LUMBERA LECTURE | JURIST

TRAIN LAW
GENERAL PRINCIPLES & NATIONAL TAXATION | PROF. LUMBERA

National Taxation Local Taxation Tariff & Customs Duties CMTA

NIRC- TRAIN LAW Loc Gov of 1991
>>Income Tax 1. OL Taxes - Code
>>VAT (Business Tax) OL taxes - Sanggunian
>>donor’s Tax (Transfer) 2. Real Property Tax
>>Percentage Tax (Business)
>>Excise Tax (Manufac, Production and Importation)
>>DST (Execute transaction, pwd pa i-tax ang transaction)
>>Estate Tax (Transfer)

REMEDIES REMEDIES
1. Govt Govt and Taxpayer
2. Taxpayer
- Collection
- Procedure

JURISPRUDENCE
BIR Regs and Issuances (RR, RMC, RMO) Sanggunian Resolutions

*In case of doubt, do not levy because taxes are burden

*Exemption, construed against taxpayer.
 LUMBERA LECTURE | JURIST

NIRC – TRAIN LAW *One particular transaction may be subjected to

Compensation Income Earner two or more taxes: DOUBLE TAXATION
Self-Employed Individual *It depends on the NATURE OF TRANSACTION
- May business
Self-Employed Professional INCOME TAX
- Individual exercising profession Important Concept
Self-Employed Business 1. Income – Expense Cycle
Mixed Income Earner EXPENSE : creates income for another
- Ang babaeng walang pahinga parang Buyer-Seller
Corporate Taxpayer Trade/Business you cannot sell w/o buying
Corporation in accordance w/ primary purpose instances where you are only a buyer
seller ka, buyer ka muna
*Act of earning is already subject to Income Tax
- engaged in T/B or P VAT or % tax 2. Taxable Period
- engaged in acts producing income - always 12 months

*Kumita ka, gumastos ka CALENDAR YEAR

first day of first year
EXPENSE  creates income for another gamitin ng tao or corpo
= Balance (Profit less Expense)
bili ka ng property: FISCAL YEAR (always first day of month, hindi
tangible/intangible Feb 14 ha)
- Real Property Tax - Fiscal Year: pang-corpo lang
bank, insurance (interest sa bangko,
may tax yun) 3. Definition of INCOME
shares of stock (pag kukikita, may  income ang motherhood statement
income tax yan)
Gross Receipt – nagbebenta ng SERVICE
PINAMIGAY ANG SOBRA Gross Sale – Goods
- Donor’s tax Gross Income – after cost of sales
Net Income – after allowable deduction
*may income tax, other than the ACT OF
EARNING COST OF SALES (puhunan)

*Transactions are recorded in a DOCUMENT Gross Sale less cost of sales (puhunan)
- bayad ka ng DST = Gross Income
less Deductions
*engaged in T/B: you may involve in mnfctrng Taxable Net Income
and production
Excise tax
*ALL OF THESE TRANSACTIONS can be levied
against you or against your transaction
ESTATE TAX – tigok
 LUMBERA LECTURE | JURIST

4. Tax is withheld at source

a. Did you receive anything? advanced collection of taxes
- In kind TAX AT SOURCE
- In cash
- Receiver (Income Net of Tax)
b. Is it income?

c. Is it Taxable? a) Creditable WT
- Source: within or without - Lahat ng taxes na binawas, i-credit mo
- Kinds of Taxpayer: naka-depende ang against the taxes na due sa iyo
taxability - Income/Transaction is still subjected to
- Kind of Income other kind of tax
- Inclusions/Exclusions, Exemptions - You credit the tax withheld against the
- Deductions tax due
- CGT vs. Cap Loss
- Ordinary Gains vs. Ord Loss b) Final
- Cap Assets v. Ord Assets - Income or Transaction is already
- Capital Expenditures vs. Ord Expenses subjected to FWT shall not be subjected
- Holding period to any other kind of tax
*Expanded WT
*NOT ALL INCOME is subject to Income Tax
c. GROSS INCOME TAX
d. What kind of tax and rate? - no authorized deduction
- Nakuha mo si GI, less Allowable
5. KINDS OF INCOME TAX deduction and multiplied by tax rate
- Generic - Tax is on the gross

a. NET INCOME TAX SYSTEM (NIT) d. 8% TAX (TRAIN LAW)

- 12 mos taxable pd - Self-employed Professional/SEI
- Add Gross Income items pagsama-samahin With gross receipt/gross sale
- Allowable deductions NOT exceeding P3MILLION
- Taxable Income multiplied by rate
= Tax Due e. Fringe Benefit, MCIT, IAET
RATE
Natural Person: Sec. 24
- 20 to 35% SECTIONS 22 – 30 gist of Income Tax

Corporation CIE
- Corpo Income Tax SEP/SEI
MIE
RESULT TAX DUE Corporation: source is always Trade/business
- Meron ka creditable withholding Tax
Natural Person
b. WITHHOLDING TAX (TONG & REMIT) 1. RC
- Source (magtatanggal/withhold and 2. NRC
remit to BIR)
 LUMBERA LECTURE | JURIST

3. RA RESIDENT ALIEN
4. NRA engaged - Alien who resides in PH
5. NRA not engaged - No classification of engaged in T/B
- Distinction lies on the fact of resident
SOURCE OF INCOME: - Intention to reside here is manifested
a. CIE (nag-rent ka, bumili ka ng condo)
b. SEP/SEI - Kapag nakatira ka sa PH, gagastos ka
c. MIE so tax will be imposed
- RA creates income for somebody else;
income producer in the form of
Corporation
expenditure
1. DC
2. RFC
3. NRFC NONRESIDENT ALIEN
- Not PH resident
- Not residing in PH
Definitions:
- Engaged or not engaged in T/B
1. RC – cit of PH who resides in the PH
INDICATORS of ENGAGED in T/B
2. NRC
1) 180-day period
– residence of the citizen
stays in PH for an aggregate period of
a) Lived in the PH; proved to the
more than 180 days
satisfaction of Internal Revenue
engaged in T/B
physical presence outside with
intention to reside there permanently
2) Principle of habituality
b) Lived outside PH for employment;
- Reguary enters into commercial
contracts require them to live abroad
transaction in PH
- OFW
- OCW
c) Immigrants 3) Puts up branch in PH
d) Seafarers 4) Appointment of agent
5) Hiring of Employees
*Very important concept (Sec. 24)
- You are a NRC
Sec. 25 SPECIAL KINDS OF TAXPAYERS
during 12-month period, anytime,
- Special Child
you decided to go back to PH PERMANENTLY,
- Employed in
you will be classified differently i. Offshore Banking
within one taxable period of 12 months ii. Oil Petroleum
iii. Multi Natnl Companies
Intention to reside herein PERMANENTLY
- Magiging RC ka for purposes of tax NRA not engaged in T/B
- They are known as Ex-Pats
RC to NRC = RC ka all the way for purposes of
tax CORPORATE TAXPAYERS
- Classification is NOT changed within a) Domestic Corpo
one taxable period - Corpo incorporated in accordance with
PH law
- Foreign equity does not matter
 LUMBERA LECTURE | JURIST

Kinds of Source Source

b) Foreign Corpo tx within without
- Incorporated in accordance with foreign RC ✓ ✓
law *Individual NRC ✓ x
- RFC or NRFC CIE RA ✓ x
- Walang counterpart ang Resident Alien SEP/SEI NRA
MEI engaged ✓ x
Determine ang Principal Source of Income

NRA not ✓ x
DOUBLE TAXATION
engaged
i. Taxing twice
ii. Same sm
iii. Same taxable period DC ✓ ✓
iv. Same purpose *CORPO RFC ✓ x
v. Same kind of tax NRFC ✓ x

- Direct Duplicate DT (broad sense;

**See Sec. 42: within or without
allowed)
a) Compensation: where service is
- Indirect Duplicate DT (strict sense)
rendered
b) Interests
DDDT - Bank deposits: w/in or w/o
- Allowed - Creditor-Debtor
- Frowned upon >>D pays: Interest expense
- Not illegal >>C: Interest Income
- REMEDY to reduce impact
- Most common remedy: TAX CREDIT --IF Debtor is PH resident
--Interest Income is within
IDDT
- Illegal --IFDebtor is non-PH resident
- Unconstitutional --Interest Income is without
- Violated: equal protection clause
c) Income from Real properties
- Rentals
- Royalties
- IN PH: within, thus taxable if you are
the recipient
lex rei sitae

d) DIVIDENDS
- Issued by DC: within
-Issued by FC: within (Gen Rule)
UNLESS 3 years prior to declaration
of dividends, ang kinita sa PH is less than 50%
ng total kita (within and without)…hindi lahat ay
 LUMBERA LECTURE | JURIST

WITHIN LESS authorized deductions (found in

in proportion to the income derived the law) taxable net income
within the PH versus its total income - then MULTIPLY with the rate(Sec. 24)
i-tax mo lang ang WITHIN - scheduler system; progressive
- Gross receipt/Gross Sale
(kita sa PH / total kita) x declared dividend not exceed P3M in a year
- SEP/SEI may choose 08% on GR/GS
SOURCE OF INCOME – See Sec. 42 Provided you made the choice at the start
of the year, such choice is irrevocable
8% applies in excess of 250, 000 wrt to
GS/GR
KINDS OF INCOME
>> for SIE/SEP
Sec. 24.a
>> 250, 000 not apply for MIE
A – all income
>>excuded/exempted?
- No choice: Default is NIT
B - Passive
- Irrevocable WITHIN ONE TAXABLE YEAR
C- Cap Gains on Shares of Stock not Traded - If exceeds: Net Income Tax applies
D – Cap Gains from Sale of Real Property
Kinds of A B C D
All Income: Taxable tx
EXC: excluded or exempted by law, or RC NIT or FWT FWT FWT
in items of exclusion (Sec. 32. B) 8%
w/in & w/in w/in w/in
w/o
B. PASSIVE INCOME NRC w/in w/in w/in w/in
- Interest on Bank only only only only
- Royalties *Individual RA w/in w/in w/in w/in
- Prizes in Winnings CIE only only only only
- Dividends SEP/SEI NRA
MEI engage w/in w/in w/in w/in
d only only only only
C. Capital Gains on Sale of Shares of Stock
- Domestic Corpo
- Capital Asset NRA ***
not Within:
- Binenta mo ng untraded, not coursed through engage subject
Stock Market d to
GROSS
INCOME
D. Cap Gains on Sale of Real Property
25% on
- Land and/or bldg. the
- located in PH GROSS
- Capital ang nature ng asset
DC
- sold
*CORPO RFC
NRFC
A. Net Income Tax or 8%
- Lahat ng income
Pagsama-samahin,
 LUMBERA LECTURE | JURIST

B. Interest on Bank Deposits e) Royalties outside

- Peso Account - Column A
Interest is 20% FWT
C. Capital Gains on Sale of Shares of Stock
- Foreign Deposit - Domestic Corpo
Interest is 15% of the foreign
- Capital Asset
currency bank deposit
- Binenta mo ng untraded, not coursed through
Long term deposit (TIMED DEPOSIT)
Stock Market
i. Not pre-terminate for 5 years
interest income is not subject to
income tax D. Capital Gains on Sale of Real Property
ii. Preterminate on the fourth - Land and/or bldg.
 rate of tax is lower at 5% - located in PH
iii. Preterminate on the third - Capital ang nature ng asset
 rate of tax is lower at 12% - ibinenta
iv. Preterminate beyond 3 years
 rate of tax is back to basic rate of *CAPITAL Sec. 39
20% FWT 1. If involved ay asset (Real/Personal/Tangible
or Intangible)
ROYALTIES 2. Determine if Capital or Ordinary (Sec. 39)
- Regular & ordinary:20% rate
- EXC. Lit and Musical Composition >>kapag ginagamit sa Trade/Business
preferential rate of 10% - ORDINARY

PRIZES AND WINNINGS in Game of *Capital Asset will not have Tax Effect on you
Chance (sa loob ng PH)
*If Ordinary, may effect kasi ginagait mo sya sa
- FWT at the rate of 20%
T/B
- nababawasan ang tax mo
a) PCSO & Lotto Winnings
- 10k and below: no tax
- More than 10K: FWT at the rate of 20% 3. In asset, when the value
(COLUMN B) depreciates/appreciates while using
such (capital or ordinary),
b) Ordinary P & W you do not have any INCOME
- Raffle - Income should be realized
- 10k and below: subject to NIT - PAPER PROFIT or loss on paper: walang
(COLUMN A) income,walang loss
- More than 10k (COLUMN B)
4. Binenta si Asset or Incurred Loss
c) Dividends - May corresponding tax consequence
- By Domestic: FWT 10% Column B - Gain or Loss
- By Foreign Corp: COLUMN A, kasi yung - Basis: FMV AT THE TIME OF SALE: Basis
nasa B, derived within PH - Gain: bayad ka ng INCOME TAX
- Loss, you sold the Asset: bawi-bawi
syste: Bayad ka ng Donor’s Tax.
d) Raffle outside PH
Nagbayad ka nang lugi
- Column A: NIT of 8%
 LUMBERA LECTURE | JURIST

5. COLUMN C b) Within 18 mos from sale, you

Capital Gains on Sale of Shares of Stock buy/build another actual physical
- Domestic Corpo residence in lieu of the one sold
- Capital Asset c) Availed it once in every 10 years
- Binenta mo ng untraded, not coursed d) Historical Cost is considered in
through Stock Market determining how much will be
- FWT: 15% subjected and exempted
CGT 6%
6. COLUMN D  FMV
Capital Gains on Sale of Real Property Gross Selling Price/Assessed Value
- CGT of 6% of Zonal Value by BIR
i. FMV of property at the time of = whichever is the highest
sale (look at tax declaration)
ii. Gross Selling Price/Assessed CONDOMINIUM UNITS
value
- Covered by 6% CGT
iii. Zonal Valuation (BIR website)
- Residential in nature
Whichever is the highest
If commercial in nature: Ordinary
valuation
Asset ‘yan

 If may improvement sa lupa, dalawa ang tax

REMEMBER
declaration mo
1. RESIDENT CITIZEN
- Income within>> Columns A, B, C,D
INVOLUNTARY SALE - Income without >> A
1. Expropriation Proceedings
- You can choose 2. NRC/RA/NRA engaged in T or B
a) 6% rate under Column D; or - Income within: Columns A, B, C, D
b) Column A: Net Income Tax - Without: no tax

Just Compensation based on FMV at the time 3. NRA not engaged in T or B

of expropriation - Without: no tax
Reality: choose letter A; no tax kasi walang - Within: Gross Income Tax at the rate of
income 25% on the gross
2. Foreclosure Mortgage hindi pwede i-tax sa net
- CGT is due at the point of consolidation automatically, Final yan, meaning
of title in favor of highest bidder withheld at source, otherwise, hindi mahahabol
redemption period expired
EXEMPTION FROM CGT OF SALE OF RP in PH:
EXEMPTION FROM CGT OF SALE OF RP in PH: Requisites
Requisites - Applicable to NRC, RA, NRA
1. Sell actual physical residence - ISSUE: If you are NRC, how can you
a) 30 days from sale claim the exemption?
- Inform BIR that you are availing ACTUAL PHYSICAL RESIDENCE
exemption i. NRC
- CGT is due within 30 days from sale = with intention of returning to
kaya inform na within such period = not necessarily continuous
 LUMBERA LECTURE | JURIST

ii. Aliens - Special kinds

- Not allowed to own real property in PH, 1. Employed in offshore banking units
exception: 2. Multinational companies
a) Succession 3. Oil & Petroleum Service Contractors
b) Purchase Condo units - They are employed as EXPATS
c) Formerly PH citizens - So, they are physically present here;
dyan mag-a-apply ang exemption They are employed in those companies
in payment of 6% CGT located in the PH
- Possibility: meron silang actual physical
Kinds of A B C D residence in the PH
tx - So, applicable ang 6% CGT
RC NIT or FWT FWT FWT
8%
COLUMN A
w/in & w/in w/in w/in
w/o - NIT or 8%
NRC w/in w/in w/in w/in
only only only only I. CIE
*Individual RA w/in w/in w/in w/in applicable rate: NIT (8% not applicable)
CIE only only only only
wala kang choice; NIT ka
SEP/SEI NRA
MEI engaged w/in w/in w/in w/in
only only only only II. SEI/SEP
a) GR/GS is not more than 3M
NRA not *** - 2 options: NIT or 8% in excess of 250K
engaged Within: - done in the 1st quarter of the year in the
subject 1st quarterly return; 1Q; 1 QR
to
GROSS
- choice is irrevocable within the year
INCOME - Default rate is NIT
25% on
the b) More than 3M
GROSS
- No choice
- NIT only
DC
*CORPO RFC
NRFC *Relevance of 3M Sec. 109
- letter BB. Threshold for income tax purposes
- Income and VAT, magkakabit
NRA not engaged in T/B: automatic withholding - Engaged in sale of service/goods: meron kang
tax, 25% is fixed rate; kapag nabigay kasi ang VAT component
income, and tax is not withheld, mahirap
maningil - CEI wala kang VAT; pinapasa sa’yo ang VAT
pero di ka nag-re-remit
COLUMN A: NIT: apply creditable WT; may Eto yung case na may va;id distinction
withholding din pero at the end, i-credit ang WT between business professionals and wage
against the tax due after the formula earners!!!!

Exemption of CGT 6% TANDAAN! - GS/GR less than 3M wala kang VAT

NRA not engaged in T/B See Sec. 109 BB. Exempted ka sa VAT
 LUMBERA LECTURE | JURIST

- GS/GR more than 3M Kinds of A B C D

tx
may VAT component ka
default NIT ka
DC NIT FWT
*CORPO (global
or fixed)
30%
RFC
- MIE (sweldo, T/B, profession) NRFC
segregate tax on income from t/b/p
sweldo: no VAT (like CIE) COLUMN B for Corporation
T/B/P: apply 3M threshold 1. % on Bank Deposits
= not exceed 3M: make a choice 2. Royalties (wala sa Literary and Musical)
= exceeds 3M: apply NIT
pagsamahin ang NIT sa income and COLUMN C & D same
sa T/B/P
COLUMN A
MIE (sale of goods & sale of service) - NIT (global or fixed) 30% (CORPO
- who chose the 8% rate (not exceed 3M) INCOME TAX)
- no in excess of 250K - Walang 8%
- apply the 8% rate to ALL GR/GS which - Lahat ng kita ni DC: w/in and w/o
do not exceed 3M - Wala sa B, C, D
- may 250K ka na sa NIT mo under your
sweldo; Mixed ka di ba
*Gross Income for the year
LESS authorized deductions
SEI (selling goods)/SEP (selling service)
Multiply by 30%
- Made 8% rate choice
LESS creditable WT
- 8% rate is applied to GR/GS in excess of
250K
- May mina-minus ka na 250K COLUMN B
1) Interest on Bank Deposits
MIE & SEI - Local Currency: 20% FWT
>>*Exemption on Long Term Deposit
subject yan sa VAT & Income Tax
DOES NOT APPLY

- Foreign Currency: 15% FWT

CORPORATION
- Kumikita due to primary/secondary 2) Royalties
purpose - Regular royalties (20%) lamang
- Trade / Business - 10% for lit and musical is not applicable

**DIVIDENDS
- Separate column
- Inter-corporate dividends tax
- DC to DC issuing and receiving:
exempt from income tax; intercorpo-
dividends tax
 LUMBERA LECTURE | JURIST

COLUMN C Gobyerno: nagdamot ka corpo, bayad ka

- FWT: 15% ng IAET
BAWI-BAWI
COLUMN D
- FWT: 6% on lands and bldgs. *6% CGT exemption: DOES NOT APPLY TO A
Considered as capita asset of domestic CORPO
corpo
- CGT does not apply RESIDENT FOREIGN CORPO
- Only income WITHIN
Minimum Corpo Income Tax (MCIT) - COLUMN A - NIT: 30%
- 2% imposed on DC - COLUMN B (Passive Income) – same
- In lieu of NIT - COLUMN C – same
- COLUMN D – not applicable; not
MCIT: 2% MCIT is imposed on DC allowed to OWN real property in PH
Beginning the 4th year
Following the commencement of its operations Additional Columns
PROVIDED that the 2% on the gross income  Intercorporate Dividends Tax
Is higher than the net income tax - DC to RFC: same – exempted
sa ikaapat na taon at lugi ka pa rin,
magbayad ka. Gobyerno ay kikita kahit lugi ka  MCIT
pay 2% or 30%, whichever is higher - 2%: still applicable, LIMITED To income
derived WITHIN
- Corpo, IF incorporated after 1997, 4 years:
magbilang ka  IAET
- Bawi-Bawi System ng gobyerno…lalaban - Not applicable
corpo e lugi ka na nga lang
NON-RESIDENT FC
GS LESS AD = Taxable Net Income x 30% - Column A& B: Gross Income Tax: 30%
(default NIT) Interest on Bank Deposits: Final Tax of 30%

Improperly Accumulated Earnings Tax - Column C: Same FWT

- Bawi-Bawi - Column D: not apply; not allowed to
- Rate: 10% on ALL earnings of corpo own rp
retained beyond reasonable business Additional Columns
means  Intercorporate Dividends Tax
- Nature: Final Tax - FWT: rate of 15%
- IN ADDITION to all other kinds of corpo
taxes  MCIT
- yung dividend na tinanggap ni - 2not applicable
individual SH sa corpo ay may tax
(COLUMN B Final Tax of 10%)
- bayad si individual SH  IAET
- SH is a corpo: NO TAX - Not applicable
- Corpo, ayaw mag-declare ng kita
See Sections 22-29
 LUMBERA LECTURE | JURIST

SECTION 30: Exempt Domestic Corpo Example:

- COLUMN A!!!! A. charitable insti; thunders gawa ng basahan
- 11 corpos: exempted from NIT for all i. Is it income? YES
income falling under column A ii. Is it within? YES.
iii. Is it taxable? NO.
a) Know the commonalities of these 11  income as such
corps
b) Know the income exempted from tax B. Rentals
- Net Income Tax (NIT: column A) i. Is it income? YES
- In respect of income received by them ii. Is it within? YES.
AS SUCH (primary purpose ‘yan sa AOI) iii. Is it taxable? YES; NIT 30%
 (Col. A)
LAST PARAGRAPH OF SEC 30: correlate
to Consti C. Dineposit ang examples sa A & B
“lahat ng kita ng 11 pursuant sa primary Peso Account
purpose: NO TAX - Is it income? YES
- BUT lahat ng kita from properties or - Is it within? YES.
activities conducted for profit, - Is it taxable? YES;
regardless of disposition, subject to TAX  Passive Income; FWT 20%
 Column B
LAST PARAGRAPH OF SEC 30:
Notwithstanding the provisions in the preceding C. Donor’s Tax/Estate Tax
paragraphs, - not covered by Consti and Sec. 30 (income
the income of whatever kind and from operations)
character
of the foregoing organizations - eto ay galing sa labas
from any of their properties, real or personal,
or from any of their activities conducted for - Is it income? YES
profit - Is it within? YES.
regardless of the disposition made of - Is it taxable? NO.
such income,  Sec. 32.B.3 ITEM OF EXCLUSION
shall be subject to tax imposed under this Code.  (3) Gifts, Bequests, and Devises. —
The value of property acquired by
CORRELATE SECTION 30 with CONSTI gift, bequest, devise, or descent:
1. CHARITABLE INSTITUTIONS Provided, however, That income
Sec. 30 (e) from such property, as well as gift,
- CCP-MC bequest, devise, or descent of
- Including LBI ADE income from any property, in cases
- Exempt from tax of transfers of divided interest, shall
- Charitable & Religious be included in gross income
A. REAL PROPERTY TAX  NOT SUBJECT TO INCOME TAX
exempted: ADE
- Mode of Transfer: DIV: Donor’s Tax
B. INCOME TAX (wala sa consti) - Mortis causa: Estate Tax
wag gamitin ang ADE, Estate Tax – Sec. 87
use NIT column A Donor’s Tax – Se. 101
apply Sec. 30 “income as such”
 LUMBERA LECTURE | JURIST

QUESTION: Apply DT/ET?  BASIS: Sec. 30, last

paragraph
ANSWER:  Column A: NIT – 30%
- No DT/ET, PROVIDED not more than
30% of the said bequest shall be used INTEREST BANK DEPOSIT
by such institutions for administration i. Is it income? YES
purposes ii. Is it within? YES.
 Not subject to DT/ET iii. Is it taxable? YES.
 BASIS: Sec. 30, last
paragraph
(D) All bequests, devises, legacies or  Column A: NIT – FWT
transfers to social welfare, cultural and 20% Column B
charitable institutions, no part of the net income
of which inures to the benefit of any individual: DONATION
Provided, however, That not more than thirty i. Is it income? YES
percent (30%) of the said bequests, devises, ii. Is it within? YES.
legacies or transfers shall be used by such iii. Is it subject to Income Tax? NO.
institutions for administration purposes.  BASIS: Sec. 32.B.3 ITEM OF
EXCLUSION
QUESTION: Is it deductible from GI of the
donor? Estate Tax – Sec. 87
Donor’s Tax – Se. 101
Sec. 34. H
A. If Donor is CIE  not deductible
B. SEP/SEI/MIE allowed to claim QUESTION: Apply DT/ET?
deduction up to 10% of the taxable
income prior to the donation ANSWER:
C. Corpo  up to 5% of the taxable - No DT/ET, PROVIDED not more than
income prior to the donation 30% of the said bequest shall be used
by such institutions for administration
RELIGIOUS ORGANIZATION purposes
1. RPT  Not subject to DT/ET
- No tax
- ADE DONOR – Deductible on his Income?
- BASIS: COnsti, LocGov BASIS  Sec. 34. H
A. If Donor is CIE  not deductible
2. Income Tax (Sec. 30) B. SEP/SEI/MIE allowed to claim
- Binyag, kasal, kumpil, patay deduction up to 10% of the taxable
i. Is it income? YES income prior to the deduction
ii. Is it within? YES. C. Corpo  up to 5% of the taxable
iii. Is it taxable? NO. income prior to the deduction
 income as such
RENTALS: **Rules on Charitable and Religious: THE SAME
i. Is it income? YES
ii. Is it within? YES.
iii. Is it taxable? YES.
 LUMBERA LECTURE | JURIST

EDUCATIONAL INSTITUTIONS ii. Is it within? YES.

BASIS 1987 CONSTITUTION iii. Is it subject to Income Tax? NO.
- All revenue and assets  BASIS: Sec. 32.B.3 ITEM OF
- Including L,B,I EXCLUSION
- ADE for educational purpose
- Exempt from taxes and duties D. Estate Tax – Sec. 87 || Donor’s Tax – Se.
Exempted: 101
a) RPT QUESTION: Apply DT/ET?
b) Internal Revenue
c) Tariffs and Customs Duties ANSWER:
- No DT/ET, PROVIDED not more than
A. RPT 30% of the said bequest shall be used
ADE: no tax (Consti) by such institutions for administration
purposes
RENT: Not ADEbayad ka RPT
 Not subject to DT/ET

B. INCOME TAX
a) Tuition Fee E. DONOR – Deductible on his Income?
- Used for ADE: no Income Tax BASIS  Sec. 34. H
- Basis: A. If Donor is CIE  not deductible
i. Consti B. SEP/SEI/MIE allowed to claim
deduction up to 10% of the taxable
b) Rentals sa Mcdo & Jollibee income prior to the deduction
C. Corpo  up to 5% of the taxable
income prior to the deduction
c) Interest on Bank Deposits
- Consti: ADE-used no Income Tax
PROPRIETARY EDUCATIONAL INSTITUTIONS
- CONSTI: Subject to limitations by law,
DE LA SALE v. CIR (2017)
they can also be exempted
- Non-stock; Non-profit Educ Insti - GenRule: hindi exempted, UNLESS may
- APPLY THE CONSTITUTION law
- Regardless of type/source of income: as
long as ADE EXEMPT
- There must be PROOF: audited financial 1. RPT
statement - Basis: LocGoc: Sec. 234
- ADE-used
- Not ADE-used: bayad ka

a) The exemption of NSNP educ insti is

2. Income Tax
constitutionally guaranteed
- Sec. 27 (B)
b) Sec. 30 of Tax Code wrt
NSNP educ insti is null and void
a) TUITION FEE (related trade/activity)
c) All assets & revenues as long as ADE
b) Rentals sa Mcdo (unrelated)
- Any type
- Whatever kind
- Not taxable as long as there is PROOF!!!
C. DONATION ~ Income Tax?
i. Is it income? YES
 LUMBERA LECTURE | JURIST

Rentals from UNRELATED T/A **NIT & FWT regardless of disposition: last
If does not exceed 50% of TOTAL INCOME paragraph: kaliwanag =)
(related + unrelated / 2)
- Then, preferential rate of 10% shall be 3. Donation ~ Income Tax
applied to total income i. Is it income? YES
ii. Is it within? YES.
If exceeds 50%, apply regular NIT rate of iii. Is it subject to INCOME tax? NO.
30%  BASIS: Sec. 32.B.3 ITEM OF
EXCLUSION
THEREFORE, wrt Proprietary Educ Insti,
4. Is it subject to ESTATE tax? NO.
INCOME is ALWAYS SUBJECT TO TAX
- Sec. 86 and 101
subject to Partial Exemption - Donation in favor of Govt
- Donation is not subject to tax IN FULL
3. Estate/Donor’s Tax - Restriction of 30% does not apply
- Same rule
- Pare-parehas ang dulo
5. DONOR – Deductible on his Gross
Income?
GOVERNMENT EDUC INSTITUTION
- State univ, public schools A. If Donor is CIE
- BASIS: Sec. 30, par. i  not deductible
- no Consti provi not allowed to claim any deduction
B. SEP/SEI/MIE
1. RPT deductible IN FULL
- Basis: LocGov Sec. 234 PROVIDED, it is declared as PRIORITY
- Not because ADE PROJECT of govt
- Owned by Rep of PH and beneficial use
OTHERWISE, apply up to 10% of the
pertains to government
taxable income prior to the deduction
C. Corpo
RENT
deductible IN FULL
- Subject to RPT
PROVIDED, it is declared as PRIORITY
- WHY? Beneficial use is subject to NON-
EXEMPT ENTITY (Mcdo, Jollibee) PROJECT of govt
OTHERWISE, apply up to 5% of the
taxable income prior to the deduction
2. INCOME (Sec. 30, i)
A. Tuition Fee CHARITABLE HOSPITALS
– no tax; “as such” - Same rules as charitable institution
B. Rental
– last par: taxable ***CHARITABLE INSTITUTIONS
Column A: NIT 30% same Consti provision
Sec. 30 (e)
C. Interest Bank Deposits
- CCP-MC
– last par: taxable - Including LBI ADE
Column B: FWT - Exempt from tax
 LUMBERA LECTURE | JURIST

A. REAL PROPERTY TAX Provided, however, That income

exempted: ADE; otherwise, pay RPT from such property, as well as gift,
Basis: Constitution bequest, devise, or descent of
income from any property, in cases
B. INCOME TAX (wala sa consti) of transfers of divided interest, shall
be included in gross income
wag gamitin ang ADE,
 NOT SUBJECT TO INCOME TAX
use NIT column A
apply Sec. 30 “income as such”:
EXEMPT - Mode of Transfer: DIV: Donor’s Tax
- Mortis causa: Estate Tax
Example: Estate Tax – Sec. 87
A. charitable insti; thunders gawa ng basahan Donor’s Tax – Se. 101
iv. Is it income? YES
v. Is it within? YES.
vi. Is it taxable? NO. D. QUESTION: Subject to Donor’s Tax or Estate
 income as such Tax

B. Rentals & Interest from BD ANSWER:

iv. Is it income? YES - No DT/ET, PROVIDED not more than
v. Is it within? YES. 30% of the said bequest shall be used
vi. Is it taxable? YES; by such institutions
NIT (Col. A) - for administration purposes
30%  Not subject to DT/ET
 income of whatever kind
and character/from an
activity conducted for profit E. QUESTION: Is it deductible from GI of the
 Sec. 30, last par. donor?
BASIS: Sec. 34. H
INTEREST: Dineposit ang examples sa A & B A. If Donor is CIE
Peso Account  not deductible
- Is it income? YES B. SEP/SEI/MIE
- Is it within? YES. allowed to claim deduction up to 10% of
- Is it taxable? YES the taxable income prior to the donation
 Passive Income; FWT 20% C. Corpo
 Column B  up to 5% of the taxable income prior to
the donation
C. Tax on the Donation
- not covered by Consti and Sec. 30 (income ST. LUKES MED CENTER v. CIR
from operations)
- eto ay galing sa labas
Is it taxable? NO.
 Sec. 32.B.3 ITEM OF EXCLUSION
 (3) Gifts, Bequests, and Devises. —
The value of property acquired by
gift, bequest, devise, or descent:
 LUMBERA LECTURE | JURIST

PROPRIETARY HOSPITALS c) Proprietary Edu and Hospi = same

- Same rule with proprietary educ insti d) Governmental Edu
- Sec. 27 (b) - LocGov

- CONSTI: Subject to limitations by law, GOVERNMENT

they can also be exempted Gen Rule: Govt cannot tax itself
- GenRule: hindi exempted, UNLESS may
law
Specific Rules:
1. Income of gov agency from gov
1. RPT functions
- Basis: LocGoc: Sec. 234 - Not subject to tax
- ADE-used - Basis: Sec. 32.B.7
- Not ADE-used: bayad ka
2. Income from proprietary fx
2. Income Tax - Not exempt
- Sec. 27 (B) - Regular Corpo Income Tax: 30%

a) TUITION FEE (related trade/activity) 3. RPT

b) Rentals sa Mcdo (unrelated) - LocGov
- Exempted
RULE: - EXCEPT if beneficial use pertains to non-
Rentals from UNRELATED T/A exempt entity
If does not exceed 50% of TOTAL INCOME
(related + unrelated / 2) 4. Gifts in favor of Gov
- Then, preferential rate of 10% shall be a) Not Taxable
applied to total income - Items of Exclusion

If exceeds 50%, apply regular NIT rate of b) Income tax on Donation
30% - Not subject to income tax

THEREFORE, wrt Proprietary Educ Insti, a) Estate and Donor’s Tax

INCOME is ALWAYS SUBJECT TO TAX - Not subject
- 30% restriction for admin purposes
subject to Partial Exemption
does not apply

c) Estate/Donor’s Tax
- Same rule
- Pare-parehas ang dulo 5. : Is it deductible from GI of the donor?
BASIS:
****RULES A. If Donor is CIE
a) Non-Stock; Non Profit Chari and Hospi and  not deductible
Religious= same not allowed to claim any deduction
- Consti B. SEP/SEI/MIE
- Sec. 30 deductible IN FULL
b) Non-Stock Non Profit EDUC INSTI PROVIDED, it is declared as PRIORITY
- Consti ONLY PROJECT of govt
 LUMBERA LECTURE | JURIST

OTHERWISE, apply up to 10% of the

taxable income prior to the deduction b) GI from exercise of profession/T/B
C. Corpo c) Gains derived from dealings in property
deductible IN FULL - Examples:
PROVIDED, it is declared as PRIORITY i. CGT on sales of SOS
PROJECT of govt ii. CGT on sales of RP
iii. Gains from Sale of Ordinary
OTHERWISE, apply up to 5% of the
Assets
taxable income prior to the deduction

d) Dividends
GOCCs
e) Interests
- Treated as ordinary domestic corpo wrt
i. On loans, obli, debentures,
tax
prom notes
- Subject to tax (Gen Rule)
ii. Bank deposits
- EXCEPT
a) SSS
b) PhilHealth f) Rentals
c) Pag-Ibig g) Royalties
d) PCSO h) Prizes and Winnings
i) Pensions
j) Partners distributing share in GPP
1. Religious
established exclusively
2. Non-Stock Non-Profit Chari
for exercise of common profession of
3. Non-Stock Non Profit Hospi
partners
4. Proprietary Hospi
no part of income is derived from T/B
5. Non Stock Non Profit Educ
6. Proprietary Educ
7. Governmental Educ
8. The Government *Partnerships and Corpo de facto: treated as
9. GOCC corpo sa TABLE!!!!
MAKE TABLES
*For purposes of tax, 2 kinds of partnerships
i. Gen Professional Partnership (GPP)
INCLUSIONS & EXCLUSION ii. Gen Co-Partnership (GCP)
I. Gross Income of Txpayr partnership other than GPP
- Sec. 32 (A)
- CG2DIR2AP3 *Lahat ng Income ay Taxable
*EXCEPT
Gross Income a) Exempted by Law
- All items of income from whatever b) Excluded under Sec. 32.B (Items of Exclusion)
source derived, in cash or in kind
- Such as CGDIRAP but not limited to Technique: Identify mga excluded and
such exempted
ALL OTHERS are taxable: Look at the
a) Compensation for Services Rendered COLUMNS: ALAMIN ANG KLASE NG TAX NA
including fees, commission BABAYARAN
and other similar items
 LUMBERA LECTURE | JURIST

Compensation for Services Rendered BUT REMEMBER:

including fees, commission  OTHER BENEFITS
and other similar items - Furnished by Er
- Taxpayer: Compe Income Earner - For convenience of Er OR
- Er-Ee relationship, otherwise SEP ka - Necessary in the T/B of taxpayer
(earning by way of profession) NOT TAXABLE
 Do not apply the table
CIE
NIT; No VAT (Sec. 109) ITEMS OF EXCUSION: Memorize
(1) Life Insurance
SEP - received by insured or heirs: NOT TAXABLE
choice bet NIT or 8% depending on Gross - PROVIDED, if Policy provides for INTEREST, the
interest payments shall be included in gross income
Receipts
- interest on the proceeds ang taxable
GR/GS exceeds 3M: meron kang VAT
- TIPID TIP ni Atty: designate junakis as Bene para No
Income is GI from exercise of profession Income Tax; do not designate them as Exec/Admin
para hindi sya subject to Estate Tax

Basic Pay Kind of Holiday De Minimis (2) Return of Premium.

Tax Pay, OT Benefits
pay, -allowances - return of capital
Hazard, - hanapin
NSD ang limit
M/S Compe NIT 30% - lahat ay (3) Gifts, Bequests, and Devises
R&F Compe NIT 30% Included in EXEMPTED - Income Tax: no tax
Compe - pag
sumobra sa - Donor’s Tax & Estate Tax component
MWE Statutory Exempted E limit,
MW from tax  ALL are subject
mapupunta
less sa OTHER Religious, NSNP Educ, Chari: subject
than 250K BENEFITS
annually
to 30% restriction
with 90K
threshold Government: exempted IN FULL

NOTE: If the gift produces income, income is

De Minimis Authorized OTHER BENEFITS included in GI: taxable; the donated property is
Benefits Exempt Tax (sobra sa 90k)
not
(13th month Sobra DMB - galing sa DMB
pay and pero less
other than 90K
(4) Compensation for Injuries or Sickness.
benefits)
not - payment/reimbursement due to REPARATION
exceeding of damage
90K
M/S Exempted E FBT or NIT kasama sa  not taxable
compe by reason of injury; payment to
R&F E E NIT with compe repair damage (wag nang paartehin)
(everything is treated
as part of your
compe) *Actual Damages: not taxabe
MWE E E NIT: sa sobra lamang
sa DMB and other
*Moral Exemplary and all Other Damages
benefits (lagpas 90K) - shall form part of Gross Income
- Subject to Tax
 LUMBERA LECTURE | JURIST

(5) Income Exempt under Treaty Sep Pay: not taxable; beyond control of
Ee
(6) Retirement Benefits, Pensions,
Gratuities, etc. (7) Miscellaneous Items. —

PRIVATE SECTOR (a) Income Derived by Foreign

a) With private ret plan Government. — Income derived from
- Reqts: investments in the Philippines in loans, stocks,
i. Atleast 50 yrs old bonds or other domestic securities, or from
ii. BIR approved ret plan interest on deposits in banks in the Philippines
iii. Rendered continuous service by
for 10 yrs (i) foreign governments,
iv. No part of the fund is used by (ii) financing institutions owned,
Er other than for ret purposes controlled, or enjoying refinancing from foreign
governments, and
b) No ret plan (iii) international or regional financial
- Apply the law institutions established by foreign governments.
- Reqts
i. Atleast 60 Classic Example: utang ng PH sa China
ii. 20 yrs of service utang natin: investment
binabayad natin na interest: interest income
GOVT SECTOR ni foreign creditor
- All ret bene and pensions are not INTERNATIONAL COMITY: inherent limitation
subject to tax
(b) Income Derived by the Government or
LABOR CASES its Political Subdivisions.
1. Resignation — Income derived from any public utility or
- w/ financial assistance, if any: taxable from the exercise of any essential governmental
function accruing to the Government of the
2. Dismissal w/o cause Philippines or to any political subdivision
- Reinstatement w/ BW + Damages thereof.
- Taxable ang sweldo, wages, damages
- Atty Fees and costs of suit: (c) Prizes and Awards. — Prizes and awards
NOT subject to tax made primarily in recognition of religious,
EXC. When award is more than actual charitable, scientific, educational, artistic,
expense literary, or civic achievement but only if:
(i) The recipient was selected without any
- Separation Pay + BW + Damages action on his part to enter the contest or
Sep Pay: Not subject to tax proceeding; and
for causes beyond the control of Ee (ii) The recipient is not required to render
BW + damages + attys fees in excess substantial future services as a condition to
of actual expense: Taxable receiving the prize or award.

3. Labor Saving Devices, Retrenchmet,

Redundancy
 LUMBERA LECTURE | JURIST

- Iba eto sa Prizes and Winnings exchange or retirement of bonds, debentures or

in the nature of passive income other certificate of indebtedness with a
prizes in game of change maturity of more than five (5) years.
subject to FWT: 20%
(h) Gains from Redemption of Shares in
Mutual Fund. — Gains realized by the investor
upon redemption of shares of stock in a mutual
(d) Prizes and Awards in Sports
fund company as defined in Section 22(BB) of
Competition. — All prizes and awards granted
this Code.
to athletes in local and international sports
competitions and tournaments whether held in
the Philippines or abroad and sanctioned by (i) Income Derived from the Sale of Gold
their national sports associations. Pursuant to Republic Act No. 7076. — Income
derived from the following transactions
pursuant to Republic Act No. 7076, otherwise
panalo mo: exempted
known as the “People’s Small-scale Mining Act
of 1991”:
(e) 13th Month Pay and Other Benefits. —
(1) The sale of gold to the Bangko Sentral
Gross benefits received by officials and
ng Pilipinas by registered small-scale miners, as
employees of public and private entities:
defined under Republic Act No. 7076, and
Provided, however, That the total exclusion
accredited traders; and
under this subparagraph shall not exceed
(2) The sale of gold by registered small-
Ninety thousand pesos (P90,000) which shall
scale miners to accredited traders for eventual
cover:
sale to the Bangko Sentral ng Pilipinas.

(i) Benefits received by officials and

HOW TO EXCLUDE?
employees of the national and local
government pursuant to Republic Act No. 6686; - Dini-declare pa rin as part of income
- NOT TAXED BY WAY OF DEDUCTION
(ii) Benefits received by employees
- Declare then deduct
pursuant to Presidential Decree No. 851, as
amended by Memorandum Order No. 28, dated
August 13, 1986;
(iii) Benefits received by officials and
employees not covered by Presidential Decree
No. 851, as amended by
Memorandum Order No. 28, dated August 13,
1986; and
(iv) Other benefits such as productivity
incentives and Christmas bonus.

(f) GSIS, SSS, Medicare and Other

Contributions. — GSIS, SSS, Medicare and Pag-
Ibig contributions, and union dues of
individuals.

(g) Gains from the Sale of Bonds,

Debentures or other Certificate of
Indebtedness. — Gains realized from the sale or
 LUMBERA LECTURE | JURIST

ITEMS OF DEDUCTIONS 5. If option of 8% is available and you

Kinds of A B C D chose it
tx - No deduction is allowed
RC

CIE
Tax Due: NIT
NRC NIT
 VAT – wala
RA or FWT
NRA  % Tax – wala
*Individual 8%
CIE engaged Deduction – zero
SEP/SEI
MEI
NRA not GIT SEP/SEI
engaged
a) GS/GR does not exceed 3M
Tax Due: NIT (choice)
DC
*CORPO
NIT FWT  VAT – wala
RFC
 % Tax – meron
NRFC GIT
Deduction – Yes: choose bet OSD and ID

1. NIT = choice is made at 1QR of 1Q

 With deduction
 Allowed to claim D (yes inulit natin Tax Due: 8% (choice) applied to GS/GR
para tumatak)  VAT – wala
 % Tax – wala
No Deduction
Deduction – zero
a) NRA; not engaged
b) NRFC **Tax Due is applied to GS/GR in excess
of 250K (not deduction)
2. FWT or GIT
 No deductions b) GS/GR exceed 3M
Tax Due: NIT ( NO choice)
3. CIE
 VAT – meron
No deductions
no personal & additional exemption  % Tax – wala
Deduction – OSD or ID
4. TWO KINDS OF D
a) OSD (Sec. 34) MIE
- 40% of GR/GS
a) Compensation
b) Itemized Deductions Tax Due: NIT (choice)
- Sec. 34  VAT – wala
You cannot have both  % Tax – wala
Available to Indiv and Corpo Deduction – Zero
Can only claim D against income from T/B/P
 LUMBERA LECTURE | JURIST

b) GS/GS from T/B OSD

i. Not exceed 3M  Gross Receipt/Gross Sale
Tax Due: NIT (choice) LESS Cost of Sale
 VAT – wala = Gross Income
 % Tax – meron dito mo kunin ang 40% na
Deduction – Yes: choose bet OSD and ID OSD
TNI is 60% of GI
= choice is made at 1QR of 1Q
multipled by rates
8% is your choice
Tax Due: 8% (choice) applied to GS/GR
**60% of GI is subjected to tax
 VAT – wala
- No receipt needed
 % Tax – wala
- Sa 12 months, compute GI and sa 12
Deduction – zero; no 250K
mos, andyan din ang deductions
- Revenue  Expense : same 12 mos.
II. Exceed 3M - 12 mos: calendar year or fiscal year
Tax Due: NIT ( NO choice)
 VAT – meron ITEMIZED DEDUCTION
 % Tax – wala - For NIT only
Deduction – OSD or ID
 GS/GR
LESS Cost of Sales
CORPORATION = Gross Income*** (Sec. 32.B)
Tax Due: NIT LESS Authorized Deductions (Sec. 34)
 VAT : wala
- not more than 3M ***Gross Income
 % Tax – meron - You arrived at TNI multiplied by RATES
- Rates: Indiv: 20%-35%; Corpo: 30%
Deduction – Yes: OSD or ID
LESS Tax Credits, if any

Tax Due: NIT Authorized Deductions under Sec. 34

 VAT : meron EITLBDCPR
GS/GR exceed 3M Reqts of Authorized Deduction
 % Tax – wala 1. Necessary in T/B
2. Reasonable in amount
Deduction – Yes: OSD or ID - Dapat may basehan ang gastos mo
- Depended sa laki ng business
**di pwede magsama si VAT and % 3. Actually paid or incurred
**you can be exempted from both IF
Actually paid: Cash Basis is the Accounting
- SEI/SEP: not exceed 3M ang GR/GS and
method (both revenue and expense side)
you chose 8% rate Actually Incurred: Accrual Basis of Accounting
need ng resibo!!!!!!!!!!!
 LUMBERA LECTURE | JURIST

CIE: wala tayong pake sa gastos niya. No or incurred

deduction is allowed.
BUT if you have T/B, maglista ka  Rent: YES Rent: NO

*Authorized Deductions are treated as Items of  Purchase of Real

Exemptions Property for
tapsi or Ordinary
SECTION 34 Asset (use it in
T/B)
“EITLBDCPR”
- Cannot claim it
Employer – X (SEI) Employee Y– CIE
as deduction
or Corpo - In lieu theref,
Tapsilogan you claim
 Revenue  Sweldo **DEPRECIATIO
- Pinasweldo si Y, Taxable? YES N of assets, not
deduction in - NIT, if M/S Expenses
the form of
expenses - MWE: exempt  Rentals: Lessee
DOES NOT
 Expense acquire any
 Holiday Pay, OT,
Hazard, NSD interest other
- Income? YES than a mere
- R&F: NIT possessor
- MWE: exempt
 IF rent to own
 DMB
agreement: not
 DMB
deductible;
- All are exempt,
Lessee’s
subject to limit
acquired
- If exceeds limit,
interest in the
it will be
form of CAPITAL
OTHER
EXPENDITURE
BENEFITS
subject to 90K
threshold **Depreciation of Assets
- Not exceed 1. Straight Line Method
90K: exempt 2. Diminishing
- Exceeds: Fringe
Bene or NIT Real Property: 15 to 25 years
 Utilities; Itemized Personal Property: 5 years
Deductions,  Utilities of Y
provided, PROVE - Not deductible even if you cannot claim it as Deductible
1. Necessary in - CIE is not Expense, you can still deduct it by way of
T/B entitled to any Claiming Depreciation Expense
2. Reasonable kind of
in amount deduction
You do not use capital expense to purchase
3. Actually paid capital asset
 LUMBERA LECTURE | JURIST

- use capital expense to purchase Sec. 34

ordinary asset (for T/B)  33%: Tax Arbitrage Rule
- No to E; Yes to D Si X nangutang kkay C
- Hindi pwede one-time deduction as - Nanganak ang Utang
expense agad, PERO gamitin ang - Binayaran ni X ang interest
depreciation. Yes ulit ulit tayo dito para - Yung interest pwede i-deduct kasi
ma-appreciate ginamit sa business na tapsilogan
Employer – X (SEI) Employee Y– CIE
or Corpo Tax Arbitrage Rule
Tapsilogan  Mr. X cannot deduct the whole
Interest Expense if he has Interest
INTEREST ON LOANS Income subject to FWT
 Debtor si X,  Nangutang din  Babawasan lamang ang Interest ng
nangutang kay C. - Interest 33% (e.g. 100, 000 LESS 33% of
Nagbayad sya ng Expense is NOT Interest Income on Bank Deposit)
interest deductible, kasi Passive Income yung BD
CIE
*Interest on Loan is a Continuation of BUSINESS EXPENSE
form of Expenses  Di nagbayad - Marketing expenses/colaterals
- Bad Debt for C PURPOSE is to maintain the sales are
“Interest Expense”
- C can claim in the nature of goodwill are NOT
Income naman eto
even if interest allowed because already in the form of
ni C (Taxable as
is not used for capital expenditure
Interest Income)
T/B by Debtor  Example: signage
- Incurred in
the course of
his T/B dapat increasing sales
- Allowed as deductible business expense
X (deductibility)
- YES. - Bribe Money are NOT allowed to be
Deductible deducted; Contrary to law, morals,
- Pag di bayad, public policy
TAX
CONSEQUENCE: - Business is illegal; Sweldo ni Employee
BAD DEBT is a Legitimate Expense; ALLOWED AS
- Debt + Interest DEDUCTION from your income sa illegal
can be claimed by business mo.
Creditor  Legitimate Expense WON business
is legal.
Reqsts:
a) Incurred in
connection w/ TAX BENEFIT RULE
T/B of Creditor - Di nakabayad si Debtor
b) Determined to - C claimed as Bad Debt
be worthless; - Nagbayad si Debtor thereafter
and EFFECT OF SUBSEQUENT RECOVERY OF BAD
c) Completely DEBT: Law requires C to declare Bad Debt
charged off
 LUMBERA LECTURE | JURIST

(amount recovered) as part of the Gross Income - Depreciation Expense in 2019 cannot be
of Creditor in the year of recovery claimed because you cannot use the
asset anymore
*Wala na ang Personal/Additional Exemption - 2016 to 2018 nakapag-claim ka na ng
Tax Code: 20% to 35% rate, if income does 60K as Dep Expense PLUS Casualty Loss
not exceed 250, 000, EXEMPTED! na 40K => P100K pa din

TAX Transition ng Deductible Expense

- Er paid RPT for tapsi Business Depreciation  Casualty Loss
- RPT: land + building (dalawa yan)
- Claim as deduction because that is a biz 2021: Robber, ibinalik ang lutuan
expense FMV in 2021 is P3,000
- Si Ee, as CIE, ZERO deduction EFFECT of subsequent recovery subjected to
Casualty Loss after claiming Casualty Loss?
*An amount was refunded to Er - Apply the Tax Benefit Rule
- APPLY The TAX BENEFIT RULE a) Bad Debt, claimed as deductions
wrt to the amount refunded subsequently recovered
- Er should declare amount refunded as b) Taxes, claimed as deductions
part of his GI in the year it was subsequently refunded
recovered. c) Casualty Loss, claimed as
deductions subsequently recovered
CASUALTY LOSS
NOTE: TAX BENE RULE
- Theft, robbery
- Fire, storm, shipwreck - Declare FMV at the time of recovery IF
- Natural calamity ASSETS
- The Loss is NOT compensated by - ACTUAL VALUE if cash/bad debt/taxes
insurance
Charitable & Other Contributions
Si Er ng tapsi Mr. X & Mr. Y gave 300K each to
- Bumili ng lutuan worth 100K last 2015 a. Home for the Aged
- Deductible as Business Expense in b. Church
2015? NO! Capital Expense yan c. NSNP Educ Insti
- DEPRECIATION: Personal is 5 years d. DepEd
- P100,000/5 = 20K (depreciation value)
 Can X claim P300K as authorized deductions
2015 2016 2017 2018 2019 2020 from his T/B revenues?
100K 80k 60K 40K 20K 0 - Yes, up to 10% of the taxable income of
X prior to deduction
Dep 20K 20K 20K 20K 20K
- If Corpo, 5%
Value

*Create Temporary Taxable Income, whichever

**ninakaw last 2018 ang lutuan is LOWER doon si dinonate (here, 300K)
- Casualty loss: Loss arises from T/B - 5% or 300K
- Arises out of Robbery
- 10% or 300 K
- 2018: 40K ang book value can be
claimed by Er Whichever is lower.
 LUMBERA LECTURE | JURIST

‘Pag binigay sa Gobyerno, Mr. X can deduct in VAT vis-à-vis INCOME TAX
FULL, provided priority project X & Y = both income txpayers
- BUT if not prio project, apply 5%-10%
restriction
REVENUE
Mr. YNO BENEFIT; ZERO; mabait lang talaga
sya EXPENDITURES
X Y
PENSIONS
- Contri to retirement fund for Ees Revenue Revenue
- Kumuha ng LI si Er out of his Ees, hindi => tapsilogan => sweldo
niya pwede i-claim ang premium kasi
not regular Business Expense
Expense Expense
Research & Devt
=>tapsilogan => u buy
- Applicable only to his Er
=> plain consumer
- Feasibility Study: Tapsilog with pansit
- TapSit
VAT
*Mobilization Expense - Indirect tax
- Passed on
REMEMBER: TIE- LBD- CPR - Burden
 All itemized deductions, to be authorized, - Cost of goods/becomes an expense
must be related to T/B
EXCEPT: capital expenditures: incurred for
*Transactions covered:
purchase of assets used in T/B
 Claim Depreciation Expense, 1. Sale of goods itc T/B;
instead of Business Expense 2. Sale of Service itc T/B
3. Importation of Goods
1. Necessary in T/B => basta nag-import: VAT!
2. Reasonable in amount =>binenta ang imported: VAT ulit! , so dalawa
3. Actually paid
 PLUS substantiated with official
12% VAT
receipts
- SELLER: output 12% VAT (sold for P100)
 TO BE AUTHORIZED
- BUYER: input 12% VAT (bought for
P112)
Done with Deductions for computing Net =>P12.00 is INPUT for Buyer
Income tax DUE => Buyer nagbenta for P150 + P18.00
(12% of 150)
NOT ENTITLED T DEDUCTIONS =>Buyer na naging Seller:
1. NRA: not engaged in T/B Input: P12.00
2. NRFC Output: P18.00
 LUMBERA LECTURE | JURIST

Output LESS Input = VAT Payable X Y

18 Less 12 = P6.00 (bayaran mo yang
Revenue Revenue
excess output sa BIR) => tapsilogan => sweldo
=>P360, 000:
WHAT IF Input > Output GR: 10M VAT annual
1.2 M (10M income
mas marami kang gastos
x 12%) =>Seller: Ee
EXCESS INPUT VAT - Output =>NO VAT;
o Credit it: for succeeding Expense Side VAT CIE ka
quarters 1) Cost of VAT
Sales Input VAT INCOME TAX
ZERO
- 6M (expense) ZERO OUTPUT
NOTE: You cannot claim Input/Output if you are - 720,000 DEDUCTIONS
Basis for
not BIR-registered GI: 4M
taxing you:
Utilities
- 12% VAT
360K lamang
2) - Input:
*The law presumes that you applied 12% VAT Authorized P1,200
Expense
on your sales Deductions INPUT
=> u buy
- Utilities Food
bayad ka pa din, kahit di mo in-apply P500K Utilities:
=> plain
- Input:
consumer
you are under obli to impose 12% - Rentals 60, 000 2,400
P300K =>Utilities:
EXC. GS/GR does not exceed 3M Rentals:
P10K
- Gasul 36,000 Rentals
P200K Gas: - Input:
=>Food: 20K
24,000 3,000
4M LESS AD =>Rentals:
25K
= 3M is the Output LESS =P6,600
Taxable Net Input = VAT VAT
Income P55,000
Payable
+ 6,600 (VAT)
you
TNI x % => 1.2M cannot
LESS credit this
Individual: 840,000 because
NIT (no = P360,000 you are
choice if NOT VAT-
lagpas ng registered
TOTAL na
3M) babayaran =
NIT + VAT
If hindi Payable
lagpas, 8% or
NIT

**you cannot be VAT-registered if you are CIE

because you are not engaged in T/B
**CIE Input VAT is only Add-On to your
expenses
**NO tax effect mga CIE
 LUMBERA LECTURE | JURIST

VAT - input cannot be credited to output

- Add 12% to Gross Selling Price or Gross - Classic Example: Sale of Goods in the
receipts ORIGINAL STATE
- Bawat benta, dagdag ka ng dose
(mandatory) Fisherman  Bangus
 Daingsilog: VATABLE na
ZERO-RATED
- vatable pero rate is Zero RENTALS OF APT UNITS
- P15, 000: threshold
**walang zero-rated sa import; export meron
Import: 12% GR/GS not exceed P3M
Export: zero - Exempted
- Percentage Tax: 2% of GR/GS (wag kang
Zero-Rated ngingiti-ng sobra, kalahati lamang)
- not subject to VAT in ALL stages
- Input can be credited against Output SALE of Property
=> There is an unquantifiable benefit to the - 3M threshold
government kaya zero %
=> Example: Export Sales - Sec. 109 BB
- Plus foreign currency reserves
- promote PH products internationally
**PLAIN CONSUMER (CIE)
ANOTHER BENEFITS - You may have INPUT VAT but it has no
 INPUT VAT (expense) can be relevance on your tax due
credited against Output - Gumastos ka lang ng mas madami
 Excess Input VAT in Zero-rated
transx can be refunded **TRADE/BUSINESS
- Input will be credited against 12% VAT
**Import on all of your sales
a) Reduces currency reserves of the
country kasi magbayad ka ng foreign VAT => VAT-payable ka
currency para sa in-import mo INCOME TAX => TAX-payable ka malamang

b) Imported goods compete with local Input > Output

products
 You are operating at a LOSS sa Income side
- Subject to limitation, not prohibition
Excess Input VAT ka sa VAT side

Exempt Transaction
VAT will always be a component of INCOME
- not subject ONLY at a particular stage
TAX : kasal silang dalawa
 LUMBERA LECTURE | JURIST

DONOR’S TAX How Taxability is Determined?

1) DIV  Income tax: Source of Income; w/in
during lifetime of Dr & Dnee or w/o (Sec. 42)
(Indiv or Corpo)  Donor’s Tax: LOCATION of property
Basis: etong tatlo if real property whether w/in or w/o
i. FMV at the time of gift
- Personal (tangible/intangible) Donor W/In W/O
ii. Assessed Value at the time of gift RC  
iii. Zonal Valuation at the time of gift NRC  
RA  
*Shares of Stock: Assets / Stocks Issued NRA  x

**Relate to Double Taxation (Broad Sense)

Calendar Year (12 mos Jan-Dec)
**RA: triple taxation: Donor’s tax here +
Gratuitous: no monetary consideration
Donor’s Tax in their Country + Tax where
- Voluntary
Property is located

*Php250,000
Determination of LOCATION
libre sa buwis for the calendar year
- RP/TPP: Mobilia Rule
RATE: 6% of the "value" at the time of gift
- Intangible PP
Sec. 104, subject to Reciprocity Rule
SUBJECT MATTER EXCEPTION SA MOBILIA RULE
a) RP Sec. 104: "SITUS"
b) TangPP - Donor's tax and Estate tax
c) IntangPP
- PH situs
1. franchise which must be exercised in the
- get the valuation as the basis of 6% Philippines;
2. shares, obligations or bonds issued by any
Gross Donation corporation or sociedad anonima organized or
LESS AD constituted in the Philippines
= Taxable Net Gift, in excess of 250K 3. shares, obligations or bonds by any foreign
x 6% corporation eighty-five percent (85%) of the
= TAX DUE business of which is located in the Philippines,
4. shares, obligations or bonds issued by any
DONORS foreign corporation if such shares, obligations
a) RC or bonds have acquired a business situs in the
b) NRC Philippines;
c) RA 5. shares or rights in any partnership, business
d) NRA or industry established in the Philippines
 LUMBERA LECTURE | JURIST

Yung FOUR NA PROPERTIES, subject to Tax in  TRAIN LAW

the PH yan as they shall be treated as located SEC. 100. Transfer for Less Than Adequate and
within SUBJECT to RECIPROCITY RULE Full Consideration
- Sale of property being used for T/B
EXEMPTION (ORDINARY ASSET: goods sold in the
- XYZ is a Domestic Corpo ordinary course of T/B)
- Mr. A, U.S. citizen, is a SH no donor’s tax component IF you sell
them at a loss
**Intangible Personal Property
- Situs BAR FAVE
GENRULE: Mobilia Secuntum Personam (MSP)
- They follow the domicile of the owner - CAPITAL ASSET (ginagamit mo ng
- IF A donates 1M shares of stocks: personal)
- not subject to Donor’s Tax in the PH
kasi WITHOUT Donor W/In W/O Govt Exempt
Insti
EXMPTN: Sec. 104 RC  
2. shares, obligations or bonds issued
NRC   deductible
by any corporation or sociedad anonima
RA   Donations PROVIDED
NRA  x & Gifts: not more
organized or constituted in the Philippines
Deductible than 30%
disregard MSP IN FULL is used by
Donee for
EXMPTN to the EXMPTN admin
purposes
Reciprocity Rule “69”
Sec. 104: Provided, still further
BAR FAVE
Pag sa US, hindi tinaxan ang Filipinos na nag-
POLITICAL or CAMPAIGN CONTRIBUTIONS
donate doon ng shares of stock niya sa foreign
OLD Corpo Code: Bawal donation for campaign
corpo sa U.S., e di SAME SIST eka ni PH
purposes
 Reciprocity Rule is a valid remedy to reduce
REVISED: Legalized donation for political
the impact of Double Taxation in the “broad”
candidates for campaign purposes
sense (not strict ha)

Rules for Campaign Contri

*Sec. 100
1. Donation is for campaign purposes
BEFORE: ‘pag namigay ka ng lugi, yung
2. Within official campaign period
pinamigay na libre is subject to Donor’s Tax
3. Subject to creditable WT of 5%
- binenta ng lugi, walang income tax, lugi
4. Candidate winning or losing should
din si gobyerno
have filed by SOCE
- Bawi-bawi: bayad ka ng Donor’s Tax
 Not subject to Income & donor’s
Tax
 LUMBERA LECTURE | JURIST

HOW TO COMPUTE DONOR’S TAX Feb – 600K PLUS

- Calendar Year May – 600K PLUS
- Only provision computed based on June – 600K
Calendar Year (12 months) = 1.8M
LESS 250K
Bawat regalo, bigay ka ng Donor’s or Gift Tax = 1, 550, 000.00
Pero ang computation is cumulative LESS AD, if any
= TNG is 1, 550, 000
Gross Donation x 6%
LESS AD = 93, 000.00 => Donor’s Tax
entire year
= Taxable Net Gift, in excess of 250K LESS 21 K (DT in Feb)
x 6% (donor’s tax rate) LESS 36K (DT in May)
= TAX DUE  TAX DUE is 36, 000

Example: *Threshold is 250, 000 in ONE YEAR para hindi

FEB. taxable
Mr. X donated to son A the amount of 600K
ESTATE TAX
600K LESS 250K - Mortis causa transfers
= 350K - RP, TPP, IPP
LESS Authorized Deductions (Donations in favor - Basis of Tax:
of Govt and Exempt Insti) FMV: tpp, ipp (exc. Shares of stock)
= Taxable Net Gift is 350K AV
x 6% ZV
Whichever is the highest
= 21, 000.00 => Donor’s Tax
- Value AT THE TIME OF DEATH
- Taxability depends on location of
MAY
property: within or without
Mr. X donated to son B the amount of 600K
Determination of LOCATION
- RP/TPP: Mobilia Rule
Feb – 600K PLUS - Intangible PP
May – 600K Sec. 104, subject to Reciprocity Rule
= 1.2M LESS 250K (in excess of 250K) EXCEPTION SA MOBILIA RULE
= 950K Yung FOUR NA PROPERTIES, subject to
LESS Authorized Deductions Tax in the PH yan as they shall be treated as
= TNG is 950K x 6% located within SUBJECT to RECIPROCITY RULE
 57, 000.00 => Donor’s Tax
LESS previous tax pad of 21, 000
TOTAL NET TAX: P36, 000.00
 LUMBERA LECTURE | JURIST

GE LESS AD = TNE x 6% => Taxable Net Estate (H) Capital of the Surviving Spouse

*walang in excess of 250, 000 ***Transfers for Insufficient Consideration

*Income Tax: rate of choice is 8% of GS/GR  Transfer is nangyari noong buhay
*Donor’s Tax: in excess of 250K pa
Decedent W/In W/O Sec. 85
GROSS ESTATE - In DT: nagbenta ka ng lugi, namigay ka
RC   Items of Inclusion ng libre (cap asset), subject to Donor’s
NRC   - DTRP tax
RA  
NRA  x
- In ESTATE TAX
buhay ka pa but due
GROSS ESTATE: value of property (RP, TPP, IPP)
at the time of death — If any one of the transfers, trusts, interests,
rights or powers enumerated and described in
*NRA only properties WITHIN shall be subject Subsections
to ET (B) Transfer in Contemplation of Death
*Double Taxation in the broad sense: - you transferred due to the thought of
Donor’s/Estate/Income Tax impending death
(C) Revocable Transfer ; and
RULE OF THUMB: (D) Property Passing Under General Power of
QUESTION: Do you have a degree of Appointment
Control/Interest or Ownership INCLUDED in the GROSS ESTATE for pusposes
IF YES, include that property in the Gross of computing Estate Tax Due
Estate
IF the transfer made in contemplation of
Basis: degree of CONTROL death is for INSUFFICIENT CONSIDERATION
- It will still form part of GE
ITEMS OF INCLUSION - Difference of FMV at the time of death
(A) Decedent’s Interest. and the consideration
(B) Transfer in Contemplation of Death.
(C) Revocable Transfer. Letter G + B/C/D
(D) Property Passing Under General Power = FMV at time of death LESS Insufficient
of Appointment. Consideration
(E) Proceeds of Life Insurance
(F) Prior Interests  Proceeds of Life Insurance
(G) Transfers for Insufficient Consideration - INCOME TAX: Item of Exclusion
Deds kaproceeds will go to
designated bene
 LUMBERA LECTURE | JURIST

= not subject to Income Tax si proceeds - Add security to GE before i-deduct si

pero may counterpart sa Estate Tax utang na hindi nabayaran
(bawi-bawi)
*BUT NRA: in proportion to the estate WITHIN
- ESTATE TAX PH
 RULES:
1. Designated Bene is himself/Exec/Admin, 2. Unpaid Taxes
whether designation is revoc or irrevoc, - Utang mo sa gobyerno will forever
INCLUDE in the GE survive you
2. Designated Bene is other than - Una mong bayaran ‘yan
himself/Exec/Admin - Deductible sya sa Estate Tax
- designation is REVOC
- still INCLUDE 3. Casualty Loss
3. Designated Bene is other than - Within one year upon death
himself/Exec/Admin - Calamities not compensated for by
- designation is IRREVOC insurance, you can claim it as deduction
- EXCLUDE from GE from GE
- BUT if you claimed it as deduction as
ITEMIZED DEDUCTION for purposes of
 Walang Income Tax; walang Estate
Income Tax, you can no longer claim it
Tax wrt to INSURANCE POLICIES
as deduction sa Estate Tax and vice-
 Wag ka na sa property daw =)
versa
 Legal yan

4. Claims against the Estate

ALLOWABLE DEDUCTIONS
- Deds si Debtor nang hindi
- Wala ng Judicial/Medical/Funeral
nakapagbayad
Expenses
- 11 na lang
- Sec. 86 5. Claims against Insolvent Person
- Deds si C
- C is the owner of the credit, add that to
Decedent W/In W/O Sec. 85 Sec. 86
GE AD his GE
RC  
NRC   6. Transfer for PUBLIC Use
- In favor of govt
RA  
- Same sa Donors Tax pero for NRA:
NRA  x
Deductible IN FULL
1. Unpaid Mortgage
- Deds si Debtor 7. Conjugal Share of SS
- May security - Deductible in FULL
- ONLY wrt conjugal assets within PH
 LUMBERA LECTURE | JURIST

8. FAMILY HOME a) 0 to 1 yr =: 100%

- P10M b) 1-2 yrs = 80%
- NRA walang FH c) 2-3 yrs = 60%
d) 3-4 yrs = 40%
9. STANDARD DEDUCTION e) 4-5 yrs = 20%
- P5M to all kinds of Decedent EXC. For
NRA: P500K SD(under TRAIN LAW) BEYOND 5 yrs  ZERO DEDUCTION

10. RETIREMENT BENEFITS *Estate Tax

- add to GE before deduct - no more reqt for filing Notice of Death
- si NRA: wala - period of payment = ONE YEAR FROM DEATH

11. VANISHING DEDUCTIONS

- Property previously taxed
REMEDIES
- Entitled lahat ng Decedent PROVIDED
property is in the PH
- ‘wag paghiwalayin kay Govt and Txpayer
Reqts:
- GOVT CAUSE OF ACTION: Magbayad si Txpayer
a) Identified Property
b) That estate tax for prior
*Local Taxes
property of PRIOR
DECEDENT is paid Automatic Assessment
c) Now computing for the
estate of PRESENT
DECEDENT *All national taxes are self-assessed taxes
d) Wherein the VD will be  Taxpayer: computes payable taxes
allowed Self-Assessment; Pay-As-You-File System
Lahat ng Internal Revenue taxes, may return
PRIOR DECEDENT deds so bayad ka ng Estate Lahat nag-start kay Txpayer
Tax Due(kasama ang House and Lot)
PRESENT DECEDENT nagmana ng House and
*RETURN
Lot), na-deds, i-tax ulit ang namana; Double
- verified statement
Taxation in Broad Sense
- filed by Txpayer
- providing for material info
TO REDUCE IMPACT OF DoubTax in BS
- relevant to the kind of tax to be paid
- Present Decedent can now claim
VANISHING DEDUCTIONS
- Depends in the period of time between AGAIN: Internal Revenue Tax is self-assessed,
death of PRIOR DECEDENT and PRESENT covered by a Return and you pay the tax as you
DECEDENT file the return
 LUMBERA LECTURE | JURIST

DUE DATE OF RETURN CONSEQUENCE ‘pag lagpas ng deadline

1) CIE 25% penalty
 April 15 of the following year PLUS INTEREST double the legal interest per
Sub Filing (you have ONE Er during the annum
year) : Er is the one filing; Feb. 28 Ddline computed on a daily basis from day of delay

2) SIE/SEP/MIE In case of FRAUD

Quarterly Returns 50% surcharge
3 returns: May 15, August 15, Nov. 15 PLUS INTEREST double the legal interest per
Final Return (Consolidated) annum
on/before Apr 15 of the following year computed on a daily basis from day of delay

3) Corporation AMENDMENT of RETURN

- Quarterly File Original + Amended, if any
- first 3 quarterly returns within 60 days When to amend: within 3 years from date of
from close of the quarter filing orig return
- then FINAL/Consolidated return (pang- PROVIDED NO NOTICE OF INVESTIGATION is
apat) on/before Apr 15 of the following yr received by Txpayer
IF CALENDAR YEAR  beyond 3 years: cannot amend

- On/before the 15th day of the fourth Taxpayer may file

month following the close of Fiscal Year
- In GF
IF Fiscal Year
- F/BF
- Not File
CAPITAL GAINS TAX BIR may file it in your behalf
30 days from sale depende sa method na gamitin ni BIR
to determine presumptive GS/GR
8% RATE
same Quarterly with FINAL WHERE TO FILE?
- Tax Jurisdiction | V
VAT - Regional Offices with Revenue Districts
 Quarterly Ret + Consolidated - Wrong Venue, even if accepted by BIR: NO
ESTOPPEL against govt
Donor’s Tax - as if you did not file/pay
30 days from gift

Estate Tax
 1 year from Death
 LUMBERA LECTURE | JURIST

BIR 2. Filed return in BF/Fraudulent

- Aaralin niya na ang return Presc. Period to issue FAN is 10 years
- May have findings on the return from DISCOVERY of filing the fraudulent
return
If may findings… Disregard date of filing

LOA Letter of Authority to Investigate 3. No Return

- Kahit pa within 3-year period ka, you BIR has 2 options:
cannot file Amended return a) File return in your nehalf; or
b) Issue FAN: within 10 years from
- You will be required to submit docs Discovery of Non-Filing of Return

PAN 4. WAIVER (BAR FAVE)

- 15 days to reply - If nos. 1-3 period are about to expire
- Sec. 223: NO PAN IS NEEDED and BIR has not issued FAN yet,
- BIR may require you to execute waiver
1. Excise Tax - CONTRACT between taxpayer and BIR
2. Mathematical error on the face of - Allowing BIR to issue FAN beyond the
return presc period
3. Discrepancy in Withholding Taxes
4. Check CODAL Waiver (for FAN issuance extension)
STRICT COMPLIANCE
FAN 1) In WRITING
- With or without reply to PAN 2) SIGNATURE of taxpayer is indicated
on the face of waiver
3) Signature of Txpayer and Date of
Execution must appear on the face
DENIAL O FDUE PROCESS if hindi nasunod ang
4) Signature of BIR Officer & date of
process and FAN is not valid
Acceptance by BIR OFFICER
5) Duly Notarized
UNTIL WHEN CAN BIR ISSUE FAN? |
PRESCRIPTIVE PERIOD
***3 copies for Txpayer, BIR, Records of the
1. Filed it in GF, before due date case
BIR FAN ISSUANCE: within 3 years
from due date
**Period of Time: not specified
- Waiver must be executed PRIOR to
Filed in GF, beyond due date
expiry date of prescriptive period
FAN pres period is within 3 years
- Date of Execution and Date of
from actual date of filing
Acceptance
 LUMBERA LECTURE | JURIST

VALID FAN PROTEST

1. In WRITING - TAXPAYER ulit
- Any form - Received FAN
2. Addressed to Txpayer - Protest within 30 days from receipt of
- Address declared in the return FAN
3. Providing for the BASIS in fact & in law - ADMINISTRATIVE PROTEST: sine qua
of the amount of tax due non reqt
- Kind of tax Motion for Recon or
- Period covered Motion for Reinvestigation
4. Amount of TAX DUE MR
- Break down - You are not submitting addtnl docs
5. DEMAND to pay MI
6. DUE DATE
- You are submitting addtnl docs
7. Signed by duly authorized BIR Officer

*Non-extendible 30 days, UNLESS holiday

Service of FAN
- Just like service of Summons
BIR’s ACTS
a) Personal Service
1) Deny 
b) Substituted Service
2) Grant 
- to a person of sufficient discretion
3) Partly grant/denied (;)
- has capacity to fully comprehend the
4) Sit on It (non-action for 180 days)
consequences of valid FAN
 May OPTION KA
- need ng Witness (kagawad

Ano mattanggap mp? FLD

IF REFUSED WHEN FAN IS SERVED
 Final Letter of Demand
- Affidavit by BIR Officer who served
- State the refusal of taxpayer: proof of
receipt BIR’s decision (acts/sits on it) here ENDS
- Proof of Receipt ADMIN PROCESS

c) Registered Mail
d) Courier FAN ---30 days--->PROTEST
- You filed on the 12th
*BIR must be able to ISSUE FAN within Presc - Complete w/ supporting dics
Period - Count 180 days from FILING
*Acceptance/Receipt by Txpayer of FAN is not - IF BIR sat on it, YOU HAVE AN OPTION
necessarily w/in Presc Pd or
- You filed on the 12th
- Lacking in docs
- NOTICE FROM BIR to submit the lacking
docs (BIR won’t specify what docs)
 LUMBERA LECTURE | JURIST

period of 60 days ang submission - 15 days from receipt of prejudicial

you submitted on the 48th day decision wrt to the MR/MNT
count 180-day period from the time - Sino matalo, go ka sa SC
that BIR RECEIVED LACKING DOX
SUPREME COURT
180 days = FOR BIR TO DECIDE ON YOUR - Yung talo, go here
PROTEST - 15 days

Upon expiry date of 180 days, WHAT ARE YOUR SC

OPTIONS? 15 days
- DENIED: Go ka na sa Judicial if denied 
- NON-ACTION/SIT ON IT CTA EB
Txpayer has OPTION 15 days
akyat ka pa-CTA or manatili, wait ka
ng desisyon until mag-expire si 180 days MR/MNT JUDICIAL
15 days
CTA DIVISION
- 30 days from RECEIPT of actual decision CTA DIV
denying/partly granting; 30 days
denying/expiration of 180
- 30 days is non-extendible 180 days for BIR to decide
PROTEST the FAN  ADMIN
**Only Txpayer can go to CTA to BIR
- IF you did not FILE THE PROTEST,
Assessment notice will BE FINAL, you NOTE: Right of the government to COLLECT is
cannot go to CTA INDEPENDENT OF THIS PROCEDURE
- Taxes are the LIFEBLOOD
CTA Div Actions - No INJUNCTION
a) Grant
b) Deny **Filing of Protest will not suspend the
c) Partly G/D Collection

File MR/MNT******A MUST!!! **EXCEPTION: Section 222

- Sine qua non
- ‘pag di ka nag-file, wala na
- 15 days from receipt of prejudicial
decision

CTA EN BANC
- TALO SA MR/MNT
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COLLECTION DURING PROTEST CASE CRIMINAL

- Two types
1) Results in tax
ADMIN JUDICIAL: civ & crim
Deficiency
 Mode of Collection
- Notice of In PROTEST CASES, CTA on the part of BIR
levy, has Exclusive Appellate  Prosec shall file
warrant, Jurisdx Info
distraint, - Review BIR  Depends on
compromise decision Jurisdictional
, forfeiture, Amount
garnishment CIVIL  Resulting in Tax
Def
- Periods of COLLECTION  CTA has EOJ when
Collection principal
*Jurisdictional amounts:
300K/400K (MM)  When principal
a) With FAN: amount of tax due
=> PrincipalAmount
3 yrs GF is 1M and above,
=>typical collection case
10 yrs BF exclusive of
period sa interest and
MTC-RTC-CTA En Banc (15
waiver surcharges
days) ->SC
->En banc because RTC
 Collection exercised appellate 2) NOT results in
period is 5 jurisdx Tax Deficiency
years from - Jurisdx of Reg
receipt of FAN Courts is
->RTC is court of origin
determined on
- CTA Div the PRESCRIBED
b) NO FAN
- 30 days PENALTY
- Fraudulent
return - CTA has no EOJ
RTC->CTA Div->MR->CTA En - Start ka dito sa
- Non-filing Banc ->SC
MTC/RTC
 BIR can walang MNT dito kasi may
directly collect trial on the merits sa Reg
from you Court
within 10 IF PROTES, MNT is available
with CTA because they
years from conduct TRIAL on the merits
discovery of
Filing
Fraudulent
Return/Non- CTA has EXCLUSIVE
filing ORIGINAL Jurisdx
- When principal
amount of tax due is
1M and above,
exclusive of interest
and surcharges
 LUMBERA LECTURE | JURIST

REFUND Pagbayad and Pag-claim ng VAT ay

- Two Types QUARTERLY
1) Ordinary Claim for Refund
- Sec. 229 EXAMPLE
- Grounds: - You are using CALENDAR YEAR
a) Illegally Assessed (Jan-Dec)
b) Illegally Collected
- First Quarter is Jan-March
c) Erroneously Assessed
- You had zero-rated transx (ZRT)
d) Erroneously Collected
on Feb. 14
- May element of BF
- Meron kang Excess Input VAT sa ZRT
- At the end of March, you had Excess
- 2 stages
Input VAT of P25, 000.00
- Admin and Judicial
**No claim for refund will be allowed UNLESS
HOW TO FILE REFUND FOR THE EXCESS INPUT
you went through Admin Stage first
VAT?
 ADMIN
ADMIN JUDICIAL (CTA) - File within 2 years
- Recover
from close of quarter (March)
Internal
Revenue taxes when ZRT occurred (Feb 14)
paid (grounds: - 2 years from March 31 (example ha)
IA, IC, EA, EC) - BIR is required to decide
WITHIN 90 days the claim for refund
- File within
File within SAME
2 years from payment
TWO-YEAR PERIOD Sec. 112 xxxx the Commissioner shall grant a
from payment refund for creditable input taxes within ninety
walang inaction dito
- nasa loo bang (90) days
wait for BIR to 30 days dito sa
decide xxxx failure on the part of BIR to act on
2 years
the application within the ninety (90)-day
period shall be punishable under Section 269 of
BIR decision can be
filed to CTA w/in 30 this Code
days from receipt of
denial of refund IF claim for refund is DENIED
CTA Div
- 30 days from receipt of denial
2) Sec 112 of Tax Code (SPECIAL TYPE) MR
- Refund of Excess Input Vat CTA En Banc
in Zero-Rated Transaction - 15 days from adverse decision
SC (MR/MNT is not required here ha
*0-rated: Input can be credited against Output but you can file because ROC
or mas marami kang Input (gastos”) suppletorily applies)