Seminars Schedules

Inherent limitations

Inherent limitations are those which are inherent with the power itself and which could be deduced from its very nature.

1. Public purpose. This requires that the purpose of imposing a particular tax must be for public. Public does not necessarily means direct benefits of the entire citizenry but maybe indirect only, though direct to particular industry.

2. Territoriality. This means that taxes imposed is binding only within the territorial jurisdiction of the Philippines because of the implications of the international arena where each estate has to give due respect to the sovereignty of other estates. This is because, outside the territorial jurisdictions of the Philippines, tax laws of other countries with separate jurisdictions apply and our tax laws do not take into effect. Territoriality however is not limited to physical location of the taxpayer because if the Philippines has tax situs or place of taxation over the object, then, by all means it shall be taxable regardless of the location of the owner. Example, income of a non-resident alien in the Philippines stock trading is taxable because it involves shares of Philippine company. Estate of a non-resident decedent is likewise taxable if located in the Philippines because our country has the situs or place of taxation.

3. Exemption of government entity. Government entity is not subject to tax with respect to the performance of its governmental functions to the citizenry because it is the core of its main obligation to the citizenry. This is most appropriate in the Philippines under the budgetary system where budget of government agencies came from taxes so that taxing them in the performance of their functions will not result in new money as thus funds from taxes will simply be reverted to the budget. However, is generally taxable in performing proprietary functions.

4. No double taxation. Double taxation is taxing twice an object of taxation with the same tax type, for the same purpose, for the same taxable year by the same taxing authority. This is not allowed and in Philippine setting, this violates the constitutional right to due process.

Comments are closed.