TAXATION

GOLDEN NOTES 2011 UNIVERSITY OF SANTO TOMAS

FACULTY OF CIVIL LAW MANILA

Academic Year 2011-2012 CIVIL LAW STUDENT COUNCIL

Lester John A. Lomeda President Wilfredo T. Bonilla, Jr. Vice-President Raissa S. Saipudin Secretary Bernadette Faustine C. Balao Treasurer Marc Mikhaele J. Santos Auditor Victor Lorenzo L. Villanuea Public Relations Officer

TEAM: BAR-OPS 2011

Diane Camilla R. Borja Chairperson Carlo Artemus V. Diaz Vice-Chairperson Mary Grace L. Javier Secretary Ronn Robby D. Rosales Logistics Committee Head Mark Arthur M. Catabona Asst. Logistics Committee Head Angeli P. Albaña Finance Committee Head Vicente Jan O. Platon III Hotel Accommodations Head Kimverly A. Ong Asst. Hotel Accommodations Head

The UST GOLDEN NOTES is a student-edited work of the University

of Santo Tomas, Faculty of Civil Law. It is updated annually. Communications regarding the NOTES should be addressed to the Academics Committee of the Team: Bar-Ops.

ADDRESS: Team Bar-Ops

Academics Committee Faculty of Civil Law

University of Santo Tomas España, Manila 1008

TEL. NO.: (02) 731-4027

(02) 4061611 loc. 8578

2011 ACADEMICS COMMITTEE

Lester Jay Alan E. Flores II Chairperson Karen Joy G. Sabugo Vice-Chair for Academics John Henry C. Mendoza Vice-Chair for Academics Jeanelle C. Lee Vice-Chair for Administration and Finance Theena C. Martinez Vice-Chair for Layout and Design Earl Louie M. Masacayan Vice-Chair for Layout and Design

TAXATION LAW COMMITTEE Rodolfo N. Ang, Jr. Taxation Law Committee Head Vannessa Rose S. Hernandez Asst. Taxation Law Committee Head Edison U. Ortiz Asst. Taxation Law Committee Head Jose Duke Bagulaya Member Charles L. Grantoza Member Christine L. Gutierrez Member Clarabel Anne R. Lacsina Member Divine C. Tee Member Keith S. Valcos Member

ADVISER

Atty. Prudence Angelita A. Kasala

FACULTY OF CIVIL LAW

UNIVERSITY OF SANTO TOMAS

Academic Year 2011-2012

ACADEMIC OFFICIALS

Atty. NILO T. DIVINA Dean

Rev. Fr. ISIDRO C. ABAÑO, O.P. Regent

Atty. ARTHUR B. CAPILI Faculty Secretary

Atty. ELGIN MICHAEL C. PEREZ Legal Counsel

UST Chief Justice Roberto Concepcion Legal Aid Clinic

Judge PHILIP A. AGUINALDO SWDB Coordinator

LENY G. GADIANA, RGC Guidance Counselor

Our deepest appreciation to our

Mentors & Inspiration

Hon. Justice Japar B. Dimaampao

Atty. Prudence Angelita A. Kasala

Atty. Marian Joanne K. Co-Pua

For activating our magnets of curiosity, knowledge and

wisdom and helping us understand the intricate

sphere of Taxation Law.

- Academics Committee 2011

UDU UI U USU UC U ULU UAU UI U UM U UE U UR U

The risk of use, non-use and misuse of

this material shall be borne solely by the user.

TABLE OF CONTENTS

SYLLABUS FOR 2011 BAR EXAMINATIONS TAXATION

November 6, 2011

(First Sunday, Afternoon)

GENERAL PRINCIPLES ………………………………………………………………………………………………………………………1 DEFINITION AND CONCEPT OF TAXATION………………………………………........................................ 1 NATURE OF TAXATION………………………………………………..………………………………………………………… 1 CHARACTERISTICS OF TAXATION…………………………………..…………………………………………………….... 4 POWER OF TAXATION COMPARED WITH OTHER POWERS OF THE STATE……………………………… 4 PURPOSE OF TAXATION…………………………………………………………………………………………………………. 4 PRINCIPLES OF SOUND TAX SYSTEM……………………………………………………………………………………. .5 Fiscal Adequacy……………………………………………………………………………………………………… 5 Administrative Feasibility………………………………………………………………………………………. 5 Theoretical Justice…………………………………………………………………………………………………. 5 THEORY AND BASIS OF TAXATION…………………………………………………………………………………………. 6 Lifeblood theory…………………………………………………………………………………………………….. 6 Necessity theory……………………………………………………………………………………………………. 6 Benefits-Protection theory…………………………………………………………………………………….. 6 DOCTRINES OF TAXATION……………………………………………………………………………………………………… 7 Prospectivity of tax laws………………………………………………………………………………………… 7 Imprescriptibility……………………………………………………………………………………………………. 7 Double taxation……………………………………………………………………………………………………… 7 Escape from taxation……………………………………………………………………………………………… 9 Exemption from taxation……………………………………………………………………………………….. 11 Compensation and Set-off……………………………………………………………………………………… 12 Compromise…………………………………………………………………………………………………………… 13 Tax amnesty…………………………………………………………………………………………………………… 13 Construction and Interpretation of Tax laws………………………………………………………….. 14 SCOPE AND LIMITATION OF TAXATION…………………………………………………………………………………. 15 Inherent limitations……………………………………………………………………………………………….. 15 Constitutional Limitations………………………………………………………………………………………. 22

Stages of Taxation………………………………………………………………………………………………….. 33 TAXES……………………………………………………………………………………………………………………………………. 34

Definition, Nature and Characteristics of Taxes……………………………………………………… 34 Requisites of valid tax……………………………………………………………………………………………. 34 Tax as distinguished from other forms of exactions……………………………………………….. 35 Kinds of Taxes……………………………………………………………………………………………………….. 36

NATIONAL INTERNAL REVENUE CODE.................................................................................................. 37

INCOME TAXATION……………………………………………………………………………………………………………………………….37 INCOME TAX SYSTEMS…………………………………………………………………………………………………………… 37 FEATURES OF PHILIPPINE INCOME TAX LAW…………………………………………………………………………. 37 CRITERIA IN IMPOSING PHILIPPINE INCOME TAX…………………………………………………………………… 37 TYPES OF PHILIPPINE INCOME TAX………………………………………………………………………………………….. 38 TAXABLE PERIOD………………………………………………………………………………………………………………….. 39 KINDS OF TAXPAYERS…………………………………………………………………………………………………………… 39 Individual Taxpayers…………………………………………………………………………………………… 39 Special Class of Individual Employees…………………………………………………………………. 41 Corporations………………………………………………………………………………………………………. 41 Partnerships……………………………………………………………………………………………………….. 43 Estates and Trusts………………………………………………………………………………………………. 43 Co-ownerships……………………………………………………………………………………………………. 44 INCOME TAXATION……………………………….……………………………………………………………………………… 45

TABLE OF CONTENTS

INCOME………………………………………………………………………………………………………………………………. 46 Definition……………………………………………………………………………………………………………. 46 Nature………………………………………………………………………………………………………………… 46 When income is taxable……………………………………………………………………………………… 47 Tests in determining whether income is earned for tax purposes……………………….. 47 Realization test………………………………………………………………………….. 47 Claim of right doctrine……………………………………………………………….. 47 Economic benefit test………………………………………………………………… 47 Severance test…………………………………………………………………………… 47 GROSS INCOME……………………………………………………………………………………………………………………….. 49 Definition………………………………………………………………………………………………………………. 49 Concept of income from whatever source derived………………………………………………… 49 Gross income vis-à-vis Net Income vis-à-vis Taxable Income………………………………….. 50

Classification of Income as to Source……………………………………………………………………… 51 Compensation Income……………………………………………………………………… 51

Fringe Benefits…………………………………………………………. 52 Professional Income………………………………………………… 53 Income from business………………………………………………. 53 Income from Dealings in Property……………………………. 53 Capital Assets …………………………………………… 53 Ordinary assets…………………………………………. 54

Types of Gains from dealings in property... 54 Passive Investment Income………………………………………. 62 Royalty Income…………………………………………………………. 66

Rental income…………………………………………………………… 67 Annuities………………………………………………………………….. 68 Prizes and Awards………………………………………………….... 68 Pensions, retirement benefit, separation pay………….. 68 Income from any source whatever…………………………... 68 Exclusions from Gross Income……………………………………………………………..69 Rationale for the exclusions………………………………………. 69 Taxpayers who may avail of the exclusions……………….. 69 Under the Constitution……………………………………………… 69 Under the Tax code…………………………………………………… 70 Under Tax treaty………………………………………………………. 78 Under Special laws……………………………………………………. 78 Deductions from Gross Income………………………………………………………….. 79 General rules……………………………………………………………. 79 Itemized deductions………………………………………………….. 80 Expenses………………………………………………………………….. 80 Interests……………………………………………………………………. 85

Taxes…………………………………………………………………………. 86 Losses…………………………………………………………………….... 88 Bad debts…………………………………………………………………. 89 Depreciation…………………………………………………………….. 90 Charitable and other contributions………………………..… 92 Optional Standard deduction……………………………………………………………… .96 Personal and additional exemption (R.A. 9504)…………………………………… 96 TAXATION OF RESIDENT CITIZENS, NON-RESIDENT CITIZENS AND RESIDENT ALIENS……………. 100 General rule……………………………………………………………………………………………………………… 103 Taxation on Compensation Income………………………………………………………………………….. 103 Taxation of Domestic Corporations………………………………………………………………………….. 107 Taxation of Resident Foreign Corporations………………………………………………………………. 110 Taxation of Non-Resident Foreign corporations………………………………………………………. 114 Improperly Accumulated Earnings of Corporations…………………………………………………. 114 Exemption from tax on corporations………………………………………………………………………. 115 Taxation of Partnerships…………………………………………………………………………………………. 116 Taxation on Estates and trusts………………………………………………………………………………… 117

TABLE OF CONTENTS

WITHHOLDING TAX……………………………………………………………………………………………………………… 118 Concept……………………………………………………………………………………………………………………. 118 Kinds………………………………………………………………………………………………………………………… 118 Withholding of final tax on certain incomes………………………………………….. 118 Withholding of creditable tax at source………………………………………………… 118 Withholding on wages……………………………………………………………………………………………… 119 ESTATE TAX………………………………………………………………………………………………………………………………………….. 123 BASIC PRINCIPLES………………………………………………………………………………………………………………….. 123 DEFINITION…………………………………………………………………………………………………………………………… 124 NATURE………………………………………………………………………………………………………………………………… 125 PURPOSE OF OBJECT……………………………………………………………………………………………………………… 125 TIME AND TRANSFER OF PROPERTIES……………………………………………………………………………………. 126 CLASSIFICATION OF DECEDENT……………………………………………………………………………………………… 126 GROSS ESTATE VIS-À-VIS NET ESTATE……………………………………………………………………………………. 126 DETERMINATION OF GROSS ESTATE AND NET ESTATE…………………………………………………………...126 COMPOSITION OF GROSS ESTATE…………………………………………………………………………………………..128 ITEMS TO BE INCLUDED IN GROSS ESTATE………………………………………………………………………………129 DEDUCTIONS FROM ESTATE……………………………………………………………………………………………………133 EXCLUSIONS FROM ESTATE…………………………………………………………………………………………………….139 TAX CREDIT FOR ESTATE TAXES PAID IN FOREIGN CURRENCY………………………………………………… 140 EXEMPTION OF CERTAIN ACQUISITIONS AND TRANSMISSIONS………………………………………………140 FILING OF NOTICE OF DEATH…………………………………………………………………………………………………. 140 ESTATE TAX RETURN………………………………………………………………………………………………………………. 141 DONOR’S TAX……………………………………………………………………………………………………………………………………… 144 BASIC PRINCIPLES………………………………………………………………………………………………………………….. 144 DEFINITION………………………………………………………………………………………………………………………….. 144 NATURE ………………………………………………………………………………………………………………………… 145 PURPOSE OR OBJECT…………………………………………………………………………………………………………… 145 REQUISITES OF VALID DONATION…………………………………………………………………………………………. 145 TRANSFERS WHICH MAY BE CONSTITUTED AS DONATION…………………………………………………… 147 TRANSFER FOR LESS THAN ADEQUATE AND FULL CONSIDERATION……………………………………… 147 CLASSIFICATION OF DONOR………………………………………………………………………………………………….. 147 DETERMINATION OF GROSS GIFT…………………………………………………………………………………………. 147 COMPOSITION OF GROSS GIFT……………………………………………………………………………………………… 149 VALUATION OF GIFTS MADE IN PROPERTY……………………………………………………………………………. 149 TAX CREDIT FOR DONOR’S TAXES PAID IN A FOREIGN COUNTRY………………………………………….. 149 EXEMPTIONS OF GIFTS FROM DONOR’S TAX………………………………………………………………………… 149 PERSON LIABLE……………………………………………………………………………………………………………………… 153 VALUE-ADDED TAX (VAT)………………………………………………………………………………………………………………………153 CONCEPT……………………………………………………………………………………………………………………………… 153 CHARACTERISTICS…………………………………………………………………………………………………………………. 155 IMPACT OF TAX…………………………………………………………………………………………………………………….. 155 INCIDENCE OF TAX……………………………………………………………………………………………………………….. 155 TAX CREDIT METHOD……………………………………………………………………………………………………………. 155 DESTINATION PRINCIPLE………………………………………………………………………………………………………. 155 PERSONS LIABLE…………………………………………………………………………………………………………………… 155 VAT ON SALE OF GOODS OR PROPERTIES……………………………………………………………………………… 157 ZERO-RATED SALES OF GOODS OR PROPERTIES, AND EFFECTIVELY ZERO-RATED SALES OF GOODS OR PROPERTIES…………………………………………………………………………………….. 158 TRANSACTIONS DEEMED SALE……………………………………………………………………………………………… 162 CHANGE OR CESSATION OF STATUS AS VAT-REGISTERED PERSON……………………………………….. 162 VAT ON IMPORTATION OF GOODS……………………………………………………………………………………….. 163 TRANSFER OF GOODS BY TAX EXEMPT PERSONS………………………………………………………………….. 163 VAT ON SALE OF SERVICE AND USE OR LEASE OF PROPERTIES……………………………………………… 165 REQUISITES FOR TAXABILITY…………………………………………………………………………………………………. 166

TABLE OF CONTENTS

ZERO-RATED SALE OF SERVICES……………………………………………………………………………………….. 166 VAT EXEMPT TRANSACTIONS…………………………………………………………………………………………… 166 Vat Exempt Transactions, In General……………………………………………………………………. 166 Exempt Transaction, Enumerate………………………………………………………………………….. 168 INPUT TAX AND OUTPUT TAX, DEFINED…………………………………………………………………………… 171 SOURCES OF INPUT TAX…………………………………………………………………………………………………… 171 PERSONS WHO CAN AVAIL OF INPUT TAX CREDIT……………………………………………………………. 172 DETERMINATION OF OUTPUT/INPUT TAX; VAT PAYABLE; EXCESS INPUT TAX CREDITS……. 172 Determination Of Output Tax………………………………………………………………………………. 172 Determination Of Input Tax Creditable………………………………………………………………… 172 Allocation Of Input Tax Creditable………………………………………………………………………… 172 Determination Of The Output Tax And Vat Payable And Computation Of Vat Payable Or Excess Tax Credits…………………………………………………………………. 173 SUBSTANTIATION OF INPUT TAX CREDITS……………………………………………………………………….. 173 REFUND OR TAX CREDIT OF EXCESS INPUT TAX………………………………………………………………. 174 Who May Claim For Refund/ Apply For Issuance Of Tax Credit Certificate……………. 174 Period To File Claim/Apply For Issuance Of TCC……………………………………………………. 174 Manner Of Giving Refund…………………………………………………………………………………….. 174 INVOICING REQUIREMENTS…………………………………………………………………………………………….. 174 Invoicing Requirements In General………………………………………………………………………. 174 Consequences Of Issuing Erroneous Vat Invoice Or Vat Official Receipt………………. 175 FILING OF RETURN AND PAYMENT………………………………………………………………………………….. 176 WITHHOLDING OF FINAL VAT ON SALES TO GOVERNMENT…………………………………………….. 176

COMPLIANCE REQUIREMENTS (INTERNAL REVENUE TAXES)…………………………………………………………………………………. 177 ADMINISTRATIVE REQUIREMENTS…………………………………………………………………………………… 177 REGISTRATION REQUIREMENTS………………………………………………………………………………………. 177 PERSONS REQUIRED TO REGISTER FOR VAT…………………………………………………………………… 177 SUPPLYING TAXPAYER IDENTIFICATION NUMBER (TIN)……………………………………………………. 178 ISSUANCE OF RECEIPTS OR SALES OR COMMERCIAL INVOICES………………………………………… 178 Printing of receipts or sales or commercial invoices……………………………………………… 178 Invoicing requirements for VAT……………………………………………………………………………. 179 Exhibition of certificate of payment at place of business……………………………………… 180 Continuation of business of deceased person………………………………………………………. 180

REMOVAL OF BUSINESS TO OTHER LOCATION…………………………………………………………………. 180 TAX RETURNS………………………………………………………………………………………………………………………………………………………. 180 INCOME TAX RETURNS……………………………………………………………………………………………………… 186 Individual Tax Returns……………………………………………………………………………………….… 180 Corporate Returns……………………………………………………………………………………………….. 182 Estate Tax Returns……………………………………………………………………………………………….. 184 Donor’s Tax Returns…………………………………………………………………………………………….. 185 Vat Returns………………………………………………………………………………………………………….. 185 Withholding Tax Returns……………………………………………………………………………………… 186 TAX PAYMENTS……………………………………………………………………………………………………………………………………………………. 186 INCOME TAXES………………………………………………………………………………………………………………… 186 ESTATE TAXES …………………………………………………………………………………………………………………. 187 DONOR’S TAXES………………………………………………………………………………………………………………. 189

VAT…………………………………………………………………………………………………………………………………… 189

TAX REMEDIES UNDER THE NIRC………………………………………………………………………………………………………………………….. 189 TAXPAYER’S REMEDIES……………………………………………………………..………………………………………………………….. 190 ASSESSMENT…………………………………………………………………………………………………………………….. 190 CONCEPT OF ASSESSMENT……………………………………………………………………………………………….. 191 Requisites for valid assessment……………………………………………………………………………… 191 Constructive methods of income determination……………………………………………………. 191 Inventory method for income determination…………………………………………………………. 192

TABLE OF CONTENTS

Jeopardy assessment………………………………………………………………………..… 193 Tax delinquency and tax deficiency……………………………………………………… 193 POWER OF THE COMMISSIONER TO MAKE ASSESSMENTS AND PRESCRIBE ADDITIONAL REQUIREMENTS FOR TAX ADMINISTRATION AND ENFORCEMENT…………………………………………………………………………..………………. 194 Power of the Commissioner to obtain information, and to summon/examine, and take testimony of persons……………………….. 195 WHEN ASSESSMENT IS MADE………………………………………………………………………………….195 Prescriptive period for assessment………………………………………………………. 196 Suspension of running of statute of limitations……………………………………. 198 ASSESSMENT PROCESS………………………………………………………………………………………….. 199 Tax audit………………………………………………………………………………………………. 199 Notice of informal conference…………………………………………………………….. 199 Notice of informal conference…………………………………………………………….. 200 Issuance of preliminary assessment notice (PAN)………………………………… 200 Exceptions to Issuance of PAN……………………………………………………………… 201 Reply to PAN………………………………………………………………………………………… 201 Issuance of formal letter of demand and assessment notice/final assessment notice………………………………………………………….. 201 Disputed assessment……………………………………………………………………………. 202 Administrative decision on a disputed assessment………………………………. 202 Protesting assessment…………………………………………………………………………. 202 Rendition of decision by Commissioner………………………………………………… 204 COLLECTION……………………………………………………………………………………………………………… 206 Requisites……………………………………………………………………………………………. 206 Prescriptive period……………………………………………………………………………….. 206 REFUND…………………………………………………………………………………………………………………… 208 GOVERNMENT REMEDIES……………………………………………………………………………………………………………………. 214 ADMINISTRATIVE REMEDIES………………………………………………………………………………………………………………. 215 DISTRAINT AND LEVY…………………………….…………………………………………………………………. 215 LEVY AND SALE OF REAL PROPERTY………………………………………………………………………… 217 FORFEITURE OF REAL PROPERTY TO THE GOVERNMENT FOR WANT OF BIDDER…….. 219 FURTHER DISTRAINT AND LEVY………………………………………………………………………………. 220 TAX LIEN…………………………………………………………………………………………………………………. 220 JUDICIAL REMEDIES……………………………………………………………………………………………………………………………. 225 STATUTORY OFFENSES AND PENALTIES…………………………………………………………………….. 229 Civil penalties…………………………………………………………………………………………………. 229 Surcharge…………………………………………………………………………………………… 229 Interest……………………………………………………………………………………………….. 231 In General……………………………………………………………………………… 231 Deficiency interest………………………………………………………………… 231 Delinquency interest……………………………………………………………… 231 Interest on extended payment………………………………………………… 231 COMPROMISE AND ABATEMENT OF TAXES……………………………………………………………… 220 ORGANIZATION AND FUNCTION OF BUREAU OF INTERNAL REVENUE……………………………………………….. 231 RULE MAKING AUTHORITY OF THE SEC. OF FINANCE………………………………………………. 233 AUTHORITY OF SEC. OF FINANCE TO PROMULGATE RULES AND REGULATIONS………. 233 SPECIFIC PROVISIONS TO BE CONTAINED IN RULES AND REGULATIONS………………….. 233 NON-RETROACTIVITY OF RULINGS…………………………………………………………………………… 235 POWER OF THE COMMISSIONER TO SUSPEND BUSINESS OPERATIONS OF A TAXPAYER……………………………………………………………………………………………………… 235

LOCAL GOVERNMENT CODE OF 1991, AS AMENDED…………………………………………………………………………. 236

LOCAL GOVERNMENT TAXATION………………………………………………………………………………………………………… 236 FUNDAMENTAL PRINCIPLES…………………………………………………………………………………….. 236

TABLE OF CONTENTS

NATURE AND SOURCE OF TAXING POWER………………………………………………………………………….. 236 Grant of local taxing power under the Local Government Code………………………………. 236 Authority to prescribe penalties for tax violations………………………………………………….. 238 Authority to grant local tax exemptions…………………………………………………………………… 238 Withdrawal of exemptions………………………………………………………………………………………. 239 Authority to adjust local tax rates……………………………………………………………………………. 240 Residual taxing power of local governments……………………………………………………………. 240 Authority to issue local tax ordinances…………………………………………………………………….. 240 LOCAL TAXING AUTHORITY…………………………………………………………………………………………………. 240 Power to create revenues exercised thru LGUs……………………………………………………….. 240 Procedure for approval and effectivity of tax ordinance………………………………………….. 241 SCOPE OF TAXING POWER………………………………………………………………………………………………….. 241 SPECIFIC TAXING POWER OF LOCAL GOVERNMENT UNITS…………………………………………………. 242 Taxing powers of provinces…………………………………………………………………………………….. 243 Taxing powers of cities…………………………………………………………………………………………….. 246 Taxing powers of municipalities………………………………………………………………………………. 246 Tax on various types of businesses…………………………………………………………….. 247 Ceiling on business tax impossible on municipalities within Metro Manila………………………………………………………………………………………….. 249 Tax on retirement on business…………………………………………………………………… 249 Rules on payment of business tax……………………………………………………………… 249 Fees and charges for regulation & licensing……………………………………………….. 249 Situs of tax collected………………………………………………………………………………….. 250 Taxing powers of barangays……………………………………………………………………………………. 251 Common revenue raising powers……………………………………………………………………………. 251 Service fees and charges…………………………………………………………………………….. 251 Public utility charges………………………………………………………………………………….. 251 Toll fess or charges…………………………………………………………………………………….. 251 Community tax………………………………………………………………………………………………………… 252 COMMON LIMITATIONS ON THE TAXING POWERS OF LGUS……………………………………………… 253 COLLECTION OF BUSINESS TAX………………………………………………………………………………………….. 254 Tax period and manner of payment………………………………………………………………………. 255 Accrual of tax…………………………………………………………………………………………………………. 255 Time of payment…………………………………………………………………………………………………….. 255 Penalties on unpaid taxes, fees or charges……………………………………………………………… 255 Authority of treasurer in collection and inspection of books…………………………………… 255 TAXPAYER’S REMEDIES……….. ………………………………………………………………………………………………. 256 Periods of assessment and collection of local taxes, fees or charges………………. 257 Protest of assessment…………………………………………………………………………………….. 258 Claim for refund of tax credit for erroneously or illegally collected tax, fee or charge……………………………………………………………………………………………………... 259 CIVIL REMEDIES BY THE LGU FOR COLLECTION OF REVENUES……………………………………………… 259 Local government’s lien for delinquent taxes, fees, charges………………….259 Civil remedies, in general……………………………………………………………………. 260 Procedure for administrative action…………………………………………………… 260 Distraint of personal property……………………………………………….. 260 Levy of real property, procedure……………………………………………..261 Further distraint or levy…………………………………………………………. 262 Exemption of personal property from distraint or levy…………….262 Penalty on local treasurer for failure to issue and execute warrant of distraint or levy………………………………………………….. 262 Procedure for judicial action……………………………………………………………….. 262

REAL PROPERTY TAXATION………………………………………………………………………………………………………………….. 265

FUNDAMENTAL PRINCIPLES………………………………………………………………………………………………….. 266 NATURE OF REAL PROPERTY TAX…………………………………………………………………………………………… 267 IMPOSITION OF REAL PROPERTY TAX……………………………………………………………………………………. 267

Power to levy real property tax……………………………………………………………………….. 267

TABLE OF CONTENTS

Exemption from real property tax………………………………………………………………………… 269 APPRAISAL AND ASSESSMENT OF REAL PROPERTY TAX…………………………………………………………………. 271 Rule on appraisal of real property at fair market value…………………………………………. 272 Declaration of real property…………………………………………………………………………………. 273 Listing of real property in assessment rolls…………………………………………………………… 274 Preparation of schedules of fair market value……………………………………………………… 274 Authority of assessor to take evidence…………………………………………………… 275 Amendment of schedule of fair market value…………………………………………. 275 Classes of real property………………………………………………………………………………………… 275 Actual use of property as basis of assessment……………………………………………………… 275 Assessment of real property………………………………………………………………………………... 276 Assessment levels………………………………………………………………………………….. 276 General revisions of assessments and property classification …………….. 276 Date of effectivity of assessment or reassessment………………………………… 276 Assessment of property subject to back taxes………………………………………. 276 Notification of new or revised assessment……………………………………………… 277 Appraisal and assessment of machinery………………………………………………………………. 277 COLLECTION OF REAL PROPERTY TAX……………………………………………………………………………………………. 277 Date of accrual of real property tax……………………………………………………………………… 277 Collection of tax……………………………………………………………………………………………………. 277 Collecting authority………………………………………………………………………………… 277 Duty of assessor to furnish local treasurer with assessment rolls……………. 277 Notice if time for collection of tax………………………………………………………….. 278

PERIODS WITHIN WHICH TO COLLECT REAL PROPERTY TAX………………………………………………………… 278 SPECIAL RULES ON PAYMENT……………………………………….………………………………………………………………. 278

Payment of real property tax in installments……………………………………………………. 278 Interests on unpaid real property tax………………………………………………………………. 278 Condonation of real property…………………………………………………………………………… 278 REMEDIES OF LGUS FOR COLLECTION OF REAL PROPERTY TAX…………………………………………………….. 280 Issuance of notice of delinquency for real property tax payment…………………….. 280 Local government’s lien…………………………………………………………………………………… 280 Remedies in general………………………………………………………………………………………… 280 Resale of real estate taken for taxes, fees or charges………………………………………. 281 Further levy until full payment of amount due………………………………………………… 281 REFUND OR CREDIT OF REAL PROPERTY TAX………………………………………………………………………………… 282 Payment under protest………………………………………………………………………………………. 282 Repayment of excessive collections……………………………………………………………………. 283 TAXPAYER’S REMEDIES………………………………………………………………………………………………………………… 283 Contesting an assessment of value of real property………………………………………….. 283 Appeal to the Local Board of Assessment Appeals………………………………….. 283 Appeal to the Central Board of Assessment Appeals………………………………. 284 Effect of payment of tax…………………………………………………………………………. 284 Payment of real property under protest………………………………………………………….. 284 TARIFF AND CUSTOMS CODE OF 1978, AS AMENDED......................................................................................... 289 TARIFF AND DUTIES, DEFINED……………………………………………………………………………………………………………. 289 FLEXIBLE TARIFF CLAUSE…………………………………………………………………………………………………………………….. 297 REQUIREMENTS OF IMPORTATION……………………………………………………………………………………………………. 305 Import entry ………………………………………………………………………………………………………………… 305 Declaration of correct weight or value…………………………………………………………………………. 303 Liability for payment of duties……………………………………………………………………………………… 306 Liquidation of duties……………………………………………………….……………………………………………. 308 IMPORTATION IN VIOLATION OF TCC…………………………………………………………………………………………………… 310 Smuggling……………………………………………………………………………………………………………………………………. 310 Other fraudulent practices……………………………………………………………………………………………….………….. 316 CLASSIFICATION OF GOODS…………………………………………………………………………………………………… ……………… 293 Taxable importation…………………………………………………………………………………………………………………….. 293

TABLE OF CONTENTS

Prohibited importation…………………………………………………………………………………………………293 Conditionally-free importation……………………………………………………………………………………..294 CLASSIFICATION OF DUTIES……………………………………………………………………………………………………298 Ordinary/Regular Duties…………………………………………………………………………………… 299 Ad valorem; Methods of valuation……………………………………………299 Specific…………………………………………………………………………………… 299 Specific duties………………………………………………………………………………………………….. 299 Dumping duties……………………………………………………………………………..300 Countervailing duties…………………………………………………………………….300 Marking duties……………………………………………………………………………….300 Retaliatory/Discriminatory duties…………………………………………………..300 Safeguard……………………………………………………………………………………….301 REMEDIES……………………………………………………………………………………………………………………………. 3 17 Government………………………………………………………………………………………………………………… 317

Administrative/Extrajudicial…………………………………………………………………. 317 Judicial………………………………………………………………………………………………… 317 Taxpayer……………………………………………………………………………………………………………………… 318 Protest………………………………………………………………………………………………… 318 Drawback, Abatement and refund…………………………………………………………..319 Abadonment …………………………………………………………………………………………..320

JUDICIAL REMEDIES; COURT OF TAX APPEALS………………………………………………………………………………… 324 JURISDICTION OF THE COURT OF TAX APPEALS…………………………………………………………………….. 325 JUDICIAL PROCEDURES………………………………………………………………………………………………………… 328

Judicial action for collection of taxes…………………………………………………….. 328 Local taxes…………………………………………………………………………….. 328 Civil cases………………………………………………………………………………………………. 328 Who may appeal, mode of appeal, effect of appeal……………….. 328 Suspension of collection of tax………………………….. 330 Taking of evidence…………………………………………….. 330 Motion for reconsideration or new trial…………… 330 Appeal to the CTA, en banc…………………………………………………….. 331 Petition for review on certiorari to the Supreme Court………….. 331 Criminal cases………………………………………………………………………………………… 334 Institution and prosecution of criminal actions………………………. 334 Institution on civil action in criminal action…………. 334 Appeal and period to appeal………………………………………………….. 335 Petition for review on certiorari to the Supreme Court………….. 335

TAXPAYER’S SUIT IMPUGNING THE VALIDITY OF TAX MEASURES OR ACT OF TAXING AUTHORITY………………………………………………………………………. 336 Taxpayer’s suit, defined………………………………………………………………………….. 336 Distinguished from citizen’s suit……………………………………………………………… 336 Requisites for challenging the constitutionality of a tax …………………………. 336

Concept of Locus Standi as applied in taxation……………………….. 337 Doctrine of transcendental importance………………………………….. 337 Ripeness for judicial determination…………………………………………. 337 INDEX……………………………………………………………………………………………………………………………………………… 340 BIBLIOGRAPHY……………………………………………………………………………………………………………………………….. 342