2004 Cut Taxation

8/11/2019 2004 Cut Taxation

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DOMONDONs CUT AND PASTE1

T A X A T I O N

Ver. 2004

Analysis of re!io"s #ar $"es%ions s&o's %&a% %&ere are f"n(a)en%al(o*%rines %&a% are ri*& so"r*es of #ar $"es%ions. +% is for %&is reason '&y %&e

a"%&or (e*i(e( %o *raf% so)e sen%en*es an( &rases '&i*& %&e #ar *an(i(a%e)ay *"% an( as%e %o &is ans'ers %o %&e #ar ,"es%ions. T&is 'o"l( also ser!eas a rea(y referen*e for o-e*%i!e %ye of ,"es%ions s"*& as (efini%ions/en")era%ions/ (is%in*%ions/ e%*. T&e )a%erials 'ere *"lle( fro) areas '&erere!io"s #ar $"es%ions 'ere so"r*e( an( fro) sele*%e( "risr"(en*e " %o"ne 200.

T&e "ser of %&ese *"% an( as%e )a%erials s&o"l( -e 'arne( %&a% %&esen%en*es s&o"l( -e a("s%e( %o )ee% %&e a*%"al re,"ire)en%s of se*ifi* #ar$"es%ions/ an( no% %o -e 'ri%%en !er-a%i) as %&e ans'ers.

T&e "ser s&o"l( *on*en%ra%e on %&e i%e)s )are( BAR-e*a"se %&ey are%&e (o*%rines fro) '&ere #ar ,"es%ions 'ere (eri!e( for %&e erio( 133 %o200.

WARNING: So)e of %&e *on*e%s in!ol!in %&e Co"r% of Ta5 Aealss&o"l( -e rea( in rela%ion %o %&e ro!isions of 6e"-li* A*% No. 3272 '&i*& %ooeffe*% on Aril 2/ 2004.

T&is !ersion is for %&e e5*l"si!e "se of re!ie'ees '&o &a!e a%%en(e( %&ere!ie' le*%"res of Prof. A-elar(o T. Do)on(on , an( o%&er re!ie'ees '&o 'ereersonally a"%&ori8e( -y &i). Una"%&ori8e( "sers s&all -e s"-e*% %o %&e la' ofar)a/ s"*& %&a% %&ey 'ill no% ass %&e #ar E5a)s an( if %&ey (o so 'o"l( -e"n&ay an( "ns"**essf"l in life.

6EV+E9EES MUST 6EP6ODUCE O6 P6+NT T:+S AT T:E+6 E;PENSE#ECAUSE T:ESE NOTES A6E NOT A PA6T O< T:E :ANDOUTS =+VENOU6 6EV+E9 CENTE6. T:ESE A6E E;T6A :ANDOUTS

NOT PA6T O< 9:AT >OU PA+D


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T&e o'er %o %a5 in*l"(es %&e o'er %o (es%roy/ '&ere %&e %a5 la' is !ali(-e*a"se a %a5ayer *o"l( no% see %&e n"llifi*a%ion of a !ali( %a5 la' solely "on%&e re)ise %&a% %&e *olle*%ion of %&e %a5 'ill i)o!eris& &i).

T&e e5er*ise of %&e o'er %o %a5 is no% (es%r"*%i!e of a %a5ayers roer%y'&ere %&e so"r*e is an in!ali( %a5 la'/ '&i*& !iola%es %&e in&eren% or*ons%i%"%ional li)i%a%ion -e*a"se %&ere is a sy)a%&e%i* *o"r% %&a% s&all *o)e %o%&e s"**or of %&e %a5ayer an( (e*lare s"*& %a5 la' as n"ll an( !oi(. +% 'o"l(no% %&"s -e %&e so"r*e of %&e o'er %o (es%roy.

+n *ase of (o"-%/ %a5 la's )"s% -e *ons%r"e( s%ri*%ly aains% %&e S%a%e an(li-erally in fa!or of %&e %a5ayer -e*a"se %a5es/ as -"r(ens '&i*& )"s% -een("re( -y %&e %a5ayer/ s&o"l( no% -e res")e( %o o -eyon( '&a% %&e la'e5ressly an( *learly (e*lares. (!in"oln P#ilippine !ife $n%uran"e Co&pany,$n"., et"., v. Court of Appeal%, et al., 293 'CRA 92, 99

Ta5 e5e)%ions are s%ri*%ly *ons%r"e( aains% %&e %a5ayer an( li-erally in

fa!or of %&e S%a%e an( )"s% -e *learly s&o'n an( -ase( on lan"ae in %&e la'%oo lain %o -e )is%aen (avao Gulf !u&ber Corporation v. Co&&i%%ioner of$nternal Revenue, et al., 293 'CRA )*, ++, -e*a"se %a5es are ne*essary for %&e*on%in"e( e5is%en*e of %&e S%a%e.

A re!ersal of a #+6 r"lin fa!ora-le %o a %a5ayer 'o"l( no% ne*essarily*rea%e a ere%"al e5e)%ion in &is fa!or/ for af%er all %&e o!ern)en% is ne!eres%oe( fro) *olle*%in %a5es -e*a"se of )is%aes or errors on %&e ar% of i%saen%s. (!in"oln P#ilippine !ife $n%uran"e Co&pany, $n"., et"., v. Court of

Appeal%, et al., 293 'CRA 92, 99

BAR: 2. As a eneral r"le/ %&e ri&% of %&e o!ern)en% %o *olle*% %a5esis i)res*ri%i-le -e*a"se %&e !ery e5is%en*e of %&e s%a%e (een(s "on %&ee5er*ise of %&is o'er.

:o'e!er/ s%a%"%es )ay ro!i(e for res*ri%i!e erio(s for %&e *olle*%ion ofar%i*"lar in(s of %a5es.

BAR: 3. As a eneral r"le/ No *o"r% s&all &a!e %&e a"%&ori%y %o ran%an in"n*%ion %o res%rain %&e *olle*%ion of any na%ional in%ernal re!en"e %a5/ fee or*&are. Se*. 217/ N+6CB

:o'e!er/ %&e Co"r% of Ta5 Aeals is e)o'ere( %o enoin %&e *olle*%ionof %a5es %&ro"& a()inis%ra%i!e re)e(ies '&en *olle*%ion *o"l( eoar(i8e %&e

in%eres% of %&e o!ern)en% or %a5ayer. Se*. 11/ 6e. A*% No. 112B

BAR: 4. T&e o'er %o %a5 is an in&eren% o'er of %&e s%a%e e5er*ise(%&ro"& %&e leisla%"re i)osin -"r(ens "on s"-e*%s an( o-e*%s 'i%&in i%s

"ris(i*%ion %o raise re!en"es in or(er %o )ee% %&e lei%i)a%e o-e*%s ofo!ern)en%.

+%s na%"re is %&a% i% is -o%& an in&eren% o'er of o!ern)en% an( ane5er*ise of leisla%i!e o'er.

T&e %&ree "roses for %&e e5er*ise of %&e %a5in o'er are aB %&ere!en"e "rose -B %&e s")%"ary "rose an( B %&e *o)ensa%ory"rose.

One of %&e "roses of %a5a%ion is %o raise re!en"es %o )ee% %&ere*oni8e( o-e*%s of "roses of o!ern)en%.

T&e s")%"ary "rose of %a5a%ion is %o ro%e*% %&e &eal%&/ safe%y or)orals of %&e in&a-i%an%s. T&is is in oin% e5er*ise of %&e o'er of %a5a%ion an(oli*e o'er '&ere re"la%ory %a5es are *olle*%e(.

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T&e *o)ensa%ory "rose of %a5a%ion is %o i)le)en% %&e so*ial "s%i*ero!isions of %&e *ons%i%"%ion %&ro"& %&e roressi!e sys%e) of %a5a%ion/ '&i*&'o"l( res"l% %o e,"al (is%ri-"%ion of 'eal%&/ e%*.

BAR: 5. +n re*en% years/ %&e in*reasin so*ial *&allenes of %&e %i)es

e5an(e( %&e s*oe of s%a%e a*%i!i%y/ an( %a5a%ion &as -e*o)e a %ool %o reali8eso*ial "s%i*e an( %&e e,"i%a-le (is%ri-"%ion of 'eal%&/ e*ono)i* roress an( %&ero%e*%ion of lo*al in("s%ries as 'ell as "-li* 'elfare an( si)ilar o-e*%i!es.Na%ional Po'er Corora%ion !. Ci%y of Ca-ana%"an/ =. 6. No. 143110/ Aril 3/200B

T&e follo'in are %&e (is%in*%ions -e%'een a %a5 an( a li*ense feea. PU6POSE A %a5 is i)ose( for re!en"e "roses 9:+@E a li*ense

fee is i)ose( for re"la%ory "roses. Unless i% is a oin% e5er*ise of -o%& %&eoli*e o'er an( %&e o'er of %a5a%ionB

-. #AS+S A %a5 is i)ose( "n(er %&e o'er of %a5a%ion 9:+@E a li*ense

fee is i)ose( "n(er oli*e o'er.*. AMOUNT T&ere is no li)i% as %o %&e a)o"n% of a %a5 9:+@E %&e

a)o"n% of li*ense fee %&a% *o"l( -e *olle*%e( is li)i%e( %o %&e *os% of %&e li*ensean( %&e e5enses of oli*e s"r!eillan*e an( re"la%ion.

(. T+ME O< PA>MENT Ta5es are nor)ally ai( af%er %&e s%ar% of a-"siness 9:+@E a li*ense fee -efore %&e *o))en*e)en% of -"siness.

e. E


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T&e in&eren% an( *ons%i%"%ional li)i%a%ions %o %&e o'er of %a5a%ion aresafe"ar(s '&i*& 'o"l( re!en% a-"se in %&e e5er*ise of %&is o%&er'ise"nli)i%e( an( lenary o'er.

BAR: 6. T&e in&eren% li)i%a%ions are aB "-li* "rose -B noi)roer (elea%ion of leisla%i!e a"%&ori%y %o %a5 *B %erri%oriali%y (Bre*oni%ion of o!ern)en% e5e)%ions an( eB o-ser!an*e of %&e rin*ile of*o)i%y.

So)e a"%&ori%ies in*l"(e no (o"-le %a5a%ion.

T&e %a5 re!en"es are for a "-li* "rose if "%ili8e( for %&e -enefi% of %&e*o))"ni%y in eneral. An al%erna%i!e )eanin is %&a% %a5 ro*ee(s s&o"l( -e"%ili8e( only %o a%%ain %&e o-e*%i!es of o!ern)en%.

T&e o'er of %a5a%ion is e5er*ise( -y %&e leisla%"re '&ose )e)-ers are%&e )ere (elea%es of %&e eole &en*e %&e o'er *o"l( no% %&erefore -e

(elea%e( -y %&e leisla%"re %o o%&er (ear%)en%s of o!ern)en%/ lie %&ee5e*"%i!e.

eleata pote%ta% non pote%t eleari. A (elea%e( o'er *anno% -ef"r%&er (elea%e(.

T&e o'er %o %a5 s&o"l( -e e5er*ise( only 'i%&in %&e %erri%orial -o"n(ariesof %&e %a5in a"%&ori%y. +n %&eory/ i% is only 'i%&in a s%a%es %erri%orial -o"n(aries%&a% a s%a%e *o"l( i!e ro%e*%ion/ &en*e i% is only 'i%&in %&a% %erri%ory %&a% i% *o"l((e)an( s"or% in %&e for) of %a5es.

$n par pare&, non #abet i&periu&. As -e%'een e,"als %&ere is noso!erein/ &en*e forein so!ereins are no% %o -e s"-e*% %o %&e so!ereino'er of %a5a%ion.

Co)i%y is %&e rese*% a**or(e( %o o%&er so!erein na%ions. T&"s/roer%ies of o%&er so!erein na%ions 'i%&in %&e %erri%ory of %&e %a5in a"%&ori%ys&o"l( no% -e s"-e*% %o %a5a%ion as a )eas"re of rese*% %o a *o?e,"al.

=o!ern)en% e5e)%ion s&o"l( -e re*oni8e( in or(er %o re("*e %&ea)o"n% of )oney %&e o!ern)en% is &an(lin. T&ere is !eri%y in %&e )a5i)/


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(o)es%i* *orora%ions are *onsi(ere( as in*o)e fro) 'i%&in/ irrese*%i!e '&ere%&e s&ares of s%o* of s"*& (o)es%i* *orora%ion is lo*a%e(.

T&e si%"s of in*o)e %a5a%ion is (e%er)ine( -y %&e na%ionali%y/ resi(en*e of%&e %a5ayer an( so"r*e of in*o)e. Please refer %o eneral rin*iles of in*o)e%a5a%ion "n(er in*o)e %a5a%ion.

T&e si%"s of e5*ise %a5es is %&e la*e '&ere %&e ri!ilee is e5er*ise(-e*a"se i% is %&a% la*e %&a% i!es ro%e*%ion.

T&e si%"s of %ransfer %a5es/ s"*& as es%a%e an( (onors %a5es/ is(e%er)ine( -y %&e na%ionali%y an( resi(en*e of %&e %a5ayer an( %&e la*e '&ere%&e roer%y is lo*a%e(. Please refer %o es%a%e an( (onors %a5es.

T&e si%"s of %a5a%ion of a *on%ra*% for a roe*% '&i*& in*l"(e( %&e*ons%r"*%ion an( ins%alla%ion in %&e P&iliines of e,"i)en% (esine(/ fa-ri*a%e(an( )an"fa*%"re( in aan is %&e P&iliine for %&e *ons%r"*%ion an( ins%alla%ion

'or an( for %&e ie*es of e,"i)en% an( aan for s"lies '&i*& 'ere*o)le%ely (esine( an( enineere( in aan. (Co&&i%%ioner of $nternalRevenue v. arubeni Corporation, G.R. No. 13)3)), e"e&ber 1+, 2001

T&e eneral or in(ire*% *ons%i%"%ional li)i%a%ions as 'ell as %&ese*ifi* or (ire*% *ons%i%"%ional li)i%a%ions.

BAR: 8. T&e eneral or in(ire*% *ons%i%"%ional li)i%a%ions are %&efollo'in

a. D"e ro*ess *la"se-. E,"al ro%e*%ion *la"se

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i)ro!e)en%s of all in(s a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for reliio"s/*&ari%a-le or e("*a%ional "roses

&. No %a5 e5e)%ion 'i%&o"% %&e *on*"rren*e of )aori%y !o%e of all)e)-ers of Conress

i. No "se of "-li* )oney or roer%y for reliio"s "roses e5*e% ifries% is assine( %o %&e ar)e( for*es/ enal ins%i%"%ions/ o!ern)en% or&anaeor lerosari")

. Money *olle*%e( on %a5 le!ie( for a se*ial "rose %o -e "se( only fors"*& "rose/ -alan*e if any/ %o eneral f"n(s

. T&e S"re)e Co"r%Fs o'er %o re!ie' "()en%s or or(ers of lo'er*o"r%s in all *ases in!ol!in %&e leali%y of any %a5/ i)ose/ assess)en% or %oll or%&e leali%y of any enal%y i)ose( in rela%ion %o %&e a-o!e

l. A"%&ori%y of lo*al o!ern)en% "ni%s %o *rea%e %&eir o'n so"r*es ofre!en"e/ %o le!y %a5es/ fees an( o%&er *&ares s"-e*% %o "i(elines an(li)i%a%ions i)ose( -y Conress *onsis%en% 'i%& %&e -asi* oli*y of lo*ala"%ono)y

). A"%o)a%i* release of lo*al o!ern)en%Fs "s% s&are in na%ional %a5es

n. Ta5 e5e)%ion of all re!en"es an( asse%s of non?s%o*/ non?rofi%e("*a%ional ins%i%"%ions "se( a*%"ally/ (ire*%ly an( e5*l"si!ely for e("*a%ional"roses

o. Ta5 e5e)%ion of all re!en"es an( asse%s of rorie%ary or *ooera%i!ee("*a%ional ins%i%"%ions s"-e*% %o li)i%a%ions ro!i(e( -y la' in*l"(inres%ri*%ions on (i!i(en(s an( ro!isions for rein!es%)en% of rofi%s

. Ta5 e5e)%ion of ran%s/ en(o')en%s/ (ona%ions or *on%ri-"%ions "se(a*%"ally/ (ire*%ly an( e5*l"si!ely for e("*a%ional "roses s"-e*% %o *on(i%ionsres*ri-e( -y la'.

BAR: 10. E,"al ro%e*%ion of %&e la' *la"se is s"-e*% %o reasona-le

*lassifi*a%ion. +f %&e ro"ins are *&ara*%eri8e( -y s"-s%an%ial (is%in*%ions %&a%)ae real (ifferen*es/ one *lass )ay -e %rea%e( an( re"la%e( (ifferen%ly fro)ano%&er. T&e *lassifi*a%ion )"s% also -e er)ane %o %&e "rose of %&e la' an()"s% aly %o all %&ose -elonin %o %&e sa)e *lass. (5iu, et al., v. Court of

Appeal%, et al., G.R. No. 12)410, anuary 20, 1999

BAR: 11. Classifi*a%ion/ %o -e !ali(/ )"s% aB res% on s"-s%an%ial(is%in*%ions/ -B -e er)ane %o %&e "rose of %&e la'/ *B no% -e li)i%e( %oe5is%in *on(i%ions only/ an( (B aly e,"ally %o all )e)-ers of %&e sa)e *lass.(5iu, et al., v. Court of Appeal%, et al., G.R. No. 12)410, anuary 20, 1999

A leisla%i!e r"le '&i*& is in %&e na%"re of s"-or(ina%e leisla%ion/(esine( %o i)le)en% a ri)ary leisla%ion -y ro!i(in %&e (e%ails %&ereof. +n%&e sa)e 'ay %&a% la's )"s% &a!e %&e -enefi% of "-li* &earin/ i% is enerallyre,"ire( %&a% -efore a leisla%i!e r"le is a(o%e( %&ere )"s% -e a &earin an("-li*a%ion as re,"ire( "n(er %&e A()inis%ra%i!e Co(e. (Co&&i%%ioner of$nternal Revenue v. Court of Appeal%, et al., 2*1 'CRA 23*

+n *ase of an in%erre%a%i!e r"le no &earin or "-li*a%ion is re,"ire( sin*ean in%erre%a%i!e r"le is (esine( )erely %o ro!i(e "i(elines of %&e la' '&i*&%&e a()inis%ra%i!e aen*y is in *&are of enfor*in. (Co&&i%%ioner of $nternalRevenue v. Court of Appeal%, et al., 2*1 'CRA 23*

BAR: 12. E,"ali%y an( "nifor)i%y of %a5a%ion )ay )ean %&e sa)e ase,"al ro%e*%ion. +n s"*& a *ase/ %&e %er)s 'o"l( )ean %&a% all s"-e*%s an(o-e*%s of %a5a%ion '&i*& are si)ilarly si%"a%e( s&all -e s"-e*% %o %&e sa)e-"r(ens an( ran%e( %&e sa)e ri!ilees 'i%&o"% any (is*ri)ina%ion '&a%soe!er.

Unifor)i%y )ay &a!e a res%ri*%i!e )eanin (ifferen% fro) e,"ali%y an(e,"al ro%e*%ion. +% 'o"l( )ean %&en %&a% %&e sa)e ra%e s&all -e i)ose( for %&esa)e s"-e*%s an( o-e*%s 'i%&in %&e %erri%orial -o"n(aries of a %a5in a"%&ori%y.

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A %rial *o"r% is no% %&e roer for") for %&e !en%ila%ion of %&e iss"es '&erei% is %&e leisla%"re %o '&i*& relief )"s% -e so"&%/ -e*a"se 'i%& %&e leisla%"reri)arily lies %&e (is*re%ion %o (e%er)ine aB %&e na%"re in(B/ -B o-e*%"roseB/ *B e5%en% ra%eB/ (B *o!erae s"-e*%sB an( eB %itu% la*eB of%a5a%ion. Co&&i%%ioner of $nternal Revenue, et al., v. 'anto%, et al., 2)) 'CRA*1)

+% is in&eren% in %&e o'er %o %a5 %&a% %&e S%a%e -e free %o sele*% %&es"-e*%s of %a5a%ion/ an( i% &as -een reea%e(ly &el( %&a%/ Gine,"ali%ies '&i*&res"l% fro) a sinlin o"% of one ar%i*"lar *lass of %a5a%ion/ or e5e)%ion/infrine no *ons%i%"%ional li)i%a%ion.G (Co&&i%%ioner of $nternal Revenue, et al.,v. 'anto%, et al., 2)) 'CRA *1)

BAR: 13. A fi5e( ann"al li*ense fee on %&ose enae( in %&e -"siness

of eneral en%errise '&i*& also i)ose( on %&e sale of -i-les -y a reliio"sse*%. is %&is !ali( !iola%es %&e *ons%i%"%ionally "aran%ee( free(o) of %&e ress/an( of reliion..

As a li*ense fee is fi5e( in a)o"n% an( "nrela%e( %o %&e re*ei%s of %&e%a5ayer/ s"*& a li*ense fee/ '&en alie( %o a reliio"s se*% is a*%"ally i)ose(as a *on(i%ion for %&e free e5er*ise of reliion. A li*ense fee res%rains ina(!an*e %&ose *ons%i%"%ional li-er%ies of ress an( reliion an( ine!i%a-ly %en(s%o s"ress %&eir e5er*ise.

T&e P1/000.00 VAT reis%ra%ion fee i)ose( on non?VAT en%errises'&i*& in*l"(es a)on o%&ers/ reliio"s se*%s '&i*& sells an( (is%ri-"%esreliio"s li%era%"re is no% !iola%i!e of reliio"s free(o)/ al%&o"& a fi5e( a)o"n%is no% i)ose( for %&e e5er*ise of a ri!ilee -"% only for %&e "rose of

(efrayin ar% of %&e *os% of reis%ra%ion.T&e reis%ra%ion fee is %&"s )ore of an a()inis%ra%i!e fee/ one no%

i)ose( on %&e e5er*ise of a ri!ilee/ )"*& less a *ons%i%"%ional ri&%.(5olentino v. 'e"retary of :inan"e, et al., an "o&panion "a%e%, 23 'CRA *30

Ar%i*le ;++/ Se*. 11 of %&e Cons%i%"%ion ro!i(es %&a% %&e ran% of afran*&ise for %&e oera%ion of a "-li* "%ili%y is s"-e*% %o a)en()en%. al%era%ionor reeal -y Conress '&en %&e *o))on oo( re,"ires

BAR: 14. A la'f"l %a5 on a ne' s"-e*%/ or an in*rease( %a5 on an ol(one/ (oes no% in%erfere 'i%& a *on%ra*% or i)airs i%s o-lia%ion/ 'i%&in %&e

)eanin of %&e *ons%i%"%ion. E!en %&o"& s"*& %a5a%ion )ay affe*% ar%i*"lar*on%ra*%s/ as i% )ay in*rease %&e (e-% of one erson an( lessen %&e se*"ri%y ofano%&er/ or )ay i)ose a((i%ional -"r(ens "on one *lass an( release %&e-"r(ens of ano%&er/ s%ill %&e %a5 )"s% -e ai( "nless ro&i-i%e( -y %&e*ons%i%"%ion/ nor *an i% -e sai( %&a% i% i)airs %&e o-lia%ions of any e5is%in*on%ra*% in i%s %r"e an( leal sense. (5olentino v. 'e"retary of :inan"e, et al., an"o&panion "a%e%, 23 'CRA *30

BAR: 15. 9&ile %&e S"re)e Co"r% &as/ no% %oo infre,"en%ly/ referre(%o %a5 e5e)%ions *on%aine( in se*ial fran*&ises as -ein in %&e na%"re of*on%ra*%s an( a ar% of %&e in("*e)en% for *arryin o"% %&e fran*&ise/ %&ese

e5e)%ions/ ne!er%&eless are far fro) -ein s%ri*%ly *on%ra*%"al in na%"re. Cons%i%"%ional %a5 e5e)%ions/ in %&e real sense of %&e %er) an( '&ere %&enon?i)air)en% *la"se of %&e Cons%i%"%ion *an ri&%ly -e in!oe(/ are %&osearee( %o -y %&e %a5in a"%&ori%y in *on%ra*%s/ s"*& as %&ose *on%aine( ino!ern)en% -on(s or (e-en%"res/ la'f"lly en%ere( in%o -y %&e) "n(er ena-linla's in '&i*& %&e o!ern)en%/ a*%in in i%s ri!a%e *aa*i%y s&e(s i%s *loa ofa"%&ori%y an( 'ai!es i%s o!ern)en% i))"ni%y. (anila le"tri" Co&pany v.Provin"e of !auna, et al., G.R. No. 13139, ay , 1999

7


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Do"-le %a5a%ion in i%s eneri* sense/ %&is )eans %a5in %&e sa)e s"-e*%or o-e*% %'i*e ("rin %&e sa)e %a5a-le erio(.

+n i%s ar%i*"lar sense/ i% )ay )ean (ire*% ("li*a%e %a5a%ion/ '&i*& isro&i-i%e( "n(er %&e *ons%i%"%ion -e*a"se i% !iola%es %&e *on*e% of e,"alro%e*%ion/ "nifor)i%y an( e,"i%a-leness of %a5a%ion. +n(ire*% ("li*a%e %a5a%ionis no% ana%&e)a%i8e( -y %&e a-o!e *ons%i%"%ional li)i%a%ions.

BAR: 16. T&e ele)en%s of (ire*% ("li*a%e %a5a%ion area. Sa)e

1B S"-e*% or o-e*% is %a5e( %'i*e2B Ta5in a"%&ori%yB Ta5in "rose4B Ta5in erio(

-. Ta5in all of %&e s"-e*%s or o-e*%s for %&e firs% %i)e 'i%&o"% %a5in allof %&e) for %&e se*on( %i)e.

+f any of %&e ele)en%s are a-sen% %&en %&ere is in(ire*% ("li*a%e %a5a%ion'&i*& is no% ro&i-i%e( -y %&e *ons%i%"%ion.

BAR: 17. Do"-le %a5a%ion a !ali( (efense aains% %&e leali%y of a %a5)eas"re if %&e (o"-le %a5a%ion is (ire*% ("li*a%e %a5a%ion/ -e*a"se i% 'o"l(!iola%e %&e e,"al ro%e*%ion *la"se of %&e *ons%i%"%ion.

9&en an i%e) of in*o)e is %a5e( in %&e P&iliines an( %&e sa)e in*o)eis %a5e( in ano%&er *o"n%ry/ %&is 'o"l( -e no'n as in%erna%ional "ri(i*al (o"-le%a5a%ion '&i*& is %&e i)osi%ion of *o)ara-le %a5es in %'o or )ore s%a%es on %&esa)e %a5ayer in rese*% of %&e sa)e s"-e*% )a%%er an( for i(en%i*al ro"n(s.(Co&&i%%ioner of $nternal Revenue v. '.C. o#n%on an 'on, $n"., et al., G.R.No. 12)10, une 2, 1999

Do"-le %a5a%ion "s"ally %aes la*e '&en a erson is a resi(en% of a*on%ra*%in s%a%e an( (eri!es in*o)e fro) or o'ns *ai%al in/ %&e o%&er*on%ra*%in s%a%e an( -o%& s%a%es i)ose %a5 on %&a% in*o)e or *ai%al.(Co&&i%%ioner of $nternal Revenue v. '.C. o#n%on an 'on, $n"., et al., G.R.No. 12)10, une 2, 1999

BAR: 18. T&e follo'in are %&e )e%&o(s of a!oi(in (o"-le %a5a%iona. Ta5 %rea%ies '&i*& e5e)%s forein na%ionals fro) lo*al %a5a%ion an(

lo*al na%ionals fro) forein %a5a%ion "n(er %&e rin*ile of re*iro*i%y.-. Ta5 *re(i%s '&ere forein %a5es are allo'e( as (e("*%ions fro) lo*al

%a5es %&a% are ("e %o -e ai(.*. Allo'in forein %a5es as a (e("*%ion fro) ross in*o)e.

P"rose of %a5 %rea%ies. To re*on*ile %&e na%ional fis*al leisla%ion of %&e*on%ra*%in ar%ies in or(er %o &el %&e %a5ayer a!oi( si)"l%aneo"s %a5a%ion in%'o (ifferen% "ris(i*%ions. More re*isely/ %&e %a5 *on!en%ions are (raf%e( 'i%& a!ie' %o'ar(s %&e eli)ina%ion of in%erna%ional "ri(i*al (o"-le %a5a%ion.(Co&&i%%ioner of $nternal Revenue v. '.C. o#n%on an 'on, $n"., et al., G.R.No. 12)10, une 2, 1999

6a%ionale for a!oi(in in%erna%ional "ri(i*al (o"-le %a5a%ion. Toen*o"rae %&e free flo' of oo(s an( ser!i*es an( %&e )o!e)en% of *ai%al/%e*&noloy an( ersons -e%'een *o"n%ries/ *on(i%ions (ee)e( !i%al in *rea%inro-"s% an( (yna)i* e*ono)ies.


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T&e )an(a%e %o Conress is no% %o res*ri-e -"% %o e!ol!e a roressi!esys%e) of %a5a%ion. O%&er'ise/ sales %a5es '&i*& er&as are %&e ol(es% for) ofin(ire*% %a5es/ 'o"l( &a!e -een ro&i-i%e( 'i%& %&e ro*la)a%ion of %&e*ons%i%"%ional ro!ision. Sales %a5es are also reressi!e. (5olentino v. 'e"retary

of :inan"e an "o&panion "a%e%, 249 'CRA *2+

T&e Cons%i%"%ion (oes no% really ro&i-i% %&e i)osi%ion of in(ire*% %a5es'&i*&/ lie %&e VAT/ are reressi!e. T&e *ons%i%"%ional ro!ision )eans si)ly%&a% in(ire*% %a5es s&o"l( -e )ini)i8e(.

6esor% %o in(ire*% %a5es s&o"l( -e )ini)i8e( -"% no% a!oi(e( en%irely-e*a"se i% is (iffi*"l%/ if no% i)ossi-le/ %o a!oi( i)osin s"*& %a5es a**or(in%o %&e %a5ayers a-ili%y %o ay. (5olentino v. 'e"retary of :inan"e an "o&panion

"a%e%, 249 'CRA *2+

+n %&e *ase of VAT/ %&e la' )ini)i8es %&e reressi!e effe*%s of %&isi)osi%ion -y ro!i(in for 8ero ra%in of *er%ain %ransa*%ions '&ile ran%ine5e)%ions %o o%&er %ransa*%ions. T&e %ransa*%ions '&i*& are s"-e*% %o VAT are

%&ose '&i*& in!ol!e oo(s an( ser!i*es '&i*& are "se( or a!aile( of )ainly -y&i&er in*o)e ro"s. (5olentino v. 'e"retary of :inan"e an "o&panion "a%e%,

249 'CRA *2+

T&e Cons%i%"%ion re,"ires %&a% all re!en"e -ills s&all oriina%e e5*l"si!elyfro) %&e :o"se of 6eresen%a%i!es. T&e Cons%i%"%ion si)ly )eans %&a% %&eini%ia%i!e for filin re!en"e/ %ariff or %a5 -ills )"s% *o)e fro) %&e :o"se of6eresen%a%i!es on %&e %&eory %&a%/ ele*%e( as %&ey are fro) %&e (is%ri*%s/ %&eMe)-ers of %&e :o"se *an -e e5e*%e( %o -e )ore sensi%i!e %o %&e lo*al nee(san( ro-le)s. (5olentino v. 'e"retary of :inan"e an "o&panion "a%e%, 249

'CRA *2+

+% is no% %&e la' ? -"% %&e re!en"e -ill ? '&i*& is re,"ire( -y %&eCons%i%"%ion %o oriina%e e5*l"si!ely in %&e :o"se of 6eresen%a%i!es -e*a"sea -ill oriina%in in %&e :o"se )ay "n(ero s"*& e5%ensi!e *&anes in %&eSena%e %&a% %&e res"l% )ay -e a re'ri%in of %&e '&ole/ an( a (is%in*% -ill )ay -ero("*e(. (5olentino v. 'e"retary of :inan"e an "o&panion "a%e%, 23 'CRA*30

To insis% %&a% a re!en"e s%a%"%e ? no% only %&e -ill '&i*& ini%ia%e( %&e

leisla%i!e ro*ess *"l)ina%in in %&e ena*%)en% of %&e la' ? )"s% s"-s%an%ially-e %&e sa)e as %&e :o"se -ill 'o"l( -e %o (eny %&e Sena%es o'er no% only %o

*on*"r 'i%& a)en()en%s -"% also %o roose a)en()en%s. +% 'o"l( -e %o!iola%e %&e *oe,"ali%y of leisla%i!e o'er of %&e %'o &o"ses of Conress an( infa*% )ae %&e :o"se s"erior %o %&e Sena%e.

=i!en %&e o'er of %&e Sena%e %o roose a)en()en%s/ i% *an roose i%so'n !ersion e!en 'i%& rese*% %o -ills '&i*& are re,"ire( -y %&e Cons%i%"%ion %ooriina%e in %&e :o"se. (5olentino v. 'e"retary of :inan"e an "o&panion "a%e%,

249 'CRA *2+

Nor (oes %&e Cons%i%"%ion ro&i-i% %&e filin in %&e Sena%e of a s"-s%i%"%e-ill in an%i*ia%ion of i%s re*ei% of %&e -ill fro) %&e :o"se/ so lon as a*%ion -y%&e Sena%e as a -o(y is 'i%&&el( en(in re*ei% of %&e :o"se -ill. Tolen%ino !.

Se*re%ary of


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or%ion of a re!en"e -ill '&i*& a*%"ally i)oses a %a5/ a se*%ion i(en%ifies %&e %a5an( en")era%es %&e ersons lia-le %&erefore 'i%& %&e *orreson(in %a5 ra%e.

To *ons%r"e %&e 'or( i%e) as referrin %o %&e '&ole se*%ion 'o"l( %ie %&ePresi(en%s &an( in *&oosin ei%&er %o aro!e %&e '&ole se*%ion a% %&e e5enseof also aro!in a ro!ision %&erein '&i*& &e (ee)s "na**e%a-le or !e%o %&een%ire se*%ion a% %&e e5ense of foreoin %&e *olle*%ion of %&e in( of %a5al%oe%&er.

BAR: 19. Ta5 e5e)%ions s&all -e ran%e( only "on )aori%y !o%e ofall %&e )e)-ers of Conress.

E;CEPT+ONSa. 9&ere %&e %a5 e5e)%ion is ran%e( %&ro"& a %rea%y-. Ta5 e5e)%ions ran%e( -y lo*al o!ern)en% "ni%s*. Ta5 e5e)%ions ran%e( '&en %&e Presi(en% e5er*ises &is o'ers

"n(er %&e fle5i-le %ariff *la"se '&en ro%e*%i!e %ariffs are re)o!e(.

BAR: 20. C&ari%a-le ins%i%"%ions/ *&"r*&es an( arsonaes or *on!en%sa"r%enan% %&ere%o/ )os,"es/ non?rofi% *e)e%eries/ an( all an(s/ -"il(ins an(i)ro!e)en%s %&a% are a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for reliio"s/*&ari%a-le or e("*a%ional "roses are e5e)% fro) %a5a%ion. ISe*.27 B Ar%i*leV+/ 137J Cons%i%"%ionB

T&e *ons%i%"%ional %a5 e5e)%ions refer only %o real roer%y %&a% area*%"ally/ (ire*%ly an( e5*l"si!ely "se( for reliio"s/ *&ari%a-le or e("*a%ional"roses/ an( %&a% %&e only *ons%i%"%ionally re*oni8e( e5e)%ion fro) %a5a%ionof re!en"es are %&ose earne( -y non?rofi%/ non?s%o* e("*a%ional ins%i%"%ions'&i*& are a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for e("*a%ional "roses.(Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 29+ 'CRA +3

BAR: 21. All re!en"es an( asse%s of non?s%o*/ non?rofi% e("*a%ionalins%i%"%ions %&a% are a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for e("*a%ional"roses s&all -e e5e)% fro) %a5a%ion.

6e!en"es an( asse%s of rorie%ary e("*a%ional ins%i%"%ions/ in*l"(in%&ose '&i*& are *ooera%i!ely o'ne(/ )ay -e en%i%le( %o e5e)%ions s"-e*% %oli)i%a%ions ro!i(e( -y la' in*l"(in res%ri*%ions on (i!i(en(s an( ro!isions forrein!es%)en%s.

T&e N+6C re*oni8es %&e e5e)%ion fro) %a5 of %&e in*o)es of *i!i*lea"es or orani8a%ions no% orani8e( for rofi% -"% oera%e( e5*l"si!ely for %&e

ro)o%ion of so*ial 'elfare/ as 'ell as *l"-s orani8e( an( oera%e( e5*l"si!elyfor leas"re/ re*rea%ion/ an( o%&er non?rofi%a-le "roses '&ere no ar% of %&ene% in*o)e in"res %o %&e -enefi% of any ri!a%e s%o*&ol(er or )e)-er.

T&e %a5 e5e)%ion so re*oni8e( (oes no% flo' %o in*o)e of '&a%e!erin( an( *&ara*%er of %&e foreoin orani8a%ions fro) any of %&eir roer%ies/real or ersonal/ or fro) any of %&eir a*%i!i%ies *on("*%e( for rofi%/ rear(less of%&e (isosi%ion )a(e of s"*& in*o)e/ '&i*& s&all -e s"-e*% %o in*o)e %a5es.(Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 29+ 'CRA +3

Ta5 a)nes%y (is%in"is&e( fro) %a5 e5e)%iona. Ta5 a)nes%y is an i))"ni%y fro) all *ri)inal/ *i!il an( a()inis%ra%i!e

lia-ili%ies arisin fro) nonay)en% of %a5es People v. Ca%tanea, G.R. No. !/4*++1, 'epte&ber 1, 19++9:+@E a %a5 e5e)%ion is an i))"ni%y fro) *i!illia-ili%y only. +% is an i))"ni%y or ri!ilee/ a free(o) fro) a *&are or -"r(en %o'&i*& o%&ers are s"-e*%e(. (:lorer v. '#erian, 13) $n. 2+, 3* N 3*

-. Ta5 a)nes%y alies only %o as% %a5 erio(s/ &en*e of re%roa*%i!eali*a%ion (Ca%tanea, %upraB 9:+@E %a5 e5e)%ion &as rose*%i!eali*a%ion.

10


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12/70

!al"e?a((e( %a5es -ein s&if%e( or %ransferre( -y %&e %a5ayer/ %&e seller/ %o %&e-"yer.

HE COUR OF AX APPEALS AND AX

REMEDIES

T&e Co"r% of Ta5 Aeals is %&e se*ial %a5 *o"r% *rea%e( "n(er 6e"-li*A*% No. 112/ as a)en(e( -y 6. A. No. 3272/ an( is *o)ose( of a Presi(in"s%i*e an( fi!e Asso*ia%e "s%i*es/ orani8e( in%o %'o (i!isions.

T&e Co"r% of Ta5 Aeals 'as *rea%e(a. To re!en% (elay in %&e (isosi%ion of %a5 *ases -y %&e %&en Co"r%s of


13/70

ne' %rial/ a (enial of '&i*& is aeala-le %o %&e Co"r% of Ta5 Aeals en ban"-y )eans of a e%i%ion for re!ie'. .

i. A (e*ision of %&e Co"r% of Ta5 Aeals en ban" a(!erse %o %&e %a5ayeror %&e o!ern)en% )ay -e aeale( %o %&e S"re)e Co"r% %&ro"& a e%i%ion forre!ie' on *er%iorari file( 'i%& fif%een 1B (ays fro) no%i*e/ an( e5%en(i-le for

"s%ifia-le reasons for %&ir%y 0B (ays only.

BAR: 27. T&e leal re)e(ies "n(er %&e N+6C of 133J a!aila-le %o anarie!e( %a5ayer a% %&e a()inis%ra%i!e an( "(i*ial le!els 'i%& rese*% %o ref"n(or re*o!ery of %a5 erroneo"sly or illeally *olle*%e(/ is %o

a. file a *lai) for ref"n( or *re(i% 'i%& %&e Co))issioner of +n%ernal6e!en"e. 1s%ar./ Se*. 223/ N+6C of 133JB

-. filin of a s"i% or ro*ee(in 'i%& %&e Co"r% of Ta5 Aeals1B -efore %&e e5ira%ion of %'o 2B years fro) %&e (a%e of ay)en%

of %&e %a5 rear(less of any s"er!enin *a"se %&a% )ay arise af%eray)en% 2n(ar./ Se*. 223/ N+6C of 133JB/ or

2B 'i%&in %&ir%y 0B (ays fro) re*ei% of %&e (enial -y %&e

Co))issioner of %&e ali*a%ion for ref"n( or *re(i%. Se*. 11/ 6.A. No.112B

T&e %'o 2B year erio( an( %&e %&ir%y 0B (ay erio( s&o"l( -e alie(on a '&i*&e!er *o)es firs% -asis. T&"s/ if %&e 0 (ays is 'i%&in %&e 2 years/ %&e0 (ays alies/ if %&e 2 year erio( is a-o"% %o lase -"% %&ere is no (e*ision ye%-y %&e Co))issioner '&i*& 'o"l( %rier %&e 0?(ay erio(/ %&e %a5ayer s&o"l(file an aeal/ (esi%e %&e a-sen*e of a (e*ision. (Co&&i%%ioner%, et". v. Courtof 5a8 Appeal%, et al., G.R.No. +2*1+, ar"# 1*, 19+9, unrep.

*. A (e*ision of a (i!ision of %&e Co"r% of Ta5 Aeals a(!erse %o %&e%a5ayer or %&e o!ern)en% )ay -e %&e s"-e*% of a )o%ion for re*onsi(era%ion or

ne' %rial/ a (enial of '&i*& is aeala-le %o %&e Co"r% of Ta5 Aeals en ban"-y )eans of a e%i%ion for re!ie'. .

(. A (e*ision of %&e Co"r% of Ta5 Aeals en ban" a(!erse %o %&e%a5ayer or %&e o!ern)en% )ay -e aeale( %o %&e S"re)e Co"r% %&ro"& ae%i%ion for re!ie' on *er%iorari file( 'i%& fif%een 1B (ays fro) no%i*e/ an(e5%en(i-le for "s%ifia-le reasons for %&ir%y 0B (ays only.

9&ere %&e %a5ayer is a *orora%ion %&e %'o year res*ri%i!e erio( fro)(a%e of ay)en% for ref"n( of in*o)e %a5es s&o"l( -e %&e (a%e '&en %&e*orora%ion file( i%s final a("s%)en% re%"rn no% on %&e (a%e '&en %&e %a5es 'ereai( on a ,"ar%erly -asis. (P#ilippine -an; of Co&&uni"ation% v. Co&&i%%ioner

of $nternal Revenue, et al., G.R. No. 112024, anuary 2+, 1999

=enerally seain i% is %&e


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Conferen*e is iss"e( in!i%in %&e %a5ayer %o e5lain '&y &e s&o"l( no% -es"-e*% %o a((i%ional %a5es.

(. +f %&e %a5ayer a%%en(s %&e infor)al *onferen*e an( %&e e5a)iner issa%isfie( 'i%& %&e e5lana%ion of %&e %a5ayer/ %&e ro*ess is aain en(e(.

+f %&e %a5ayer inores %&e in!i%a%ion %o %&e infor)al *onferen*e/ or if %&ee5a)iner is no% sa%isfie( 'i%& %a5ayers e5lana%ion// an( &e -elie!es %&a%roer %a5es s&o"l( -e assesse(/ %&e Co))issioner of +n%ernal 6e!en"e or &is("ly a"%&ori8e( reresen%a%i!e s&all %&en no%ify %&e %a5ayer of %&e fin(ins in %&efor) of a re?assess)en% no%i*e. T&e re?assess)en% no%i*e re,"ires %&e%a5ayer %o e5lain 'i%&in fif%een 1B (ays fro) re*ei% '&y no no%i*e ofassess)en% an( le%%er of (e)an( for a((i%ional %a5es s&o"l( -e (ire*%e( %o &i).

e. +f %&e Co))issioner is sa%isfie( 'i%& %&e e5lana%ion of %&e %a5ayer/%&en %&e ro*ess is aain en(e(.

+f %&e %a5ayer inores %&e re?assess)en% no%i*e -y no% reson(in or&is e5lana%ions are no% a**e%e( -y %&e Co))issioner/ %&en a no%i*e ofassess)en% an( a le%%er of (e)an( is iss"e(.

T&e no%i*e of assess)en% )"s% -e iss"e( -y %&e Co))issioner %o %&e

%a5ayer 'i%&in a erio( of %&ree B years fro) %&e %i)e %&e %a5 re%"rn 'as file(or s&o"l( &a!e -een file( '&i*&e!er is %&e la%er of %&e %'o e!en%s. 9&ere %&e%a5ayer (i( no% file a %a5 re%"rn or '&ere %&e %a5 re%"rn file( is false orfra"("len%/ %&en %&e Co))issioner &as a erio( of %en 10B years fro) (is*o!eryof %&e fail"re %o file a %a5 re%"rn or fro) (is*o!ery of %&e fra"( 'i%&in '&i*& %oiss"e an assess)en% no%i*e. T&e r"nnin of %&e a-o!e res*ri%i!e erio(s )ay&o'e!er -e s"sen(e( "n(er *er%ain ins%an*es.

T&e no%i*e of assess)en% )"s% -e iss"e( 'i%&in %&e res*ri%i!e erio(an( )"s% *on%ain %&e fa*%s/ la' an( "risr"(en*e relie( "on -y %&eCo))issioner. O%&er'ise i% 'o"l( no% -e !ali(.

f. T&e %a5ayer s&o"l( %&en file an a()inis%ra%i!e ro%es% -y filin a

re,"es% for re*onsi(era%ion or rein!es%ia%ion 'i%&in %&ir%y 0B (ays fro) re*ei%of %&e assess)en% no%i*e.

T&e %a5ayer *o"l( no% i))e(ia%ely in%erose an aeal %o %&e Co"r% ofTa5 Aeals -e*a"se %&ere is no (e*ision ye% of %&e Co))issioner %&a% *o"l( -e%&e s"-e*% of a re!ie'.

To -e !ali( %&e a()inis%ra%i!e ro%es% )"s% -e file( 'i%&in %&e res*ri%i!eerio(/ )"s% s&o' %&e error of %&e #"rea" of +n%ernal 6e!en"e an( %&e *orre*%*o)"%a%ions s"or%e( -y a s%a%e)en% of fa*%s/ an( %&e la' an( "risr"(en*erelie( "on -y %&e %a5ayer. T&ere is no nee( %o ay "n(er ro%es%. +f %&ero%es% 'as no% seasona-ly file( %&e assess)en% -e*o)es final an( *olle*%i-lean( %&e #"rea" of +n%ernal 6e!en"e *o"l( "se i%s a()inis%ra%i!e an( "(i*ialre)e(ies in *olle*%in %&e %a5.

. 9i%&in si5%y H0B (ays fro) filin of %&e ro%es%/ all rele!an% s"or%in(o*")en%s s&all -e s"-)i%%e(/ o%&er'ise %&e assess)en% s&all -e*o)e final an(*olle*%i-le an( %&e #+6 *o"l( "se i%s a()inis%ra%i!e an( "(i*ial re)e(ies %o*olle*% %&e %a5.

On*e an assess)en% &as -e*o)e final an( *olle*%i-le/ no% e!en %&e #+6Co))issioner *o"l( *&ane %&e sa)e. T&"s/ %&e %a5ayer *o"l( no% ay %&e %a5/%&en aly for a ref"n(/ an( if (enie( aeal %&e sa)e %o %&e Co"r% of Ta5

Aeals.&. +f %&e ro%es% is (enie( in '&ole or in ar%/ or is no% a*%e( "on 'i%&in

one &"n(re( ei&%y 170B (ays fro) %&e s"-)ission of (o*")en%s/ %&e %a5ayera(!ersely affe*%e( -y %&e (e*ision or ina*%ion )ay aeal %o %&e Co"r% of Ta5

Aeals 'i%&in %&ir%y 0B (ays fro) re*ei% of %&e a(!erse (e*ision/ or fro) %&elase of %&e one &"n(re( ei&%y 170?B (ay erio(/ 'i%& an ali*a%ion for %&eiss"an*e of a 'ri% of reli)inary in"n*%ion %o enoin %&e #+6 fro) *olle*%in %&e%a5 s"-e*% of %&e aeal.

+f %&e %a5ayer fails %o so aeal/ %&e (enial of %&e Co))issioner or %&eina*%ion of %&e Co))issioner 'o"l( res"l% %o %&e no%i*e of assess)en% -e*o)infinal an( *olle*%i-le an( %&e #+6 *o"l( %&en "%ili8e i%s a()inis%ra%i!e an( "(i*ialre)e(ies %o *olle*% %&e %a5.

14


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i. A (e*ision of a (i!ision of %&e Co"r% of Ta5 Aeals a(!erse %o %&e%a5ayer or %&e o!ern)en% )ay -e %&e s"-e*% of a )o%ion for re*onsi(era%ion orne' %rial/ a (enial of '&i*& is aeala-le %o %&e Co"r% of Ta5 Aeals en ban"-y )eans of a e%i%ion for re!ie'. .

T&e Co"r% of Ta5 Aeals/ &as a erio( of %'el!e 12B )on%&s fro)s"-)ission of %&e *ase for (e*ision 'i%&in '&i*& %o (e*i(e.

. +f %&e (e*ision of %&e Co"r% of Ta5 Aeals en ban"affir)s %&e (enial of%&e ro%es% -y %&e Co))issioner or %&e assess)en% in *ase of fail"re -y %&eCo))issioner %o (e*i(e %&e %a5ayer )"s% file a e%i%ion for re!ie' on *er%iorari'i%& %&e S"re)e Co"r% 'i%&in fif%een 1B (ays fro) no%i*e of %&e "()en% on,"es%ions of la'. An e5%ension of %&ir%y 0B (ays )ay for "s%ifia-le reasons -eran%e(. +f %&e %a5ayer (oes no% so aeal/ %&e (e*ision of %&e Co"r% of Ta5

Aeals 'o"l( -e*o)e final an( %&is &as %&e effe*% of )ain %&e assess)en%also final an( *olle*%i-le. T&e #+6 *o"l( %&en "se i%s a()inis%ra%i!e an( "(i*ialre)e(ies %o *olle*% %&e %a5

"ris(i*%ion of %&e Co"r% of Ta5 Aeals

a. E5*l"si!e aella%e "ris(i*%ion %o re!ie' -y aeal

-. "ris(i*%ion o!er *ri)inal offenses

1B E5*l"si!e oriinal "ris(i*%ion

2B E5*l"si!e aella%e "ris(i*%ion

*. "ris(i*%ion o!er %a5 *olle*%ion *ases

1B E5*l"si!e oriinal "ris(i*%ion

2B E5*l"si!e aella%e "ris(i*%ion

E5*l"si!e aella%e "ris(i*%ion of CTA %o re!ie' -y aeal

a. De*isions of %&e Co))issioner of +n%ernal 6e!en"e

-. +na*%ion -y %&e Co))issioner of +n%ernal 6e!en"e

*. De*isions/ or resol"%ions of %&e 6eional Trial Co"r%s

(. De*isions of %&e Co))issioner of C"s%o)s

e. De*isions of %&e Cen%ral #oar( of Assess)en% Aeals

f. De*isions of %&e Se*re%ary of


16/70

. De*isions/ or(ers or resol"%ions of %&e 6eional Trial Co"r%s inlo*al %a5 *ases oriinally (e*i(e( or resol!e( -y %&e) in %&e e5er*ise of %&eiroriinal or aella%e "ris(i*%ion

4. De*isions of %&e Co))issioner of C"s%o)s in *ases in!ol!inlia-ili%y for *"s%o)s ("%ies/ fees or o%&er )oney *&ares/ sei8"re/ (e%en%ion

or release of roer%y affe*%e(/ fines/ forfei%"res or o%&er enal%ies in rela%ion%&ere%o/ or o%&er )a%%ers arisin "n(er %&e C"s%o)s @a' or o%&er la'sa()inis%ere( -y %&e #"rea" of C"s%o)s

. De*isions of %&e Cen%ral #oar( of Assess)en% Aeals in %&ee5er*ise of i%s aella%e "ris(i*%ion o!er *ases in!ol!in %&e assess)en%an( %a5a%ion of real roer%y oriinally (e*i(e( -y %&e ro!in*ial or *i%y -oar(of assess)en% aeals

H. De*isions of %&e Se*re%ary of


17/70

)illion esos P1/000/000B s&all -e %rie( -y %&e roer M"ni*ial Trial Co"r%/Me%rooli%an Trial Co"r% an( 6eional Trial Co"r%.

2. E5*l"si!e aella%e "ris(i*%ion in %a5 *olle*%ion *ases

a. O!er aeals fro) "()en%s/ resol"%ions/ or or(ers of %&e6eional Trial Co"r%s in %a5 *olle*%ion *ases oriinally (e*i(e( -y %&e)/in %&eir rese*%i!e %erri%orial "ris(i*%ion.

-. O!er e%i%ions for re!ie' of %&e "()en%s/ resol"%ions oror(ers of %&e 6eional Trial Co"r%s in %&e e5er*ise of %&eir aella%e

"ris(i*%ion o!er %a5 *olle*%ion *ases oriinally (e*i(e( -y %&eMe%rooli%an Trial Co"r%s/ M"ni*ial Trial Co"r%s an( M"ni*ial Cir*"i%Trial Co"r%s/ in %&eir rese*%i!e "ris(i*%ion. Se*. J/ 6. A. No. 112/ asa)en(e( -y 6. A. No. 3272/ e)&asis s"lie(B

E5*l"si!e aella%e "ris(i*%ion of Co"r% of Ta5 Aeals %o re!ie' -y aeal(e*isions of %&e Co))issioner of +n%ernal 6e!en"e.

a. Cases in!ol!in

1) Dis"%e( assess)en%s 1B 6ef"n(s of in%ernal re!en"e %a5es/ fees or o%&er *&ares

2) Penal%ies i)ose( in rela%ion %&ere%o.-. O%&er )a%%ers arisin "n(er

1B T&e Na%ional +n%ernal 6e!en"e Co(e/ or

2B O%&er la's a()inis%ere( -y %&e #"rea" of +n%ernal 6e!en"e. Se*. J/6. A. No. 112/ as a)en(e( -y 6. A. No. 3272B.

T&e Co"r% of Ta5 Aeals &as "ris(i*%ion o!er (e*isions of %&e

Co))issioner of C"s%o)s o!era. Cases in!ol!in

1B @ia-ili%y for *"s%o)s ("%ies/ fees or o%&er )oney *&ares/2B Sei8"res/ (e%en%ion or release of roer%y affe*%e(/B


18/70

%&e a)o"n% *lai)e( is less %&an One )illion esos P1/000/000.00B. Se*. 13/#.P .#l. 123/as a)en(e( -y 6. A. No. JH31 in rela%ion %o Se*. / 6.A. No. JH31an( Se*. J/ 6. A. No. 112 as a)en(e( -y 6. A. No. 3272B

NOTE Ta5 *olle*%ion *ases %&a% are -elo' %&e %&res&ol( a)o"n%s ofP200/000.00 an( P400/000.00 fall 'i%&in %&e "ris(i*%ion of %&e M"ni*ial Trial

Co"r%s/ %&e M"ni*ial Trial Co"r%s in Ci%ies/ %&e M"ni*ial Cir*"i% Trial Co"r%s/ or%&e Me%rooli%an Trial Co"r%s. 9&ere %&e a)o"n% e5*ee(s P1 )illion/ e5*l"si!eoriinal "ris(i*%ion is !es%e( 'i%& %&e Co"r% of Ta5 Aeals.

E5*l"si!e aella%e "ris(i*%ion of 6eional Trial Co"r%s in %a5 *olle*%ion*ases. 6eional Trial Co"r%s s&all e5er*ise aella%e "ris(i*%ion o!er all *ases(e*i(e( -y Me%rooli%an Trial Co"r%s/ M"ni*ial Trial Co"r%s an( M"ni*ialCir*"i% Trial Co"r%s in %&eir rese*%i!e %erri%orial "ris(i*%ion. Se*. 22/ #. P. #l.123B

E5*l"si!e aella%e "ris(i*%ion of %&e Co"r% of Ta5 Aeals %o re!ie' -y

aeal (e*isions of Co))issioner of C"s%o)sa. +n *ases in!ol!in

1B @ia-ili%y for *"s%o)s ("%ies/ fees or o%&er )oney *&ares2B Sei8"re/ (e%en%ion or release of roer%y affe*%e(B


19/70


20/70

*o)"%a%ion s&all -e in a**or(an*e 'i%& s"*& )e%&o( as in %&e oinion of %&eCo))issioner *learly refle*%s %&e in*o)e. Se*. 4/ N+6C of 133JB

9&en a reor% re,"ire( -y la' as a -asis for %&e assess)en% of anyna%ional in%ernal re!en"e %a5 s&all no% -e for%&*o)in 'i%&in %&e %i)e fi5e( -yla's or r"les an( re"la%ions or '&en %&ere is reason %o -elie!e %&a% any s"*&reor% is false/ in*o)le%e or erroneo"s/ %&e Co))issioner s&all assess %&eroer %a5 on %&e -es% e!i(en*e o-%aina-le.

+n *ase a erson fails %o file a re,"ire( re%"rn or o%&er (o*")en% a% %&e%i)e res*ri-e( -y la'/ or 'illf"lly or o%&er'ise files a false or fra"("len% re%"rnor o%&er (o*")en%/ %&e Co))issioner s&all )ae or a)en( %&e re%"rn fro) &iso'n no'le(e an( fro) s"*& infor)a%ion as &e *an o-%ain %&ro"& %es%i)ony oro%&er'ise/ '&i*& s&all -e pri&a fa"ie *orre*% an( s"ffi*ien% for all leal"roses. ISe*. H #B/ N+6C of 133JK

BAR: 30. T&e follo'in are %&e eneral )e%&o(s (e!eloe( -y %&e#"rea" of +n%ernal 6e!en"e for re*ons%r"*%in a %a5ayers in*o)e '&ere %&e

re*or(s (o no% s&o' %&e %r"e in*o)ne or '&ere no re%"rn 'as file( or '&a% 'asfile( 'as a false an( fra"("len% re%"rn aB Per*en%ae )e%&o( -B Ne% 'or%&)e%&o(. *B #an (eosi% )e%&o( (B Cas& e5en(i%"re )e%&o( eB Uni% an(!al"e )e%&o( fB T&ir( ar%y infor)a%ion or a**ess %o re*or(s )e%&o( BS"r!eillan*e an( assess)en% )e%&o(. C&a%er ;+++. +n(ire*% Aroa*& %o+n!es%ia%ion/ :an(-oo on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ .H7?J4B

Un(er %&e er*en%ae )e%&o(/ %&e *o)"%e( a)o"n% of re!en"es -ase(on %&e er*en%ae *o)"%a%ion is *o)are( %o %&e a)o"n% of re!en"es refle*%e(on %&e re%"rn. T&e er*en%aes "se( )ay -e o-%aine( fro) %&e %a5ayer/

in("s%ry "-li*a%ion/ rior years a"(i% res"l%s/ or %&ir( ar%ies. T&e *o)arison'ill ro!i(e an in(i*a%ion on %&e ossi-ili%y of re!en"e -ein "n(ers%a%e(.

A)on %&e sinifi*an% ra%ios an( %ren(s %o -e analy8e( are %&e er*en%ae)ar?"/ ross rofi%s ra%io or ross )arin er*en%ae/ rofi% )arin/ %o%alasse%s %"rno!er/ an( in!en%ory %"rno!er. C&a%er ;+++. +n(ire*% Aroa*& %o+n!es%ia%ion/ :an(-oo on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ .H7?J4B

T&e ne% 'or%& )e%&o( is a )e%&o( of re*ons%r"*%in in*o)e '&i*& is-ase( on %&e %&eory %&a% if %&e %a5ayers ne% 'or%& &as in*rease( in a i!en yearin an a)o"n% larer %&an &is reor%e( in*o)e/ &e &as "n(ers%a%e( &is in*o)e for

%&a% year. T&e ne% 'or%& on a fi5e( s%ar%in (a%e is *o)are( 'i%& %&e ne% 'or%&on a fi5e( en(in (a%e. Any in*rease in ne% 'or%& is res")e( %o -e in*o)e no%(e*lare( for %a5 "roses. C&a%er ;+++. +n(ire*% Aroa*& %o +n!es%ia%ion/:an(-oo on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ . H7?J4B

T&e (iffi*"l%y of es%a-lis&in %&e oenin ne% 'or%& of a %a5 ayer &as le(%o %&e Co&an 6"le '&i*& is %&e "se of es%i)a%es or aro5i)a%ions of %&ea)o"n% of *as& an( o%&er asser%s '&ere %&e %a5ayer la*s a(e,"a%e re*or(s.C&a%er ;+++. +n(ire*% Aroa*& %o +n!es%ia%ion/ :an(-oo on A"(i% Pro*e("resan( Te*&ni,"es L Vol")e +/ . H7?J4B

Un(er %&e -an (eosi% )e%&o(/ %&e -an re*or(s of %&e %a5ayer are

analy8e( an( %&e #+6 es%i)a%es in*o)e on %&e -asis of %&e %o%al -an (eosi%saf%er eli)ina%in non?in*o)e i%e)s. T&is )e%&o( s%an(s on %&e re)ise %&a%(eosi%s reresen% %a5a-le in*o)e "nless o%&er'ise e5laine( as -ein non?%a5a-le i%e)s. T&is )e%&o( )ay -e "se( only '&ere %&e #+6 &as -een leallyallo'e( a**ess %o %&e %a5ayers -an re*or(s. C&a%er ;+++. +n(ire*% Aroa*&%o +n!es%ia%ion/ :an(-oo on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ .H7?J4B

20


21/70

T&e *as& e5en(i%"re )e%&o( ass")es %&a% %&e e5*ess of a %a5ayerse5en(i%"res ("rin %&e %a5 erio( o!er &is reor%e( in*o)e for %&a% erio( is%a5a-le %o %&e e5%en% no% (isro!e( o%&er'ise. C&a%er ;+++. +n(ire*% Aroa*& %o+n!es%ia%ion/ :an(-oo on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ .H7?J4B

Un(er %&e "ni% an( !al"e )e%&o(/ %&e (e%er)ina%ion or !erifi*a%ion ofross re*ei%s )ay -e *o)"%e( -y alyin ri*e an( rofi% fi"res %o %&eno'n as*er%aina-le ,"ali%y of -"siness of %&e %a5ayer. C&a%er ;+++. +n(ire*%

Aroa*& %o +n!es%ia%ion/ :an(-oo on A"(i% Pro*e("res an( Te*&ni,"es LVol")e +/ . H7?J4B


22/70

T&e 'or( assess)en% '&en "se( in *onne*%ion 'i%& %a5a%ion/ )ay &a!e)ore %&an one )eanin.. More *o))only %&e 'or( assess)en% )eans %&eoffi*ial !al"a%ion of a %a5ayers roer%y for "rose of %a5a%ion. T&e a-o!e(efini%ion of assess)en% fin(s ali*a%ion "n(er %ariff an( *"s%o)s %a5a%ion as'ell as lo*al o!ern)en% %a5a%ion.


23/70

'ai!er of %&e erio( for assess)en% )"s% -e in 'ri%in an( &a!e %&e 'ri%%en*onsen% of %&e #+6 Co))issioner is s%ill (o*%rinal -e*a"se of %&e ro!isions ofSe*. 22/ N+6C of 133J '&i*& ro!i(es for %&e s"sension of %&e res*ri%i!eerio(

a. 9&en %&e Co))issioner is ro&i-i%e( fro) )ain %&e assess)en%/ or-einnin (is%rain%/ or le!y or ro*ee(in in *o"r% an( for si5%y H0B (ays%&ereaf%er

-. 9&en %&e %a5ayer re,"es%s for an( is ran%e( a rein!es%ia%ion -y %&e*o))issioner

*. 9&en %&e %a5ayer *o"l( no% -e lo*a%e( in %&e a((ress i!en -y &i) in%&e re%"rn file( "on '&i*& %&e %a5 is -ein assesse( or *olle*%e(

(. 9&en %&e 'arran% of (is%rain% an( le!y is ("ly ser!e( "on %&e%a5ayer/ &is a"%&ori8e( reresen%a%i!e/ or a )e)-er of &is &o"se&ol( 'i%&s"ffi*ien% (is*re%ion/ an( no roer%y *o"l( -e lo*a%e( an(

e. 9&en %&e %a5ayer is o"% of %&e P&iliines.

T&e sina%"res of -o%& %&e Co))issioner an( %&e %a5ayer/ are re,"ire(

for a 'ai!er of %&e res*ri%i!e erio(/ %&"s a "nila%eral 'ai!er on %&e ar% of %&e%a5ayer (oes no% s"sen( %&e res*ri%i!e erio(. (Co&&i%%ioner of $nternalRevenue v. Court of Appeal%, et al., G.R. No. 11)12, :ebruary 2, 1999(Carnation "a%e

BAR: 36. T&e follo'in are %&e re,"ire)en%s for %&e !ali(i%y of a%a5ayers ro%es%

a. +% )"s% -e file( 'i%&in %&e rele)en%ary erio( of %&ir%y 0B (ays fro)re*ei% of %&e no%i*e of assess)en%.

-. T&e %a5ayer )"s% s&o' %&e errors of %&e #"rea" of +n%ernal 6e!en"eas 'ell as %&e *orre*% *o)"%a%ion %&ro"&

1B A s%a%e)en% of %&e fa*%s/ %&e ali*a-le la'/ r"les an(re"la%ions/ or "risr"(en*e on '&i*& %&e %a5ayers ro%es% is -ase(/

2B +f %&ere are se!eral iss"es in!ol!e( in %&e (is"%e( assess)en%an( %&e %a5ayer fails %o s%a%e %&e fa*%s/ %&e ali*a-le la'/ r"les an(re"la%ions/ or "risr"(en*e in s"or% of &is ro%es% aains% so)e of %&ese!eral iss"es on '&i*& %&e assess)en% is -ase(/ %&e sa)e s&all -e*onsi(ere( "n(is"%e( iss"e or iss"es/ in '&i*& *ase/ %&e %a5ayer s&all-e re,"ire( %o ay %&e *orreson(in (efi*ien*y %a5 or %a5es a%%ri-"%a-le%&ere%o. Se*. .1./ 6e!. 6es. 12?33B*. 9i%&in si5%y H0B (ays fro) filin of %&e ro%es%/ %&e %a5ayer s&all

s"-)i% all rele!an% s"or%in (o*")en%s. I4%&ar./ Se*. 227 eB/ N+6C of 133JK

@a's on res*ri%ion s&o"l( -e li-erally *ons%r"e( in fa!or of %&e%a5ayer.


24/70

a. Cri)inal *&are nee( only -e s"or%e( -y a pri&a fa"ies&o'in offail"re %o file a re,"ire( re%"rn 9:+@E %&e fa*% of fail"re %o file a re%"rn nee( no%-e ro!en -y an assess)en%.

-. #efore an assess)en% is iss"e(/ %&ere is/ -y ra*%i*e/ a re?assess)en% no%i*e sen% %o %&e %a5ayer 9:+@E s"*& is no% so 'i%& a *ri)inal*&are. T&e *&are is file( (ire*%ly 'i%& %&e Dear%)en% of "s%i*e.

*. A *ri)inal *o)lain% is ins%i%"%e( no% %o (e)an( ay)en%/ -"% %oenali8e %&e %a5ayer for !iola%ion of %&e Ta5 Co(e 9:+@E %&e "rose of %&eiss"an*e of an assess)en% is %o *olle*% %&e %a5. (Co&&i%%ioner of $nternalRevenue v. Pa%"or Realty an evelop&ent Corporation, et al., G.R. No.12+31, une 29, 1999

T&e (o*%rines in Co&&i%%ioner of $nternal Revenue v. Court of Appeal%,et al., G.R. No. 119322, une 4, 199*/ Co&&i%%ioner of $nternal Revenue v.Pa%"or Realty an evelop&ent Corporation, et al., G.R. No. 12+31, une 29,1999 an( Una- !. C"si/ 3J SC6A 7JJ/ are (ifferen% fro) one ano%&er.

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a. 9i%&&ol(in %a5 *ases "nless %&e ali*an%?%a5ayer in!oesro!isions of la' %&a% *as% (o"-% on %&e %a5ayers o-lia%ion %o 'i%&&ol(.

-. Cri)inal %a5 fra"( *ases/ *onfir)e( as s"*& -y %&e Co))issioner of+n%ernal 6e!en"e or &is ("ly a"%&ori8e( reresen%a%i!e

*. Cri)inal !iola%ions alrea(y file( in *o"r%(. Delin,"en% a**o"n%s 'i%& ("ly aro!e( s*&e("le of ins%all)en%

ay)en%se. Cases '&ere final reor%s of rein!es%ia%ion or re*onsi(era%ion &a!e

-een iss"e( res"l%in %o re("*%ion in %&e oriinal assess)en% an( %&e %a5ayer isareea-le %o s"*& (e*ision -y sinin %&e re,"ire( aree)en% for) for %&e"rose. On %&e o%&er &an(/ o%&er ro%es%e( *ases s&all -e &an(le( -y %&e6eional E!al"a%ion #oar( 6E#B or %&e Na%ional E!al"a%ion #oar( NE#B on a*ase %o *ase -asis

f. Cases '&i*& -e*o)e final an( e5e*"%ory af%er final "()en% of a *o"r%'&ere *o)ro)ise is re,"es%e( on %&e ro"n( of (o"-%f"l !ali(i%y of %&eassess)en% an(

. Es%a%e %a5 *ases '&ere *o)ro)ise is re,"es%e( on %&e ro"n( of

finan*ial in*aa*i%y of %&e %a5ayer. Se*. 2/ 6e!. 6es. No. 0?2002B

58. T&e Co))issioner )ay *o)ro)ise %&e ay)en% of any in%ernalre!en"e %a5 '&en

a. A reasona-le (o"-% as %o %&e !ali(i%y of %&e *lai) aains% %&e %a5ayere5is%s ro!i(e( %&a% %&e )ini)") *o)ro)ise en%ere( in%o is e,"i!alen% %o for%yer*en% 40B of %&e -asi* %a5 or

-. T&e finan*ial osi%ion of %&e %a5ayer (e)ons%ra%es a *lear ina-ili%y %oay %&e assesse( %a5 ro!i(e( %&a% %&e )ini)") *o)ro)ise en%ere( in%o ise,"i!alen% %o %en er*en% 10B of %&e -asi* assesse( %a5

+n %&e a-o!e ins%an*es %&e Co))issioner is allo'e( %o en%er in%o a

*o)ro)ise only if %&e -asi* %a5 in!ol!e( (oes no% e5*ee( One )illion esosP1/000/000.00B/ an( %&e se%%le)en% offere( is no% less %&an %&e res*ri-e(er*en%aes. ISe*. 204 AB/ N+6C of 133JK

+n ins%an*es '&ere %&e Co))issioner is no% a"%&ori8e(/ %&e *o)ro)ises&all -e s"-e*% %o %&e aro!al of %&e E!al"a%ion #oar( *o)ose( of %&eCo))issioner an( %&e fo"r 4B De"%y Co))issioners.

BAR: 39. T&e Co))issioner of +n%ernal 6e!en"e is a"%&ori8e( %o a-a%eor *an*el a %a5 lia-ili%y/ '&en

a. T&e %a5 or any or%ion %&ereof aears %o -e "n"s%ly or e5*essi!elyassesse( or

-. T&e a()inis%ra%ion an( *olle*%ion *os%s in!ol!e( (o no% "s%ify %&e*olle*%ion of %&e a)o"n% ("e. ISe*. 204 #B/ N+6C of 133JK

T&e offer %o *o)ro)ise a (elin,"en% a**o"n% or (is"%e( assess?)en%on %&e ro"n( of reasona-le (o"-% as %o %&e !ali(i%y of %&e assess)en% )ay -ea**e%e( '&en i% is s&o'n %&a%

a. T&e (elin,"en% a**o"n% or (is"%e( assess)en% is one res"l%in fro) aeoar(y assess)en%. or

-. T&e assess)en% see)s %o -e ar-i%rary in na%"re/ aearin %o -e-ase( on res")%ions an( %&ere is reason %o -elie!e %&a% i% is la*in in lealan(or fa*%"al -asis or

*. T&e %a5ayer faile( %o file an a()inis%ra%i!e ro%es% on a**o"n% of %&e

allee( fail"re %o re*ei!e no%i*e of assess)en% an( %&ere is reason %o -elie!e%&a% %&e assess)en% is la*in in leal an(or fa*%"al -asis or

(. T&e %a5ayer faile( %o file a re,"es% for rein!es%ia%ionre*onsi(era%ion'i%&in 0 (ays fro) re*ei% of final assess)en% no%i*e an( %&ere is reason %o-elie!e %&a% %&e assess)en% is la*in in leal an(or fa*%"al -asis or

e. T&e %a5ayer faile( %o ele!a%e %o %&e Co"r% of Ta5 Aeals CTAB ana(!erse (e*ision of %&e Co))issioner/ or &is a"%&ori8e( reresen%a%i!e/ in so)e

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*ases/ 'i%&in 0 (ays fro) re*ei% %&ereof an( %&ere is reason %o -elie!e %&a% %&eassess)en% is la*in in leal an(or fa*%"al -asis or

f. T&e assess)en%s 'ere iss"e( on or af%er an"ary 1/ 1337/ '&ere %&e(e)an( no%i*e allee(ly faile( %o *o)ly 'i%& %&e for)ali%ies "n(er Se*. 227 of%&e Na%ional +n%ernal 6e!en"e Co(e of 133J or

. Assess)en%s )a(e -ase( on %&e #es% E!i(en*e O-%aina-le 6"le an(%&ere is reason %o -elie!e %&a% %&e sa)e *an -e (is"%e( -y s"ffi*ien% an(*o)e%en% e!i(en*e or

&. T&e assess)en% 'as iss"e( 'i%&in %&e res*ri%i!e erio( forassess)en% as e5%en(e( -y %&e %a5ayers e5e*"%ion of 9ai!er of %&e S%a%"%e of@i)i%a%ions %&e !ali(i%y or a"%&en%i*i%y of '&i*& is -ein ,"es%ione( or a% iss"ean( %&ere is s%ron reason %o -elie!e an( e!i(en*e %o ro!e %&a% i% is no%a"%&en%i*. Se*. / 1/ 6e!. 6es. No. 0?002B

T&e offer %o *o)ro)ise -ase( on finan*ial in*aa*i%y )ay -e a**e%e("on s&o'in %&a%

a. T&e *orora%ion *ease( oera%ion or is alrea(y (issol!e( Pro!i(e(/

%&a% %a5 lia-ili%ies *orreson(in %o %&e S"-s*ri%ion 6e*ei!a-le or Asse%s(is%ri-"%e((is%ri-"%a-le %o %&e s%o*&ol(ers reresen%in re%"rn of *ai%al a% %&e%i)e of *essa%ion of oera%ion or (issol"%ion of -"siness s&all no% -e *onsi(ere(for *o)ro)ise or

-. T&e %a5ayer/ as refle*%e( in i%s la%es% #alan*e S&ee% s"ose( %o -efile( 'i%& %&e #"rea" of +n%ernal 6e!en"e/ is s"fferin fro) s"rl"s or earnins(efi*i% res"l%in %o i)air)en% in %&e oriinal *ai%al -y a% leas% 0/ ro!i(e(%&a% a)o"n%s aya-le %o ("e %o s%o*&ol(ers o%&er %&an -"siness?rela%e(%ransa*%ions '&i*& are roerly inel"(i-le in %&e re"lar a**o"n%s aya-le are-y fi*%ion of la' *onsi(ere( as ar% of *ai%al an( no% lia-ili%y/ an( ro!i(e(f"r%&er %&a% %&e %a5ayer &as no s"ffi*ien% li,"i( asse% %o sa%isfy %&e %a5 lia-ili%y or

*. T&e %a5ayer is s"fferin fro) a ne%'or%& (efi*i% %o%al lia-ili%ies e5*ee(%o%al asse%sB *o)"%e( -y (e("*%in %o%al lia-ili%ies ne% of (eferre( *re(i%s an(a)o"n%s aya-le %o s%o*&ol(erso'ners refle*%e( as lia-ili%ies/ e5*e% -"siness?rela%e( %ransa*%ionsB fro) %o%al asse%s ne% of reai( e5enses/ (eferre(*&ares/ re?oera%in e5enses/ as 'ell as araisal in*reases in fi5e( asse%sB%aen fro) %&e la%es% a"(i%e( finan*ial s%a%e)en%s/ ro!i(e( %&a% in %&e *ase of anin(i!i("al %a5ayer/ &e &as no o%&er le!ia-le roer%ies "n(er %&e la' o%&er %&an&is fa)ily &o)e or

(. T&e %a5ayer is a *o)ensa%ion in*o)e earner 'i%& no o%&er so"r*e ofin*o)e an( %&e fa)ilys ross )on%&ly *o)ensa%ion in*o)e (oes no% e5*ee(/ ifsinle/ P10/00 or less/ or if )arrie(/ '&ose salary %oe%&er 'i%& &is so"se isP21/000 er )on%&/ or less/ an( i% aears %&a% %&e %a5ayer ossesses no o%&erle!ia-le(is%raina-le asse%s o%&er %&an &is fa)ily &o)e or

e. T&e %a5ayer &as -een (e*lare( -y any *o)e%en% %ri-"nala"%&ori%y-o(yo!ern)en% aen*y as -anr"% or insol!en%. Se*. . 2/ 6e!. inrela%ion %o Se*.4.1.1 -o%& of 6es. No. 0?002B

BAR: 40. T&e filin of an a()inis%ra%i!e *lai) for ref"n( 'i%& %&e #+6/-efore filin a *ase 'i%& %&e Co"r% of Ta5 Aeals/ is ne*essary for %&e follo'inreasons

a. To affor( %&e Co))issioner an oor%"ni%y %o *orre*% &is errors or %&a%of s"-or(ina%e offi*ers. (Gonale% v. Court of 5a8 Appeal%, et al., 14 'CRA )9

-. To no%ify %&e =o!ern)en% %&a% s"*& %a5es &a!e -een ,"es%ione( an(

%&e no%i*e s&o"l( -e -orne in )in( in es%i)a%in %&e re!en"e a!aila-le fore5en(i%"res. (-er&e>o v. Colle"tor, G.R. No. !/302+, uly 2+, 190

BAR: 41. T&e fail"re %o firs% file a 'ri%%en *lai) for ref"n( or *re(i% is no%fa%al %o a e%i%ion for re!ie' in!ol!in a (is"%e( assess)en%.

To &ol( %&a% %&e %a5ayer &as no' los% %&e ri&% %o aeal fro) %&e r"linon %&e (is"%e( assess)en% an( re,"ire &i) %o file a *lai) for a ref"n( of %&e%a5es ai( as a *on(i%ion re*e(en% %o &is ri&% %o aeal/ 'o"l( in effe*% re,"ire

26


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of &i) %o o %&ro"& a "seless an( nee(less *ere)ony %&a% 'o"l( only (elay%&e (isosi%ion of %&e *ase/ for %&e Co))issioner 'o"l( *er%ainly (isallo' %&e*lai) for ref"n( in %&e sa)e 'ay as &e (isallo'e( %&e ro%es% aains% %&eassess)en%. T&e la'/ s&o"l( no% -e in%erre%e( as %o res"l% in a-s"r(i%ies . (va.e 'an Au%tin., et".,v. Co&&i%%ioner of $nternal Revenue, G.R. No. 13+4+,'epte&ber 10, 2001*i%in Ro&an Cat#oli" Ar"#bi%#op of Cebu v. Colle"tor of$nternal Revenue, 4 'CRA 2)9

6e*on*ilia%ion -e%'een no. 40 an( 41. An ali*a%ion for ref"n( or *re(i%"n(er Se*. 223 of %&e N+6C of 133J is re,"ire( '&ere %&e *ase file( -efore %&eCTA is a ref"n( *ase/ '&i*& is no% re)ise( "on a (is"%e( assess)en%. T&ereis no nee( for a rior ali*a%ion for ref"n( or *re(i%/ if %&e ref"n( is )erely a*onse,"en*e of %&e resol"%ion of %&e #+6s (enial of a ro%es%e( assess)en%.

Se*. H3 of %&e 13JJ N+6C no' Se*. JH of %&e N+6C of 133JB ro!i(es%&a% any e5*ess of %&e %o%al ,"ar%erly ay)en%s o!er %&e a*%"al in*o)e %a5*o)"%e( in %&e a("s%)en% or final *orora%e in*o)e %a5 re%"rn/ s&all ei%&er aB

-e ref"n(e( %o %&e *orora%ion/ or -B )ay -e *re(i%e( aains% %&e es%i)a%e(,"ar%erly in*o)e %a5 lia-ili%ies for %&e ,"ar%ers of %&e s"**ee(in %a5a-le year.To ease %&e a()inis%ra%ion of %a5 *olle*%ion/ %&ese re)e(ies are in %&e al%erna%i!ean( %&e *&oi*e of one re*l"(es %&e o%&er. Sin*e %&e #an &as *&osen %&e %a5*re(i% aroa*& i% *anno% any)ore a!ail of %&e %a5 ref"n(. (P#ilippine -an; ofCo&&uni"ation% v. Co&&i%%ioner of $nternal Revenue, et al., G.R. No. 112024,anuary 2+, 1999

T&e %i)ely ser!i*e of a 'arran% of (is%rain% or le!y s"sen(s %&e r"nninof %&e erio( %o *olle*% %&e %a5 (efi*ien*y in %&e sense %&a% %&e (isosi%ion of %&ea%%a*&e( roer%ies )i&% 'ell %ae %i)e %o a**o)lis&/ e5%en(in e!en af%er %&e

lase of %&e s%a%"%ory erio( for *olle*%ions. (Averti%in A%%o"iate%, $n"., v.Court of Appeal%, 133 'CRA )*= Palan"a v. Co&&i%%ioner of $nternal Revenue,114 P#il. 203

T&e enfor*e)en% of %a5 *olle*%ion %&ro"& s"))ary ro*ee(ins )ay -e*arrie( o"% -eyon( %&e s%a%"%ory erio(. (Republi" of t#e P#ilippine%, et". v.?ion, G.R. No. 1304, e"e&ber 13, 1999 T&e s%a%"%ory erio( for *olle*%ionalies only '&ere a *o"r% s"i% is a!aile( of for *olle*%ion.

BAR: 42. Ci!il an( *ri)inal a*%ions an( ro*ee(ins ins%i%"%e( in -e&alfof %&e =o!ern)en% "n(er %&e a"%&ori%y of %&e N+6C of 133J or o%&er la' enfor*e(

-y %&e #"rea" of +n%ernal 6e!en"e s&all -e -ro"&% in %&e na)e of %&e=o!ern)en% of %&e P&iliines an( s&all -e *on("*%e( -y leal offi*ers of %&e#"rea" of +n%ernal 6e!en"e -"% no *i!il or *ri)inal a*%ion for %&e re*o!ery of%a5es or %&e enfor*e)en% of any fine/ enal%y or forfei%"re "n(er %&e N+6C of133J s&all -e file( in *o"r% 'i%&o"% %&e aro!al of %&e Co))issioner of +n%ernal6e!en"e. Se*. 220/ N+6C of 133JB

T&e %'o year erio( alies only %o re*o!ery of %a5es or enal%ies NOT %o%a5 *re(i%s a!ail)en%. A-sen% a se*ifi* ro!ision in %&e Ta5 Co(e or se*ial la's/%&e erio( 'o"l( -e 10 years. "s%i*e Vi%"/ *on*"rrin in Co))issioner of+n%ernal 6e!en"e !. T&e P&iliine @ife +ns"ran*e Co./ e% al. =.6. No. 10207/May 23/ 133 rei%era%in %&e TM; *aseB

9&ere a *orora%ion is (issol!e( +% -e*o)es ne*essary for %&e -an %ofile i%s in*o)e %a5 re%"rn 'i%&in 0 (ays af%er aro!al -y %&e SEC of i%s lan orresol"%ion of (issol"%ion. +n(ee(/ i% 'o"l( -e a-s"r( for %&e -an %o 'ai% "n%il %&efif%een%& (ay of Aril/ af%er i% *ease( i%s oera%ions/ -efore filin i%s in*o)e %a5re%"rn.

T&"s/ %&e %'o?year res*ri%i!e erio( s&o"l( -e *o"n%e( fro) 0 (aysaf%er %&e aro!al -y %&e SEC of i%s lan for (issol"%ion. T&ere is no nee( %o file

27


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a


29/70

a()inis%ra%i!e -o(ies &a!e o-%aine( e5er%ise/ %&e *o"r%s 'ill (efer. T&is islie'ise re)ise( on %&e life-loo( %&eory '&i*& )an(a%es %&e i))e(ia%e*olle*%ion of %a5es %o ens"re %&e *on%in"e( e5is%en*e of %&e S%a%e.

T&ere are %'o in(s of r"lins %&e #+6 )ay iss"e ? in%erre%a%i!e r"linsan( leisla%i!e r"lins.

+n%erre%a%i!e r"les are (esine( %o ro!i(e "i(elines %o %&e la' '&i*&%&e a()inis%ra%i!e aen*y is in *&are of enfor*in. No no%i*e/ &earin or"-li*a%ion is re,"ire(/ as %&ey are iss"e( )erely for %&e "i(an*e ofa()inis%ra%i!e offi*ers. +ll"s%ra%ion 6e!en"e Me)oran(") Cir*"lar No. 4J?31*lassifyin *ora as an ari*"l%"ral non?foo( i%e) (e*larin i% e5e)% fro) VATonly if %&e sale is )a(e -y %&e ri)ary ro("*er. i%a&i% 7riental A%%o"iation ofCo"o 5raer%, $n". v. epart&ent of :inan"e 'e"retary, et al., 23+ 'CRA *3@1994

@eisla%i!e r"les are in %&e na%"re of s"-or(ina%e leisla%ion/ (esine( %o

i)le)en% a ri)ary leisla%ion -y ro!i(in %&e (e%ails %&ereof. T&ey are iss"e("n(er %&e ,"asi?leisla%i!e a"%&ori%y of %&e #+6 Co))issioner. T&ere is are,"ire)en% for no%i*e/ &earin an( "-li*a%ion. +ll"s%ra%ion 6e!en"eMe)oran(") Cir*"lar No. J?3 '&i*& la*e( :oe @"5"ry/ Pre)i") More an(C&a)ion *iare%%es 'i%&in %&e s*oe of %&e a)en(a%ory la' 6.A. No. JH4 an(s"-e*%e( %&e) %o %&e in*rease( %a5 ra%e re,"ires no%i*e/ &earin an("-li*a%ion. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 2*1'CRA 23*

T&e r"lins an( *ir*"lars ro)"la%e( -y %&e Co))issioner (o no% &a!e

re%roa*%i!e ali*a%ion if %&e re!o*a%ion/ )o(ifi*a%ion/ or re!ersal 'o"l( -e

re"(i*ial %o %&e %a5ayers. ('e". 24*, N$RC of 199)= Co&&i%%ioner of $nternalRevenue v. Court of Appeal%, et al., 2*) 'CRA )

+ns%an*es '&en re!en"e r"lins an( re"la%ions &a!e re%roa*%i!e effe*%e!en if re"(i*ial %o %&e %a5ayer

a. 9&ere %&e %a5ayer (eli-era%ely )iss%a%es or o)i%s )a%erial fa*%s fro)&is re%"rn or in any (o*")en% re,"ire( of &i) -y %&e #+6

-. 9&ere %&e fa*%s s"-se,"en%ly a%&ere( -y %&e #+6 are )a%erially(ifferen% fro) %&e fa*%s on '&i*& %&e r"lin is -ase(/ or

*. 9&ere %&e %a5ayer a*%e( in -a( fai%&. Se*. 24H/ N+6C of 133JB

9. T&e Co))issioner or &is a"%&ori8e( reresen%a%i!e is e)o'ere( %os"sen( %&e -"siness oera%ions an( %e)orarily *lose %&e -"sinesses%a-lis&)en% of any erson for any of %&e follo'in !iola%ions

a. +n *ase of a VAT?reis%ere( erson1B


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31/70


32/70

a. Cai%al is 'eal%& or f"n(/ 9:+@E in*o)e is rofi% or ain fro) %&e flo'of 'eal%&. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R.No. 10+)*, anuary 20, 1999

-. Cai%al is a f"n( of roer%y e5is%in a% an ins%an% of %i)e 9:+@Ein*o)e is %&a% flo' of ser!i*es ren(ere( -y %&a% *ai%al -y %&e ay)en% of )oneyfro) i% or any o%&er -enefi% ren(ere( -y a f"n( of *ai%al in rela%ion %o s"*& f"n(%&ro"& a erio( of %i)e.

*. Cai%al is 'eal%& 9:+@E in*o)e is %&e ser!i*e of 'eal%& an((. Cai%al is %&e %ree 9:+@E in*o)e is %&e fr"i%. (arial v. Rafferty, 3+

P#il. 414

6eali8a%ion is (e%er)ina%i!e of earnin ro*ess res"l%in %o in*o)e.9i%&o"% reali8a%ion/ %&ere is no in*o)e.

T&e (e%er)inin fa*%or for %&e i)osi%ion of in*o)e %a5 is '&e%&er anyain or rofi% 'as (eri!e( fro) %&e %ransa*%ion. +n %&e )e%a&or of i%ner v.a"o&ber, 22


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BAR: 48. T&e eneral rin*iles of in*o)e %a5a%ion in %&e P&iliinesO6 %&e si%"s of in*o)e %a5a%ion in %&e P&iliines O6 %&e so"r*e r"le of in*o)e%a5a%ion as alie( in %&e P&iliines.

a. A *i%i8en of %&e P&iliines resi(in %&erein is %a5a-le on all in*o)e(eri!e( fro) so"r*es 'i%&in an( 'i%&o"% %&e P&iliines.

-. A nonresi(en% *i%i8en is %a5a-le only on in*o)e (eri!e( fro) so"r*es'i%&in %&e P&iliines.*. An in(i!i("al *i%i8en of %&e P&iliines '&o is 'orin an( (eri!in

in*o)e fro) a-roa( as an o!erseas *on%ra*% 'orer is %a5a-le only on in*o)efro) so"r*es 'i%&in %&e P&iliines Pro!i(e(/ T&a% a sea)an '&o is a *i%i8en of%&e P&iliines an( '&o re*ei!es *o)ensa%ion for ser!i*es ren(ere( a-roa( asa )e)-er of %&e *o)le)en% of a !essel enae( e5*l"si!ely in in%erna%ional%ra(e s&all -e %rea%e( as an o!erseas *on%ra*% 'orer.

(. An alien in(i!i("al/ '&e%&er resi(en% or no% of %&e P&iliines/ is%a5a-le only on in*o)e (eri!e( fro) so"r*es 'i%&in %&e P&iliines.

e. A (o)es%i* *orora%ion is %a5a-le on all in*o)e (eri!e( fro) so"r*es'i%&in an( 'i%&o"% %&e P&iliines.

f. A forein *orora%ion/ '&e%&er enae( or no% in %ra(e or -"siness in%&e P&iliines/ is %a5a-le only on in*o)e (eri!e( fro) so"r*es 'i%&in %&eP&iliines. Se*. 2/ N+6C of 133JB

BAR: 49. Co)ensa%ion in*o)e is *onsi(ere( as &a!in -een earne(in %&e la*e '&ere %&e ser!i*e 'as ren(ere( an( no% *onsi(ere( as so"r*e(fro) %&e la*e of oriin of %&e )oney.

BAR: 50. Pay)en% for ser!i*es/ o%&er %&an *o)ensa%ion in*o)e/ is*onsi(ere( as &a!in -een earne( a% %&e la*e '&ere %&e )oney oriina%e( an(no% a% %&e la*e '&ere %&e a*%i!i%y or ser!i*e 'as erfor)e(.

A non?resi(en% alien/ '&o &as s%aye( in %&e P&iliines for an area%eerio( of )ore %&an 170 (ays ("rin %&e *alen(ar year 2001/ s&all -e*onsi(ere( as a non?resi(en% alien (oin -"siness in %&e P&iliines.Conse,"en%ly/ &e s&all -e s"-e*% %o in*o)e %a5 on &is in*o)e (eri!e( fro)so"r*es fro) 'i%&in %&e P&iliines. ISe*. 2 AB 1B/ N+6CK

:e is allo'e( %o a!ail of %&e i%e)i8e( (e("*%ions in*l"(in %&e ersonalan( a((i%ional e5e)%ions s"-e*% %o %&e r"le on re*iro*i%y.

+)roerly a**")"la%e( earnins are %&e earnins or rofi%s of a*orora%ion '&i*& are er)i%%e( %o a**")"la%e ins%ea( of -ein (i!i(e( -y a

*orora%ion %o i%s s&are&ol(ers for %&e "rose of a!oi(in %&e in*o)e %a5 on(i!i(en(s 'i%& rese*% %o i%s s&are&ol(ers or %&e s&are&ol(ers of ano%&er*orora%ion. +f %&e in*o)e 'ere (i!i(e( an( (is%ri-"%e(/ %&ey 'o"l( &a!e -een%a5e( as (i!i(en(s.

+n a((i%ion %o o%&er in*o)e %a5es/ %&ere is i)ose( for ea*& %a5a-le yearon %&e i)roerly a**")"la%e( %a5a-le in*o)e of ea*& *orora%ion/ ani)roerly a**")"la%e( earnins %a5 e,"al %o 10 of %&e i)roerlya**")"la%e( %a5a-le in*o)e. ISe*. 23 AB/ N+6C of 133JK

E!ery *orora%ion for)e( or a!aile( for %&e "rose of a!oi(in in*o)e%a5 'i%& rese*% %o i%s s&are&ol(ers or %&e s&are&ol(ers of ano%&er *orora%ion/-y er)i%%in earnins an( rofi%s %o a**")"la%e ins%ea( of -ein (i!i(e( or(is%ri-"%e(. ISe*. 23 #B 1B/ N+6C of 133JK

Corora%ions e5e)% fro) %&e i)roerly a**")"la%e( earnins %a5a. P"-li*ly?&el( *orora%ions-. #ans an( o%&er non-an finan*ial in%er)e(iaries an(*. ns"ran*e *o)anies. ISe*. 23 #B 2B/ N+6C of 133JK

33


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T&e fa*% %&a% %&e earnins or rofi%s of a *orora%ion are er)i%%e( %oa**")"la%e( -eyon( %&e reasona-le nee(s of %&e -"siness s&all -e(e%er)ina%i!e of %&e "rose %o a!oi( %&e %a5 "on i%s s&are&ol(ers or )e)-ers"nless %&e *orora%ion/ -y *lear reon(eran*e of e!i(en*e/ s&all ro!e %&e*on%rary. ISe*. 23 CB 2B/ N+6C of 133JK

6easona-le nee(s of -"siness in*l"(es %&e reasona-ly an%i*ia%e( nee(sof %&e -"siness. ISe*. 23 EB/ N+6C of 133JK

+n or(er %o (e%er)ine '&e%&er rofi%s are a**")"la%e( for %&e reasona-lenee(s of %&e -"siness %o a!oi( %&e s"r%a5 "on s&are&ol(ers/ i% )"s% -e s&o'n%&a% %&e *on%rollin in%en%ion of %&e %a5ayer is )anifes%e( a% %&e %i)e of %&ea**")"la%ion/ no% in%en%ions (e*lare( s"-se,"en%ly/ '&i*& are )ereaf%er%&o"&%s.


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ine er"#ant%, $n". v. Co&&i%%ioner of $nternal Revenue in %"rn *i%inMer%ensB

T&e %'o 2B rin*ial a**o"n%in )e%&o(s for re*oni%ion of in*o)e are%&e aB a**r"al )e%&o( an( %&e -B *as& )e%&o(.

Un(er %&e a**r"al )e%&o( of a**o"n%in/ in*o)e is reor%a-le '&en all%&e e!en%s &a!e o**"rre( %&a% fi5 %&e %a5ayers ri&% %o re*ei!e %&e in*o)e/ an(%&e a)o"n% *an -e (e%er)ine( 'i%& reasona-le a**"ra*y. T&"s i% is %&e ri&% %ore*ei!e in*o)e/ an( no% %&e a*%"al re*ei%/ %&a% (e%er)ines '&en %o in*l"(e %&ea)o"n% in ross in*o)e. (:ilipina% :iber Corporation v. Court of Appeal%, et al.,G.R. No%. 11+49+ B 1243)), 7"tober 12, 1999

T&e re,"isi%es of %&e a**r"al )e%&o( of in*o)e re*oni%iona. T&a% %&e ri&% %o re*ei!e %&e in*o)e )"s% -e !ali(/ "n*on(i%ional an(

enfor*ea-le/ i.e. no% *on%inen% "on f"%"re %i)e-. T&e a)o"n% )"s% -e reasona-ly s"s*e%i-le of a**"ra%e es%i)a%e an(

*. T&ere )"s% -e a reasona-le e5e*%a%ion %&a% %&e a)o"n% 'ill -e ai( in("e *o"rse. (:ilipina% :iber Corporation v. Court of Appeal%, et al., G.R. No%.11+49+ B 1243)), 7"tober 12, 1999

Un(er %&e *as& )e%&o( in*o)e is %o -e *ons%r"e( as in*o)e for %a5"roses only "on a*%"al re*ei% of %&e *as& ay)en%. +% is also referre( %o as%&e *as& re*ei%s an( (is-"rse)en%s )e%&o( -e*a"se -o%& %&e re*ei% an((is-"rse)en%s are *onsi(ere(. T&"s/ in*o)e is re*oni8e( only "on a*%"alre*ei% of %&e *as& ay)en% -"% no (e("*%ions are allo'e( fro) %&e *as& in*o)e"nless a*%"ally (is-"rse( %&ro"& an a*%"al ay)en% in *as&.

T&e o%&er )e%&o(s of a**o"n%in are aB %&e *o)le%ion of *on%ra*% -asisno% re*oni8e( "n(er %&e N+6C of 133JB -B %&e er*en%ae of *o)le%ion)e%&o( an( *B %&e ins%all)en% )e%&o(.

T&e ins%all)en% -asis is a )e%&o( *onsi(ere( '&en *olle*%ions e5%en(o!er rela%i!ely lon erio(s of %i)e an( %&ere is a s%ron ossi-ili%y %&a% f"ll*olle*%ion 'ill no% -e )a(e. As *"s%o)ers )ae ins%all)en% ay)en%s/ %&e sellerre*oni8es %&e ross rofi% on sale in roor%ion %o %&e *as& *olle*%e(. C&a%er++/ A**o"n%in Me%&o(s/ :an(-oo on A"(i% Pro*e("res an( Te*&ni,"es LVol")e +/ 6e!ision 2000/ . ?4B

BAR: 51. T&e frine -enefi%s %a5 is a final 'i%&&ol(in %a5 i)ose( on%&e rosse(?" )one%ary !al"e of frine -enefi%s f"rnis&e(/ ran%e( or ai( -y%&e e)loyer %o %&e e)loyee/ e5*e% ran an( file e)loyees. I1 s%ar./ Se*.2. AB/ 6e!. 6es. No. ?37K +% is %&e e)loyer %&a% ays %&e %a5.


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. @ife or &eal%& ins"ran*e an( o%&er non?life ins"ran*e re)i")s orsi)ilar a)o"n%s in e5*ess of '&a% %&e la' allo's. ISe*. #B/ N+6C of 133J 1s%

ar./ Se*. 2. #B/ 6e!. 6es. No. ?37K

BAR: 52.


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e)loyer as -enefi%s %o i%s e)loyees/ '&e%&er *lassifie( as e &ini&i%-enefi%sor frine -enefi%s/ s&all *ons%i%"%e as (e("*%i-le e5ense "on s"*& e)loyer.ISe*. 2.J7.1 AB B/ 6e!. 6es. 2?37 as a)en(e( -y 6e!. 6es. No. 7?2000K

51. +n*o)e s"-e*% %o final %a5 refers %o an in*o)e *olle*%e( %&ro"& %&e'i%&&ol(in %a5 sys%e).

T&e ayor of %&e in*o)e 'i%&&ol(s %&e %a5 an( re)i%s i% %o %&e o!ern)en%as a final se%%le)en% of %&e in*o)e %a5 as a final se%%le)en% of %&e in*o)e %a5 ("eon sai( in*o)e. T&e re*iien% is no loner re,"ire( %o in*l"(e %&e in*o)es"-e*%e( %o a final %a5 as ar% of &is ross in*o)e in &is in*o)e %a5 re%"rn.

T'o e5a)les of in*o)e s"-e*% %o final %a5 are in%eres% fro) -an(eosi%s an( royal%ies.

BAR: 54. 6oyal%ies s"-e*% %o final %a5 in*l"(es %e*&ni*al a(!i*e/assis%an*e or ser!i*es ren(ere( in *onne*%ion 'i%& %e*&ni*al )anae)en% ora()inis%ra%ion of any s*ien%ifi*/ in("s%rial or *o))er*ial "n(er%ain/ !en%"re/roe*% or s*&e)e/ s"*& as *ons"l%an*y an( %e*&ni*al ser!i*es ren(ere(

in*i(en%al %o %&e (is%ri-"%ion/ s"or% an( "se of *o)"%er sys%e)s.

BAR: 55. S%o* (i!i(en(s are "nreali8e( ains an( *anno% -e s"-e*%%o in*o)e %a5 "n%il %&e ains &a!e -een reali8e(. #efore reali8a%ion/ s%o*(i!i(en(s are no%&in -"% a reresen%a%ion of an in%eres% in %&e *orora%eroer%ies. As *ai%al/ i% is no% ye% s"-e*% %o in*o)e %a5. (Co&&i%%ioner of$nternal Revenue v. Court of Appeal%, et al., G.R. No. 10+)*, anuary 20, 1999

An e5a)le of reali8a%ion 'o"l( -e sales of %&e s%o* (i!i(en(s/ or '&ere%&e iss"an*e res"l%s %o a roor%iona%e *&ane in o'ners&i.

E5*l"sions (is%in"is&e( fro) (e("*%ions

a. E5*l"sions fro) ross in*o)e refer %o a flo' of 'eal%& %o %&e %a5ayer'&i*& are no% %rea%e( as ar% of ross in*o)e for "roses of *o)"%in %&e%a5ayers %a5a-le in*o)e/ ("e %o %&e follo'in reasons 1B +% is e5e)%e( -y%&e f"n(a)en%al la' 2B +% is e5e)%e( -y s%a%"%e an( B +% (oes no% *o)e'i%&in %&e (efini%ion of in*o)e Se*. H1/ 6e!. 6es. No. 2B 9:+@E (e("*%ionsare %&e a)o"n%s '&i*& %&e la' allo's %o -e s"-%ra*%e( fro) ross in*o)e inor(er %o arri!e a% ne% in*o)e.

-. E5*l"sions er%ain %o %&e *o)"%a%ion of ross in*o)e 9:+@E(e("*%ions er%ain %o %&e *o)"%a%ion of ne% in*o)e.

*. E5*l"sions are so)e%&in re*ei!e( or earne( -y %&e %a5ayer '&i*& (ono% for) ar% of ross in*o)e 9:+@E (e("*%ions are so)e%&in sen% or ai( in

earnin ross in*o)e.An e5a)le of an e5*l"sion fro) ross in*o)e are life ins"ran*ero*ee(s/ an( an e5a)le of a (e("*%ion are losses.

BAR: 56. T&e follo'in are e5*l"(e( fro) ross in*o)ea. Pro*ee(s of life ins"ran*e oli*ies ai( %o %&e &eirs or -enefi*iaries

"on %&e (ea%& of %&e ins"re( '&e%&er in a sinle s") or o%&er'ise.-. A)o"n%s re*ei!e( -y %&e ins"re( as a re%"rn of re)i")s ai( -y &i)

"n(er life ins"ran*e/ en(o')en% or ann"i%y *on%ra*%s ei%&er ("rin %&e %er)/ ora% )a%"ri%y of %&e %er) )en%ione( in %&e *on%ra*%/ or "on s"rren(er of %&e*on%ra*%.

*. Val"e of roer%y a*,"ire( -y if%/ -e,"es%/ (e!ise/ or (es*en%.(. A)o"n%s re*ei!e(/ %&ro"& a**i(en% or &eal%& ins"ran*e or 9or)ens

Co)ensa%ion A*%s as *o)ensa%ion for ersonal in"ries or si*ness/ l"s %&ea)o"n%s of any (a)aes re*ei!e( on '&e%&er -y s"i% or aree)en% on a**o"n%of s"*& in"ries or si*ness.

e. +n*o)e of any in( %o %&e e5%en% re,"ire( -y any %rea%y o-lia%ion-in(in "on %&e =o!ern)en% of %&e P&iliines.

f. 6e%ire)en% -enefi%s re*ei!e( "n(er 6e"-li* A*% No. JH41. 6e%ire)en%re*ei!e( fro) reasona-le ri!a%e -enefi% lan af%er *o)lian*e 'i%& *er%ain

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*on(i%ions. A)o"n%s re*ei!e( for -eyon( *on%rol seara%ion.


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6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alienin(i!i("als '&o are enae( in %ra(e an( -"siness/ on %&eir ross in*o)eso%&er fro) *o)ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5enses.Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5ense.Nonresi(en% *i%i8ens an( forein *orora%ions on %&eir ross in*o)es fro) 'i%&in)ay also (e("*% %&is e5ense.

Nonresi(en% alien in(i!i("als no% enae( in %ra(e or -"siness in %&eP&iliines are no% allo'e( %o (e("*% %&is e5ense.

*. T%*')ai( or in*"rre( 'i%&in %&e %a5a-le year in *onne*%ion 'i%& %&e%a5ayers rofession.


Nonresi(en% alien in(i!i("als no% enae( in %ra(e or -"siness in %&e

P&iliines are no% allo'e( %o (e("*% %&is e5ense.(. Or(inary -))')/ losses fro) *as"al%y/ %&ef% or e)-e88le)en% an( ne%

oera%in losses.6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien

in(i!i("als '&o are enae( in %ra(e an( -"siness/ on %&eir ross in*o)eso%&er fro) *o)ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5enses.Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5ense.Nonresi(en% *i%i8ens an( forein *orora%ions on %&eir ross in*o)es fro) 'i%&in)ay also (e("*% %&is e5ense.


e. B%" "'/)("e %o %&e %a5ayer/ a*%"ally as*er%aine( %o -e 'or%&lessan( *&are( off 'i%&in %&e %a5a-le year/ *onne*%e( 'i%& rofession/ %ra(e or-"siness/ no% s"s%aine( -e%'een rela%e( ar%ies.



f. '+!'(#%#$or a reasona-le allo'an*e for %&e e5&a"s%ion/ 'ear an(%ear in*l"(in reasona-le allo'an*e for o-soles*en*eB of roer%y "se( in %ra(eor -"siness.



. '+-'#$ or (e("*%ion arisin fro) %&e e5&a"s%ion of a non?

rela*ea-le asse%/ "s"ally a na%"ral reso"r*e.6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien

in(i!i("als '&o are enae( in %ra(e an( -"siness/ on %&eir ross in*o)eso%&er fro) *o)ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5enses.Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5ense.Nonresi(en% *i%i8ens an( forein *orora%ions on %&eir ross in*o)es fro) 'i%&in)ay also (e("*% %&is e5ense.

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&. C%!#%/-' an( o%&er ($!#/#$). 6esi(en% *i%i8ens/ resi(en% alienin(i!i("als an( nonresi(en% alien in(i!i("als '&o are enae( in %ra(e an(-"siness/ on %&eir ross in*o)es o%&er fro) *o)ensa%ion in*o)e are allo'e(%o (e("*% %&ese e5enses. Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also(e("*% %&is e5ense. Nonresi(en% *i%i8ens an( forein *orora%ions on %&eirross in*o)es fro) 'i%&in )ay also (e("*% %&is e5ense.


i. R')'%!( %$" "''-+'$ e5en(i%"res %rea%e( as (eferre(e5enses ai( or in*"rre( -y %&e %a5ayer in *onne*%ion 'i%& &is %ra(e/ -"sinessor rofession/ no% (e("*%e( as e5enses an( *&area-le %o *ai%al a**o"n% -"%no% *&area-le %o roer%y of a *&ara*%er '&i*& is s"-e*% %o (ere*ia%ion or(ele%ion.

6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alienin(i!i("als '&o are enae( in %ra(e an( -"siness/ on %&eir ross in*o)es

o%&er fro) *o)ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5enses.Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5ense.Nonresi(en% *i%i8ens an( forein *orora%ions on %&eir ross in*o)es fro) 'i%&in)ay also (e("*% %&is e5ense.


. C$!#/#$) +'$)#$ !)). 6esi(en% *i%i8ens/ resi(en% alienin(i!i("als an( nonresi(en% alien in(i!i("als '&o are enae( in %ra(e an(-"siness/ on %&eir ross in*o)es o%&er fro) *o)ensa%ion in*o)e are allo'e(%o (e("*% %&ese e5enses. Do)es%i* *orora%ions/ es%a%es an( %r"s%s )ay also(e("*% %&is e5ense. Nonresi(en% *i%i8ens an( forein *orora%ions on %&eir

ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5ense.Nonresi(en% alien in(i!i("als no% enae( in %ra(e or -"siness in %&e

P&iliines are no% allo'e( %o (e("*% %&is e5ense.. I$)!%$(' +!'#)for &eal%& an( &osi%ali8a%ion. 6esi(en% *i%i8ens/

resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are enae( in%ra(e an( -"siness/ on %&eir ross in*o)es o%&er fro) *o)ensa%ion in*o)eare allo'e( %o (e("*% %&ese e5enses. Nonresi(en% *i%i8ens an( nonresi(en%alien in(i!i("al enae( in %ra(e or -"siness in %&e P&iliine on %&eir rossin*o)es fro) 'i%&in )ay also (e("*% %&ese re)i")s.

Nonresi(en% alien in(i!i("als no% enae( in %ra(e or -"siness in %&eP&iliines are no% allo'e( %o (e("*% %&ese re)i")s.

l. '!)$%- %$" %""##$%- '*'+#$). 6esi(en% *i%i8ens/ an( resi(en%alien on %&eir ross in*o)es an( fro) *o)ensa%ion in*o)e are allo'e( %o(e("*% %&ese re)i")s. Nonresi(en% *i%i8ens on %&eir ross in*o)es fro) 'i%&in)ay also (e("*% %&is e5ense. Nonresi(en% alien in(i!i("als enae( in %ra(eor -"siness in %&e P&iliines are allo'e( %o (e("*% %&ese e5e)%ions "n(erre*iro*i%y.


E5%raor(inary (e("*%ionsa. T&ose allo'e( %o ins"ran*e *o)anies-. De("*%ions allo'e( %o es%a%es an( %r"s%s a!ailin of i%e)i8e(

(e("*%ions of in*o)e *"rren%ly (is%ri-"%e( %o -enefi*iaries.*. @osses fro) 'as& sales of s%o*s or se*"ri%ies.(. Cer%ain *ai%al losses -"% only fro) *ai%al ains.

Or(inary e5enses are %&ose '&i*& are *o))on %o in*"r in %&e %ra(e or-"siness of %&e %a5ayer 9:+@E *ai%al e5en(i%"res are %&ose in*"rre( %oi)ro!e asse%s an( -enefi%s for )ore %&an one %a5a-le year. Or(inary e5enses

40


41/70


42/70

B 1.00 er*en% 1B of ne% re!en"e i.e./ ross re!en"e less(is*o"n%sB for %a5ayers enae( in sale of ser!i*es/ in*l"(in e5er*ise ofrofession an( "se or lease of roer%ies. 4B :o'e!er/ if %&e %a5ayer is (eri!in in*o)e fro) -o%& sale ofoo(sroer%ies an( ser!i*es/ %&e allo'a-le en%er%ain)en%/ a)"se)en%an( re*rea%ion e5ense s&all in all *ases -e (e%er)ine( -ase( on anaor%ion)en% for)"la %ain in%o *onsi(era%ion %&e er*en%ae of %&e ne%salesne% re!en"e %o %&e %o%al ne% salesne% re!en"e/ -"% '&i*& in no *ases&all e5*ee( %&e )a5i)") er*en%ae *eilin. Se*. / $bi.B

9&o are allo'e( %o (e("*% en%er%ain)en%/ a)"se)en% an( re*rea%ione5enses

a. +n(i!i("als enae( in %ra(e or -"siness/ in*l"(in %a5a-le es%a%esan( %r"s%s

-. +n(i!i("als enae( in %&e ra*%i*e of rofession *. Do)es%i* *orora%ions (. 6esi(en% forein *orora%ions

e. =eneral rofessional ar%ners&is.

En%er%ain)en%/ A)"se)en% an( 6e*rea%ion E5enses/ in*l"(ereresen%a%ion e5enses an(or (ere*ia%ion or ren%al e5ense rela%in %oen%er%ain)en% fa*ili%ies. 1s%ar./ Se*. 2/ 6e!. 6es. 110?2002B

6eresen%a%ion e5enses/ s&all refer %o e5enses in*"rre( -y a%a5ayer in *onne*%ion 'i%& %&e *on("*% of &is %ra(e/ -"siness or e5er*ise ofrofession/ in en%er%ainin/ ro!i(in a)"se)en% an( re*rea%ion %o/ or )ee%in'i%& a "es% or "es%s a% a (inin la*e/ la*e of a)"se)en%/ *o"n%ry *l"-/%&ea%er/ *on*er%/ lay/ sor%in e!en%/ an( si)ilar e!en%s or la*es. 2 n( ar./

Se*. 2/ 6e!. 6es. 10?2002B 6eresen%a%ion e5enses s&all no% refer %o fi5e( reresen%a%ionallo'an*es %&a% are s"-e*% %o 'i%&&ol(in %a5 on 'aes "rs"an% %o aroria%ere!en"e re"la%ions. $bi.B

Cl"- ("es/ '&en frine -enefi%s an( '&en reresen%a%ion e5enses. +n%&e *ase ar%i*"larly of a *o"n%ry/ olf/ sor%s *l"-/ or any o%&er si)ilar *l"-'&ere %&e e)loyee or offi*er of %&e %a5ayer is %&e reis%ere( )e)-er an( %&ee5enses in*"rr

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2004 Cut Taxation