Tax

• Chapter Overview and Objectives: This Chapter discusses tax laws, taxes, and their distinction from similar items, and the administration of the tax system
• After this chapter, readers are expected to comprehend and demonstrate knowledge on

  1. The type of taxation laws

  2. Distinction among tax laws, revenue regulations, and rulings

  3. Tax, its elements, and classifications

  4. Distinction of tax from similar items

  5. Tax system and its types

  6. The principles of a sound tax system

  7. How tax is administered

  8. The powers of the Bureau of Internal Revenue (BIR) and the Commissioner of Internal Revenue (CIR) and the non-delegated powers of the CIR

  9. The criteria for selection of large taxpayers
• Taxation law


  Refers to any law that arises from the exercise of the taxation power of the State
• Types of taxation laws

  • Tax laws
  • Tax exemption laws
• Tax laws

  • The National Internal Revenue Code (NIRC)
  • The Tariff and Customs Code RA 1937
  • The Local Tax Code PD 431
  • The Real Property Tax Code PD 464
• Tax exemption laws

  • The Minimum Wage Law
  • The Omnibus Investment Code of 1987 (E.0.226)
  • Barangay Micro-Business Enterprise (BMBE) Law
  • Cooperative Development Act
• Sources of Taxation Laws

  • Constitution
  • Statutes and Presidential Decrees
  • Judicial Decisions or case laws
  • Executive Orders and Batas Pambansa
  • Administrative Issuances
  • Local Ordinances
  • Tax Treaties and Conventions with foreign countries
  • Revenue Regulations
• Revenue Regulations

  • Issuances signed by the Secretary of Finance upon recommendation of the Commissioner of Internal Revenue (CIR) that specify, prescribe, or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes
• Revenue Memorandum Orders (RMOs)


  • Provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods, and procedures necessary in the implementation of stated policies, goals, objectives, plans, and programs of the Bureau in all areas of operations except auditing
• Revenue Memorandum Rulings (RMRs)


  • Rulings, opinions and interpretations of the CIR with respect to the provisions of the Tax Code and other tax laws as applied to a specific set of facts, with or without established precedents, and which the CIR may issue from time to time for the purpose of providing taxpayers guidance on the tax consequences in specific situations
• Revenue Memorandum Circulars (RMCS)


  • Issuances that publish pertinent and applicable portions as well as amplifications of laws, rules, regulations, and precedents issued by the BIR and other agencies/offices
• BIR Rulings are official interpretations by the Bureau of Internal Revenue (BIR) on tax laws and regulations, providing guidance to taxpayers and other stakeholders regarding tax compliance
• Types of rulings

  • Value Added
  • International
  • BIR rulings
  • Delegated Authority
  • Generally Accepted
• Tax laws include reporting, a specific set of rules and regulations that cater to the needs of tax authorities and taxpayers
• Taxpayers need to follow the tax laws to ensure compliance with tax regulations
• Philippine taxation laws are enforced during periods of peace and not by the country's enemies during wartime
• Delegated Authority (DA) rulings are types of rulings
• Revenue Bulletins (RB) refer to periodic issuances, notices, and official announcements of the Commissioner of Internal Revenue
• BIR Rulings are official positions of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws
• Rulings are merely advisory or a sort of information service to the taxpayer
• None of the rulings is binding except to the addressee and may be reversed by the BIR at any time
• Types of rulings

  • Value Added Tax (VAT) rulings
  • International Tax Affairs Division (ITAD) rulings
  • BIR rulings
  • Delegated Authority (DA) rulings
• Generally Accepted Accounting Principles (GAAP)


  Conventions of financial reporting, benchmarks for the fair and relevant valuation and recognition of income, expense, assets, liabilities, and equity of a reporting entity for general purpose financial reporting
• Tax laws


  Prescribe the criteria for tax reporting, a special form of financial reporting intended to meet specific needs of tax authorities
• Philippine tax laws

  Civil and not political in nature, effective even during periods of enemy occupation, laws of the occupied territory and not by the occupying enemy
• Internal revenue laws

  Not penal in nature because they do not define crime, penalty provisions are intended to secure taxpayers' compliance
• Tax is an enforced proportional contribution levied by the lawmaking body of the State to raise revenue for public purpose
• Elements of a Valid Tax

  • Tax must be levied by the taxing power having jurisdiction over the object of taxation
  • Tax must not violate Constitutional and inherent limitations
  • Tax must be uniform and equitable
  • Tax must be for public purpose
  • Tax must be proportional in character
  • Tax is generally payable in money
• Classification of Taxes

  • Fiscal or revenue tax
  • Regulatory tax
  • Sumptuary tax
  • Personal, poll or capitation tax
  • Property tax
  • Excise or privilege tax
  • Direct tax
  • Indirect tax
• When the tax is collected from the person who is intended to pay the same, it is said to be direct
• Indirect tax is when the tax is paid by any person other than the one who is intended to pay the same
• Types of taxpayers

  • Statutory taxpayer
  • Economic taxpayer
• Statutory taxpayer


  The person named by law to pay the tax
• Economic taxpayer


  The one who actually pays the tax
• As to amount

  • Specific tax
  • Ad valorem
• Specific tax


  A tax of a fixed amount imposed on a per unit basis such as per kilo, liter, or meter
• Ad valorem


  A tax of a fixed proportion imposed upon the value of the tax object
• As to rate

  • Proportional tax
  • Progressive or graduated tax
  • Regressive tax
  • Mixed tax
• Proportional tax


  A flat or fixed rate tax that subjects all taxpayers with the same rate without regard to their ability to pay
• Progressive or graduated tax

  A tax that imposes increasing rates as the tax base increases, aiming for equitable taxation