Laws granting tax exemption are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted (Sea Land Service, Inc. vs CA, GR 57828, June, 14, 1993; PAGCOR vs. BIR, GR No. 172087, March 15, 2011.

The grant of immunity, express or implied (or contractual) to particular persons or corporations or to persons or corporations of a particular class from a tax which persons or corporations generally within the same state or taxing district are obliged to pay (Greenfield vs. Meer, GR No. 156, September 27, 1946).

Taxation is a high prerogative of sovereignty whose relinguishment is never presumed (Luzon Stevodoring Co. vs. CA, GR No. L-58897, December 3, 1987).

General Rule
The Government is not bound by the errors committed by its agents. In the performance of its government functions, the State cannot be estopped by the neglect of its agents and officers (CIR vs. CTA, GR No. 106611, July 21, 1994).

Reason
Upon taxation depends the Government's ability to serve people for whose benefit taxes are collected. to safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people 

Exception
The CIR is precluded from adopting a position inconsistent with the one previously taken where injustice would result therefrom or where there has been a misrepresentation to the taxpayer (Balmaceda vs. Corominas, GR No. L-21971, Sept. 5, 1975).

A contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced.
(Art. 2028, Civil Code).

Rule
Compromises are allowed and enforceable when the subject matter thereof is not expressly prohibited from being compromised and the public official entering into is duly authorized by law. (Vitug vs. Acosta).

Persons Allowed to Compromise
1. BIR Commissioner - may enter, under certain conditions into a compromise for both the civil and criminal liabilities of the taxpayer (Sec, 204, Tax Code).
2. Collector of Customs - with respect to customs duties limited to cases where legitimate authority is specifically granted, such as in the remission of duties. (Tariff Code, Sec. 709)
3. Customs Commissioner (Tariff Code, Sec. 2316)
4. Local Government Code - no provision regarding compromise; however, tax (not criminal) liability is not prohibited from being compromise (Art. 2034 and 2035).

Compensation takes place when two persons, in their own right, are creditors and debtors of each other (Civil Code, Art. 1278). This presupposes mutual obligations between the parties, and that they are mutual creditors and debtors of each other.

In Taxation
The Government may be allowed to set-off a taxpayer's claim for refund that has been finally adjudged by the courts in favor of the taxpayer as against a tax assessment that the Government issued to such taxpayer even if such assessment is not yet final and executory (CIR vs. Cebu Portland, GR No. L-29059, December 15, 1987).

General Rule
Taxes are not subject to set-off or legal compensation (Republic vs. Mambulao, GR No. L-177225, Feb. 28, 1962).

Reasons
Taxes and debts are of different nature and character. The taxes assessed are the obligations of the taxpayer arising from law, while the money judgment against the government is an obligation arising from contract, whether express or implied (Francia vs. IAC, GR No. L-67649, June 28, 1988).

Taxes are not in the nature of contracts between the parties but grow out of duty to, and are positive acts of the government to the making and enforcing of which, the personal consent of the individual taxpayers is not required (Republic vs. Mambulao, GR No. L-177225, Feb. 28, 1962).

Exception
When the set-off took place because both the claim of the Government for inheritance taxes and the claim of the estate for services rendered have already become overdue, demandable, and fully liquidated. Further, an amount for the claim of the estate had already been appropriated by the government by virtue of a law (Domingo vs. Garlitos, GR No. L-18994, June 29, 1963; see also Article 1279 of Civil Code for legal compensation).

Where the refund of a tax illegally or erroneously collected or overpaid by a taxpayer is barred by prescription, a tax presently being assessed against a taxpayer may be recouped or set-off against the tax already barred by prescription.

This doctrine is pertinent only to taxes arising from the SAME transaction on which an overpayment is made and underpayment is due.

Equitable recoupment is allowed ONLY in common law countries, not in the Philippines

Reason:
If allowed, both the collecting agency and the taxpayer might be tempted to delay and neglect the pursuit of their respective claims which the period prescribed by law (Collector vs. UST, 104 Phil. 1062).

Taxes must only be imposed prospectively, unless other provided by such law (Civil Code, Art. 4; Hydro Resources vs. CA, GR No. 80276, December 21, 1990).

The legislative intent evincing that a tax statute should operate retroactively should be explicit and perfectly clear. Thus, a statute should be considered as prospective in its operation, whether it enacts, amends or repeals, unless the language of the statute clearly demands or expresses that it shall have a retroactive effect (Lorenzo vs. Posadas, GR No. L-43082, June 18, 1937).

General Rule
The right to assess and collect are imprescritible (CIR vs. Ayala Securities, GR No. L-29484, November 21, 1980).

Exception
When the laws otherwise provide

Specifics
1. NIRC - assessment of internal revenue taxes within 3 years after the last day prescribed by law for filing of return (Sec. 203) and 10 years in cases of fraud (Sec. 222).
2. Tariff and Customs - entry and passage free of duty, after the expiration of the 3 years from the date of the final payment of duties, in the absence of fraud or protest, be final and conclusive upon all parties, unless the liquidation of the import entry was merely tentative (Sec. 1603, Tariff Code as amended by R.A. 9135, Sec. 4)
3. Local Government Code - Five (5) year prescriptive period for assessment and collection (LGC, Sec. 194 and 270).

(Republic Act 10754, July 25, 2016)

Persons with disabilities (PWD) can again be considered as qualified dependents for tax purposes. In line with this purpose, the establishments may claim the discounts it granted as tax deductions based on the net cost of goods sold or services rendered. The claim for deductions can only be done in the same taxable year the discount is granted. Such claim shall be included in gross sales receipts subject to proper documentation for tax purposes. In addition, taxpayers taking care of PWDs who are within their fourth civil degree of consanguinity or affinity may include these PWDs in their list of dependents and enjoy the corresponding additional personal exemption of P25,000 for tax purposes. To qualify as dependents, the PWDs should be unemployed and chiefly dependent on the taxpayer for support.

-Revenue memorandum circulars are considered administrative rulings - (565 Phil. 255, 269-270 (2007)). 

-It was held that under R.A. No. 1125, 12 which was thereafter amended by RA No. 9282, 13 such rulings of the CIR (including revenue memorandum circulars) are appealable to the Court of Tax Appeals (CTA), and not to any other courts. 

-In the same case, we further declared that "failure to ask the CIR for a reconsideration of the assailed revenue regulations and RMCs is another reason why a case directly filed before us should be dismissed. It is settled that the premature invocation of the court's intervention is fatal to one's cause of action. If a remedy within the administrative machinery can still be resorted to by giving the administrative officer every opportunity to decide on a matter that comes within his jurisdiction, then such remedy must first be exhausted before the court's power of judicial review can be sought. The party with an administrative remedy must not only initiate the prescribed administrative procedure to obtain relief but also to pursue it to its appropriate conclusion before seeking judicial intervention in order to give the administrative agency an opportunity to decide the matter itself correctly and prevent unnecessary and premature resort to the court

-the CTA "can now rule not only on the propriety of an assessment or tax treatment of a certain transaction, but also on the validity of the revenue regulation or revenue memorandum circular on which the said assessment is based

-income derived by PAGCOR from its gaming operations such as the operation and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools and related operations is subject only to 5% franchise tax, in lieu of all other taxes, including corporate income tax

-its contractees and licensees remain exempted from the payment of corporate income tax and other taxes since the law is clear that said exemption inures to their benefit. 


**Bloomerry Resorts and Hotels, vs. BIR
GR 212530, August 10, 2016