notes in taxation

8/10/2019 Notes in taxation

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TAXATION


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GENERAL PRINCIPLES

Taxation. An incidental and destructive power of the State, unlimited in its

range, by which the sovereign raises revenue to defray government expenses

by way of apportionment to those privileged to enjoy its benefits.

Principles of a sound tax system

Fiscal adequacy. Sources should be sufficient to meet demand for

public expenditures Theoretical justice. Tax burden should be in proportion to tax

payers ability to pay

Administrative feasibility. Tax laws should be capable of

convenient, just and effective implementation

Doctrine of Imprescriptibility of tax laws. In absence of a specific provision,

tax laws shall not prescribe. They shall only be repealed by subsequent laws

Statute of limitations.Assessment of tax liability prescribes 3 years from the

date of filing of the return or from expiry of period prescribed to file such.

Doctrine of equitable recoupment. Refers to a case where taxpayer has

claim for refund but fails to file claim due to prescription. Taxpayer is allowed

to credit refund to existing tax liability. Not allowed in the Philippines due to

lifeblood theory.

Doctrine of set-off. Applies when government and taxpayer are mutual

creditors and debtors of one another. Not allowed in the Philippines due to

the different nature of taxes and debts, and public policy is better served.

Direct tax. Demanded from person intended to pay the tax.Indirect tax. Demanded from one person with the expectation that he can

shift the burden to someone else.

Final withholding tax. Constitutes final settlement of tax liability.

Expanded withholding tax. Constitutes advance payment of tax liability.

Nature of taxation

Necessary attribute of sovereignty

Legislative in character. Power to:

o

Determine

Nature

Object

Extent

Coverage

Apportionment

Situs

Methodo Grant exemptions

o Provide remedies

Cannot be delegated. Except:

o

To local legislative bodies

o To the President

o When only in respect to administration or

implementation

Subject to constitutional and inherent limitations

Stages of taxation (LAP)

1. Levy. Enactment of law by Congress

2. Assessment and collection. Implementation of the law

3. Payment. Compliance by the taxpayer

THEORIES BEHIND TAXATION

Lifebloodtheory. The existence of the government is a necessity; it cannot

exist without a means to pay its expenses; and for those means, the

government has the right to compel those under its jurisdiction to contributein the form of taxes.

Benefits-protection theory. Every person who is able must contribute his

share to the running of the government. For its part, the government is also

expected to respond in the form of tangible and intangible benefits.

Expresses the symbiotic relationship between the taxpayer and government.

Characteristics of taxes (PIPFALL)

Payable in money

Imposed by the State with the principle of territoriality

Personal to the taxpayer

Forced charge

Assessed in accordance with the rule of apportionment

Levied by legislature

Levied for public purpose

Purpose of taxation (R3PEP)

Revenue

Regulation

Reduction of social inequality

Promotion of general welfare

Encourage economic growth through incentives and exemptions

ProtectionismGeneral rule: The Constitution does not prohibit double taxation

Except: When it amounts to direct duplicate taxation; when both taxes are

imposed: (JAPPSC)

Within the samejurisdiction

By the same authority

For the same purposes

During the same period

On the same subject matter

Of the same kind or character

Usual methods to avoiding double taxation:

Reciprocal exemption by law or treaty

Allowing tax credit for foreign taxes

Allowing deduction for foreign taxes

Reduction of local tax rate

Tax pyramiding. Imposing a tax on a tax.Taxexemptions. A grant of immunity to particular persons from a tax upon

property or excise, which they are generally obliged to pay. They are

generally construed against the claimant since they are, in essence, a

derogation of sovereignty.

Tax laws. Statutes levying taxes are construed strictly against the

government, because burdens are not imposed, nor presumed to be

imposed beyond what the statutes clearly import. Construction of a statute

by those administering it is not binding is not binding on their successors.

Tax avoidance. Tax saving device within the means sanctioned by law, used

by the taxpayer in good faith and at arms length.

Tax evasion. Scheme used outside of those lawful means, which subjects the

taxpayer to civil or criminal liability. Elements: (UBI)

Unlawful act or omission

Bad faith

Intent to pay less than what he legally owes

LIMITATIONSInherent. Those which exist despite the absence of an express provision o

the Constitution. (PITED)

Must be for a public purpose at inception

International comity

Territorial jurisdiction

Exemption of government entities (except GOCC)

Cannot be delegated. Except:

o

To local legislative bodies

o To the President

o When only in respect to implementation

Constitutional

Due process clause

o Substantive due process. Statute free from ambiguity

o Procedural due process. Notice and hearing

Equal protection clause. Subject to reasonable classification:o

Substantial distinction

o Germane to the purpose of the law

o Not limited to existing conditions

o Apply equally to all members of such class

Uniform and equitable. All taxable articles of the same class sha

be taxed at the same rate

Non-impairment of contractual obligations. Levying statues that

alter relative rights of the parties with each other are prohibited

Unilateral tax exemptions may be revoked at will, but when

exemption is founded on valuable consideration, revocation

constitutes impairment.

Freedom of religion

Freedom of the press


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Properties for religious, charitable and educational purposes are

exempt. Real property tax only. The test is usageof the property,

not ownership. Exemption extends to incidental and necessary

real properties.

Revenue used actually, directly and exclusively for religious,

charitable, and educational purposes are exempt. Exemption not

automatic, must show:o

Certification of interest income from passive

investments, which are not subject to final withholding

tax

o Certification of exclusive actual, direct and exclusive

utilization

o Board resolution for the funded project

Revenue bills must originate from the House of Representatives,

but Senate may amend

Statute granting tax exemption requires concurrence of majority

of all members of Congress

Every bill must embrace only one subject

INCOME AND WITHHOLDING TAX

Income tax. Direct tax on all income, actual or presumed, that the taxpayer

received during the taxable year

Taxable income. In order to be taxable, following requisites:

There is income, gain or profit

It is realized during the taxable year

It is not exempt from income tax

Income tax systems

Global. Total allowable deductions and exemptions are deducted from the

gross income to arrive at the net taxable income. All items are reported in

one income tax return filed at least annually.

Schedular. Different types of income are subject to different tax rates.

Separate tax returns are filed by the taxpayer depending of the type of

income received.

Semi-schedular/global. Compensation and passive income not subject to

final withholding tax are added together to arrive at gross income. The

allowable deductions and exemptions are then deducted to arrive at taxable

income. However, passive income subject to final withholding tax and capital

gains from the sale of capital assets are subject to different tax rates andreturns.

Criteria for imposing income tax

Citizenship principle. Resident citizen is subject to income tax from sources

within and without the Philippines, while non-resident citizen only from

sources within. Non-resident include:

Physically abroad with the intention to reside therein

Immigrants on a permanent basis from the time they depart from

the Philippines

Employees of a foreign entity on a permanent basis from the time

they depart from the Philippines

OFWs who spend at least 183 days abroad

Residence principle. Resident alien is subject to income tax from sources

within the Philippines.

Source principle. Non-resident alien is subject to income tax from sources

within the Philippines. Income is deemed to be sourced within when it is

earned from services rendered in the Philippines.

Non-resident alien doing business in the Philippines. One who

spends more than 180 days in the country. Taxed in the same

manner as a resident citizen on sources within. Thus, he is allowed

deductions and personal exemptions, the latter being subject to

the rule on reciprocity.

Employees entitled to preferential tax rates

Regional headquarters of multinational corporations

Offshore banking units

Foreign service contractors engaged in petroleum operations

When is income taxable

There is income

It is realized during the taxable year

It is not exempt from income tax

KINDS OF TAXPAYERS

Citizens. See criteria for imposing income tax

Aliens. See criteria for imposing income tax

Estates and trusts. Taxed in the same manner as persons, except that the

income distributed to the heirs or beneficiaries shall be considered an

allowable deduction

Co-ownerships. Individual co-owners report their share of the income fromthe property owned in common.

In the event of co-ownership resulting from death, the co-ownership o

inherited properties is automatically converted into an unregistered

partnership from the moment that the said properties are used as a common

fund to derive profit. However, if the transaction isolated transactions

where there is no habituality, there is no basis to support the formation of an

unregistered partnership.

Partnerships. Treated as a corporation subject to income tax

General professional partnerships. Not considered a separate taxable entity

Partners are liable for individual income tax

Domestic corporations

Joint ventures. Elements:

Contribute either property or industry

Profits must be shared

Joint proprietary interest and mutual control over the subject

matter Single business transaction

Note: Joint ventures for the purpose undertaking a construction o

energy-related project are not taxable entities.

Resident foreign corporations. However, Philippine branch of a foreign

corporation is merely an extension of the head office. Income from branch

sourced within is subject to income tax

GROSS INCOME

Gross income. All income from whatever source derived, including but not

limited to: (CBP-CRAP-DRIPP)

Compensation income

Business income

Professional income

Capital gains

Rent Annuities

Prizes and winnings

Dividends

Royalties

Interest

Pensions

Partners income in GPP

Net income. Also referred to as taxable income. Gross income less

deductions and exemptions.

Income vs. capital. Income is any wealth which flows into the taxpayer othe

than the return of capital, while capital constitutes the investment which is

the source of the income.


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Source rules:

Interest: residence of the debtor

Dividends: residence of the corporation paying

Services: place of performance. If there is no accurate segregation

for compensation performed, the amount shall be determined on

apportionment of time basis

International shipping lines and air carriers. Gross Philippine billingsmeans gross revenue from persons, cargo or mail originating from the

Philippines up to the final destination, regardless of the place of sale of

passage or freight.

In the case of transhipment, only the portion of the cost from the

Philippines to the point of transhipment. Sale of tickets in the

Philippines by an off-line carrier (those without any flight operations in

the country) is treated as income from whatever source.

Rentals and royalties: location of the property or interest therein

Sale of real property: location of real property

Sale of personal property

o Produced within, sold without and vice versa: partly

within, partly without

o

Purchase within, sold without and vice versa: country

where sold

o Shares of stock of a domestic corporation: within

Tests in determining income

Realization test. No income until there is a separation from

capital of something of exchangeable value. The transmutation

results in the receipt of income.

Claim of right doctrine. A taxable gain is conditioned on the

presence of a claim of right to such gain and the absence of an

unconditional obligation to return such.

Income from whatever source. All income not expressly excluded

or exempted from taxable income, irrespective of voluntariness

and its source, is taxable.

Economic benefit test. Any economic benefit that increases net

worth, whatever the mode, is taxable.

COMPENSATION INCOME

All remuneration for services performed under an employer-employee

relationship, unless expressly excluded by the law.Elements of an employer-employee relationship:

Power to select

Payment of wages

Power to dismiss

Power to control

Items not considered compensation income:

Agricultural labor paid entirely in the farms produce

Domestic service in a private home

Casual labor not in the course of employers trade

Services for a foreign government or international organization

Fringe benefits. Any benefit furnished by an employer to an employee.

Managerial and supervisory employees: fringe benefit tax is

withheld by employer, who is then liable to remit it and deduct

such as a business expense.

Rank-and-file: fringe benefits are treated as part of compensation

BUSINESS INCOME

Continuity of commercial dealings incidental to the pursuit of commercial

gain. In the case of manufacturing, merchandising and mining, it means the

total sales, less cost of goods sold, plus income from outside investments.

Rental income is business income.

Exchange of real property classified as ordinary assetsis business income.

PROFESSIONAL INCOME

Fees received by a professional in the practice of his profession, provided

there is no employer-employee relationship between him and his clients.

CAPITAL GAINS

General types of capital assets:

Shares of stock in a domestic corporation

o If transferor is a dealer, shares are ordinary assets

subject to income tax

o If transferor is not a dealer, shares are capital assets:

If shares are listed and traded in the locastock exchange, exempt from income tax

Subject to stock transaction tax.

If shares are not listed, or listed but no

traded, subject to capital gains tax.

Note: Intracorporate dividend. Stock is transferred from one

corporation to another. Transaction not taxable.

Real property. Gain is determined by either selling price or zona

value of the property, whichever is higher

o

If transferor is a dealer, property is ordinary asset

subject to income tax.

o If transferor is not a dealer:

If used in trade or business, property i

ordinary asset, subject to income tax.

If not used in trade or business, property is

capital asset, subject to capital gains tax.

Other types of assets. Holding period rules: (applicable only toindividual tax payers)

o Long-term. Held for more than 12 months. Only 50% o

long-term capital assets are subject to income tax.

o Short-term. Held for 12 months or less. 100% of short

term capital assets are subject to income tax.

INTEREST INCOME

Interests received are included in gross income, unless exempt from tax o

subject to final withholding tax

Interest income from Philippine currency deposits. Subject to loca

income tax

Interest income on foreign currency deposits. Bank outside

Philippines, deposit made by nonresident, alien, or foreign

corporation, not subject to local income tax. Otherwise, subject.

Interest income from traditional loans by local banks. Subject toincome tax. Exempt from withholding tax.

Discounts are treated in the same manner as interest income

Interest income from long-term investments of individuals are

exempt. Long-term investments are those for 5 years and over

Pre-terminate, final income tax shall be imposed.

Interest income from long-term investments of corporations are

taxable.

Interest on foreign loans extended by nonresident foreign

corporations is subject to income tax.

DIVIDEND INCOME

Corporate profit set aside, declared and ordered by the directors to be paid

to stockholders on demand or at a fixed time. Until the dividend is declared

the profits belong to the corporation, not to the stockholders.

Cash dividend. Disbursement to the stockholder of the corporations

accumulated earnings.Stock dividend. Payable in reserve or additional stock of the corporation

Involves no disbursement, since stockholders do not receive an actua

dividend, but only a certificate of stock.

General rule: Stock dividends are exempt from income tax. They are

considered unrealized gain, and as such cannot be considered income, but

rather capital.

Exception: If the dividend gives the stockholder an interest different from

what his former holdings represented, i.e. increase in interest.

ROYALTY INCOME

Where a person pays royalty to another for the use of its intellectua

property rights, considered passive income subject to final withholding tax


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OTHER INCOME FROM ANY SOURCE WHATSOEVER

Discloses the legislative intent to include all income not expressly exempted

by law, irrespective of the its voluntariness or the source.

PRIZES AND AWARDS

Prizes and awards received within the Philippines are subject to final

withholding tax. Except if 10,000 or less.Prizes and awards for the recognition of religious, charitable, scientific,

education, artistic, literary or civic achievement is excluded if the recipient:

Was selected without any action on his part

Is not required to render substantial future service as a condition

Prizes and awards granted to athletes in sports competitions, whether held

within or without the Philippines, are exempt if sanctioned by their national

sports associations

Prizes and awards received by professional athletes are no longer exempt as

they were earned in the exercise of their profession or occupation

EXCLUSIONS FROM GROSS INCOME(MAGPAIR)

Refer to income not included because:

Represent a return of capital

Subject to another kind of internal revenue tax

Income that are expressly exempt from income tax by:

o

Constitution

o

Statute

o Treaty

Proceeds of life insurance. Because it is a contract of indemnity; it is

compensatory in nature

Amounts received under life insurance, endowment or annuity . Only the

excess of the aggregate premiums and interest payments shall be subject to

income tax

Property acquired by gift, bequest, devise or decent. Because they are

subject to another kind of internal revenue tax

Amounts received through accident and health insurance. Compensatory

Income exempt under treaty

Retirement, benefits, pensions and gratuities. Retirement benefits received

in accordance with a reasonable private benefit plan is exempt if:

Retiree is not less than 50 years old

In the service of the same employer for at least 10 years Benefit availed of only once

Separation pay for causes beyond the control of the employee. Exempt

Terminal leave pay. Commutation of leave credits. Exempt

Retirement benefits from foreign government agencies. Exempt

Miscellaneous items

Income derived from Philippine investments by foreign

governments, and financial institutions controlled and/or

established by such

Income derived by the government from a public utility

13th

month pay and other gross benefits are exempt up to 30,000

GSIS, SSS, Pag-ibig and PhilHealth contributions

RETURN OF CAPITAL

Sale of inventory of goods. Cost of goods manufactured (manufacturers) and

cost of goods sold (dealers) are deductable from gross sales

Sale of stock in trade. Real estate and security dealers are required to deduct

total cost specifically identifiable to the real property or stocks sold

Sale of services. Since no inventory or stocks in trade, entire gross receipts

are treated as income

DEDUCTIONS

Exclusions vs. deductions. Exclusions refer to a flow of wealth not treated as

part of gross income, while deductions are amounts which the law allows to

be deducted to arrive at net income. Exclusions are amounts received, while

deductions are amounts paid. Both are construed strictly against the

claimant.

Types of deduction Itemized deductions

Optional standard deductions

Special deductions

BUSINESS EXPENSES

Conditions

Ordinary and necessary

o Ordinary. Normal in relation to the type of business

o Necessary. Appropriate or helpful for the developmen

of the business

o Expenses in connection with the creation of goodwil

are considered capital expenditures

Incurred during the taxable year

o

Satisfaction of the all events test:

Fact of liability has been determined by

events which have already occurred

Amount of liability is determined with

reasonable accuracy

Incurred in the conduct of trade

Supported by adequate receipts

Not contrary to law, public policy or morals

Tax required to be withheld is remitted

INTEREST

Amount paid by the debtor for the use of money. Interest expense incurred

in connection with the taxpayers trade shall be allowable deduction

Interest expense on capital expenditure may, at the taxpayers option, be:

Treated as deduction in full in the year incurred; or

Treated as a capital expenditure, in which case the taxpayer may

claim the periodic amortization as the deduction

Conditions Valid and existing indebtedness

Indebtedness is that of the taxpayer

Interest is legally due and stipulated

Indebtedness is connected with the taxpayers business

The arrangement must not be between related taxpayers

Deduction of interest expense must not be expressly disallowed

Amount of interest deducted must not exceed the limits set forth

by law (Interest arbitrage rule. See below)

TAXES

General rule: All national or local taxes

Except:

Philippines income tax

Foreign income tax

Estate and donors tax

Special assessments on real property

Electric energy consumption tax

Conditions

Payment for taxes

Taxes are imposed by law

Taxes are not specifically excluded by law

Incurred during the taxable year


Amt loaned * interest rate = interest expense

Interest income * 33% = - interest arbitrage

= deductable interest expense


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LOSSES

Classes

Incurred in trade

Incurred in any transaction entered into for profit, although not

connected with trade

Casualty losses, although not connected with trade. Destruction

of property resulting from an identifiable event of sudden,unexpected or unusual nature

Conditions

Loss must be that of the taxpayer

Incurred within the taxable year


Evidenced by a closed transaction

Not claimed as a deduction for estate tax

Not compensated by insurance

In case of casualty loss, reported within 45 days

BAD DEBT

Debt resulting from the worthlessness of amount due to the taxpayer. In

order to be considered a bad debt, taxpayer should show that during the

taxable year of the deduction, a situation developed which it became evident

that there remained no practical, but only vaguely theoretical, prospect that

the debt would ever be paid

Tax benefit rule. Taxpayer is obliged to declare as taxable income the

recovery of bad debts in the year collected to the extent of the tax benefit

enjoyed by him when the bad debts were claimed as deduction

DEPRECIATION

Gradual diminution in the useful value of tangible property resulting from

wear and tear and normal obsolescence, and the amortization of value of

intangible assets, the use of which is limited in duration. It cannot go beyond

the cost of acquisition and cannot be based on appraisal value

Conditions

Allowance must be reasonable. Must be computed through:

o

Straight-line method

o Declining balance method

o

Sum-of-years-digit method

o

Other methods prescribed by the Secretary Property must be used in trade


CHARITABLE CONTRIBUTIONS

Conditions

Made to the Philippine government or accredited domestic

corporation or association specified by law


Not exceed 10% (individual) or 5% (corporation) of taxable

income before charitable contributions

Evidenced by receipts

Based on acquisition cost

OPTIONAL STANDARD DEDUCTIONS

May be claimed in lieu of itemized deductions

Conditions

Claimant must be a citizen or resident alien

Intention to avail must be expressed in the tax return

Such availment is irrevocable for the taxable year

Limited to 40% of gross income

Proof of expenses not required

NON-DEDUCTABLE EXPENSES

Personal expenses

Amount paid for permanent improvements

Amount paid for restoration of property

Premiums paid on life insurance

Losses for exchanges of property between related parties

PERSONAL EXEMPTIONS

Basic personal exemption. 50,000

Additional exemption. Maximum of 4 dependent children. 25,000 each.

Not more than 21 years old or any age if incapable of self-support

Unmarried

Not gainfully employed

Living with the taxpayerDeductions vs. personal exemptions. Deductions are expenses incurred in

the conduct of trade, while personal exemptions are arbitrary amounts fo

personal expenses. Deductions can be claimed by all taxpayers, while

personal exemptions can only be claimed by individuals

Status-at-the-end-of-the-year rule. Whatever the taxpayers status at the

end of the calendar year shall be used for purposes of determining his

personal and additional exemptions. Change of status generally benefits, but

does not prejudice the taxpayer.

TAX BASES AND RATES

Tax bases can be grouped into:

Compensation, business, professional income, capital gains no

subject to final tax, passive income not subject to final tax, and

other income

Capital gains subject to final tax

Passive income subject to final tax

INDIVIDUALS

Tax bracket Tax rate

Not over 10,000 5%

10,00130,000 500+ 10% excess 10,000

30,00170,000 2,500 + 15% excess 30,000

70,001140,000 8,500 + 20% excess 70,000

140,001250,000 22,500 + 25% excess 140,000

250,001500,000 50,000 + 30% excess 250,000

Over 500,000 125,000 + 32% excess 500,000

DOMESTIC CORPORATIONS

Generalrule: 30% of taxable income (normal corporate income tax) or 2% o

gross income (MCIT, imposable on the 4th

year of operation)

Except: Non-profit hospital and educational institutions, 10% of taxableincome. Provided that gross income from unrelated trade does not exceed

50% of total gross income

Purpose of the MCIT

Prevent over-claiming of deductions

Ensure minimum contribution to support the government

Grounds for valid suspension of MCIT

Force majeure

Prolonged labor dispute

RESIDENT FOREIGN CORPORATIONS

30% of taxable income on sources within

Preferential tax rate for resident foreign corporations

International carriers. 2.5% of GPB

Offshore banking units. 10% of income derived from transactions

with Philippine residents Regional headquarters. 10% of taxable income sourced within

Preferential tax rate for non-resident foreign corporations

Cinematographic film owner. 25% of gross income sourced within

Lessor of vessels chartered by Filipinos. 4.5% of gross rentals

Lessor of aircraft, machines or other equipment. 7.5% of gross

rentals

Interest income on foreign loans. 20% final withholding tax

Dividends received from domestic corporations. 15% fina

withholding tax

Net capital gains realized by non-resident foreign corporation

from disposition of stock in a domestic corporation. Fina

withholding tax of:

o 5% of net capital gains, if not over 100,000

o 10% of net capital gains, if over 100,000


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GAINS FROM SALE OF PROPERTY

Excess of the amount realized over the basis or adjusted basis.

Amount realized shall be the sum of money received plus the fair market

value (other than money) received

Basisshall be:

Acquisition cost

Fair market value as of date of acquisition If acquired by gift, the basis shall be the same as the last

preceding owner by whom it was not acquired by gift. For loss, if

basis is greater than fair market value, latter shall prevail

Acquired for less than adequate consideration, acquisition cost

paid by the transferee

Adjusted basisshall be the original cost plus amounts spent for improvement

Transfer for inadequate consideration. Is deemed as a gift. Except: When

sold for a bona fide business purpose. What is important is the showing of

donative intent on the part of the seller

Nature of property

If ordinary asset, use either individual or corporate tax rate

If capital asset, 6% of actual consideration or fair market value,

whichever is higher

ORDINARY AND CAPITAL ASSETS

Ordinary assets. Include:

Stock in trade, included in inventory

Property held by taxpayer for sale

Property used in trade, subject to depreciation

Real property used in trade

Capital assets. All else

Loss limitation rule. A capital loss can only be deducted from capital gains

but never from an ordinary gain.

TAX-FREE EXCHANGES

No gain or loss in the following circumstances

Merger or consolidation

o

Corp A, property > Corp B, stock

o Shareholder A, stock > Corp B, stock

o

Security holder A, securities > Corp B, stock or

securities Property transferred to corporation in exchange for stock, which

as a result of such exchange maximum of 5 persons gain control

of the corporation

Sale of principal residence

Dwelling house, including land where situated, where husband and wife or

an unmarried individual, and members of his family reside. Character of

permanency must be present; individual intends to return to the dwelling,

whenever he is absent

Where ownership of land and house belongs to a different person, only

house shall be treated as principal residence

Where owned by several co-owners and actually used as principal residence

by one or more, property shall be treated as principal residence of co-

owner/s actually using the same to the extent of their share

When exempt from capital gains tax:

Proceeds of the sale of principal residence are fully utilized in the

acquisition of new principal residence within 18 months

Commissioner is duly notified within 30 days of taxpayers

intention to avail of the exemption

Tax exemption can be availed only once every 10 years

ACCOUNTING METHODS AND PERIODS

There is no uniform method of accounting prescribed for all taxpayers

Taxpayer may adopt such methods as are in his judgment best suited to hi

purpose. If the method that clearly reflects his income, it is to be followed

with respect. In case of conflict, tax code prevails over generally accepted

accounting principles

Cash receipts and disbursements method. Income is realizedupon actual or constructive receipt, and expenses are deductible

only upon actual payment thereof, regardless of the period in

which service is rendered or expense is incurred

Accrual method. Income is accounted for in the period it is

earned, regardless if received or not; expenses are accounted fo

in the period they are incurred, regardless if paid or not

o

Income is recognized when the requirements for the

realization principle are met:

Earning process is complete

Exchange has taken place

o All events test is followed for expenses

Fact of liability has been determined by

events which have already occurred

Amount of liability is determined with

reasonable accuracy

Installment method. Appropriate when collections of incomeextend over long periods of time and there is a strong possibility

that full collection may not be made. As customers pay

installments, seller recognizes profit in proportion to the

collection during the year

Percentage of completion method. Applicable in the case o

building , installation or construction contract covering a period in

excess of 1 year. Gross income reported upon basis of percentage

of completion of contract. Basis:

o

Cost incurred compared with estimated total

o Work performed compared with estimated total

Crop year basis

General rule: All income received during the year shall be included

computation of gross income

Income which is credited or set aside for the taxpayer and may be drawn at

any time is deemed received during the year it was creditedExcept: Under permitted accounting methods, such amounts are to be

properly accounted for during a different period

General rule: Deductions must be taken for the year in which they were paid

or incurred

Except: Under permitted accounting methods, such amounts are to be

properly accounted for during a different period

FILING OF RETURNS

Exemption from income tax does not mean an exemption from filing ITR

Individuals deriving purely compensation income. Exempt from filing ITR if

substituted filing of tax returns are filed by the employer:

Employee receives purely compensation income

From only one employer

Tax due is equal to tax withheld

Individual deriving purely trade, business or professional income or mixed

income. Must file quarterly ITR and annual ITRDomestic corporation and resident foreign corporation. Must file quarterly

corporate ITR and annual corporate ITR

Computation for quarterly and annual ITR made on a cumulative basis


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WITHHOLDING TAXES

Methodof collecting income tax in advance of the income of the recipient.

The amount withheld constitutes a full and final payment of the income tax

due from the recipient. The liability for the payment of tax withheld lies

solely on the withholding agent.

Since it is considered as advance payment, it follows that all persons exempt

from income tax are also exempt from withholding taxCreditable withholding tax. Taxes withheld are intended to equal or at least

approximated the tax due. Recipient is still required to file ITR, report the

income, and pay the difference between tax withheld and tax due.

Withholding agent. In application of the territoriality principle, must be

resident of the Philippines

In general, any juridical person

An individual, payments made in connection with trade

All government offices and GOCCs

Bases for withholding tax

Based on gross income, for expanded withholding tax

Based on gross selling price or fair market value, whichever is

higher, for creditable withholding tax


9/13

TRANSFER TAXES

Imposed upon the privilege granted by the State to the taxpayer so that hey

may transfer his property to another. As popularly understood in taxation,

refers to estate and donors tax.

ESTATE TAX. Graduated tax imposed on the privilege of the decedent to

transmit his property at death. Based on the entire net estate, regardless of

the number of heirs or their relation to the decedentIn the absence of an express provision to the contrary, a transfer is presumed

revoked during the life of the donor. Hence subject to estate tax

The law in force at the time of death applies.

Notice of death should be given to the BIR within 2 months from death

Estate tax return must be filed within 6 months from death

Approval of probate court is not required to collect estate tax. There is

nothing in the NIRC that requires such. Lifeblood

Justifications:

Benefit-received theory

Privilege theory. Succession to the property is not a fundamental

right. Hence legislature can burden such with a tax.

Ability to pay theory. Those with more properties to transfer

should pay more taxes.

Gross estate. All properties and interests of the decedent at the time of his

death. Gross estate of a citizen and resident alien consist of all property

within and without the Philippines. For nonresident aliens, it consists ofproperties within the Philippines (intangible property is subject to the rule of

reciprocity)

Valuation of real property. Fair market value as determined by the

Commissioner or provincial or city assessors, whichever is higher.

Mobilia sequuntur personam. Intangible property generally follows the

residence or domicile of the owner.

Residence refers to the permanent home. The place which whenever absent,

one intends to return. It depends on facts and circumstances that disclose

the intent. It is not necessarily the actual place of residence.

Instances when it does not apply:

When inconsistent with the provisions of a statute

Justice demands that it should not be applied

Intangible personal properties within the Philippines:

Franchise exercised within

Shares of a domestic corporation Shares of a foreign corporation 85% business within

Shares of a foreign corporation with business situs within

Shares of a business established within

Transfers inter vivos which still for part of the gross estate:

Transfers in contemplation of death. Motive for the transfer is the

thought of death, regardless if imminent. Exception: transfers

made in a bona fide sale for full and adequate consideration

Revocable transfers. Transferor reserves his right to alter, amend

or revoke the transfer.

Property passing under general power of appointment. See power

of appointment.

Transfers for insufficient consideration. Not a bona fide sale for a

full and adequate consideration. Difference between

consideration and fair market value forms part

Power of appointment. Right to designate a person who shall possess the

property from a prior decedent:

General. Any person he pleases. Thus donee has full dominion

over the property, as though it was his own. Donee subject to

estate tax

Special. Only to a restricted class of persons other than donee.

Thus donee holds the property in the concept of a trustee. Donee

not subject to estate tax

Exclusions from gross estate:

Proceeds of irrevocable life insurance payable to a beneficiary

other than the estate.

GSIS, SSS

Proceeds of GSIS life insurance

Transfers made in a bona fide sale for full and adequate

consideration Retirement benefits from BIR-approved private pension plans

Amount from US Veterans Administration

Transfers expressly declares as exempt:

o

Merger of the usufruct in the owner of the naked title

o Transmission of the inheritance by the fiduciary heir to

the fideicommissary

o

Transmission of the first heir in favor of another, in

accordance to the desires of the decedent

o

Transfers to charitable institutions, no part of the net

income inures to the benefit of an individual. Provided

not more than 30% is used for administrative purposes

o

Separate property of surviving spouse

Deductions from gross estate:

Funeral expenses. Not to include expenses made after burial o

paid for by other persons. Whichever is lower:

o

Actual amount

o 5% gross estate, not exceeding 200,000

Medical expenses. Requirements:

o Incurred 1 year prior to death

o

Substantiated by receipts

o Not to exceed 500,000

Judicial expenses for testate or intestate proceedings

Claims against the estate. Obligations of the decedent. Requisites

o Contracted in good faith

o

Existing against the estate

o Enforced by claimants

o Reasonably certain in amount

o

Notarized instrument

o Loan contracted within 3 years before death

administrator shall submit a statement showing the

disposition of the proceeds of the loan Claims of decedent against insolvent persons. Requirements:

o Amount of claim initially included as part of the estate

o

Incapacity of the debtor is proven, not merely alleged

Unpaid mortgage. Decedents interest in the property must be

included in the gross estate

Losses. Requisites:

o Not compensated for by insurance

o

Not claimed as deductions in ITR

o Incurred not later than 6 months from death

Unpaid taxes:

o Income tax on income received before death

o

Real property tax accrued before death

Family home. Dwelling house, including land, where head of the

family and its members actually reside. Requisites:

o Actual residence, as certified by Barangay Captain

o

Initially included in the gross estate

o Amount equivalent to fair market value, not exceeding

1,000,000

Standard deduction. 1,000,000, without need of substantiation

Vanishing deduction.Operates to ease the harshness of successive taxation

on the same property within a 5 years occasioned by the untimely death o

the transferee after the decedent. Requisities:

Death within 5 years from death of prior decedent or gift

Identity of property

Inclusion of property as part of gross estate or taxable gift of the

prior decedent

Previous taxation of the property

No previous vanishing deduction on the property


10/13

DONORS TAX. Graduated tax imposed on the privilege of the donor to

transfer property during his lifetime without any consideration.

Purpose. To complement estate tax by preventing tax-free depletion of the

estate during the lifetime of the decedent

Requisites for taxable gift:

Capacity of the donor to donate the property

Donative intent. Except: transfers of ordinary assets for less thana full and adequate consideration. Reason: transfer of capital

assets is subject to capital gains tax on presumed gain

Acceptance by the donee

Delivery of the gift

Tax rates:

Relatives. Schedular rate. 100,000 exempt

o Brother and sister, whether full or half blood

o Ancestor

o

Descendant

o Relative by consanguinity in the collateral line within

the 4th

degree (first cousin)

o Spouse

Strangers. 30%

o Persons who are not relatives

Gross gift.All property given to the donee by way of gift. Condonation of a

debt constitutes donation. Donations of common property, considered

separate donors to the extent of interest in such. Consequently, each files

separate donors tax return.

Exemptions from gross gift: Even if exempted, the donor must still file a tax

return for the transfers

Gifts on account of marriage. 10,000, each parent. Requisites:

o

Given on account of marriage

o Before celebration or 1 year after

o

Donor is the parent

o Donee is legitimate, recognized natural or legally

adopted child

Gifts in favor of the national government

Gifts in favor of an educational or charitable institution. Provided,

not more than 30% is used for administrative purposes

Splitting of donations. Dividing donations into different taxable periods so as

to take advantage of tax exemptions. Tax base is dependent on theaccumulated value of the donation and the number of donors, not donees.

BUSINESS TAXES

VALUE-ADDED TAX. Tax imposed on the gross selling price of goods,

properties or services or the lease of goods and properties in the course of

business. Indirect tax shifted to the purchaser or lessee

Output tax refers to the VAT on the sale or lease

Input tax refers to the VAT on the purchase or lease

VAT payable refers to the difference between output and input tax

Characteristics of VAT:

Tax on value added of a tax payer

Collected through tax credit method

Transparent form of sales tax

Broad-based tax on the consumption of goods, properties or

services within the Philippines

Indirect tax

The Philippines has adopted the tax-inclusive method. Unless

otherwise indicated, VAT is presumed included in the purchase

price.

There is no cascading in the VAT system. No tax pyramiding.

Instances where VAT is imposed without an actual sale or lease:

Importation of goods. VAT imposed on the importer-buyer

Issuance of VAT receipt for exempt sales. These goods should

normally be evidenced by non-VAT receipts. However, issuance of

VAT receipt makes the seller liable for VAT on the otherwise

exempt transaction.

Deemed sale. Situation where the seller is effectively the final

consumer. Reason: recapture the VAT that was claimed as input

tax.

o Consumption, not in the course of business, of goods

originally intended for sale

o Transfer to shareholders as dividends or creditors as

payment of debt

o Consignment of goods, if actual sale is not made within

60 days

o

Cessation of business with respect to inventory otaxable goods

Cross border doctrine. Otherwise known as the destination principle

Destination of goods determines the transactions taxability. Export sales are

zero-rated, while imports are subject to VAT.

In the case of services, follow the situs-of-service principle. Place o

consumption is the place of performance.

Zero-rated transactions. Taxable transactions that do not result in any

output tax. However, the input tax may be claimed as a tax credit or refund

Examples are:

Export sales by VAT-registered person

Foreign currency denominated sale

Sales to persons exempt under special law. See constructive zero

rated

Types of zero-rated transactions:

Actual. Taxpayer sells to foreign buyers

Constructive. Taxpayer sells to PEZA or foreign territories which

are actually within the Philippines

Exempt transactions. Not subject to output tax nor allowed tax credit o

refund on input tax.

Taxable persons:Failure to register does not exculpate him from liability.

Undertakes taxable transactions in goods, properties or service

for consumption in the Philippines

Such transactions are entered into in the course of business

Amount of gross sales are over the threshold. Less than the

threshold option to use percentage tax of 3%

Importer of taxable goods

Elements to a taxable transaction:

Sale of goods:

Actual or deemed sale

In the course of business

Goods are for consumption in the Philippines Not exempt by law

Sale of real property:

Seller executes a deed of conveyance

Property is within the Philippines

Seller is engaged in the real estate business

Real property is held primarily for sale or lease

Not exempt by law

Sale of services:

Performed in the course of business in the Philippines

For a valuable consideration received

Not exempt by law

Transitional input tax. Person may claim transitional input tax on hi

beginning inventories:

Becomes liable for VAT for the first time. Ex: new legislation o

exceeding threshold Registers as VAT-registered

Already VAT-registered, deals with VAT exempt goods o

properties which have become taxable under new legislation


11/13

TAX REMEDIES

Assess. To impose a tax. Determine the correct amount to be paid.

Legal and factual bases of the asssessment must be stated. Otherwise

assessment is void.

ASSESSMENT PROCESS

Starts with the self-assessment of the taxpayer via filing of his tax return andpayment of the entire tax due as shown thereon

Amended return. Taxpayer may amend return within 3 years from filing.

Except: when notice for audit or investigation has been served.

If the amendment is substantial, prescriptive period for assessment shall

start to run from the date of filing of amended return.

Best evidence obtainable rule.When taxpayer fails to file tax return within

the time fixed by law or when there is reason to believe that such report is

false, CIR may assess proper tax based on the best evidence obtainable.

Prima facie correct. Reason: public policy, regularity and lifeblood.

Burden of proof on the taxpayer contesting the assessment. Prove not only

that the CIR is wrong, but the taxpayer is right.

The government is never estopped by the errors of its agents from collecting

the correct amount of taxes

Net worth method. Assessment is based on the increase in taxpayers net

worth plus a reasonable allowance for living expenses and plus or minus

adjustments for other items within period.

Reconsideration v. Reinvestigation. Former refers to re-evaluation of an

assessment without need of additional evidence. Latter is on the basis of

newly discovered evidence.

Jeopardy assessment. Delinquency tax assessment without the benefit of a

complete and preliminary audit by an authorized revenue officer who has

reason to believe that the assessment and collection of a deficiency tax wil

be jeopardized by delay because of the taxpayers failure to comply with the

audit and investigation requirements.

Assessment based on best evidence obtainable.

Prima facie correct. Reason: public policy, regularity and lifeblood.Mandamus. CIR cannotbe compelled by mandamus to issue assessment

Prescriptive period. Return is filed:

Before last day of filing, considered on last day of filing. 3 year

from last day of filing

Beyond last day of filing. 3 years from the date of actual filing

In case of failure to file or false or fraudulent return, 10 years after discovery

of fraud or omission. Failure to prove fraud can be fatal to the assessment, if

such is made beyond the regular 3-year prescriptive period

ADMINISTRATIVE REMEDIES OF GOVERNMENT

Distraint, levy and garnishment proceedings may be validly commenced by

the issuance of the warrant and service thereof to taxpayer.

Tax lien. Legal claim or charge on taxpayers property as security for paymen

of tax. Resorted to when taxpayer neglects or refuses to pay after demand

Tax liens are given preference over any other claim. Lifeblood

Distraint.The collection is enforced on personal property of the taxpayer. Actual. Resorted to when taxpayer fails to pay his delinquen

obligation. Actual seizure of personal property

Constructive. Resorted to when there is no actual delinquency

Requires:

o Taxpayer retiring from taxable business

o

Intends to leave the Philippines

o Removes his property from the Philippines or perform

other act tending to obstruct collection of tax due

Levy.The collection is enforced on real property of the taxpayer.

Garnishment. The collection is enforced on bank account of the taxpayer.

CIR authorized to issue warrant of garnishment pending protest with the BIR

but not pending appeal with CTA. Reason: NIRC does not require CIR to rule

first on protest before he can collect assessed tax.

Sale of property. Public auction of assets collected via warrant of distraint

Any excess is returned to the taxpayer. Failure to issue notice, voids auctionForfeiture. Resorted to in case there is no bidder at public auction or if the

highest bid is insufficient to pay the obligation

Within 1 year from the forfeiture, taxpayer or anyone for him, may redeem

Compromise. CIR may compromise when:

Reasonable doubt as to validity of the claim. Minimum

compromise rate 40% basic tax

Financial position of taxpayer shows clear inability to pay

Minimum compromise rate 10% basic tax

Taxpayers offer to compromise requires him to waive his bank secrecy right

Payment of withholding tax cannot be compromised. Withholding is not a

tax, but a mere method of collecting tax

All criminal violations may be compromised. Except:

Already filed in court

Involving fraud

Abatement. CIR may cancel the tax liability when:

Unjust or excessive assessment Costs do not justify collection of the amount due

Penalties and fines. Compromise penalty is the amount paid to compromise

a tax violation, which may be subject to criminal prosecution. Compromise is

the amount paid to settle taxpayers civil liability for tax. Both require mutua

agreement between CIR and taxpayer.

Suspension of business operations

Taxpayer files self-assessed tax return

BIR issues PANTaxpayer reply. 15

days from receipt PAN

BIR issues FAN and letter of demand

Taxpayer files protest. 30 days from receipt

Nature of protest:

Motion forReconsideration

Nature of protest:

Motion forReinvestigation

Submit additional

documents. 60

days from filing

Protest denied. Appeal CIR. 30 days from receipt

Final decision or 180 days

inaction. Appeal CTA

division. 30 days from

receipt or expiry of 180-

day period. Choose only

one (RCBC v. CIR [2007])

Decision CTA division. Motion for reconsideration en

banc. 15 days from receipt

Decision CTA en banc. Appeal SC. 15 days from receipt

Final decision.

Appeal Secretary

of Finance. Does

not stop 30-day

period of appeal

to CTA


12/13

JUDICIAL REMEDIES OF GOVERNMENT

No injunction rule. No lower court may grant an injunction for collection of

taxes. 218 NIRC

Civil action. Initiated by the government only the liability becomes

delinquent and collectible, within 5 years from the date of assessment.

Collection enforced by:

Filing a civil case for collection of sum of money in proper court Filing answer to petition for review filed by taxpayer with CTA

Delinquency arises when:

Self-assessed tax is not paid within the date prescribed by law

Final assessment is not timely protested

Non-compliance with conditions for approval of protest

Failure to file timely appeal with CTA

Criminal action. Crimes punishable by NIRC:

Tax evasion

Failure to file return, fraudulent return, pay tax, withhold and

remit tax, or refund excess tax withheld

Important principles on criminal action:

No criminal action without approval of CIR

Criminal cases are brought in the name of the government

Grant of motion to dismiss is based on judges personal conviction

Acquittal does not necessarily result in exoneration of civil liability

Judgment shall not only impose penalty, but also order payment

Assessment is not necessary before criminal action can be filed

A criminal action may be filed during pendency of protest. Requires:

Violator knowingly and willfully filed the fraudulent return

Intent to evade tax

Final determination of tax due

Civil penalties. Generic term referring to surcharges, penalties, deficiency

and delinquency interests, and compromise penalties

Surcharge. 25%. Following instances:

Failure to file return on the date prescribed. Late return

Filing of return in the wrong venue

Failure to pay deficiency tax on date prescribed

Failure to pay tax in the amount shown in the return

Fraud penalty. 50%. Prima facie fraudulent when difference exceeds 30%

A return may not necessarily be fraudulent where it appears that it was not

prepared by the taxpayer but his accountant

Deficiency interest v. delinquency interest. Former is interest due on amount

not paid before date prescribed. Latter is interest due for failure to pay:

Amount due on any return required to be filed

Amount due for which no return is required

Civil penalty thereon on due date appearing in the notice and

demand of the CIR

Compromise penalty. Amount paid to compromise a criminal violation

REMEDIES OF TAXPAYERS

Taxpayer may be assessed only once per year

Before payment:

Protest

Appeal

After payment: Claim for tax refund or tax credit

The filing of the CIR of civil case for collection constitutes denial of protestAppeal to the CTA gives the court exclusive jurisdiction over the case. Hence,

cases filed in the lower courts should be dismissed

Prescription must be raised at the administrative level. Waiver of

prescription is strictly construed against the government.

Extension of prescriptive period. Taxpayer and CIR may execute written

waiver extending period BIR assessment and collection

Waiver is ineffective if executed beyond prescriptive period

Filing of bond is tantamount to written waiver

Waivers may only extend, not reduce, the prescriptive period

Waivers must be signed by both taxpayer and CIR or hi duly

authorized representative

Amount and kind of tax, date of acceptance by BIR, and date of

receipt by taxpayer must be indicated

Interruption of prescriptive period. Running of the period is only suspended

CIR is prohibited from making assessment or beginning distrain

and levy proceedings. Ex: pendency of appeal with CTA

Motion for reinvestigation is granted

Taxpayer cannot be located

Warrant of distraint and levy is served, but no property could be

located Taxpayer is out of the Philippines

Tax refund v. Tax credit. Former takes place when there is actua

reimbursement. Latter takes place upon issuance of tax credit certificate

which is applied to any sum due and collected from taxpayer.

An action for refund or credit may be maintained whether or not taxpayer

has paid under protest. 299 NIRC

Choice of one is irrevocable for the taxable period

Withholding tax agent may claim refund. Reason: agent is also personally

liable for withholding tax. Hence, such person should be regarded as a party

in-interest to a suit for refund

Requirements:

Written claim by the taxpayer to the CIR

Categorical demand for reimbursement

Prescriptive period.2 years from payment, regardless of supervening cause

Prescriptive period applies to both administrative and judicial levels

LOCAL GOVERNMENT CODE

LOCAL BUSINESS TAXES

Each local government has the power to create its own sources of revenue

and levy taxes subject to limitations Congress may provide. Such taxes accrue

exclusively to the LGU. Article X, 1987 Constitution

Power vested with local legislative bodies (Sanggunian)

Local taxes must not be unjust, excessive, oppressive, confiscatory o

contrary to declared national economic policy. Cannot be imposed without a

public hearingprior to the enactment of the ordinance

Common limitations:

Income tax, except on financial institutions

Documentary stamp tax

Taxes on acquisitions provided in NIRC

Customs duties provided in Customs Code

Impositions on goods passing through jurisdiction LGU Tax on agricultural and aquatic products sold by marginal farmer

or fishermen

Tax on business enterprises certified by Board of Investment

Excuse taxes on articles enumerated under NIRC and on

petroleum products

Percentage tax or VAT

Common carriers tax

Taxes on premiums for reinsurance

Taxes for issuance of driving licenses or permits, except tricycles

Taxes on exported local products

Taxes on Countryside, BMBE and cooperatives

Taxes on the national government and its instrumentalities

Taxes by province:

Tax on transfer of real property

Tax on printing and publication Franchise tax

Tax on quarry resources

Professional tax

Amusement tax

Tax for delivery truck or van


13/13

Taxes by municipalities and cities:

Manufacturers and other processors of articles of commerce

Dealers in articles of commerce

Exporters, manufacturers and processors of essential

commodities

Retailers

Contractors Banks and financial institutions

Peddlers

Any business not otherwise specified

Taxes by barangays

Tax on stores with fixed establishments, gross sales 50,000 or less

in cities, 30,000 in municipalities

Fees and charges on:

o Use of barangay-owned properties

o

Commercial breeding of fighting cocks, cockfights and

cockpits

o Admission fee for places of recreation

o

Outdoor advertisements

o Barangay clearance

Accrual: Generally on January 1. However, may be paid in quarterly

installments. Surcharges and interest may apply

Review of tax ordinances:

Within 3 days after approval. City Sanggunian >> Provincial

Within 10 days after enactment. Barangay >> City

Receiving Sanggunian review within 30 days of receipt. Inaction = approval

Prescriptive periods:

Assessment. 5 years from due date

Fraud. 10 years from discovery

Collection. 5 years from assessment

Steps to challenge validity of tax ordinance:

Appeal to Secretary of Justice within 30 days from effectivity

Decision by SoJ within 60 days from receipt

Appeal to court of competent jurisdiction within 30 days from

receipt of decision or lapse of 60-day period

Assessment procedure

Local treasurer assess taxes within periods provided

Local treasurer issues notice of assessment

Taxpayer pays under protest

Taxpayer files protest within 60 days from receipt of notice

Local treasurer decides within 60 days from protest

Taxpayer appeals to court of competent jurisdiction within 30

days from receipt of the decision or lapse of 60-day period

REAL PROPERTY TAX

National, not local tax. However, proceeds accrue to the LGU where property

is situated. Payable on January 1

For assessment purposes, actual use refers to the principal utilization of

the property by the person in possession. Thus, even if user is not the owner,

he may be subject to real property tax

Components:

Annual ad valorem tax. 1% province. 2% Metro Manila

Special levies:o

Special education fund. 1%

o Tax on idle lands. 5%

o Special levy or assessment. Owner contributes to the

cost of local improvements shouldered by the

government but inure to his benefit. Not to exceed

60% of the cost of the improvement

Properties exempt from real property tax:

Government-owned properties

Properties used for charitable or religious purposes

Machineries and equipment used by energy and water GOCCs

Cooperative-owned properties

Machineries and equipment for environmental protection

Assessment of land value:

Local assessor makes appraisal based on fair market value

Local assessor classifies property based on actual use

Local assessor fixes assessed value

Local assessor gives notice of assessment to owner

Owner-taxpayer protest assessment within 60 days from receip

to Local Board of Assessment Appeals LBAA decision within 120 days from protest

Taxpayer appeals within 30 days from receipt to Central Board o

Assessment Appeals

Taxpayer appeals to CA

Taxpayer appeals to SC

Assessment/collection of real property tax:

Local assessor submits assessment roll to local treasurer

Local treasurer informs public of due date

Local treasurer assesses and collects

Taxpayer pays under protest

Taxpayer files written protest with local treasurer

Local treasurer decides within 60 days

Taxpayer appeals to LBAA 60 days from receipt of decision o

lapse of the 60-day period

LBAA decides within 120 days Taxpayer appeals to CBAA

Taxpayer appeals to CA

Taxpayer appeals to SC

notes in taxation

Documents