TAXATION_ATTY.-LOANZON.pdf

Pointers in Taxation Law 2016 Bar Examinations Professor Victoria V V.. Loanzon Lo anzon With the assistance of Atty. Sid Angelo Bautista Admitted to the Practice of Law, May 2016

I. General Principles Q. What is the nature of the taxing power of government? A. The power to tax is inherent to the state but constitutional provisions limit the exercise thereof. Taxes are mandatory impositions and not a contract between the state and the taxpayer ( in invitum) because invitum) because consent, which is an essential element of contract, is absent. It has the power to destroy as it puts restraint on personal and property rights. Q. What is the two-fold nature of the power to tax? A. Th e two-fold natur e of the powe powerr of taxation   is inherent power and legislative power. It is inherent because it is an exercise of sovereign powers and not granted by the Constitution. The  primary purpose of taxation is to generate funds for the state to finance the needs of the citizens and promote the common good. This is carried out by way of legislation. Q. What are the relevant theories governing the state’s inherent power to tax?  Necessity Theory Theory  –  existence  existence of government is a necessity, therefore it has A. Relevant Theories: Necessity the right to compel citizens and property to pay taxes;  Benefits  –  Protection   Protection Theor y –  payment   payment of taxes allows a citizen to enjoy benefits in an organized society; and  Life Blood Theory  –  taxes constitute the lifeblood of the country and taxes support the operations of government and the  public services services extended extended to the people. people. Lifeblood Theory: Taxes are the lifeblood of the nation. The Philippines has been struggling to improve its tax efficiency collection for the longest time with minimal success. Consequently, the Philippines has suffered the economic adversities arising from poor tax collections, forcing the government to continue borrowing to fund the budget deficits. ( Wes Wester ter n M in danao danao Power Power Corp v. CI R, 2013)  2013) 

Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor , (2003)) endure. (Nati onal Power Power Corporation v. City of Cabanatuan  Cabanatuan  Benefits Protection Theory:  The individual receives the equivalent of the tax in the form of  protection and benefit benefit he receives receives from the government as such. Chur chil l and Tait vs. vs. Raf Raf ferty, ) 32 Phi l. 580, No. 10572, Decembe Decemberr 21, 1915  Necessity Theory: The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve the State’s sovereignty and a means to give the citizenry an army to resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvements designed for the enjoyment of the citizenry and those which come within the State’s territory, and facilities and protection which a government is supposed to provide. ( Phi l . Guar anty Co., In c, vs vs. Commissi Commissi oner of I nt. Rev., Rev., 13 SCRA 775, 775, No. ) L -22074 -22074 Apri l 30, 1965  1965  Q. What is the distinction between the power to tax and the exercise of police power? A. When the purpose of the imposition of a royalty fee upon an oil company is not for the  purpose of generating generating revenue but but a recognition recognition that the oil industry industry is imbued imbued with public public interest, then the royalty fee will be considered as a regulatory fee. *Simply stated an imposition that is for revenue is generally a tax while an imposition that has another purpose such as regulation is an exercise of police power. ( Chevron Chevron v. BCDA and CDC) Q. What are the constitutional proscriptions in enacting tax laws? A. All tax measures must originate from the House of Representatives but Senate may propose or concur with amendments. The rule on taxation must be uniform and equitable; Congress shall evolve a  progressive  progressive system of taxation (tax rate and tax base are directly proportional as against  proportional system which system which has a fixed rate regardless of tax base; and regressive system where system  where the tax rate and tax base are inversely proportional).

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The constitutional provision has been interpreted to mean simply that "direct taxes are to be  preferred [and] as much as possible, indirect taxes should be minimized. ( Tol enti no v. Secretary Secretary of F in ance, ance, 1995) 1995)

The Constitution has delegated legislative power to the President to impose tariff rates, import and export quotas, tonnage and wharfage dues and other duties or imposts within the framework of the national development program. Charitable institutions, churches and personages or convents appurtenant thereto, mosques, non-profit cemeteries and all lands, buildings and improvements, actually, directly and  (  (ADE) used for religious, charitable or educational purposes are tax exempt. exclusively  ADE means solely used for the purposes enumerated in the Constitution.  Note also that it is the use of property that determines exemption not the use of income coming ) from such property. (L un g Center Center of the Phi li ppines v. Quez Quezon Cit y, 2004  2004  Any law granting tax exemption must be approved by majority of all members of Congress. All money collected for a special purpose ( special ( special levy or tax as contrasted to general tax) shall tax)  shall  be dedicated only for that purpose and any excess shall be transferred to the general fund of the government. All local government units may impose tolls ( ex. ex. use of roads), charges charges (ex. special assessment for certain activities) activities) and fees (ex. fees (ex. building permits, business permits) in line with the principle of local autonomy; except for non-payment of community taxes/poll taxes, non-payment of other taxes such as real property taxes may subject one to imprisonment. While taxes are not subject to set-off or compensation and over payment when proven forces the government to restore to the taxpayer the amount it overpaid ( solutio ( solutio indebiti indebiti). ). Q. Can a non-profit, non-stock educational institution refuse to settle the assessment of a local government for its building permit? A. No. The DPWH implements the Building Code through the Building Officials of all local government units. While there is incidental revenue to the local government unit, the imposition of a Building Permit partakes of a regulatory nature. The imposition of Building Permit fee is an exercise of police power to ensure compliance with the standards under the Building Code to  protect the the public from any danger. danger. (Angeles Angeles Uni ver ver sity F oundation v. City of Angeles Angeles)  Q. When enacting tax measures, what w hat general guidelines must the legislator consider? A. In enacting tax measures measures the legislator must exert every effort to distribute the tax burden  between individuals or classes of population; in general, to redistribute resources between individuals (to include some form subsidy by way of support to particular classes like the senior citizens, the poor, the retired employees, the disabled); to provide basis for fiscal policy; to modify patterns of consumption or employment (may have incentives or factors to make them less attractive). Q. What are general characteristics of tax measures? A.  Taxes are enforced and never voluntary (does not need consent of the taxpayer); exacted  pursuant to law (part of legislative legislative power but limited by constitutional constitutional provisions; and must originate from the House of Representatives); exaction is always in the form of money but failure to pay may result to distraint and levy of properties; taxes are personal and cannot be transferred or transmitted but the burden can be shifted (in case of indirect taxes like VAT), purpose is to raise revenue for public/ governmental purpose; proceeds of tax collection cannot be used for  private purpose; levied by authority which has jurisdictio j urisdiction n over the following person, property, transaction, rights and privileges (which is the extent of coverage/scope of powers). Q. Discuss the normal tax cycle. A. The Tax Cycle:  Levy  –  Congress determines the persons, property or exercises to be taxed, amount to be raised, rates to be imposed and manner of implementation.  Assessment and Collection Collection  –  The   The executive branch administers and implements all tax laws; and enforces the levy. levy .  Payment and/or Exercise Exercise of Remedies  –  Compliance   Compliance results in payment but resistance will allow the government and the taxpayer to exercise both administrative and judicial remedies. Q. What is the purpose of tax? A. Fiscal when it raises funds or regulatory when it seeks to achieve social or economic goals.

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Q. Who are liable for tax? A. For direct taxes, same person absorbs the tax (ex. income tax, PTR, CTC) and burden to pay cannot be shifted while in indirect taxes, tax is paid by the person other than the one upon whom it is imposed, thus the burden can be shifted (ex. VAT). (Expect questions on VAT-exempt transactions and VATable transactions). Q. What factors must be considered in imposing taxes? A. Consider persons (natural and juridical) to be taxed; consider residence of the tax payer (mobilia sequntur personam); consider threshold period and threshold amount; determine situs of the tax to avoid double taxation; review reciprocity and comity principles under tax treaties which may operate for a given tax incident. Q. The employees of the Bureau of Customs assailed the constitutionality of the Attrition Law on the following grounds: denial of due process, violative of the equal protection clause, undue delegation of power, constitutes itself as a bill of attainder and threatens their security of tenure. Will the case prosper? A. No. The Attrition Bill is constitutional. There is a valid classification not violative of the equal  protection clause as the employees of BIR and BOC, being involved in revenue collection, are different from other government employees. The law does not violate due process and security of tenure; it is also not a bill of attainder as the underperformance is indicated by a clear standard expressly provided and dismissal is subject to civil service substantive and procedural rules. (BOCEA v. Sec. Teves) Q. How are tax measures interpreted? A. As a general rule, tax statutes are construed strictly against the government and liberally in favor of taxpayers; under the lifeblood theory, it frowns against exemptions  and there therefore the taxpayer has the burden of proof to show his claim ( strictissimi juris); tax amnesty is never  presumed. M ir amar F ish Company, I nc. v Commissioner of I nternal Revenue., G.R. No. 185432, Jun e 4, : A claim for tax refund or credit, like a claim for tax refund exemption, is construed strictly 2014 

against the taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is compliance with the 120+30 day mandatory and jurisdictional periods. CI R v. San Roque Power Corp and oth er consoli dated cases,  G.R No. 205543, June 30, 2014 :

The general rule is that a void law or administrative act cannot be the source of legal rights or duties. Article 7 of the Civil Code enunciates this general rule, as well as its exception. The Court said that although Section 4 of the 1997 Tax Code provides that the "power to interpret the  provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance," Section 7 of the same Code does not prohibit the delegation of such power. Thus, "the Commissioner may delegate the  powers vested in him under the pertinent provisions of this Code to any or such subordinate officials with the rank equivalent to a division chief or higher, subject to such limitations and restrictions as may be imposed under rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner." The Court further held that provisions of the NIRC particularly Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The taxpayer can file his administrative claim for refund or credit within the two-year prescriptive period. If he files his claim on the last day of the two-year prescriptive period, his claim is still filed on time. The Commissioner will have 120 days from such filing to decide the claim. If the Commissioner th decides the claim on the 120  day, or does not decide it on that day, the taxpayer still has 30 days to file his judicial claim with the CTA. Q. May a private company refuse to grant a 20% senior for its services? A. No. The validity of the 20% senior citizen discount and tax deduction scheme under RA 9257, as an exercise of police power of the State, has already been settled in Carlos Superdrug Corporation. The discount given to senior citizens meets all the requirements under the equal protection class. Senior citizens are likewise exempt from 12% VAT imposition. ( Manila M emori al Park , I nc and La F unerar ia Paz-Sucat v. DSWD Secretary, 2013) 

Q. What are the factors to consider in enacting revenue-raising measures? A. Purpose is lawful, identify specific person, property or privilege to be taxed, specify schedule

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of the rate to be imposed; distinguish if tax is direct or indirect; apportionment of the tax to be collected; situs of taxation; and mode of levy/collection. Q. What may be the subject matter of taxes? A. Personal, capitation or poll  –  fixed amount without regard to class;  Property –   subject to assessment based on area, location, use and normally distinguishes between land and improvements which may include equipment;  Excise –   based on exercise of privileges or doing business (Expect questions on input/output tax and zero rated transactions); and Customs duties –  imposed on commodities exported or imported. Q. May the provisions of a tax law be extended by implication? A. Yes. It is well settled that where the language of the law is clear and unequivocal, it must be given its literal application and applied without interpretation. The general rule of requiring adherence to the letter in construing statutes applies with particular strictness to tax laws and  provisions of a taxing act are not to be extended by implication. A careful reading of the RMOs pertaining to the Voluntary Assessment Program (VAP) shows that the recording of the information in the Official Registry Book of the BIR is a mandatory requirement before a taxpayer may be excluded from the coverage of the VAP. ( CI R v. Ar iete et al, 2010)  Q. Is a claim for tax exemption tantamount to questioning the authority of the assessor? A. No. A claim for tax exemption, whether full or partial, does not deal with the authority of local assessor to assess real property tax. Such claim questions the correctness of the assessment and compliance with the applicable provisions of Republic Act (RA) No. 7160 or the Local Government Code (LGC) of 1991, particularly as to requirement of payment under protest, is mandatory. (Camp John Hay Dev. Corp. v. Central Board of Assessment Appeals (“CBAA”), 2013)

Q. PEZA holds a special charter and created by law. The main objective of the law is to provide a package of incentives to investors locating in areas identified as export processing zones. Through the years, PEZA has established a number of these zones. May PEZA be taxed as a corporate body? A. No. Being an instrumentality of the national government, the PEZA cannot be taxed by local government units. Although a body corporate vested with some corporate powers, the PEZA is not a government-owned or controlled corporation taxable for real pr operty taxes. The PEZA’s  predecessor, the EPZA, it was declared non-profit in character with all its revenues devoted for its development, improvement, and maintenance. Consistent with this non- profit character, the EPZA was explicitly declared exempt from real property taxes under its charter. Even the PEZA’s lands and building whose beneficial use have been granted to other persons may not be taxed with real property taxes. The PEZA may only lease its lands and buildings to PEZA-registered economic zone enterprises and entities. These PEZA- registered enterprises and entities, which operate within economic zones, are not subject to real property taxes. ( CITY OF LAPU-LAPU vs. PHILIPPINE ECONOMIC ZONE AUTHORITY; PROVINCE OF BATAAN, REPRESENTED BY GOVERNOR ENRIQUE T. GARCIA, JR., AND EMERLINDA S. TALENTO, IN HER CAPACITY AS PROVINCIAL TREASURER OF BATA AN vs. PH I LI PPI NE ECONOM I C ZONE AUTH ORIT Y, G.R No. 184203, G.R NO. 187583, November 26, 2014) 

Q. What is the cross border doctrine of the VAT system? A. The cross border doctrine states that no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Accordingly, the sales made by suppliers from a customs territory to a purchaser located within an ECOZONE will be considered as exportations. (Commi ssi oner of I ntern al Revenue v. ) Toshi ba In for mation E quipment (PHI L S.) I nc., G.R. No. 150154, August 9, 2005  Q. What is the Destination Principle of the VAT system? A. The destination principle states that goods and services are taxed only in the country where they are consumed (Commissioner of I nternal Revenue v. Amer ican E xpress In ter national , ) G.R. No. 152609, June 29, 2005  Q. Can an entity located within an ECOZONE seek from BIR the refund of its unutilized input taxes?

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A. No. CORAL BAY NICKEL CORPORATION v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 190506, June 13, 2016: Under the destination principle and cross border doctrine, sales of goods and services to Coral Bay Nickel Corporation, a PEZA-registered enterprise located in Rio Tuba Export Processing Zone (Ecozone) is subject to 0% VAT. The  proper party to seek the tax refunds or credits should be the sellers of the goods, not the BIR. Thus, Coral Bay Nickel is not entitled to claim for refund of input VAT it paid on its purchases of goods and services. Q. When is there double taxation? A. There is double taxation when the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and the taxes must be of the same kind or character. ( NURSERY CARE CORPORATI ON; SH OEM ART, I NC.; STAR APPLI ANCE CENTER, I NC.; H & B, INC.; SUPPLIES STATION INC.; and HARDWARE WORKSHOP, INC. vs. ANTHONY ACEVEDO, in hi s capacity as TH E TREASURER OF M ANI LA; and TH E CI TY OF M AN I L A, G.R. NO. 180651, July 30, 2014) 

Q. XYZ is a cigarette manufacturing company. The Bureau of Internal Revenue assessed it separately for the raw materials it used for manufacturing its products and for its finished products. Is the taxation of raw materials and the products resulting therefrom considered double taxation? A. No. Stemmed leaf tobacco is subject to the specific tax under Section 141 (b). It is a partially  prepared tobacco. The removal of the stem or midrib from the leaf tobacco makes the resulting stemmed leaf tobacco a prepared or partially prepared tobacco. Since the Tax Code contained no definition of “partially prepared tobacco,” then the term should be   construed in its general, ordinary, and comprehensive sense x x x.” Finally, excise taxes are essentially taxes on property  because they are levied on certain specified goods or articles manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition, and on goods imported . In this case, there is no double taxation in the prohibited sense despite the fact that they are paying the specific tax on the raw material and on the finished product in which the raw material was a part, because the specific tax is imposed by explicit provisions of the Tax Code on two different articles or products: (1) on the stemmed leaf tobacco; and (2) on cigar or cigarette. (LA SUERTE CI GAR & CIGARETTE FA CTORY vs. COURT OF APPEAL S AND COMM I SSI ONER OF I NTE RNAL REVEN UE, G.R No. 125346, G.R Nos. 136328-29, G.R No. 144942, G.R No. 148605, G.R No. 158197, G.R. No. 165499, November 11, 2014)

Q. The City of Manila sought to enforce both Sections 14 and 21 of the Manila Revenue Code claiming that the former is a tax on manufacturers, etc. while the latter applies to business subject to excise, VAT or percentage tax. Wi ll the impositi on of both sections amount to in vali d double taxation? A. Yes. There is in fact double taxation since both sections are being imposed on the same subject

matter (privilege of doing business within the city), for the same purpose, by the same taxing authority, within the same taxing jurisdiction, for the same taxing period, and of the same kind or character (a local business tax imposed on gross sales or receipts). NURSERY CARE CORPORATI ON; SH OEM ART, I NC.; STAR APPLI ANCE CENTER, I NC.; H & B, INC.; SUPPLIES STATION INC.; and HARDWARE WORKSHOP, INC. vs. ANTHONY ACEVEDO, in hi s capacity as TH E TREASURER OF M ANI LA; and TH E CI TY OF M AN I L A, G.R. NO. 180651, July 30, 2014) 

Q. What is a Final Withholding Tax? A. Revenue Regulation No. 02-98: The final withholding tax (FWT) is the amount of income tax that constitutes as a full and final payment of income tax due from the recipient of the income. Q. CODE-NGO, assisted by RCBC requested for the approval of the Department of Finance (“DOF”) in order for the Bureau of Treasury’s (“BOT”) issuance of ten-year zero coupon treasury certificates (T-notes). These T-Notes would initially be purchased by a special purpose vehicle on behalf of CODE-NGO, repackaged and sold at a premium to investors as PEACE Bonds. Thereafter, the BOT issued the T-notes to RCBC on behalf of CODE-NGO. RCBC Capital, as the lead underwriter, sold the Peace Bonds in the secondary market. Note that BDO purchased several PEACE Bonds on different dates. However, the BIR issued a later ruling declaring that the PEACE Bonds, being deposit substitutes, are subject to the 20% final withholding tax. Are these PEACE Bonds subject to

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final withholding tax? A.  Yes. The Supreme Court held that the number of lenders is determinative of whether a debt instrument should be considered a deposit substitute and consequently subject to the 20% final withholding tax. From the point of view of the financial market, the phrase “at any one time” for  purposes of determining the “20 or more lenders” would mean every transaction executed in the  primary or secondary market in connection with the purchase or sale of securities. Where the financial assets involved are government securities like bonds, the reckoning of the “20 or more lenders/investors” is made at any transaction in connection with the purchase or sale of the government bonds, such as: a) Issuance by the Bureau of Treasury of the bonds to the Government Securities Eligible Dealers (GSEDs) in the primary market; b) Sale and distribution  by GSEDs to various lenders/investors in the secondary market; c) Subsequent sale or trading by a bondholder to another lender/investor in the secondary market usually through a broker or dealer; or d) Sale by a financial intermediary-bondholder of its participation interests in the  bonds to individual or corporate lenders in the secondary market. When, through any of the foregoing transactions, funds are simultaneously obtained from 20 or more lenders/investors, there is deemed to be a public borrowing and the bonds at that point in time are deemed deposit substitutes. Consequently, the seller is required to withhold the 20% final withholding tax on the imputed interest income from the bonds.

Q. What is the nature of Documentary Stamp Tax (“DST”)? A. DST partakes of Excise : L iabil ity f or payment of D ST i s for account of the Sell er Fort Bonifacio Dev. Corp v. CIR, 2013. DST i s an exci se tax l evied on th e exerci se by persons of pr i vil eges conf er r ed by law. * note that t hi s was asked in t he 2014 bar even t hough excl uded i n t he coverage

Philacor Credit Corp v. CIR, 2013: DST i s due the person (1) makin g; (2) signi ng; (3) issui ng; (4) accepting; or (5) tr ansferr in g the taxable documents.

Q. When is DST imposed? DST is in the nature of an excise tax because it is imposed upon the privilege, opportunity or facility offered at exchanges for the transaction of the business. DST is a tax on documents, instruments, loan agreements, and papers evidencing the acceptance, assignment, or transfer of an obligation, right or property incident thereto. DST is thus imposed on the exercise of these  privileges through the execution of specific instruments, independently of the legal status of the transactions giving rise thereto. In a merger of two corporations, the transfer of real properties not conveyed to or vested by means of any specific deed, instrument or writing is not subject to DST.R.A No. 9243, entitled “An Act Rationalizing the Provisions of the Documentary Stamp Tax of the National Internal Revenue Code of 1997” was enacted and took effect on April 27, 2004, which exempts the transfer of real property of a corporation, which is a party to the merger or consolidation, to another corporation, which is also a party to the merger or consolidation, from the payment of DST. ( COM M I SSI ONER OF I NTERNAL REVENUE vs. PIL I PINAS SH EL L PETROL EU M CORPORATI ON, G.R No. 192398, September 29, 2014) 

Q. Is an electronic message with instruction to debit an account and pay a person subject to DST? A. No. On review with the Supreme Court, it held that an electronic message containing instructions to debit their respective local or foreign currency accounts in the Philippines and pay a certain named recipient also residing in the Philippines is not transaction contemplated under Section 181 of the Tax Code. They are also not bills of exchange due to their non-negotiability. Hence, they are not subject to DST. ( THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED-PHILIPPINE BRANCHES vs. COMMISSIONER I NT ERN AL REVE NU E, G.R. No. 166018 & 167728, June 4, 2014) 

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Q. National Power Corporation (“NAPOCOR”) transferred its franchise to the newly-created National Transmission Corporation (“TRANSCO”). At the time of transfer, NAPOCOR had pending franchise tax obligations to the local government. May the liability to pay delinquent franchise tax be transferred to TRANSCO? Q. Yes. A corporation that has been ordered to pay franchise tax delinquency but which facilities, including its nationwide franchise, had been transferred to the National Transmission Corporation

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(TRANSCO) by operation of law during the time of the alleged delinquency, cannot be ordered to  pay as it is not the proper party subject to the local franchise tax, the transferee being the one liable. ( NATIONAL POWER CORPORATION vs. PROVINCIAL GOVERNMENT OF BATAAN, SANGGUNIANG PANLALAWIGAN OF BATAAN, PASTOR B. VICHUACO (IN HIS OFFICIAL CAPACITY AS PROVINCIAL TREASURER OF BATAAN) and THE REGISTER OF DEEDS OF THE PROVINCE OF BATAAN, G.R. No. 180654, April 21, 2014) Q. What is the 120+30 Rule in a Claim for refund or credit of unutilized input tax under Section 112 of NIRC? A. Requisites –   first, administrative claim must be filed with BIR within two years after the close of taxable quarter when zero-rated or effectively zero rated sales were made; second, judicial claim must be made within 30 days from receipt of BIR decision on tax refund/credit claim or if no action is received from the BIR within 120 days. ( M in danao Geotherm al v. CI R, 2013) Ni ppon Expr ess Corp v. CI R, 2013  : Failure of BIR to act on a claim within 120 days will allow

the taxpayer to seek relief within 30 days from the lapse of said 120 day period. : The failure to observe the 120-day period to claim CI R v. Vi sayas Geothermal Power Co., 2013  refund/credit is considered prematurely filed and CTA cannot take cognizance of the judicial claim. Nor thern M in danao Power Corporation vs. Commissioner of I nternal Revenue, G.R. No. 185115, Febru ary 18, 2015: In case the BIR fails to act on a claim for refund within the 120-day

 period prescribed by law, the taxpayer only has 30 days counted from the expiration of the 120-day period to appeal the unacted claim w ith the CTA. A taxpayer’s non-compliance with the mandatory period of 30 days is fatal to its refund claim on the ground of prescription. Consequently, the CTA acquires no jurisdiction over the taxpayer’s claim as the petition was  belatedly filed. : Upon filing of the administrative claim, the BIR is given Sil icon Phil ippin es v. CI R, 2 M ar 2016 

a period of 120 days within which to (1) grant a refund or issue the tax credit certificate for creditable input taxes; or (2) make a full or partial denial of the claim for a tax refund or tax credit. Failure on the part of respondent to act on the application within the 120-day period shall  be deemed a denial. Note that the 120-day period begins to run from the date of submission of complete documents supporting the administrative claim. If there is no evidence showing that the taxpayer was required to submit –   or actually submitted –   additional documents after the filing of the administrative claim, it is presumed that the complete documents accompanied the claim when it was filed. Whether the BIR rules in favor of or against the taxpayer  –   or does not act at all on the administrative claim –  within the period of 120 days from the submission of complete documents, the taxpayer may resort to a judicial claim before the CTA. The judicial claim shall be filed within a period of 30 days after the receipt of respondent's decision or ruling or after the expiration of the 120-day period, whichever is sooner. Q. What is the effect of the non-observance of the 120-day period? A. Two claims for refund of the VAT were filed within the two-year prescriptive periods. The taxpayer failed to comply with the 120-day period as it filed its judicial claim in C.T.A Case No. 6792 four (4) days after the filing of the administrative claim. The Court held that only C.T.A Case No. 6792 should be dismissed on the ground of lack of jurisdiction for being prematurely filed. However, the Court held that since C.T.A Case No. 6837, the judicial claim was filed a day after the filing of the administrative claim, the same should be sustained based on equitable estoppel having been filed i.e., from December 10, 2003 to October 6, 2010, when BIR Ruling No. DA-489-03 was in place. The supposed jurisdictional defect, which would have attended the filling of its judicial claim before the expiration of the 120-day period, was cured. (COM M I SSI ONER OF I NTERNAL REVE NUE vs. CE LUZ ON GEOTH ERMA L POWER COM PAN Y, I NC., G.R N o. 190198, September 17, 2014   ) Q. Is the 120+30 day rule always mandatory? A. No. As an exception to the mandatory and jurisdictional nature of the 120+30 day period,  judicial claims filed between December 10, 2003 or from the issuance of BIR Ruling No.

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DA-489-03, up to October 6, 2010 need not wait for the lapse of the 120+30 day period in consonance with the principle of equitable estoppel. Since Taganito filed its judicial claim with the CTA on February 19, 2004, clearly within the period of exception of December 10, 2003 to October 6, 2010. Its judicial claim was, therefore, not prematurely filed and should not have been dismissed by the CTA En Banc. The SC ruled that the jurisdiction of the CTA over decisions or inaction of the CIR is only appellate in nature and, thus, necessarily requires the prior filing of an administrative case before the CIR under Section 112. A petition filed prior to the lapse of the 120-day period prescribed under said Section would be premature for violating the doctrine on the exhaustion of  admin i str ative remedies.  There is, however, an exception to the mandatory and jurisdictional nature of the 120+30 day period under BIR Ruling No. DA-489-03, dated December 10, 2003, expressly stated that the “taxpayer -claimant need not wait for the lapse of the 120-day period  before it could seek judicial relief with the CTA b y way of Petition for Review.” ( TAGANITO M I NI NG CORPORATI ON vs. COMM I SSI ONER OF I NTERNAL REVENUE, G.R. No. 198076, November 19, 2014 and G.R. No. 201195, N ovember 26, 2014)

Q. What are the purposes of the aforementioned 120+30 periods? A. Section 112(D) of the 1997 Tax Code states the time requirements for filing a judicial claim for the refund or tax credit of input VAT. The legal provision speaks of two periods: the period of 120 days, which serves as a waiting period to give time for the CIR to act on the administrative claim for a refund or credit ; and the period of 30 days, which refers to the period for filing a judicial claim with the CTA. It is the 30-day period that is at issue in this case. (ROHM APOLLO SEMICONDUCTOR PHILIPPINES vs. COMMISSIONER OF I NT ERN AL REVE NU E, G.R. No. 168950, Januar y 14, 2015) 

Q. What is the purpose of the requirement for printing of sales invoices and official receipts? A. I n Sili con Vall ey, Phil s., In c. v. CI R, 2011, the Supreme Court reiterated that the requirement of [printing] the BIR permit to print on the face of the sales invoices and official receipts is a control mechanism adopted by the Bureau of Internal Revenue to safeguard the interest of the government. Wi thout producing the Aut hori ty to Pr in t, the taxpayer cannot clai m any tax refu nd/tax credit.

Q. Differentiate a VAT invoice from a VAT receipt. A. A VAT invoice is necessary for every sale, barter or exchange of goods or properties while a VAT official receipt properly pertains to every lease of goods or properties, and every sale, barter or exchange of services. In other words, the VAT invoice is the seller's best proof of the sale of the goods or services to the buyer while the VAT receipt is the buyer's best evidence of the  payment of goods or services received from the seller. ( NIPPON EXPRESS (PHILIPPINES) CORP v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 185666, February 4, 2015) Q. What are the requirements for a tax refund or tax credit? A. The Supreme Court reiterated that it is fatal if the taxpayer failed to print the word “zero-rated” on the VAT invoices or official receipts in claims for a refund or credit of input VAT on zero-rated sales, even if the claims were made prior to the effectivity of R.A 9337. A VAT invoice is the seller’s best proof of the sale of goods or services to the buyer, while a VAT receipt is the buyer’s best evidence of the payment of goods or services received from the seller. The requirement of imprinting the word “zero-rated” proceeds from the rule-making authority granted to the Secretary of Finance by the NIRC for the efficient enforcement of the same Tax Code and its amendments. A VAT-registered person whose sales are zero-rated or effectively zero-rated, Section 112(A) specifically provides for a two-year prescriptive period after the close of the taxable quarter when the sales were made within which such taxpayer may apply for the issuance of a tax credit certificate or refund of creditable input tax. ( CARGILL PHILIPPINES, INC vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 203774, March 11, 2015) Q. May a claim of refund prosper if the VAT invoices do not indicate the transactions as zero-rated? A. No. The Court stressed that the failure to indicate the words “zero -rated” on the invoices and receipts issued by a taxpayer would result in the denial of the claim for refund or tax credit. (EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., vs. COMMISSIONER OF

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I NT ERN AL REVE NU E, G.R. No. 183531, M arch 25, 2015) 

Q. In a claim for refund of excess income tax payments resulting from unutilized creditable withholding taxes, is the taxpayer required to present in evidence its quarterly income tax return of the subsequent year to prove that excess income tax payment was indeed not carried over to the succeeding year? A.  No. According to the Supreme Court, subsequent quarterly income tax returns are not indispensable. What Sec. 76 of the Tax Code requires is to prove the prima facie entitlement to a claim, including the fact of not having carried over the excess credits to the subsequent quarters or taxable year. It does not say that to prove such a fact, succeeding quarterly ITRs are absolutely needed. This simply underscores the rule that any document, other than quarterly ITRs may be used to establish that indeed the non-carry over clause has been complied with, provided that such is competent, relevant and part of the records. ( Wi nebrenner & I ñ igo I nsur ance Br okers, I nc. vs. Commi ssi oner of I ntern al Revenu e, 748 SCRA 591, G.R. N o. 206526 Januar y 28, 2015)

Q. May the BIR impose conditions not included in a tax treaty for the application of tax relief? A. No. A tax treaty is an agreement that provides for a uniform treatment of a taxable event  between agreeing countries. The Court reiterated that the purpose of a tax treaty is “it is used to reconcile the national fiscal legislations of the contracting parties in order to help the taxpayer avoid international juridical double taxation. Double taxation is the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical periods” Thus the Court held that the BIR cannot impose additional requirements that would negate the availment of relief provided under international agreements. ( Deutsche Bank v. CI R, 2013)  Q. Are persons selling aviation fuel exempt from paying taxes for selling their fuel to

international air carriers? A. Under the basic international law principle of  pacta sunt servanda, the state has the duty to fulfill its treaty obligations in good faith. This entails harmonization of national legislation with treaty provisions. Section 135 (a) of the National Internal Revenue Code embodies the country’s compliance with its undertakings under the 1944 Chicago Convention on International Aviation (Chicago Convention), Article 24 (9) of which has been interpreted to prohibit taxation of aircraft fuel consumed for international  transport, and various bilateral air service agreements not to impose excise tax on aviation fuel purchased by international carriers from domestic manufacturers or suppliers on petroleum products sold to tax-exempt international carriers. Evidently, construction of the tax exemption provision in question should give primary consideration to its broad implications on the country’s commitment   under international agreements. In view of the foregoing the Court held that respondent, as the statutory taxpayer who is directly liable to pay the excise tax on its petroleum products is entitled to a refund or credit of the excise taxes it paid for petroleum products sold to international carriers, the latter having been granted exemption from the payment of said excise tax under Section 135 (a) of the  NIRC. (Commissioner of I nternal Revenue v. Pili pinas Shell Petr oleum Corporati on  , G.R. No. 188497. February 19, 2014  )  II. National Internal Revenue Code Q. What is income? A. Income consists of profit or gains as to the amount of money coming to a person or corporation over a specified period of time. Income:  definition, nature, tests when it becomes taxable; inclusions of gross income, classification as to source (compensation income, fringe benefits, professional income, income from business, income from dealings in property; passive income investment (ex. Final tax of 20% on interest income, royalty income except on royalty on books which is subject to 10%, yield on monetary benefit from deposit substitutes, prizes or awards except PCSO and Lotto winnings);10% final tax on royalties on literary works, books and musical compositions ( LBM); 10% on from winnings from horse races; 10% on cash and stock dividends for Filipinos, annuities, proceeds from insurance policies, prizes and awards, pensions, retirement benefit or separation pay; income from whatever source (ex. forgiveness of indebtedness, tax refund); capital gains tax expect a question on this review Sec. 24(D) of the NIRC for schedule of rate and for actual computation of final sale over a property transaction); Tax rates for non-resident aliens are higher. Check relevant provisions.

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Q. What are the elements of income? A. Presence of gain or profit, such is realized actually or constructively; and is not exempt by any law or treaty. Q. What is taxable income ? A. Items earned or gained as gross income less deductions and/ or personal and additional exemptions, if authorized under the NIRC or any special law; distinguish between ordinary income and ordinary loss. Q. Who are liable to pay income tax? Resident citizens with minimum wage earners considered as special class; non -resident citizens (Overseas contract workers, seafarers); aliens (determine threshold as to amount and period), domestic corporations (review principles on transfer pricing); foreign corporations (review profit sharing for branches) including resident and non-resident foreign corporations, partnerships including general partnerships, co-ownerships and estates and trusts. Q. What is included in income tax? A. Income tax, estate and donor’s taxes, value -added tax, other percentage taxes, excise taxes; documentary stamp taxes; and such other taxes as are or hereafter may be imposed and collected  by the BIR. Q. What is the nature of capital gains tax? A. Capital gains is a tax on passive income, it is the seller, not the buyer, who generally would shoulder the tax. As a general rule, therefore, any of the parties to a transaction shall be liable for the full amount of the documentary stamp tax due, unless they agree among themselves on who shall be liable for the same. ( REPUBLI C OF TH E PH AI LI PPI NES, REPRESENTED BY TH E DEPARTM ENT OF PUBLI C WORKS AND H I GHWAYS vs. ARLENE R. SORIANO, G.R No. 211666, Febru ary 25, 2015) 

Q. Is the sale of goodwill subject to ordinary income tax? A.  No. Goodwill is not an ordinary asset as it is not among the exceptions under the definition of capital assets in Section 39(A)(1) of the 1997 National Internal Revenue Code. Thus, it is a capital subject to capital gains tax, not ordinary income tax. ( WM . H . An der son v. Juan Posadas, Jr ., G.R. N o. 44100, September 22, 1938) 

Q. What are included when a natural person is taxed? A. Inclusions in compensation income, exclusions and deductions (itemized and standard deductions. Memorize the amounts on personal exemption for individual tax payer under Section 35 (A) of the NIRC.); Income derived from business or practice of profession; treatment of  passive income (final tax and need not be reported since deduction is in the form of final tax); tax on capital gains; senior citizens, minimum wage earners and those who granted exemptions under international agreements (those employed with Asian Development Bank and IRRI) are exempt from payment. Q. What are included when domestic corporations are taxed? A. Covered transactions, payment schedule, allowable deductions (itemized and optional standard deductions); treatment of passive incomes subject to tax and those not subject to tax; tax on capital gains; check also on principle of transfer pricing if domestic corporation does business in another foreign country; treatment of accumulated earnings. Section 27(B) of the NI RC im poses a 10% pr eferential tax r ate on the in come of (1) propri etary non-profit educational institutions and (2) proprietary non-profit hospitals. The only quali f ications for hospitals ar e that they must be propri etary and non-pr ofi t. " Propri etary" means private, f ollowing the defi niti on of a " propri etary educational institution" as " any pri vate school maintai ned and admi ni ster ed by pr ivate in dividual s or groups" with a gover nment per mi t. " Non -pr ofi t" means no net income or asset accr ues to or benefi ts any member or specif i c per son, wi th all the net in come or asset devoted to th e i nstitu ti on' s pur poses and all its activi ties conducted not for profi t.

Q. What taxes are imposed on an educational institution? A. Only portions actually, directly and exclusively used for charitable purposes are exempt from

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real property taxes; while portions leased to private entities are not exempt from such taxes. (An geles Un iversity F oundati on v. Cit y of A ngl es, 2012  ) Q. What taxes are imposed on a hospital? A. As a general principle, a charitable institution does not  lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution. (CI R v. St. Luke’s Medical Center, 2012) Q. What taxes are imposed on resident foreign corporations? A. General rule –  foreign corporations are liable for income derived from Philippine sources; may enjoy certain incentives if covered by a treaty or special provision of law (registration under the Board of Investments and the Philippine Economic Zone Authority); minimum corporate tax due and schedule of payment; treatment of other incomes; liability for capital gains tax; treatment of accumulated earnings Q. Enumerate the different kinds of resident foreign corporations and discuss their tax liabilities, if any. A. Philippine Branch is a foreign corporation in the Philippines that is allowed by the SEC to do  business in the Philippines in such activities it normally does in its home country. It is normally taxable in like manner as a local corporation  –   12% VAT, 30% corporate income tax, and such other applicable internal revenue taxes. Also, repatriation of its operational income in the Philippines is subject to 15% branch profit remittance tax. Representative Office is a foreign corporation licensed to do business in the Philippines to deal directly with the clients of its parent company abroad on information dissemination, as communication center, product promotion, and quality control for exports. It is not allowed to earn income in the Philippines, thus not subject to income tax. Regional Operating Headquarters  in the Philippines (ROHQ) is a special type of income  producing foreign corporation. The income to be generated is limited to specific services rendered to its affiliates, branches, and subsidiaries within the Asia-Pacific Region. It is subject to a special income tax rate of 10% and 12% VAT in the Philippines. Repatriation of its operational income in the Philippines is subject to 15% branch profit remittance tax. Regional Area Headquarters (RAHQ) is a non-income generating foreign corporation tasked to act as a supervisory, communications, or coordinating center for its subsidiaries, affiliates, and  branches in the Asia-Pacific region. It is only a cost center and is not allowed to earn income. : An Ai r Can ada v. Commissi oner of I ntern al Revenu e, G.R. No. 169507, Janu ary 11, 2016  offline international air carrier is a resident foreign corporation for income tax purposes. In this case, the Court applied the doctrine in CIR v. British Overseas Airways Corporation that an international air carrier with no landing rights in the Philippines is a resident foreign corporation if its local sales agent sells and issues tickets in its behalf. An offline international carrier selling  passage tickets in the Philippines, through a local general sales agent, is considered a resident foreign corporation doing business in the Philippines. As such, it is taxable on income derived from sources within the Philippines, and not on Gross Philippine Billings, subject to any applicable tax treaty. Accentur e, I nc. v. CIR, 2012: Tax for services rendered by a resident corporation outside Philippine territory: The Cour t held that that the recipient of the service should be doing

 business outside the Philippines to qualify for zero-rating is the only logical interpretation of Section 102(b) (2) of the 1977 Tax Code, as we explained in Burmeister: “This can only be the logical interpretation of Section 102 (b) (2). If the provider and recipient of the "other services" are both doing business in the Philippines, the payment of foreign currency is irrelevant. Otherwise, those subject to the regular VAT under Section 102 (a) can avoid paying the VAT by simply stipulating payment in foreign currency inwardly remitted by the recipient of services. To interpret Section 102 (b) (2) to apply to a payer-recipient of services doing business in the Philippines is to make the payment of the regular VAT under Section 102 (a) dependent on the generosity of the taxpayer. The provider of services can choose to pay the regular VAT or avoid it

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 by stipulating payment in foreign currency inwardly remitted by the payer-recipient. Such interpretation removes Section 102 (a) as a tax measure in the Tax Code, an interpretation this Court cannot sanction. A tax is a mandatory exaction, not a voluntary contribution. x x x Further, when the provider and recipient of services are both doing business in the Philippines, their transaction falls squarely under Section 102 (a) governing domestic sale or exchange of services. Indeed, this is a purely local sale or exchange of services subject to the regular VAT, unless of course the transaction falls under the other provisions of Section 102 (b).’ Q. What taxes are imposed on non-resident foreign corporations? A. Non-resident foreign corporations are liable only for income derived from Philippine sources, rate and schedule of payment, tax liability on certain incomes like interest on foreign loans, intra corporate dividends; may enjoy certain exemptions under tax treaty or provision of special laws; treatment of accumulated earnings. Q. Goodyear Philippines (“Goodyear”) increased its Authorized Capital Stock from P400M (divided to 4M shares with par value of P100) to P1.73B (divided to 4M common shares and 13.3M preferred shares with par value of P100 each). Consequently, all the preferred shares wer subscribed by Goodyear Tire and Rubber Company (“GTRC”), a foreign company registered in the US. Thereafter, Goodyear’s Board of Directors authorized the redemption of GTRC’s 3.72M worth of  preferred shares at the redemption price of P372M representing the aggregate par value and P97M representing accrued and unpaid dividends. Is the gain derived by GTRC subject to 15% Final Witholding Tax (“FWT”) on dividends? A. No. The term dividends means any distribution made by a corporation to its shareholders out of its earnings or profits and payable to its shareholders, whether in one or in other property. In light of the foregoing, the Court holds therefore that the redemption price representing the amount of P97,732,314.00 received by GTRC could not be treated as accumulated dividends in arrears that could be subjected to 15% FWT. Verily, respondent’s AFS covering the years 2003 to 2009 show that it did not have unrestricted retained earnings, and in fact, operated in a position of deficit. Thus, absent the availability of unrestricted retained earnings, the board of directors of respondent had no power to issue dividends. ( Commissi oner of I ntern al Revenue v. Goodyear Phi li ppin es I nc., G.R. No. 216130, August 3, 2016) 

III. Estate Tax and Donor’s Taxes under the NIRC Q. How do you determine the value of estate to be taxed? A. Only the net value of the estate is liable to tax. A schedule of brackets of amount of net value and the corresponding rate schedule per bracket are imposed. Q. Who are liable to pay estate taxes? A.  Residents and citizens covering all properties, real or personal, tangible or intangible, wherever situated; and non-resident aliens covering only properties in the Philippines provided, that, with respect to intangible personal property, its inclusion in the gross estate is subject to the rule on reciprocity. Q. What is gross estate? A. Decedent’s interest at the time of his death, transfer in contemplation of death, prope rty transfers subject to revocation, property passing under a general power of appointment, proceeds of life insurance; and property transfers for insufficient consideration Q. What may be deducted from the estate? A. The following may be deducted from the estate: 1. Expenses, losses, indebtedness and taxes (funeral expenses, judicial expenses, claims against the estate, claims against insolvent persons, unpaid mortgages, taxes and casualty losses); and 2. Property previously taxed (transfers for public use, family home, standard deduction, medical expenses and amounts received by heirs under R.A. 4917 on Retirement Benefits of Private Employee). Please review the concept of vanishing deduction and the corresponding holding  period and the tax rate based on the value of the property under Section 86(A) (2) of the NIRC. Q. Who are considered strangers for purposes of donor’s tax? A. Read on definition, transactions covered and schedule of payment based on brackets as to the

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value of the donation (Section 16 of the NIRC); for the “stranger”, a flat rate of 30% is imposed; the following are NOT “strangers”- brother, sister (whether by whole or half blood), spouse, ancestor and lineal descendant; and relative by consanguinity in the collateral line within the fourth civil degree of relationship. Q. What items are not subject to donor’s tax? A. Dowries or gifts made on account of marriage, gifts made or for use of the national government or entity created by any of its agencies which is not conducted for profit, or to any  political subdivision of said government; and gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non- governmental organization, trust or philanthropic organization or research institution or organization.

IV. Tax Remedies under the NIRC Q. What are the steps in the assessment process? A. Letter of author it y issued for tax audit, noti ce of i nf ormal conf er ence (termin ated if taxpayer presents satisfactory proof); release of preliminary assessment in case of unsatisfactory explanation and if taxpayer disagrees, he has 15 days to request for reconsideration; service of formal letter of demand/ notice of assessment if basis for reconsideration i s not meri tori ous; taxpayer may fi le a protest wi thi n th e 30-day peri od of the f orm al demand and must submi t support i ng documents with i n 60 days (i f n ot, the pr otest i s deemed waived); i f t he Commi ssi oner does not decide th e matt er wi thi n 180 days or decides wi th f i nal i ty that t he taxpayer i s li able for the assessment ; taxpayer has 30 days f r om the lapse of the 180 day period for the Commissioner to decide or notice of final decision of the Commi ssi oner of the I ntern al Revenu e ( even beyond 180 days) to f i le an appeal wi th t he Court of T ax Appeal s (L ascona Lan d v Commission er of I nt er nal Revenu e, 2012); case i s heard in iti all y by a division of the CTA and an appeal can fu r ther be made with the CTA en banc ( with in 15 days under Section 4 (A) RU L E, 8 in relati on to Rule 43 of the Rules of Ci vil Procedure) and f in al ar biter i s the Supreme Court. Through the enactment of Republic Act

 No. 9282, the jurisdiction of the CTA has been expanded to include not only civil tax cases but also cases that ar e cri mi nal i n natu r e, as wel l as l ocal tax cases, proper ty taxes and fi nal coll ection of taxes.

Q. Can a protesting taxpayer appeal to the CIR from the failure to act by the CIR’s authorized representative? A. No. In PAGCOR v. Commi ssi oner of I ntern al Revenue, 27 Jan 2016  , the Supreme Court outlined the remedies available to a protesting taxpayer, to wit: (1) A whole or partial denial by the CIR's authorized representative may be appealed to the CIR or the CTA (2) A whole or partial denial by the CIR may be appealed to the CTA (3) The CIR or CIR's authorized representative's failure to act may be appealed to the CTA. NOTE: There is no mention of an appeal to the CIR from the failure to act by the CIR's authorized representative. Q. What cases are within the jurisdiction of the Court of Tax Appeals? A. Pursuant to the provisions of Republic Act No. 1125 and other laws prior to R.A. 9282, the Court of Tax Appeals retains exclusive appellate jurisdiction to review by appeal, the following: 1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue; 2. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges; seizure, detention or release of property affected; fines, forfeitures or other penalties imposed in relation thereto; or other matters arising under the Customs Law or other law or part of law administered by the Bureau of Customs [Rep. Act. No. 1125, (1954), Sec. 7]; 3. In automatic review cases where such decisions of the Commission of Customs favorable to the taxpayer is elevated to the Secretary of Finance (Sec. 2315, TCC); and 4. Decisions of the Secretary of Trade and Industry, in the case of non-agricultural product, commodity or article, or the Secretary of Agriculture, in the case of agricultural product,

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commodity or article, in connection with the imposition of the Anti-Dumping Duty, Countervailing and Safeguard Duty [Republic Act Nos. 8751 and 8752, (1999) Sec. 301 (a) and (p), and Republic Act 8800]. Under Republic Act Number 9282, the CTA's original appellate jurisdiction was expanded to include the following: 1. Criminal cases involving violations of the National Internal Revenue Code and the Tariff and Customs Code; 2. Decisions of the Regional Trial Courts (RTC) in local tax cases; 3. Decisions of the Central Board of Assessment Appeals (CBAA) in cases involving the assessment and taxation of real property; and 4. Collection of internal revenue taxes and customs duties the assessment of which have already become final. Q. Discuss the function of the Court of Tax Appeals? A. Being dedicated exclusively to the resolution of tax problems, the Court of Tax Appeals (“CTA”) has developed an expertise on the subject. In the absence of grave abuse of discretion or  palpable error, the CTA’s findings are accorded the highest respect and are generally conclusive upon the Supreme Court. ( Commissioner of I nternal Revenue v. GJM Phil ippin es, I nc. G.R. ) No. 202695, Febru ary 29, 2016  Q. Petron imported liters of alkylate and paid VAT therein. However, the Collector of Customs subjected these alkylate imports to excise tax following Customs Memorandum Circular (CMC) No. 164-2012 stating that alkylate is a product of distillation similar to naphta and is subject to excise tax under Section 148(e) of the NIRC. Thereafter, Petron filed a petition for review with the CTA raising the issue of whether its importation of alkylates is subject to excise tax. The CIR argued that the interpretation of Section 148(e) is an exercise of her quasi-legislative function, which is reviewable by the Secretary of Finance, thus, the CTA has no jurisdiction to decide on the matter. Decide. A. The Court ruled in favor of the CIR. It recognized the fact that the CTA is a court of special  jurisdiction, with power to review by appeal decision involving tax disputes rendered wither by the Commissioner of Internal Revenue and Commissioner of Customs. Conversely, it has no  jurisdiction to determine the validity of a ruling issued by the CIR or the COC in the exercise of their quasi-legislative powers to interpret tax laws. In this case, Petron’s tax liability was  premised on the COC’s issuance of CMC No. 164-2012, which gave effect to the CIR’s June 29, 2012 Letter interpreting Section 148(e) of the NIRC as to include alkylate among the articles subject to customs duties, hence, Petron’s petition before the CTA ultimately challenging the legality and constitutionality of the CIR’s interpretation of a tax provision. The CTA had no  jurisdiction to take cognizance of the petition as its resolution would necessarily involve a declaration of the validity or constitutionality of the CIR's interpretation of Section 148 (e) of the  NIRC, which is subject to the exclusive review by the Secretary of Finance and ultimately by the regular courts. ( Commissi oner of I ntern al Revenu e vs. Cour t of T ax Appeal s and Petr on ) Corpor ati on, G.R. No. 207843, Jul y 15, 2015  Q. Kepco Corporation filed with the BIR its claim for refund for input tax incurred for the st nd 1  and 2  quarters of calendar year 2000 from its importation and domestic purchases of capital goods and services preparatory to its production and sales of electricity to NAPOCOR. For failure of BIR to act upon the claim for refund or issuance of tax credit certificate, KEPCO filed a Petition for Review. Thereafter, KEPCO filed its Memorandum, but BIR failed to file its Memorandum despite notice, thus, the case was deemed submitted for decision. Subsequently, the CTA First Division rendered a Decision, holding that KEPCO is entitled to a refund for its unutilized input VAT paid. There being no Motion for Reconsideration filed by BIR, the decision became final and executory. Aggrieved, BIR filed a petition for annulment of judgment with the CTA en banc    but it was dismissed, and its motion for reconsideration was likewise denied. Does the CTA en banc have jurisdiction to take cognizance of Petition for Annulment of Judgment filed by BIR? A. The Court denied BIR’s Petition as it ruled that SC, CA, and CTA en banc cann ot annul  judgment of their divisions. Annulment of Judgment (Rule 47) involves exercise of original  jurisdiction and implies power by a superior court against the final judgment, decision or ruling of an inferior court based on the grounds of extrinsic fraud and lack of jurisdiction. The Divisions are not separate and distinct courts but are divisions of one and the same court. There is no hierarchy of courts within the SC, CA, and CTA, for each remain as one court notwithstanding that they also work in divisions.

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Q. Will a case for tax evasion fail without a deficiency tax assessment? A. No. BUREA U OF I NTE RNAL REVEN UE, as represented by the COMM I SSI ONER OF I NTERNAL REVENUE vs. COURT OF APPEAL S, SPOUSES ANTONI O VI LL AN M ANL Y, and RUB Y ONG M AN L Y, G.R No. 197590, November 24, 2014:   The Court ruled that tax

evasion is deemed complete when the violator has knowingly and willfully field a fraudulent return with intent to evade and defeat a part of all of the tax. Corollarily, an assessment of the tax deficiency is not required in a criminal prosecution for tax evasion. However, in Commissioner of Internal Revenue v. Court of Appeals, the Court clarified that although a deficiency assessment is not necessary, the fact that a tax is due must first be proved before one can be prosecuted for tax evasion. ( Commissioner of I nternal Revenue v. Kepco Il ij an Corporati on, G.R. No. 199422, ) Ju ne 21, 2016  SAM AR-I EL ECTRIC COOPERATI VE vs. COMM I SSI ONER OF I NTERNAL REVEN UE, G.R N o. 193100, December 10, 2014: The Court held that the notice requirement under section

228 of the NIRC is substantially complied with whenever the taxpayer had been fully informed in writing of the factual and legal bases of the deficiency taxes assessment, which enabled the latter to file an effective protest. Q. Discuss the Expenditure Method in reconstructing a taxpayer’s income. A. The Expenditure Method is a method used by the government to reconstruct the income of a taxpayer by deducting the aggregate yearly expenditures from the declared yearly income. he theory of this method is that when the amount of the money that a taxpayer spends during a given year exceeds his reported or declared income and the source of such money is unexplained, it may be inferred that such expenditures represent unreported or undeclared income. ( BUREAU OF INTERNAL REVENUE, as represented by the COMMISSIONER OF INTERNAL REVEN UE vs. COURT OF APPEAL S, SPOUSES ANT ONI O VI L LA N M ANL Y, and RUBY ONG M AN L Y, G.R No. 197590, November 24, 2014) 

Q. When is a tax assessment deemed made? A. . The assessment of the tax is deemed made and the three-year period for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed or sent by the BIR to the taxpayer. Thus, failure of the BIR to file a warrant of distraint or serve a levy on taxpayer’s properties nor file collection case within the three -year period is fatal. Also, the attempt of the BIR to collect the tax through its Answer with a demand for the taxpayer to pay the assessed DST in the CTA is not deemed compliance with the Tax Code. ( CHI NA BANKING CORPORATI ON vs. COM M I SSI ONER OF I NTERNA L REVEN UE, G.R. No. 172509, F ebru ary 04, 2015) 

Q. Will a request for reinvestigation suspend the statute of limitations? A. No. A request for reinvestigation alone will not suspend the statute of limitations. Two things must concur: there must be a request for reinvestigation and the CIR must have granted it. (CHI NA BANKI NG CORPORATI ON vs. COMM I SSI ONER OF I NTERNAL REVEN UE, ) G.R. No. 172509, Febru ary 04, 2015  Q. Ms. Sarmiento, Next Mobile Inc’s Director of Finance, executed several waivers of the statute of limitations to extend the three-year prescriptive period of assessment for taxes due. Naturally, BIR issued its assessment beyond the prescriptive period. Thereafter, Ms. Sarmiento contests the issued assessment arguing that her waivers were void because of the following: (a) waivers were executed without a notarized board authority; (b) the dates of acceptance by BIR were not indicated therein; (c) several irregularities were present in the subject waivers; and (d) estoppel does not apply in questioning the validity of waiver of the statute of limitations. Are the Waivers valid? the BIR’s right to assess already prescribed? A. No. The general rule is that a waiver of the statute of limitations that does not comply with the requisites for its validity specified under RMO No. 20-90 and RDAO 01-05 is generally invalid and ineffective to extend the prescriptive period to assess taxes. However, due to peculiar circumstances and as an exception to the general rule, the supposedly invalid waivers may be considered valid for the following reasons:

, the parties are in pari delicto or in equal fault. The two parties to a controversy are equally First  guilty and they shall have no action against each other.

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Second  , Parties must come to court with clean hands. Parties ho do not come to Court with clean

hands cannot be allowed to benefit from their own wrongdoing. Taxpayer should not be allowed to benefit from the flaws in its own waivers and successfully insist on their invalidity in order to evade its responsibility to pay taxes. Third  , taxpayer is estopped from questioning the validity of its Waivers. Verily, the application

of estoppel in this case would promote the administration of the law, prevent injustice and avert the accomplishment of a wrong. Finally  , the Court cannot tolerate a highly suspicious situation. In this case, the taxpayer, on one hand, after voluntarily executing the Waivers insisted on their invalidity by raising the very same defects it caused. On the other hand, the BIR miserably failed to exact from the taxpayer strict compliance with the rules. ( COMM I SSI ONER OF I NTERNAL REVEN EU v. NEXT M OBI L E, I NC., G.R. NO.212825, DECEM BER 7, 2015) 

Q. How to prove that a tax assessment was made? A. The Court held that in order to prove the fact of mailing, it is essential to present the registry receipt issued by the Bureau of Posts or the Registry return card, which would have been signed  by the taxpayer or its authorized representative. And if said documents could not be located, the CIR should have, at the very least, submitted to the Court a certification issued by the Bureau of Posts and any other pertinent document executed with its intervention. The Court does not put much credence to the self-serving documentations made by the BIR personnel, especially if they are unsupported by substantial evidence establishing the fact of mailing. While it is true that an assessment is made when the notice is sent within the prescribed period, the release, mailing, or sending of the same must still be clearly and satisfactorily proved. Mere notations made without the taxpayer's intervention, notice or control, and without adequate supporting evidence cannot suffice. Otherwise, the defenseless taxpayer would be unreasonably  placed at the mercy of the revenue offices. The BIR's failure to prove GJM's receipt of the assessment leads to no other conclusion but that no assessment was issued. Consequently, the government's right to issue an assessment for the said period has already prescribed. (COMMISSIONER OF INTERNAL REVENEU v. GJM PHILIPPINES M ANU F ACTURI NG, 29 Feb 2016)

Q. What constitutes proof of taxes withheld? A. The Court held that the certificate of creditable tax withheld at source is the competent proof of establish the fact that taxes are withheld. It is not necessary for the person who executed and  prepared the certificate of creditable tax withheld source to be presented and to testify personally to prove the authenticity of the certificates. ( COM M I SSI ONER OF I NTERNAL REVENUE vs. PH I L I PPI NE N AT I ONA L B AN K, G.R. No. 180290 September 29, 2014) 

Q. Is a deficiency VAT assessment tantamount to an assessment for withholding tax liabilities such that the taxpayer cannot avail of a tax amnesty program? A.  No. Indirect taxes, like VAT and excise tax, are different from withholding taxes. To distinguish, in indirect taxes, the incidence of taxation falls on one person but the burden thereof can be shifted or passed on to another person, such as when the tax is imposed upon goods before reaching the consumer who ultimately pays for it. On the other hand, in case of withholding taxes, the incidence and burden of taxation fall on the same entity, the statutory taxpayer. The  burden of taxation is not shifted to the withholding agent who merely collects, by withholding, the tax due from income payments to entities arising from certain transactions and remits the same to the government. Q. What are the rules on protest and refund for income tax? A. A taxpayer may protest any assessment administratively; taxes may be paid under protest. General Rule: Refund may be requested by the taxpayer within two years from payment. Commissioner of Internal Revenue v. Team (Philippines) Operations Corporation (formerly Mirant Phils., Operation Corporation), G.R. No. 179260 (2014:   There are three essential conditions for the grant of a claim for refund of creditable withholding income tax, to wit: (1) The claim is filed with the Commissioner of Internal Revenue within the two-year  period from the date of payment of the tax; (2) It is shown on the return of the recipient that the income payment received was declared as part of the gross income; and (3) The fact of withholding is established by a copy of a statement duly issued by the

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 payor to the payee showing the amount paid and the amount of the tax withheld therefrom. Q. What may the government resort to in case of taxpayer’s delinquency? A. Distraint of personal property, levy of real property; civil action and criminal action. Q. What are the requirements for entitlement of a corporate taxpayer for a refund or the issuance of tax credit certificate involving excess withholding taxes? A The Court held that the following requisites must be complied with to sustain the claim for refund: 1) That the claim for refund was filed within the two-year reglementary period pursuant to Sec. 229 of the NIRC; 2) When it is shown on the ITR that the income payment received is being declared part of the tax payer’s gross income; and 3) When the fact of withholding is established by a copy of the withholding tax statement, duly issued by the payor to the payee, showing the amount paid and income tax withheld from that account. . REPUBLI C OF TH E PHI LI PPI NES, REPRESENTED BY TH E COMMISSIONER OF INTERNAL REVENUE vs. TEAM (PHILS.) ENERGY CORPORATI ON (F ORM ERLY M I RANT PH I LS ENERGY CORPORATI ON), G.R. No. 188016, Jan uar y 14, 2015) 

Q. Is the CTA prohibited from determining whether taxes should have been paid because it is an assessment? A. No. The Supreme Court ruled that in an action for the refund of taxes allegedly erroneously  paid, the Court of Tax Appeals may determine whether there are taxes that should have been paid is not assessment. It is incidental to determining whether there should be a refund. ( SMI-ED PHI LI PPI NES TECHN OLOGY, I NC. vs. COM M I SSI ONER OF I NTERNAL REVEN UE, ) G.R. N o. 175410, November 12, 2014  THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY vs. SECRETARY OF F I NANCE and COMM I SSI ONER OF I NTERNAL REVENUE, G.R No. : The Court ruled that, the CTA can now rule not only on the 210987, November 24, 2014 

 propriety of an assessment or tax treatment of a certain transaction, but also on the validity of the revenue regulation or revenue memorandum circular on which the said assessment is based. CITY OF L APU-LAPU vs. PH I LI PPI NE ECONOM I C ZONE AUTHORITY; PROVINCE OF BATAAN, REPRESENTED BY GOVERNOR ENRIQUE T. GARCIA, JR., AND EMERLINDA S. TALENTO, IN HER CAPACITY AS PROVINCIAL TREASURER OF BATA AN vs. PH I L I PPIN E ECONOM I C ZONE AUT H ORIT Y, G.R. No. 184203, G.R No. 187583, November 26, 2014:   The Court held that in case of an illegal assessment where the

assessment was issued without authority, exhaustion of administrative remedies is not necessary and the taxpayer may directly resort to judicial action. The taxpayer shall file a complaint for injunction before the Regional Trial Court to enjoin the local government unit from collecting real property taxes. The party unsatisfied with the decision of the Regional Trial Court shall file an appeal , not a petit ion f or cert ior ari , before the Court of Tax Appeals, the complaint being a local tax case decided by the Regional Trial Court. The appeal shall be filed within fifteen (15) days from notice of the trial court’s decision. NIPPON EXPRESS (PHILIPPINES) CORP vs. COMMISSIONER OF INTERNAL REV EN UE , G.R. No. 185666, F ebru ary 04, 2015: The Court held the BIR has 120 days from

the date of submission of complete documents in support of the administrative claim within which to decide whether to grant a refund or issue a tax credit certificate. In case of failure on the  part of the BIR to act on the application within the 120-day period prescribed by law, the taxpayer has only has 30 days after the expiration of the 120-day period to appeal the unacted claim with the CTA.

Q. What is the principle of exhaustion of administrative remedies in tax cases before a  judicial action may be instituted? A. : Taxpayer submits that the requirement to exhaust the 120-day period under Section 112 (c) of the National Internal Revenue Code prior to filing the judicial claim with the Court of Tax Appeals (CTA) is a doctrine of “exhaustion of administrative remedies.” The non -observance of the same merely results in lack of cause of action which may be waived for failure to timely

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invoke the same. ( Commissioner of I nternal Revenue vs. Team Sual Corporation (F ormerl y M ir ant Sual Corporation), G.R. No. 194105. February 5, 2014  )  Commissioner of Internal Revenue v. Team (Philippines) Operations Corporation (formerly Mirant Phils., Operation Corporation), G.R. No. 179260, Apr il 2, 2014  .  The findings and conclusions of the Court of Tax Appeals (CTA) are accorded the highest respect and will not be lightly set aside. In the absence of any clear and convincing proof to the contrary, the Court must  presume that the CTA rendered a decision which is valid in every respect. The City of Manila, etc. et al. v. Hon. Caridad H. Grecia-Cuerdo etc., et al, G.R. No. 175723. F ebru ary 4, 2014  :  Petitioners availed of the wrong remedy when they filed the special civil action for certiorari  under Rule 65 of the Rules of Court with the Court in assailing the resolutions of the Court of Appeals (CA) which dismissed their petition filed with the said court and their motion for reconsideration of such dismissal. Hence, in the instant case, petitioner should have filed a petition for review on certiorari under Rule 45, which is a continuation of the appellate process over the original case. Clark Investors and Locators Association, Inc. vs. Secretary of Finance and Commissioner of Internal Revenue, G.R. No. 200670, July 6, 2015: A petition for certiorari (Rule 65) cannot  be invoked against the Secretary of Finance and Commissioner of Internal Revenue as they do not fall within the ambit of a tribunal, board, or officer exercising judicial or quasi-judicial functions in issuing Revenue Regulations. On the contrary, what they exercise in issuing these Revenue Regulations is their quasi-legislative or rule-making power, thus, outside the scope of a  petition for certiorari. V. Local Taxation Q. What taxes may local government unit collect? A. Under Section 5 of Article X of the Constitution, local government units are allowed to collect tolls, fees and charges. (TFC). Q. Are submarine or underwater cables considered real property, thus subject to real property tax under the LGC? A. Yes. Submarine or underwater cables are akin to electric transmission lines which the Court declared in Manila Electric Company v. City Assessor and City Treasurer of Lucena City  (G.R.  No. 166202, August 5, 2015), as “no longer exempted from real property tax” and may qualify as “machinery” subject to real property tax. Both electric lines and communication cables, in the strictest sense, are not directly adhered to the soil but pass through posts, relay or landing stations,  but both may be classified under the term “machinery” as real property under Article 415(5) of the New Civil Code for the simple reason that such pieces of equipment serve the owner's  business or tend to meet the needs of his industry or works that are on real estate. ( Capitol ) Wi r el ess, I nc., v. The Provin cial Tr easur er of B atangas, et al., G.R. No. 180110, M ay 30, 2016  Q. Is a golf course considered a place of amusement subject to amusement tax? A: No. Following the principle of ejusdem generis, a golf course cannot be considered a place of an amusement subject to amusement of tax. In so ruling, the Court cited its pronouncements in  Pelizloy Realty Corporation v. The Province of Benguet   wherein it held that amusement taxes cannot be imposed on admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots as they do not belong to the same category or class as theaters, cinemas, concert halls, circuses, and boxing stadia. ( AL TA VI STA GOLF AN D COUNTRY CLUB v. TH E CITY OF CEB U, et al., G.R. No. 180235, Januar y 20, 2016)  M actan-Cebu I nternational Ai rport Au thority (M CI AA) v. City of L apu-L apu and Elena T. Pacaldo, G.R. No. 181756, June 15, 2015:   Mactan-Cebu International Airport Authority

(MCIAA) is a government instrumentality and not a government-owned or controlled corporation (GOCC). Thus, its properties actually, solely and exclusively used for public purposes, consisting of airport terminal building, airfield, runway, taxiway and the lots on which they are situated are not subject to real property tax under Section 133(o) and 234(a) of the LGC. Moreover, when a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. Additional Cases: Camp John H ay Devel opment Cor porati on v. Centr al B oard of Assessment Appeal s,  G.R. No.

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169234. October 2, 2013  . Section 252 and Section 222 of the Local Government Code sets out

the administrative remedies available to a taxpayer or real property owner who does not agree with the assessment of the real property tax sought to be collected. Two conditions must be met: the taxpayer/real property owner questioning the assessment should first pay the tax due before his protest can be entertained. Secondly, within the period prescribed by law, any owner or person having legal interest in the property not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may file an appeal with the Local Board of Assessment Appeals (LBAA) of the province or city concerned. Thereafter, within thirty days from receipt, he may elevate, by filing a notice of appeal, the adverse decision of the LBAA with the Central Board of Assessment Appeals Camp John H ay Devel opment Cor porati on v. Centr al B oard of Assessment Appeals,  G.R. No. 169234. October 2, 2013. A claim for exemption from payment of real property taxes does not

actually question the assessor’s authority   to assess and collect such taxes, but pertains to the reasonableness or correctness of the assessment by the local assessor  Smart Communi cations, In c. v. M uni cipali ty of M alvar, Batangas, G.R. No. 20442. F ebru ary . Section 5, Article X of the 1987 Constitution provides that “[e]ach local government 18, 2014 

unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. The LGC defines the term “charges” as referring to pecuniary liability, as rents or fees against persons or property, w hile the term “fee” means “a charge fixed  by law or ordinance for the regulation or inspection of a business or activity. The effect is merely incidental. Thus, the fees imposed in Ordinance No. 18 are not taxes. Considering that the fees in Ordinance No. 18 are not in the nature of local taxes, and petitioner is questioning the constitutionality of the same, the CTA correctly dismissed the petition for lack of jurisdiction . City of M anila, H on. Alf redo S. Li m, as M ayor of th e City of M anila, et al. v. Hon. An gel Valera Colet, as Presidi ng ju dge, Regional T ri al Cour t of M anil a (Br .43), et al. G.R No. : The power to tax of local government units is a delegated power 120051, December 10, 2014 

and must be exercised within the guidelines and limitations that Congress may provide. taxing  power of local government units. VI. Tariff and Customs Code of 1978, as amended A. IMPORT DUTIES Q. When does importation begin and deemed terminated? A. Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with the intention to unlade therein. Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the articles, or secured to be paid, at a port of entry and the legal permit for withdrawal shall have been granted, or in case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of Customs. Q. What are ordinary import duties? A. Tariff duties are levied on imported goods either as a revenue generating measure or a  protective scheme to artificially or temporarily inflate prices to protect a country’s domestic output and its industries from their foreign counterparts. With the exception of certain articles which can be imported duty-free, upon compliance with certain prescribed conditions or formalities, goods are levied ordinary import duties under the Most Favored Nation (MFN) treatment, ranging from Free/Zero to 30% except in cases of sensitive agricultural products which are accorded a certain degree of protection via higher tariff rates reaching to as high as 65%. On the other hand, under the Common Effective Preferential Tariff (CEPT) Scheme, goods are levied ordinary import duties ranging from 0% to 5%, except also in cases of sensitive agricultural  products which are subject to as high as 40% tariff duties. Q. What are special duties under the Tariff Code? A. These are levied in addition to the ordinary import duties, taxes and charges imposed by law on the imported product under the following circumstances: Q. Define the following terms: a. Anti-Dumping Duty: The anti-dumping duty is a special duty imposed in the event that a specific kind or class of foreign article, is being imported into, sold or is likely to be sold in the Philippines, at an export price less than its normal value in the ordinary course of trade for a like product, commodity or article destined for consumption in the exporting country which is causing or threatening to cause material injury to a domestic industry, or materially retarding the

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establishment of a domestic industry producing similar product. b. Countervailing Duty: The countervailing duty is a special duty charged whenever any  product, commodity or article of commerce is granted directly or indirectly by the government in the country of origin or exportation, any kind or form of specific subsidy upon the production, manufacture or exportation of such product, commodity or article, and the importation of such subsidized product, commodity or article has caused or threatens to cause material injury to a domestic industry or has materially retarded the growth or prevents the establishment of a domestic industry. c. Marking Duty: The marking of articles (or its containers) is a prerequisite for every article or container imported into the Philippines in accordance with Section 303 of the TCCP. In case of failure to mark an article or its container at the time of importation, there shall be levied upon such article a marking duty of 5% ad valorem. d. Discriminatory Duty: The discriminatory duty is imposed by the President by proclamation upon articles of a foreign country which discriminate against Philippine commerce or against goods coming from the Philippines as stipulated under Section 304 of the TCCP. The amount of additional duty to be levied shall not exceed 100% ad valorem based on the dutiable value of imported articles. e. General Safeguard Measure: The general safeguard measure is applied by the Secretary of Trade and Industry, in the case of non-agricultural products, or the Secretary of Agriculture, in the case of agricultural products, upon positive final determination of the Tariff Commission that a product is being imported into the country in increased quantities, whether absolute or relative to domestic production, as to cause or threaten to cause serious injury to the domestic industry. In the case of non-agricultural products, however, the Secretary of Trade and Industry shall first establish that the application of such safeguard measures will be in the course of public interest.

The general safeguard measure shall be limited to the extent of redressing or preventing the injury and to facilitate adjustments by the domestic industry from the adverse effects directly attributed to the increased imports. f. Special Safeguard Duty:  An additional special safeguard duty is imposed on an agricultural  product whenever the cumulative import volume in a given year exceeds its trigger volume and when the actual c.i.f. (Cost, Insurance and Freight) import price falls below its trigger price. The safeguard duty is imposed by the Commissioner of Customs through the Secretary of Finance upon request by the Secretary of Agriculture. B. EXPORT DUTIES Q. What domestic items remain subject to export duties? A. Logs are the only remaining products subject to the duty under Section 514 of the TCCP, as amended. The export duty imposed on logs is 20% of the gross Free on Board (FOB) value at the time of shipment based on the prevailing rate of exchange. However, only planted trees  are subject to the export duty, since all naturally grown trees are banned from being exported under Ministry of Environment and Natural Resources Memorandum Order No. 8 (issued June 20, 1986). C. Remedies

1. The Commissioner of Customs has jurisdiction in cases involving liability for customs duties, fees or other money charges; seizure, detention or release of property affected; fines, forfeitures or other penalties imposed in relation thereto; or other matters arising under the Customs Law or other law or part of law administered by the Bureau of Customs [Rep. Act. No. 1125, (1954), Sec. 7]. 2. Decisions of the Commission of Customs favorable to the taxpayer are elevated to the Secretary of Finance (Sec. 2315, TCC); and 3. The Secretary of Trade and Industry has jurisdiction in the case of non-agricultural product,

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commodity or article, while the Secretary of Agriculture, in the case of agricultural product, commodity or article, in connection with the imposition of the Anti-Dumping Duty, Countervailing and Safeguard Duty [Republic Act Nos. 8751 and 8752, (1999) Sec. 301 (a) and (p), and Republic Act 8800]. 4. Decisions/ Resolutions of the DTI and DA Secretaries may be elevated to the Tariff Commission. 5. Decisions of the Tariff Commission are appealable to the CTA. 6. CTA decisions are appealable to the Supreme Court.

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