Bureau of Internal Revenue
Republic of the Philippines

This research guide summarizes the sources of Philippine tax law. 

Tax law in the Philippines covers national and local taxes.  National taxes refer to national internal revenue taxes imposed and collected by the national government through the Bureau of Internal Revenue (BIR) and local taxes refer to those imposed and collected by the local government. The Tax Code of 1997, Revenue Issuances and BIR Rulings pertaining to national taxes are posted at the BIR website, http://www.bir.gov.ph.

National Tax Law

I.       1987 Constitution - (http://www.supremecourt.gov.ph/constitution/1987)

The 1987 Philippine Constitution sets limitations on the exercise of the power to tax.

The rule of taxation shall be uniform and equitable.  The Congress shall evolve a progressive system of taxation.  (Article VI, Section 28, paragraph 1)

All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only.  If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government.  (Article VI, Section 29, paragraph 3)

The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restriction as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government (Article VI, Section 28, paragraph 2) The President shall have the power to veto any particular item or items in an appropriation, revenue or tariff bill, but the veto shall not affect the item or items to which he does not object.  (Article VI, Section 27, second paragraph)

The Supreme Court shall have the power to review, revise, reverse, modify or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower courts in x x x all cases involving the legality of any tax, impost, assessment, or toll or any penalty imposed in relation thereto.  (Article VIII, Section 5, paragraph)           

Tax exemptions are limited to those granted by law.  However, no law granting any tax exemption shall be passed without the concurrence of a majority of all the members of the Congress.  (Article VI, Section 28, par. 4).  The Constitution expressly grants tax exemption on certain entities/institutions such as (1) charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and nonprofit cemeteries and all lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes (Article VI, Section 28, paragraph 3); (2) non-stock non-profit educational institutions used actually, directly and exclusively for educational purposes. (Article XVI, Section 4(3))

In addition to national taxes, the Constitution provides for local government taxation. (Article X, Section 5) (Article X, Section 6)  Parenthetically, the Local Government Code provides that all local government units are granted general tax powers, as well as other revenue-raising powers like the imposition of service fees and charges, in addition to those specifically granted to each of the local government units.  But no such taxes, fees and charges shall be imposed without a public hearing having been held prior to the enactment of the ordinance.  The levy must not be unjust excessive, oppressive, confiscatory or contrary to a declared national economic policy (Section 186 and 187) Further, there are common limitations to the grant of the power to tax to the local government, such that taxes like income tax, documentary stamp tax, etc. cannot be imposed by the local government.

II.      Laws

The basic source of Philippine tax law is the National Internal Revenue Law, which codifies all tax provisions, the latest of which is embodied in Republic Act No. 8424 (“The Tax Reform Act of 1997”).  It amended previous national internal revenue codes, which was approved on December 11, 1997. A copy of the Tax Reform Act of 1997, which took effect on January 1, 1998, can be found in http://www.bir.gov.ph/issu_nir.html.

Local taxation is treated separately in this Guide.  There are, however, special laws that separately provide special tax treatment in certain situations.  (See attached matrix on special laws)

III.    Treaties

The Philippines has entered into several tax treaties for the avoidance of double taxation and prevention of fiscal evasion with respect to income taxes.  At present, there are 31 Philippine Tax Treaties in force.   Copies are available at the BIR Library and the International Tax Affairs Division of the BIR, which is under the Deputy Commissioner for Legal and Inspection Group.

The Philippine Treaty Series, edited and annotated by Haydee Yorac and published by Law Publishing House, University of the Philippines, is available in seven (7) volumes, covering the years 1944 to 1978 . The Philippine Treaty Index, by Benjamin Domingo, covers the years 1978 to 1982. A copy of the Philippine Treaty Index is available in the Department of Foreign Affairs (DFA) Library. These publications contain treaties entered into by the Philippines. Tax privileges and exemptions granted under treaties to which the Philippines is a signatory are recognized under Philippine tax law.  Copies of treaties entered into by the Philippines with other countries and/or international organizations, from 1983 up to the present, are available at the DFA Library.

IV.     Administrative Material

The Secretary of Finance, upon the recommendation of the Commissioner, promulgates needful rules and regulations for the effective enforcement of the provisions of the Tax Code  (Section 244, Tax Code of 1997). The Commissioner of Internal Revenue, however, has the exclusive and original power to interpret the provisions of the Tax Code, but subject to review by the Secretary of Finance.

Administrative issuances which may be relied upon in interpreting the provisions of the Tax Code, which are signed by the Secretary of Finance, or the Commissioner of Internal Revenue, or his duly authorized representative, come in the form of Revenue Regulations, Revenue Memorandum Orders, Revenue Memorandum Rulings, Revenue Memorandum Circulars, Revenue Memorandum Rulings, and BIR Rulings.

Revenue Regulations (RRs) are issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes.

Revenue Memorandum Orders (RMOs) are issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods and procedures necessary in the implementation of stated policies, goals, objectives, plans and programs of the Bureau in all areas of operations, except auditing.

Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the Commissioner of Internal Revenue with respect to the provisions of the Tax Code and other tax laws, as applied to a specific set of facts, with or without established precedents, and which the Commissioner may issue from time to time for the purpose of providing taxpayers guidance on the tax consequences in specific situations. BIR Rulings, therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null and void ab initio.

Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices.

BIR Rulings are the official position of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws.

Revenue Regulations, Revenue Memorandum Orders, Revenue Memorandum Rulings, Revenue Memorandum Circulars, Revenue Memorandum Rulings, and BIR Rulings are found in http://www.bir.gov.ph/hom_issrul.html

V.     Case Law

In the Philippines, Supreme Court decisions form part of the law of the land.  As such, decisions by the Supreme Court (http://www.supremecourt.gov.ph) in the exercise of its power to review, revise, reverse, modify or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower courts cases involving the legality of any tax, impost, assessment, or toll or any penalty imposed in relation thereto are adhered to and recognized as binding interpretations of Philippine tax law.  Court of Appeals and Court of Tax Appeals decisions which have become final and executory are also recognized interpretations of Philippine tax law.

VI.     Treatises and other books

There are no Philippine treatises exclusively devoted to Philippine Tax law but various Philippine authors have come up with annotated versions of the Tax Code. These books can be purchased from Rex Bookstore and Central Law Publishing, Inc. 

VII.   Periodicals

Periodicals on Philippine tax law are the (1) Philippine Revenue Service (copies available in the BIR Library), published by the BIR from 1969-1980; (2) Philippine Revenue Journal  (copies available in the BIR Library) which was both published by the Bureau of Internal Revenue from 1969 to 2000; and (3) the Tax Monthly, published by the National Tax Research Center (NTRC) (copies available in the BIR Library and the NTRC). 

VIII.           Local Government Tax Law

Local government taxation in the Philippines is based on the constitutional grant of the power to tax to the local governments.

Local taxes may be imposed, as the Constitution grants, to each local government unit, the power to create its own sources of revenues and to levy taxes, fees, and charges which shall accrue to the local governments (Article X, Section 5). With respect to national taxes, local Government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them (Article X, Section 6).

However, certain taxes, such as the following, may not be imposed by local government units: (Section 133, Local Government Code and Tax Law and Jurisprudence by Vitug & Acosta, copyright 2000)

(1)       Income tax, except when levied on banks and other financial institutions;

(2)       Documentary stamp tax;

(3)       Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided in the Local Government Code (Code) (except taxes levied on the transfer of real property ownership under Section 135, and Section 151 of the Code);

(4)       Customs duties, registration fees of vessels (except license fees imposed under Section 149, and Section 151 of the Code), wharfage on wharves, tonnage dues and all other kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned;

(5)       Taxes, fees, charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local governments in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes in any form whatever upon such goods or merchandise;

(6)       Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;

(7)       Taxes on business enterprises certified by the Board of Investments as pioneer or non-pioneer for a period of six and four years, respectively, from the date of registration;

(8)       Excise taxes on articles enumerated under the National Internal Revenue Code and taxes, fees, or charges on petroleum products, but not a tax on the business of importing, manufacturing or producing said products (Patron vs. Pililla, 198 SCRA 82);

(9)       Percentage tax or value-added tax on sales, barters or exchanges of goods or services or similar transactions thereon (but not fixed graduated taxes on gross sales or on volume of production);

(10)  Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water except as provided by the Code;

(11)  Taxes on premiums paid for reinsurance or retrocession;

(12)  Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles;

(13)  Taxes, fees, or other charges on Philippine products actually exported except as provided by the Code (the prohibition applies to any local export tax, fee, or levy on Philippine export products but not to any local tax, fee, or levy that may be imposed on the business of exporting said products);

(14)  Taxes, fees or charges on duly organized and registered Countryside and Barangay Business Enterprises (R.A. No. 6810) and on cooperatives (R.A. No. 6938); and

(15)  Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units (Section 133, LGC)

The Local Government Code (http://www.comelec.gov.ph/laws/lgc.html) or (http://www.dilg.gov.ph/) contains provisions on the scope and limitation on the exercise of local government taxing power.

IX.     National Tax Research Center (NTRC)

Constituted under Presidential Decree 74, the NTRC is mandated to conduct continuing research in taxation to restructure the tax system and raise the level of tax consciousness among the Filipinos, to achieve a faster rate of economic growth and to bring about a more equitable distribution of wealth and income.  Specifically, the NTRC performs the following functions:

1.      Undertake comprehensive studies on the need for additional revenue for accelerated national development and the sources from which this might most equitably be derived;

2.      Re-examine the existing tax system and tax policy structure;

3.      Conduct researches on taxation for the purpose of improving the tax system and tax policy;

4.      Pass upon all tax measures and revenue proposal;

5.      Recommend of such reforms and revisions as may be necessary to improve revenue collection and to formulate sound tax policy and a more efficient tax structure.