It is a well settled principle that "taxation is the rule, tax exemption is the exception." Tax exemptions must be strictly interpreted such that exemption will not be conferred unless the terms under which it is granted clearly and distinctly show that such taxpayer is exempted from his share in the common burden of taxation.

In other words, tax exemptions are never presumed and are strictly interpreted against the taxpayer and liberally in favor of the taxing authority. This norm was reiterated by the Court of Tax Appeals in the case of Rowena Vicente et. al. vs. Commissioner of Internal Revenue, where several ADB Filipino employees filed various claims for refund of supposed erroneous payment of income taxes on compensation income for taxable years 2012 and 2013.

Tax treatment of compensation income of ADB