Professional Documents
Culture Documents
Part II
SITUS OF TAXATION (Place of taxation)
RULE: The State where the subject to be taxed has a situs may rightfully levy and
collect the tax
EXCEPTIONS TO THE TERRITORIALITY RULE
A) Where the tax laws operate outside territorial
jurisdiction
1) TAXATION of resident citizens on their
incomes derived
from abroad
B) Where tax laws do not operate within the
territorial jurisdiction of the State
1) When exempted by treaty obligations
In determining the situs of taxation, you have to consider the nature of the taxes
Example:
RULES:
1) TANGIBLE PERSONAL PROPERTY
Where located, usually the owners domicile
2) INTANGIBLLE PERSONAL PROPERTY
General Rule: Domicile of the owner
EXCEPTION: The situs location not domicile
Where the intangible personal property has acquired a business situs in another
jurisdiction
* The principle of “Mobilia Sequntur Personam” is only for purposes of convenience.
It must yield to the actual situs of such property.
Personal intangible properties which acquires business situs here in the Philippines
1) Franchise which is exercised within the Philippines
2) Shares, obligations, bonds issued by a domestic corporation
3) Shares, obligations, bonds issued by a foreign corporation, 85% of its business is conducted in
the Philippines
4) Shares, obligations, bonds issued by a foreign corporation which shares of stock or bonds
acquire situs here
5) Rights, interest in a partnership, business or industry established in the Philippines
- These intangible properties acquire business situs here in the Philippines, you cannot
apply the principle of “Mobilia Sequntur Personam” because the properties have
SITUS OF INCOME acquired
TAX situs here.
A) DOMICILLARY THEORY
- The location where the income earner resides is the situs of taxation
B) NATIONALITY THEORY
- The country where the income earner is a citizen is the situs of taxation
C) SOURCE RULE
- The country which is the source of the income or where the activity that produced the income
took place is
the situs of taxation.
SITUS OF SALE OF PERSONAL PROPERTY - The place where the sale is consummated and
perfected
SITUS OF TAX ON INTEREST INCOME - The residence of the borrower who pays the interest
irrespective of the place where the obligation was contracted
CIR vs. BOAC
Revenue derived by an off-line international carrier without any flight from the
Philippines, from
ticket sales through its local agent are subject to tax on gross Philippine billings
SITUS OF EXCISE TAX - Where the transaction performed
HOPEWELL vs. COM. OF CUSTOMS
The power to levy an excise upon the performance of an act or the
engaging in an occupation does not depend upon the domicile of the
person subject to the exercise, nor upon the physical location of the
property or in connection with the act or occupation taxed, but depends
upon the place on which the act is performed or occupation engaged in.
Thus, the gauge of taxability does not depend on the location of the
office, but attaches upon the place where the respective transaction is
perfected and consummated
DOUBLE TAXATION- Taxing same property twice when it should be taxed but once.
Taxing the same person twice by the same jurisdiction over the same thing.
- Also known as duplicate taxation
PEPSI COLA vs. CITY OF BUTUAN
There is no constitutional prohibition against double taxation in the Philippines. It is
something not favored but is permissible, provided that the other constitutional requirements is
not thereby violated
2) CAPITALIZATION - Reduction is the price of the taxed object equal to the capitalized value of
future taxes on
the property sold
This is a special form of backward shifting, where the burden of future taxes
which the buyer
may have to pay is shifted back to the seller in the form of reduction in the
selling price
2) Local governments
- Municipal corporations are clothed with no inherent power to tax or grant
tax exemptions.
- But the moment the power to impose a particular tax is granted, they also
have the power
to grant exemption therefrom unless forbidden by some provision of the
Constitution or the law
- The legislature may delegate its power to grant tax exemptions to the
same extent that it
may exercise the power to exempt.
Basco vs. PAGCOR (196 SCRA 52): The power to tax municipal corporations must
always yield to a legislative act which is superior, having been passed by the State
itself. Municipal corporations are mere creatures of Congress which has the power
Chavez
to createv.andPCGG, G.R.
abolish No. 130716,
municipal 09 December
corporations due to1998
its general legislative powers. If
·Congress
In a compromise agreement between the Philippine Government,
can grant the power to tax, it can also provide represented
for exemptions or evenbytake
the
backPCGG, and the Marcos heirs, the PCGG granted tax exemptions to the assets
the power.
which will be apportioned to the Marcos heirs. The Supreme Court ruled that the
PCGG has absolutely no power to grant tax exemptions, even under the cover of its
authority to compromise ill gotten wealth cases. The grant of tax exemptions is the
exclusive prerogative of the Congress.
· In fact, the Supreme Court even stated that Congress itself cannot grant tax
exemptions in the case at bar because it will violate the equal protection clause of
the Constitution.
Interpretation of the laws granting tax exemptions
· General rule - In the construction of tax statutes, exemptions are not favored
and are
construed strictissimi juris against the taxpayer. The
fundamental theory is that
all taxable property should bear its share in the cost and
expense of the
government.
- He who claims exemption must be able to justify his claim or
right thereto by a
grant express in terms “too plain to be mistaken and too
categorical to be
misinterpreted.” If not expressly mentioned in the law, it
must be at least
within its purview by clear legislative intent.
· Exceptions
1) When the law itself expressly provides for a liberal construction
thereof.
2) In cases of exemptions granted to religious, charitable and
educational institutions
or to the government or its agencies or to public property because
the general rule
is that they are exempt from tax.
Strict interpretation does not apply to the government and its agencies
· Petitioner cannot invoke the rule on stritissimi juris with respect to the interpretation
of statutes granting tax exemptions to the NPC. The rule on strict interpretation does
not apply in the case of exemptions in favor of a political subdivision or
instrumentality of the government. [Maceda v. Macaraig]
CONSTITUTIONAL RESTRICTION:
“No law granting any tax exemption shall be passed without the
concurrence of a
majority of all members of Congress.” (Sec. 28 (4) ART VI)
ELEMENTS OF TAX EVASION - Tax evasion connotes the integration of three (3)
factors:
1) The end to be achieved, i.e. payment of less than that known by the taxpayer to
be legally due,
or paying no tax when it is shown that tax is due
2) An accompanying state of mind which is described as being “evil”, “in bad
faith”, “willful”, or
“deliberate” and not “accidental”
3) A course of action (or failure of action) which is unlawful