Strategic Tax Management

ACT 123
Chapter 1
A Framework for Understanding Tax

 Learning Objectives
 Understand the importance of taxes in decision making
 Know the types of taxes
 Understand the basic principles of taxation
 Know the sources of tax laws
 Know the SAVANT Framework

Week 2
Chapter 1 CHAPTER 1: FRAMEWORK OF UNDERSTANDING
TAXES IN THE PHILIPPINES

Week 2
Chapter 1
Overview

 The provisions on Philippine national internal revenue taxes are codified in the National
Internal Revenue Code (the “Tax Code”) as amended by RA 10963 beginning January 1,
2018 or the Tax Reform for Acceleration and Inclusion (the “TRAIN”). The national
internal revenue taxes are administered by the Bureau of Internal Revenue (“BIR”).
 On or before the commencement of business, a Philippine corporation must register with
the appropriate revenue district office having jurisdiction over the principal place of
business of the corporation as stated in its articles of incorporation. A person maintaining a
head office, branch or facility is also required to register with the revenue district office
having jurisdiction over the head office, branch or facility. The term “facility” here
includes sales outlets, places of production, warehouses and storage places.1

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Chapter 1
Module Objectives

 At the end of the topic, the learner will be able to:

 Understand the importance of taxes in decision making
 Know the types of taxes
 Understand the basic principles of taxation
 Know the sources of tax laws
 Know the SAVANT Framework

Week 2
Chapter 1
I. National Internal Revenue Taxes
(A-D)

A. Income Tax
i. Regular Income Tax
ii. Minimum Corporate Income Tax
iii. Final Tax on Passive Income
iv. Improperly Accumulated Earnings Tax

B. Value Added Tax

C. Donor’s Tax
D. Documentary Stamp Tax

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Chapter 1
National Internal Revenue Taxes
(E)

E. Assessment of National Internal Revenue Taxes

i. Prescriptive Period
ii. Procedure in the Issuance of Deficiency Tax Assessment
1. Letter of Authority (LOA)

2. Notice of Informal Conference

3. Preliminary Assessment Notice

4. Formal Letter of Demand and Assessment Notice

5. Administrative Protest

6. Appeal to the Court of Tax Appeals

7. Appeal to the Supreme Court

8. Collection of National Internal Revenue Tax

Week 2
Chapter 1
II. Local Business Tax
(1-3 “a-c”)

1. Community Tax
2. Business Tax
3. Assessment of Local Business Tax
a. Prescription of Local Business tax
b. Procedure of Governing Protest of Assessment
c. Collection of Local Business Tax

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Chapter 1
III. Real Property Tax

1. Collection of Real Property Tax

2. Protest of Real Property Tax

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Chapter 1 I. NIRC
A. Income Tax

1. Regular Income Tax

2. Minimum Corporate Income Tax
3. Final Tax on Passive Income
4. Improperly Accumulated Earnings Tax

Week 2
Chapter 1 I. NIRC
A. Income Tax
1. Regular Income Tax

 A domestic corporation2 is taxable on all income derived from sources within and without
the Philippines.3 The general corporate income tax rate on taxable income is 30%.4 For
purposes of computing taxable income, the Tax Code allows certain deductions.5 In lieu of
an itemized deduction, the Tax Code allows a standard deduction of 40% of the gross
income.6

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 I. NIRC
Chapter 1
A. Income Tax
2. Minimum Corporate Income Tax

 Under the Tax Code, a minimum corporate income tax (“MCIT”) of 2% of the gross
income of a corporation is imposed beginning on the 4th taxable year immediately
following the corporation’s commencement of business operations, when such MCIT is
greater than the tax computed using the 30% regular or normal tax rate.7 Any excess
MCIT over the regular income tax is carried forward and credited against the regular
income tax of the corporation for the three immediately succeeding taxable years.8

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 I. NIRC
A. Income Tax
3. Final Tax on Passive Income

Chapter 1

Income Tax Rate Basis

Interest on currency bank deposit and yield or any

other monetary benefit from deposit substitutes and
20% Section 27(D)(1), Tax Code, as amended
from trust funds and similar arrangements from
sources within the Philippines

Royalties derived from sources within the Philippines 20% Section 27(D)(1), Tax Code, as amended

Interest income from a depository bank under the

15% Section 27(D)(1), Tax Code, as amended
expanded foreign currency deposit system

Net capital gains from the sale, exchange or other

disposition of shares of stock in a domestic 15% Section 27(D)(2), Tax Code, as amended
corporation other than through the stock exchange

Dividends received from a domestic corporation Exempt Section 27(D)(4), Tax Code

Gain on sale, exchange or disposition of lands and/or

buildings which are not actually used in the business 6% Section 27(D)(5), Tax Code
of a corporation and are treated as capital assets

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 I. NIRC
Chapter 1 A. Income Tax
4. Improperly Accumulated Earnings Tax

 In addition to the other taxes imposed on domestic corporations, the Tax Code imposes a 10%
tax on “improperly accumulated taxable income” of corporations formed or availed for the
purpose of avoiding the income tax with respect to its shareholders or the shareholders of any
other corporation by permitting earnings and profits to accumulate instead of being divided or
distributed.10 This tax, however, does not apply to publicly-held corporations, banks and other
non-bank financial intermediaries and insurance companies.11
 “Improperly accumulated taxable income” means taxable income adjusted by: (i) income
exempt from tax;
(ii) income excluded from gross income; (iii) income subject to final tax; (iv) the amount of net
 operating loss carry-over deducted; and reduced by the sum of: (i) dividends actually or
constructively paid; and (ii) income tax paid for the taxable year.12

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Chapter 1 I. NIRC
B. Value Added Tax

 Value-added tax (“VAT”) is a tax on consumption levied on the sale, barter, exchange or
lease of goods or properties and services in the Philippines and on importation of goods
into the Philippines. VAT is imposed upon the seller, who may pass on the same to the
buyer, transferee or lessee of the goods, properties or services.16
 VAT is based on the gross selling price or gross value in money of the goods or properties
sold, bartered or exchanged, or the gross receipts derived from the sale or exchange of
services or the use or lease of properties.17 With respect to the importation of goods, VAT
is based on the total value used by the Bureau of Customs in determining tariff and
customs duties, plus customs duties, excise taxes, if any, and other charges. Where the
customs duties are determined on the basis of the quantity or volume of the goods, VAT
shall be based on the landed cost plus excise taxes, if any.18

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Chapter 1 I. NIRC
B. Value Added Tax

 For a transaction to be subject to VAT, the sale, exchange, barter or lease of goods,
properties or services or the importation of goods must be in the course of trade or
business.19 The phrase “in the course of trade or business” means the regular conduct or
pursuit of a commercial or economic activity, including transactions incidental thereto, by
any person regardless of whether or not the person engaged therein is a non-stock, non-
profit private organization or government entity. Services rendered by non-resident foreign
persons are automatically considered as being rendered in the course of trade or business.20
 As a general rule, VAT is imposed at the rate of 12%.21 There are, however, sales which are
subject to VAT at the rate of 0%. These include export sales or services, foreign currency
denominated sales, and sales to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory effectively subjects such
sales to zero rate.22 Certain transactions, however, are exempt from VAT.23

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Chapter 1 I. NIRC
C. Donors Tax

 Donor's tax is imposed upon the transfer by any person of property by gift as provided
under Section 98 of the Tax Code.24
 While the Tax Code does not define transfer of property by gift, donation is defined in
Article 725 of the Civil Code as an act of liberality whereby a person disposes gratuitously
of a thing or right in favor of another, who accepts it.25 Donation has the following
elements: (a) the reduction of the patrimony of the donor; (b) the increase in the patrimony
of the donee; and, (c) the intent to do an act of liberality or animus donandi.26 In a sale
transaction where the fair market value of the property sold exceeds its selling price, the
excess is considered a donation even in the absence of animus donandi.27
 Under the Tax Code, prior to the amendments by TRAIN, total net gifts made during the
calendar year before January 1, 2018 28 are subject to the following donor’s tax
 If the net gift is:

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Chapter 1 I. NIRC
C. Donors Tax

Over But Not Over The Tax Shall be Plus Of the Excess Over

PhP 100,000 Exempt

PhP 100,000 200,000 0 2% PhP100,000

200,000 500,000 2,000 4% 200,000

500,000 1,000,000 14,000 6% 500,000

1,000,000 3,000,000 44,000 8% 1,000,000

3,000,000 5,000,000 204,000 10% 3,000,000

5,000,000 10,000,000 404,000 12% 5,000,000

10,000,000 1,004,000 15% 10,000,000

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Chapter 1 I. NIRC
C. Donors Tax

 When the donee or beneficiary is a stranger, the tax payable by the donor shall be thirty
percent (30%) of the net gifts. For the purpose of donor’s tax, a 'stranger', is a person who
is not a: (1) Brother, sister (whether by whole or half-blood), spouse, ancestor and lineal
descendant; or (2) Relative by consanguinity in the collateral line within the fourth degree
of relationship.29
 Note, however, that starting January 1, 2018, the donor’s tax is imposed at the rate of 6%
computed on the basis of the total gifts in excess of two hundred fifty thousand pesos (PhP
250,000) exempt gift made during the calendar year,30 regardless of whether or not the
donee is a stranger.
 The Donor’s Tax Return (BIR Form No. 1800) must be filed within thirty (30) days after
the date the gift (donation) is made.31

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Chapter 1
I. NIRC
D. Documentary Stamp Tax
 The documentary stamp tax (“DST”) is an excise tax levied on documents, instruments, loan agreements and papers
evidencing the acceptance, assignment, sale or transfer of an obligation, rights, or property incident thereto.32
 The tax is paid by the person making, signing, issuing, accepting or transferring the documents. However, whenever
one party to the taxable document enjoys exemption from the tax, the other party thereto who is not exempt shall be
the one directly liable for the tax.
 The tax return must be filed and the tax due paid at the same time within five (5) days after the close of the month
when the taxable document was signed, issued, accepted or transferred. In lieu of the foregoing, the tax may be paid
either through purchase of DST stamp and actual affixture, or by imprinting a secured stamp on the taxable document
through the web-based Electronic Documentary Stamp Tax (eDST) System.33
 Failure to stamp a taxable document does not invalidate the same. However, it shall not be recorded or admitted or
used as evidence in any court until the requisite stamp is paid. Furthermore, no notary or other officer authorized to
administer oaths shall add his jurat or acknowledgment to the document unless the proper documentary stamp has
been paid.34
 Examples of documentary stamp taxes applicable and relevant to the Company, and their corresponding rates, are:

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 I. NIRC
D. Documentary Stamp Tax
Chapter 1

Tax Rate
Transaction Legal Basis
Until December 31, 2017 From Jan. 1, 2018 onwards

• One peso (PhP1.00) on each Two • Two pesos (PhP2.00) on each Two
Sec. 174, Tax Code Sec. 51, Tax
hundred pesos (P200), or fractional part hundred pesos (PhP200), or fractional
Original Issue of shares Reform for Acceleration and Inclusion
thereof, of the par value, of such shares part thereof, of the par value, of such
Act (“TRAIN”)35
of stock. shares of stock.

• Seventy-five centavos (PhP0.75) on • One peso and fifty centavos (PhP1.50)

Sale or Transfer of shares of certificates each Two hundred pesos (PhP200) or on each Two hundred pesos (PhP200)
Sec. 175, Tax Code Sec. 52, TRAIN
of stock fractional part thereof, of the par value or fractional part thereof, of the par
of such certificate of stock. value of such certificate of stock.

• Six pesos (PhP6.00) for the first Two

• Three pesos (PhP3.00) for the first
thousand
Lease of property Two thousand pesos (PhP2,000), or Sec. 194, Tax Code Sec. 67, TRAIN
pesos (PhP2,000), or fractional part
fractional part thereof, and
thereof, and

an additional One peso (PhP1.00) for an additional Two peso (PhP2.00) for
every One Thousand pesos (PhP1,000) every One Thousand pesos (PhP1,000)
or fractional part thereof, in excess of or fractional part thereof, in excess of
the first Two thousand pesos the first Two thousand pesos
(PhP2,000) for each year of the term of Week 2
(PhP2,000) for each year of the term of
said contract or agreement. said contract or agreement.
Chapter 1 I. NIRC
E. Assessment of National Internal Revenue Taxes

 The Philippines follows the pay-as-you-file system in the enforcement and collection of
taxes. In the pay- as-you-file system, the taxpayer determines the amount of tax due, files
his return and pays the tax based on his own computation.36 The pay-as-you-file system
obliges the taxpayer to conduct self- assessment in order to determine and declare the
amount to be used as the basis for the computation of the tax liability, any deductions
therefrom, and finally, the tax to be paid.37 The tax due is paid at the time the return is
filed. However, the BIR is empowered to ascertain the correctness of the tax return filed
and consequently, the amount of tax paid.38

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Chapter 1 1. Prescriptive Period for Assessment

 The assessment for national internal revenue taxes must be made within three years from the last day
provided by law for the filing of tax return. When a return is filed beyond the period laid down by law, the
period will commence to run on the day the return is filed. However, if the return is filed before the last
day of filing, the three-year period will be counted on such last day.39 Section 222 of the Tax Code
provides exceptions on the three year prescriptive period to assess internal revenue taxes. In case of false
or fraudulent return with intent to evade tax or in case of failure to file a return, the tax may be assessed
within a ten-year period commencing from the discovery of the falsity, fraud or omission. In addition, the
BIR and the taxpayer may agree in writing to an assessment beyond the three-year period, provided that
the agreement was entered into before the expiration of such period.
 The running of the prescriptive period for making an assessment and the beginning of distraint or levy is
suspended for the period during which: (a) the BIR is prohibited from making an assessment or beginning
distraint or levy or a proceeding in court and for 60 days thereafter; (b) the taxpayer requests for a
reinvestigation which is granted by the BIR; (c) the taxpayer cannot be located in the address given by him
in the return; (d) the warrant of distraint and levy is duly served and no property could be located; and (e)
when the taxpayer is out of the Philippines.42

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 2. Procedure in the Issuance of Deficiency Tax Assessment
Chapter 1
a. Letter of Authority

 The BIR has the power to issue a Letter of Authority (“LOA”) against a taxpayer pursuant to Section 5 of the Tax
Code which shall authorize the BIR, in ascertaining the correctness of any entry in the tax return, or in making a
return where none has been filed, or in ascertaining the liability of any person for internal revenue taxes, or in
collecting tax liability or in determining tax compliance, to: (a) examine any book, paper, record, or other data which
maybe relevant or material to the inquiry; (b) obtain on a regular basis any relevant information concerning a
taxpayer from any person other than the taxpayer whose tax liability is in question; (c) summon the person liable for
tax or required to file a return or any officer or employee of such person to appear before the BIR or its duly
authorized representative and to produce relevant books, papers, records or other data, and to give testimony; (d) take
the testimony of the person concerned under oath; and (d) cause revenue agents to canvass any revenue district or
region and inquire after and concerning all persons therein who may be liable for internal revenue taxes and all
persons owning, managing or in possession of any taxable object.
 As a general rule, the taxpayer’s books of accounts and accounting records may be audited only once every taxable
year except in the following instances: (a) fraud, irregularity, or mistakes, as determined by the BIR; (b) the taxpayer
requests re-investigation; (c) verification of compliance with withholding tax laws and regulations; (d) verification of
capital gains tax liabilities; and (e) in the exercise of the BIR’s power under Section 5(B) of the Tax Code to obtain
information from other persons in which case, another or separate examination and inspection may be made.43

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Chapter 1 2. Procedure in the Issuance of Deficiency Tax Assessment
b. Notice of Informal Conference

 After the examination of the taxpayer’s books of accounts and accounting records pursuant
to the LOA, a notice of informal conference, informing the taxpayer that the findings of
the audit indicate that deficiency taxes has to be paid, must be issued to the taxpayer.44
The informal conference must afford the taxpayer an opportunity to know the results of the
investigation and to refute the same.45 A second conference is allowed to enable the
taxpayer to examine his position and gather evidence to support his claim.46 The taxpayer
is given a period of 15 days within which to respond, counted from the receipt of the notice
of informal conference, otherwise, the taxpayer will be considered in default.47 In such a
case, the matter will be endorsed with the least possible delay to the Assessment Division
of the BIR for review and issuance of deficiency tax assessment, if necessary.48

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Chapter 1 2. Procedure in the Issuance of Deficiency Tax Assessment
c. Preliminary Assessment Notice

 The Assessment Division of the BIR will determine if there is sufficient basis to issue a deficiency tax
assessment. If there is, a Preliminary Assessment Notice (“PAN”) will be issued to the taxpayer, at least
by registered mail. A PAN informs the taxpayer of the audit findings of the Revenue Officer after a
review of the said findings.
 Notice of Informal Conference and PAN are not necessary in the following instances: (a) when the
finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing
on the face of the tax return filed by the taxpayer; (b) when a discrepancy has been determined between
the tax withheld and the amount actually remitted by the withholding agent; (c) when a taxpayer who
opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was
determined to have carried over and automatically applied the same amount claimed against the
estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; (d) when the
excise tax due on excisable articles has not been paid; or (e) when an article locally purchased or
imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and
spare parts, has been sold, traded or transferred to non- exempt persons.49

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Chapter 1 2. Procedure in the Issuance of Deficiency Tax Assessment
d. Formal Letter of Demand and Assessment Notice

 If the taxpayer fails to respond within 15 days from receipt of the PAN, the taxpayer will
be considered in default. A Formal Letter of Demand (“FLD”) and Assessment Notice will
thereafter be issued by the concerned office.50 An Assessment Notice is a declaration of
deficiency taxes issued to a taxpayer who fails to respond to the PAN or whose reply
thereto was found not to be meritorious. The FLD must state the facts, the law, rules and
regulations or jurisprudence on which the assessment is based. It must also include a
demand for payment of deficiency taxes, otherwise, the FLD and Assessment Notice will
be void.51

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Chapter 1 2. Procedure in the Issuance of Deficiency Tax Assessment
e. Administrative Protest

 A taxpayer has 30 days from receipt of the FLD and Assessment Notice to protest the same
administratively through either a request for reconsideration or a request for
reinvestigation. All the relevant supporting documents to the protest must be submitted
within 60 days from filing of the request for reinvestigation.
 Otherwise, the assessment will become final, executory and demandable.52

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Chapter 1 2. Procedure in the Issuance of Deficiency Tax Assessment
f. Appeal to the Court of Appeals

 If the BIR denies the protest, in whole or in part, the taxpayer may appeal to the Court of Tax Appeals
(“CTA”) Division within 30 days from the receipt of the decision by filing a petition for review.
Otherwise, the decision will become final and demandable. A taxpayer may likewise appeal a disputed
assessment without awaiting the decision of the BIR. If the BIR or its duly authorized representative
fails to act on the protest, a petition for review may be filed within 30 days from the expiration of 180
days counted from the date of submission of the required documents in the case of a request for
reinvestigation or from the submission of the request for reconsideration. Otherwise, the assessment
shall become final and demandable.53 If the taxpayer is not satisfied with the decision of the CTA
Division, a motion for reconsideration can be filed with the CTA Division within 15 days from receipt
of the decision. If the taxpayer is still dissatisfied with the decision, a Petition for Review can be filed
with the CTA En Banc within 15 days from receiptof the decision. From the decision of the CTA En
Banc, a motion for reconsideration can be filed within 15 days from receipt of the decision.
 Please note that there is a slight difference in the availment of these remedies when it comes to VAT
especially in the period of appeal.

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Chapter 1 2. Procedure in the Issuance of Deficiency Tax Assessment
g. Appeal to the Supreme Court

 The decision of the CTA En Banc can be questioned before the Supreme Court by filing a
Petition for
 Review within 15 days from receipt of the decision.

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Chapter 1 2. Procedure in the Issuance of Deficiency Tax Assessment
f. Collection of National Internal Revenue Taxes

 Once the assessment becomes final, executory, and demandable by failure to protest the same
administratively and/or judicially, or the protest or appeal is denied or decided against the
taxpayer, the government may avail of the following remedies to collect deficiency taxes: (a)
distraint of personal property; (b) levy of real property; (c) civil action; and (d) criminal
action.54
Revenue Memorandum Order (“RMO”) No. 39-200755 authorizes the immediate issuance and
service of warrants of distraint and garnishment and/or levy upon the issuance of the final
decision on the disputed assessment against the taxpayer by the Commissioner of Internal
Revenue or the Regional Director of the BIR or by the CTA Division or CTA En Banc of its
decision upholding the assessment against the taxpayer. The BIR has a period of three years
from expiration of the period within which to assess a taxpayer.56 On the other hand, the BIR
has a period of five (5) years from the date of the said assessment to collect the assessed tax. In
case of false or fraudulent return with intent to evade tax or in case of failure to file a return, the
BIR has five years following the assessment of tax to collect the same.57

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Chapter 1
II. Local Business Tax

 The provisions on local business taxes are codified in the Local Government Code of 1991
(the “Local Government Code”). Under Section 129 of the Local Government Code, each
local government unit (“LGU”) has the power to create its own sources of revenue and to
levy taxes, fees and charges. LGUs usually have their own Revenue Code levying taxes,
fees and charges which must not contravene the Local Government Code.

Week 2
Chapter 1
II. Local Business Tax
A. Community Tax
 Every corporation is required to pay annually not later than the last day of February a basic
community tax of PhP500.00 and an additional tax which in no case shall exceed
PhP10,000.00, depending on the amount of gross receipts or earnings during the preceding
year.58 The community tax must be paid in the place where the principal office of the
juridical entity is located.59 In determining the gross receipts or earnings for purposes of
this additional tax, dividends received from another corporation are included.60

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Chapter 1
II. Local Business Tax
A. Business Tax
 Corporations also have to pay the annual business tax and other fees imposed by the LGU having jurisdiction
over the corporation. These local taxes and fees must be paid within the first 20 days of January each year.61
They may also be paid in four quarterly installments.62
 The rates of business tax vary depending on the business of the corporation and on the amount of gross sales or
receipts. Municipalities in Metropolitan Manila Area63 may levy taxes which must not exceed by 50% the
maximum rates prescribed for municipalities outside the Metropolitan Manila Area.64 The taxes levied by cities
may exceed the maximum rates prescribe for other municipalities by not more than 50%.65
 For businesses maintaining or operating branch or sales outlets in various LGUs, the sale is recorded in the
branch or sales outlet making the sale or transaction and the tax thereon will accrue and be paid to the LGU
where such branch or sales outlet is located. In cases where there is no branch or sales outlet in the LGU where
the sale or transaction is made, the sale should be recorded in the principal office and the taxes due will accrue
and be paid to such LGU.66
 For manufacturers, assemblers, contractors, producers and exporters with factories, project offices, plants and
plantations, the following sales allocation must be followed in determining the amount of business taxes due for
each LGU:

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Chapter 1
II. Local Business Tax
B. Business Tax
 (a) 30% of all sales recorded in the principal office is taxable by the LGU where the principal
office is located; and
 (b) 70% of all sales recorded in the principal office is taxable by the city or municipality where the
factory, project, office, plant or plantation is located.67
 Where the plantation is located at a place other than the place where the factory is located, the
70% mentioned in the preceding sentence will be divided as follows:
 (a)  60% to the LGU where the factory is located; and
 (b)  40% to the LGU where the plantation is located.68
 Where a manufacturer, assembler, producer, exporter or contractor has two or more factories,
project offices, plants and plantations located in different LGUs, the 70% mentioned above will be
prorated among the locAlities where the factories, project offices, plants and plantations are
located in proportion to their volume of production during the period for which the tax is due.69

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Chapter 1 II. Local Business Tax
C. Assessment of Local Business Tax
1. Prescription of Local Business Tax
 Local taxes, fees or charges must be assessed within five years from the date they became
due. In case of fraud or intent to evade the payment of taxes, fees, or charges, the same
may be assessed within ten years from discovery of the fraud or intent to evade
payment.70 The running of the prescriptive period will be suspended for the time during
which: (a) the treasurer is legally prevented from making the assessment or collection; (b)
the taxpayer requests for a reinvestigation and executes a waiver in writing before
expiration of the period within which to assess or collect; and (c) the taxpayer is out of the
country or otherwise cannot be locate

Week 2
Chapter 1 II. Local Business Tax
C. Assessment of Local Business Tax
2. Procedure Governing Protest of Assessment

 The procedure for protesting an assessment of local business tax by the City/Municipal Treasurer
is
 as follows:
 (a) issuance by the Treasurer or his duly authorized representative of a Notice of Assessment;72
 (b) filing of a written protest by the taxpayer within 60 days from receipt of the Notice of
Assessment;73
 (c) rendering of decision by the City/Municipal Treasurer within 60 days from filing of the
written protest;74
 (d) filing by the taxpayer of an appeal to the Regional Trial Court within 30 days from receipt of
the denial of the protest or from the lapse of the 60 day period within which to decide the
protest;75

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Chapter 1 II. Local Business Tax
C. Assessment of Local Business Tax
2. Procedure Governing Protest of Assessment

 (e) filing of a Motion for Reconsideration with the Regional Trial Court within fifteen (15) days
from notice of the decision;76
 (f) filing of a Petition for Review with the CTA Division within 30days from receipt of the
Regional Trial Court’s decision;77
 (g) filing of a Motion for Reconsideration with the CTA Division within 15 days from notice of
the decision;78
 (h) filing of a Petition for Review with the CTA En Banc within 15 days from receipt of the
decision;
 (i) filing of a motion for reconsideration within 15 days from receipt of the decision with the
CTA En Banc; and
 (j) filing of a Petition for Review with the Supreme Court within 15 days from receipt of the
decision.

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Chapter 1
II. Local Business Tax
D. Collection of Local Business Tax

 Local business taxes may be collected within five years from the date of assessment by
administrative or judicial action.79 The civil remedies for collection of local taxes may be:
(a) by administrative action through distraint of goods, chattels, or effects, and other
personal property of whatever character, and by levy upon real property or interests in or
rights to real property; and (b) by judicial action.80

Week 2
Chapter 1
III. Real Property Tax

 The Local Government Code authorizes provinces to levy real property tax on real property such as land,
building, machinery and other improvements at the rate not exceeding 1% of the assessed value of the said
property annually while for cities, including municipalities within the Metropolitan Manila Area at the rate not
exceeding 2% of the assessed value of the property.81 In addition, provinces, cities, including municipalities
within the Metropolitan Manila Area may levy and collect an annual tax of 1% on real property as Special
Education Fund (“SEF”) over and above the real property tax.82 The real property tax accrues on the first day of
January every year.83 The real property tax and the additional tax for the SEF may be paid in four installments
without interest: the first installment payable on or before March 31; the second installment on or before June 30;
the third installment on or before September 30 and the last installment on or before December 31.84
 In case of failure to pay the said taxes on the dates mentioned above, the taxpayer will be liable to pay interest at
the rate of 2% per month on the unpaid amount until full payment is made. However, the total interest should not
exceed 36 months.85 In addition, the real property tax and the tax for the SEF constitutes a lien on the real
property superior to all liens, charges or encumbrances in favor of any person which can be enforced by
administrative or judicial action and will only be extinguished upon payment of taxes, and related interests and
expenses.86

Week 2
Chapter 1 III. Real Property Tax
A. Collection of Real Property Tax

 Real property tax must be collected within five years from the date they become due. In
case of fraud or intent to evade the payment of taxes, fees, or charges, the action for
collection must be instituted within ten years from discovery of the fraud or intent to evade
payment.87 The running of the prescriptive period will be suspended for the time during
which: (a) the treasurer is legally prevented from collecting the tax; (b) the owner of the
property or the person having legal interest therein requests for a reinvestigation and
executes a waiver in writing before expiration of the period within which to collect; and (c)
the owner of the property or the person having legal interest therein is out of the country or
otherwise cannot be located.88

Week 2
Chapter 1
III. Real Property Tax
b. Protest of Real Property Tax

 Generally, a protest can only be entertained if the taxpayer pays the real property tax. The words “paid
under protest” must be annotated on the tax receipts for payment of real property tax. The protest must be
filed within 30 days from payment of the real property tax to the provincial, city treasurer or municipal
treasurer. The protest must be decided by the treasurer within 60 days from receipt thereof.89 Any owner
or person having legal interest in the property who is not satisfied with the action of the treasurer may,
within 60 days from the date of receipt of the decision or from the lapse of the 60 day period without any
decision, appeal to the Local Board of Assessment Appeals (“LBAA”) by filing a petition.90 The LBAA
has 120 days from receipt thereof to decide the appeal.91If the owner of the property or the person having
legal interest therein or the assessor is not satisfied with the decision of the LBAA, an appeal to the Central
Board of Assessment Appeals (“CBAA”) may be filed.92
 A party adversely affected by a decision or ruling of CBAA in the exercise of their appellate jurisdiction
may appeal to the CTA En Banc by filing a petition for review within 30 days from receipt of the
questioned decision or ruling.93 From the decision of the CTA En Banc, a motion for reconsideration can
be filed within 15 days from receipt of the decision. The decision of the CTA En Banc can be questioned
before the Supreme Court by filing a Petition for Review within 15 days from receipt of the decision.

Week 2
Chapter 1
III. Real Property Tax
b. Protest of Real Property Tax

 Sometimes taxation, and thus tax planning, is one of the most important factors in decision
making. Tax planning can affect decision making in even the most commonplace of
settings. Considering the vastness of tax types here in the Philippines, one could maximize
the potential of tax planning if one has knowledge of each and every types herein
presented. A bewildering array of taxes, imposed by a variety of governments, can have
significant impacts on the results of decisions made. It is correct to say that no person will
ever know all the tax rules nor anyone will know what will be the effect of taxes to every
decision. But suffice it to say that having a critical mass of knowledge will allow one to
ask the right questions.

Week 2
Chapter 1 Assessment: CHAPTER 1: FRAMEWORK OF
UNDERSTANDING TAXES IN THE PHILIPPINES

1. Discuss / define the following:

a. Type of taxes
b. Tax rates
c. Provide example for computation of these taxes
d. Tax remedies of Govt and taxpayer

Week 2