TAXATION LAW 2

REPUBLIC ACT NO. 8424 as last amended by REPUBLIC ACT NO. 10963

GENERAL CONCEPTS
1. Definition of Taxes
2. Kinds of Internal Revenue Taxes – Section 21
3. Definition of Terms – Section 22

INCOME TAXATION
I. General Concepts
1. Different Types:
a. Personal Income Tax (Sections 24–25);
b. Corporate Income Tax (Sections 27–28);
c. Minimum Corporate Income Tax [Section 27(E)];
d. Capital Gains Tax [Sections 24(C) & (D); 25(A)(3); 27(D)(5); 28(B)(5)(c)];
e. Income Tax on Passive Income [Sections 24(B); 25(A)(2); 27(D); 28(A)(7); 28(B)
(5)];
f. Fringe Benefits Tax (Section 33);
g. Branch Profit Remittance Tax [Section 27(A)(5)];
h. Improperly Accumulated Earnings Tax (Section 29);
i. Withholding Taxes (Sections 57–58).
2. Systems:
a. Global;
b. Schedular;
c. Semi-Schedular or Semi-Global;
3. Principles:
a. Income tax is a direct tax;
b. Income tax is a progressive tax;
c. Criteria used in imposing income tax:
i. Citizenship principle;
ii. Residence principle;
iii. Source principle;
iv. Territoriality principle;
4. Case:
a. Commissioner of Internal Revenue v. John Gotamco & Son., Inc., G.R. No. L-
31092, 27 February 1987; SOMERA

II. Income
1. Kinds of Taxpayers (Sections 22);
a. Individuals:
i. Citizens;
ii. Aliens;
iii. Estates and Trusts;
b. Corporations
i. Domestic;
ii. Foreign;
iii. Partnerships.
1. See Revenue Regulations 10-2012
2. Concept of income (Section 31)
a. What is income?;
b. When is income taxable?;
a. Vicente Madrigal And His Wife, Susana Paterno, v. James J. Rafferty, G.R. No. L-
12287, 7 August 1918; CARBONELL
b. Conwi v. Court of Tax Appeals, 213 SCRA 83; JAGODILLA
c. Eisner v. Macomber, 252 US 189 (1920); KIS-ING
d. Commissioner Of Internal Revenue v. The Court Of Appeals, Court Of Tax Appeals
and A. Soriano Corp., G.R. No. 108576, 20 January 1999; KILLIP
3. Income v. Capital
a. Vicente Madrigal And His Wife, Susana Paterno, v. James J. Rafferty, G.R. No. L-
12287, 7 August 1918; YAPYAPAN
4. Tests in determining income:
a. Realization Test;
i. Eisner v. Macomber, 252 US 189 (1920); GAYA

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b. Claim of Right Doctrine;

i. Commissioner v. Wilcox, 286 US 417; CALPITO
c. Income from Whatever Source;
i. Gutierrez v. Collector, 101 Phil. 713; LIMON
d. Economic Benefit Test;
i. Commissioner v. Smith, 324 US 177; NUEVA
5. Methods of recognizing income and expenses:
a. All events test;
b. Accrual method;
c. Cash method;
i. Commissioner v. Isabela Cultural Corporation, G.R. No. 172231, 12
February 2007; CABERO
6. Methods of determining the net taxable income:
a. Expenditure method;
i. Collector v. Jamir, 4 SCRA 718; BATTON
b. Net worth or inventory method;
i. Li Yao v. Collector, 9 SCRA 8; BANG-AS
c. Sales or percentage of receipts method;
7. Situs of Income Taxation (Sections 23; 42):
a. Income from Sources within the Philippines;
b. Income from Sources without the Philippines;
c. Income from Sources partly within and without the Philippines.
8. Cases:
a. Commissioner Of Internal Revenue v. V. E. Lednicky And Maria Valero Lednicky,
G.R. Nos. L-18169, L-18286, & L-21434, 31 July 1964; PUCTIYAO
b. Vegetable Oil Corporation v. Trinidad, 45 Phil. 822; PAR-OGAN
c. Pascual v. Commissioner, 166 SCRA 560; LAIGO
d. Ona, et al. v. Commissioner, 45 SCRA 74; SANTIAGO
e. Obillos v. Commissioner, 139 SCRA 436; GAWIDAN
f. Tan v. Del Rosario, 237 SCRA 324; LIKIGAN
g. Manila Gas Corporation v. The Collector Of Internal Revenue, G.R. No. 42780, 17
January 1936; DANIEL
h. Commissioner v. British Overseas Airways Corporation, 149 SCRA 395; LISING
i. CIR v. Marubeni Corp., G.R No. 137377, 18 December 2011; CERALDE
j. Marubeni Corporation v. Commissioner of Internal Revenue, G.R. No. 76573, 14
September 1989; IGOY
k. Baier-Nickel v. Commissioner of Internal Revenue, G.R. No. 156305, 17 February
2003; FERNANDEZ
l. Commissioner Of Internal Revenue v. Juliane Baier-Nickel, G.R. No. 153793, 29
August 2006; SOMERA
m. National Development Corporation v. Commissioner, 151 SCRA 472;
CARBONELL

III. Gross Income

1. Section 32(A);
2. Definition;
a. CIR v. PAL, G.R. No. 160528, 9 October 2006; JAGODILLA
3. Gross Income v. Net Income v. Taxable Income;
4. Sources:
a. Compensation for services in whatever form paid, including, but not limited to fees,
salaries, wages, commissions, and similar items; 
b. Gross income derived from the conduct of trade or business or the exercise of a
profession;
c. Gains derived from dealings in property; 
d. Interests;
i. Revenue Regulations No. 14-2012;
ii. Definition;
iii. Deposit substitutes;
iv. Interests earned that are exempt from income tax:
1. Interest income earned from long-term deposits or investment
certificates (see conditions for exemption);

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2. Income of nonresidents from transactions with depository banks under

the expanded system;
3. Interest derived by OBUs authorized by the BSP from foreign
currency transactions with nonresidents, other OBUs, local
commercial banks including branches of foreign banks that may be
authorized by the BSP to transact business with OBUs;
4. Income of nonresidents from trasnsactions with OBUs;
v. On interest income derived from and yield from trust funds and similar
arrangements:
1. 20% Final Withholding Tax if interest income is received by:
a. Citizens;
b. Resident aliens;
c. NRAETB;
d. Domestic corporations; and
e. Resident foreign corporations.
2. 25% Final Withholding Tax if interest income is received by
NRANETB;
3. 30% Final Withholding Tax if interest income is received by
nonresident foreign corporation.
vi. On interest income from a depository bank under expanded foreign currency
deposit system:
1. 7 ½% Final Withholding Tax if interest income is received by:
a. Citizens;
b. Resident aliens;
c. Domestic corporations; and
d. Resident foreign corporations.
2. If jointly in the name of a nonresident citizen or a Filipino seaman,
and the spouse or dependent who is a resident in the Philippines, 50%
of the interest income from such bank deposit shall be treated as
exempt while the other 50% shall be subject to 7 ½% Final
Withholding Tax;
3. 15% Final Withholding Tax if interest income from foreign currency
loans is granted by the depository bank under an expanded system to
residents other than OBUs in the Philippines or other depository banks
under the expanded system;
vii. On interest income derived from foreign currency loans granted to resident
other OBUs, local commercial banks including branches of foreign banks
that may be authorized by the BSP to transact business with OBUs:
1. 10% Final Withholding Tax;
e. Rentals; 
i. Definition;
ii. Leasehold improvements;
1. Outright method;
2. Spread-out method;
3. Helvering v. Brunn, 209 US 461; KIS-ING
iii. Treatment of security deposit;
f. Royalties; 
i. Definition;
g. Dividends; 
i. Definition;
ii. Tax sparing rule;
1. Marubeni Corporation v. Commissioner of Internal Revenue, G.R. No.
76573, 14 September 1989; KILLIP
iii. Dividends exempt from income tax:
1. Intercorporate dividends;
a. What if the dividend is received by a domestic corporation from a
foreign corporation?;
b. What if the dividend is received by a resident foreign corporation
from a domestic corporation?;
2. Pure liquidating dividends;
3. Dividends from cooperatives;
4. Stock dividends;

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a. Commissioner v. Court of Appeals, 301 SCRA 152;

YAPYAPAN
b. Commissioner v. Manning, 66 SCRA 14 GAYA
iv. Disguised dividends;
v. Case:
1. CIR v. Wander Phils., G.R. No. L-68375, 15 April 1988; CALPITO
h. Annuities; 
i. Prizes and winnings;
i. Conditions for taxability;
j. Pensions; and 
k. Partner's distributive share from the net income of the general professional
partnership.
5. Other sources:
a. Illegal gains;
b. Recovery of damages if they represent lost profit;
c. Bad debts recovery;
d. Tax refund;
i. Does not include refund of:
1. Income;
2. Value-added tax;
3. Estate tax;
4. Donor’s tax; or
5. Taxes paid for stock transactions;
e. For both c and d above, apply the following rule:
i. Tax benefit rule or the Doctrine of equitable benefit;

IV. Exclusions from Gross Income

1. Exclusion v. Deduction;
2. Life insurance;
a. El Oriente v. Posadas, 56 Phil. 147; LIMON
b. Fisher v. Trinidad, 43 Phil. 73; NUEVA
3. Amount Received by Insured as Return of Premium;
4. Gifts, Bequests, and Devises;
5. Compensation for Injuries or Sickness;
a. Lobom v. Standard Cigarette Manufacturing Co., 58 SCRA 750; CABERO
6. Income Exempt under Treaty;
7. Retirement Benefits, Pensions, Gratuities, etc.;
a. Retirement Benefits;
i. Requisites;
ii. Miguel J. Ossorio Pension Foundation, Incorporated v. Court Of Appeals
And Commissioner Of Internal Revenue, G.R. No. 162175, 28 June 2010;
BATTON
iii. Santos v. Servier Philippines, Inc., 572 SCRA 487; BANG-AS
b. Separation benefits;
c. Social security benefits;
d. United States Veterans Administration;
e. Benefits received from or enjoyed under the Social Security System;
f. Benefits received from the GSIS.
8. Miscellaneous Items:
a. Income Derived by Foreign Government;
b. Income Derived by the Government or its Political Subdivisions;
c. Prizes and Awards;
i. Conditions for exemption;
d. Prizes and Awards in sports Competition;
i. Conditions for exemption;
e. 13th Month Pay and Other Benefits;
i. As updated by Republic Act No. 10963;
f. GSIS, SSS, Medicare and Other Contributions;
g. Gains from the Sale of Bonds, Debentures or other Certificate of Indebtedness;
h. Gains from Redemption of Shares in Mutual Fund;
i. Income derived from the Sale of Gold Pursuant to Republic Act No. 7076 –
Republic Act No. 11256 adding Section 32(B)(7)(i).

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9. Exception:
a. If the recovered amount represents damages for lost profits – taxable.

V. Deductions from Gross Income

1. Section 34-38;
2. The Cohan Rule Principle;
a. Exclusion v. Deduction;
b. Kinds of Allowable Deductions:
i. Itemized Deductions
ii. Optional Standard Deduction
1. Revenue Regulations No. 16-2008;
2. Revenue Regulations No. 2-2010;
3. Revenue Regulations No. 8-2018;
3. Rule on Expenses;
a. Substantiation Requirement;
b. H. Tambunting Pawnshop, Inc., v. Commissioner Of Internal Revenue, G.R. No.
173373, 20 July 2013; PUCTIYAO
c. Collector v. Philippine Education Co., G.R. No. L-8505, 30 May 1953; PAR-OGAN
d. ESSO Standard Eastern v. Commissioner, 175 SCRA 149; LAIGO
e. Atlas Consolidated v. Commissioner, 102 SCRA 246; SANTIAGO
f. Commissioner v. Algue, 158 SCRA 11; GAWIDAN
4. Examples of Business Expenses:
a. Compensation;
b. Travelling expenses;
c. Representation and entertainment;
i. Revenue Regulations No. 10-2002;
d. Advertising and promotional expenses;
i. Commissioner v. General Foods, Inc., 401 SCRA 545 LIKIGAN
e. Rent;
f. Cost of materials and supplies;
g. Repairs;
5. Applicable only to the following taxpayers:
a. Citizens;
b. Resident aliens;
c. NRAETB;
d. General professional partnerships and partners;
e. Domestic corporations; and
f. Resident foreign corporations.
6. Removed deductions by Republic Act No. 10963:
a. Personal Exemption (Section 35);
b. Additional Exemption (Section 35);
c. Premium Payments on Health and/or Hospitalization Insurance of an Individual
Taxpayer – Removed under RA 10963 [Section 34(M)];
7. Interest;
a. Requisites for deductibility;
i. Revenue Regulations No. 13-2000;
ii. Commissioner v. Palanca, 18 SCRA 496; DANIEL
iii. Commissioner v. Prieto, 109 Phil. 592; LISING
b. Tax Arbitrage Scheme on Deductible Interest;
8. Taxes;
a. Requisites for deductibility;
9. Losses;
a. Types of Losses;
i. Net Operating Loss Ordinary Losses;
1. Revenue Regulations No. 14-2001;
2. Taxpayers entitled:
a. Individuals; and
b. Domestic and resident foreign corporations;
ii. Casualty Losses;
1. See also Revenue Memorandum Order No. 31-2009;
iii. Capital Losses;
iv. Special Losses:

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1. Losses from wash sales of stocks or securities;

2. Wagering losses; and
3. Abandonment losses.
b. Requisites for deductibility;
c. Cases:
i. Marcelo Steel Corporation v. Collector, 109 Phil. 921; CERALDE
ii. Collector v. Asturias Sugar Central, Inc., 2 SCRA 1140; IGOY
iii. Philippine Sugar Estate Development Company v. Posadas, 68 Phil. 216;
FERNANDEZ
iv. Cu Unjieng Sons, Inc. v. Board of Tax Appeals and Collector, 100 Phil. 1;
TOYOKEN
10. Bad Debts;
a. Revenue Regulations No. 25-2002;
b. Requisites for deductibility;
i. PRC v. CA, 256 SCRA 667;
ii. Collector v. Goodrich International Rubber, G.R. No. 22265, 22 December
1967;
11. Depreciation;
a. Requisites for deductibility;
12. Depletion of Oils and Gas Wells and Mines;
a. Requisites for deductibility;
13. Charitable and Other Contributions;
a. Requisites for deductibility;
b. Contributions deductible in full;
c. Contribution subject to limitation;
d. Deductible under Special Law;
14. Research and Development;
a. Requisites for deductibility;
15. Pension Trusts;
a. Requisites for deductibility;
16. Additional Requirements for Deductibility of Certain Payments;
17. Nondeductible Items (Section 36);

VI. Individual Income Taxes

1. Sections 24–26;
2. Revenue Regulations No. 8-2018;
3. Revenue Regulations No. 11-2018;
4. Tax Regimes under Section 24:
a. Graduated Tax Rates;
b. 8% Income Tax on Gross Sales or Receipts;
5. Compensation Income (Section 78)
a. Existence of employer-employee relationship;
b. Statutory Minimum Wage
c. Rule on back wages
i. Revenue Memorandum Circular 39-2012
d. 13th month pay and other benefits
e. Fringe Benefits (Section 33)
i. Convenience of Employer Rule;
ii. Who pays for the Fringe Benefits Tax;
iii. Fringe benefits of those persons under Section 25(C)(D)(E)(F);
iv. Exemptions:
1. Fringe benefits which are authorized and exempted from tax under
special laws;
2. Contributions of the employer for the benefit of the employee to
retirement, insurance and hospitalization benefit plans;
3. Benefits given to the rank and file employees, whether granted
under a collective bargaining agreement or not; and
4. De minimis benefits;
5. If the grant of fringe benefits to the employee is required by the
nature of, or necessary to the trade, business, or profession of the
employer; or

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6. If the grant of the fringe benefit is for the convenience of the

employer;
f. Cases:
i. Soriano v. Secretary of Finance, G.R. No. 184450, 24 January 2017;
SOMERA
ii. Nitafan v. Commissioner, 152 SCRA 284; CARBONELL
iii. Commissioner v. Secretary of Justice, G.R. No. 177387, 9 November
2016; JAGODILLA
iv. COURAGE v. Commissioner, G.R. No. 213446, 3 July 2018; KIS-ING
6. Taxation of Passive Income of Citizens and Resident Aliens:
a. Interest Income from any currency bank;
b. Interest Income received from depository bank under the expanded foreign current
deposit system;
c. Interest income from a 5-year long-term deposit;
d. Royalties on books as well as other literary works and musical compositions;
e. Regular royalties;
f. Prizes;
g. Other winnings;
h. Cash and property dividends from:
i. A domestic corporation;
ii. ROHQ of a multinational corporation;
iii. The share of an individual in the distributable net income of an after tax of
a partnership, except from a general professional partnership of which the
taxpayer is a partner; or
iv. The share in the net income after tax in a joint venture or consortium of
which the taxpayer is a co-venturer;
i. Net capital gains from sale of shares of stocks in a domestic corporation not listed
and traded in the stock exchange;
j. On presumed capital gains from sale of real property located in the Philippines
classified as capital assets, except the sale of a principal residence;
k. Gross income derived from contracts by subcontractors from service contractors
engaged in petroleum operations;
7. Taxation of Income of Nonresident Alien Individuals Engaged in Trade or Business in the
Philippines;
a. Test to determine NRA if engaged in trade or business within the Philippines or not;
b. Taxation of Passive Income of NRAETB:
i. Interest income from any currency bank deposit;
ii. Yield or any monetary benefit from deposit substitute;
iii. Interest income and yield from trust funds and similar arrangements;
iv. Royalties in any form;
v. Royalties on books, literary works, and musical compositions;
vi. Prizes;
vii. Winnings;
viii. Gross income from all sources within the Philippines derived by
nonresident cinematographic film owners, lessors, or distributors;
ix. Interest income from a 5-year long-term deposit;
x. Cash or property dividends actually or constructively received from
domestic corporations, etc.;
xi. Net capital gains from sale of shares of stocks of domestic corporations
not listed and traded in the stock market;
xii. Presumed capital gains from sale of real property situated in the
Philippines considered as capital assets;
xiii. Gross income derived from contracts by subcontractors from service
contractors engaged in petroleum operations;
8. Taxation of Income of Nonresident Alien Individuals Not Engaged in Trade or Business in
the Philippines;
a. Test to determine NRA if engaged in trade or business within the Philippines or not;
b. Revenue Regulations No. 11-2010;
c. Tests to determine whether a Filipino working in the ROHQ/RHQ is qualified to the
15% preferential tax rate:
i. Position and function test;
ii. Compensation threshold test;

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iii. Exclusivity test;

d. See also Section 24(F);
9. Partnerships
a. General Professional Partnership
i. Revenue Memorandum Circular 3-2012;
ii. Revenue Regulations No. 2-2012;
iii. See also Revenue Memorandum Circular 16-2010;
iv. Revenue Regulations 8-2018;
b. Taxable partnerships:
i. Partnerships which are not GPP;
ii. When is a joint venture or consortium not taxable as a corporation? (See
Presidential Decree No, 929);

VII. Corporate Income Taxes

1. Sections 27–30;
2. Taxable corporations:
a. Rallos v. Rallos, 2 Phil. 509; KILLIP
b. Evangelista v. Collector, 102 Phil. 140; YAPYAPAN
c. Ona v. Commissioner, G.R. No. L-19342, 25 May 1972; CALPITO
d. Pascual and Dragon v. Commissioner, 166 SCRA 560; GAYA
e. Obillos v. Commissioner, 139 SCRA 436; TOYOKEN
f. Afisco Insurance Corporation v. Court of Appeals, 302 SCRA 1; LIMON
3. Private Educational Institution and Non-Profit Hospital;
a. Predominance Test;
b. Meaning of proprietary and nonprofit;
i. Commissioner of Internal Revenue v. St. Luke’s Medical Center, G.R. No.
195909 and 195960, 26 September 2012; NUEVA
c. Other Case:
i. Commissioner v. St. Luke’s Medical Center, Inc., G.R. No. 203514, 13
February 2017; CABERO
ii. Commissioner v. De La Salle University, G.R. No. 196596, 9 November
2019; BATTON
4. Government-Owned-and-Controlled Corporations
a. Exempt GOCCs:
i. GSIS;
ii. SSS;
iii. PhIC;
iv. PCSO (removed by Republic Act No. 10963);
v. PAGCOR (removed by Republic Act No. 9337);
vi. Local Water Districts.
b. Case:
i. PAGCOR v. BIR, G.R. No. 172087, 15 March 2011; BANG-AS
5. Domestic Corporations:
a. Taxation of Passive Income of Domestic Corporations:
i. Interest income from any currency bank deposit;
ii. Yield or any monetary benefit from deposit substitute;
iii. Interest income and yield from trust funds and similar arrangements;
iv. Royalties derived from sources within the Philippines;
v. Interest income derived from a depository bank under the FCDU;
vi. Interest income from foreign currency loans granted by depository bank
under the expanded foreign currency deposit system to residents other than
OBUs in the Philippines or other depository banks under the expanded
depository system;
vii. Net capital gains from sale of shares of stocks of domestic corporations not
listed and traded in the stock market;
viii. Presumed capital gains from sale of real property situated in the Philippines
considered as capital assets;
ix. Gross income derived from contracts by subcontractors from service
contractors engaged in petroleum operations;
b. Minimum Corporate Income Tax – Section 27(E)
i. Revenue Regulations No. 12-2007;
ii. Purpose and nature;

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iii. Coverage;
iv. Suspension or relief;
v. Computation;
vi. Carry forward;
vii. Cases:
1. Chamber of Real Estate and Builders’ Association, Inc. v. Romulo,
G.R. No. 160756, 09 March 2010; PUCTIYAO
2. Commissioner of Internal Revenue V. Philippine Airlines, Inc.
(PAL), G.R. No. 179259, 25 September 2013; PAR-OGAN
3. Manila Banking Corporation v. Commissioner, 499 SCRA 782;
LAIGO
6. Resident Foreign Corporations
a. Meaning of doing business in the definition of an RFC;
i. Commissioner of Internal Revenue v. Atlas Consolidated Mining and
Development Corporation, G.R. No. 104151, 10 March 1995; IGOY
b. Taxability of RFC’s income in the Philippines;
i. British Traders Insurance Co., Ltd. v. Commissioner of Internal Revenue, 13
SCRA 719; SANTIAGO
ii. South African Airways v. Commissioner of Internal Revenue, 612 SCRA
665; GAWIDAN
c. Minimum Corporate Income Tax on RFC
i. Same as MCIT in Domestic Corporations;
ii. Not applicable to:
1. RFC engaged in business as international carrier subject to tax at 2 ½
% of their gross Philippine billings;
2. RFC engaged in business as OBUs on their income from foreign
currency transactions with local commercial banks, including
branches of foreign banks, authorized by the BSP to transact
business with OBUs, including interest income from foreign
currency laons granted to resdients of the Philippines, subject to a
final income tax at 10% of such income;
3. RFC engaged in business as ROHQs subject to tax at 10% of their
taxable income; and
4. Firms that are taxes under special income tax regime such as those
covered in accordance with RA 7916 and RA 7227;
d. Taxation of Income of International Carriers:
i. International carriers;
1. Air;
2. Shipping;
ii. Gross Philippine Billings;
iii. Revenue Regulations No. 15-2002;
iv. Cases:
1. South African Airways v. Commissioner of Internal Revenue, 612
SCRA 665; LIKIGAN
2. United Airlines, Inc. v. Commissioner of Internal Revenue, 631
SCRA 567; FERNANDEZ
3. CIR v. BOAC, G.R. No. L-65773-74, 30 April 1987; CERALDE
e. Offshore Banking Units:
i. Definition;
ii. Foreign Currency Deposit Unit;
iii. RCBC v. CIR, G.R. No. 170257, 7 September 2011; LISING
f. Regional or Area Headquarters and Regional Operating Headquarters of
Multinational Companies
i. Definition of multinational company;
ii. Definition of regional or area headquarters;
iii. Taxation of income;
g. Branch Profit Remittance Tax
i. Rationale;
1. Bank of America NT & SA v. Court of Appeals, 234 SCRA 302;
DANIEL
ii. Cases:
1. Commissioner v. Marubeni, 177 SCRA 500;

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2. Marubeni v. Commissioner, G.R. No. 76573, 14 September 1989;

3. Deutsche Ban AG Manila v. Commissioner, 704 SCRA 216
h. Taxation of Passive Income:
i. Interest income from any currency bank deposit;
ii. Yield or any monetary benefit from deposit substitute;
iii. Royalties derived from sources within the Philippines;
iv. Interest income derived from a depository bank under the FCDU;
v. Interest income from foreign currency loans granted by depository bank
under the expanded foreign currency deposit system to residents other than
OBUs in the Philippines or other depository banks under the expanded
depository system;
vi. Net capital gains from sale of shares of stocks of domestic corporations not
listed and traded in the stock market;
vii. Gross income derived from contracts by subcontractors from service
contractors engaged in petroleum operations;
7. Nonresident Foreign Corporation [Section 28(B)]:
a. Definition;
b. Taxation of Income;
c. Tax Credit Rule;
d. Case:
i. Commissioner of Internal Revenue v. Procter and Gamble PMC, G.R. No.
66835, 15 April 1988;
8. Improperly Accumulated Earnings Tax (Section 29);
a. Revenue Regulations No. 2-2001;
b. Revenue Memorandum Circular No. 35-2011;
c. Rationale;
d. Accumulation of Profits:
i. Basilan Estates, Inc. v. CIR, 21 SCRA 17
e. Immediacy test or Reasonable needs of the business;
i. The Manila Wine Merchants, Inc. v. The Commissioner Of Internal
Revenue, G.R. No. L-26145, 20 February 1984;
f. Coverage;
g. Other Cases:
i. Cyanamid Philippines, Inc. v. Court of Appeals, G.R. No. 108067, 20
January 2000;
9. Tax-Exempt Corporations (Section 30);
a. Revenue Memorandum Order No. 38-2019;
b. Revenue Memorandum Circular No. 64-2016;
c. Cases:
i. Collector v. Sinco Educational Institution, 100 Phil. 127;
ii. Manila Gas Corporation v. Collector, 62 Phil. 895;
iii. Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 124043, 14
October 1998;
iv. Association of Non-Profit Clubs, Inc. (ANPC), herein represented by its
authorized representative, Ms. Felicidad M. Del Rosario Vs. Bureau of
Internal Revenue (BIR), herein represented by Hon. Commissioner Kim S.
Jacinto-Henares, G.R. No. 228539, 26 June 2019;
v. Lung Center of the Philippines v. Quezon City, 433 SCRA 119;
vi. Commissioner of Internal Revenue v. St. Luke’s Medical Center, G.R. No.
195909 and 195960, 26 September 2012;
vii. Abra Valley College, Inc. v. Aquino, 162 SCRA 106;
viii. Commissioner v. De La Salle University, G.R. No. 196596, 9 November
2019;
ix. Henares v. St. Paul College of Makati, G.R. No. 215383, 8 March 2017.

VIII. Dealings in Property

1. Shares of Stocks:
a. Net capital gains from sale, barter, exchange, or other disposition of shares of stock
of a domestic corporation held as capital asset not listed and traded in the local stock
exchange;
b. Sale, barter, exchange, or other disposition of shares of stock of a domestic
corporation which are traded and listed in the local stock exchange;

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c. If stocks are held as ordinary assets, what happens to the resulting gain or loss?;
2. Real Property:
a. Section 24(D)(1)&(2);
b. Section 6(E);
c. Revenue Regulations No. 11-2018;
d. Revenue Memorandum Circular No. 9-2018;
e. Revenue Regulations No. 9-2012;
f. Revenue Memorandum Circular No. 55-2011;
g. Doctrine of Presumed Gain;
h. Capital gains if the seller is:
i. Habitually engaged in the real estate business;
ii. Not habitually engaged in the real estate business;
i. Sale of Principal Residence (Section 2.57-1(A)(7);
i. Conditions for exemption from capital gains tax;
3. Capital gains and losses:
a. Section 39;
b. Kinds of Assets:
i. Capital Asset v. Ordinary Asset;
ii. Revenue Regulations No. 7-2003;
iii. Capital gains v. Ordinary gains;
c. Rules:
i. Holding period rule;
ii. Capital loss limitation rule;
iii. Net capital loss carry over;
1. NCLCO v. NOLCO;
d. Case:
i. Supreme Transliner v. BPI Family Savings Bank, Inc., 644 SCRA 59;
4. Recognition of Gains or Losses:
a. Section 40;
b. Revenue Regulations No. 6-2008;
c. Tax-Free Exchanges

IX. Withholding Taxes

1. Sections 57, 58, 79, 80, 81
2. Revenue Regulations 2-98 and its amendments;
3. Revenue Regulations 11-2018 and its amendments;
4. Three-fold purpose of withholding tax system;
a. Chamber of Real Estate and Builders’ Association, Inc. v. Executive Secretary, G.R.
No. 160756, 9 March 2010;
5. Withholding Tax on Compensation
a. Year-end adjustment;
b. Cases:
i. Ing Bank N.V. v. Commissioner Of Internal Revenue, G.R. No. 167679, 22
July 2015;
ii. Benguet Corporation v. Commissioner of Internal Revenue, G.R. No.
141212, 22 June 2006;
6. Expanded Withholding Tax
a. Creditable withholding tax system;
7. Final Withholding Tax
a. Commissioner v. Malayan Insurance Co., Inc., 21 SCRA 944
8. Other Cases:
a. Bank of America v. Commissioner, 234 SCRA 302;
b. Commissioner of Internal Revenue v. Court of Appeal 361 Phil. 103;
c. Chamber of Real Estate and Builders’ Association, Inc. v. Romulo, G.R. No.
160756, 09 March 2010;
d. Honda Cars Philippines, Inc. v. Honda Cars Technical Specialist and Supervisors
Unions, G.R. No. 204142, 19 November 2014;
e. PAGCOR v. Commissioner, G.R. No. 210704-90, 22 November 2017;
f. PAL v. Commissioner of Internal Revenue, G.R. No. 206079-80, 17 January 2018;
g. Edison Cogeneration Corporation v. Commissioner of Internal Revenue, G.R. No.
201665, 30 August 2017;
h. Metrobank v. Commissioner of Internal Revenue, G.R. No. 182582, 17 April 2017;

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X. Income Tax Return

1. Accounting Periods (Section 43):
a. Calendar accounting period;
b. Fiscal accounting period;
2. Accounting Methods (Section 43):
a. Cash;
b. Accrual;
c. Installment payment;
d. Deferred payment;
e. Percentage-of-completion;
3. Returns – Individuals (Section 51):
a. Individuals required to file ITR;
b. Individuals not required file ITR;
c. Substituted Filing (Section 51-A);
i. Conditions;
4. Returns – Corporations (Section 51);
5. Returns – General Professional Partnerships (Section 55);
6. Payment and Assessment of Income Tax Returns (Section 56):
a. Installment payment;
7. Declaration of Income Tax – Individuals (Section 74);
a. Individuals not required to render a declaration of estimated income tax:
i. Nonresident citizens with respect to income without the Philippines;
ii. NRANETB;
b. Due dates;
8. Declaration of Income Tax – Corporations (Sections 75 & 77);
a. Due dates;
9. Final Adjusted Return (Section 76);
a. Options:
i. Pay the balance;
ii. Carry-over the excess;
iii. Credit or refund the excess;
b. Irrevocability rule;
c. Cases:
i. Paseo Realty and Development Corporation v. Court of Appeals, G.R. No.
119286, 13 October 2000;
ii. Commissioner of Internal Revenue v. Philamlife and General Insurance
Corporation, G.R. No. 175124, 29 September 2010;
iii. Philam Asset Management, Inc. v. Commissioner of Internal Revenue, G.R.
Nos. 156637, 162004, 14 December 2005;
iv. Commissioner of Internal Revenue v. Mirant, G.R. 171742, 15 June 2011;
v. Commissioner of Internal Revenue v. Bank of the Philippine Islands, G.R.
No. 178490, 7 July 2009;
vi. Commissioner of Internal Revenue v. McGeorge Food Industries, Inc., G.R.
No. 174157, 20 October 2010;
vii. University Physicians Services, Inc. – Management, Inc., v. Commissioner of
Internal Revenue, G.R. No. 205955, 7 March 2018;
viii. Commissioner of Internal Revenue v. Philippine National Bank, G.R. No.
212699, 13 March 2019;

BUSINESS TAXES

I. Value-Added Taxes
1. Sections 105 – 115;
2. Revenue Regulations No. 16-2005;
3. Revenue Regulations No. 13-2018;
4. Concepts:
a. Definition;
b. Nature and Characteristics:
i. Indirect tax;
ii. Tax credit method;

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iii. It is not a cascading tax. What has been subjected to VAT before is not
thereafter further subjected to VAT. There is no tax pyramiding;
iv. It is not a tax on tax;
v. It is a transparent form of sales tax;
vi. It adheres to the Cross Border Doctrine or Destination Principle;
1. Toshiba Information Equipment (Phils.), Inc. v. CIR, 157594, 9
March 2010;
2. CIR vs. American Express International, Inc., GR No. 152609, 29
June 2005;
3. CIR vs. Seagate Technology (Philippines), GR No. 153866, 11
February 2005;
c. Persons Liable (Section 105);
d. Registration:
i. Mandatory VAT registration;
ii. Optional VAT registration;
iii. Persons required to register as non-VAT or VAT-exempt persons;
e. Imposition of VAT:
i. Transaction in the course of trade or business;
ii. Incidental transactions;
iii. Cases:
1. CIR v. Sony Phils., Inc., 635 SCRA 234;
2. Mindanao Geothermal II Partnership vs. CIR, GR No. 193301, 11
March 2013;
3. CIR vs. CA and COMASERCO, GR No. 125355, 30 March 2000;
4. MEDICARD Phils., Inc. vs, CIR, GR No. 222743, 5 April 2017;
5. TFS, Inc. vs. CIR, GR No. 166829, 19 April 2010;
6. CIR vs. SM Prime Holdings, Inc., GR No. 183505, 26 February
2010;
7. Diaz vs. The Secretary of Finance, GR No. 193007, 19 July 2011;
8. PSALM v. Commissioner of Internal Revenue, G.R. No. 226556, 3
July 2019;
9. PSALM v. Commissioner of Internal Revenue, G.R. No. 198146, 8
August 2017;
5. 12% VAT on Sale of Goods or Properties (Section 106)
a. Requisites for the imposition of VAT;
b. Gross selling price;
i. Allowed deductions;
c. Transactions – Deemed Sale [Section 106(B)]:
i. Transfer, use, or consumption not in the course of business of goods or
properties originally intended for sale or for use in the course of business;
ii. Distribution or transfer to shareholders or investors or creditors;
iii. Consignment of goods if actual sale is not made within 60 days following the
date such goods were consigned;
iv. Retirement from or cessation of business;
6. VAT on the Sale of Services and Use or Lease of Properties (Section 108)
a. Requisites for the imposition of VAT;
b. Gross receipts;
c. Cases:
7. VAT on Importation of Goods (Section 107);
8. Zero-Rated Sales
a. Automatically Zero-Rated Transactions v. Effectively Zero-Rate Transactions;
b. Zero-Rated Export Sales of Goods or Properties [Section 106)(A)(2)]:
i. Export Sales:
1. The sale and actual shipment of goods from the Philippines to a
foreign country, irrespective of any shipping arrangement that may
be agreed upon which may influence or determine the transfer of
ownership of the goods so exported, paid for in acceptable foreign
currency or its equivalent in goods or services, and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP);
2. The sale of raw materials or packaging materials to a non-resident
buyer for delivery to a resident local export-oriented enterprise to be

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used in manufacturing, processing, packing or repacking in the

Philippines of the said buyer's goods, paid for in acceptable foreign
currency, and accounted for in accordance with the rules and
regulations of the BSP;
3. The sale of raw materials or packaging materials to an export-
oriented enterprise whose export sales exceed seventy percent (70%)
of total annual production;
4. Transactions considered export sales under Executive Order No. 226,
otherwise known as the Omnibus Investments Code of 1987, and
other special laws;
5. The sale of goods, supplies, equipment and fuel to persons engaged
in international shipping or international air transport operations:
Provided, That the goods, supplies, equipment, and fuel shall be used
exclusively for international shipping or air transport operations.
6. Sale of gold to the BSP (removed and made VAT-exempt by
Republic Act No. 10963);
a. Establishment of an enhanced VAT refund system so
transactions described in 2, 3, and 4 above will be subject to
12%;
ii. Sales to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory effectively
subjects such sales to zero rate.
iii. Foreign Currency Denominated Sale. - The phrase "foreign currency
denominated sale" means sale to a nonresident of goods, except those
mentioned in Sections 149 and 150, assembled or manufactured in the
Philippines for delivery to a resident in the Philippines, paid for in acceptable
foreign currency and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP) – Removed by Republic
Act No. 10963.
c. Zero Rated Sale of Services [Section 109(B)]:
i. Processing, manufacturing or repacking goods for other persons doing
business outside the Philippines, which goods are subsequently exported,
where the services are paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the BSP;
ii. Services other than processing, manufacturing or repacking rendered to a
person engaged in business conducted outside the Philippines or to a non-
resident person not engaged in business who is outside the Philippines when
the services are performed, the consideration for which is paid for in
acceptable foreign currency and accounted for in accordance with the rules
and regulations of the BSP;
iii. Services rendered to persons or entities whose exemption under special laws
or international agreements to which the Philippines is a signatory effectively
subjects the supply of such services to zero percent (0%) rate;
iv. Services rendered to persons engaged in international shipping or air
transport operations, including leases of property for use thereof;
v. Services performed by subcontractors and/or contractors in processing,
converting, or manufacturing goods for an enterprise whose export sales
exceed seventy percent (70%) of the total annual production;
vi. Transport of passengers and cargo by domestic air or sea vessels from the
Philippines to a foreign country. Gross receipts of international air or
shipping carriers doing business in the Philippines derived from transport of
passengers and cargo from the Philippines to another country shall be exempt
from VAT; however, they are still liable to a percentage tax of three percent
(3%) based on their gross receipts derived from transport of cargo from the
Philippines to another country as provided for in Sec. 118 of the Tax Code;
and
vii. Sale of power or fuel generated through renewable sources of energy such as,
but not limited to, biomass, solar, wind, hydropower, geothermal and steam,
ocean energy, and other emerging sources using technologies such as fuel
cells and hydrogen fuels: Provided, however, that zero-rating shall apply
strictly to the sale of power or fuel generated through renewable sources of

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energy, and shall not extend to the sale of services related to the maintenance
or operation of plants generating said power.
1. Establishment of an enhanced VAT refund system so transactions
described in i and iv above will be subject to 12%;
d. Cases:
i. Coral Bay Nickel Corporation vs. CIR, GR No. 190506, 13 June 2016;
ii. CIR vs. Cebu Toyo Corp., GR No. 149073, 16 February 2005;
iii. CIR vs. Seagate Technology (Philippines), GR No. 153866, 11 February
2005;
iv. Sitel v. Commissioner, G.R. No. 201326, 8 February 2017;
v. Commissioner v. Euro-Philippines Airline Services, Inc., G.R. No. 222436,
23 July 2018;
9. VAT – Exempt Transactions (Section 109);
a. VAT-Exempt Transactions v. VAT-Exempt Entity;
b. VAT-exemption v. Zero-rating;
c. Transactions:
i. Sale or importation of agricultural and marine food products in their original
state;
ii. Sale or importation of fertilizers, etc.;
iii. Importation of personal and household effects belonging to the residents of
the Philippines returning from abroad and nonresident citizens coming to
resettle in the Philippines;
iv. Importation of professional instruments and implements, tools of trade,
occupation or employment, wearing apparel, domestic animals, and personal
and household effects belonging to persons coming to settle in the
Philippines or Filipinos or their families and descendants who are now
residents or citizens of other countries, such parties hereinafter referred to as
overseas Filipinos, in quantities and of the class suitable to the profession,
rank or position of the persons importing said items, for their own use and
not for barter or sale, accompanying such persons, or arriving within a
reasonable time;
v. Services subject to percentage tax under Title V of the Tax Code;
vi. Services by agricultural contract growers and milling for others of palay into
rice, corn into grits and sugar cane into raw sugar;
vii. Medical, dental, hospital and veterinary services except those rendered by
professionals;
viii. Educational services rendered by private educational institutions, duly
accredited by the Department of Education (DepED), the Commission on
Higher Education (CHED), the Technical Education and Skills Development
Authority (TESDA)and those rendered by government educational
institutions;
ix. Services rendered by individuals pursuant to an employer-employee
relationship;
x. Services rendered by regional or area headquarters established in the
Philippines by multinational corporations;
xi. Transactions which are exempt under international agreements;
xii. Sales by agricultural cooperatives;
xiii. Gross receipts from lending activities by credit or multi-purpose
cooperatives;
xiv. Sales by non-agricultural, non- electric and non-credit cooperatives;
xv. Export sales by persons who are not VAT-registered;
xvi. Sale of real properties not primarily held for sale to customers or held for
lease in the ordinary course of trade or business or real property utilized for
low-cost and socialized housing;
xvii. Lease of a residential unit with a monthly rental;
xviii. Sale, importation, printing or publication of books and any newspaper,
magazine review or bulletin;
xix. Transport of passengers by international carriers
xx. Sale, importation or lease of passenger or cargo vessels and aircraft,
including engine, equipment and spare parts thereof for domestic or
international transport operations;

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xxi. Importation of fuel, goods and supplies by persons engaged in international

shipping or air transport operations: Provided, That the fuel, goods and
supplies shall be used for international shipping or air transport operations;
xxii. Services of banks, non-bank financial intermediaries performing quasi-
banking functions, and other non-bank financial intermediaries;
xxiii. Sale or lease of goods and services to senior citizens and persons with
disabilities;
xxiv. Transfer of Property pursuant to Section 40(C)(2) of the Tax Code;
xxv. Association dues, membership fees, and other assessments and charges
collected on a purely reimbursement basis by homeowners’ associations and
condominium corporations;
xxvi. Sale of gold to the Bangko Sentral ng Pilipinas;
xxvii. Sale of drugs and medicines prescribed for diabetes, high cholesterol, and
hypertension to beginning January 1, 2019 as determined by the Department
of Health; and
xxviii. Sale or lease of goods or properties or the performance of services other than
the transactions mentioned in the preceding paragraphs, the gross annual
sales and/or receipts do not exceed the amount of Three Million Pesos.
10. Tax Credits (Section 110);
a. Input Tax v. Output Tax;
b. Creditable input taxes;
i. Sources of Creditable Input Taxes;
ii. Claimant of input tax credit;
iii. Determination of Input Tax creditable during a taxable month or quarter;
1. The amortization of the input VAT shall only be allowed until
December 31, 2021 after which taxpayers with unutilized input VAT
on capital goods purchased or imported shall be allowed to apply the
same as scheduled until fully utilized;
c. Apportionment of Input on Mixed Transactions;
d. Other Types of Input Tax (Section 11):
i. Transitional Input Tax Credits;
1. Available to:
a. A person who becomes liable to VAT; or
b. Any person who elects to be VAT-registered.
ii. Presumptive Input Tax Credits;
1. Available to:
a. Persons engaged in the processing of sardines, mackerel,
milk; and
b. Manufacturers of refined sugar, cooking oil, and packed
noodle-based instant meals.
iii. Cases:
1. Fort Bonifacio Development vs. CIR, GR No. 158885, 2 April 2009;
2. Fort Bonifacio Development Corporation vs. CIR, GR No. 173425, 4
September 2012;
11. Refunds or Tax Credit of Input Tax (Section 112)
a. Contex Corporation v. CIR, G.R. No. 151135, 2 July 2004;
b. Philippine Geothermal v. CIR, 154028, 29 July 2005;
c. San Roque Power Corporation v. Commissioner of Internal Revenue, G.R. No.
180345, 25 November 2009;
d. CIR v. Aichi Forging Co. of Asia, Inc., G.R. No. 184823, 6 October 2010;
e. Commissioner of Internal Revenue v. San Roque Power Corporation, G.R. No.
187485, 12 February 2013;
f. San Roque Power Corporation v. Commissioner of Internal Revenue, G.R. No.
203249, 23 July 2018;
12. Invoicing and Accounting Requirements for VAT-Registered Persons (Section 113);
13. Return and Payment of Value-Added Tax (Section 114);
14. Power of the Commissioner to Suspend the Business Operations of a Taxpayer (Section 115);
a. Oplan Kandado;
15. Other Cases:
a. CIR v. Seagate Technology Phils., G.R. No. 153866, 11 February 2005;
b. CIR v. Mirant Pagbilao Corp., G.R. 172129, 12 September 2008;
c. Atlas Consolidated v. CIR, G.R. Nos. 141104 & 148763, June 8, 2007;

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d. CIR vs. Sony Philippines, Inc., GR No. 178697 dated November 17, 2010;
e. Commissioner of Internal Revenue v. Negros Consolidated, G.R. No. 212735, 5
December 2018;

II. Percentage Taxes (Sections 116 – 128)

1. Sale or lease of goods or properties or the performance of services of non-VAT-registered
persons, the gross annual sales and/or receipts of which do not exceed the amount of
₱3,000,000.00;
2. Services rendered by domestic common carriers by land for transport of passengers, and
keepers of garages;
3. Services rendered by international air/shipping carriers;
4. Services rendered by franchise grantees of radio and/or TV broadcasting whose annual gross
receipts of the preceding year do not exceed ₱10M, and by franchise grantees of gas and
water utilities;
5. Services rendered for overseas dispatch, message, or conversation originating from the
Philippines;
6. Services rendered by banks and non-bank financial intermediaries performing quasi-banking
functions;
7. Services rendered by other non-bank financial intermediaries;
8. Services rendered by any person, company, or corporation, except purely cooperative
companies or associations, doing life insurance business of any sort in the Philippines;
9. Services rendered by fire, marine, or miscellaneous insurance agents of foreign insurance
companies;
10. Services of proprietors, lessees or operators of cockpits, cabarets, night or day clubs, boxing
exhibitions, professional basketball games, Jai-alai and race tracks;
11. Services of owner’s winnings race horses in horse racing;
12. Sale, barter, or exchange of shares of stock listed and traded through the local stock exchange
or through initial public offering.
13. Returns and Payment of Percentage Taxes;
14. Cases:
a. CIR vs. Citytrust Investment Phils., Inc., GR No. 139786, 27 September 2006;

III. Excise Taxes

1. Alcohol products;
2. Tobacco products;
3. Petroleum;
a. Fuel Marking;
4. Automobiles;
5. Non-essential goods;
a. Jewelries;
b. Perfumes and toilet waters;
c. Yachts and other vessels intended for pleasure or sports;
6. Non-essential services;
7. Sweetened beverages;
8. Mineral products
9. Case:
a. Chevron Philippines, Inc. vs. CIR, GR No. 210836, 1 September 2015;

TRANSFER TAXES

I. Estate Tax
1. Sections 84 – 97;
2. Section 104;
3. Revenue Regulations No. 2-2003;
4. Revenue Regulations No. 12-2018;
5. Concepts:
a. What are transfer taxes?;
b. Characteristics of donation mortis causa;
i. Del Rosario v. Ferrer, 630 SCRA 683;
c. Estate Tax;
i. Lorenzo v. Posadas, 64 Phil. 353;
ii. Gregg v. Commissioner, 315 Mass. 704;

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d. Situs of Estate Taxation;

6. Gross Estate;
a. Definition;
i. Blas v. Santos, 29 March 1961
b. Date-of-death valuation rule;
i. Section 88;
ii. Dizon v. Court of Tax Appeals, G.R. No. 140944, 30 April 2008
c. Composition:
i. Decedent’s interest;
ii. Transfers in contemplation of death;
iii. Revocable transfers;
iv. Property passing under general power of appointment;
v. Proceeds of life insurance;
vi. Prior interests; and
vii. Transfers for insufficient consideration;
d. Items not part of the gross estate:
i. Capital of the surviving spouse;
ii. Amount received as compensation for personal injuries and damages which led
to the death of a decedent not part of the gross estate;
7. Deductions from Gross Estate;
a. Citizen or Resident Alien:
i. Ordinary Deductions:
1. Expenses, losses, indebtedness, and taxes:
a. Funeral expenses;
i. Conditions for deductibility;
ii. Removed by Republic Act No. 10963;
b. Judicial expenses;
i. Conditions for deductibility;
ii. Removed by Republic Act No. 10963;
c. Claims against the estate;
i. Conditions for deductibility;
d. Claims of the deceased against insolvent persons;
i. Conditions for deductibility;
e. Unpaid mortgages or any indebtedness in respect to property;
i. Conditions for deductibility;
f. Taxes; and
i. Conditions for deductibility;
g. Losses;
i. Conditions for deductibility;
2. Property previously taxes or Vanishing deduction;
a. Rationale;
b. Conditions for deductibility;
3. Transfers for public use;
a. Conditions for deductibility;
ii. Special Deductions:
1. Family home;
a. Definition;
2. Standard deduction;
3. Medical expenses;
a. Removed by Republic Act No. 10963;
4. Amount received by heirs under RA 4917;
iii. Net share of the surviving spouse in the conjugal or community property
b. Nonresident Aliens:
i. Ordinary Deductions:
1. Expenses, losses, indebtedness, and taxes:
a. Claims against the estate;
i. Conditions for deductibility;
b. Claims of the deceased against insolvent persons;
i. Conditions for deductibility;
c. Unpaid mortgages or any indebtedness in respect to property;
i. Conditions for deductibility;
d. Taxes; and

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i. Conditions for deductibility;

e. Losses;
i. Conditions for deductibility;
2. Property previously taxes or Vanishing deduction;
a. Rationale;
b. Conditions for deductibility;
3. Transfers for public use;
a. Conditions for deductibility;
ii. Special Deductions:
1. Standard deduction;
iii. Net share of the surviving spouse in the conjugal or community property
iv. Tax Credits for Estate Taxes paid to a Foreign Country;
8. Estate tax rate (Section 84);
9. Exemption of Certain Acquisitions and Transmissions (Section 87);
10. Estate Tax Return;
a. Due date;
b. Place of filing;
c. Payment;
i. Conditions for installment payment;
11. Other Cases:
a. CIR vs. Fisher, GR No. L-11622, 28 January 1961;
b. US v. Wells, 283 US 102;
c. CIR vs. CA and Pajonar, GR No. 123206, 22 March 2000;
d. CIR vs. Pineda, GR No. L-22734, 15 September 1967;

II. Donor’s Tax

1. Sections 98 – 104;
2. Revenue Regulations No. 2-2003;
3. Revenue Regulations No. 12-2018;
4. Concepts:
a. Section 104;
b. Donor’s tax;
c. Imposition of donor’s tax;
d. Cases:
i. Lladoc v. Commissioner of Internal Revenue, G.R. No. L-19201, 16 June
1965;
ii. Bromley v. McCaughs, 280 US 124;
e. Requisites of a valid donation
i. Abellana v. Ponce, G.R. No. 160488, 3 September 2004;
ii. Del Rosario v. Ferrer, 630 SCRA 683;
iii. Arangote v. Maglunob, G.R. No. 178906, 18 February 2009;
iv. Pirovano vs. CIR, GR No. L-19865, 31 July 1965;
f. Date-of-gift valuation (Section 102);
5. Exempt Donations (Section 101):
a. Gifts Made by a Resident:
i. Dowries;
1. Conditions for exemption;
2. Removed by Republic Act No. 10963;
ii. Gifts made to or for the use of the National Government or any entity created
by any of its agencies which is not conducted for profit, or to any political
subdivision of the said Government; and
1. Conditions for exemption;
iii. Gifts in favor of an educational and/or charitable, religious, cultural or social
welfare corporation, institution, accredited nongovernment organization, trust
or philanthropic organization or research institution or organization.
1. Conditions for exemption;
b. Gifts Made by a Nonresident not a Citizen of the Philippines:
i. Gifts made to or for the use of the National Government or any entity created
by any of its agencies which is not conducted for profit, or to any political
subdivision of the said Government; and
1. Conditions for exemption;

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ii. Gifts in favor of an educational and/or charitable, religious, cultural or social

welfare corporation, institution, accredited nongovernment organization, trust
or philanthropic organization or research institution or organization.
1. Conditions for exemption;
6. Tax credit of donor’s tax paid to a Foreign Country [Section 101(C)];
7. Transfer for Less Than Adequate and Full Consideration (Section 100);
8. Donor’s tax rate [Section 99(A)];
9. Donor’s Tax Return;
a. Due date;
b. Place of filing;
c. Payment;
10. Other Cases:
a. Philamlife Company vs. SOF, GR No. 210987, 24 November 2014;

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