Taxation Law II
Prelim Exam S.Y. 2020-2021
1. Tony has inadvertently omitted P100,000 income in his 2004 Income Tax Return. Upon
discovery in 2005, the BIR issued an assessment for deficiency income tax for P100,000
plus 50% fraud surcharge. Meanwhile, Tony included the omitted P100,000 income in his
2005 income tax return. What advice will you give to Tony?
2. Mario disputed a deficiency tax assessment and upon receipt of an adverse decision by the
Commissioner of Internal Revenue, filed an appeal with the Court of Tax Appeals. While
the appeal is pending, the BIR served a warrant of levy on the real properties of Mario to
enforce the collection of the disputed tax. Granting arguendo that the BIR can legally levy
on the properties, what would Mario do to stop the process?
3. Mr. Meneses, a hobbyist of motorcycle paraphernalia, received an order for a good number
of his products which he manufactures himself that would be exported to the United States.
Mr. Meneses did not know that such order would amount to almost P10,000,000.00. The
said order was completed and shipped to the United States. What is the VAT implication
on the said shipment?
4. Jose is a law-abiding citizen who pays his real estate taxes promptly. Due to a series of
typhoons and adverse economic conditions, an ordinance was passed by Panabo City
granting a 50% discount for payment of unpaid real estate taxes for the preceding year and
the condonation of all penalties on fines resulting from the late payment.
Arguing that the ordinance rewards delinquent taxpayers and discriminates against prompt
ones, Jose demands that he be refunded an amount equivalent to one-half of the real estate
taxes he paid. The provincial attorney rendered an opinion that Jose cannot be reimbursed
because the ordinance did not provide for such reimbursement. Jose files suit to declare the
ordinance void on the ground that it is a class legislation.
Will his suit prosper?
5. Barbarian Municipality has an ordinance which requires that all stores, restaurants, and
other establishments selling liquor should pay a fixed annual fee of P20,000. Subsequently,
the municipal board proposed an ordinance imposing a sales tax equivalent to 5% of the
amount paid for the purchase or consumption of liquor in stores, restaurants, and other
establishments. The municipal mayor refused to sign the ordinance on the ground that it
would constitute double taxation. Is the refusal of the mayor justified?
6. Neil Sanchez was being prosecuted by the BIR for failure to pay his income tax liability
for Calendar Year 2000 despite several demands by the BIR in 2004. The Information was
filed with the RTC only last January 3, 2007. Neil Sanchez filed a motion to quash the
information on the ground of prescription, the Information having been filed beyond the 5-
year reglementary period.
If you were the judge, will you dismiss the Information?
7. Members of the Kapisanan ng mga Broadcaster sa Pilipinas regularly receive broadcast
orders for airtime from the Philippine Information Agency (PIA). Does VAT requirement
apply to PIA regarding government plugs for airing in radio and TV stations?
8. ABC Corp. has been a grantee of a franchise from the National Government and part of
the said agreement includes the exemption from the payment of local taxes. The franchise
was granted before the enactment of the local government code that included a general
provision withdrawing all exemptions. Within a few years after the enactment of the local
government code, the local government wherein ABC Corp. was doing business enacted a
tax on the business activity of ABC Corp. As counsel for ABC Corp, what would you do
to protect your client’s interest?
9. What is the minimum compromise rate in cases of doubtful validity of assessment?
Explain.
10. The BIR sent an assessment to the tax payer on the last day of the prescribed period to
assess deficiency taxes. The said assessment was sent via registered mail dated on the last
day of the assessment period and received by the taxpayer two weeks thereafter. Is the said
assessment valid?
