TAXATION LAW II - ATTY.

MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

ESTATE TAX
Lorenzo vs. Posadas [1937]
The accrual of the inheritance tax is distinct from the obligation to pay the same. Section
1536 as amended, of the Administrative Code, imposes the tax upon "every transmission by
virtue of inheritance, devise, bequest, gift mortis causa, or advance in anticipation of inheritance,
devise, or bequest." The tax therefore is upon transmission or the transfer or devolution of
property of a decedent, made effective by his death.

Dizon v. Posadas [1932]

Construing the conveyance here in question, under the facts presented, as an advance
made by-Felix Dison to his only child, we hold section 1540 (inheritance tax) to be applicable
and the tax to have been properly assessed by the Collector of Internal Revenue.

Circumstances:
1) all properties were conveyed
2) to only heir
3) no remaining property at the time of death

Jose Ma. de La Viña y dela Rosa vs. Collector of Internal Revenue [1939] - administration
expenses
the income tax claimed by the Collector of Internal Revenue had been imposed upon the
profits obtained by the administrator of the estate in the sale of certain properties of the deceased
Diego de la Viña, after the latter's death, does not make the said tax a necessary expense of
administration, unless the administrator had paid it either from his own pocket or out of the funds
of the estate.in the first case the tax paid is converted into an expense of administration which the
administrator may fully recover, plus his commission; in the second case, he may only collect his
commission, which partakes of the nature of an expense of administration.

Dizon v. CA [2009]
Court agrees with the date-of-death valuation rule; Tax burdens are not to be imposed nor
presumed to be imposed beyond what the statute expressly and clearly imports, tax statutes being
construed strictissimi juris against the government.
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

DONOR'S TAX
Lladoc v. CIR [1965]
Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation
cemeteries, churches and parsonages or convents, appurtenant thereto, and all lands, buildings,
and improvements used exclusively for religious purposes. The exemption is only from the
payment of taxes assessed on such properties enumerated, as property taxes, as contra
distinguished from excise taxes.

A gift tax is not a property tax, but an excise tax imposed on the transfer of property by
way of gift inter vivos, the imposition of which on property used exclusively for religious
purposes, does not constitute an impairment of the Constitution.

Philippine American Life and General Insurance Company vs. Secretary of Finance [2014]
The absence of donative intent, if that be the case, does not exempt the sales of stock
transaction from donor's tax since Sec. 100 of the NIRC categorically states that the amount by
which the fair market value of the property exceeded the value of the consideration shall be
deemed a gift. Thus, even if there is no actual donation, the difference in price is considered a
donation by fiction of law.

see new BIR RULING, there is now a requirement of donative intent

VALUE ADDED TAX

Abakada Guro Party List vs. Ermita [2005]

Article VI, Section 28(1) of the Constitution reads:
The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation.

Uniformity in taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. Different articles may be taxed at different amounts
provided that the rate is uniform on the same class everywhere with all people at all times.

Progressive taxation is built on the principle of the taxpayer’s ability to pay. This
principle was also lifted from Adam Smith’s Canons of Taxation, and it states:

The subjects of every state ought to contribute towards the support of the government, as
nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue
which they respectively enjoy under the protection of the state.

Taxation is progressive when its rate goes up depending on the resources of the person
affected.
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

The VAT is an antithesis of progressive taxation. By its very nature, it is regressive. The
principle of progressive taxation has no relation with the VAT system inasmuch as the VAT paid
by the consumer or business for every goods bought or services enjoyed is the same regardless of
income. In other words, the VAT paid eats the same portion of an income, whether big or small.
The disparity lies in the income earned by a person or profit margin marked by a business, such
that the higher the income or profit margin, the smaller the portion of the income or profit that is
eaten by VAT. A converso, the lower the income or profit margin, the bigger the part that the VAT
eats away. At the end of the day, it is really the lower income group or businesses with low-profit
margins that is always hardest hit.

Nevertheless, the Constitution does not really prohibit the imposition of indirect taxes,
like the VAT. What it simply provides is that Congress shall "evolve a progressive system of
taxation.

The Court stated in the Tolentino case, thus:

The Constitution does not really prohibit the imposition of indirect taxes which, like the
VAT, are regressive. What it simply provides is that Congress shall ‘evolve a progressive
system of taxation.’ The constitutional provision has been interpreted to mean simply
that ‘direct taxes are . . . to be preferred [and] as much as possible, indirect taxes should
be minimized.’ (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221
(Second ed. 1977)) Indeed, the mandate to Congress is not to prescribe, but to evolve, a
progressive tax system. Otherwise, sales taxes, which perhaps are the oldest form of
indirect taxes, would have been prohibited with the proclamation of Art. VIII, §17 (1) of
the 1973 Constitution from which the present Art. VI, §28 (1) was taken. Sales taxes are
also regressive.

Mindanao I Geothermal Partnership vs. CIR [2013]

Mindanao II Geothermal Partnership vs. CIR [2013]
it does not follow that an isolated transaction cannot be an incidental transaction for
purposes of VAT liability. Indeed, a reading of Section 105 of the 1997 Tax Code would show
that a transaction "in the course of trade or business" includes "transactions incidental
thereto.”The phrase "in the course of trade or business" means the regular conduct or pursuit of a
commercial or an economic activity, including transactions incidental thereto, by any person
regardless of whether or not the person engaged therein is a nonstock, nonprofit private
organization (irrespective of the disposition of its net income and whether or not it sells
exclusively to members or their guests), or government entity.

SEC. 112. Refunds or Tax Credits of Input Tax. -

(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are
zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of
creditable input tax due or paid attributable to such sales, xxx
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases,
the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes
within one hundred twenty (120) days from the date of submission of complete documents xxx

xxx In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the
part of the Commissioner to act on the application within the period prescribed above, the
taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim
or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted
claim with the Court of Tax Appeals.

From the foregoing provisions it is clear that the prescriptive period for filing an administrative
claim is within two years after the close of the taxable quarter when the zero-rated or effectively
zero-rated sales were made while for a judicial claim, it must be filed with the CTA within 30
days from the receipt of the CIR’s decision denying the administrative claim or from the
expiration of the 120-day period without any action from the CIR (120+30).

CIR v. Magsaysay Lines

A brief reiteration of the basic principles governing VAT is in order. VAT is ultimately a
tax on consumption, even though it is assessed on many levels of transactions on the basis of a
fixed percentage. It is the end user of consumer goods or services which ultimately shoulders the
tax, as the liability therefrom is passed on to the end users by the providers of these goods or
services who in turn may credit their own VAT liability (or input VAT) from the VAT payments
they receive from the final consumer (or output VAT). The final purchase by the end consumer
represents the final link in a production chain that itself involves several transactions and several
acts of consumption. The VAT system assures fiscal adequacy through the collection of taxes on
every level of consumption, yet assuages the manufacturers or providers of goods and services
by enabling them to pass on their respective VAT liabilities to the next link of the chain until
finally the end consumer shoulders the entire tax liability.

not vatable, forced sale through public auction by reason of atp

CIR v. CA and Commonwealth management and servies Corporations (Comaserco)

VAT is a tax on the value added by the performance of the service. It is immaterial
whether profit is derived from rendering the service.

Even a non-stock, non-profit, organization or government entity, is liable to pay VAT on

the sale of goods or services. VAT is a tax on transactions, imposed at every stage of the
distribution process on the sale, barter, exchange of goods or property, and on the performance of
services, even in the absence of profit attributable thereto. The term "in the course of trade or
business" requires the regular conduct or pursuit of a commercial or an economic activity,
regardless of whether or not the entity is profit-oriented.
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

Section 108 of the National Internal Revenue Code of 1997 10 defines the phrase "sale of
services" as the "performance of all kinds of services for others for a fee, remuneration or
consideration." It includes "the supply of technical advice, assistance or services rendered in
connection with technical management or administration of any scientific, industrial or
commercial undertaking or project."

Hence, it is immaterial whether the primary purpose of a corporation indicates that it

receives payments for services rendered to its affiliates on a reimbursement-on-cost basis only,
without realizing profit, for purposes of determining liability for VAT on services rendered. As
long as the entity provides service for a fee, remuneration or consideration, then the service
rendered is subject to VAT.

Section 106 of the Tax Code explains when VAT may be imposed or exacted. Thus:

„SEC. 106. Value-added Tax on Sale of Goods or Properties.·

(A) Rate and Base of Tax.·There shall be levied, assessed and

collected on every sale, barter or exchange of goods or properties,
value-added tax equivalent to ten percent (10%) of the gross selling
price or gross value in money of the goods or properties sold, bartered
or exchanged, such tax to be paid by the seller or transferor.

Thus, there must be a sale, barter or exchange of goods or properties

before any VAT may be levied. Certainly, there was no such sale, barter or
exchange in the subsidy given by SIS to Sony. It was but a dole out by SIS and
not in payment for goods or properties sold, bartered or exchanged by Sony.

In the case of CIR v. Court of Appeals (CA), 23 the Court had the occasion to rule that
services rendered for a fee even on reimbursement-on-cost basis only and without realizing profit
are also subject to VAT. The case, however, is not applicable to the present case. In that case,
COMASERCO rendered service to its affiliates and, in turn, the affiliates paid the former
reimbursement-on-cost which means that it was paid the cost or expense that it incurred although
without profit. This is not true in the present case. Sony did not render any service to SIS at all.
The services rendered by the advertising companies, paid for by Sony using SIS dole-out, were
for Sony and not SIS. SIS just gave assistance to Sony in the amount equivalent to the latter's
advertising expense but never received any goods, properties or service from Sony

Commissioner of Internal Revenue vs. Seagate Technology (Philippines)

Nature of the VAT and the Tax Credit Method
If at the end of a taxable quarter the output taxes charged by a seller are equal to the input
taxes passed on by the suppliers, no payment is required. It is when the output taxes exceed the
input taxes that the excess has to be paid. If, however, the input taxes exceed the output taxes, the
excess shall be carried over to the succeeding quarter or quarters. Should the input taxes result
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

from zero-rated or effectively zero-rated transactions or from the acquisition of capital goods,
any excess over the output taxes shall instead be refunded to the taxpayer or credited against
other internal revenue taxes.

Zero-Rated and Effectively Zero-Rated Transactions

Although both are taxable and similar in effect, zero-rated transactions differ from
effectively zero-rated transactions as to their source.

Zero-rated transactions generally refer to the export sale of goods and supply of
services. The tax rate is set at zero. When applied to the tax base, such rate obviously results in
no tax chargeable against the purchaser. The seller of such transactions charges no output tax, but
can claim a refund of or a tax credit certificate for the VAT previously charged by suppliers.

Effectively zero-rated transactions, however, refer to the sale of goods or supply of

services to persons or entities whose exemption under special laws or international agreements to
which the Philippines is a signatory effectively subjects such transactions to a zero rate. Again, as
applied to the tax base, such rate does not yield any tax chargeable against the purchaser. The
seller who charges zero output tax on such transactions can also claim a refund of or a tax credit
certificate for the VAT previously charged by suppliers.

Zero Rating and Exemption

In terms of the VAT computation, zero rating and exemption are the same, but the extent
of relief that results from either one of them is not.

Applying the destination principle to the exportation of goods, automatic zero rating is
primarily intended to be enjoyed by the seller who is directly and legally liable for the VAT,
making such seller internationally competitive by allowing the refund or credit of input taxes that
are attributable to export sales. Effective zero rating, on the contrary, is intended to benefit the
purchaser who, not being directly and legally liable for the payment of the VAT, will ultimately
bear the burden of the tax shifted by the suppliers.

In both instances of zero rating, there is total relief for the purchaser from the burden of
the tax. But in an exemption there is only partial relief, because the purchaser is not 58 allowed
any tax refund of or credit for input taxes paid.

Exempt Transaction and Exempt Party

The object of exemption from the VAT may either be the transaction itself or any of the
parties to the transaction.

An exempt transaction, on the one hand, involves goods or services which, by their
nature, are specifically listed in and expressly exempted from the VAT under the Tax Code,
without regard to the tax status·VAT-exempt or not·of the party to the transaction. Indeed, such
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

transaction is not subject to the VAT, but the seller is not allowed any tax refund of or credit for
any input taxes paid.

An exempt party, on the other hand, is a person or entity granted VAT exemption under
the Tax Code, a special law or an international agreement to which the Philippines is a signatory,
and by virtue of which its taxable transactions become exempt from the VAT. Such party is also
not subject to the VAT, but may be allowed a tax refund of or credit for input taxes paid,
depending on its registration as a VAT or non-VAT taxpayer.

As mentioned earlier, the VAT is a tax on consumption, the amount of which may be
shifted or passed on by the seller to the purchaser of the goods, properties or services. While the
liability is imposed on one person, the burden may be passed on to another. Therefore, if a
special law merely exempts a party as a seller from its direct liability for payment of the VAT, but
does not relieve the same party as a purchaser from its indirect burden of the VAT shifted to it by
its VAT-registered suppliers, the purchase transaction is not exempt.

Sales made by a VAT-registered person in the customs territory to a PEZA-registered

entity are considered exports to a foreign country; conversely, sales by a PEZA-registered entity
to a VAT-registered person in the customs territory are deemed imports from a foreign country.

Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal

Revenue [2007]
A zero-rated sale is still considered a taxable transaction for VAT purposes, although the
Value-Added Tax (VAT) rate applied is 0%·a sale by a VAT-registered taxpayer of goods and/or
services taxed at 0% shall not result in any output VAT, while the input VAT on its purchases of
goods or services related to such zero-rated sale shall be available as tax credit or refund.

According to the Destination Principle, goods and services are taxed only in the country
where these are consumed, and in connection with the said principle, the Cross Border Doctrine
mandates that no VAT shall be imposed to form part of the cost of the goods destined for
consumption outside the territorial border of the taxing authority

Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine

Branch) [2005]
Confusion in zero rating arises because petitioner equates the performance of a particular
type of service with the consumption of its output abroad. In the present case, the facilitation of
the collection of receivables is different from the utilization or consumption of the outcome of
such service. While the facilitation is done in the Philippines, the consumption is not.
Respondent renders assistance to its foreign clients–the ROCs outside the country–by receiving
the bills of service establishments located here in the country and forwarding them to the ROCs
abroad. The consumption contemplated by law, contrary to petitioner's administrative
interpretation, does not imply that the service be done abroad in order to be zero-rated.
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

Consumption is "the use of a thing in a way that thereby exhausts it." Applied to services,
the term means the performance or "successful completion of a contractual duty, usually
resulting in the performer's release from any past or future liability x x x." The services rendered
by respondent are performed or successfully completed upon its sending to its foreign client the
drafts and bills it has gathered from service establishments here. Its services, having been
performed in the Philippines, are therefore also consumed in the Philippines.

Unlike goods, services cannot be physically used in or bound for a specific place when
their destination is determined. Instead, there can only be a "predetermined end of a course"
when determining the service "location or position x x x for legal purposes." Respondent's
facilitation service has no physical existence, yet takes place upon rendition, and therefore upon
consumption, in the Philippines. Under the destination principle, as petitioner asserts, such
service is subject to VAT at the rate of 10 percent.

However, the law clearly provides for an exception to the destination principle; that is,
for a zero percent VAT rate for services that are performed in the Philippines, "paid for in
acceptable foreign currency and accounted for in accordance with the rules and regulations of the
[BSP]." Thus, for the supply of service to be zero-rated as an exception, the law merely requires
that first, the service be performed in the Philippines; second, the service fall under any of the
categories in Section 102(b) of the Tax Code; and, third, it be paid in acceptable foreign
currency accounted for in accordance with BSP rules and regulations.

Partial Zero-rated
Where the contract involves payment in both foreign and local currency, only the service
corresponding to that paid in foreign currency shall enjoy zero-rating. The portion paid for in
local currency shall be subject to VAT at the rate of 10%.

Coral Bay Nickel Corporation vs. Commissioner of Internal Revenue [2016]

Section 8 of Republic Act No. 7916 mandates that PEZA shall manage and operate the
ECOZONE as a separate customs territory. The provision thereby establishes the fiction that an
ECOZONE is a foreign territory separate and distinct from the customs territory. Accordingly,
the sales made by suppliers from a customs territory to a purchaser located within an ECOZONE
will be considered as exportations. Following the Philippine VAT system's adherence to the
Cross Border Doctrine and Destination Principle, the VAT implications are that "no VAT shall be
imposed to form part of the cost of goods destined for consumption outside of the territorial
border of the taxing authority."

Accenture, Inc. vs. Commissioner of Internal Revenue [2012]

Zero-Rated Transactions; The recipient of the service must be doing business outside the
Philippines for the transaction to qualify for zero-rating under Section 108(B) of the Tax Code.

Thus, being a Foreign Corporation is not sufficient for the application of Section 108(B)
of the Tax Code, the Court ruled that the recipient of the service must be doing business outside
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

the Philippines for the transaction to qualify for zero-rating under Section 108(B) of the Tax
Code.

Fort Bonifacio Development Corp. vs. Commissioner of Internal Revenue [2012]

Prior payment of taxes is not required to avail of the transitional input tax credit because
it is not a tax refund per se but a tax credit. Tax credit is not synonymous to tax refund. Tax
refund is defined as the money that a taxpayer overpaid and is thus returned by the taxing
authority. Tax credit, on the other hand, is an amount subtracted directly from one's total tax
liability. It is any amount given to a taxpayer as a subsidy, a refund, or an incentive to encourage
investment. Thus, unlike a tax refund, prior payment of taxes is not a prerequisite to avail of a tax
credit. In fact, in Commissioner of Internal Revenue v. Central Luzon Drug Corp., 456 SCRA 414
(2005), we declared that prior payment of taxes is not required in order to avail of a tax credit.

Takenaka Corporation-Philippine Branch vs. Commissioner of Internal Revenue [2016]

The CTA did not err in denying the claim for refund on the ground that the petitioner had
not established its zero-rated sales of services to PIATCO through the presentation of official
receipts. In this regard, as evidence of an administrative claim for tax refund or tax credit, there
is a certain distinction between a receipt and an invoice. The Court has reiterated the distinction
in Northern Mindanao Power Corporation v. Commissioner of Internal Revenue, 750 SCRA 733
(2015), in this wise: Section 113 of the NIRC of 1997 provides that a VAT invoice is necessary
for every sale, barter or exchange of goods or properties, while a VAT official receipt properly
pertains to every lease of goods or properties; as well as to every sale, barter or exchange of
services. The Court has in fact distinguished an invoice from a receipt in Commissioner of
Internal Revenue v. Manila Mining Corporation: A “sales or commercial invoice” is a written
account of goods sold or services rendered indicating the prices charged therefor or a list by
whatever name it is known which is used in the ordinary course of business evidencing sale and
transfer or agreement to sell or transfer goods and services. A “receipt” on the other hand is a
written acknowledgment of the fact of payment in money or other settlement between seller and
buyer of goods, debtor or creditor, or person rendering services and client or customer.
Denied yung claim for refund dahil mali ang pinresent na document

Commissioner of Internal Revenue vs. United Salvage and Towage (Phils.), Inc. [2014]
The statute of limitations on assessment and collection of national internal revenue taxes
was shortened from five (5) years to three (3) years by virtue of Batas Pambansa Blg. 700. Thus,
petitioner has three (3) years from the date of actual filing of the tax return to assess a national
internal revenue tax or to commence court proceedings for the collection thereof without an
assessment. However, when it validly issues an assessment within the three (3)-year period, it
has another three (3) years within which to collect the tax due by distraint, levy, or court
proceeding. The assessment of the tax is deemed made and the three (3)-year period for
collection of the assessed tax begins to run on the date the assessment notice had been released,
mailed or sent to the taxpayer.
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

TAX REMEDIES

Commissioner of Internal Revenue vs. Sony Philippines, Inc. [2010]

Based on Section 13 of the Tax Code, a Letter of Authority or LOA is the authority given
to the appropriate revenue officer assigned to perform assessment functions. It empowers or
enables said revenue officer to examine the books of account and other accounting records of a
taxpayer for the purpose of collecting the correct amount of tax. The very provision of the Tax
Code that the CIR relies on is unequivocal with regard to its power to grant authority to examine
and assess a taxpayer.

There must be a grant of authority before any revenue officer can conduct an examination
or assessment. Equally important is that the revenue officer so authorized must not go beyond the
authority given. In the absence of such an authority, the assessment or examination is a nullity.
- "Unverified prior years" coverage of LoA is prohibited it must not exceed 1 taxable
year.
- It must be served within 30 days from its date of issuance
- Beyond said 30 days, it must be revalidated, otherwise void.

Commissioner of Internal Revenue vs. Metro Star Superama Inc. [2010]

If the taxpayer denies ever having received an assessment from the Bureau of Internal
Revenue (BIR), it is incumbent upon the latter to prove by competent evidence that such notice
was indeed received by the addressee. The onus probandi was shifted to respondent to prove by
contrary evidence that the Petitioner received the assessment in the due course of mail. The
Supreme Court has consistently held that while a mailed letter is deemed received by the
addressee in the course of mail, this is merely a disputable presumption subject to controversion
and a direct denial thereof shifts the burden to the party favored by the presumption to prove that
the mailed letter was indeed received by the addressee (Republic vs. Court of Appeals, 149
SCRA 351).

Section 228 of the Tax Code clearly requires that the taxpayer must first be informed that
he is liable for deficiency taxes through the sending of a PAN. He must be informed of the facts
and the law upon which the assessment is made. The law imposes a substantive, not merely a
formal, requirement. To proceed heedlessly with tax collection without first establishing a valid
assessment is evidently violative of the cardinal principle in administrative investigations — that
taxpayers should be able to present their case and adduce supporting evidence.

The sending of a Preliminary Assessment Notice (PAN) to taxpayer to inform him of the
assessment made is but part of the due process requirement in the issuance of a deficiency tax
assessment, the absence of which senders nugatory any assessment made by the tax authorities.
A FAN without PAN is violative of due process, therefore, assessment is void
XPN: No. 10 Taxpayer's Bill of Rights
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

A PAN shall not be required in any of the following cases, in which case,
issuance of the Final Assessment Notice for the payment of the taxpayer’s
deficiency tax liability shall be sufficient:

(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; or

(b) When a discrepancy has been determined between the tax withheld and the
amount actually remitted by the withholding agent; or

(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;
or

(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 (Section 228, NIRC).

Commissioner of Internal Revenue vs. Pascor Realty and Development Corporation [1999]
Assessment is deemed made only when the collector of internal revenue releases, mails
or sends such notice to the taxpayer.
In the present case, the revenue officers’ Affidavit merely contained a
computation of respondents’ tax liability. It did not state a demand or a period for
payment. Worse, it was addressed to the justice secretary, not to the taxpayers.

Section 222 of the NIRC specifically states that in cases of failure to file a return,
proceedings in court may be commenced without an assessment.

Section 222 of the NIRC specifically states that in cases of failure to file a return,
proceedings in court may be commenced without an assessment.

Section 222 states that an assessment is not necessary before a criminal charge can be
filed.
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

Commissioner of Internal Revenue vs. GJM Philippines Manufacturing, Inc. [2016]

It has been settled that while a mailed letter is deemed received by the addressee in the
course of mail, this is merely a disputable presumption subject to controversion, the direct denial
of which shifts the burden to the sender to prove that the mailed letter was, in fact, received by
the addressee.
The BIR has to prove that the assessment notice was actually received by the taxpayer.

Commissioner of Internal Revenue vs. Primetown Property Group, Inc. [2007]

Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the
Administrative Code of 1987 deal with the same subject matter—the computation of legal
periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a
leap year. Under the Administrative Code of 1987, however, a year is composed of 12 calendar
months. Needless to state, under the Administrative Code of 1987, the number of days is
irrelevant. There obviously exists a manifest incompatibility in the manner of computing legal
periods under the Civil Code and the Administrative Code of 1987. For this reason, we hold that
Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law,
governs the computation of legal periods. Lex posteriori derogat priori.

Commissioner of Internal Revenue vs. Phoenix Assurance Co., Ltd. [1965]

Where the deficiency assessment is based on the amended return, which is substantially
different from the original return, the period of prescription of the right to issue the same should
be counted from the filing of the amended, not the original income tax return.

Allied Banking Corporation vs. Commissioner of Internal Revenue [2010] - Exceptional

Case - Read the case
Upon receipt of FLD, the proper remedy of the taxpayer is to file a protest and not a
direct court action. However, the Court in this case allowed direct filing on the ground of
estoppel on the part of the BIR.

FLD contains the following statement:

"This is our final decision based on investigation. If you disagree, you
may appeal this final decision within thirty (30) days from receipt hereof,
otherwise said deficiency tax assessment shall become final, executory and
demandable.”

In this case, records show that petitioner disputed the PAN but not the Formal Letter of
Demand with Assessment Notices. Nevertheless, we cannot blame petitioner for not filing a
protest against the Formal Letter of Demand with Assessment Notices since the language used
and the tenor of the demand letter indicate that it is the final decision of the respondent on the
matter. We have time and again reminded the CIR to indicate, in a clear and unequivocal
language, whether his action on a disputed assessment constitutes his final determination thereon
in order for the taxpayer concerned to determine when his or her right to appeal to the tax court
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

accrues. Viewed in the light of the foregoing, respondent is now estopped from claiming that he
did not intend the Formal Letter of Demand with Assessment Notices to be a final decision.

Moreover, we cannot ignore the fact that in the Formal Letter of Demand with
Assessment Notices, respondent used the word “appeal” instead of “protest”, “reinvestigation”,
or “reconsideration”. Although there was no direct reference for petitioner to bring the matter
directly to the CTA, it cannot be denied that the word “appeal” under prevailing tax laws refers
to the filing of a Petition for Review with the CTA. As aptly pointed out by petitioner, under
Section 228 of the NIRC, the terms “protest”, “reinvestigation” and “reconsideration” refer to the
administrative remedies a taxpayer may take before the CIR, while the term “appeal” refers to
the remedy available to the taxpayer before the CTA. Section 9 of RA 9282, amending Section
11 of RA 1125,likewise uses the term “appeal” when referring to the action a taxpayer must take
when adversely affected by a decision, ruling, or inaction of the CIR. As we see it then, petitioner
in appealing the Formal Letter of Demand with Assessment Notices to the CTA merely took the
cue from respondent. Besides, any doubt in the interpretation or use of the word “appeal” in the
Formal Letter of Demand with Assessment Notices should be resolved in favor of petitioner, and
not the respondent who caused the confusion.

Revenue Memorandum Order No. 14, s2016

The waiver may be, but not necessarily, in the form prescribed by RMO No. 20-90 or
RDAO No. 05-01. The taxpayer's failure to follow the aforesaid forms does not invalidate the
executed waiver, for as long as the following are complied with:
a) The Waiver of the Statute of Limitations under Section 222 (b) and (d) shall be
executed before the expiration of the period to assess or to collect taxes. The date of
execution shall be specifically indicated in the waiver.
b) The waiver shall be signed by the taxpayer himself or his duly authorized
representative. ln the case of a corporation, the waiver must be signed by any of its
responsible officials;
c) The expiry date of the period agreed upon to assess/collect the tax after the regular
three-year period of prescription should be indicated;
Waiver only extends the prescriptive period. Hence, expiration date must be
clearly indicated in the waiver.

d) It shall be executed and accepted by the Commissioner or his duly authorized

representative
What are the 3 dates that must appear in the waiver?
1) date of execution
2) date of expiration
3) date of acceptance
DONT FORGET THESE 3 DATES
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

Commissioner of Internal Revenue vs. The Stanley Works Sales (Phils.), Incorporated
[2014]
A waiver of the statute of limitations, whether on assessment or collection, should not be
construed as a waiver of the right to invoke the defense of prescription but, rather, an agreement
between the taxpayer and the Bureau of Internal Revenue (BIR) to extend the period to a date
certain, within which the latter could still assess or collect taxes due.

To emphasize, the Waiver was not a unilateral act of the taxpayer; hence, the BIR must
act on it, either by conforming to or by disagreeing with the extension
There must be acceptance

Fishwealth Canning Corporation vs. CIR [2010]

A motion for reconsideration of the denial of the administrative protest does not toll the
30-day period to appeal to the Court of Tax Appeals
Q: Ano yung nagtotoll dun sa prescriptive period?
A: Request for Reinvestigation which MUST BE GRANTED

Lascona Land Co. Inc. vs. Commission of Internal Revenue [2012]

As in Section 228, when the law provided for the remedy to appeal the inaction of the
CIR, it did not intend to limit it to a single remedy of filing of an appeal after the lapse of the
180-day prescribed period. Precisely, when a taxpayer protested an assessment, he naturally
expects the CIR to decide either positively or negatively. A taxpayer cannot be prejudiced if he
chooses to wait for the final decision of the CIR on the protested assessment. More so, because
the law and jurisprudence have always contemplated a scenario where the CIR will decide on the
protested assessment.

It must be emphasized, however, that in case of the inaction of the CIR on the protested
assessment, while we reiterate—the taxpayer has two options, either: (1) file a petition for review
with the CTA within 30 days after the expiration of the 180-day period; or (2) await the final
decision of the Commissioner on the disputed assessment and appeal such final decision to the
CTA within 30 days after the receipt of a copy of such decision, these options are mutually
exclusive and resort to one bars the application of the other.

Commissioner of Internal Revenue vs.Liquigaz Philippines Corporation [2016]

Final Decision on Disputed Assessment; Failure of the Final Decision on Disputed
Assessment (FDDA) to reflect the facts and law on which it is based will make the decision void.
It, however, does not extend to the nullification of the entire assessment.
Invalidity of the FDDA does not invalidate the PAN and/or FAN validly made.
Invalid FDDA; effect - it is as if no FDDA was issued = equivalent to inaction
Remedy - Appeal to the CTA.
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

Philippine Amusement and Gaming Corporation vs. Bureau of Internal Revenue [2016]
three options of the protesting taxpayer:
1. If the protest is wholly or partially denied by the CIR or his authorized representative, then
the taxpayer may appeal to the CTA within 30 days from receipt of the whole or partial
denial of the protest.
2. If the protest is wholly or partially denied by the CIR’s authorized representative, then the
taxpayer may appeal to the CIR within 30 days from receipt of the whole or partial denial of
the protest.
3. If the CIR or his authorized representative failed to act upon the protest within 180 days
from submission of the required supporting documents, then the taxpayer may appeal to the
CTA within 30 days from the lapse of the 180-day period.

Facts:
Jan 17, 2008 - FAN
Jan 24, 2008 - Protest sa Revenue District
Aug 14, 2008 - MR to CIR (no decision)
Mar 11, 2009 - Petition for review before the CTA

Ruling:
The judicial action (petition for review before the CTA) was prematurely filed.
Note: the action is filed beyond the prescriptive period. Thus, the only
option of the taxpayer is to wait for the decision of the CIR/
representative, then file an appeal based on the denial by the latter.
Having said that, the appeal made by PAGCOR in this case was
prematurely filed because there is no such decision yet.

Commissioner of Internal Revenue vs. TMX Sales, Inc. [1992]

The filing of quarterly income tax returns required in Section 85 (now Section 68) and
implemented per BIR Form 1702-Q and payment of quarterly income tax should only be
considered mere installments of the annual tax due. These quarterly tax payments which are
computed based on the cumulative figures of gross receipts and deductions in order to arrive at a
net taxable income, should be treated as advances or portions of the annual income tax due, to be
adjusted at the end of the calendar or fiscal year. This is reinforced by Section 87 (now Section
69) which provides for the filing of adjustment returns and final payment of income tax.
Consequently, the two-year prescriptive period provided in Section 292 (now Section 230 of the
Tax Code should be computed from the time of filing the Adjustment Return or Annual Income
Tax Return and final payment of income tax.

Quaterly ITRs - mere installment

Annual Income Tax Return - a consolidated return
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

In the instant case, TMX Sales, Inc. filed a suit for a refund on March 14, 1984. Since the
two-year prescriptive period should be counted from the filing of the Adjustment Return on April
15, 1982, TMX Sales, Inc. is not yet barred by prescription.

Commissioner of Internal Revenue vs. Court of Appeals [1994]

A deficiency tax assessment is bar to the application for tax refund and tax credit
certificate for the same year. The deficiency assessment creates doubt on the truth and accuracy
of the tax return.

Silkair (Singapore) Pte. Ltd vs. Commissioner of Internal Revenue [2008]

The proper party to question, or seek a refund of an indirect tax is the statutory taxpayer,
the person on whom the tax is imposed by law and who paid the same even if he shifts the
burden thereof to another.

Correlate this case with CIR v. Pilipinas Shell [2012] and Chevron Philippines, Inc. vs.
CIR [2015]

Chevron Philippines, Inc. vs. CIR [2015]

However, if the tax is passed to an entity exempted from direct and indirect taxes, that
entity may file a refund.
So meaning to say, kung si Silkair ay nagfile ng refund after this particular case,
makaka avail siya ng refund because it is exempted from direct and indirect
taxes.

Pag yung law granting exemption provides

"from all kinds of taxes" - does not necessarily include indirect tax; this covers only DIRECT
taxes
"from any kind of taxes" - it covers all taxes, including indirect taxes.

CIR v. Wander Philippines, Inc. [1988]

The withholding agent of the non-resident foreign corporation is entitled to claim the
refund of excess withholding tax paid on the income of said corporation in the Philippines. Being
a withholding agent, it is the one held liable for any violation of the withholding tax law should
such a violation occur. In the same vein, it should be allowed to claim a refund in case of
overwithholding.

A subsidiary, while not the real party in interest, could prosecute a claim of refund in
behalf of its non-resident stockholders by virtue of its being the withholding agent for the
government in respect of the cash dividends it declared
Note: GR: only the STATUTORY TAXPAYER may claim a tax refund
XPN: in case of WH Agent of non-resident foreign corp
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

The City of Manila v. Cuerdo [2014]

The CTA may issue writ of certiorari if it is in aid of its appellate jurisdiction.

British American Tobacco vs. Camacho [2008]

Jurisdiction:
- Pure question of law to challenge/contest the assessment - CTA
- Validity or constitutionality of law - Regular courts

Commissioner of Internal Revenue vs. Hambrecht & Quist Philippines, Inc [2010]
Under Section 3, 1986 National Internal Revenue Code (NIRC), the issue of prescription
of the Bureau of Internal Revenue’s (BIR’s) right to collect taxes may be considered as covered
by the term “other matters” over which the Court of Tax Appeals (CTA) has appellate
jurisdiction.

Banco de Oro vs. Republic [2015]

An appeal of BIR Ruling falls within the exclusive appellate jurisdiction of the CTA as
covered by "other matters arising under the NIRC or other laws or portions thereof administered
by the BIR"
Note: BIR ruling - is not an assessment or a claim for refund.
- The nature of BIR Ruling, you are requesting an opinion from the BIR.
- nature - judicial function

Yabes vs. Flojo [1982]

While the case is still pending before the CTA, BIR cannot file a collection case before
the RTC. If the same was already filed before the RTC prior institution of appeal to CTA, it must
be suspended to avoid the possibility of conflicting judgment by injunction, provided, that the
taxpayer either (a) deposit the amount claimed or (b) to file a surety bond for not more than
double the amount with the Court.

Pacquiao vs. Court of Tax Appeals, First Division [2016] - XPN to Section 11 of RA 1125
regarding surety bond deposit requirement.
Despite the amendments to the law, the Supreme Court (SC) still holds that the Court of
Tax Appeals (CTA) has ample authority to issue injunctive writs to restrain the collection of tax
and to even dispense with the deposit of the amount claimed or the filing of the required bond,
whenever the method employed by the Commissioner of Internal Revenue (CIR) in the
collection of tax jeopardizes the interests of a taxpayer for being patently in violation of the
law.

Merong recent case, i just forgot the title, The SC held that the CTA may reduce the
amount of surety bond or dispense with the requirement.
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

Collector of Internal Revenue vs. Yuseco [1961]

Nowhere does the law expressly vest in the Court of Tax Appeals original jurisdiction to
issue writs of prohibition and injunction independently of, and apart from, an appealed case. The
writ of prohibition or injunction that it may issue under the provisions of Section 11, Republic
Act No. 1125 to suspend the collection of taxes, is merely ancillary to and in furtherance of its
appellate jurisdiction in the case mentioned in Sec. 7 of the Act. The power to issue the writ
exists only in cases appealed to it. In other words the intention of Congress to vest the Court of
Tax Appeals with jurisdiction to issue writs of prohibition and injunction only in aid of its
appellate jurisdiction in cases appealed to it and not to clothe it with original jurisdiction to issue
them.

Dito kasi sa case na to nagfile si petitioner ng special civil action for prohibition
directly before the CTA against the BIR to restrain the collection of tax (may assessment
FDDA).

Q: will the claim prosper?

A: No. The special civil action for prohibition will not prosper because the CTA has not
jurisdiction over the case.

Dapat ginawa niya: C.w CITY OF MANILA v. CUERDO

1. Appeal muna to CTA - para magkajurisdiction CTA
2. Once magkajurisdiction CTA, dun ka magfile ng petition for injunction (in aid of its
appellate jurisdiction subject requirements under Sec 11 or RA No. 1125]
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

LOCAL TAX

Commissioner of Internal Revenue vs. SM Prime Holdings, Inc. [2010]

VAT does not apply to cinema or theater operators or proprietors under the NIRC. What
applies to them is the amusement tax under the LGC.

At present, only lessors or distributors of cinematographic films are subject to VAT.

While persons subject to amusement tax under the NIRC of 1997 are exempt from the coverage
of VAT.

Pelizloy Realty Corporation vs. Province of Benguet [2013]

Section 140, Local Government Code (R.A. No. 7160) expressly allows for the
imposition by provinces of amusement taxes on “the proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, boxing stadia, and other places of amusement.” However,
resorts, swimming pools, bath houses, hot springs, and tourist spots are not among those places
expressly mentioned by Section 140 of the Local Government Code as being subject to
amusement taxes. Resorts, swimming pools, bath houses, hot springs and tourist spots do not
belong to the same category or class as theaters, cinemas, concert halls, circuses, and boxing
stadia. It follows that they cannot be considered as among the ‘other places of amusement’
contemplated by Section 140 of the Local Government Code and which may properly be subject
to amusement taxes.
Read Sec 131(c)
Keyword: "by seeing or viewing"

Alta Vista Golf and Country Club vs. City of Cebu [2016]
People do not enter a golf course to see or view a show or performance. People go to a
golf course to engage themselves in a physical sport activity, i.e., to play golf; the same reason
why people go to a gym or court to play badminton or tennis or to a shooting range for target
practice, yet there is no showing herein that such gym, court, or shooting range is similarly
considered an amusement place subject to amusement tax. There is no basis for singling out golf
courses for amusement tax purposes from other places where people go to play sports. Thus, not
subject to amusement tax

City of Iriga vs. Camarines Sur III Electric Cooperative, Inc. (CASURECO III) [2012]
Franchise tax is a tax on the exercise of a privilege. As Section 137 of the LGC provides,
franchise tax shall be based on gross receipts precisely because it is a tax on business, rather than
on persons or property. Since it partakes of the nature of an excise tax, the situs of taxation is the
place where the privilege is exercised, in this case in the City of Iriga, where CASURECO III
has its principal office and from where it operates, regardless of the place where its services or
products are delivered. Hence, franchise tax covers all gross receipts from Iriga City and the
Rinconada area.
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

To be liable for local franchise tax, the following requisites should concur: (1) that one
has a “franchise” in the sense of a secondary or special franchise; and (2) that it is exercising its
rights or privileges under this franchise within the territory of the pertinent local government
unit.
Secondary or special franchise as distinguish from primary franchise
Primary Franchise - your authority to engage or establish a corporation. It is a primary
franchise because it is granted by law. Corporation Code
Secondary franchise - your authority to engage in special kind of operation
Ex: electric distribution.

When the requisites are present, the entity is liable to pay franchise tax regardless
of whether you are a profit or non-profit entity.

Batangas City vs. Pilipinas Shell Petroleum Corporation [2015]

Q: May LGU impose business tax on petroleum products?
No: Sec 133(h)

Strictly speaking, as long as the subject matter of the taxing powers of the local
government units (LGUs) is the petroleum products per se or even the activity or privilege
related to the petroleum products, such as manufacturing and distribution of said products, it is
covered by the said limitation and thus, no levy can be imposed.

City of Manila v. Colet [2014[

Q: can City of Manila impose business tax on gross receipts of transportation constructors?
A: No. Sec133(j)

Cagayan Electric Power and Light Co., Inc. vs. City of Cagayan de Oro [2012]
The law requires that the dissatisfied taxpayer who questions the validity or legality of a
tax ordinance must file his appeal to the Secretary of Justice, within 30 days from effectivity
thereof. In case the Secretary decides the appeal, a period also of 30 days is allowed for an
aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of 60
days, a party could already proceed to seek relief in court.

In this case, the petition was dismissed on the ground of failure to exhaust administrative
remedies. Dapat nagpunta muna siya sa Sec of Justice, then to RTC.
XPN: if pure question of law (British American Tobacco vs. Camacho [2008])

Province of Bulacan vs. Court of Appeals [1998]

A province has no authority to impose taxes on stones, sand, gravel, earth and other
quarry resources extracted from private lands.

A province may not ordinarily impose taxes on stones, sand, gravel, earth and other
quarry resources, as the same are already taxed under the National Internal Revenue Code. The
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

province can, however, impose a tax on stones, sand, gravel, earth and other quarry resources
extracted from public land because it is expressly empowered to do so under the Local
Government Code. As to stones, sand, gravel, earth and other quarry resources extracted from
private land, however, it may not do so, because of the limitation provided by Section 133 of the
Code in relation to Section 151 of the National Internal Revenue Code.

Philippine Petroleum Corp. vs. Municipality of Pililla, Rizal [1991]

Q: can the mayor waive the payment of mayor's permit ......
A: no. (1) The power to tax includes the power to exempt which is essentially a legislative
prerogative. (2) The waiver partakes of the nature of an exemption. It is an ancient rule that
exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in
favor of the taxing authority (Esso Standard Eastern, Inc. v. Acting Commissioner of Customs,
18 SCRA 488 [1966]). Tax exemptions are looked upon with disfavor (Western Minolco Corp. v.
Commissioner of Internal Revenue, 124 SCRA 121 [1983]). Thus, in the absence of a clear and
express exemption from the payment of said fees, the waiver cannot be recognized. As already
stated, it is the law-making body, and not an executive like the mayor, who can make an
exemption.

Caltex (Phil.) Inc. vs. Central Board of Assessment Appeals [1982]

Gasoline station equipments and machineries are subject to the real property tax.—We
hold that the said equipment and machinery, as appurtenances to the gas station building or shed
owned by Caltex (as to which it is subject to realty tax) and which fix tures are necessary to the
operation of the gas station, for without them the gas station would be useless, and which have
been attached or affixed permanently to the gas station site or embedded therein, are taxable
improvements and machinery within the meaning of the Assessment Law and the Real Property
Tax Code.

Gasoline station equipments and machineries are permanent fixtures for purposes of
realty taxation.—Here, the question is whether the gas station equipment and machinery
permanently affixed by Caltex to its gas station and pavement (which are indubitably taxable
realty) should be subject to the realty tax. This question is different from the issue raised in the
Davao Saw Mill case. Improvements on land are commonly taxed as realty even though for some
purposes they might be considered personalty (84 C.J.S. 181-2, Notes 40 and 41). “It is a
familiar phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property” (Standard Oil Co. of New York vs.
Jaramillo, 44 Phil. 630, 633).
See also Sec199 LGC
Manila International Airport Authority vs. Court of Appeals [2006]
MIAA is an instrumentality of the Government. Thus exempted from the payment of
RPT.
See also Sec 133(o)
XPN: beneficial use to a taxable person.
** PEZA is also an instrumentality of the government
 TAXATION LAW II - ATTY. MAGSOMBOL
UNIVERSITY OF SANTO TOMAS – FACULTY OF CIVIL LAW Jhoven Paul Tolentino

Government-owned or controlled corporation refers to any agency organized as a

stock or non-stock corporation, vested with functions relating to public needs whether
governmental or proprietary in nature, and owned by the Government directly or through its
instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the
extent of at least fifty-one (51) percent of its capital stock

A government-owned or controlled corporation must be “organized as a stock or non-

stock corporation.” MIAA is not organized as a stock or non-stock corporation. MIAA is not a
stock corporation because it has no capital stock divided into shares.

Instrumentality refers to any agency of the National Government, not integrated within
the department framework, vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter. x x x (Emphasis supplied)

When the law vests in a government instrumentality corporate powers, the

instrumentality does not become a corporation—unless the government instrumentality is
organized as a stock or non-stock corporation, it remains a government instrumentality
exercising not only governmental but also corporate power.

National Power Corporation vs. Central Board of Assessment Appeals (CBAA [2009]
Sec 234 (c) of the LGC - All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned or-controlled corporations
engaged in the supply and distribution of water and/or generation and transmission of electric
power are exempt from payment of the real property tax.