Academicus Review Center Inc.: Taxation Law 2018 Bar By: Atty. Clare Marie F. Ortega

Academicus Review Center Inc. .

.

Success Driven Value for Money Customer Focus 1408 Ermita Center, 1350 Roxas Blvd., cor. Sta. Monica St. Ermita, Manila Globe (0977) 675 1793 |Landline: (02) 247 1757

TAXATION LAW 2018 BAR BY: ATTY. CLARE MARIE F. ORTEGA I. TARIFF AND CUSTOMS CODE (PD 1464) AS AMENDED BY THE CUSTOMS MODERNIZATION AND TARIFF ACT (RA 10863), WHICH TOOK EFFECT ON JUNE 16, 2016 A.

Tariff and duties 1. Definitions: Tariff-list or schedule of articles on which a duty is imposed upon the importation into the country, with the rates at which they are severally taxed. Simply put, this refers to the system of imposing taxes on the importation of foreign merchandise. Kinds: Import and Export Tariff Customs Duties-name of taxes on the importation and exportation of commodities. 2. Purpose for imposition: Revenue-raising and regulation (Garcia v. The Executive Secretary, G.R. No. 101273, 03 July 1992) 3. Kinds/Classification of Duties: a) Ordinary/Regular Duties (1) Ad valorem-computed based on the value of the imported article. Criteria for the determination of the dutiable value: -price of imported article in the exporting country -price of imported article in the manufacturing country (if it is not the exporting country), or in a third country with the same stage of economic development -reports of Revenue or Commercial Attaches -if it is still not ascertainable, the domestic wholesale market price (2) Specific-computed based on the dutiable weight of goods Weights may either be: -Gross: weight of the articles together with the weight of all the containers, holders and packing (at the time of importation) -Legal: weight of the articles together with its immediate container, holder or packing (at the time of importation, and/or when packed in retail, at the time of their sale to the public in their usual retail quantities, unless the articles are packed in a single container. -Net: actual weight of the articles excluding their containers, holders and packing. b) Special duties 4. Flexible Tariff Clause (TIETWO) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restriction as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government

1|P a g e - U N A U T H O R I Z E D R E P R O D U C T I O N O F T H I S R E V I E W M A T E R I A L I S I L L E G A L AND TANTAMOUNT TO INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT

ATTY. CLARE MARIE ORTEGA

Academicus Review Center Inc. .

.

Success Driven Value for Money Customer Focus 1408 Ermita Center, 1350 Roxas Blvd., cor. Sta. Monica St. Ermita, Manila Globe (0977) 675 1793 |Landline: (02) 247 1757

(Article VI, Section 28, paragraph 2, Section 28, Article 6, 1987 Constitution subject to limitations under the law. AntiDum ping Duty Imposition

Purpose

Imposing Authori ty

Countervailing Duty

Marking Duty

Discriminatory Duty

Safeguar d Meas ures

Duties

Imported Goods enjoying a Imported Goods from GeneralAll goods subsidy in good foreign goods imp sold the exporting s not countries or orts below country prop that produ mad its erly discriminate cts e by norma mark against impor the l value ed Philippine ted in Pres products increa iden sed t quanti upo ties n inve Specialstig volum atio e of n of impor the ts Tarif excee f ds a Co base mmi trigge ssio r level n or and price reco falls mm below end a atio trigge n of r price NED level A Protect local industries from Prevent Protect national Protect Protect undue competition possi interest dome nati ble stic onal dece indust eco ption ries nom and y, produ gen cers eral from welf increa are sed and impor nati ts onal secu rity Secretary of Trade and Comm. of President GeneralPreside Industry, Secretary of Custo Secret nt ms ary of

2|P a g e - U N A U T H O R I Z E D R E P R O D U C T I O N O F T H I S R E V I E W M A T E R I A L I S I L L E G A L AND TANTAMOUNT TO INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT

ATTY. CLARE MARIE ORTEGA

Academicus Review Center Inc. .

.

Success Driven Value for Money Customer Focus 1408 Ermita Center, 1350 Roxas Blvd., cor. Sta. Monica St. Ermita, Manila Globe (0977) 675 1793 |Landline: (02) 247 1757

Agriculture, Commission

Judicial review

B.

Tariff

Any interested party adversely affected, Petition for Review: CTA, within 30 days.

Trade and Indust ry; Secret ary of Agricu lture

None

SpecialSecret ary of Agricu lture Any None intere sted party advers ely affect ed, Petitio n for Revie w: CTA, within 30 days. Howe ver, the filing of the Petitio n for Revie w shall not suspe nd the impos ition and collect ion of the tariff duties .

Accrual and Payment of Tax Duties

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ATTY. CLARE MARIE ORTEGA

Academicus Review Center Inc. .

.

Success Driven Value for Money Customer Focus 1408 Ermita Center, 1350 Roxas Blvd., cor. Sta. Monica St. Ermita, Manila Globe (0977) 675 1793 |Landline: (02) 247 1757

1. As a general rule, all goods imported into the Philippines shall be subject to duty upon importation, including goods previously exported from the Philippines. What to remember? -De Minimis Value: Php 10,000.00 -Adult Passengers: 2 reams of cigarettes or 2 tins of tobacco, 2 bottles of liquor or wine not exceeding one (1) liter per bottle. -OFW’s and Balikbayans/Returning Residents: Php 150,000.00 duty exemption on their personal and household effects (less than 5 years and have not availed of this privilege within 6 months prior to return); Php 250,000.00 duty exemption on their personal and household effects (at least 5 years but not more than 10 years and have not availed of this privilege within 5 years prior to return); Php 350,000.00 duty exemption on their personal and household effects (at least 10 years and have not availed of this privilege within 10 years prior to return.) -Requirements: not in commercial quantities, not intended for barter, sale or for hire, and limited to the foregoing values. -Balikbayan Boxes: Php 150,000.00 Excess: Ad Valorem. 2. When does importation begin and when is it terminated? -Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with 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 the customs. (Section 1202 of the TCCP) The Bureau of Customs has jurisdiction so long as importation has not ended. In order for an importation to be deemed terminated, the payment of the duties, taxes, fees and other charges of the item brought into the country must be in full. For as long as the importation has not been completed, the imported item remains under the jurisdiction of the BOC. 3. What is smuggling? This is committed by a person who – (1) fraudulently imports or brings into the Philippines, or assist in doing so, any article contrary to law, or (2) receives, buys, sells, or in any manner facilitate the transportation, concealment, or sale of such article after importation, knowing the same to have been imported contrary to law. (Sec. 3601, TCC) 4. Import Entry must be filed in the Customhouse within 30 days from the date of discharge of the last package from the vessel, which shall not be extendible. 4|P a g e - U N A U T H O R I Z E D R E P R O D U C T I O N O F T H I S R E V I E W M A T E R I A L I S I L L E G A L AND TANTAMOUNT TO INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT

ATTY. CLARE MARIE ORTEGA

Academicus Review Center Inc. .

.

Success Driven Value for Money Customer Focus 1408 Ermita Center, 1350 Roxas Blvd., cor. Sta. Monica St. Ermita, Manila Globe (0977) 675 1793 |Landline: (02) 247 1757

Failure to file the entry constitutes implied abandonment and will result in the ̳ipso facto‘ forfeiture of the goods/shipment. 5. Kinds of Import Entry: Informal and Formal Informal Entry: a. Articles of a commercial nature intended for sale, barter or hire, the dutiable value of which does not exceed P2,000.00; b. Personal and household effects or articles, not in commercial quantity, imported in passenger‘s baggage, mail, or otherwise for personal use. Formal Entry: a. Articles of a commercial nature intended for sale, barter, or hire, the dutiable value of which is more than P2,000.00; b. Articles for, which the Collector may, upon the recommendation of the Tariff Commission for the protection of a local industry, or the revenue, require formal entry regardless of value and whatever purpose and nature of the importation. *All imported articles are subject to Formal and Informal entry except importation admitted free of duty for the official use of embassies, legation and other agencies of foreign governments who accord like privileges to corresponding agencies of the Philippines. C.

Remedies: 1. Government: Right of Police Officer to Enter or search any land or enclosure or any warehouse, store or other building, which is not a dwelling house: WITHOUT SEARCH WARRANT. -A warehouse, store or other building or enclosure used for the keeping of storage of articles does not become a dwelling house merely by reason of the fact that a person employed as watchman lives in the place, nor will the fact that his family stays there with him alter the case; If search is of Dwelling House, SHOULD BE WITH SEARCH WARRANT issued by a competent court; Right to Search, inspect, examine Vessels or Aircrafts and Persons or Articles Conveyed Therein: should be within the limits of any collection district, if it shall appear that any breach or violation of the customs and tariff laws of the Philippines has been committed, whereby or in consequence of which such vessels or aircrafts, or the article, or any part thereof, on board of or imported by such vessel or aircraft, is liable to forfeiture, to make seizure of the same or any part thereof. No proceeding shall give rise to any claim for the damage caused to article or vessel or aircraft.

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ATTY. CLARE MARIE ORTEGA

Academicus Review Center Inc. .

.

Success Driven Value for Money Customer Focus 1408 Ermita Center, 1350 Roxas Blvd., cor. Sta. Monica St. Ermita, Manila Globe (0977) 675 1793 |Landline: (02) 247 1757

Seizure and Forfeiture proceedings (exclusive jurisdiction of BOC) are available to the BOC in the case of smuggling which may refer to the following: Prohibited articles; Wrong entry of port; Export of goods contrary to law; Contraband;

Doctrine of Hot Pursuit -If the act committed in violation of the TCC is done within Philippine waters, seizure and forfeiture may be pursued or continued beyond the territorial jurisdiction or the maritime zone and on the high seas. Automatic review over the decision of the Commissioner of Customs (COC) if the Government was aggrieved in a Decision of the Collector in seizure cases-to protect the Government against corrupt and conniving customs collectors.

2. Taxpayer Protest Cases procedure: Examiner issues an Assessment (import/export) File a protest before a collector within 15 days from payment Commissioner of Customs Who has 15 days to set the case For hearing, and 30 days to decide

1. Rule against taxpayer

2. Rule for taxpayer

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ATTY. CLARE MARIE ORTEGA

Academicus Review Center Inc. .

.

Success Driven Value for Money Customer Focus 1408 Ermita Center, 1350 Roxas Blvd., cor. Sta. Monica St. Ermita, Manila Globe (0977) 675 1793 |Landline: (02) 247 1757

Appeal to COC within 15 days

Automatic review by COC

Appeal to CTA Division within 30 days from receipt of decision

Automatic review by DOF

MR to CTA Division Within 15 days

Appeal to CTA Division within 30 days from receipt of decision (R42 ROC)

Appeal to CTA en banc within 15 days Appeal to the SC (Petition for Review) within 15 days under R45

II.

LOCAL GOVERNMENT TAXATION

What is the nature of the taxing power of the provinces, municipalities and cities? How will the local government units be able to exercise their taxing powers? (2007 Bar) -The power of a province, municipality and city to tax is limited to the extent that such power is delegated to it either by the Constitution or by statute. Such power, however, is not inherent for provinces, cities and municipalities as they are not the sovereign; rather, they are mere “territorial and political subdivisions of the Republic of the Philippines”. -The taxing powers may be exercised by the sanggunian of the local government unit through an appropriate ordinance. (Sec. 132, LGC) Important points: a. All local taxes accrue on January 1 and are due on or before 20 January; b. Fundamental principles shall govern the exercise of the taxing and other revenueraising powers of local government units: i. Taxation shall be uniform in each local government unit; ii. Taxes, fees, charges and other impositions shall: (1) be equitable and based as far as practicable on the taxpayer's ability to pay; (2) be levied and collected only for public purposes; 7|P a g e - U N A U T H O R I Z E D R E P R O D U C T I O N O F T H I S R E V I E W M A T E R I A L I S I L L E G A L AND TANTAMOUNT TO INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT

ATTY. CLARE MARIE ORTEGA

Academicus Review Center Inc. .

.

Success Driven Value for Money Customer Focus 1408 Ermita Center, 1350 Roxas Blvd., cor. Sta. Monica St. Ermita, Manila Globe (0977) 675 1793 |Landline: (02) 247 1757

(3) not be unjust, excessive, oppressive, or confiscatory; (4) not be contrary to law, public policy, national economic policy, or in the restraint of trade; iii. The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person; iv. The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subject to the disposition by, the local government unit levying the tax, fee, charge or other imposition unless otherwise specifically provided herein; and, v. Each local government unit shall, as far as practicable, evolve a progressive system of taxation. Principles to remember in local taxation (a). Residual Taxing Power: Power to levy taxes, fees, or charges on any base or subject not specifically enumerated under the LGC and not taxed under the NIRC or any other tax laws. (b). Rule of pre-emption: If the national government elects a particular area as subject to tax, it impliedly withholds from the local government unit the delegated power to tax the same fields or area.

For purposes of local taxation (including real property taxes), what is the significance of the distinction between an agency or instrumentality of the government AND a government owned or controlled corporation (GOCC)? An agency or instrumentality of the national government is exempt from local taxes, fees and charges while a GOCC is not so exempt. Prescriptive Period for Assessment and Collection of ordinary local taxes: ASSESSMENT

COLLECTION

5 yrs from due date ( Jan 1 every year)

5 yrs from receipt of Assessment

10 yrs from discovery of fraud or intent to evade payment

5 yrs from receipt of Assessment

Procedure in Protest Cases of Local Taxes 1. When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and penalties. 2. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file a written protest (payment under protest) with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. 3. The local treasurer shall decide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice cancelling wholly or partially the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the 8|P a g e - U N A U T H O R I Z E D R E P R O D U C T I O N O F T H I S R E V I E W M A T E R I A L I S I L L E G A L AND TANTAMOUNT TO INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT

ATTY. CLARE MARIE ORTEGA

Academicus Review Center Inc. .

.

Success Driven Value for Money Customer Focus 1408 Ermita Center, 1350 Roxas Blvd., cor. Sta. Monica St. Ermita, Manila Globe (0977) 675 1793 |Landline: (02) 247 1757

taxpayer. 4. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty (60) day period prescribed herein within which to appeal with the court of competent jurisdiction (MTC: does not exceed 300k/400k; RTC: exceeds 300/400k, provided the amount is less than 1M; CTA Division: 1M or above) otherwise the assessment becomes conclusive and unappealable. Refund of Local Tax: No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be entertained in any court after the expiration of two (2) years from the date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit. III.

REAL PROPERTY TAX

Fundamental Principles a. Appraisal and Assessment by the Assessor’s Office; "Appraisal" is the act or process of determining the value of property as of a specified date for a specific purpose; "Assessment" is the act or process of determining the value of a property, or proportion thereof subject to tax, including the discovery, listing, classification, and appraisal of properties; b. what constitutes real properties? - properties covered by Article 415 of the Civil Code; - Airfield, runway and taxiway and the lots on which the runway and taxiway are located; - Underground tanks; - Gasoline tanks permanently attached to the soil; - Machineries and equipment; - Underground cables; - Submarine or undersea communication cables; - Oil pipes; - Boathouse if tied to the shore and used as residence c. Idle lands maybe exempt from RET due to valid causes such as force majeure, civil disturbance, natural calamity, or any other reason which prevents the owner from utilizing the property d. Exemption from RET shall be based on the actual use not the ownership: e. Unpaid RET attaches to the land and not the owner, thus, the remedy of lien is available to the government. f. Exemption from real estate tax:

9|P a g e - U N A U T H O R I Z E D R E P R O D U C T I O N O F T H I S R E V I E W M A T E R I A L I S I L L E G A L AND TANTAMOUNT TO INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT

ATTY. CLARE MARIE ORTEGA

Academicus Review Center Inc. .

.

Success Driven Value for Money Customer Focus 1408 Ermita Center, 1350 Roxas Blvd., cor. Sta. Monica St. Ermita, Manila Globe (0977) 675 1793 |Landline: (02) 247 1757

(a). real properties owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted for consideration to a taxable person: -Beneficial use principle Sec. 234 (a) exempts from real estate taxes real property owned by the Republic, unless the beneficial use of the property is, for consideration, transferred to a taxable person. *This exemption, however, must be read in relation with Sec. 133 (o) of the LGC, which prohibits LGUs from imposing taxes or fees of any kind on the national government, its agencies, and instrumentalities. Thus read together, the provisions allow the Republic to grant the beneficial use of its property to an agency or instrumentality of the national government. Such grant does not necessarily result in the loss of the tax exemption. The tax exemption that the property of the Republic or its instrumentality carries ceases only if, as stated in Sec. 234 (a) of the LGC of 1991, “beneficial use thereof has been granted, for a consideration or otherwise, to a taxable person.” (b). charitable institutions, churches, parsonages, convents, mosques, or religious cemeteries and all L, B, and I, ADE for religious, charitable, and educational purposes; (c). Machineries and equipment ADE by local water utilities and GOCC’s engaged in supply/distribution of water and/or generation of electric power; (d). real properties owned by cooperatives; (e). machinery and equipment used for pollution control and environment protection.

Collection of Real Property Tax Through the Court AND Prescriptive Period for Assessment and Collection ASSESSMENT

COLLECTION

5 yrs from due date ( Jan 1 every year)

5 yrs from receipt of Assessment

10 yrs from discovery of fraud or intent to evade payment

5 yrs from receipt of Assessment

Refund of Local Tax: No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be entertained in any court after the expiration of two (2) years from the date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit. Payment Under Protest is required in protest of RPT: 30 days from payment of tax and filed before provincial, city treasurer or municipal treasurer, in the case of a municipality within Metropolitan Manila Area. Treasurer decides within 60 days. If denied or after lapse of 60 day period TX may go to LBAA (60 days). LBAA decides within 120 days. Appeal to CBAA within 30 days, then appeal to the CTA within 15 days. Finally, file a Petition for Review before the SC within 15 days. 10 | P a g e - U N A U T H O R I Z E D R E P R O D U C T I O N O F T H I S R E V I E W M A T E R I A L I S ILLEGAL AND TANTAMOUNT TO INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT

ATTY. CLARE MARIE ORTEGA