TAXATION LAW I

COURSE OUTLINE

TAXATION

I. Concepts & Principles

A. Definition and Concept

i. Power
ii. Process
iii. Means

B. Nature

‣ PEPSI-COLA v. MUNICIPALITY OF TANAUAN; G.R. No. L-31156

i. Inherent

a. Local Government Units & Other Political Subdivisions

‣ ICARD v. CITY OF BAGUIO; G.R. No. L-1281

‣ NPC v. CITY OF CABANATUAN; G.R. No. 149110
‣ MCIAA v. MARCOS; G.R. No. 120082
‣ C.N. HODGES v. MUNICIPAL BOARD; G.R. No. L-18129

ii. Legislative

a. Imposition of Tax

1. Nature (Kind)
2. Coverage (Subjects)
3. Purpose (Object)
4. Extent (Rate)
5. Situs (Place)

‣ CREBA v. ROMULO; G.R. No. 160756

 b. Grant of Exemption

‣ GOMEZ v. PALOMAR; G.R. No. L-23645

‣ CIR v. LINGAYEN GULF; G.R. No. L-23771
‣ JOHN HAY PEOPLE’S ALTERNATIVE COALITION v. LIM; G.R. No.
119775

c. Provision of Remedies

‣ PEPSI-COLA v. MUNICIPALITY OF TANAUAN; G.R. No. L-31156

‣ CIR v. FORTUNE TOBACCO; G.R. Nos. 167274-75

C. Basis

i. Necessity Theory (Principle of Necessity)

a. Lifeblood Doctrine

‣ PHILIPPINE GUARANTY v. CIR; G.R. No. L-22074

‣ CIR v. ALGUE; G.R. No. L-28896
‣ CIR v. PINEDA; G.R. L-22734
‣ NPC v. CITY OF CABANATUAN; G.R. No. 149110
‣ VERA v. FERNANDEZ; G.R. No. L-31364
‣ MCIAA v. MARCOS; G.R. No. 120082
‣ PBCOM v. CIR; G.R. No. 112024
‣ CIR v. CEBU PORTLAND CEMENT; G.R. L-29059
‣ FIRST LEPANTO v. CIR; G.R. No. 197117
‣ VALLEY TRADING v. CFI; G.R. No. L-49529
‣ CHURCHILL v. RAFFERTY; G.R. No. L-10572

ii. Benefits-Protection Theory (Principle of Benefits Received)

a. Symbiotic Relationship

‣ NPC v. CITY OF CABANATUAN

‣ CIR v. ALGUE
‣ GOMEZ v. PALOMAR; G.R. No. L-23645
‣ LORENZO v. POSADAS; G.R. L-43082

D. Objectives & Purposes

i. Revenue
 ii. Non-Revenue (Sumptuary)

‣ TIO v. VRB; G.R. No. L-75697

‣ LUTZ v. ARANETA; G.R. No. L-7859
‣ CALTEX v. COA; G.R. No. 92585
‣ PAL v. EDU; G.R. No. L-41383
‣ CIR v. CENTRAL LUZON DRUG; G.R. No. 159647
‣ CARLOS SUPERDRUG v. DSWD; G.R. No. 166494
‣ MANILA MEMORIAL v. SECRETARY; G.R. No. 175356

E. Object

i. Person

ii. Property

iii. Privilege

F. Characteristics

i. Attribute of Sovereignty

ii. Legislative in Character

iii. Territorial in Operation

iv. Comprehensive

v. Plenary

vi. Unlimited

vii. Supreme

‣ CHURCHILL v. CONCEPCION; G.R. No. L-75697

‣ CREBA v. ROMULO; G.R. No. 160756

G. Scope

i. Comprehensive
 ii. Unlimited

iii. Plenary

H. Power to Destroy

i. Marshall Dictum

‣ McCULLOCH v. MARYLAND; 17 U.S. (4 Wheat.) 316

‣ PASEO REALTY v. CA; G.R. No. 119286
‣ ROXAS v. CTA; G.R. No. L-25043
‣ TIO v. VRB; G.R. No. L-75697
‣ SISON v. ANCHETA; G.R. No. L-59431
‣ CHURCHILL v. CONCEPCION
‣ CREBA v. ROMULO

I. Limitations

‣ CIR v. ALGUE; G.R. No. L-28896

‣ ROXAS v. CTA; G.R. No. L-25043

i. Inherent Limitations

a. Public Purpose

‣ PASCUAL v. SECRETARY; G.R. No. L-10405

‣ LUTZ v. ARANETA
‣ CALTEX v. COA; G.R. No. 92585
‣ GOMEZ v. PALOMAR
‣ TIO v. VRB; G.R. No. L-75697
‣ (MANOSCA v. CA; G.R. No. 106440)
‣ PLANTERS PRODUCTS v. FERTIPHIL; G.R. No. 166006

b. Territoriality

‣ CIR v. MARUBENI; G.R. No. 137377

‣ REAGAN v. CIR; G.R. No. L-26379
‣ MERALCO v. YATCO; G.R. No. 45697

c. Non-Delegation
 (i) Delegation to the President

- Flexible Tariff Clause; Sec. 28(2), Art. VI

(ii) Delegation to LGUs

(iii) Tax Issuances

- Legislative Rule
- Interpretative Rule

‣ CIR v. FORTUNE TOBACCO; G.R. Nos. 167274-75

‣ ABAKADA v. ERMITA; G.R. No. 168056

d. International Comity

(i) Doctrine of Sovereign Equality of the States

(ii) Sec. 2, Art. II, Constitution

e. Government Exemption

‣ BOARD OF ASSESSMENT APPEALS v. CTA; G.R. No. 18125

‣ MACEDA v. MACARAIG; G.R. No. 88291 (31 May 1991)
‣ (PPA v. CITY OF ILOILO; G.R. No. 109791)

(i) Doctrine of Supremacy of the National Government Over the

Local Governments

‣ BASCO v. PAGCOR; G.R. No. 91649

‣ MIAA v. CA; G.R. No. 155650
‣ MCIAA v. MARCOS; G.R. No. 120082
‣ (MCIAA v. CITY OF LAPU-LAPU; G.R. No. 181756)

ii. Constitutional Limitations

a. Uniformity and Equality of Taxation; Sec. 28(1), Art. VI

‣ CHURCHILL v. CONCEPCION; G.R. No. 11572 - billboards

‣ PHILIPPINE TRUST COMPANY v. YATCO; G.R. Nos. L-
46255, 46256, 46259 and 46277 - banks, exemption gov’t
instrumentality
 ‣ EASTERN THEATRICAL v. ALFONSO; G.R. No. L-1104 - fee
on ticket - not all amusement places
‣ SISON v. ANCHETA; G.R. No. L-59431 - compensation and
business income
‣ (LUTZ v. ARANETA; G.R. No. L-7859)
‣ (VILLEGAS v. HIU TSIONG TSAI PAO HO; G.R. No. L-29646)
‣ CIR v. LINGAYEN GULF; G.R. No. L-23771 - franchises 2%
and 5%

(i) Classification Freeze Provision

‣ BRITISH AMERICAN TOBACCO v. CAMACHO; G.R. No.

163583

(ii) Progressive System of Taxation

‣ TOLENTINO v. SECRETARY; G.R. No. 115455 (25 August

1994; 30 October 1995)
‣ ABAKADA v. ERMITA; G.R. No. 168056

b. Exemption of Properties Actually, Directly, and Exclusively Used for

Religious, Charitable, and Educational Purposes; Sec. 28(3), Art. VI

‣ LLADOC v. CIR; G.R. No. L-19201

‣ CIR v. CA and YMCA; G.R. No. 124043
‣ BISHOP OF NUEVA SEGOVIA v. PROVINCIAL BOARD; G.R.
No. L-27588
‣ LUNG CENTER v. QUEZON CITY; G.R. No. 144104
‣ ABRA VALLEY COLLEGE v. AQUINO; G.R. No. L-39086
‣ CIR v. DLSU; G.R. No. 196596

c. Exemption of Assets and Revenues of Non-Stock, Non-Profit

Educational Institution; Sec. 4(3), Art. XIV

‣ CIR v. CA and YMCA; G.R. No. 124043

‣ CIR v. DLSU; G.R. No. 196596

d. Votes Required for Tax-Exemption; Sec. 28(4), Art. VI

‣ JOHN HAY PEOPLE’S ALTERNATIVE COALITION v. LIM;

G.R. No. 119775
‣ COCONUT OIL REFINERS v. TORRES; G.R. No. 132527
‣ ORMOC SUGAR v. TREASURER; G.R. No. L-23794
e. Origination Clause; Sec. 24, Art. VI

‣ TOLENTINO v. SECRETARY; G.R. No. 115455

‣ ABAKADA v. ERMITA; G.R. No. 168056

f. Prohibition against Imprisonment for Non-Payment of Poll Tax; Sec 20,

Art. III

g. Non-Appropriation for the Benefit of Any Religion; Sec. 29(2); Art. VI

‣ AGLIPAY v. RUIZ; G.R. No. L-45459

h. Specific Use of Tax Levied for Special Purpose; Sec. 29(3), Art. VI

‣ CCFOP v. AQUINO; G.R. No. 217965

i. Power to Tax of Local Government Units; Sec. 5, Art. XI

‣ MCIAA v. MARCOS; G.R. No. 120082

‣ NPC v. CITY OF CABANATUAN; G.R. No. 149110
‣ MIAA v. CA; G.R. No. 155650

j. Veto Power of the President; Sec. 27(2), Art. VI

k. Due Process; Sec. 1, Art. III

‣ PEPSI-COLA v. MUNICIPALITY OF TANAUAN; G.R. No. L-

31156
‣ CIR v. CA; G.R. No. 119761
‣ SISON v. ANCHETA; G.R. No. L-59431
‣ REYES v. ALMANZOR; G.R. Nos. L-49839-46
‣ PBCOM v. CIR; G.R. No. 112024

l. Equal Protection; Sec. 1, Art. III

• Rational Basis Test

• Classification Freeze Provision

‣ SISON v. ANCHETA; G.R. No. L-59431

‣ LUTZ v. ARANETA; G.R. No. L-7859
‣ BRITISH AMERICAN TOBACCO v. CAMACHO
‣ GOMEZ v. PALOMAR; G.R. No. L-23645
‣ TIU v. CA; G.R. No. 127410
‣ JUAN LUNA SUBDIVISION v. SARMIENTO; G.R. No. L-3538
 ‣ ORMOC SUGAR v. ORMOC CITY; G.R. No. L-23794

m. Religious Freedom & Non-Establishment of Religion; Sec. 5, Art. III

‣ AMERICAN BIBLE SOCIETY v. CITY OF MANILA; G.R. No. L-

9637
‣ TOLENTINO v. SECRETARY; G.R. No. 115455

n. Freedom of the Press

‣ TOLENTINO v. SECRETARY; G.R. No., 115455

o. Non-Impairment of Obligation of Contracts

‣ TOLENTINO v. SECRETARY; G.R. No., 115455

‣ MERALCO v. PROVINCE OF LAGUNA; G.R. No. 131359
‣ REPUBLIC v. CAGUIOA; G.R. No. 168584
‣ MCIAA v. MARCOS; G.R. No. 120082
‣ CASANOVA v. HORD; G.R. No. 3473
‣ MANILA RAILROAD v. INSULAR COLLECTOR; G.R. No. L-
10211

p. Judicial Review; Sec. 1, Sec. 5(2)(b), Art. VIII; Sec. 30, Art. VI

‣ TOLENTINO v. SECRETARY; G.R. No. 115455

‣ KAPATIRAN v. TAN; G.R. No. 81311

J. Aspects of Taxation

i. Levy

ii. Collection

a. Assessment and Collection

b. Payment

K. Systems of Taxation

i. As to Tax Imposed

a. Progressive
b. Regressive
 ii. As to Treatment of Taxable Income

a. Global
b. Schedular
c. Mixed (Semi Global, Semi Schedular)

L. Principles of Sound Tax System

i. Fiscal Adequacy
ii. Theoretical Justice
iii. Administrative Feasibility

M. Miscellaneous Concepts and Doctrines

i. Nature of Tax Laws

‣ REPUBLIC v. VDA. DE FERNANDEZ; G.R. No. L-9141

‣ HILADO v. COLLECTOR; G.R. No. L-9408

ii. Prospectivity of Tax Laws (Doctrine of Prospective Application)

• Art. 4, Civil Code

• Sec. 246, NIRC

‣ HYDRO RESOURCES v. CTA; G.R. No. 80276

‣ CIR v. ACOSTA; G.R. No. 154068
‣ CIR v. REYES; G.R. No. 159694
‣ UMALI v. ESTANISLAO; G.R. No. 104307
‣ PANSACOLA v. CIR; G.R. No. 159991
‣ SORIANO v. SECRETARY; G.R. No. 184450
‣ CIR v. BURROUGHS LIMITED; G.R. No. L-66653
‣ PBCOM v. CIR; G.R. No. 112024

iii. Imprescriptibility of Taxes

iv. Situs of Taxation

‣ CIR v. MARUBENI; G.R. No. 137377

a. Factors
b. Moblia Sequuntur Personam
 ‣ WELLS FARGO v. COLLECTOR; G.R. No. L-46720

v. Double Taxation

a. Kinds of Double Taxation

1. As to Validity

1. Direct Double Taxation

2. Indirect Double Taxation

b. As to Taxing Authority

1. Domestic Double Taxation

2. International Double Taxation

‣ PEPSI-COLA v. MUNICIPALITY OF TANAUAN; G.R. No. L-31156

‣ VILLANUEVA v. CITY OF ILOILO; G.R. No. L-26521
‣ ERICSSON v. CITY OF PASIG; G.R. No. 176667
‣ CIR v. SOLIDBANK; G.R. No. 148191
‣ CIR vs. CITYTRUST INVESTMENT; G.R. No. 139786

c. Methods of Relief from Double Taxation

1. Exemption Method
2. Credit Method
3. Deduction Method
4. Reduction Method
(i) Statute
(ii) Treaty

• RR No. 1-2010
• Most-Favored Nation Clause

‣ CIR v. S.C. JOHNSON; G.R. No. 127105

vi. Impact of Taxation and Incidence of Taxation

vii. Set-off or Compensation

‣ REPUBLIC v. MAMBULAO LUMBER; G.R. No. L-17725

 ‣ PHILEX MINING v. CIR; G.R. No. 125704
‣ DOMINGO v. GARLITOS; G.R. No. L-18994

viii. Estoppel

‣ CIR vs. CA AND CITYTRUST; G.R. No. 106611

ix. Compromise

x. Escape from Taxation

1. Tax Evasion

• Willful Blindness Doctrine

‣ PEOPLE v. KINTANAR; CTA EB Crim. No. 006; G.R. No. 196340

‣ PEOPLE v. SANTOS; CTA Crim. Case No. 012

2. Tax Avoidance

‣ HENG TONG TEXTILES v. CIR; G.R. No. L-19737

‣ CIR v. ESTATE OF TODA; G.R. No. 30554
‣ REPUBLIC v. GONZALES; G.R. No. L-17744
‣ PEREZ v. CTA; G.R. No. L-10507

A. Shifting

a. Forward Shifting
b. Backward Shifting
c. Onward Shifting

B. Capitalization

C. Transformation

D. Tax Option

E. Tax Exemption

(i) Basis

a. Reciprocity
 b. Public Policy

(ii) Source

a. Treaty
b. Constitution
c. Statute
d. Contract

(iii) Attributes

a. Personal
b. Privilege
c. Non-Discriminatory

(iv) Principles

(v) Classification

1. As to Coverage or Object

a. Personal
b. Impersonal

2. As to Extent

a. Full or Total
b. Partial

3. As to Condition

a. Absolute
b. Conditional

4. As to Manner of Creation

a. Express
b. Implied

‣ LUZON STEVEDORING v. CTA; G.R. No. L-30232

‣ CIR v. BOTELHO SHIPPING CORPORATION; G.R. Nos. L-
21633-34
 ‣ MERALCO v. VERA; G.R. No. L-29987
‣ SMART COMMUNICATIONS v. CITY OF DAVAO; G.R. No.
155491
‣ MACEDA v. MACARAIG; G.R. No. 88291
‣ MIA A v. CA; G.R. No. 155650

(vi) Related Concepts

1. Tax Condonation or Remission

‣ JUAN LUNA SUBDIVISION v. SARMIENTO; G.R. No. L-

3538
‣ SURIGAO CONSOLIDATED MINING v. COLLECTOR;
G.R. No. L-14878

2. Tax Refund

‣ DAVAO GULF LUMBER v. CIR; G.R. No. 117359

3. Tax Assumption

‣ MITSUBISHI CORPORATION v. CIR; G.R. No. 175722

4. Tax Amnesty

‣ REPUBLIC v. IAC; G.R. No. L-69344

‣ CIR v. CA; G.R. No. 108576
‣ RCBC v. CIR; G.R. No. 170257

5. Equitable Recoupment

xi. Taxpayer’s Suit

‣ MAMBA v. LARA ; G.R. No. 165109

‣ REMULLA v. MALIKSI; G.R. No. 171633
‣ JOYA v. PCGG; G.R. No. 96541
‣ ANTI-GRAFT LEAGUE v. SAN JUAN; G.R. No. 97787

• Citizen’s Suit

‣ PROVINCE OF NORTH COTABATO v. GRP; G.R. No. 18359

 xii. Inherent Powers

‣ ESSO STANDARD v. CIR; G.R. Nos. L-28508-9

‣ PROGRESSIVE DEVELOPMENT CORPORATION v. QUEZON CITY;
G.R. No. L-36081
‣ PAL v. EDU; G.R. No. L-41383
‣ COMPAÑIA GENERAL DE TABACOS v. CITY OF MANILA; G.R. No. L-
16619
‣ OSMEÑA v. ORBOS; G.R. No. 99886
‣ GEROCHI v. DOE; G.R. No. 159796
‣ PPI v. FERTIPHIL; G.R. No. 166066
‣ CHEVRON PHILIPPINES v. BCDA; G.R. No. 173863
‣ ANGELES UNIVERSITY v. CITY OF ANGELES; G.R. No. 189999
‣ VILLEGAS v. HIU CHIONG TSAI PAO HU; G.R. No. L-29646
‣ SMART COMMUNICATIONS v. MUNICIPALITY OF MALVAR; G.R. No.
204429

N. Tax Laws

• Sources

• Nature

• Construction/Interpretation

‣ LORENZO v. POSADAS; G.R. No. L-43082

‣ MARINDUQUE IRON MINES v. MUNICIPAL COUNCIL; G.R. No. L-18924

O. Taxes

i. Concept

ii. Characteristics

iii. Classification

a. As to Subject Matter
b. As to to Bears the Burden
c. As to Basis
d. As to Purpose
e. As to Taxing Authority
f. As to Graduation of Rates
 iv. Related Charges

a. License
b. Toll
c. Penalty
d. Special Assessment
e. Customs Duties
f. Debt

II. Income Taxation

A. Concepts and Principles

i. Basis

a. Partnership Theory

‣ CIR v. LEDNICKY; G.R. Nos. L-18169, L-18262 & L-21434

b. Protection Theory

‣ CIR v. BOAC; G.R. No. L-65773-74

c. Favorable Business Climate Theory

‣ CREBA v. ROMULO; G.R. No. 160756

ii. Systems

iii. Income Tax

a. Concept

b. Nature

c. Basis

d. Functions

‣ MADRIGAL v. RAFFERTY; G.R. No. L-12287

iv. Income

a. Capital

b. Return of Capital

c. Return on Capital

d. Revenue

e. Receipts

‣ FISHER v. TRINIDAD; G.R. No. L-17518

‣ CONWI v. CTA; G.R. No. 48532
‣ EISNER v. MACOMBER; 252 U.S. 189 (1920)
‣ MADRIGAL v. RAFFERTY
‣ CREBA v. ROMULO; G.R. No. 160756

v. Tests of Income

a. Net Worth Method ● Expenditure(s) Method

‣ PEREZ v. CTA; G.R. No. L-10507

‣ CASTRO v. COLLECTOR; G.R. No. L-12174
‣ FERNANDEZ HERMANOS v. CIR; G.R. No. L-21551
‣ LI YAO v. COLLECTOR; G.R. No. L-11875
‣ BIR v. CA & SPOUSES MANLY; G.R. No. 197590

b. Flow of Wealth Test

‣ CIR v. ADMINISTRATRIX; G.R. No. L-45544

‣ CIR v. TOURS SPECIALISTS; G.R. No. 66416
• RMC 89-2012
• RMC 16-2013

c. Doctrine of Indirect Receipts

‣ OLD COLONY TRUST CO. v. COMMISSIONER; 279 U.S. 716

(1929)

d. Claim of Right Doctrine

‣ NORTH AMERICAN OIL v. BURNET; 286 U.S. 417 (1932)

 ‣ RUTKIN v. U.S.; 343 U.S. 130

e. Economic Benefit Principle (Doctrine of Proprietary Interest)

f. Substantial Alteration of Interest Test

g. Control Test

• Assignment of Income Doctrine

• Power to Dispose

‣ LUCAS v. EARL; 281 U.S. 111 (1930)

‣ HELVERING v. HORST; 311 U.S. 112 (1940)
‣ RUTKIN v. U.S.; 343 U.S. 130

h. Severance Test (Macomber Test)

‣ EISNER v. MACOMBER; 252 U.S. 189 (1920)

i. Realization Test

• Value Appreciation/Revaluation Increment

‣ CIR v. FDC; G.R. No. 163653

j. All-Events Test

‣ CIR vs. ISABELA CULTURAL CORPORATION; G.R. No. 172231

k. Doctrine of Constructive Receipt

• Sec. 4-108.4, RR 16-2005

‣ CIR v. BANK OF COMMERCE; G.R. No. 149636

‣ LIMPAN INVESTMENT v. CIR; G.R. No. L-21570

vi. Types of Income

vii. Forms of Income

viii. Valuation

B. Philippine Income Tax

 GENERAL REFERENCES:

• Secs. 22 - 83, NIRC

• RR No. 2-40
• RR No. 2-98
• RR No. 8-2018
• RR No. 11-2018
• RR No. 14-2018
• RMC No. 50-2018

i. Features and Characteristics

• Moral Neutrality of the Taxing Authority

‣ JAMES v. UNITED STATES; 366 U.S. 213 (1961)

‣ CIR v. MANNING; G.R. No. L-28398

ii. Types

iii. Definition of Terms

• Sec. 22, NIRC

iv. General Principles

• Sec. 23, NIRC

a. Basis of Imposition (Criteria)

b. Kinds of Taxpayers

1. Individuals

2. Corporations

• Partnership

• Co-Ownership

‣ EVANGELISTA v. COLLECTOR; G.R. No. L-9996

‣ OÑA v. CIR; G.R. No. L-19342
 • Joint Venture & Consortium

‣ PD 929
‣ RR No. 10-2012

3. Special Entities

(i) Trusts

(ii) Estates

v. Tax on Individuals

a. Classification of Individuals

1. Citizens

• Sec. 1, Art. IV, Constitution

(i) Resident Citizens

(ii) Nonresident Citizens

• BIR Ruling 128-99

(iii) Special Cases

• Overseas Contract Workers (OCWs)

RR 1-2011
RR 11-2012
RR 5-2001

• Seafarers

• Dual Citizens

2. Aliens

(i) Resident Aliens

 (ii) Nonresident Alien

(a) Nonresident Aliens Engaged in Trade or Business

within the Philippines (NAETB)

(b) Nonresident Aliens Not Engaged in Trade or

Business within the Philippines (NRA-NETB)

(c) Special Cases

b. Income Tax on Citizens and Resident Aliens

• Sec. 24, NIRC

• Secs. 5 & 6, RR 2-40
• RMO No. 23-2018

(i) Graduated Tax

(ii) Gross Income Tax

(iii) Final Tax on Passive Income

(A) Capital Gains Tax

(a) Shares of Stock

• RR No. 6-2008
• RR No. 6-2013
• RMC 37-2012
• RMC 15-03

(b) Real Property

‣ CALAZANS v. CIR; G.R. No. L-26284

1. Exempt Sales

2. Sale of Principal Residence

c. Income Tax on Nonresident Aliens

• Sec. 25, NIRC

 (i) Nonresident Aliens Engaged in Trade or Business within the
Philippines

(a) Graduated Tax

(b) Tax on Passive Income

1. Capital Gains Tax

(ii) Nonresident Aliens Not Engaged in Trade or Business within

the Philippines

‣ CIR v. MALAYAN INSURANCE; G.R. No. L-21913

(iii) Special Cases

d. Income Tax on Members of General Professional Partnerships

• Sec. 26, NIRC

e. Minimum Wage Earners

‣ SORIANO v. SECRETARY; G.R. No. 184450

vi. Tax on Corporations

‣ AFISCO INSURANCE v. CA; G.R. No. 112675

a. Classification of Corporations

1. Domestic Corporations

2. Foreign Corporations

(i)Resident Foreign Corporations

(ii) Nonresident Foreign Corporations

a.1)Special Cases:

(i) Condominium Corporation

 (ii) Real Estate Investment Trust

b. Domestic Corporations

• Sec. 27, NIRC

(i) Normal (Regular Income Tax)

(ii) Gross Income Tax

(iii) Proprietary Education Institutions and Hospitals

• Predominance Test

‣ CIR v. ST. LUKE’S; G.R. Nos. 195909 & 195960

‣ CIR v. ST. LUKE’s; G.R. No. 203514

(iv) Government-Owned or Controlled Corporations

‣ PAGCOR v. BIR; G.R. No. 172087

‣ PAGCOR v. BIR; G.R. No. 215427
‣ BLOOMBERRY RESORTS v. BIR; G.R. No. 212530
‣ CIR v. SECRETARY; G.R. No. 177387

(v) Tax on Passive Income

• Capital Gains Tax

‣ SMI-ED PHILIPPINES v. CIR; G.R. No. 175410

(vi) Minimum Corporate Income Tax

• RR 9-98
• RR 12-2007

‣ CREBA v. ROMULO; G.R. No. 160756

‣ CIR v. PAL; G.R. No. 180066
‣ MBC v. CIR; G.R. No. 168118

c. Resident Foreign Corporations

‣ N.V. REEDERIJ v. CIR; G.R. No. L-46029

 ‣ ERIKS PTE. LTD. v. CIR; G.R. No. 118843
‣ CIR v. BOAC; G.R. Nos. L-65773-74
‣ CIR v. CA; G.R. No. 104151

• Sec. 28, NIRC

(i) Normal (Regular) Income Tax

(ii) Minimum Corporate Income Tax

(iii) Gross Philippine Billings Tax

• International Carriers
• Originating Rule

‣ SOUTH AFRICAN AIRWAYS v. CIR; G.R. No. 180356;

‣ AIR CANADA v. CIR; G.R. No. 169507

(iv) Branch Profits Remittance Tax

‣ BANK OF AMERICA v. CA; G.R. No. 103092

‣ MARUBENI v. CIR; G.R. No. 76573
‣ CIR v. BURROUGHS LIMITED; G.R. No. 66653

• Sec. 28 (A)(5), NIRC

• Single Entity Concept

• Attribution Rule
• Principal-Agent Relationship Theory

(v) Tax on Passive Income

(vi) Capital Gains Tax

(vii) Tax on Regional or Area Headquarters and Regional

Operating Headquarters of Multinational Corporations

d. Nonresident Foreign Corporations

• Sec. 28, NIRC

(i) In General
 (ii) Specific Cases

(iii) Capital Gains Tax

(iv) Tax on Intercorporate Dividends

• Tax Sparing Rule

‣ CIR v. PROCTER & GAMBLE; G.R. No. L-66838

‣ CIR v. WANDER PHILIPPINES; G.R. No. L-68375
‣ CIR v. GOODYEAR PHILIPPINES; G.R. No.
216130

e. Improperly Accumulated Earnings Tax

• Sec. 29, NIRC

• RR 2-2001

‣ CIR v. TUASON; G.R. No. 85749

‣ MANILA WINE v. CIR; G.R. No. L-26145
‣ BASILAN ESTATES v. CIR; G.R. No. L-22492
‣ CYANAMID PHILIPPINES v. CA; G.R. No. 108067

f. Exempt Corporations

• Sec. 30, NIRC

‣ CIR v. V.G. SINCO; G.R. No. L-9276

‣ CIR v. CA and YMCA; G.R. No. 124043
‣ CIR v. DLSU; G.R. No. 196596
‣ CIR v. ST. LUKE’S; G.R. Nos. 195909 & 195960
‣ PAGCOR v. BIR; G.R. No. 172087
‣ PAGCOR v. BIR; G.R. No. 215427
‣ BLOOMBERRY RESORTS v. BIR; G.R. No. 212530
‣ CIR v. SECRETARY; G.R. No. 177387
‣ REPUBLIC v. PAL; G.R. Nos. 209353-54
‣ CIR v. PAL; G.R. No. 215705-07
‣ AMERICAN BILBLE SOCIETY v. CITY OF MANILA
‣ MANILA GAS v. COLLECTOR; G.R. No.

vii. Taxable Income

 • Sec. 31, NIRC

a. Concept

• Accounting Income

b. Characteristics (Requisites)

c. Net Worth Method

d. Expenditure Method

‣ CREBA vs. ROMULO; G.R. 160756

‣ FERNANDEZ HERMANOS v. CIR; G.R. No. L-21551
‣ FISHER v. TRINIDAD; G.R. No. L-17518
‣ CIR v. FDC.; G.R. Nos. 163653 & 167689
‣ CIR v. BANK OF COMMERCE; G.R. No. 149636
‣ LIMPAN INVESTMENT v. CIR; G.R. No. L-21570
‣ LI YAO v. COLLECTOR; G.R. No. L-11875
‣ COLLECTOR v. JAMIR; G.R. No. L-16552

viii. Gross Income

• Sec. 32, NIRC

‣ CIR v. BOAC; G.R. Nos. L-65773-74

‣ JAMES v. U.S.; 366 U.S. 213 (1961)
‣ RUTKIN v. U.S.; 343 U.S. 130

a. Concept

b. Compensation Income

• Convenience of the Employer Rule

‣ MILLARES v. NLRC; G.R. No. 122827

‣ CIR v. HENDERSON; G.R. No. L-12954
‣ PIROVANO v. CIR; G.R. No. L-19865

c. Business Income (Income from Exercise of Profession)

d. Passive Income
‣ CIR v. PAL; G.R. No. 160528

(i) Gains from Dealings in Property

1. Shares of Stock

2. Real Property

‣ GONZALES v. CTA; G.R. No. L-14532

(ii) Interest Income

• RR 14-2012

• 20-Lender Rule (19-Lender Rule)

• Imputed/Theoretical Interest

‣ GONZALES v. CTA
‣ CIR v. MITSUBISHI METAL; G.R. No. L-54908
‣ CIR v. FDC; G.R. No. 163653
‣ BDO v. CIR; G.R. No. 198756
‣ CIR v. ISABELA CULTURAL; G.R. No. 172231

(iii) Rental Income

• BIR Ruling No. 3-00, 05 January 2000

• RMC 16-2013

1. Outright Method

2. Spread-Out Method

(iv) Royalty Income

(v) Dividend Income

‣ CIR v. CA; G.R. No. 108576

‣ CIR v. Manning; G.R. No. L-28398
‣ WISE AND CO. v. MEER; G.R. No. 48231
 (vi) Annuities and Proceeds from Insurance

(vii) Prizes and Winnings

(viii) Pensions

e. Distributive Share from the Net Income of General Professional

Partnership

‣ TAN v. DEL ROSARIO; G.R. No. 109289

f. Income from Miscellaneous Sources

• Tax Benefit Rule

(i) Bad Debts Recovery

(ii) Unutilized Campaign Funds

(iii) Subsidy

‣ CIR v. SONY; G.R. No. 178697

(iv) Tax Refund (Credit)

(v) Condonation of Debt

ix. Exclusions from Gross Income

• Sec. 32, NIRC

a. Nature

b. Rationale

c. Exclusions and Deductions

d. Excluded Items

‣ CIR v. CA; G.R. No. 95022

‣ CIR v. MITSUBISHI METAL; G.R. No. L-54908
 ‣ EL ORIENTE v. POSADAS; G.R. No. 34774
‣ RE: REQUEST OF ATTY. BERNARDO ZIALCITA; A.M. No. 90-6-
015-SC
‣ BORROMEO v. CSC; G.R. No. 96032
‣ SANTOS v. SERVIER PHILIPPINES; G.R. No. 166377
‣ TANTUICO v. DOMINGO; G.R. No. 96422

e. De Minimis Benefits

f. 13th Month Pay and Other Benefits

x. Fringe Benefits

• Fringe Benefits Tax

• Convenience of the Employer Rule

xi. Allowable Deductions - NIRC

• Sec. 34

a. Concept

b. Nature

‣ CIR v. GENERAL FOODS; G.R. No.

‣ CONSOLIDATED MINES v. CTA; G.R. Nos. L-18843 & L-18844

c. Entitled Taxpayers

d. Interpretation

e. Requisites in General

f. Deductible Items

1. Business Expenses

• Sec. 237, NIRC

(i) Definition and Concept

(ii) Capital Expenditure

• Origin of the Claim Doctrine

(iii) Requisites

• Substantiation Requirements

• Business or Statutory Test

• All Events Test

• Cohan Principlle

• Origin of the Claim Doctrine

‣ PHILMICO-MAURI v. CIR; G.R. No. 175651

‣ ATLAS CONSOLIDATED v. CIR; G.R. No. L-26911
‣ CIR v. ISABELA CULTURAL; G.R. No. 172231
‣ ESSO STANDARD v. CIR; G.R. No. 28508
‣ CIR v. SONY PHILIPPINES; G.R. No. 178697
‣ CIR v. GENERAL FOODS; G.R. No. 143672
‣ PIROVANO v. CIR; G.R. No. L-19865
‣ AGUINALDO INDUSTRIES v. CIR; G.R. L-29790
‣ C.M. HOSKINS & Co. v. CIR; G.R. L-24059
‣ HOSPITAL DE SAN JUAN DE DIOS v. CIR; G.R. L-
31305
‣ REPUBLIC v. MERALCO; G.R. No. 141314
‣ ZAMORA v. CIR; G.R. No. L-15290
‣ C.F. CALANOC v. CIR; G.R. No. L-15922
‣ KUENZLE & STREIFF v. CIR; G.R. Nos. L-12010 &
L-12113
‣ VISAYAN CEBU TERMINAL vs. CIR; G.R. No. L-
12798
‣ COHAN v. COMMISSIONER; 39 F .2d 540 (2d Cir.
1930)
‣ CIR v. A. SORIANO; G.R. L-24893
‣ U.S. v. GILMORE; 372 U.S. 39 (1963)
‣ WOODWARD v. COMMISSIONER; 397 U.S. 572
(1970)
 ‣ WELLS FARGO vs. COMMISSIONER; U.S. Court of
Appeals, Eight Circuit; No. 99-3307, 29 August 2000

(iv) Private Educational Institutions

2. Interest

(i) Definition and Concept

(ii) Requisites

(iii) Tax Arbitrage Rule

(iv) Non-Deductible Interest Expense

(v) Optional Treatment

(a) Outright Deduction

(b) Periodic Amortization

‣ KUENZLE & STREIFF v. CIR; G.R. Nos. L-12010 & L-

12113
‣ CIR v. PALANCA; G.R. No. L-16626
‣ PICOP v. CA; G.R. No. 106949
‣ CIR v. VDA. DE PRIETO; G.R. No. L-13912

3. Taxes

(i) Concept

• Tax Benefit Rule

(ii) Requisites

(iii) Non-Deductible Taxes

(iv) Tax Credit

‣ CIR v. CENTRAL LUZON DRUG; G.R. No. 148512

‣ CIR v. LEDNICKY; G.R. Nos. L-18169, L-18286, & L-21434
4. Losses

• RMC 17-2011
• RMO 31-2009
• RMO 6-2012

(i) Concept

(ii) Requisites in General

(iii) Classification of Losses

(a) Ordinary Losses

1. Operating Losses

• Net Operating Loss Carry-Over

RR No. 14-2001

2. Casualty Losses

• RR No. 12-77
• RMO No. 31-2009

‣ CITY LUMBER v. DOMINGO; G.R. No.

18611

(b) Capital Losses

• Limitation

RR No. 6-2008

• Securities Becoming Worthless

• Net Capital Loss Carry-Over

‣ CIR v. PRISCILLA ESTATE; G.R. No. L-18282

(c) Special Losses

 (iv) Losses from Wash Sales

(v) Wagering Losses

(vi) Abandonment Losses

‣ FERNANDEZ HERMANOS v. CIR; G.R. No. L-21551

5. Bad Debts

• RR No. 5-99
• RR No. 25-2002

(i) Concept

(ii) Requisites

‣ PRC v. CA; G.R. No. 118794

‣ CHINABANK. v. CA; G.R. 125508
‣ COLLECTOR v. GOODRICH; G.R. L-22265
‣ PHILEX MINING v. CIR; G.R. No. 148187

6. Depreciation

• RR No. 12-2012
• RMC 2-2013
• RMC No. 70-2010

(i) Concept

• Obsolescence

(ii) Requisites

(iii) Methods of Computation

(iv) Basis

‣ BASILAN ESTATES v. CIR; G.R. No. L-22492

‣ VICTORIAS MILLING vs. CTA; G.R. L-24213

7. Depletion
 • RR No. 5-76

(i) Concept

(ii) Entitled Taxpayers

(iii) Basis

‣ CONSOLIDATED MINES v. CTA; G.R. Nos. L-18843 & L-

18844

8. Charitable and Other Contributions

(i) Concept

(ii) Classification

(iii) Requisites

‣ ROXAS v. CTA; G.R. No. L-25043

9. Research and Development

(i) Concept

(ii) Requisites

10. Pension Trust Contributions

(i) Concept

• Pension Trusts

• Normal Cost

• Past Service Cost

(ii) Requisites

11. Additional Requirements

 12. Optional Standard Deduction

(i) Concept

(ii) Entitled Taxpayers

(iii) Requisites

(iv) Rate and Basis

xii. Deductions - Special Laws

xiii. Non-Deductible Items

• Sec. 36, NIRC

a. Concept and Rationale

xiv. Special Cases

a. Insurance Companies

• Sec. 37, NIRC

• RMC No. 30-2008
• RMC 59-2008
• RMC 49-2010

b. Wash Sales

• Sec. 38, NIRC

• RR No. 6-2008

c. Capital Gains and Losses

(i) Capital Gains Tax

• Secs. 24, 27, 39 and 40, NIRC

• RR No. 7-2003
• RR No. 6-2008
• RR No. 6-2013

‣ CBC v. CA; G.R. No. 125508

 ‣ SUPREME TRANSLINER v. BPI; G.R. No. 165617
‣ CALAZANS v. CIR; G.R. No. L-26284
‣ GONZALES v. CTA; G.R. No. L-14532
‣ ROXAS v. CTA; G.R. No. L-25043
‣ SMI-ED PHILIPPINES v. CIR; G.R. No. 175410
‣ CIR v. FDC; G.R. No. 163653
‣ CIR v. UCPB; G.R. No. 179063

xv. Sources of Income

• Secs. 42
• 50% Rule

‣ CIR v. BOAC; G.R. Nos. L-65773-74

‣ CIT v. JAL; G.R. No. 60714
‣ HOWDEN v. COLLECTOR; G.R. No. L-19392
‣ PHILIPPINE GUARANTY v. CIR; G.R. L-22074
‣ NDC vs. CIR; G.R. No. L-53961
‣ CIR vs. JULIANBAIER-NICKEL; G.R. No. 153793

xvi. Accounting Periods and Methods

• Secs. 43 - 50, NIRC

a. Accounting Periods

• Regular Accounting Period

• Short Accounting Period

• Variable Accounting Period

b. Change of Accounting Period

c. Accounting Methods

• Accounting Methods, in General

• Percentage of Completion Basis

• Installment Basis
 • Sec. 2.57-1(A)(7), RR 2-98

‣ BAÑAS v. CA; G.R. No. 102967

• Spread-Out Method

• Outright Method

• Crop-Year Basis

‣ CIR v. LANCASTER; G.R. No. 183408

• Power of CIR to Adopt Method of Accounting

‣ LI YAO v. COLLECTOR; G.R. No. L-11875

‣ BIR v. CA & SPOUSES MANLY; G.R. No. 197590

• Net Worth Method

‣ PEREZ v. CTA; G.R. No. L-10507

‣ CASTRO v. COLLECTOR; G.R. No. L-12174
‣ FERNANDEZ HERMANOS v. CIR; G.R. No. L-21551

• Expenditures Method

‣ COLLECTOR v. JAMIR; G.R. No. L-16552

‣ BIR v. CA & SPOUSES MANLY; G.R. No. 197590

d. Recognition of Income and Deductions

• All-Events Test

e. Power of CIR to Allocate Income and Deductions

• Sec. 179, RR 2-40

• RR 2-2013

‣ CONSOLIDATED MINES v. CTA; G.R. Nos. L-18843 & L-18844

‣ FILIPINAS SYNTHETIC v. CA; G.R. Nos. 118498 & 124377
‣ CIR v. ISABELA CULTURAL; G.R. No. 172231

xvii. Returns and Payment of Tax

• Secs. 51 - 59, Secs. 74 - 77, NIRC

a. Tax Return

b. Information Return

c. Individuals

1. Applicability

2. Place of Filing

3. Time of Filing

4. Substituted Filing

5. Declaration of Income Tax

• Estimated Tax

• Quarterly Return

d. Corporations

1. Applicability

2. Corporation Contemplating Dissolution or Reorganization

3. Capital Gains Tax

4. Place of Filing

5. Time of Filing

6. Extension of Time

7. Receivers, Trustees, and Assignees

8. General Professional Partnerships

9. Quarterly Returns and Payments

 10. Final Adjustment Return

• Irrevocability Rule

‣ CIR v. BPI; G.R. No. 178490

‣ PHILAM v. CIR; G.R. No. 156637
‣ UPSI-MI v. CIR; G.R. 205955

e. Payment and Assessment

1. Statutory Liability

2. Time of Payment

3. Installment Payment

4. Deficiency Tax

‣ CIR v. LIMPAN INVESTMENT; G.R. No. L-28571

‣ CASTRO v. COLLECTOR; G.R. No. L-12174

f. Withholding Tax at Source

1. Kinds

(i) Final Withholding Tax

(ii) Creditable Withholding Tax

(iii) Tax-Free Covenant Bonds

2. Returns and Payment

(i)Time of Filing and Payment

(ii)Place of Filing and Payment

3. Statement of Income Payments

4. Annual Information Return

xviii. Tax on Income of Estates and Trusts

• Secs. 60 - 66, NIRC

a. Applicability

• Exceptions

b. Taxable Income

c. Exemption

d. Revocable Trusts

e. Fiduciary Returns

‣ EVANGELISTA v. COLLECTOR; G.R. No. L-9996

‣ PASCUAL v. CIR; G.R. No. 68116
‣ CIR v. VISAYAN ELECTRIC; G.R. No. L-22611
‣ CIR v. CA; G.R. No. 95022
‣ OSSORIO FOUNDATION v. CA; G.R. No. 162175

xix. Miscellaneous Matters

• Secs. 67 - 73, NIRC

a. Stock Dividends

‣ LINCOLN PHILIPPINE LIFE v. CA; G.R. No. 118043

‣ CIR v. CA; G.R. No. 108576

xx. Withholding Tax on Wages

• Secs. 78 - 83, NIRC

a. Terms and Concepts

b. Applicability

c. Withholding Agent

d. Liability for Tax

 • Employer

• Employee

e. Refunds and Credits

f. Year-End Adjustments

g. Returns and Payment

h. Employees Withholding Statements

i. Annual Information Returns

j. Substituted Filing

xxi. Withholding Tax System

a. Concept

‣ BANK OF AMERICA v. CIR; G.R. No. 103092

‣ CIR v. MALAYAN INSURANCE; G.R. No. L-21913

b. Purpose

‣ CREBA v. ROMULO; G.R. No. 106756

c. Applicability

d. Withholding Agents

‣ HONDA CARS v. HONDA CARS UNION; G.R. No. 204142

‣ CIR v. CA; G.R. No. 108576

e. Duties and Obligations of Withholding Agents

‣ BENGUET CORPORATION v. CIR; G.R. No. 141212

f. Classification of Withholding Tax

g. Time of Withholding
‣ ING BANK v. CIR; G.R. No. 167679
‣ CIR v. UCPB; G.R. No. 179063