TAX II (GONZALEZ)

ESTATE TAX
Overview
- Excise tax on the right of transmitting property at the time of death and on the privilege
that a person is given controlling to a certain extent the disposition of his property to take
effect upon death
- Applies to:
1. Citizens
2. Residents
3. Non-resident aliens with respect to properties in the Philippines
- Right to transmit accrues at time of death; value of property at time of death and loss at
time of death
- Right to dispose property at moment of death of decedent = NOT allowed; estate tax
must first be paid and then title be transferred to the heir
- Where to file: domicile rule; if no legal residence in RP, with the Office of the
Commissioner
- For future review: though exact number of value of properties not yet known, still has to
pay taxes (Marcos v. CA)
- File Notice of Death 60 days after death (Sec. 90) and file tax return 6 months from death
(Sec. 91)

I. Gross Estate
- Citizens and Residents = real and personal properties within and without Philippines
Non-resident aliens = real and personal within RP
- Properties within the RP:
o Franchise held in the RP
o Shares, obligations or bonds of domestic corporations
o Shares, obligations or bonds of foreign corp where 85% of business is in the RP or
has sites in the RP
o Intangibles owned by resident

a. Decedents interest = actual or beneficial (aliquot but not yet realized; e.g. decedent
adjudged as owner of the property
- Donation to a spouse during marriage = exclusive property of such spouse and does not
form part of the estate
- Roads or open spaces for public purpose = NOT part
- Receivables and tax refund = part
b. Transfer in contemplation of death
- Irrevocable trust with power to designate beneficiary = trustor can be beneficiary; has
not released full dominion; hence, forms part of the gross estate
Revocable trust = income of trustor; proceeds still go back to decedent, hence forms
part of gross estate
- Transfer years prior to death, although death came days after the actual transfer = NOT
in contemplation of death; transfer years prior death, unthinkable that such be in
contemplation of death when decedent was full of life at that time
- Donation mortis cause = part
Donation inter vivos = NOT part
- Payment of donors tax for transfers later proved to be in contemplation of death =
deemed partial payment of estate tax

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 c. Revocable transfer = no actual transfer of ownership
- Transfer without consideration between trustee and trustor = not donation for lack of
donative intent; no actual transfer of ownership
- Property placed in revocable trust = part
o Even if the trustor is incompetent and cannot legally exercise the power of
revocation, mere possession at death of the power to revoke shall cause the
inclusion of the properties held in trust in the trustors estate
- Irrevocable trust = does NOT form part; trustor is liable for donors tax NOT estate tax;
there must be payment of donors tax, otherwise there is no taxable trust entity
d. Property under general power of appointment
- General powers = power to return the property to the transferor
SPA = not part of the estate; property cannot be returned to the transferor
- Money owned by B given in trust to heirs of A with the condition of death of A for its
transfer to the heirs. A died. Estate tax? = No, not part since B is not the decedent. But
subject to donors tax
e. Life insurance
- If beneficiary is irrevocable, proceeds do not form part UNLESS the decedent is the
irrevocable beneficiary
- If beneficiary is revocable (statement made in 2013); died in 2015 = deemed irrevocable
if not exercised
- Even with stipulation that it is irrevocable BUT for the benefit of the estate, then still
subject to estate tax
f. Prior interest
g. Transfer for insufficient consideration = Sec. 100 is an exception where the real
property is sold as a capital asset (possible defense is excessive double taxation)
- Excess of FMV over selling price = part
- Applies only to real property and shares of stock subject to the FMV rule
h. Capital of surviving spouse = in contemplation of properties owned by both spouses,
the share of the decedent ONLY forms part of the estate

Valuation of properties
- Real properties = value at time of death (Sec. 88B)
- Shares of stock = FMV at time of death
o Listed in stock exchange = mean between the highest and lowest quotation at the
date nearest the death
o Not listed = book value [total number of equity (assets liabilities except
appraisal value) divided by total number of outstanding shares]
If less than the book value = subj to donors tax (difference of the FMV and
selling price)
- Receivables = discounted value (general rule)
- Bank deposits = cash therefore face value; only part of the joint account shall be
considered (i.e. in accordance to the number of owners of an account, 1/x of balance of
deposit shall be reported for purposes of estate tax)

II. Net Estate

A. Deduction allowed for Citizens and Residents
1. Expenses, losses, indebtedness and taxes = 1(a-c) are actual deductions and need
NOT be included in the gross estate
a. Funeral expenses = 5% of gross estate or 200k whichever is lower
- Should not exceed 200k

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 - Admin expenses = necessary for the care, management and settlement of
the estate; expenses for first death anniversary is NOT included (De
Guzman v De Guzman)
b. Judicial expenses = interest of the estate and not of the heir/s (Vera v Navarro)
c. Claims against the estate
- Included as accounts payable
- Expenses of administration are due only to the executor/administrator and
he alone, and no other, may collect them (De la Vina v Collector)
- Order of payment if estate is insolvent
1. Necessary funeral expenses
2. Expenses of the last sickness
3. What is owing to the laborer for salaries and wages earned and for
indemnities due to him, for the last year
4. Debts due to the US
5. Taxes and assessments due to the govt or any branch or subdivision
6. Debts due to the province
7. Debts due to the creditors
d. Insolvent = must be included as accounts receivable of the gross estate
e. Unpaid mortgage = must be included in the gross estate
2. Property previously taxed (vanishing deduction)
o Two reqs for this provision to apply:
1. Previous decedent died within 5 yrs prior to the decedent
2. Estate tax has been paid
3. Transfer for public use = must first be included in the gross estate
4. Family home = P1M max; must be the owner of a house not mere lessee
o Married and the house is a conjugal property = only half of the total value
of the house
5. Standard deduction = P1M
6. Medical expenses = P500k max; to be declared as separate allowable deduction
7. Amount received under RA 4917 = retirement benefits of private employees

B. Non-resident Alien = all of 1-3 aforementioned plus tax credits to foreign country

III. Exempt Transfers Sec. 87

1. First P200k = exception: Sec. 84
2. Merger in usufruct = estate tax only on transfers with full ownership
3. Transmission of fiduciary
4. Donee institution = Sec. 34(H2)
5. Family home
- Non-resident aliens = only #s 1-3
- Sec. 87(a-c) = no full title; there is still tax imposed on the first transfer but none on
the subsequent transfers since in those cases, the transferees are not allowed to
dispose of the property

X is an individual who had real and personal property; and who married on 1990 (absolute
community).
Exclusive Property Absolute Community
Real properties
Personal properties
Share of surviving spouse

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Deductions
1. Funeral
2. Judicial
3. Claims
4. Vanishing deductions
Subtotal X = share of surviving spouse
Special Deductions
Standard Deduction
Family home
Med expenses

IV. Procedural Requirements

- Notice of death Sec. 89
- Returns to be filed Sec. 90
- Payment of estate tax
o Heirs cannot inherit a debt; hence, he cannot be made to pay an obligation
which is greater than what he actually received
o Cash bond is required if the heirs wish for the release and distribution of
the estate before the assessment and payment of the estate tax; the amount
of the bond shall be proportional to the share of the heir in the estate (Ruiz
v CA)
- Surcharges = mandatory (Commissioner v Co Unjieng); can be waived if
approved by the Commissioner BUT still liable for interest for the concomitant
use of the funds by the estate when it is supposed to have been paid (BIR Ruling
46-98)

V. Liabilities of Executor and Heirs

- Taxes may still be collected even after the estate has been distributed among the
heirs, who shall be liable therefore in proportion to their share in the inheritance
(Government v Pamintuan)
Deficiency

VI. Government Duties

VII. Special Topics

1. Renunciation of heir of share in the estate
- In legal succession, accretion takes place in case of repudiation among heirs
of the SAME degree. This is so because there is no right of representation.
The co-heirs in legal succession are co-owners of the inheritance, for which
reason there is always a right of accretion among them.
o Did not donate the property which was never his, such renunciation
is not subject to donors tax
- However, if the renunciation is made in favor of SPECIFIC heir/s, such is an
act of disposition inasmuch as the disposition and the benefits thereof are not
enjoyed by everybody but by the specific heir/s.
o Treated both as an inheritance and donation
o Such an act is an act made out of pure liberality and therefore
subject to donors tax
o The co-heirs to whom the renunciation was made shall pay not only
the estate tax but also the gift tax in proportion to what they received

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 2. Creation of an unregistered partnership
- Partnership is treated as a corporation for tax purposes
- If after partition, heirs allow their share to be held in common with other
heirs under a single management to be used with the intent of making profit
thereby in proportion to his share, there can be no doubt that an unregistered
partnership is formed (Ona v Comm.)
- Sharing of gross returns must be with an unmistakable intention to form
partnership/jv; per s sharing does not automatically create a partnership
(Obillos v CIR)
- Sharing of returns does not itself establish partnership, there has to be:
1. An agreement to contribute to common fund
2. Intent to divide the profits
- Overt act of creation of partnership (Gatchalian v CIR)
3. Partition of estate individually among heirs = Every act which is intended to
put an end to co-ownership among heirs is deemed to be a partition although it
should purport to be a sale, exchange, compromise, or any other transaction.
4. Extension of time to file estate tax return
5. Survivorship clause = not violative of the law; imposed a mere obligation with a
term, the term being death (Vitug v CA)
o Liable for estate tax?
Vitug v CA: NO BIR Ruling: YES

DONORS TAX
Definition
- Sec 98
- Act of liberality whereby a person disposes gratuitously of a thing or a right in favor of
another who accepts it (Art. 725, NCC)
- Perfected upon the knowledge of the donor of the donees acceptance (Art. 734, NCC)
- A tax on the privilege of transmitting ones property or property rights to another or
others without adequate and full valuable consideration. It is an act of liberality
- Sec 100 (sale of property held as ordinary asset; Sec. 24 (D) pertains only to property
held as a capital asset) amount by which the FMV exceeds the consideration shall be
deemed a gift

When it is not an act of liberality = when the transfer is for a legitimate purpose (e.g. business
consideration); pure liberality (CIR v Goodrich)

Donation of Real Property = donation and acceptance must be in a public instrument

Donation of Personal Property = verbal donation for 5k or less; written for exceeding 5k
Void Donations The following donations shall be void:
(1) Those made between persons who were guilty of adultery or concubinage at the time of
the donation;
(2) Those made between persons found guilty of the same criminal offense, in consideration
thereof;
(3) Those made to a public officer or his wife, descedants and ascendants, by reason of his
office.
In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse
of the donor or donee; and the guilt of the donor and donee may be proved by preponderance of
evidence in the same action.

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What it should NOT mean
- Gifts inter vivos in contemplation of death or gifts mortis causa
- Creditor cancels a debt for a consideration = considered as an income for the debtor

Rules
- Gifts by employers to employees = de minimis and fringe benefits
- Gifts by corporation to the shareholders = any distribution is considered as dividend
distribution
- Corporate sponsorships = for a consideration; advertising expenses
- Bonus plus additional compensation = compensation in form of allowances which are
relatively of small value is a donation; if full payment then it is considered as an income
- Contributions to political campaigns = are not subject to donors tax BUT donee must
indicate: (1) donors name; and (2) allocation of the donation; not pure liberality
- Capacity of the children to buy the property titled in their names = if no capacity, deemed
as donation

Who are liable?

Citizens and Residents = real and personal properties within and without Philippines
Non-resident aliens = real and personal within RP

Rates Payable Sec 99

Who is subject to graduated rates? Strangers

Who is a stranger?
- Treatment of son-in-law and parent-in-law = strangers
- Second cousins onwards = strangers
- Donation of conjugal property = If the donation of the community property is made by
the husband alone, the donation is taxable as his own exclusive act; the participation of
the wife cannot be implied
o Two issues on donation from the conjugal property/absolute community:
1. Each spouse shall share in donation rather than joint = lower rate of tax
since each shall be taxed of the donors tax
2. Financial capacity of the donee child to buy the said donated property shall
be looked into
- Donation mortis causa = estate tax
- Donations directly to employees of a donee institution = subj to donors tax
- Donations by spouses of property in ACP or CPG = each spouse donates half of their
share, subj to lower rates

Exemptions
a. Residents
1. First 100k = not to son/daughter-in-law
2. Gifts to national government
3. Gifts to educational and/or charitable org
b. Non-resident aliens
1. Gifts to national government
2. Gifts to educational and/or charitable org

Credits for Donors Tax Paid to a Foreign Country

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 1. General
2. Limitation

Donee institution status Sec. 101(A3)

1. Any donor is exempt from donors tax
2. Not limited by the 10% (individual) or 5% (corporation) cap for donation
- An institution which is non-stock, non-profit is not automatically exempt from income tax
(See Sec. 30)

FMV at time of gift Sec 102

Filing of Returns Sec 103

e.g. A has 3 children (B, C, and D)
Return Total Tax
Jan 15 B 100k Feb 15 100k Exempt
June 15 C 100k July 15 200k 2,000 Paid on July 15
Dec 1 D 100k Dec 30 300k 4,000 Accumulated total for the yr but paid tax is
deducted
- Calendar basis

Definition of estate and donors tax Sec. 104

Special Topics
1. Termination of trust = trustee to beneficiary NOT subject to donors tax (trustee is not
the owner of the property)
2. Income tax exempt organization = donation to such orgs is not automatically exempt;
such org much be organized solely for the purposes in Sec. 123(a3), or a combination
thereof
3. Dissolution of conjugal partnership = appropriation of shares in the dissolved conjugal
partnership; property which rightfully belonged to each of them
- Recognition of heirs by annotation of legitime in the title of a property = NOT a
donation; no disposition but mere recognition of legitime
4. Homeowners association to members = exempt from donors tax if such is for socialized
housing purposes
5. Repudiation of heir = repudiation to co-heirs: exempt; repudiation to heirs of different
degree = subject to donors tax
6. Benefits of a qualified donee institution = Sec. 34(H1) and 2C; Sec 100 (A3)
7. Termination of co-ownership = not subject to donors tax
8. Partition of co-owned properties
9. Revocation of donation = In cases where revocation of a donation is anchored on
grounds other than those where the law allows the same to be exercised as a matter of
right on the part of the donor, the donee should give consent to the revocation; otherwise,
subject to donors tax

VAT
- Value-added = added price not value per se
- Tax on purchase rather than tax on sale
- Sales minus purchases

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 - Income tax is tax on the earnings, whereas VAT is a tax on the money collected
- Progressive tax system = moral incentive not judicial direction to Congress (Tolentino v
CIR)
- Abakada v Ermita
- Input VAT = tax when you purchase; Output VAT = tax when you sell
- Indirect tax meaning it is shiftable
- No such thing as VAT inclusive (i.e. breakdown must be written in the receipt)
- Seller = mere trustee of VAT for government; withholding agent
- Zero-based and exempt entity
Zero-based Exempt
Sales 0% Do not apply VAT
Purchase Two rules: Apply the VAT = which is
1. Effectively zero rated = request a BIR deemed as part of the cost of
confirmation that such entity is zero the product; as such cannot
rated be input VAT
2. Automatic = cannot apply VAT;
automatic exempt; acquire a VAT
Exemption Certificate
Seller can apply VAT = input VAT can be
claimed as refund by the entity

- Examples of Sec 108b

1. For a local entity to repack goods for export such as a bag made in the Philippines
is to be exported to US, and then in US be labeled as Lacoste (in re para 1)
2. Foreign client asks a Filipino lawyer to make a report for him (in re para 2); such
foreign client must NOT have an office in the country
- The foreign client must have no presence in the Philippines for the 0% VAT rule to apply
Subsidiary is an entirely separate and distinct entity from the foreign principal
UNLIKE a branch (foreign entity with a branch in the RP is deemed as doing
business)
- PEZA within = 0%; outside = 12%
- Destination Principle
GR: destination basis [taxed only in the country where they are consumed]
E: recipient must be a non-resident foreign entity
1. Service performed in RP
2. Service falls under Sec 108b
3. Paid in acceptable foreign currency accounted for in accordance with
BSP rules and regulations
Examples of Sec 108b
1. For a local entity to repack goods for export such as a bag made in the
Philippines is to be exported to US, and then in US be labeled as Lacoste
(in re para 1)
2. Foreign client asks a Filipino lawyer to make a report for him (in re para
2); such foreign client must NOT have an office in the country

Sec. 105: Persons liable

Direct tax and Indirect tax

o Once shifted to the customer as an addition to the cost of goods sold, it is no longer a
tax but an additional cost which the customer has to pay in order to obtain the goods.

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 o The shifting of the VAT does not make the buyer liable therefore.
o Indirect tax is an added cost on the good/service
o Direct tax is that which is demanded from the very person who, it is
intended/desired, should pay; whereas, indirect tax is demanded in the first instance
from one person in the expectation and intention that he can shift the burden to
someone else. (CIR v Gotamco)
o What is shifted in an indirect tax is the burden and not the liability. (Contex v CIR)

Definition of the term Business: Sec 22 (S); Sec 105(1)

o Conveys the idea of business being done, not from time to time, but all the time;
connotes regularity of activity
o To engage is to embark in business or to employ oneself therein.
o To be held primarily for sale or lease, the property must be held with the chief
intention of being sold or leased.
o The phrase in the course of trade or business does not contemplate an activity that
can no longer be repeated or carried on with regularity. On the other hand, the word
incidental contemplates an activity that necessarily follows the carrying out of the
primary function.
o Incidental = in the long run, would sell (normal course of trade or business)
Isolated = really forced; not for the reason that it is old, etc.
o However, the assignment of the inventory, although the same does not occur in the
regular conduct of its trade or business and is likewise a transaction which is not
done with regularity and would no longer be repeated is nevertheless subject to VAT
since it constitutes stock-in-trade and is deemed an ordinary asset.
o A taxpayer may be subject to VAT even if its activities do not give rise to a
permanent establishment in the RP.
o Even a nonstock, nonprofit organization or government entity is liable to pay VAT
for the sale of goods and services (although no profit)
Organizations for recreational or other non-profit purposes = subject to VAT;
includes its sale of foods and drinks, membership fees
Homeowners associations and condo corps = subject to VAT
o Giving of a subsidy is NOT a business transaction; also NOT subject to VAT
because it is not an act of liberality
o Sale of company car = subject to VAT since it is incidental to the pursuit of business
(vehicle was purchased and used in furtherance of the business)

Sec. 106: VAT on Sale of Goods and Properties

Goods or properties
o Zonal values declared by BIR = exclusive of VAT
o Lease of dormitory beds = exempt
o Condo units = considered as residential home for VAT purposes
o Government airtime = subj to VAT
o Advertising agencies = gross billings subj to VAT
o Shares distributed to shareholders = goods (includes inventory, shares) being
transferred to the shareholder

Zero rated sales: automatic v effectively zero rated

o Zero rated = can claim input tax refund
Exempt = cannot claim input tax refund

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 o Effectively zero rated = local sale to person/entity who was granted indirect tax
exemptions under special law or international agreements (only those on the level of
consuls and ambassadors)
o Sale of water (whether in the form of bottled mineral water or water
delivered/supplied to inter-island and ocean-going vessels by persons engaged in the
business of supplying water to such vessels) = subj to VAT
o Local licensee shall be responsible for withholding the VAT in behalf of the non-
resident foreign licensor (if the local licensee is a PEZA enterprise, such is not subj
to VAT)
o Sale to PEZA enterprises = zero rated
o Service to PEZA outside the zone = subj to VAT
o Ordinary ice = considered as processed; hence subject to VAT
o Sale by VAT-registered entity to PEZA registered = considered as export; hence,
zero rated
o Sale of goods online to non-residents and are being paid through foreign currency =
zero rated
o VAT registered export-oriented entity, paid by foreign currency, not in the PEZA,
purchase of equipment for business = zero rate OR buy with VAT and claim refund;
not VAT registered = no VAT; suggestion: apply as PEZA entity so all purchases are
exempt from VAT

Transactions deemed sale

o Transfer of assets pursuant to a merger = NOT subj to VAT

Sec. 107 VAT on Importation

o Balikbayan boxes = exempt for $500

Sec. 108 VAT on Services

Sale or exchange of service

o Services of a director is NOT subj to VAT (BoD member) since he is not a seller of
services; he has an interest in the company
Services of an independent director = subject to VAT (accdg to Gonzalez)
o Sale of airline tickets = NOT subj to VAT
o Airline rents an office to sell tickets, room in airport, parking lot for plane = NOT
subj to VAT
o Is an ber driver subject to VAT (no receipt)? Yes vatable transaction; the driver
should issue a receipt

Sec. 109 Exempt transactions

(E) Percentage tax
(G) Quack doctor = NOT exempt
o Lab tests = exempt
(H) Seminars = NOT included if not conducted by educational institutions
(I) A person who teaches but the school does not consider him as an employee but as a
professional = subj to VAT (rendering of service not under EER)
o Doctor employed by a corporation charging professional fee = NOT exempt
o Private nurse = subj to VAT
(J) ROHQs
(V) Borrow money with interest with a bank = exempt

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 o Car loan with a bank (car financing) = exempt

Sec. 110
(A1b) Statement of account for service = not valid for VAT purposes
(A2) Rule of allocation
(B) How to compute VAT payable
o Input > output = allowed to carry over excess
(C) If you decide to claim input tax refund = reduce creditable iput tax to claim refund

Sec. 111
(A) Sale is below 1.9M = can claim traditional input tax

Sec. 112 (for proportional distribution for claim for refunds)

(A&B) = rule of refunds; 2 yrs from date it was paid
(C) File with Commissioner (120 days to answer) before going to CTA

Sec. 113
(B4) 1k and above = indicate amount and TIN #
(C) VAT books
(D) non-VAT then issue VAT receipt = subj to 12% VAT but NO input tax benefit; valid
purchaser can claim input tax

Sec. 114
(A) 2 monthly returns
o VAT-exempt = place of residence or business
o VAT-registered = only place of business

Special Topics
Effect of issuing erroneous receipt = entity subject to VAT but has not issued VAT invoice
cannot claim input VAT
VAT receipt v VAT invoice
Joint ventures
o 2 construction firms = JV
o NOT JV if owner and developer = hence, taxable
Subsistence level = any business aggregate gross sales or receipts do NOT exceed 100k
during any 12-month pd
Withholding tax on VAT
When to pay
Royalties
Professional services
VAT exempt cooperatives
Dwelling below 1M
VAT/Percentage tax on tiangge
Power of Commissioner to suspend business operations

PERCENTAGE TAXES
Sec. 116 (GR)
Only applicable to those under Sec. 109(w) and earns below 1,919,500 M

Sec. 117 Percentage tax on domestic carriers and keepers of garages

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 Incoming and outgoing freight shall NOT be subj. to local taxes under the LGC

Sec. 118 Percentage tax on international carriers

o Fees are collected in the foreign country; collect freight fees = those earned in the
Philippines but paid in the foreign country; subj to percentage tax on the freight revenue
earned from the shipment of cargoes from the Philippines to the foreign country
o Mere selling of tickets without landing rights = NOT subj to tax since airline is not
deemed as doing business in the RP (no service rendered = no tax)

Sec. 119 Franchise Tax = mere privilege

o General law (NIRC) cannot impliedly repeal rate of franchise tax provided for in a
special law. There is a superiority of a legislative franchise by a special enactment over
a mere permit granted in accordance with the provisions of laws of general application.
o A legislative franchise partakes the nature of a contract.
o Franchise = right/privilege granted by the sovereignty to one or more parties to do act/s
(which they could not do so without this grant from the state)
License = confers no right or estate nor vested interest, nor does it constitute a binding
contract; mere leave to be enjoyed as a matter of indulgence at the will of the party
granting it

Sec. 120 Tax on overseas communication (telephone lines)

Sec. 121 Tax on bank and non-bank financial intermediaries (tax on gross receipts)

Sec. 122 Tax on Foreign insurance companies

Sec. 123 Tax on Insurance premiums

o Risk is located in the RP = subj to tax
o Activities merely part of main business which serves no other person or business (e.g.
manufacturing tin cans by a fuel oil seller) = NOT subj to tax

Sec. 124 Tax on agents of foreign insurance companies

Sec. 125 Amusement taxes

(D) PBA games

Sec. 126 Tax on Winnings

Sec. 127 Tax on sale, barter or exchange of shares of stock listed and traded through the
local stock exchange or IPO (1/2 of 1%)
o NOT traded through stock exchange (based on gain)
Not over 100k 5%
In excess of 100k 10%

Sec. 128 Returns and Payment of Percentage taxes

o Quarterly Return = Final Tax Return for VAT and percentage taxes
o Final return = only basis for BIR assessment
o A(4) = no reasonable basis

EXCISE TAX

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What is excise tax?
o Tax on goods manufactured or produced in the RP for domestic sale or consumption
o Tax on imported goods
o Sin tax
o VAT = value + excise tax
o Two kinds:
a. Specific tax = based on weight/volume
b. Ad valorem tax = tax based on selling price; value of product

Sec. 129 Goods subject to the excise tax

Sec. 130 Filing of return and payment of excise taxes on domestic products

Sec. 131 Payment of excise taxes on imported articles

o Non-payment of internal revenue taxes may lead to forfeiture of imported products
o Either the owner or importer shall pay the specific taxes on imported articles. So that if
the sale of the cigarettes by the importer to the owners of the certificates of
indebtedness was valid, then said purchasers become the owners of the shipment and
could pay specific taxes.
o Additional sanctions provided by the NIRC:
Internal revenue officer can search for taxable articles in any place where taxable
articles are produces or kept, or believed by him upon reasonable grounds to be
produced or kept (Sec. 171)
Internal revenue officer may also search any vehicle or other means of transportation
when upon reasonable grounds he believes the same carries articles subj to excise tax
not paid (Sec. 171)
Revenue officer may detain articles subj to excise tax when he has good reason to
believe the tax had not yet been paid (Sec. 172)
Misdeclaration or misrepresentation of manufacturers subject to excise tax shall be
punished by a summary cancellation or withdrawal of business permit as
manufacturer (Sec. 268)

Sec. 132 Mode of computing contents

Sec. 149 Automobiles (vehicles for business purposes NOT covered)

o Transfers from an exempt entity to a non-exempt entity = deemed as first importer; basis
is the imported price

DOCUMENTARY STAMP TAX

- Excise tax
- Not tax on the document itself; but tax on the transaction through affixation of the
documentary stamp

Inter office memos

o Inter-office memo evidencing lendings/borrowings is in nature of a promissory note
subject to DST
o Instructional letters as well as journal and cash vouchers evidencing advances qualify as
loan agreements subj to DST

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When does the tax accrue?
o When issued or recorded
o When instrument attains value

Effect of failing to attach the DST

o Does NOT nullify documents

Sec. 173 Whenever one party is exempt from DST, the party not otherwise exempt shall be liable
for the DST

Sec. 174 Stamp tax on original issue of shares of stock

o Upon issuance of share of stock NOT certificate of share of stock (full share of stock is
issued upon acceptance of the corporation; certificate is upon full payment)
o P1 on each P200, or fractional part thereof, of the PAR VALUE of such shares of stock
(regardless of selling price)

Sec. 175 Stamp on sales, agreements to sell, memoranda of sales, deliveries or transfer of
shares or certificates of stock
o P0.75 on each P200, or fractional part thereof, of the PAR VALUE of such shares of
stock (regardless of selling price)
o Treasury shares included

Sec. 179 Debt instruments

o P1 on original issue
o Debt with terms for less than 1 yr = DST in proportional amt in accordance with its ratio
of its term in number of days to 365 days
o Only one DST on either loan agreement or promissory notes issued to secure such loan

Sec. 192 Stamp tax on proxies (P15)

o Proxies for voting at nay election for officers
o Except proxies issued for affairs of religious, charitable, or literary associations or
corporations

Sec. 193 Stamp tax on powers of attorney (P5)

o Except acts connected with the collection of claims due from or accruing to the national
or local government

Sec. 194 Stamp tax on leases and other hiring agreements

o Lease, agreement, memorandum, or contract for hire, use or rent of any lands or
tenements
o First 2k, or fractional part P3
Every 1k, or fractional part, in excess of 2k for EACH yr P1

Sec. 195 Stamp tax on mortgages, pledges, and deeds of trust

o Amt secured does not exceed P5k P20
Each 5k, or fractional part, in excess of 5k P10
o Subsequent advances = additional DST BUT if full amount is stated on the document,
such is the basis for DST

Sec. 196 Stamp tax on deeds of sale and conveyances of real property

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Sec. 199 Documents and papers NOT subject to stamp tax

Sec. 200 Payment of DST

(B) Certificate of incorporation = date thereon is the basis when to pay DST (must pay
within 5 days of the next month

Sec. 201 Effect of failure to stamp taxable document

o Not recorded
o Not admissible as evidence until stamp has been affixed and cancelled
o Cannot be affixed with jurat or acknowledgment until stamp has been affixed and
cancelled

Payment of DST = DST return within 5 days of the following month

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