Topics:

1. Income taxation of Non-Stock Non-Profit Educational Institutions vs. Proprietary Educational Institutions.
Differentiate. When can one be considered Non-Stock Non-Profit? When is one Proprietary?

2. Scientologee recently set up a diocese at Araneta Center. In said diocese, they are offering yoga services,
stem cell therapy and sold books regarding Scientologee. The BIR assessed Scientologee with deficiency
income tax for the amounts it received from its patrons. Scientologee argued that the assessment infringes
their religious freedom since Scientologee is a religion and a way of life. Decide.

3. Merry Rose filed a Petition for Certiorari before the Court of Tax Appeals seeking the annulment of the
VAT assessments issued against her by the BIR and the declaration of the VAT provisions of the National
Internal Revenue Code as null and void since VAT, being an indirect tax, is prohibited under the
Constitution which requires Congress to pass laws seeking the collection of only direct tax. Decide.

4. Nikita Co. is an emerging car manufacturer. It values its employees as its main asset for its current success.
Nikita provides the following to its employees aside from their basic pay and other bonuses: a) free buffet
lunch for all of its employees; b) free use of the transport shuttle for its rank and file employees (i.e., the
route is from company office to MOA and vice versa); c) free cars for all of its managerial employees; d)
free use of the company’s Manila Polo Club shares for recreation, golfing and use of other facilities; and e)
free monthly allowance. Nikita Co. is now asking you as its tax advisor how to account for such other
benefits. Should it be considered fringe benefits subject to Fringe Benefits Tax, or is it regular
compensation by the employees subject to withholding of taxes, or is it simply a company expense (i.e., not
subject to WTC or FBT)?

5. Cebu Airlines Co. is the leading airline company in the Philippines. Currently, its roster of flight attendants
is of the average age of 45 years old. To keep up with other international airlines, the management of Cebu
Airlines has opted to hire younger flight attendants, but this decision has resulted in severe redundancy
among the flight attendants. Cebu Airlines now is faced with the problem of whether to retain its senior
flight attendants or not. If ever it decides to let go of their older flight attendants, they wanted to give the
latter good retirement packages and ensure that their take home pay is more than sufficient. Currently,
under their CBA with flight attendants, flight attendants may optionally retire at the age of 50 years old,
provided the retiring employee has rendered at least five (5) years of service. Likewise, under the CBA, the
retiring employee is entitled to receive two (2) months worth of salary for every year of service with Cebu
Airlines. To entice their senior flight attendants to retire, management decided to increase the take home
pay to four (4) months worth of salary for every year of service, and reduce the optional retiring age to 45
years old without any limit on the number of years of service with the company as a prerequisite to availing
the optional retirement. Should Cebu Airlines proceed to let go of their senior flight attendants, what are the
tax implications on their proposed manner of reducing their senior flight attendants? What other options
can you propose to Cebu Airlines in removing their senior flight attendants with the primary objective that
the senior flight attendants’ take home pay will be imposed the least amount of taxes?

6. Sean Oliva is a legal specialist engaged by the Office of the Mayor of Quezon City. Under such
designation, Sean’s main duty is to advise the City Mayor on the legal implication of every official act she
intends to issue and perform for the City. Sean is not part of the LGU of Quezon City’s plantilla and was
merely hired on a contractual basis by the Office of the Mayor. Under his contract, no GSIS premiums will
be withheld from his salary but he will be entitled to sick leave of 30 days, vacation leave of 15 days, and 1
day valentine’s day leave. Likewise, he will be given free use of a Mercedes Benz with wang wang while
the contract is in effect. Sean and the Office of the Mayor are both confused as to how his fees will be
taxed. Please advise. Concentrate on what should be included in Sean’s gross income and the issue on
withholding of taxes.
7. Jollijoy Foods Corp. is one of the biggest fast food chains in the Philippines. It recently established a
Corporate Social Responsibility Department (CSRD) within its company. Using this department, it plans to
assist in various social development efforts. Jollijoy’s CSRD is now thinking of whether to donate funds to
non-profit organizations or directly create programs addressing social issues. If you are Jollijoy’s tax
advisor, what would you advise Jollijoy should it choose to donate funds to non-profit organizations in
order that the amounts it expended can be used as income tax deductions? How about if it chooses to
directly create programs addressing social issues, what would you advise?

8. OCCRA Law Office is one of the biggest law office in the country. It is a GPP comprising of 20 lawyer
partners. For 2023, its total gross income is 11.2 Billion Pesos. However, its allowable expenses only totals
1.2 Billion Pesos comprising mainly of salaries of staff and associate lawyers (not partners), utilities
expense and the RPT of their building in BGC. Erika Recalde, OCCRA’s managing partner, asked for your
tax advice. She wants to reduce the amount of income tax she will pay to the BIR considering that aside
from her share in the GPP, she also has various income from other ventures during the year, such as: a) 1
Million Pesos salary for being the Dean of San Beda College of Law; b) 35 Million Pesos from Interests in
Foreign Currencies deposited with Philippine National Bank; c) 400 Million Pesos from rental income from
her various buildings in BGC; and d) 1 Billion pesos from Ereneta Corp. for being their main consigliere in
underground government dealings. Please advise Erika Recalde.

9. Per the inventory management system of Honda Cars Corp., they still have 2 Billion Pesos worth of cars in
their warehouses. However, upon inventory count by SGC, the external auditor, only 1.5 Billion Pesos
worth of cars are actually left in the warehouses. Kindly advise how Honda Cars Corp. can justify such
losses when it declares the same in their income tax returns?

10. Jeannet Cordova has various businesses such as real property leasing, pawnshop, gas station, check
discounting, pizza hub and beach front recreation. She runs such businesses as a sole proprietor. Aside from
this, she is listed as an employee of her mom’s bakery shop wherein she receives monthly salaries although
she does not perform any work in such bakeshop. She would like to avail of the 8% preferential tax. Kindly
advise her if this is possible. What are other means and measures to reduce her income tax liabilities?

11. U-Shop, Inc. is a Ukranian based company engaged in e-commerce. It has a Regional Operating
Headquarters in Afghanistan named U-Shop Afghanistan ROHQ which provides consultancy services to
the benefit of various U-Shop Affiliates located all around the world. During the year, it rendered
consultancy service to U-Shop Philippines. RMC 5-2024 was recently issued stating that the source of
income should be determined by the location of the business activity that generates the income, rather than
the location of the pay-out or where it is physically received. Accordingly, U-Shop Philippines is now
asking whether the fees it will pay to U-Shop Afghanistan is subject to income taxes here in the Philippines.
Also, U-Shop Philippines is asking whether such RMC 5-2024 is valid. Please advise.

12. Maria Ressa won the Nobel Peace Prize for safeguarding the freedom of expression in the Philippines in
October 2022. For winning such award, she will be given a monetary award of 11 Million Swedish Kronor.
However, the release of such award will only be released on February 2023. The Philippine government has
instituted various tax evasion charges against her. All of which have been dismissed for lack of evidence.
However, she would like to ensure the tax implications of her monetary award to avoid future hassle
involved in tax evasion charges which the Philippine government could file against her in case she made a
mistake in the declaration of her income taxes. During 2022, Maria spent 250 days outside the Philippines
attending various conferences on freedom of the press. She would like to know if there is a need for her to
declare the monetary award as part of her gross income subject to income tax, and if so, on what year
should she declare such income. What other advice can you give to Maria Ressa to reduce her Philippine
income tax liabilities, if there is one?