5, and for
poll tax- Section 20, Article III, Bill of Rights.]
corporations, it depends on their gross
Who are the persons liable for community tax?
receipts.
A. Every inhabitant of the Philippines 18 years of
2. Additional Tax (Class C-1): This is based on
age or over who: (Class A and/or Class B)
the individual's income or the corporation's
 has been regularly employed on a wage or gross receipts. It is calculated at ₱1 for
salary basis for at least 30 consecutive every ₱1,000 of income or receipts, up to a
working days during any calendar year; or certain limit.
 is engaged in business or occupation; or (The (Note: Estates of deceased persons, being neither
business or occupation need not be taxable corporation nor individuals, ARE NOT subject to tax,
under the NIRC) but the heirs must declare their proportionate
shares of the income.)
26
(If the corporation has sales offices, branches or
warehouses of establishments, the community tax is Amount or rate of the community tax:
imposed on its principal office.)
 Individual- a basic tax of Php 5 and an
C. Optional Tax (Class D)- is issued to any person annual additional tax of Php 1.00 for every
or corporation not liable to the payment of the Php 1,000.00 of income regardless of whether
community tax but desiring to have a residence from business, exercise of profession or from
certificate upon payment of the basic tax. property that in no case shall exceed Php
Class D: an additional tax that may be imposed by 5,000.00.
local government units for specific purposes. It is The additional tax shall be based upon the total
not mandatory and varies depending on the locality. property owned by both husband and wife and the
total gross receipts or earnings derived by them.

When community tax is payable?  Corporation- Whether domestic or foreign,

Community tax accrues on the first day of January engaged in or doing business in the

each year that shall be paid on or before the last Philippines. Basic tax of PHP 500.00 and an

day of February of each year. annual additional tax which in no case shall

 If a person reaches the age of 18 years or exceed Php 10,000.00, in accordance with- Php

otherwise loses the benefit of exemption on 2.00 for every Php 5,000.00 worth of real

or before the last day, he reaches 18 years property in the Philippines owned by it

of age or upon the day the exemption ends. during the preceding year based on the
assessed value of the real property and Php
 If a person reaches 18 years of age or loses
2.00 for every Php 5,000.00 of gross receipts
the benefit of exemption on or before the
or earnings derived by it from its business
last day of March, he shall have 20 days to
in the Philippines during the preceding year.
pay the community tax without becoming
delinquent.  Dividends received by a corporation from
another corporation shall be considered as
 Persons who come to reside in the Philippines
part of the gross receipts or earnings of
or reach 18 years of age on or after July 1st
said corporation.
of any year or who cease to be exempted on or
after the same date shall not be subject to  If the tax is not paid within the time

the community tax for the year. prescribed, there shall be added to the
unpaid amount an interest of 24% per annum
 Corporations established and organized on or
from the due date until it is paid.
before the last day of June shall be liable
for the community tax for that year. Whereas Situs of the community tax

corporations established and organized on or - shall be paid in the place of residence of the

before the last day of March shall have 20 individual, or in the place where the principal

days within which to pay the community tax office of the juridical entity is located.

without becoming delinquent and corporations Characteristic of the community tax

established and organized on or after July 1 -It is local tax for the following reasons.
shall not be subject to the community tax for
 The participation by the BIR is only for the
that year.
printing of the certificates and distribution
 If the tax is not paid within the time thereof to municipal and city treasurers.
prescribed above, there shall be added to the
 Only a small portion is remitted to the
unpaid amount an interest of 24% per annum
national Government merely to cover cost of
from the due date until it is paid.

27
 printing and distribution of the community g. When he receives any salary or wage from any
tax certificates. person or corporation.

 Collection is done by the city or municipal The community tax certificate required shall be the
treasurer who can deputize barangay one issued for the current year, except for the
treasurers in collecting the tax. period from January to April 15 each year, in which

 Proceeds are allocated to the cities, case, the certificate issued for the preceding years

municipalities, and barangay in the 50%-50% shall suffice.

proportion; and

 The provision on community tax are in

Sections 156-164 of the Local Government Code PART XVI: REAL PROPERTY TAXATION
of 1991.

Who is exempt from community tax?

Governing law: Real Property Tax Code (P.D. 464).
a. Individuals below 18 years of age who do not
Now incorporated in the Local Government Code (RA
have real property or are not engaged in
7160)
business.

b. Individuals less than 18 years of age

Objectives of RPTC:
although employed.
● Increase local government revenues from the
c. Non-profit corporations realty tax;
d. Diplomatic and consular representatives ● Upgrade procedures and processes;
e. Transient visitors when their stay in the ● Bring about an equitable distribution of the
Philippines does not exceed 3 months. tax burden;

Community tax Certificate defined:

Nature and Scope of local taxing power:
A community tax certificate shall be issued to every
● Delegated Power;
person or corporation upon payment of the community
tax. A community tax certificate may also be issued ● Provinces, cities, and municipalities in the
Metro Manila area do not only have the power
to any person or corporation not subject to the
to levy real estate taxes, but they also fix
community tax upon payment of the basic tax.
real estate tax rates;
Instances when community tax certificate is
● Municipalities and barangays are devoid of
required:
the power to levy real property taxes.
a. When an individual subject to the community
● Provinces shall fix a uniform rate of basic
tax acknowledges any document before a notary
real property tax applicable to their
public.
respective localities at the rate not
b. When he takes the oath of office upon
exceeding 1% of the assessed value of real
election or appointment to any position in
property.
the government service.
● The LGUs are authorized to impose additional
c. When he receives any license, certificate, or 1/2% on the assessed value of all lands in
permit from any public authority. urban areas more than Php50,000.00 as
d. When he receives any money from the public provided under the Socialized Housing Law
fund. (RA;7279) except those land specifically

e. When he transacts other official business. exempted under the coverage of said law;

f. When he pays any tax or fee.

28
 ● No public hearing required before the 5. The goal of real property assessment shall be
enactment of a local tax ordinance levying equitable distribution of the tax burden;
the basic RPT; 6. The appraisal of real property shall be
● Taxes on property are taxes assessed on all uniform in each local political subdivision;
property or on all property of a certain 7. Real property shall be assessed based on a
class located within a territory on a uniform standard of value within each local
specified date in proportion to its value or political subdivision.
in accordance some other reasonable method of
apportionment. Real Property Tax Definition
 It is a direct tax on the ownership of lands
Coverage of RPTC: and buildings or other improvements thereon
not specially exempted and is payable
 Annual ad valorem tax.
regardless of whether the property is used or
 Special levies on said properties such as:
not, although the value may vary in
o Additional 1% Special Education Fund
accordance with such factor.
(SEF)
o Additional 5% tax on idle lands.
Charateristics of RPT:
o
 It is a direct tax on the ownership of the
property. The impact and incidence of
o Imposed by local or national governments taxation devolves on the same person;
on property especially benefited by  It is an ad valorem tax. Value is the tax
certain infrastructure development to base;
help defray a part , not exceeding 60%  It is proportionate because the tax is
of the cost, including the cost of calculated based on a certain percentage of
acquiring land and other real property the value assessed;
in connection therewith  It creates a single indivisible obligation;
Real property taxation:  It is a local tax.
● Taxation of real property. “Real Property”
may include things that should generally be
Do local governments have the power to exempt real
regarded as personal property.
properties from taxation?

Ans: No. There is no provision in the LGC that

expressly empowers local governments to exempt
Fundamental Principles Governing RPT: real property from taxes. What is stated in Sec.
1. Real property whether taxable or exempt, 234 of the LGC are real properties that are
shall be appraised at its current fair market exempted. However, they may exempt idle lands from
value; the additional 5% tax by reason of force majeure,
2. Real property shall be classified for civil disturbance, natural calamity or any cause
assessment purposes based on its actual use; or circumstances which physically or legally
3. The appraisal, assessment, levy, and prevents the owner of the property or person
collection of real property tax shall not be having legal interest therein from utilizing,
let to any private person; improving, or cultivating the same.
4. Appraisal and assessment shall be equitable;

29
Power of remission on RPT

1. Sangguniang Panlalawigan/Panlungsod in case of:

● General failure of crops;
● Great decrease in the price of products or
● Similar widespread disaster in any city or
municipality or municipalities of the Real Property Appraisal for tax purposes:

province.
 All real properties, whether taxable or
2. President of the Philippines;
exempt, shall be appraised at the current fair
3. Secretary of Finance.
market value prevailing in the city where they
are located. To establish the fair market
Classification of real properties for assessment
value of real property, the City Assessor may
purposes:
summon the owners of real properties affected,
as well as other witnesses, for the purpose of
 Residential
getting information to base upon the real
 Agricultural
property’s market value.
 Commercial
 Industrial
Market Value – The highest price estimated in term of
 Mineral
money which the property will buy if exposed for sale
 Timber and Forest land; and
in the open market allowing a reasonable time to find
 Special (church, hospital, orphanage, etc.)
a purchaser who buys with knowledge of all the uses
to which it is adopted and for which it is capable of
Doctrine of Usage being used

It is the gauge used in determining taxability of Fair Market Value – determined by the declarant of
real properties. Real properties are taxed the real property or by the Assessor. Supposed to be
according to how they are used and not on the actual value of the property in the open market
ownership.
Assessed Value – Determined by the application of the
assessment level to the “fair market value”. It is
Case: City of Baguio vs. Busuego (1980)
merely a percentage of the “fair market value”
The taxpayer resisted the assessment on the real
depending on the assessment level of the real property
property that he acquired from the GSIS under a
in question.
contract to sell on the theory that the property is
still not fully paid and is still registered in the
Assessment level – the percentage applied to the
name of the GSIS. The Supreme Court applied the
market value to determine the taxable or assessed
Doctrine of Usage and held that since the property
value of the property, fixed by the Sangguniang
was already being used by a non-exempt taxpayer, it
Panlungsod/Panlalawigan where the property is
cannot be exempted from real property tax. The
located.
beneficial user of said property is liable.

Special levies on real properties

1. Special Education Fund Tax (RA 5447) – 1% on the

Doctrine of Essentiality – some assessed value in addition to the basic RPT;

personal properties may be considered

real properties for tax purposes.
30
Particularly when said properties are
essentail and a principal elements of
an industry without which that
industry would be unable to carry on
2. Special Assessment – No more than 60% of the actual  Administrative remedies - destraint of
cost of improvement introduced by the LGU within its personal property of the taxpayer, and/or sale
territorial jurisdiction benefiting the property of the delinquent real property of the
owners; taxpayer
 Judicial action that may be brought in any
3. Idle Tax – 5% of the assessed value in addition to court of competent jurisdiction
the annual basic RPT, which is designed to encourage
utilization of land resources to contribute to the Apportionment of proceeds of RPT
national development of our country; and to penalize ● For Provinces:
property owners who do not use their property ○ 35% - General Fund of the province
productively. ○ 40% - General Fund of the
Municipality where the property is
When are property taxes due and demandable? located
○ 25% to the barangay where the
Answer: The RPT for any year shall attach and become
property is located
due and payable on the first day of January and from
● For Cities
the same date said tax and all penalties subsequently
o 70% - General Fund
accruing thereto should constitute a lien upon the
o 30% distributed among the component
property subject to such tax.
barangays of the city, distributed as
follows: 50% to the barangay where
RPT paid in full on or before March 31 shall be given
the property is located; and 50%
20% discount.
shall accrue equally to all component

Penalty of 2% on the amount of delinquent tax for each barangays of the city.

month until the tax be paid in full.

Power of Courts to Impeach Tax

Under the RPTC, no court shall entertain any suit

assailing the validity of a tax assessed under the
RPTC until the taxpayer shall have paid, under
protest, the tax assessed against him.

“Payment under protest”

 Protest must be made at the time of the payment

to preserve the taxpayer’s right to claim tax
refund/credit under the RPTC (claim must be
made 2 years from the date the taxpayer is
entitled to such reduction or adjustment.

Government’s remedies in the collection of real

property taxes:

31