Taxation Law 1
Taxation Law 1
College of Law
Taxation Law 1
Maria Luisa J. Cepeda-Reyes
I. TAXATION
A. Definition
B. Nature of Internal Revenue Law
- Hilado v CIR, G.R. No. L-9408, October 31, 1956 100 Phil 288
C. Stages of Taxation ; levy, assessment and collection
D. Scope and Nature of Taxation (the characteristics of taxing power ; scope of legislative power
to act)
- Sec. 28, Art. VI, 1987 Constitution
- Sec. 5, Art. X, 1987 Constitution
- Sison v Ancheta, G.R. No. L-59431, July 25, 1984, 130 SCRA 654
- Lutz v Araneta G.R. No. L-7859 (1955)]
- Tio v Videogram Regulatory Board, G.R. No. 75697 (1987)]
E. Underlying Theory and Basis; Necessity Theory; Benefit-Received Principle
- Commissioner v. Algue, G.R. No. L-28896, February 17, 1988, 158 SCRA9
- Lorenzo v. Posadas, G.R. No. 43082, June 18, 1937, 64 Phil 353
- Paseo Realty & Development Corporation v. CA, G.R. No. 119286 (2004)
F. Purpose of Taxation
General/Fiscal/Revenue
- Napocor v Province of Albay G.R. No. 87479, 4 June 1990
- Tolentino v. Secretary of Finance, G.R. No. 115455, August 8, 1994, 235
SCRA 630; 249 SCRA 628
Non-revenue/Special or Regulatory
- Southern Cross Cement Corporation v. Cement Manufacturers Association of the
Philippines, et al., G. R. No. 158540 (2005)
- Osmena v. Orbos, G.R. No. 99886, March 31, 1993, 220 SCRA 703
-PAL v Edu, G.R. No. L-41383, 164 SCRA 320
G. Principles of a Sound Tax System
- Chavez v Ongpin, G.R. No. 76778, June 6, 1990, 186 SCRA 331
- 1987 Constitution, Art. VI, Section 28(1)
H. Comparison with Police Power and Eminent Domain
- Roxas v. CTA, G.R. No. L-25043, April 26, 1968, 23 SCRA 276
- LTO v. City of Butuan, G.R. No. 131512, Jan. 20, 2000
- Commissioner of Internal Revenue v. Central Luzon Drug Corporation, G.R. No.
159647, 15 April 2005
II. TAXES
A. Definition
B. Essential elements of taxes
-Republic v COCOFED, G.R. No. 147062-64, December 14, 2001
C. Kinds of Taxes as to object, purpose, burden, rate, scope, and graduation; progressive tax rate
v. progressive system of taxation
- Tolentino v. Secretary of Finance
- Mandanas v. Executive Secretary, GR No.s 199802 & 208488, 10 April 2019
D. Taxes distinguished from:
1. Debts
- Republic v. Mambulao Lumber Company, G.R. No. L-17725,
4 SCRA 622
- Philex Mining v. CIR, G.R. No.125704, August 28, 1998
- Domingo v Garlitos, G.R. No. L-18994, June 29, 1963, 8 SCRA
443
2. License Fees
-Progressive Dev. Corp. v QC, G.R. No. L-36081, April 24, 1989,
172 SCRA 629
- Ferrer, Jr. V. Bautista, G.R.No. 210551, June 30, 2015
3. Special Assessment
- Lutz v. Araneta (supra)
- Republic v. Central Azucarera de Danao, G.R. No. L-19842, December 26,
1969
• Special Levy
- Apostolic Prefect v Treasurer of Baguio, G.R. No. L-47252, April
18, 1941, 71 Phil. 547
- Sec. 240, RA 7160
5. Tolls
- Diaz v. Secretary of Finance, G.R. No. 193007, July 19, 2011
6. Penalty
- NDC v CIR 151, G.R. No. L-53961, June 30, 1987, SCRA 472
7. Customs Duties
C. Statutes
- RA 8424, as amended by RA 9337, RA 9504, etc.
- Tariff and Customs Code, as amended
- Book II, Local Government Code
- Special Laws
D. Administrative Issuances
- Secs. 244 – 245, NIRC
- Art. 7, Civil Code
- CIR v. Fortune Tobacco, G.R. No. 119761. August 29, 1996
- CIR v. San Miguel Corporation, G.R. No. 184428, November 23,
2011
- Section 201(a),(e)(1)&(2), CMTA
- COC and the District Collector of the Port of Subic v. Hypermix
Feeds Corporation, G.R. No. 179579, Feb. 1, 2012
E. Tax/Revenue Ordinances
-Hagonoy Market Vendor v. Municipality of Hagonoy, G.R. No. 137621, February
6, 2002
F. Tax Treaties
- Deutsche Bank AG Manila Branch v. CIR, G.R. No. 188550, August 19, 2013
- Air Canada v CIR, G.R. No. 169507, January 11, 2016
WEEK TWO
INHERENT LIMITATIONS
A. Public Purposes
- Lutz v Araneta, G.R. No. L-7859, December 22, 1955, 98 Phil. 48
- Pascual v Sec. of Public Works, G.R. No. L-10405, December 29, 1960,
110 Phil. 331
- Planters Products v Fertiphil Corporation, G.R. No. 166006, March 14, 2008
E. International Comity
- Sec. 2, Art. 11, 1987 Constitution
- Tanada v. Angara, G.R. No. 118295, May 2, 1997
- Mitsubishi Corp. v. CIR, CTA Case 6139, Dec. 17, 2003
CONSTITUTIONAL LIMITATIONS
WEEK
THREE
A. In General
- PLDT v. Davao City, G.R. No. 143867, August 22, 2001
- CIR v. Seagate Technology, G.R. No. 153866, February 11, 2005
- Republic v Caguioa, G.R. No. 168584, October 15, 2007
B. Compared with Other Terms
• Tax Remission/Condonation
- Surigao Con. Min. v. Collector, G.R. No. L-14878, December 26, 1963,
• Compromise and Abatement
- Section 204, NIRC as amended
- Qatar Airways v CIR, G.R. No. 238914. June 8, 2020
• Tax Amnesty
- CIR v. Marubeni, G.R. No. 137377, December 18, 2001
• Exclusion/Deduction
- Sec. 32(B), NIRC
- Sec. 34, NIRC
A. Powers and Duties of the BIR ; Interpret Tax Laws and Decide Tax Cases
• Sections 2-18, 21, 246, 244-246, Tax Code
• DOF Department Order No. 7-02, as circularized by RMC No. 40-A-02
• Marcos v CA, G.R. No. 120880 June 5, 1997
• Philippine Bank of Communications v. CIR, G.R. No. 112024 January 28, 1999
• CIR v. Hedcor Sibulan, Inc., G.R. No. 209306, September 27, 2017
• Oceanic Wireless Network v. CIR - G.R. No. 148380, December 9, 2005
• Philippine American Life v Secretary of Finance, G.R. No. 210987, November 24,
2014
B. Chief Officials of the BIR
• Section 3, Tax Code
C. The Court of Tax Appeals
• Composition : Section 1, RA No. 1125 (June 16, 1954), as amended by RA Nos. 9282
(March 30, 2004) and 9503 (June 12, 2008) Section 2, RA No. 1125, as amended by
RA Nos. 9282 and 9503
• Jurisdiction : Section 7, 11, 18, and 19, RA No. 1125 as amended by RA No. 9282
• CIR v CTA, G.R. No. 210501/G.R. No. 211294/G.R. No. 212490. March 15, 2021
• City of Manila v Judge Grecia Cuerdo, G.R. No. 175723, February 4, 2014
WEEK
FOUR
A. Income
• Windfall Receipts
B. Income Tax
C. When is Income Taxable?
- Secs. 43-44, NIRC
- Secs. 51-53, Revenue Regulations No. 2
- CIR v. Tours Specialist, G.R. No. L-66416, March 21, 1990
- CIR v. Filinvest Development Corporation, G.R. No. 163653, July 19, 2011
- ING Bank v CIR, G.R. No. 167679, July 22, 2015
WEEK FIVE
• Situs of Income
- Sec. 42, NIRC
- Secs. 152-165, Revenue Regulations No. 2
B. Compensation Income
- Sec. 32(A), NIRC
- Rep. Act No. 10963 (TRAIN Law), Dec. 19, 2017
- Revenue Regulations No. 11-2018, Jan. 31, 2018, as amended by RR 14-18
- Revenue Memorandum Circular No. 050-18, May 11, 2018
- Sec. 2.78.1(A), Revenue Regulations No. 2-98
- Sec. 2.78.1(A), Revenue Regulations No. 2-98
- Sec. 2.83.5, Revenue Regulations No. 10-2008
- Sec. 2.83.6, Revenue Regulations No. 2-98
- Revenue Memorandum Circular No. 34-2008
• Fringe Benefits
- Revenue Regulations Nos. 3-98, 8-2000, 10-2000, 05-2008, 05-2011
- Revenue Regulations No. 10-2002
- Revenue Memorandum Circular No. 88-2012, December 27, 2012
• Exclusions:
• Compensation for Injuries or Sickness
- Sec. 32(b)(4), NIRC
13th Month Pay and Other benefits
- Sec. 32 (7)(b,e), NIRC
D. Rentals/Leases
- Sec. 32(A5), NIRC
- Secs. 74, 49 and 58, Revenue Regulations No. 2
- Revenue Regulations 19-86
- BIR Ruling No. 009-07
E. Passive Income
1. Interest Income; deposit substitutes
- Sec. 32(A)(4), NIRC
- Revenue Regulations No. 10-98
- RR 14-2011; RMC 77-2012; RMC 81-2012
- BDO v. Republic, G.R. No. 198756, January 13, 2015
• Exclusions:
- Sec. 32(B)(7)(a), NIRC
- CIR v. Mitsubishi Metal, G.R. No. L-54908, January 22, 1990, 181
SCRA 214
- NDC v. CIR, G.R. No. L-53961, June 30, 1987
3. Royalties
- Sec. 32(A)(6), NIRC
- CIR v. SC Johnson, G.R. No. 127105, June 25, 1999
4. Dividends
- Sec. 32(A)(7), NIRC
- Secs. 58 and 71, 250-253, Revenue Regulations No. 2
- Revenue Memorandum No. 31-90
- Sec. 73(C,D), NIRcC
- Wise v Meer, G.R. No. 48231. June 30, 1947
- CIR v. CA, G.R. No. 108576, Jan. 20, 1999
WEEK SIX
o Treatment of Sale or Exchange of Capital Assets which are not Real Property or
Shares of Stock
- Secs. 39(A), 40, NIRC ; Net Capital Gain and Net Capital Loss; Holding Period
III. TAXPAYERS
I. General Principles
- Sec. 23, NIRC
• Citizens
- Sec. 23(A-D), NIRC
- Secs. 1 and 2, Art. IV, 1987 Constitution
o Resident Citizens
- Sec. 23(E), NIRC
o Non-Resident Citizens
- Secs. 22(E), 23(B), NIRC
• Aliens
o Resident Alien
- Secs. 22(F), 24(B), NIRC
- Sec. 5, Revenue Regulations No. 2
o Non-Resident Alien
• Passive Income:
• Dividends
- Sec. 24(B)(2), NIRC
- Sec. 73, NIRC
C. Non-resident Alien
• engaged in trade or business (Sec. 25(A), NIRC);
- Taxable Income Taxation
- Gross Income Taxation
- Passive Income; Revenue Regulations 2-2021
- Capital Gains Sec. 25(3)
• not engaged in trade or business (Sec. 25(B), NIRC)
- Sec. 25(B)
WEEK
SEVEN
• Co-ownership
- Art. 484, Civil Code
- Revenue Memorandum Circular No. 003-12, January 11, 2012
- Revenue Memorandum Circular No. 89-12, December 27, 2012
- Obillos v. CIR, L-68118, Oct. 29, 1985
a. Domestic Corporations
- Sections 3 and 4, Revised Corporation Code
- Revenue Regulations 5-2021
• Taxable Income
- Sec. 27(A), NIRC
• Special Corporations
• Private Educational Institutions and Non-profit Hospitals
- Sec. 27(B), NIRC
- CIR v. St. Luke’s Medical Center, Inc., G.R. Nos. 195909 and 195960, September 26,
2012)
• Government-owned and controlled corporations
- Sec. 27(C), NIRC
• Passive Income.
• Interest, Royalties
- Sec. 27(D)(1, 3), NIRC
• Dividends
- Sec. 27(4), NIRC
• Capital Gains
- Sec. 27(D)(2, 5), NIRC
• Taxable Income
- Sec. 28(A), NIRC
- Secs. 22(B), (C), (D), (H), NIRC
- Title XV Revised Corporation Code
- Section 3(d), RA No. 7042 (Foreign Investments Act of 1991)
- Revenue Regulations 5-2021
• International Carriers
-Sec. 28(A)(3), NIRC
-RA 10378, March 7, 2013
-RR 15-2013
- CIR v. British Overseas Airways Corporation, G.R. No. L-65773, April 30, 1987
- South African Airways v. CIR, G.R. No. 180356, February 16, 2010
- RR No. 15-2002, May 20, 2002
o FCDU Income
o Dividends
- Sec. 28(A)(7)(d), NIRC
o Intercorporate Dividends
- Sec. 28(A)(7)(c), NIRC, as amended by CREATE
WEEK
EIGHT
• Taxable Income
- Sec. 28(B)(1)
o Interest
- Sec. 28(B)(5)(a), NIRC
o Dividends
- Sec. 28(B)(5)(b), NIRC
- CIR v. Wander Philippines, G.R. No. L-68375 April 15, 1988
- Marubeni v. Commissioner, G.R. No. 76573 September 14, 1989
- CIR v. Procter & Gamble, G.R.No. 66838, December 2, 1991
o Capital Gains
- Sec. 28(B)(5)(c), NIRC
• Hospitals
- CIR v. St. Luke’s Medical Center, G.R. No. 195960, September 26, 2012
- Sec. 30(E) vs. Sec. 30(G), NIRC
• Others
WEEK NINE
A. In General
- Revenue Regulations No. 18-2001, Nov. 13, 2001
- Revenue Memorandum Order 32-2001, Nov. 28, 2001
- Revenue Memorandum Order (RMO) No. 17-2016
B. Merger or Consolidation
- Sec. 40(C)(2) and (6)(b), NIRC
- Sec. 75 -79 Revised Corporation Code
- CIR vs. Rufino, G.R. Nos. L-33665-68 February 27, 1987
o De Facto Merger
- Revenue Memorandum Ruling 1-2002, Apr. 25, 2002
C. Exchange of Property for Shares of Stock
- Sec. 40(C)(2), NIRC
- CIR v. Filinvest Development Corporation, G.R. No. 163653, July 19, 2011
- CIR v Co, G.R. No. 241424. February 26, 2020
- CIR v. HSBC, G.R. No. 227121. December 9, 2020
- Deeds of Trusts
- Transfers by Mistakes
- Sec. 196, NIRC
Transfers of Rights;
Rescinded Contracts;
Equitable Mortgage
Condominium Corporations
Miscellaneous Exempt Transactions
- Sec. 24(D), NIRC
- RA 6657
- Revenue Regulations No. 7-2011, February 16, 2011
- Revenue Memorandum Circular No. 32-2012, July 16, 2012
E. Administrative Requirements
- Revenue Memorandum Order No. 32-2001, Nov. 29, 2001
• Deductions in General
- Sec. 34, NIRC
- Secs. 119-120, Revenue Regulations No. 2
- CIR v. General Foods, G.R. No. 143672, April 24, 2003
- Commissioner v. Philippine Acetylene, G.R. No. L-22443, May 29, 1971, 39
SCRA 70
• Kinds of Deductions
- Itemized
- Optional Standard
- Sec. 34(L), NIRC
- RR No. 16-2008
- RR No. 2-2010
- RMC No. 16-2010
- Special Deductions
• Allowable Deductions
- Secs. 24(A), 25(A), 26, 27(A,B,C), 28(A)(1), 45, NIRC
o Interest Expense
- Sections 34(B), 36(B), NIRC
- Revenue Regulations No. 13-00
- Paper Industries v. CA, G.R. Nos. 106494-50, December 1, 1995, 250 SCRA
434
o Taxes
- Secs. 34(2)(C), NIRC; Tax Benefit Rule
- Secs. 80-83, 84 par. 1, 85, 92, Revenue Regulations No. 2
- CIR v. Lednicky, G.R. No. L-18169, July 31, 1964
- Mercury Drug Corporation v. CIR, G.R. No. 164050, July 20, 2011, 654 SCRA 124
o Losses
- Sec. 34(D), NIRC
- Secs. 93-101, Revenue Regulations No. 2
- Tambunting v. CIR, G.R. No.173373, July 29, 2013
- Fernandez Hermanos v. CIR, G.R. No. L-21551, L-21557, L-24972, L-24978,
September 30, 1969, 29 SCRA 552
- China Bank v. CA, G.R. No. 125508, July 19, 2000, 336 SCRA 178
- Paper Industries v. CA, G.R. Nos. 106494-50, December 1, 1995, 250 SCRA
434
▪ Abandonment Loss
- Sec. 34(D)(7), NIRC
▪ NOLCO
- Sec. 34(D)(3)
- RR No. 14-01
- Section 4, RA No. 11469 (Bayanihan 1); RR 25-2020
▪ Obsolescence
- Sec. 110, RR No. 2
WEEK TEN
o Bad Debts
- Sec. 34 (E), NIRC
- Revenue Regulations Nos. 5-99 and 25-02; Tax Benefit Rule
- Secs. 102-104, Revenue Regulations No. 2
- Collector v. Goodrich, G.R. No. L-22265, December 22, 1967, 21 SCRA 1336
- Fernandez Hermanos v. CIR (supra)
o Depletion
- Sec. 34(G), NIRC
- Revenue Regulations No. 5-76
- Consolidated Mines v. CTA, G.R. Nos. L-18843 & 18844, 58 SCRA 618
o R&D Expenses
- Sec. 34(I), NIRC
o Illegal Expenses
- Sec. 34(1), NIRC
- Callanoc v. Collector, 3 SCRA 517
- 3M Philippines v. CIR, G.R. No. 82833, Sept. 26, 1988
o Special Deductions
- Sec. 37, NIRC
A. Application of Tax
- Articles 1440-1457, New Civil Code
- Secs. 60-66, NIRC
- Secs. 207-213, NIRC
- RMC No. 39-2014, May 12, 2014
- Secs. 207-213, Revenue Regulations No. 2
- CIR v. CA, G.R. No. 95022, March 23, 1992
B. Exception (Sec. 60(B), NIRC)
C. Computation and Payment
- Sec. 60(C), NIRC
- In General (Sec. 60(C)(1), NIRC)
- Consolidation of income of two or more trusts (Sec. 60(C )(2), NIRC)
- Taxable income (Sec. 61, NIRC)
- Exemption allowed to Estates and Trusts (Sec. 62, NIRC)
- Revocable trusts (Sec. 63, NIRC)
- Income for benefit of grantor (Sec. 64(A), NIRC)
- Meaning of “in the discretion of the grantor” (Sec. 64(B), NIRC)
WEEK
ELEVEN
a. In General
- NIRC, secs. 24-28, 33, 51-52, 55, 74-77
- RMC 31-2019
b. Individuals
c. Corporations
- CIR v. TMX Sales, G.R. No. 83736 January 15, 1992
- San Carlos Milling v. CIR, G.R. No. 103379 November 23, 1993
WEEK
TWELVE