Words and Phrases
Abatement is the diminution or decrease in the amount of tax imposed; it refers to the act of eliminating or nullifying; of lessening or moderating. To abate is to nullify or reduce in value or amount; while to cancel is to obliterate, cross out, or invalidate; and to strike out; delete; erase; make void or invalid; annul; destroy; revoke or recall.
>>>People of the Philippines vs. Sandiganbayan (Fourth Division), et al. (G.R. No. 152532, 16 August 2005, 3rd Div., J. Panganiban)
Ad valorem taxes refer to excise taxes that are based on the selling price or other specific value of the article taxed.
(2nd paragraph of Section 109 of the NIRC of 1977, as amended and renumbered by PD 1994, and again amended by EO 22)
>>>Footnote no. 23, People of the Philippines vs. Sandiganbayan (Fourth Division), et al. (G.R. No. 152532, 16 August 2005, 3rt Div., J. Panganiban)
Assess means to impose a tax; to charge with a tax; to declare a tax to be payable; to apportion a tax to be paid or contributed; to fix a rate; to fix or settle a sum to be paid by way of tax; to set, or charge a certain sum to each taxpayer; to settle, determine or fix the amount of tax to be paid (84 C.J.S. pp. 749-750).
>>>Republic of the Philippines vs. Limaco & De Guzman Commercial Co., Inc., et al. (G.R. No. L13081, 31 August 1962, En Banc, J. Paredes)
To “assume” means to take on, become bound as another is bound, or put oneself in place of another as to an obligation or liability. This means that the obligation or liability remains, although the same is merely passed on to a different person. In this light, the concept of an assumption is therefore different from an exemption.
cf.: Exemption
>>>Mitsubishi Corporation – Manila Branch vs. Commissioner of Internal Revenue (G.R. No. 175772, 5 June 2017, 1st Div., J. Perlas-Bernabe)
Ownership recognized by law and capable of being enforced in the courts at the suit of the beneficial owner. Black’s Law Dictionary indicates that the term is used in two senses: first, to indicate the interest of a beneficiary in trust property (also called “equitable ownership”); and second, to refer to the power of a corporate shareholder to buy or sell the shares, though the shareholder is not registered in the corporation’s books as the owner. Usually, beneficial ownership is distinguished from naked ownership, which is the enjoyment of all the benefits and privileges of ownership, as against possession of the bare title to property.
>>>La Bugal-B’laan Tribal Association, Inc. et al. vs. Ramos, et al. (G.R. No. 127882, 1 December 2004, En Banc, J. Panganiban)
A fund or property existing at one distinct point in time.
>>>Bureau of Internal Revenue, et al. vs. First E-Bank Tower Condominium Corp. (G.R. Nos. 215801 and 218924, 15 January 2020, 1st Div., J. Lazaro-Javier)
A tax on the gain from the sale of the taxpayer’s property forming part of capital assets.
>>>Commissioner of Internal Revenue vs. B.F. Goodrich Phils., Inc. (G.R. No. 104171, 24 February 1999, 3rd Div., J. Panganiban)
Ownership of stocks in a corporation possessing at least fifty-one percent (51%) of the total voting power of all classes of stocks entitled to vote.
[cf: Section 40(C)(6)(2) of the NIRC of 1997]
>>>Commissioner of Internal Revenue vs. Co, et al. (G.R. No. 241424, 26 February 2020, 1st Div., J. Caguioa)
“Cost of services” refers to all direct costs and expenses necessarily incurred to provide the services required by the customers and clients including (a) salaries and employee benefits of personnel, consultants, and specialists directly rendering the service; and (b) cost of facilities directly utilized in providing the service, such as depreciation or rental of equipment used and cost of supplies.
>>>Commissioner of Internal Revenue vs. Philippine Airlines, Inc. (G.R. No. 180066, 7 July 2009, 3rd Div., J. Chico-Nazario)
Demurrage fee is the allowance or compensation due to the master or owners of a ship, by the freighter, for the time the vessel may have been detained beyond the time specified or implied in the contract of affreightment or the charter-party. It is only an extended freight or reward to the vessel, in compensation for the earnings the carrier is improperly caused to lose.
Demurrage fees which are in the nature of rent for the use of property of the carrier in the Philippines, is considered income from Philippine source and is subject to income tax under the regular rate as the other types of income of the on-line carrier.
Demurrage fees definitely form part of an international sea carrier’s gross income. For they are acquired in the normal course of trade or business.
Demurrage fees fall within the definition of “gross income”, since it is considered as rent payment for the vessel.
>>>Association of International Shipping Lines, Inc., et al. vs. Secretary of Finance, et al. (G.R. No. 222239, 15 January 2020, 1st Div., J. Lazaro-Javier)
The deposit on stock subscription refers to an amount of money received by the corporation as a deposit with the possibility of applying the same as payment for the future issuance of capital stock.
The deposit on stock subscription is merely an amount of money received by a corporation with a view of applying the same as payment for additional issuance of shares in the future, an event which may or may not happen. The person making a deposit on stock subscription does not have the standing of a stockholder and he is not entitled to dividends, voting rights or other prerogatives and attributes of a stockholder.
>>>Commissioner of Internal Revenue vs. First Express Pawnshop Company, Inc. (G.R. Nos. 172045-46, 16 June 2009, 3rd Div., J. Carpio)
cf: Stock subscription contract; Subscription contract
Detention occurs when the consignee holds on to the carrier’s container outside of the port, terminal, or depot beyond the free time that is allotted. Detention fee is charged when import containers have been picked up, but the container (regardless if it is full or empty) is still in the possession of the consignee and has not been returned within the allotted time. Detention fee is also charged for export containers in which the empty container has been picked up for loading, and the loaded container is returned to the steamship line after the allotted free time.
Detention fees and other charges relating to outbound cargoes and inbound cargoes are all considered Philippine-sourced income of international sea carriers they being collected for the use of property or rendition of services in the Philippines, and are subject to the Philippine income tax under the regular rate.
Detention fees definitely form part of an international sea carrier’s gross income. For they are acquired in the normal course of trade or business.
Detention fees fall within the definition of “gross income”, since it is compensation for use of a carrier’s container.
>>>Association of International Shipping Lines, Inc., et al. vs. Secretary of Finance, et al. (G.R. No. 222239, 15 January 2020, 1st Div., J. Lazaro-Javier)
A tax for which a taxpayer is directly liable on the transaction or business it engages in, without transferring the burden to someone else. Examples are individual and corporate income taxes, transfer taxes, and residence taxes.
>>>Abakada Guro Party List Officers, et al. vs. The Honorable Executive Secretary Eduardo Ermita, et al., et seq. (G.R. Nos. 168056, 168207, 168461, 168463, and 168730, 1 September 2005, En Banc, J. Austria-Martinez)
For the purpose of imposing capital gains taxes for the sale, barter, exchange or other disposition of shares of stock in a domestic corporation, except if the sale or disposition is through the stock exchange, the term disposition includes any act of disposing, transferring or parting with, or alienation of, or giving up of property to another.
>>>Commissioner of Internal Revenue vs. Jerry Ocier (G.R. No. 192023, 21 November 2018, 1st Div., J. Bersamin)
Any distribution made by a corporation to its shareholders out of its earnings or profits and payable to its shareholders, whether in money or in other property. [Section 73(A), NIRC of 1997]
A dividend declaration is dependent upon the availability of unrestricted retained earnings.
One of the primary features of an ordinary dividend is that the distribution should be in the nature of a recurring return on stock.
>>>Commissioner of Internal Revenue vs. Goodyear Philippines, Inc. (G.R. No. 216130, 3 August 2016, 1st Div., J. Perlas-Bernabe)
Of or relating to one’s own country, or an article of domestic manufacture.
>>>Philippine Airlines, Inc. vs. Commissioner of Internal Revenue (G.R. No. 198759, 1 July 2013, 2nd Div., J. Perlas-Bernabe)
A tax on the privilege of transmitting one’s property or property rights to another or others without adequate and full valuable consideration.
>>>Commissioner of Internal Revenue vs. B.F. Goodrich Phils., Inc. (G.R. No. 104171, 24 February 1999, 3rd Div., J. Panganiban)
Double taxation means taxing the same property twice when it should be taxed only once. That is, taxing the same person twice by the same jurisdiction for the same thing.
~~~Afisco Insurance Corp., et al. vs. Court of Appeals, et al. (G.R. No. 112675, 25 January 1999, 3rd Div., J. Chico-Nazario)
That which would otherwise be included in the provision from which it is excepted. It is a clause which exempts something from the operation of a statue by express words. Further, an exception need not be introduced by the words “except” or “unless.” An exception will be construed as such if it removes something from the operation of a provision of law.
~~~South African Airways vs. Commissioner of Internal Revenue (G.R. No. 180356, 16 February 2010, 3rd Div., J. Velasco, Jr.)
A record of a routine agreement that has many similarities with the private law contract. The agreement consists of the exchange of two documents, each of the parties being in the possession of the one signed by the representative of the other. Under the usual procedure, the accepting State repeats the text of the offering State to record its assent. The signatories of the letters may be government Ministers, diplomats or departmental heads. The technique of exchange of notes is frequently resorted to, either because of its speedy procedure, or, sometimes, to avoid the process of legislative approval.
It is stated that treaties, agreements, conventions, charters, protocols, declarations, memoranda of understanding, modus vivendi and exchange of notes all refer to international instruments binding at international law.
Significantly, an exchange of notes is considered a form of an executive agreement, which becomes binding through executive action without the need of a vote by the Senate or Congress.
>>>Mitsubishi Corporation – Manila Branch vs. Commissioner of Internal Revenue (G.R. No. 175772, 5 June 2017, 1st Div., J. Perlas-Bernabe)
These are taxes on articles manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition.
>>>Footnote no. 25, People of the Philippines vs. Sandiganbayan (Fourth Division), et al. (G.R. No. 152532, 16 August 2005, 3rt Div., J. Panganiban)
cf: De Leon, The Law on Transfer and Business Taxation (12th ed., 1998), p. 251.
The freedom from a duty, liability or other requirement or a privilege given to a judgment debtor by law, allowing the debtor to retain a certain property without liability.
cc: Assume
>>>Mitsubishi Corporation – Manila Branch vs. Commissioner of Internal Revenue (G.R. No. 175772, 5 June 2017, 1st Div., J. Perlas-Bernabe)
A false return simply involves a deviation from the truth, whether intentional or not.
cf: Fraudulent return
>>>Commissioner of Internal Revenue vs. Fitness By Design, Inc. (G.R. No. 215957, 9 November 2016, 2nd Div., J. Leonen)
Forum shopping exists when a party repetitively avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending in or already resolved adversely by some other court.
>>>Commissioner of Internal Revenue vs. Court of Tax Appeals (First Division), et al., et seq. (G.R. Nos. 210501, 211294, and 212490, 15 March 2021, 2nd Div., J. Perlas-Bernabe)
A franchise is a legislative grant to operate a public utility. Like those of any other statute, the ambiguous provisions of a franchise should be construed in accordance with the intent of the legislature.
>>>Commissioner of Internal Revenue vs. Philippine Airlines, Inc. (G.R. No. 160528, 9 October 2006, 1st Div., CJ. Panganiban)
A franchise started out as a “royal privilege or (a) branch of the King’s prerogative, subsisting in the hands of a subject.” This definition was given by Finch, adopted by Blackstone, and accepted by every authority since. Further, “a franchise is defined to be a special privilege to, do certain things conferred by government on an individual or corporation, and which does not belong to citizens generally of common right.” Insofar as the great powers of government are concerned, “[a] franchise is basically a legislative grant of a special privilege to a person.”
>>>More Electric and Power Corporation vs. Panay Electric Company, Inc. et seq. (G.R. Nos. 248061 and 249406, 9 March 2021, En Banc, J. Carandang)
Fraud in its general sense, is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust or confidence justly reposed, resulting in the damage to another, or by which an undue and unconscionable advantage is taken of another.
>>>Commissioner of Internal Revenue vs. The Estate of Benigno P. Toda, Jr. (G.R. No. 147188, 14 September 2004, 1st Div., CJ. Davide, Jr.)
Fraud is a question of fact that should be alleged and duly proven. It entails corresponding sanctions under the tax law.
>>>Commissioner of Internal Revenue vs. Fitness By Design, Inc. (G.R. No. 215957, 9 November 2016, 2nd Div., J. Leonen)
A fraudulent return implies intentional or deceitful entry with intent to evade the taxes due.
cf: False return
>>>Commissioner of Internal Revenue vs. Fitness By Design, Inc. (G.R. No. 215957, 9 November 2016, 2nd Div., J. Leonen)
The term “goods or properties” shall mean all tangible and intangible objects which are capable of pecuniary estimation. These “goods” or “properties” include real property, intellectual property, equipment, and rights over motion picture films.
>>>Bureau of Internal Revenue, et al. vs. First E-Bank Tower Condominium Corp. (G.R. Nos. 215801 and 218924, 15 January 2020, 1st Div., J. Lazaro-Javier)
Grave abuse of discretion denotes a “capricious, arbitrary[,] and whimsical exercise of power. The abuse of discretion must be patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a duty enjoined by law, as not to act at all in contemplation of law, or where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility.”
>>>Bureau of Internal Revenue, et al. vs. First E-Bank Tower Condominium Corp. (G.R. Nos. 215801 and 218924, 15 January 2020, 1st Div., J. Lazaro-Javier)
Income derived from whatever source, including compensation for services; the conduct of trade or business or the exercise of a profession; dealings in property; interests; rents; royalties; dividends; annuities; prizes and winnings; pensions; and a partner’s distributive share in the net income of a general professional partnership, among others.
>>>Bureau of Internal Revenue, et al. vs. First E-Bank Tower Condominium Corp. (G.R. Nos. 215801 and 218924, 15 January 2020, 1st Div., J. Lazaro-Javier
Under Section 32 of the Tax Code, gross income means income derived from whatever source, including compensation for services; the conduct of trade or business or the exercise of a profession; dealings in property; interests; rents; royalties; dividends; annuities; prizes and winnings; pensions; and a partner’s distributive share in the net income of a general professional partnership. Section 34 enumerates the allowable deductions; Section 35, personal and additional exemptions.
The definition of gross income is broad enough to include all passive incomes subject to specific rates or final taxes. However, since these passive incomes are already subject to different rates and taxed finally at source, they are no longer included in the computation of gross income, which determines taxable income.
>>>Commissioner of Internal Revenue vs. Philippine Airlines, Inc. (G.R. No. 160528, 9 October 2006, 1st Div., CJ. Panganiban)
The gross income, referred to in Section 31, is described in Section 32 of the NIRC of 1997 as income from whatever source, including compensation for services; the conduct of trade or business or the exercise of profession; dealings in property; interests; rents; royalties; dividends; annuities; prizes and winnings; pensions; and a partner’s distributive share in the net income of a general professional partnership.
>>>Commissioner of Internal Revenue vs. Philippine Airlines, Inc. (G.R. No. 180066, 7 July 2009, 3rd Div., J. Chico-Nazario)
Gross income means income derived from whatever source, including compensation for services; the conduct of trade or business or the exercise of a profession; dealings in property; interests; rents; royalties; dividends; annuities; prizes and winnings; pensions; and a partner’s distributive share in the net income of a general professional partnership, among others. Demurrage and detention fees fall within the definition of “gross income” – the former is considered as rent payment for the vessel; and the latter, compensation for use of a carrier’s container.
>>>Association of International Shipping Lines, Inc., et al. vs. Secretary of Finance, et al. (G.R. No. 222239, 15 January 2020, 1st Div., J. Lazaro-Javier)
Gross revenue whether for passenger, cargo or mail originating from the Philippines up to final destination, regardless of the place of sale or payments of the passage or freight documents.
GPB covers gross revenue derived from transportation of passengers, cargo and/or mail originating from the Philippines up to the final destination.
[Section 28(A)(I)(3a) of the NIRC, as amended by RA 10378]
>>>Association of International Shipping Lines, Inc., et al. vs. Secretary of Finance, et al. (G.R. No. 222239, 15 January 2020, 1st Div., J. Lazaro-Javier)
Literally, “in equal fault”.
In pari delicto connotes that the two parties to a controversy are equally culpable or guilty and they shall have no action against each other. However, although the parties are in pari delicto, the Court may interfere and grant relief at the suit of one of them, where public policy requires its intervention, even though the result may be that a benefit will be derived by one party who is in equal guilt with the other.
>>>Commissioner of Internal Revenue vs. Next Mobile, Inc. (G.R. No. 212825, 7 December 2015, 3rd Div., J. Velasco, Jr.)
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.
>>>Association of International Shipping Lines, Inc., et al. vs. Secretary of Finance, et al. (G.R. No. 222239, 15 January 2020, 1st Div., J. Lazaro-Javier)
This denotes a flow of wealth during a definite period of time. It is gain derived and severed from capital.
>>>Bureau of Internal Revenue, et al. vs. First E-Bank Tower Condominium Corp. (G.R. Nos. 215801 and 218924, 15 January 2020, 1st Div., J. Lazaro-Javier)
The imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical periods. .
>>>Commissioner of Internal Revenue vs. S.C. Johnson and Son, Inc., et al. (G.R. No. 127105, 25 June 1999, 3rd Div., J. Gonzaga-Reyes)
A case or issue is considered moot and academic when it ceases to present a justiciable controversy by virtue of supervening events, so that an adjudication of the case or a declaration on the issue would be of no practical value or use. In such instance, there is no actual substantial relief which a petitioner would be entitled to, and which would be negated by the dismissal of the petition.
>>>Sze, et al. vs. Bureau of Internal Revenue (G.R. No. 210238, 6 January 2020, 1st Div., J. Reyes, J. Jr.)
It is a business tax, which the government imposes on the gross annual sales of operators of communication equipment sending overseas dispatches, messages or conversations from the Philippines. According to Section 120 of the NIRC, the person paying for the services rendered shall pay the OCT to the person rendering the service; the latter, in turn, shall remit the amount to the BIR.
>>>Commissioner of Internal Revenue vs. Philippine Airlines, Inc. (G.R. No. 180043, 14 July 2009, 3rd Div., J. Chico-Nazario)
One who is called upon to pay an import duty, a tax, subscription, or the like, which he thinks he ought not to be required to pay, but is unwilling to encounter the delay and expense of a law suit at that time, pays the sum demanded under protest.
>>>Wee Poco & Co., Inc. vs. Posadas, Jr. (G.R. No. L-43142, 26 August 1937, En Banc, J. Concepcion)
The weight, credit, and value of the aggregate evidence on either side and is usually considered to be synonymous with the term “greater weight of the evidence” or “greater weight of the credible evidence.” It is evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto.
>>>Winebrenner & Iñigo Insurance Brokers, Inc. vs. Commissioner of Internal Revenue (G.R. No. 206526, 28 January 2015, 2nd Div., J. Mendoza)
The spontaneous declaration made to acquire or keep some right or to prevent an impending damage.
>>>Wee Poco & Co., Inc. vs. Posadas, Jr. (G.R. No. L-43142, 26 August 1937, En Banc, J. Concepcion)
Quasi-judicial power has been described as:
Quasi-judicial or administrative adjudicatory power on the other hand is the power of the administrative agency to adjudicate the rights of persons before it. It is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. The administrative body exercises its quasi-judicial power when it performs in a judicial manner an act which is essentially of an executive or administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it.
>>>Commissioner of Internal Revenue vs. Avon Products Manufacturing, Inc, et seq. (G.R. Nos. 201398-99 and 201418-19, 3 October 2018, 3rd Div., J. Leonen)
The term “relevant supporting documents” should be understood as those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can only inform the taxpayer to submit additional documents. The BIR cannot demand what type of supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents that a taxpayer cannot submit.
cf: Section 228, NIRC of 1997
>>>Commissioner of Internal Revenue vs. First Express Pawnshop Company, Inc. (G.R. Nos. 172045-46, 16 June 2009, 1st Div., J. Carpio)
The phrase “sale or exchange of services” means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services; lessors or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or repacking goods for others; proprietors, operators or keepers of hotels, motels, rest-houses, pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in securities; lending investors; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land relative to their transport of goods or cargoes; common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines; sales of electricity by generation companies, transmission, and distribution companies; services of franchise grantees of electric utilities, telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 119 of this Code and non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. x x x x
The phrase “sale or exchange of services” shall include the use of intellectual property, use of certain types of equipment, supplying certain types of knowledge or information, lease of motion picture films, and use of transmission or air time.
>>>Bureau of Internal Revenue, et al. vs. First E-Bank Tower Condominium Corp. (G.R. Nos. 215801 and 218924, 15 January 2020, 1st Div., J. Lazaro-Javier)
The term “settle” is synonymous to “reconcile” and “harmonize”.
>>>Abakada Guro Party List Officers, et al. vs. The Honorable Executive Secretary Eduardo Ermita, et al., et seq. (G.R. Nos. 168056, 168207, 168461, 168463, and 168730, 1 September 2005, En Banc, J. Austria-Martinez)
Specific taxes refer to excise taxes that are based on the weight, volume capacity, or any other physical unit of measurement of the article taxed.
(2nd paragraph of Section 109 of the NIRC of 1977, as amended and renumbered by PD 1994, and again amended by EO 22)
>>>Footnote no. 24, People of the Philippines vs. Sandiganbayan (Fourth Division), et al. (G.R. No. 152532, 16 August 2005, 3rd Div., J. Panganiban)
A stock subscription is a contract by which the subscriber agrees to take a certain number of shares of the capital stock of a corporation, paying for the same or expressly or impliedly promising to pay for the same.
>>>Commissioner of Internal Revenue vs. First Express Pawnshop Company, Inc. (G.R. Nos. 172045-46, 16 June 2009, 3rd Div., J. Carpio)
cf: Deposit on stock subscription; Subscription contract;
A subscription contract is defined as any contract for the acquisition of unissued stocks in an existing corporation or a corporation still to be formed.
>>>Commissioner of Internal Revenue vs. First Express Pawnshop Company, Inc. (G.R. Nos. 172045-46, 16 June 2009, 3rd Div., J. Carpio)
cf: Deposit on stock subscription; Stock subscription contract
Tax avoidance is one of the two most common ways used by taxpayers in escaping from taxation. Tax avoidance is the tax saving device within the means sanctioned by law. This method should be used by the taxpayer in good faith and at arms length.
>>>Commissioner of Internal Revenue vs. The Estate of Benigno P. Toda, Jr. (G.R. No. 147188, 14 September 2004, 1st Div., CJ. Davide, Jr.)
cf.: Tax evasion
A tax credit is not specifically defined in our Tax Code, but Art. 21 of EO 226 defines a tax credit as “any of the credits against taxes and/or duties equal to those actually paid or would have been paid to evidence which a tax credit certificate shall be issued by the Secretary of Finance or his representative, or the Board (of Investments), if so delegated by the Secretary of Finance.” Tax credits were granted under EO 226 as incentives to encourage investments in certain businesses. A tax credit generally refers to an amount that may be “subtracted directly from one’s total tax liability.” It is therefore an “allowance against the tax itself” or “a deduction from what is owed” by a taxpayer to the government. In RR 5-2000, a tax credit is defined as “the amount due to a taxpayer resulting from an overpayment of a tax liability or erroneous payment of a tax due.”
The tax credit of a taxpayer evidenced by a TCC is used up or, in accounting parlance, debited when applied to the taxpayer’s internal revenue tax liability, and the TCC canceled after the tax credit it represented is fully debited or used up. A credit is a payable or a liability. A tax credit, therefore, is a liability of the government evidenced by a TCC. Thus, the tax credit of a taxpayer evidenced by a TCC is debited by the BIR through a TDM, not only evidencing the payment of the tax by the taxpayer, but likewise deducting or debiting the existing tax credit with the amount of the tax paid.
Since a tax credit partakes of what is owed by the State to a taxpayer, if the taxpayer has an outstanding liability with the BIR or the BOC, the money value of the tax credit covered by the TCC is primarily applied to such internal revenue liabilities of the holder as provided under condition number two. Elsewise put, the TCC issued to a claimant is applied first and foremost to any outstanding liability the claimant may have with the government. Thus, it may happen that upon post-audit, a TCC of a taxpayer may be reduced for whatever liability the taxpayer may have with the BIR which remains unpaid due to inadvertence or computational errors, and such reduction necessarily affects the balance of the monetary value of the tax credit of the TCC.
>>>Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue (G.R. No. 172598, 21 December 2007, 2nd Div., J. Velasco, Jr.)
cf: Tax Credit Certificate; Tax Debit Memo
A TCC is
a certification, duly issued to the taxpayer named therein, by the Commissioner or his duly authorized representative, reduced in a BIR Accountable Form in accordance with the prescribed formalities, acknowledging that the grantee-taxpayer named therein is legally entitled a tax credit, the money value of which may be used in payment or in satisfaction of any of his internal revenue tax liability (except those excluded), or may be converted as a cash refund, or may otherwise be disposed of in the manner and in accordance with the limitations, if any, as may be prescribed by the provisions of these Regulations.
From the above definitions, it is clear that a TCC is an undertaking by the government through the BIR or DOF, acknowledging that a taxpayer is entitled to a certain amount of tax credit from either an overpayment of income taxes, a direct benefit granted by law or other sources and instances granted by law such as on specific unused input taxes and excise taxes on certain goods. As such, tax credit is transferable in accordance with pertinent laws, rules, and regulations.
The tax credit of a taxpayer evidenced by a TCC is used up or, in accounting parlance, debited when applied to the taxpayer’s internal revenue tax liability, and the TCC canceled after the tax credit it represented is fully debited or used up. A credit is a payable or a liability. A tax credit, therefore, is a liability of the government evidenced by a TCC. Thus, the tax credit of a taxpayer evidenced by a TCC is debited by the BIR through a TDM, not only evidencing the payment of the tax by the taxpayer, but likewise deducting or debiting the existing tax credit with the amount of the tax paid.
Since a tax credit partakes of what is owed by the State to a taxpayer, if the taxpayer has an outstanding liability with the BIR or the BOC, the money value of the tax credit covered by the TCC is primarily applied to such internal revenue liabilities of the holder as provided under condition number two. Elsewise put, the TCC issued to a claimant is applied first and foremost to any outstanding liability the claimant may have with the government. Thus, it may happen that upon post-audit, a TCC of a taxpayer may be reduced for whatever liability the taxpayer may have with the BIR which remains unpaid due to inadvertence or computational errors, and such reduction necessarily affects the balance of the monetary value of the tax credit of the TCC.
>>>Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue (G.R. No. 172598, 21 December 2007, 2nd Div., J. Velasco, Jr.
cf: Tax credit; Tax Debit Memo (TDM)
Under RR 5-2000, a TDM is
a certification, duly issued by the Commissioner or his duly authorized representative, reduced in a BIR Accountable Form in accordance with the prescribed formalities, acknowledging that the taxpayer named therein has duly paid his internal revenue tax liability in the form of and through the use of a Tax Credit Certificate, duly issued and existing in accordance with the provisions of these Regulations. The Tax Debit Memo shall serve as the official receipt from the BIR evidencing a taxpayer’s payment or satisfaction of his tax obligation. The amount shown therein shall be charged against and deducted from the credit balance of the aforesaid Tax Credit Certificate.
The tax credit of a taxpayer evidenced by a TCC is used up or, in accounting parlance, debited when applied to the taxpayer’s internal revenue tax liability, and the TCC canceled after the tax credit it represented is fully debited or used up. A credit is a payable or a liability. A tax credit, therefore, is a liability of the government evidenced by a TCC. Thus, the tax credit of a taxpayer evidenced by a TCC is debited by the BIR through a TDM, not only evidencing the payment of the tax by the taxpayer, but likewise deducting or debiting the existing tax credit with the amount of the tax paid.
>>>Pilipinas Shell Petroleum Corporation vs. Commissioner of Internal Revenue (G.R. No. 172598, 21 December 2007, 2nd Div., J. Velasco, Jr.)
cf: Tax credit; Tax Credit Certificate
Tax evasion is one of the two most common ways used by taxpayers in escaping from taxation.
Tax evasion is a scheme used outside of those lawful means and when availed of, it usually subjects the taxpayer to further or additional civil or criminal liabilities.
Tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due; (2) an accompanying state of mind which is described as being “evil,” in “bad faith,” “willfull,” or “deliberate and not accidental”; and (3) a course of action or failure of action which is unlawful.
>>>Commissioner of Internal Revenue vs. The Estate of Benigno P. Toda, Jr. (G.R. No. 147188, 14 September 2004, 1st Div., CJ. Davide, Jr.)
cf.: Tax avoidance
A tax should not be imposed upon another tax. This is tax pyramiding, which has no basis either in fact or in law.
>>>People of the Philippines vs. Sandiganbayan (Fourth Division), et al. (G.R. No. 152532, 16 August 2005, 3rd Div., J. Panganiban)
Taxes are the lifeblood of government and should be collected without hindrance.
>>>Commissioner of Internal Revenue vs. Fitness By Design, Inc. (G.R. No. 215957, 9 November 2016, 2nd Div., J. Leonen)
Taxes are the government’s primary means to generate funds needed to fulfill its mandate of promoting the general welfare and well-being of the people and so should be collected without unnecessary hindrance.
>>>Commissioner of Internal Revenue vs. Pilipinas Shell Petroleum Corporation, et. seq. (G.R. Nos. 197945 and 204119-20, 9 July 2018, J. Leonardo-De Castro)
The pertinent items of gross income specified in this Code, less the deductions and/or personal and additional exemptions, if any, authorized for such types of income by this Code or other special laws. (Per RA No. 8424)
The pertinent items of gross income specified in this Code, less the deductions if any, authorized for such types of income by this Code or other special laws. [Per RA No. 10963 (The TRAIN Law)]
>>>Bureau of Internal Revenue, et al. vs. First E-Bank Tower Condominium Corp. (G.R. Nos. 215801 and 218924, 15 January 2020, 1st Div., J. Lazaro-Javier)
Taxable income means the pertinent items of gross income specified in the Tax Code, less deductions and/or personal and additional exemptions, if any, authorized for these types of income.
>>>Commissioner of Internal Revenue vs. Philippine Airlines, Inc. (G.R. No. 160528, 9 October 2006, 1st Div., CJ. Panganiban
Taxable income is defined under Section 31 of the NIRC of 1997 as the pertinent items of gross income specified in the said Code, less the deductions and/or personal and additional exemptions, if any, authorized for such types of income by the same Code or other special laws. The gross income, referred to in Section 31, is described in Section 32 of the NIRC of 1997 as income from whatever source, including compensation for services; the conduct of trade or business or the exercise of profession; dealings in property; interests; rents; royalties; dividends; annuities; prizes and winnings; pensions; and a partner’s distributive share in the net income of a general professional partnership.
>>>Commissioner of Internal Revenue vs. Philippine Airlines, Inc. (G.R. No. 180066, 7 July 2009, 3rd Div., J. Chico-Nazario)
“Valid and effective” means that treaty provisions that define rights and duties as well as definite prestations have effects equivalent to a statute.
cc: Article VII, Section 21, 1987 Constitution
>>>Air Canada vs. Commissioner of Internal Revenue (G.R. No. 169507, 11 January 2016, 2nd Div., J. Leonen)
The VAT is a burden 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, so much so that even a non-stock, non-profit organization or government entity, is liable to pay VAT on the sale of goods or services.
>>>Bureau of Internal Revenue, et al. vs. First E-Bank Tower Condominium Corp. (G.R. Nos. 215801 and 218924, 15 January 2020, 1st Div., J. Lazaro-Javier)
A Waiver of the Defense of Prescription is a bilateral agreement between a taxpayer and the BIR to extend the period of assessment and collection to a certain date.
>>>Commissioner of Internal Revenue vs. Avon Products Manufacturing, Inc, et seq. (G.R. Nos. 201398-99 and 201418-19, 3 October 2018, 3rd Div., J. Leonen)
