Course Outline

Tax I
INCOME TAX

1. Definitions
Section 22 (A) to (I), (Z), (GG), and (HH), Tax Code
Sections 25 (A)(1), 31, 35 (B), and 39 (A), Tax Code
Republic Act 10754 (March 23, 2016)
Resident citizens and resident aliens
Garrison vs. Court of Appeals (July 19, 1990)
Non-resident citizens
RR 1-79 (January 8, 1979) (Section 2 only)
RR 5-01 (July 31, 2001)
BIR Ruling 33-00 (September 5, 2000)
BIR Ruling DA 095-05 (March 29, 2005)
Non-resident aliens engaged in business in the Philippines
Sec. 5 & 6, RR 2
Corporations
AFISCO Insurance Corporation vs. Court of
Appeals (January 25, 1999)
Pascual vs. Commissioner of Internal Revenue
(October 18, 1988)
Obillos vs. Commissioner of Internal Revenue
(October 29, 1985)
Oa vs. Commissioner of Internal Revenue
(May 25, 1972)

RR 10-2012 (June 1, 2012)

BIR Ruling 108-2010 (October 19, 2010)
2. Income
In general
Madrigal vs. Rafferty (August 7, 1918)
Fisher vs. Trinidad (October 30, 1922)

Limpan Investment Corporation vs.

Commissioner of Internal Revenue (July 26,
1966)
Conwi vs. Court of Tax Appeals ( August 31,
1992)
Commissioner v. Glenshaw Glass Co., 348 U.S.
426 (March 28, 1955)
Cesarini vs. United States 296 F. Supp. 3 (February 17,
1969)
Hornung vs. Comissioner of Internal 47 T.C. 428
(January 27, 1967)
Murphy vs. Internal Revenue Service 493 F3rd 170 US
Court of Appeals, District of Columbia Circuit (July 3,
2007)
Officemetro Philippines, Inc. vs. Commissioner of
Internal Revenue (CTA Case No. 8382, June 3, 2014)

Statutory inclusions
Section 32 (A), Tax Code
Compensation for services
Section 78 (A), Tax Code

OLD COLONY TRUST CO. VS. COMMISSIONER OF

INTERNAL REVENUE, 279 US 716 (JUNE 3, 1929)
The American Woolen Company adopted a
resolution which provided that the company would
pay all taxes due on the salaries of the company's
officers. It calculated the employees' tax liabilities
based on a gross income that omitted, or excluded,
the amount of the income taxes themselves.

PAYMENT

BY THE EMPLOYER OF THE INCOME TAXES

ASSESSABLE AGAINST THE EMPLOYEE CONSTITUTE
ADDITIONAL TAXABLE INCOME TO SUCH EMPLOYEE:

The payment of taxes by his employer constituted

additional taxable income to him for the years in
question. The taxes were paid upon a valuable
consideration: namely, the services rendered by the
employee and as part of the compensation. The
fact that a person induced or permitted a third party
to pay income taxes on his behalf does not excuse
him from filing a tax return. Furthermore, Taft
added, The discharge by a third person of an
obligation to him is equivalent to receipt by the
person taxed.
Thus, the company's payment of Wood's tax bill
was the same as giving him extra income,
regardless of the mode of payment. Further, the
payment of taxes of Wood's behalf did not
constitute a gift in the legal sense, because it was
made in consideration of his services to the
company, thus making the payment part of his
compensation package.

CIR assessed a deficiency for the amount of taxes

paid on behalf of the company's president, Mr.
William Wood.

Rents
Helvering vs. Bruun, 309 US 461 (March 25, 1940)
Dividends
Section 73 (A) to (C), Tax Code
ANSCORS REDEMPTION OF STOCK DIVIDENDS IS
CIR VS. CA (JANUARY 20, 1999)
After the death of Don Andres Soriano, ANSCOR CONSIDERED AS ESSENTIALLY EQUIVALENT TO A
DISTRIBUTION
OF
TAXABLE
DIVIDENDS:
ANSCOR
(company he founded), in several occasions:
redeemed
shares
of
stocks
from
a
stockholder
(Don
1. Exchanged some common shares from Don
Andres) twice (28,000 and 80,000 common shares). But
Andres estate with preferred shares
2. Redeemed common shares from Don Andres where did the shares redeemed come from?

If its source is the original capital subscriptions

estate
upon establishment of the corporation or from initial
In 1973, BIR issued a ruling that ANSCOR should be
capital investment in an existing enterprise, its
assessed for deficiency withholding taxes based on
redemption to the concurrent value of acquisition
these transactions. CTA reversed the BIR ruling after
may not invite the application of Sec. 83(b) under the
finding sufficient evidence to overcome the prima facie
1939 Tax Code, as it is not income but a mere return
correctness of the questioned assessments.
of capital.

if the redeemed shares are from stock dividend

BIRS ARGUMENT: The exchange transaction is
declarations other than as initial capital investment,
tantamount to cancellation under Section 83(b) making
the proceeds of the redemption is additional wealth,
the proceeds thereof taxable. Said Section applies to
for it is not merely a return of capital but a gain
stock dividends which is the bulk of stocks that ANSCOR
thereon.
redeemed and that under the net effect test, the estate
o It is not the stock dividends but the proceeds of
of Don Andres gained from the redemption. Accordingly,
its redemption that may be deemed as taxable
it was the duty of ANSCOR to withhold the tax-at-source
arising from the two transactions, pursuant to Section 53
dividends.
o Here, at the time of the last redemption, the
and 54 of the 1939 Revenue Act.
original common shares owned by the estate
ANSCORS ARGUMENT: It has no duty to withhold any
were only 25,247.5. This means that from the
tax because the same were done for legitimate
total of 108,000 shares redeemed from the
business purposes which are (a) to reduce its foreign
estate, the balance of 82,752.5 (108,000 less
exchange remittances in the event the company would
25,247.5) must have come from stock
declare cash dividends, and to (b)subsequently
dividends.
filipinized ownership of ANSCOR, as allegedly PROFITS DERIVED FROM THE CAPITAL INVESTED CANNOT
envisioned by Don Andres/
ESCAPE INCOME TAX: 3 elements in the imposition of
It also claimed invoked tax amnesty claimed under a income tax are: (1) there must be gain or profit, (2) that
PD.
the gain or profit is realized or received, actually or
constructively, and (3) it is not exempted by law or treaty
from income tax. Any business purpose as to why or how
the income was earned by the taxpayer is not a
requirement. Income tax is assessed on income received
from any property, activity or service that produces the
income because the Tax Code stands as an indifferent
neutral party on the matter of where income comes from
As stated above, the test of taxability under the
exempting clause of Section 83(b) is, whether income
was realized through the redemption of stock dividends.
The redemption converts into money the stock dividends
which become a realized profit or gain and consequently,
the stockholders separate property. Profits derived
from the capital invested cannot escape income tax.
As realized income, the proceeds of the redeemed stock
dividends can be reached by income taxation regardless
of the existence of any business purpose for the
redemption. Otherwise, to rule that the said proceeds are
exempt from income tax when the redemption is
supported by legitimate business reasons would defeat
the very purpose of imposing tax on income.

TAX AMNESTY IS PERSONAL TO TAX PAYER, WITHOLDING

AGENT NOT ENTITLED THERETO.
THE DIVIDENDS RECEIVED BY THE PLAINTIFFS ARE

WISE & CO., INC. VS. MEER (JUNE 30, 1947)

The plantiffs, all non resident aliens were stockholders of
Manila Wine Merchants, Ltd. (Hongkong Company), a
foreign corporation duly authorized to do business in the
Philippines. Pursuant to the recommendation of its Board
of Directors, the stock holders adopted a resolution that
would enable the board to sell its business and assets to
Manila Wine Merchants, Inc. (Manila Company), a
Philippine corporation for the sum of P400,000.The
Board later on passed several resolutions to declare
dividends, wherein the Hongkong Company made a
distribution from its earnings for the year 1937 to its
stockholders. At a special general meeting of the
shareholders of the Hongkong Company, the stock
holders directed that the company be voluntarily
liquidated and its capital distributed among the
stockholders.

LIQUIDATING
DIVIDENDS
AND
DIVIDENDS; THUS TAXABLE.

NOT

ORDINARY

The distributions were not in the ordinary course of

business and with intent to maintain the corporation as a
going concern but rather, they were after the liquidation
of the business had been decided upon, which makes
them payments for the surrender and relinquishment of
the stockholders' interest in the corporation, or so-called
liquidating dividends.

Where a corporation, etc. distributes all

its assets in complete liquidation or
dissolution, the gain realized or loss
sustained by the stockholder is a taxable
income or a deductible loss as the case
may
be,
in
effect
treated
such
distributions as payments in exchange for
the stock or share.
THE PLAINTIFFS ARE SUBJECT TO BOTH INCOME TAX
AND
ADDITIONAL
TAXES:
When a solvent
corporation dissolves and liquidates, it distributes
to its stockholders not only any earnings it may
have on hand, but it also pays to them their
invested capital, namely, the amount which they
had paid in for their stocks, thus wiping out their
interest inthe company.

THE PROFIT REALIZED CONSTITUTE INCOME

FROM THE PHILIPPINES AND THUS SUBJECT
TO PHILIPPINE TAXES: Hongkong Company
was incorporated for the purpose of
carrying on business in the Philippine
Islands the business. Hence, its earnings,
profits, and assets, including those from
whose proceeds the distributions in
question were made, the major part of
which consisted in the purchase price of
the business, had been earned and
acquired in the Philippines.

The appointed liquidator gave deficiency assessments

for the payment of income tax of the plaintiffs based on
the dividends they received.

Sections 250-254, and 256, RR 2

BIR RULING 322-87 (OCTOBER 19, 1987)
A company is in the process of liquidation and individual
stockholders will receive their liquidating dividends in
excess of their investment.

1. Since the individual stockholders of your company will

receive, upon complete liquidation,all its assets as
liquidating dividends, they will thereby realize capital gain
or loss. The gain,if any, derived by the individual
stockholders consisting of the difference between thefair
market value of the liquidating dividends and the
adjusted cost to thestockholders of their respective
shareholdings in the said corporation (Sec. 83(a),Sec.
256, Income Tax Regulations) shall be subject to income
tax at the ratesprescribed under Section 21(a) of the Tax
Code.
2. Moreover, pursuant to Section 34(b) of the Tax Code,
only 50% of the aforementionedcapital gain is reportable
for income tax purposes if the shares were held by the
individualstockholders for more than twelve months and
100% of the capital gains if the shares wereheld for less
than twelve months
The SC ruled that TA is not liable for income tax on

BIR RULING 039-02 (NOVEMBER 11, 2002)

TA Bank is planning to decrease its authorized capital

stock. TMBC holds some TA shares. To accomplish the
decrease in capital stock, it entered into a deal with
TMBC wherein TMBC shall surrender the TA shares it
currently holds and give it back to TA. In exchange, TA
shall transfer to TMBC both real and personal, tangible
and intangible properties.

receipt of surrendered shares or in the transfer of the

distributed assets. No documentary stamp tax ("DST") is
due on the surrender and cancellation of the TA shares.
The transfer by TA to TMBC of real property is not
subject to DST on sale or transfer of real property. The
transfer by TA of its Loan Portfolio to TMBC is not subject
to DST. Transfer or Assignment of any mortgage which
stands as security for TA's Loan Portfolio shall be subject
to DST.
Liquidating gain or loss is in the nature of capital gain or
loss, as the case may be, and therefore treated in the
manner stated in Section 39 of the Tax Code of 1997.
Liquidating gain, while characterized as gain from sale or
exchange of shares, is subject to the ordinary income tax
rates provided under Sections 24(A)(1)(c), 25(A)(1),
27(A) and (E), 28(A)(1) and (2) and (B)(1) of the Tax
Code of 1997, depending on the status of the
shareholder, and not to the 5%/10% final tax.
BIR RULING 039-02 REVERSED: Please be informed that
it is the position of this Office that your request cannot be
granted for lack of legal basis under the National Internal
Revenue Code of1997, as amended; Consequently, the
previously issued BIR Ruling No. 039-02 cited in your
letter and the BIR Rulings cited in the said ruling are
reversed and set aside.

BIR RULING 479-11 (DECEMBER 5, 2011)

APC is a corporation duly registered with the Securities
and Exchange Corporation on15 December 195614
December 2006 - the corporate term of APC expired and
accordingly, APC ceasedto exist as a corporate entity
and was dissolved ipso facto.1 December 2009 - a
majority of the members of the Board of Directors of APC
in their capacity as Trustees of the corporate assets,
approved and adopted a resolution ordering the
distribution of the remaining assets of APC to its
stockholders by way of liquidating dividend.
APCs argument: APC is not liable for income tax either
on its transfer of the properties to MI asliquidating
dividend or in its receipt of the surrendered shares of MI,
citing BIR Ruling No.039-02 dated 11 November 2002.

From whatever source

Section 34 (C)(1), Tax Code
JAMES VS. UNITED STATES, 366 US 213 (MAY 15, 1961)
James, was an official in a labor union who had
embezzled more than $738,000 in union funds, and did
not report these amounts on his tax return. He was tried
for tax evasion, and claimed in his defense that
embezzled funds did not constitute taxable income. His
argument was that just as the receipt of loan proceeds is
not taxable to the borrower (because of the borrower's
corresponding obligation to repay the loan), the person
who embezzles money should not be treated as having
received income, since that person is legally obligated to
return those funds to their rightful owner.

INCOME DERIVED FROM BOTH LAWFUL AND UNLAWFUL

ACTIVITIES ARE TAXABLE: the receipt of embezzled funds
was includable in the gross income of the wrongdoer and
was taxable to the wrongdoer, even though the
wrongdoer had an obligation to return the funds to the
rightful owner.
The absence of the "lawful" modifier indicated that the
framers of the Sixteenth Amendment had intended no
safe harbor for illegal income. The Court expressly
overruled Commissioner v. Wilcox and ruled that James
was therefore liable for the federal income tax due on his
embezzled funds. The Court also ruled, however, that
Eugene James could not be held liable for the willful tax
evasion because it is not possible to willfully violate laws
that were not established at the time of the violation.

COMMISSIONER OF INTERNAL REVENUE VS. SPOUSES

MANLY (NOVEMBER 24, 2014)
Spouses Manly are into the rental business and the
BIR observed that they have been underdeclaring
their income for the past 6 years. Petitioner

INFERRED

SOURCE OF THEIR UNREPORTED OR

UNDECLARED INCOME IS VALID BASED ON SPS.
MANLEYS UNJUSTIFIED REFUSAL TO EXPLAIN: In

Ungab v. Judge Cusi, Jr., we ruled that tax evasion

is deemed complete when the violator has

contends that in filing a criminal case for tax

evasion, a prior computation or assessment of tax
is not required because the crime is complete when
the violator knowingly and willfully filed a fraudulent
return with intent to evade a part or all of the tax.
Manly spouses income and expenditure shows
that
their
cash
expenditure
is
grossly
disproportionate to their reported or declared
income, leading CIR to believe that they under
declared their income. In computing the unreported
or undeclared income, which was likely sourced
from respondent Antonios rental business, CIR
used the expenditure method of reconstructing
income, a method used to determine a taxpayers
income tax liability when his records are
inadequate or inaccurate. And since respondent
spouses failed to explain the alleged unreported or
undeclared income, CIR asserts that criminal
charges for tax evasion should be filed against
them.

knowingly and willfully filed a fraudulent return with

intent to evade and defeat a part or all of the tax.
Corollarily, an assessment of the tax deficiency is
not required in a criminal prosecution for tax
evasion. However, in CIR vs CA (1992), we clarified
that although a deficiency assessment is not
necessary, the fact that a tax is due must first be
proved before one can be prosecuted for tax
evasion.
In the case of income, for it to be taxable, there
must be a gain realized or received by the
taxpayer, which is not excluded by law or treaty
from taxation. The government is allowed to resort
to all evidence or resources available to determine
a taxpayers income and to use methods to
reconstruct his income. A method commonly used
by the government is the expenditure method,
which is a method of reconstructing a taxpayers
income by deducting the aggregate yearly
expenditures from the declared yearly income. The
theory of this method is that when the amount of
the money that a taxpayer spends during a given
year exceeds his reported or declared income and
the source of such money is unexplained, it may be
inferred that such expenditures represent
unreported or undeclared income.
CIR used this method to determine Manly spouses
tax liability.

RMC 16-2013 (FEBRUARY 8, 2013)

taxpayer receives a deposit or advance from a client, the

taxpayer is required to immediately issue an Official
Receipt (OR) for said payment. The amount received
shall be recorded as income and shall be subject to
Value-Added Tax or Percentage Tax, as the case may
be. The client who made the payment may deduct the
same as an expense, provided an OR was issued in the
clients name for the said payment.

Section 50, RR 2
RMC 88-2012 (December 27, 2012)

Inventories
Section 41, Tax Code
BIR RULING DA 128-08 (AUGUST 11, 2008)
Shell requests for an authority to change theinventory
method used by Shell Companies from WAVE (Weighted
Average Method) to FIFO (First-in-First-Out). The change
in inventory valuation will be used for statutory and tax
reporting purposes for the taxable year 2008 for SGTAP
and SGEI, and taxable year 2009 for PSPC.

Considering that the purpose of Shell Companies'

change in its inventory method will best conform to its
accounting practice as said valuation will clearly reflect
the income of the said companies, this Office hereby
grants authority to Shell Companies the use of FIFO
method in its inventory costing.

Exclusions

Section 32 (B), Tax Code

Republic Act 10653, July 28, 2014
Retirement benefits, etc.
Commissioner of Internal Revenue vs. Court of Appeals
(March 23, 1992)
Commissioner of Internal Revenue vs. Court of Appeals
(October 17, 1991)
Re: Request of Atty. Bernardo Zialcita (October 18, 1990)
Intercontinental Broadcasting Corporation vs. Amarilla
(October 27, 2006)

RMC 27-2011 (July 1, 2011)

Income derived by foreign government
Commissioner of Internal Revenue vs. Mitsubishi Metal Corporation (January 22, 1990)

De minimis/ PERA
Republic Act 9505
RR 8-00 (August 21, 2000)
RR 5-2011 (March 16, 2011)
RR 17-2011 (October 27, 2011)
RR 8-2012 (May 11, 2012)
RR 1-2015 (January 5, 2015)
3. General Principles
Section 23, Tax Code
4. Source of Income Rules
Section 42, Tax Code
Gross income from sources within Phils.

Commissioner of Internal Revenue vs. Marubeni Corporation (December 18, 2001)

Commissioner of Internal Revenue vs. BOAC (April 30, 1987)
Commissioner v. CTA and Smith Kline & French Overseas (January 17, 1984)
Philippine Guaranty Co., Inc. vs. Commissioner of Internal Revenue (April 30, 1965)
Howden & Co., Ltd. Vs. Collector of Internal Revenue (April 14, 1965)
Philippine American Life Insurance Company, Inc. vs. Court of Tax Appeals CA-GR Sp. No. 31283
(April 25, 1995)
Commissioner of Internal Revenue vs. Baier-Nickel (August 29, 2006)
A. Soriano Y Cia vs. Collector of Internal Revenue (August 31, 1955)
Quill Corp. vs. North Dakota, 504 US 298 (May 26, 1992)
Vodafone International Holdings B.V. vs. Union of India & Anr. (Supreme Court of India, Civil Appeal No.
733 of 2012; January 20, 2012)

RAMO 1-95 (March 21, 1995)

RAMO 4-86 (April 5, 1986)
5. Deductions
Sections 34-36, Tax Code
Business expenses
Republic Act 10028 (Sections 3 & 14 only)
Republic Act 8502
Republic Act 8525 (Sections 1 to 5 only)
Republic Act 9999
Republic Act 7277 (Section 8 only)
Commissioner of Internal Revenue vs. Isabela Cultural Corporation (February 12, 2007)
ING Bank, N.V. vs. Commissioner of Internal Revenue (July 22, 2015)
Commissioner of Internal Revenue vs. General Foods (Phils.) Inc. (April 24,
2003)
Aguinaldo Industries Corporation vs. Commissioner of Internal Revenue (February 25, 1982)
Atlas Consolidated Mining & Development Corporation vs. Commissioner of Internal Revenue
(January 27, 1981)
Zamora vs. Collector of Internal Revenue (May 31, 1963)
C.M. Hoskins & Co., Inc. vs. Commissioner of Internal Revenue (November 28, 1969)
Calanoc vs. Collector of Internal Revenue (November 29, 1961)
Kuenzle & Streiff, Inc. vs. Collector of Internal Revenue (October 20, 1959)
RR 10-2002 (July 10, 2002)
RR 1-2009 (December 9, 2008)

RR 7-2010 (July 20, 2010)

Interest (as amended by Republic Act 9337)
Paper Industries Corporation of the Philippines vs. Court of Appeals (December 1, 1995)
Commissioner of Internal Revenue vs. Vda. de Prieto (September 30, 1960)
RR 13-2000 (November 20, 2000)
Interest arbitrage
BIR Ruling No. 006-00 (January 5, 2000)
Taxes
Commissioner of Internal Revenue vs. Lednicky (July 31, 1964)
BIR Ruling 123-13 (March 25, 2013)
Losses
Section 38, Tax Code
Tambunting Pawnshop, Inc. vs. Commissioner of Internal Revenue (July 29, 2013)
RR 12-77 (October 6, 1977)
RMO 31-2009 (October 16, 2009)
Forex losses
BIR Ruling 206-90 (October 30, 1990)
BIR Ruling No. 144-85 (August 26, 1985)
Bad Debts
Philex Mining Corporation vs. Commissioner of Internal Revenue (April 16, 2008)
Philippine Refining Company vs. Court of Appeals (May 8, 1996)
Fernandez Hermanos, Inc. vs. Commissioner of Internal Revenue (September 30, 1969)
RR 5-99 (March 10, 1999)
Depreciation
Basilan Estates, Inc. vs. Commissioner of Internal Revenue (September 5, 1967)
Limpan Investment Corporation vs. Commissioner of Internal Revenue (July 26, 1966)
RR 12-2012 (October 12, 2012)
Depletion
Consolidated Mines, Inc. vs. Court of Tax Appeals (August 29, 1974)

Charitable and other contributions

Republic Act 9500 (Section 25 only)

Republic Act 9521, Section 3

BIR Ruling 19-01 (May 10, 2001)
Research and Development
3M Philippines, Inc. vs. Commissioner of Internal Revenue (September 26, 1988)
Additional requirements for deductibility
RMO 38-83 (November 14, 1983)
RR 12-2013 (July 12, 2013)
Optional Standard Deduction
Section 34 (L), Tax Code as amended by Republic Act 9504
RR 2-2010 (February 18, 2010)
RR 16-2008 (November 26, 2008) (Sections 1 to 7 only)
NOLCO
Paper Industries Corporation of the Philippines vs. Court of Appeals (December 1, 1995)
RR 14-01 (August 27, 2001)
BIR Ruling 30-00 (August 10, 2000)
Premium payments on health and/or hospitalization insurance
Non-deductible expenses
Section 36, Tax Code
Esso Standard Eastern, Inc. vs. Commissioner of Internal Revenue (July 7, 1989)
Section 119-122, RR 2
6. Individuals
Sections 24 (as amended by Republic Act 9504) & 25, Tax Code
Ordinary Income
Passive Income
Section 22 (T) to (Y), Tax Code
RR 01-2011 (February 24, 2011)

10

RR 14-2012 (November 7, 2012)

Capital Gains Tax
Section 22 (Z) and 39 (B), Tax Code
SMI-Ed Philippines Technology, Inc. vs. Commissioner of Internal Revenue (November 12, 2014)
Supreme Transliner, Inc. vs. BPI Family Savings Bank, Inc. (February 23, 2011)
Department of Public Works and Highways vs. Soriano (February 25, 2015)
RR 8-98 (August 25, 1998)
RR 4-99 (March 9, 1999)
RR 13-99 (July 26, 1999)
RR 14-2000 (November 20, 2000)
RR 06-2008 (April 22, 2008)
RR 06-2013 (April 11, 2013)
RMC 37-2012 (August 3, 2012)
BIR Ruling DA 029-08 (January 23, 2008)
BIR Ruling DA 287-07 (May 8, 2007)
OCWs/Senior Citizens/Disabled/Employees of Foreign Governments
Republic Act 9257, Section 4 (c) only
M.E. Holdings Corporation vs. CIR & CTA (March 3, 2008)
Manila Memorial Park, Inc. vs. Secretaries of Department of Social Welfare and Development and
Department of Finance (December 3, 2013)
RR 1-2009 (December 9, 2008)
RR 7-2010 (July 20, 2010)
RR 1-2011 (February 24, 2011)
RMC 031-2013 (April 12, 2013)
Personal and additional exemptions/PERA
Section 35 (A), (B), (C), and (D), Tax Code
Republic Act 10754
Republic Act 10165, Sections 3-5 & 22-24 only
Republic Act 9504
Republic Act 9505
Pansacola vs. Commissioner of Internal Revenue (November 16, 2006)
RR 17-2011 (October 27, 2011)
7. Partnerships

11

Section 26 & 73 (D), Tax Code

RMC 89-2012 (December 27, 2012)
RR 2-2010 (February 18, 2010)
8. Corporations
Sections 27 (A) & (D), and 28, Tax Code as amended by Republic Act 9294 & Republic Act 9337
(1) Domestic Corporations
Ordinary Income
Passive Income
China Banking Corporation vs. Commissioner of Internal Revenue (February 27, 2013)
Banco de Oro vs. Commissioner of Internal Revenue (January 13, 2015)
Capital Gains Tax
RR 4-99 (March 9, 1999)
RR 06-2008 (April 22, 2008)
(2) Resident Foreign Corporations
Section 28 (A), Tax Code as amended by Republic Act 9294
In general
International Carrier
Republic Act No. 10378 (March 7, 2013)
Air New Zealand vs. Commissioner of Internal Revenue (CTA Case, January 30, 2008)
Commissioner of Internal Revenue vs. BOAC (April 30, 1987)
United Airlines, Inc. vs. Commissioner of Internal Revenue (September 29, 2010)
RR 15-2002 Sections 1 to 5 only
OBUs/FCDUs
RR 14-2012 (November 7, 2012)
Branch Profit Remittance Tax
Bank of America NT & SA vs. Court of Appeals (July 21, 1994)
Compania General de Tabacos de Filipinas vs. Commissioner of Internal Revenue CTA
Case No. 4141 (August 23, 1993) & 4451 (November 17, 1993)

12

ITAD BIR Ruling No. 018-09 (June 23, 2009)

Regional or Area Headquarters and ROHQs
Section 22 (DD) & (EE), Tax Code
RR 11-2010 (October 26, 2010)
(3) Nonresident Foreign Corporations
Section 28 (B), Tax Code
In general
Commissioner of Internal Revenue vs. S.C. Johnson and Son, Inc. (June 25, 1999)
Marubeni Corporation vs. Commissioner of Internal Revenue (September 14, 1989)
N.V. Reederij Amsterdam and Royal InterOcean Lines vs. Commissioner of Internal
Revenue (June 23, 1988)
Special non-resident foreign corporations
Tax on Certain Incomes of Non-resident Foreign Corporations
Interest on foreign loans
Intercorporate dividends
Section 28 (B)(5)(b), Tax Code, as amended by Republic Act 9337
Commissioner of Internal Revenue vs. Procter & Gamble Philippines
Manufacturing Corp. (December 2, 1991)
BIR Ruling DA-145-07 (March 8, 2007)
Income covered by Tax Treaties
Mirant (Philippines) Operations Corporation vs. Commissioner of Internal
Revenue (CTA EB Case No. 40, June 7, 2005 as affirmed by SC Minute
Resolution dated February 18, 2008)
Deutsche Bank AG Manila Branch vs. Commissioner of Internal Revenue (August
19, 2013)
RMO 072-10 (August 25, 2010)
ITAD Ruling 102-02 (May 28, 2002)
ITAD Ruling 024-13 (February 11, 2013)
9. Withholding Tax
Section 22 (K), Tax Code
Final Withholding Tax at Source
Section 57 (A), Tax Code
Commissioner of Internal Revenue vs. Smart Communication, Inc. (August 25, 2010)
Section 2.57.1., RR 2-98 (April 17, 1998)
Creditable Withholding Tax
Section 57 (B), Tax Code
Filipinas Synthetic Fiber Corporation vs. Court of Appeals (October 12, 1999)

13

Philippine National Bank vs. Commissioner of Internal Revenue (March 18, 2015)
Section 2.57.2., RR 2-98 (April 17, 1998)
RR 12-98 (August 14, 1998)
Return and Payment of Tax
Section 58, Tax Code
Withholding on Wages
Section 78 83, Tax Code
Section 2.78, RR 2-98 (April 17, 1998)
RR 1-2006 (December 29, 2005)
RMC 39-2012 (August 3, 2012)
Withholding Tax by Government Agencies
Section 2.57.2., RR 2-98 (April 17, 1998)
10. Special Rules
(1) Minimum Corporate Income Tax
Section 27 (E), and 28 (A)(2), Tax Code
Chamber of Real Estate Builders Association, Inc. vs. Executive Secretary (March 9, 2010)
Commissioner of Internal Revenue vs. Philippine Airlines , Inc. (July 7, 2009)
RR 9-98 (August 25, 1998) except Sec. 2.28 (E)(7) Accounting treatment as amended by RR 12-2007
(October 10, 2007)
(2) Improperly Accumulated Earnings Tax
Section 29, Tax Code
The Manila Wine Merchants, Inc. vs. Commissioner of Internal Revenue (February 20, 1984)
Commissioner of Internal Revenue vs. Tuason (May 15, 1989)
Cyanamid Philippines, Inc. vs. Court of Appeals (January 20, 2000)
RR 2-01 (February 12, 2001)
RMC 35-2011 (March 14, 2011)
BIR Ruling 25-02 (June 25, 2002)
(3) Fringe Benefits Tax
Section 22(AA) and 33, Tax Code
Benaglia vs. Commissioner of Internal Revenue, 36 BTA 838 (November 5, 1937)
RR 3-98 (January 1, 1998)
RMC 88-2012 (December 27, 2012)
RMC 79-2104 (October 31, 2014)
(4) Transfer Pricing
Section 50, Tax Code

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Commissioner of Internal Revenue vs. Filinvest Development Corporation (July 19, 2011)
Her Majesty the Queen vs. GlaxoSmithKline Inc., 2012 SCC 52 (Supreme Court of Canada, Court File
33874; October 18, 2012)
RR 2-2013 (January 23, 2013)
RMO 63-99 (July 19, 1999)
11. Special Entities
(1) Proprietary Educational Institutions and Hospitals
Section 27 (B), Tax Code
Commissioner of Internal Revenue vs. St. Lukes Medical Center, Inc. (September 26, 2012)
RMC 67-2012 (October 31, 2012)
RMC 76-03 (November 14, 2003)
(2) GOCCs
Section 27 (C), Tax Code as amended by Republic Act 9337
Republic Act 10026
Philippine Amusement and Gaming Corporation vs. Bureau of Internal Revenue (December 10,
2014)
(3) Exempt Corporations
Article XIV, Section 4 (3), Constitution
Section 30, Tax Code
Executive Order 226, Article 39
Republic Act 7916, Sections 23 25
Republic Act 9178
Republic Act 9593, Sections 4 & 86-88
Republic Act 9856
Republic Act 10165, Sections 3-5 & 22-24 only
Dumaguete Cathedral Credit Cooperative vs. Commissioner of Internal Revenue (January 22,
2010)
Commissioner of Internal Revenue vs. G. Sinco Educational Corp. (October 23, 1956)
RR 13-2011 (July 25, 2011)

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RMC 35-2012 (August 3, 2012)

RMC 9-2013 (January 29, 2013)
RMC 51-2014 (June 6, 2014)
(4) Insurance Companies
Section 37, Tax Code
12. Capital Gains and Losses
Section 39, Tax Code
Capital assets/income
Calasanz vs. Commissioner of Internal Revenue (October 9, 1986)
Section 132, RR 2
BIR Ruling 27-02 (July 15, 2002)
Ordinary assets/income
Section 22 (Z), Tax Code
Tuason vs. Lingad (July 31, 1974)
Net capital gain, net capital loss
Percentage taken into account
Limitation on capital loss
China Banking Corporation vs. Court of Appeals (July 19, 2000)
13.

Determination of Gain or Loss from Sale or Transfer of Property

Section 40, Tax Code
Section 136-143, RR 2
Computation of gain or loss
Cost or basis for determining gain or loss
Exchange of property (Tax-free exchange)
Definitions
Section 40 (C)(6), Tax Code
Merger or consolidation
Commissioner of Internal Revenue vs. Rufino (February 27, 1987
Transfer of "substantially all" the assets
Transfer of property for shares of stocks
Commissioner of Internal Revenue vs. Filinvest Development Corporation (July 19, 2011)
BIR Ruling No. 274-87 (September 9, 1987)
Administrative requirements in case of tax-free exchanges
RR 18-01 (November 13, 2001) (only Sections 3 to 6 and 9 to 12)
RMR 1-02 (April 25, 2002)
Assumption of liability in tax-free exchanges
Cost or basis in tax-free exchanges
Business Purpose

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Gregory vs. Helvering, 293 U.S. 465; 55 S.CT. 266 (January 7, 1935)
Rulings
RMC 40-2012 (August 3, 2012)
Losses from Wash Sales of Stocks or Securities
Section 38, Tax Code
Section 131, RR 2
14.

Administrative Provisions
(1) Accounting Periods and Methods
Sections 43-50, Tax Code
Section 166-177, RR 2
Section 51-53, RR 2
Accounting method - cash (actual or constructive) or accrual
Hybrid method
Consolidated Mines, Inc. vs. Court of Tax Appeals (August 29, 1974)
Percentage of completion method
Section 48, Tax Code
Section 44, RR 2
Change of accounting period
Installment basis
Bibiano V. Banas, Jr. vs. Court of Appeals (February 10, 2000)
Allocation of income and deductions
(2) Returns and Payment of Taxes
RR 019-11 (December 9, 2011)
Individual Return
Section 51 & 56, Tax Code
Who are required to file
Those not required to file
Where to file
When to file
Where to pay
Capital gains on shares of stocks and real estate
Quarterly declaration of income tax
Section 74, Tax Code
Corporation Returns
Section 52, 53 & 56, Tax Code
Quarterly Income Tax

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Section 75, Tax Code

Final Adjustment Return
Section 76, Tax Code
Systra Philippines, Inc. vs. Commissioner of Internal Revenue (September 21, 2007)
Philam Asset Management, Inc. vs. Commissioner of Internal Revenue (December 14, 2005)
Commissioner of Internal Revenue vs. Far East Bank & Trust Company (March 15, 2010)
Weinbrenner & Inigo Insurance Brokers, Inc. vs. Commissioner of Internal Revenue
(January 28, 2015)
Where to file
When to file
Section 77, Tax Code
When to pay
Capital gains on shares of stock
Return of corporations contemplating dissolution/reorganization
Section 52 (C), Tax Code
Sec. 244, RR 2
Bank of the Philippine Islands v. Commissioner of Internal Revenue - CA-GR Sp. No. 38304
(April 14, 2000)
Philippine Deposit Insurance Corporation vs. Bureau of Internal Revenue (June 13, 2013)
Returns of GPPs
Section 55, Tax Code
Returns of Receivers, Trustees in Bankruptcy or Assignees
Section 54, Tax Code
Others not captured
Section 59, Tax Code
Other income tax requirements
Section 67-72, Tax Code
United Airlines, Inc. vs. Commissioner of Internal Revenue (September 29, 2010)

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