Competence. Integrity. Commitment.

COURT OF TAX APPEALS DECISIONS

APPEAL OF FDDA TO THE REGIONAL DIRECTOR AND FILING OF MOTION FOR RELIEF TO THE CIR ON THE CIR’S DECISION RENDERS THE ASSESSMENT FINAL AND EXECUTORY. If the protest is denied by the Commissioner of Internal Revenue’s (CIR) duly authorized representative via Final Decision on Disputed Assessment (FDDA), the taxpayer may either: (i) appeal to the CTA within 30 days from date of receipt of the FDDA; or, (ii) elevate his protest through a request for reconsideration to the CIR’s within 30 days from date of receipt of the FDDA. Moreover, if the taxpayer decides to lodge an administrative appeal with the CIR, and the same is denied by the latter, in whole or in part, the taxpayer may appeal to the CTA the CIR’s decision, within 30 days from receipt thereof. Otherwise, the assessment shall become final, executory and demandable.  Thus, where the taxpayer elevated the  FDDA not in the office of commissioner but to the Regional Director, the assessment becomes final. Moreover, where the CIR issued a decision, and instead of appealing to the CTA, the taxpayer filed an Urgent Motion for Relief, the assessment becomes final, and CTA lost jurisdiction. (Permafrost Marketing, Inc. v. CIR, CTA Case No. 10410, July 4, 2025)

TAX CREDITS MUST BE CLAIMED IN THE PROPER PERIOD; EXCESS CREDITS WERE DISALLOWED TO PREVENT PREMATURE AND DOUBLE UTILIZATION. Tax credits are allowed only in the taxable period when the related income is earned or received, and may not be prematurely applied or used in a manner that results in double benefit; otherwise, their disallowance is proper. In this case, the BIR disallowed the taxpayer’s claimed creditable withholding taxes because the supporting certificates were dated outside taxable year 2016, and the taxpayer failed to prove that the related income was earned in 2016, thereby justifying the full disallowance. The BIR also deducted the excess minimum corporate income tax and excess creditable taxes carried over to the succeeding period from the taxpayer’s 2016 tax credits to prevent premature and duplicative application of these credits. Verification showed that the excess CWT was actually utilized as credits in later taxable years, confirming that allowing them again against the 2016 deficiency would result in double benefit, while the excess MCIT was not in fact utilized and thus should not have been disallowed. Consequently, the disallowance of CWT and the excess credits carried over was upheld. (Kalayaan Engineering Company Inc. v. Commissioner of Internal Revenue, CTA Case No. 10839, October 29, 2025)

3-YEAR PRESCRIPTION TO ASSESS SHALL APPLY IF 30% THRESHOLD IS NOT BREACHED AND 50% SURCHARGE IS NOT IMPOSED; 3-YEAR PRESCRIPTION TO COLLECT APPLIES  FROM ISSUANCE OF ASSESSMENT AND NOT TOLLED BY REQUEST FOR RECONSIDERATION. Under the law, the prescriptive period for assessment of taxes is three years from the last day to file the return, extendable only if a false or fraudulent return is established with clear evidence, and the period to collect begins upon issuance of the assessment. In this case, there was no substantial under-declaration, overstatement of deductions, or evidence of fraud to invoke the extraordinary 10-year period, and the BIR did not impose the corresponding 50% surcharge. Consequently, the ordinary three-year period applied, making the right to assess deficiency IT, VAT, and EWT for 2013 expire before collection efforts. Moreover, the BIR has three-year period to collect from the issuance of the assessment and tolled when BIR grants a request to reinvestigation. Here, the taxpayer merely requested for reinvestigation. Accordingly, the 3-year prescription applies by the time the BIR enforced collection by filing its Answer. Thus, the Court enjoined the BIR from enforcing collection of the 2013 deficiency taxes. (Noatum Logistics Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10867, July 30, 2025)

ASSESSMENT IS INVALID WHEN WAIVERS ARE NOT ACCEPTED BY THE BIR BEFORE THE ASSESSMENT PERIOD EXPIRES OR ISSUED WITHOUT PROPER AUTHORITY. The law provides that the period to assess taxes is three years, extendable only through validly executed waivers accepted by the BIR and facilitated by officers with proper authority. In this case, five waivers executed by Medicard Philippines, Inc. were defective: four lacked proof of timely BIR acceptance, and four were obtained by a revenue officer without a valid LOA. Consequently, the original three-year prescriptive period for assessing Income Tax, VAT, and EWT for TY 2014 lapsed before the undated Formal Letter of Demand and Assessment Notices were served, rendering them void. As a result, the Court canceled and set aside the assessments. (Medicard Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10853, October 30, 2025)

THE CTA MAY UPHOLD DOUBTFUL VALIDITY OF THE ASSESMMENT EVEN THOUGH BIR DENIES THE OFFER OF COMPROMISE. A compromise may be granted when there exists reasonable doubt as to the validity of the assessment, and while tax assessments are generally presumed correct, such presumption does not apply when the assessment is arbitrary, capricious, or “naked,” meaning it is not anchored on actual facts but merely on presumptions. In this case, the assessment against the taxpayer was premised on alleged “unaccounted sources of cash” derived from discrepancies between its financial statements, VAT returns, and alphalists, which the BIR automatically treated as undeclared income. Consequently, the assessment was based on mere presumptions rather than factual evidence, rendering it not only of doubtful validity but legally defective. (GMA Worldwide (Phils.), Inc. v. Commissioner of Internal Revenue, CTA Case No. 11158, August 1, 2025

RECEIPT OF THE FAN BEFORE THE END OF THE 15-DAY PERIOD TO REPLY TO THE PAN RENDERS THE ASSESSMENT VOID. Taxpayer has 15 days to reply to the PAN. In this case, the records show that the taxpayer received the preliminary assessment notice on March 12, 2015 and was entitled to a full fifteen-day period, or until March 27, 2015, to submit a reply; however, the tax authority prematurely issued the formal letter of demand and final assessment notices on March 26, 2015, or one day before the lapse of the response period, a procedural defect that was expressly admitted by its own witness during trial. Jurisprudence categorically holds that the issuance of a final assessment before the expiration of the taxpayer’s response period constitutes a clear violation of due process, which is not cured by the subsequent filing of a protest or by claims of substantial compliance, and renders the assessment void, incapable of attaining finality, and without any legal basis for collection or compromise(GMA Worldwide (Phils.), Inc. v. Commissioner of Internal Revenue, CTA Case No. 11158, August 1, 2025

ASSESSMENT IS VOID IF THE FAN REITERATED THE FINDINGS IN THE PAN WITHOUT ADDRESSING THE REPLY TO THE PAN. As a legal basis, due process in tax assessment requires that the taxing authority strictly observe the mandatory procedure of fully informing the taxpayer, in writing, of the factual and legal bases of the assessment, and of genuinely considering the taxpayer’s explanations and evidence, with any rejection thereof being supported by stated reasons grounded on facts and law; failure to comply renders the assessment void and without legal effect. In this case, although a preliminary assessment was issued and a protest was timely filed, the subsequent formal letter of demand, final assessment notice, and final decision merely reiterated, almost word for word, the same findings and bases found in the preliminary notice, without addressing, evaluating, or explaining the rejection of the taxpayer’s defenses, thereby showing a patent disregard of the taxpayer’s submissions; moreover, even when the assessment amounts were modified, no reasons or factual bases were provided for such changes. This repetition of findings, coupled with the absence of any articulated consideration of the defenses raised, deprived the taxpayer of administrative due process, rendering the assessment void; in addition, the Court further found that the taxpayer is permanently exempt from income tax under its governing law, so that no deficiency income tax could legally arise in the first place, further nullifying the assessment. (Bukidnon II Electric Cooperative, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11142, October 9, 2025; Imasen Philippine Manufacturing Corporation v. CIR, CTA Case No. 10402 ).

ASSESSMENT IS VOID IF A REPLACING REVENUE EXAMINER RECOMMENDED THE PAN BUT LOA NAMING SUCH EXAMINER WAS ISSUED AFTER THE ISSUANCE OF THE PAN. The Tax Code provides that the CIR or duly authorized representatives may examine a taxpayer and issue assessments, and such authority must be expressly granted through a Letter of Authority (LOA); any participation by revenue officers not named in a valid LOA renders the resulting audit or assessment void, as it violates the taxpayer’s right to due process. In this case, although the audit was initially authorized under a valid LOA, a group supervisor who was not named in the LOA participated in supervising and reviewing the audit that led to the issuance of the preliminary assessment notice, and no LOA had been issued for his involvement at that time; consequently, the participation of the unauthorized officer invalidated the assessment and related collection notices, notwithstanding any subsequent LOA or continuation by authorized officers. Accordingly, the assessment and the final decision on the disputed assessment were cancelled and set aside. (O-Healthcare Solution Phil., Inc. v. Commissioner of Internal Revenue, CTA Case No. 10951, July 30, 2025).

FAILURE TO FILE A PROTEST OR FILING AN OFFER OF COMPROMISE RENDERS THE ASSESSMENT FINAL AND EXECUTORY; HOWEVER, FAILURE TO INITIATE COLLECTION EFFORTS WITHIN THE PRESCRIBED PERIOD PREVENTS THE BIR FROM COLLECTION. Under the tax laws and implementing regulations, a final assessment becomes final, executory, and demandable when the taxpayer fails to file a valid protest within the prescribed period, fails to submit supporting documents for a protest for reinvestigation, abandons a pending protest, or fails to timely elevate an adverse decision or inaction to the CTA, after which the government is given only a limited period to enforce collection through the modes allowed by law. Applying these rules, the Court held that the deficiency income tax and VAT assessments for taxable years 2006 and 2007 had already become final and executory because the protest filed against the second assessment for 2006 was in substance a mere motion for reconsideration without submission of supporting documents, was later expressly abandoned by the filing of an application for compromise settlement which was treated as an admission of liability, and no protest at all was filed against the 2007 assessment; consequently, while the assessments were already final, the government nonetheless lost its right to collect them because no warrant of distraint and levy, garnishment, or judicial action was initiated within the applicable prescriptive period counted from the taxpayer’s receipt of the final assessment notices, rendering further collection efforts legally untenable, and for the same reasons, the taxpayer was likewise not entitled to any refund of amounts paid pursuant to the compromise application. (Remie R. Talaver v. Hon. Romeo D. Lumagui, in his capacity as Commissioner of Internal Revenue, CTA Case No. 11211, Decision dated 22 August 2025.)

INTENT MUST BE ESTABLISHED TO FOR 10-YEAR PRESCRIPTIVE PERIOD TO APPLY. Under the tax laws, the government is generally allowed 3 years which to assess internal revenue taxes, and the use of an extended prescriptive period (10 years) is permitted only in exceptional cases where there is a clear showing that the taxpayer committed false or fraudulent acts with intent to evade tax, which intent must be duly proven. Applying this rule, the Court held that the assessment for taxable year 2009 was already time-barred because the annual income tax return was filed on 15 April 2010, giving the taxing authority only until 15 April 2013 to validly issue an assessment, yet the Final Assessment Notice was issued only on 3 June 2015; at the time the ordinary three-year period lapsed, prevailing jurisprudence already required proof of intent to evade tax before the extended ten-year period could be invoked, and since no such intent was established, the taxing authority could not rely on the longer prescriptive period, rendering the assessment void for having been issued beyond the allowable time. (CTA Case No. 9837, Meridien East Realty & Development Corporation v. CIR, CTA Case No. 9837)

COURT OF TAX APPEALS DECISIONS

A TAXPAYER’S VAT REGISTRATION IS SATISFIED ONCE THE HEAD OFFICE IS VAT-REGISTERED; BRANCHES NEED NOT BE SEPARATELY VAT-REGISTERED FOR PURPOSES OF A VAT REFUND. THE CTA En Banc held that only a VAT-registered person may claim a refund of input VAT attributable to zero-rated sales, and VAT registration is complied with once the taxpayer’s head office is duly registered as a VAT taxpayer. Applying this to the case, the Court ruled that the taxpayer’s branch did not need separate VAT registration because the Tax Code requires VAT registration only at the entity level, and administrative regulations cannot impose additional requirements not found in the law. Although the Court initially denied the claim for lack of branch registration, the En Banc reversed this finding, holding that head-office VAT registration was sufficient. (Foundever Philippines Corporation (formerly: Sitel Philippines Corporation) v. CIR, CTA EB No. 2799 (CTA Case No. 10136), April 2025)

TAXPAYERS CLAIMING ZERO-RATED VAT MUST STRICTLY SUBSTANTIATE THAT SERVICES WERE PERFORMED AT THE CORRECTLY REGISTERED SITE; LACK OF PERSONAL KNOWLEDGE OF THE WITNESS AND REGISTRATION AFTER THE PERIOD OF REFUND WARRANT THE DENIAL OF THE CLAIM. The law provides that only VAT-registered persons engaged in zero-rated or effectively zero-rated sales are entitled to claim input VAT refund, and the taxpayer must prove that, among others, services were rendered to nonresident foreign clients. Here, the taxpayer failed to demonstrate that the services were actually rendered at the Palawan Site during the relevant quarter, as the site was only registered after the period of claim, the witness (based in Mandaluyong City) lacked personal knowledge of operations, and no corroborating evidence such as operations records or agreements specifying the service site was provided. In view of the strict scrutiny applied in tax exemption claims, the Court found that the taxpayer did not satisfy all requisites for zero-rating, particularly the site-specific performance requirement, and thus disallowed the input VAT refund claim. (Foundever Philippines Corporation (formerly: Sitel Philippines Corporation) v. CIR, CTA EB No. 2799 (CTA Case No. 10136), April 2025)

TAX EXEMPTION IN THE SUBIC SPECIAL ECONOMIC ZONE APPLIES ONLY AFTER THE SBMA ISSUES A CERTIFICATE OF REGISTRATION OR CRTE, AND MERE EXECUTION OF A LEASE OR BOARD APPROVAL DOES NOT CONFER EXEMPTION; FAILURE TO COMPLY RESULTS IN LIABILITY FOR DOCUMENTARY STAMP TAX. Business enterprises within the Subic Special Economic Zone are exempt from national and local taxes, including documentary stamp tax, subject to registration with the SBMA and issuance of a Certificate of Registration or CRTE. In the case at hand, the taxpayer argued that its lease agreement and Board approval prior to the CRTE issuance should suffice for tax exemption. The Court held that only the issuance of the CRTE finalized registration and conferred entitlement to the tax exemption. Evidence showed that taxpayer executed the lease before the CRTE was issued, and that several procedural steps remained before registration could be deemed complete. Consequently, the lease agreement was subject to documentary stamp tax. The Court also ruled that the taxpayer was not liable for compromise penalty, as no agreement with the BIR had been made. (CIR v. The Teleempire Incorporated CTA EB No.2817, April 29, 2025; The Teleempire Incorporated v. CIR, CTA EB No. 2819, April 29, 2025 2025)

A FOREIGN AFFILIATE CONDUCTING CORE BUSINESS ACTIVITIES THROUGH A PHILIPPINE ENTITY IS CONSIDERED “DOING BUSINESS” LOCALLY. In zero-rated sales, one of the requirements is that the non-resident foreign corporation is not doing business in the Philippines. Here, the taxpayer acted as an agent of its foreign affiliate, performing significant and integral services in the Philippines under strict contractual controls, earning fees almost entirely from a foreign company, and operating under the affiliate’s instructions, pricing, among others. These facts established that the foreign company was effectively conducting business in the Philippines through the taxpayer, making it a resident foreign corporation engaged in trade or business locally, thereby disqualifying the VAT refund. (PPD Pharmaceutical Development Philippines Corp. v. Commissioner of Internal Revenue, CTA EB No. 2839 (CTA Case No. 10249), April 3, 2025)

IMPORTED COMMISSARY SUPPLIES 1) NECESSARY FOR OPERATIONS AND 2) CHEAPER OR UNAVAILABLE LOCALLY ARE EXEMPT FROM EXCISE TAX.  Under the law, a corporation may claim excise tax exemption on imported commissary supplies if it meets certain conditions, including payment of corporate income tax for the relevant period, use of the imported items in transport and related operations, and demonstration that the supplies are not reasonably available in the local market in terms of quantity, quality, or price. In this case, Philippine Airlines established compliance through detailed evidence: testimony of its in-flight materials purchasing manager, tables comparing the cost of importing versus local purchase, and published local and international price lists. The evidence showed that the cost of importing wines and liquor was lower than purchasing them locally. The Court emphasized that once the taxpayer establishes a prima facie right to the refund, the BIR must disprove it, which it failed to do. Accordingly, the Court affirmed the refund of excise taxes on imported wine and liquor products. (Commissioner of Internal Revenue v. Philippine Airlines, Inc., CTA EB No. 2866 (CTA Case No. 8340), April 24, 2025)

A TAXPAYER CLAIMING REFUND OF EXCISE TAX ON COPPER CONCENTRATES MUST STRICTLY COMPLY WITH STATUTORY RECOVERY PERIODS AND SECURE GOVERNMENT APPROVAL OF PRE-OPERATING EXPENSES; FAILURE TO DO SO BARS RECOVERY. Under the law, excise taxes due from FTAA contractors are collectible only after the contractor has fully recovered its pre-operating, exploration, and development expenses, reckoned from the date of commercial production. The Court found that the taxpayer failed to prove the proper reckoning point for its recovery period, as the date declared in the feasibility study and other documentation was not adequately established, and the contractor’s claimed pre-operating expenses were not approved by the DENR Secretary as required. Without proof of valid, unrecovered pre-operating expenses, the taxpayer could not establish that it was still within the recovery period, a prerequisite for excise tax refund claims. Accordingly, the Court affirmed the denial of the refund, emphasizing that tax exemptions and refunds are strictly construed against the taxpayer. (OceanaGold Philippines, Inc. v. Commissioner of Internal Revenue, CTA EB No. 2876 (CTA Case Nos. 9627, 9697, 9760, 9830 & 9856), May 9, 2025)

TAXPAYERS CLAIMING ZERO-RATED SALES MUST STRICTLY PROVE ACTUAL FOREIGN CURRENCY RECEIPTS OR VALID OFFSETTING ARRANGEMENTS, SUPPORTED BY CLEAR AND UNDERSTANDABLE EVIDENCE. Zero-rated sales of services require proof of foreign currency payment or a valid offsetting arrangement. The Court found that the taxpayer failed to establish that the funds advanced by its head office could be offset against receivables from its affiliates, as the Short-Term Credit Facility Agreement only covered loans between the head office and each affiliate, not between affiliates themselves. Moreover, the taxpayer’s Schedule of Offsetting of Receivables, the only evidence of such offsetting, was largely in a foreign language and was not adequately explained or translated, rendering it inadmissible as proof. Consequently, petitioner failed to prove the existence of a valid offsetting arrangement and, therefore, could not substantiate its claim of engaging in zero-rated sales of services. (Avaloq Philippines Operating Headquarters v. Commissioner of Internal Revenue, CTA EB No. 2897 (CTA Case No. 10397), June 2025)

INPUT VAT ON PURCHASES NOT COVERED BY A ZERO-RATED INCENTIVE IS REFUNDABLE IF VALID, PAID, AND PROPERLY SUBSTANTIATED. Under the law, a VAT-registered taxpayer may claim a refund of input taxes that are due or paid, even if the purchases are not directly exempt or zero-rated, provided they are incurred in the course of business and properly documented. In this case, while the taxpayer’s renewable energy operations are entitled to zero-rated VAT for certain plant-related purchases, not all local purchases were necessary for its plant development and therefore incurred regular VAT. The Court found that the taxpayer sufficiently proved that its input VAT arose from these non-zero-rated local purchases through supporting schedules and documents, establishing that it was the proper party to claim the refund. The Court accordingly allowed the refund of the input VAT that was valid, due, and unutilized. (Commissioner of Internal Revenue v. Monte Solar Energy, Inc., CTA EB No. 2919 (CTA Case No. 10434), April 15, 2025)

AN ASSESSMENT IS VOID WHEN THE BIR FAILED TO PROVE THAT PERSONAL SERVICE IS NOT PRACTICABLE; AND CANNOT PROVE ACTUAL RECEIPT OF THE PAN AND FAN/FLD, WHEN DENIED RECEIPT THEREOF THE BY THE TAXPAYER. Jurisprudence consistently holds that when a taxpayer categorically denies receipt of tax assessment notices, the burden shifts to the BIR to prove, by competent and credible evidence, that the PAN and FAN/FLD were actually received; mere registry receipts, or bare allegations of mailing do not suffice, as due process demands actual notice to enable the taxpayer to respond. Applying this doctrine, the CTA found that the BIR failed to justify resort to service by registered mail, failed to prove that personal service was impracticable, and failed to present reliable proof of mailing and receipt. Consequently, the failure to validly serve the PAN and FAN/FLD violated due process, rendering the assessment void and without legal effect. (Aegis Integrated Lightning and Grounding Protection Inc. v. Commissioner of Internal Revenue, CTA Case No. 10716, August 14, 2025)

RECEIPT OF FINAL DECISION IS PRESUMED IF TAXPAYER’S TESTIMONY IS NOT CREDIBLE; INITIATORY PLEADINGS SHOULD BE FILED BY PERSONAL SERVICE OR MAIL, AND IF ORDINARY MAIL, DATE OF COURT RECEIPT IS THE DATE OF FILING. The CTA exercises appellate jurisdiction only over decisions or inaction of the CIR when an appeal is filed strictly within the reglementary 30-day period, and compliance with the prescribed mode of filing is jurisdictional. Once the CIR establishes the fact of proper mailing of its decision, a disputable presumption of receipt arises, which prevails unless rebutted by competent and credible evidence. In this case, the CIR sufficiently proved that the Final Decision was dispatched by registered mail in May 2021, giving rise to the presumption that it was received by the taxpayer in due course. The taxpayer’s claim that it received the decision only in January 2022 through personal service was unsupported by any objective proof, such as acknowledgment stamps or receipts, and was contradicted by its own witness testimony. Moreover, even assuming arguendo that receipt occurred on January 20, 2022, the Petition for Review was still filed beyond the allowable period and, in any event, was improperly filed via private courier, an impermissible mode for initiatory pleadings, rendering the filing effective only upon actual receipt by the CTA. Consequently, the petition was filed out of time, the CIR decision had already become final and executory, and the CTA correctly dismissed the case for lack of jurisdiction. (SCG Marketing Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10779, October 9, 2025)

AN ASSESSMENT ISSUED 7 DAYS AFTER THE RECEIPT OF FAN/FLD IS VOID. Under the rules, taxpayer has 15 days to respond to PAN. In this case, the petitioner received the PAN on 08 January 2013 and timely filed its reply via registered mail on 09 January 2013. Despite this, the BIR issued the FLD/FAN on 15 January 2013, only seven (7) days after receipt of the PAN and well before the expiration of the 15-day period, which ended on 23 January 2013. Worse, the BIR’s authorized representative actually received the petitioner’s PAN reply only on 16 January 2013, meaning the FLD/FAN had already been issued even before the reply was received and considered. These undisputed dates clearly show that the assessment was prematurely issued, depriving the petitioner of its right to fully respond and have its defenses evaluated, thereby violating administrative due process and rendering the tax assessments null and void. (MyServ International Inc., as represented by Ms. Cecilia O. Toledo v. Cesar R. Dulay, Commissioner of Internal Revenue, et al., CTA Case No. 10796, July 17, 2025)

AN ASSESSMENT IS VOID WHEN A TAXPAYER RECEIVES A FLD/FAN AFTER THE DUE DATE.  The law mandates that a taxpayer must be informed in writing of the factual and legal bases of any proposed assessment, and that an FLD/FAN must contain a definite amount of tax due with a demand for payment within a specific, prospective period; failure to comply renders the assessment void. In this case, the FAN was issued on January 3, 2019 with a stated due date of January 31, 2019, and the FLD was dated February 11, 2019, but petitioner received both notices only on February 12, 2019, after the due date had already lapsed. The FLD and FAN also failed to state a fixed and determinate tax amount, leaving the liability uncertain and contingent on an already-lapsed due date. These defects deprived the taxpayer of a fair opportunity to pay or protest, thereby violating due process and nullifying the assessment. (I-Cyberworld Biz, Inc., represented by Jacqueline Guinto v. Bureau of Internal Revenue, represented by Commissioner Caesar R. Dulay, CTA Case No. 10827, July 11, 2025)

ASSESSMENT IS VOID IF THE REVENUE OFFICERS, WHO ARE NOT NAMED IN THE LOA, SIGNED THE WAIVER, INDICATED IN THE NOTICE OF INFORMAL CONFERENCE AND RECOMMENDED THE ISSUANCE OF PAN. Only the Commissioner of Internal Revenue (CIR) or his duly authorized representatives may examine taxpayers and issue assessments, and only Regional Directors or other officials specifically authorized by the CIR may issue Letters of Authority (LOAs) to revenue officers. BIR regulations further require that LOAs identify the authorized officers and mandate the issuance of a new LOA whenever cases are reassigned. In this case, the LOA authorized ROs Argoso and GS Favis to audit the taxpayer, yet the audit was actually conducted by RO Joey Fragante and GS Josefina B. Yu, who were not named in the LOA. The reassignment of ROs was not properly authorized by a valid LOA, as the memorandum signed by RDO Espiritu exceeded his authority. The absence of a valid LOA and the participation of unauthorized officers (signing the waiver and recommending the issuance of the PAN) violated both statutory and due process requirements, rendering the audit and resulting assessment fatally defective, null, and void. (Philam Properties Corporation v. Commissioner of Internal Revenue, CTA Case No. 10921, October 1, 2025)

REVENUE ISSUANCES

Revenue Memorandum Circular No. 109-2025

BIR DEADLINES FROM DECEMBER 22 TO DECEMBER 28, 2025. A gentle reminder on the following deadlines, as may be applicable:

COURT OF TAX APPEALS DECISIONS

THE COURT DENIED THE VAT ZERO-RATING CLAIM BECAUSE THE TAXPAYER FAILED TO PROVE THAT ASURION EUROPE LIMITED AND NEW ASURION EUROPE LIMITED WERE THE SAME NRFC. Under the rules on VAT zero-rating of services rendered to a non-resident foreign corporation (NRFC), the taxpayer must establish the true identity of the NRFC. Applying this standard, the Court found that the SEC Certification of Non-Registration and the Articles of Association presented by petitioner referred only to Asurion Europe Limited and not to New Asurion Europe Limited, the entity to whom the zero-rated sales were allegedly made. The taxpayer likewise failed to provide independent proof that these two entities are the same, and the testimonies of its finance manager and the court-commissioned independent accountant were deemed insufficient to establish such identity. Following the strict scrutiny applied to refund claims, the Court held that the taxpayer did not meet an essential element for zero-rating and thus sustained the disallowance sales to New Asurion Europe Limited. (Asurion Hongkong Limited – ROHQ v. CIR, CT Case No. 10413, April 24,2025)

A VAT ZERO-RATING CLAIM MUST BE SUPPORTED BY CLEAR PROOF OF THE ACTUAL SERVICE RENDERED, AND A STATEMENT “PURPOSE FOR TRAVEL COST” IS INSUFFICIENT TO ESTABLISH THE NATURE OF THE SERVICE. Under the requirements for VAT zero-rating of services to foreign clients, the taxpayer must establish through adequate and credible evidence the specific nature of the service performed. Here, the taxpayer argued that a service agreement is not indispensable and relied instead on witness testimony, SEC certifications, company documents, and VAT official receipts to substantiate its zero-rated sale. However, the Court found that the only official receipt issued merely described the payment as “Purpose for Travel Cost,” which neither identified nor substantiated the actual service rendered and failed to corroborate the witnesses’ statements. Given the strict construction applied to refund claims, the absence of evidence clearly describing the nature of the service was fatal to the taxpayer’s claim. (Asurion Hongkong Limited – ROHQ v. CIR, CT Case No. 10413, April 24,2025); While Regus Service Centre, Philippines B.V. presented VAT zero-rated official receipts, but it did not indicate the nature of the services rendered, a mandatory invoicing requirement. This defect rendered the substantiation of its zero-rated sales incomplete and prevented Regus from proving essential elements for a valid refund. (Regus Service Centre, Philippines B.V. v. Commissioner of Internal Revenue, CTA Case No. 10813, July 1, 2025)

EVEN IF A TAXPAYER FIRST OPTS FOR A REFUND, CARRYING OVER EXCESS CWTS MAKES THE CHOICE IRREVOCABLE, PREVENTING ANY LATER REFUND FOR THAT TAXABLE PERIOD. Under the rule governing excess and unutilized creditable withholding taxes, a taxpayer may either seek a refund/TCC or carry over the excess credits to succeeding taxable years, but choosing the carry-over option renders that choice irrevocable for the taxable period concerned. In this case, the taxpayer initially marked “To be refunded” in its 2019 AITR, indicating its intent to claim a refund. However, it subsequently carried over the same excess CWTs—including the amount claimed—to its 2020 amended AITR and quarterly returns as prior year’s excess credits. This act effectively shifted its choice to the carry-over option, which, by law and jurisprudence, cannot thereafter be reversed. Having availed of the carry-over, the taxpayer is barred from claiming a refund and may only apply the excess taxes to future periods until fully utilized. Accordingly, the Court denied the refund claim. (Decision dated Norconsult Management Services Phils., Inc. v. CIR, CTA Case No. 10835, July 1, 2025)

TO CLAIM A REFUND OF EXCESS CWTS, TAXPAYERS MUST PROVIDE DETAILED RECORDS LINKING WITHHELD INCOME TO REPORTED GROSS INCOME, AS SUMMARY FIGURES OR AGGREGATE BALANCES ARE INSUFFICIENT. To secure a refund of excess and unutilized creditable withholding taxes, the taxpayer must prove, among others, that the income payments on which CWTs were withheld were actually reported as part of gross income in its annual income tax return. Here, the Court found that the taxpayer failed to meet this requirement. Although the taxpayer submitted its 2019 Annual ITR, AFS, and General Ledger, the Court noted inconsistencies in reported sales figures and the absence of detailed transaction records linking specific income payments subjected to withholding to the amounts declared as revenue in the ITR. Without such documentation, the Court could not verify compliance with the requisite that withheld income must be included in reported gross income. The CTA emphasized that summary figures or aggregate GL balances are insufficient and that taxpayers must present expanded or detailed ledgers directly tracing the CWT-related income to reported sales. Given the failure to substantiate this critical element—and applying the strictissimi juris rule governing tax refunds—the Court denied the refund claim. (Ford Group Philippines, Inc. v. CIR, CTA Case No. 10877,April 21, 2025)

WHEN INPUT VAT CANNOT BE DIRECTLY TRACED, IT MUST BE PROPORTIONALLY ALLOCATED BASED ON THE RATIO OF VAT-ABLE TO ZERO-RATED SALES USING THE TAXPAYER’S DECLARED (NOT SUBSTANTIATED) INPUT VAT, AVOIDING INDIRECT JUDICIAL ASSESSMENT. Under the rule requiring proportional allocation of input VAT, input taxes that cannot be directly attributed to either zero-rated or VAT-able sales must be apportioned based on sales volume. The CTA held that courts must use the taxpayer’s declared input VAT—not merely the substantiated portion—to avoid making an indirect judicial assessment, which is reserved exclusively to the BIR. Following this legal standard, the Court noted that Pure Essence reported mixed sales and that its input VAT could not be directly traced to any specific category. Thus, it allocated the taxpayer’s declared input VAT based on the ratio of VAT-able to zero-rated sales. (Pure Essence International Incorporated v. CIR, CTA Case No. 10932, May 19, 2025; Stefanini Philippines, Inc. v. CIR CTA Case No. 10595, 2025).

SINCE EXCISE TAX EXEMPTIONS ATTACH TO THE PETROLEUM PRODUCT, THE SELLER OR IMPORTER (NOT THE BUYER) IS ENTITLED TO CLAIM A REFUND WHEN THE PRODUCT IS SOLD TO EXEMPT ENTITIES. Under the rules governing excise taxes and the statutory exemption for petroleum products sold to specified exempt entities, the exemption is impersonal in nature and attaches to the petroleum product itself rather than to the purchaser. Jurisprudence has consistently held that excise tax is a property tax, and although the manufacturer or importer is the statutory taxpayer, the product becomes tax-exempt once sold to entities enumerated under the exemption, making any excise taxes previously paid erroneous or illegal. Here, the BIR argued that only buyers may invoke the exemption and that petitioner remained liable as manufacturer, but the Court rejected this position, citing Supreme Court rulings recognizing that manufacturers/importers may claim refunds when the petroleum products they sold are ultimately tax-exempt. Since the taxpayer’s imported and locally manufactured LPG was sold to tax-exempt entities, the product’s exempt status became fixed upon sale, thereby converting the excise taxes earlier paid into refundable erroneous payments. (Petron Corporation v. CIR, CTA Case No. 10438, 2025; see also Pilipinas Shell Petroleum Corporation v. CIR, CTA 10707, April 14, 2025)

FOR VAT ZERO-RATING ON EXPORTED SERVICES, TAXPAYERS MUST PROVE INWARD REMITTANCE IN ACCEPTABLE FOREIGN CURRENCY; FAILING TO DO SO INVALIDATES THE ZERO-RATING CLAIM. The consideration for exported services must be paid in acceptable foreign currency and accounted for in accordance with BSP rules. Here, Citco International Support Services Limited submitted VAT zero-rated receipts for certain clients, but failed to prove that the corresponding payments were inwardly remitted through the Philippine banking system and duly accounted for under BSP regulations, relying instead on RMC No. 57-97, which does not exempt proof of inward remittance; consequently, the Court found that petitioner did not satisfy an essential element for zero-rating of its sales, rendering its claim for VAT refund invalid, and denied the Petition for Review (Citco International Support Services Limited- Philippine ROHQ, CTA Case No. 10462, May 6, 2025).

IN INPUT VAT REFUND CLAIMS, TAXPAYERS MUST ELEVATE ADMINISTRATIVE CLAIMS TO THE CTA WITHIN 30 DAYS FROM AN ADVERSE DECISION OR LAPSE OF THE 90-DAY BIR PERIOD, WHICHEVER IS EARLIER. The CTA dismissed the Petition for lack of jurisdiction, holding that under Section 112(C) of the NIRC, as amended by the TRAIN Law, the Commissioner must act on an administrative input VAT refund claim within 90 days from the submission of complete documents, and the taxpayer must elevate the matter to the CTA within 30 days from receipt of an adverse decision or from the lapse of the 90-day period, whichever comes earlier. Here, Stefanini Philippines filed its administrative claim on July 15, 2020, giving the BIR until October 13, 2020 to decide; because no decision was issued by that date, the claim was deemed denied by operation of law, and the taxpayer had only until November 12, 2020 to file a judicial claim. Its Petition for Review filed on December 23, 2020 was therefore out of time, depriving the CTA of jurisdiction. (Stefanini Philippines Inc. v. CIR, CTA Case No. 10431, June 23, 2025)

BUREAU OF INTERNAL REVENUE ISSUANCES

Revenue Memorandum Circular No. 091-2025, October 8, 2025

THE BIR WILL NOW ACCEPT BOARD RESOLUTIONS AND SECRETARY’S CERTIFICATES SIGNED BY THE ASSISTANT CORPORATE SECRETARY AS PART OF THE DOCUMENTARY REQUIREMENTS FOR BUSINESS REGISTRATION. While previous rules under RMC No. 74-2025 required that only the duly appointed Corporate Secretary may sign Secretary’s Certificates, the BIR now recognizes that, for administrative efficiency and in line with corporate practices, such authority may be validly exercised by an Assistant Corporate Secretary. Accordingly, the BIR will accept Board Resolutions and Secretary’s Certificates signed by the Assistant Corporate Secretary as part of the documentary requirements for business registration. (Clarifying Documentary Requirements for Business Registration, Revenue Memorandum Circular No. 091-2025, October 8, 2025)

Revenue Memorandum Circular No. 092-2025

Under R.A. No. 12214 (CMEPA) and RMC No. 092-2025, taxpayers shall temporarily use BIR Form No. 0605 to remit the increased 20% final withholding tax on foreign currency deposit interest pending revision of Form 1602Q.

Revenue Memorandum Order No. 046-2025

The BIR streamlines the identification and monitoring of the ½% creditable withholding tax.

BIR RULINGS 

TRANSFER OF MEMBERSHIP SHARE BETWEEN TRUSTEES NOT SUBJECT TO CAPITAL GAINS TAX, DOCUMENTARY STAMP TAX, OR DONOR’S TAX UNDER DUE TO ABSENCE OF CONSIDERATION AND CHANGE IN BENEFICIAL OWNERSHIP. Transfers that do not involve consideration or conveyance of beneficial ownership are not subject to Capital Gains Tax (CGT), Documentary Stamp Tax (DST), or Donor’s Tax. In this case, a domestic corporation transferred a club membership share from its former trustee to a newly appointed trustee pursuant to a Declaration of Trust, where both trustees merely held legal title and the corporation retained full beneficial ownership. Since the transfer did not result in any gain, conveyance of beneficial interest, or act of liberality, the transaction was deemed exempt from CGT, DST, and Donor’s Tax. (BIR Ruling No. OT-190-2025, August 29, 2025)

A NON-STOCK, NON-PROFIT EDUCATIONAL INSTITUTION IS EXEMPT FROM INCOME TAX AND VAT ONLY FOR REVENUES ACTUALLY, DIRECTLY, AND EXCLUSIVELY USED FOR EDUCATIONAL PURPOSES, WHILE INCOME FROM NON-EDUCATIONAL ACTIVITIES REMAINS FULLY TAXABLE. Pursuant to Section 30(H) of the National Internal Revenue Code of 1997, as amended, non-stock, non-profit educational institutions are exempt from income tax on revenues derived from tuition fees and income from school-related facilities, provided such income is actually, directly, and exclusively used for educational purposes. Applying this provision, the Bureau of Internal Revenue issued a Certificate of Tax Exemption to a private non-stock, non-profit educational institution, recognizing its compliance with the statutory requirements and confirming its entitlement to exemption from income tax and VAT on its educational operations and ancillary services. However, it remains subject to other internal revenue taxes on non-exempt income, VAT or percentage tax on commercial activities beyond the exemption scope, and to its withholding and reporting obligations under applicable BIR rules and regulations. (Certificate of Tax Exemption No. SH30-192-2025, September 11, 2025)

BIR DEADLINES FROM DECEMBER 8 TO DECEMBER 14, 2025. A gentle reminder of the following deadlines, as may be applicable:

BIR ISSUANCE

The Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular No. 107‑2025, which temporarily suspends all field audits and related operations nationwide, including the issuance, revalidation, extension, or replacement of Letters of Authority (LOAs) and Mission Orders (MOs). This suspension applies to all BIR audit offices and divisions, covering both large and small taxpayers. The directive is intended to provide the BIR sufficient time to review and improve existing audit procedures, ensuring a more transparent and standardized approach in the future. While the suspension is in effect, taxpayers are not prohibited from voluntarily settling known tax liabilities, and operations will resume only upon further notice from the BIR Commissioner.

COURT OF TAX APPEALS DECISIONS

computed from the DOJ’s receipt of the assailed Resolution, as the deputized BIR prosecutor acts only as the DOJ’s representative while the DOJ retains control of the prosecution. Applying this rule, the 15-day period deadline to file the petition began on May 2, 2024, when the DOJ received the Resolution, and expired on May 17, 2024. Because the Petition for Review was filed only on May 22, 2024, it was filed out of time. (People of the Philippines v. Lemuel Sibuma Consolacion, CTA EB Crim. No. 150, CTA Crim Case No. O-983, May 29 2025)

CONDOMINIUM CORPORATIONS ARE NOT SUBJECT TO LOCAL BUSINESS TAX (LBT) UNLESS THEY ENGAGE IN PROFIT-ORIENTED ACTIVITIES, WHICH SHOULD BE PROVED BY THE LGU. Condominium corporations are generally not subject to LBT because their statutory purposes under the Condominium Act are limited to holding and managing common areas and performing activities necessary to maintain the condominium project—not to earn profit. Applying this rule, the MeTC, RTC, and the Court En Banc uniformly found that LGU’s collection of association dues and alleged rental fees fell within its lawful, non-profit functions as a condominium corporation, and LGU failed to present any evidence showing that the Company is engaged in profit-oriented activities that would remove it from the general exemption. Further, the Court held that the Environmental Inspection Fee (EIF) and Business Permit Fee (BPF) are regulatory fees—not taxes—and thus fall outside its jurisdiction. Accordingly, while the petition was procedurally cognizable, the substantive claims on LBT and costs of suit lack merit. (CTA EB No. 2843, RTC SCA Case No. 285, Amended Decision dated Aril 7, 2025; see also Taguig City Treasurer and the City Government of Taguig v. Forbeswood Heights Condominium, CTA EB No. 2888, May 15, 2025)

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. If you have clarification or concern or no longer wish to receive updates, please feel free to reach out to us.

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Dumlao & Co.

UNDER THE 1987 CONSTITUTION AND THE LOCAL GOVERNMENT CODE, A TAXPAYER MUST BE FULLY INFORMED OF THE LEGAL AND FACTUAL BASES OF A LOCAL TAX ASSESSMENT; THE RTC CORRECTLY RULED THAT DKT HEALTH’S ASSESSMENT REPORT VIOLATED DUE PROCESS BECAUSE IT LACKED SUFFICIENT DETAIL ON STATUTORY BASIS AND TAX APPORTIONMENT. Sections 195 and 196 of the Local Government Code prescribe that local tax assessments must clearly state the nature of the tax, the amount of deficiency, surcharges, penalties, and the period covered to adequately inform the taxpayer. In this case, Quezon City issued a two-page Assessment Report for DKT Health covering 2016–2021, but failed to indicate the precise statutory basis under the local revenue code and provided no detailed breakdown of the apportionment of sales between essential and non-essential products. As a result, DKT Health could not verify the computation of the deficiency tax. Precedents on proper assessment content establish that such omissions violate due process. Consequently, the RTC correctly ruled that the Assessment Report did not satisfy the required procedural safeguards, justifying DKT Health’s challenge (Quezon City v. DKT Health, Inc., CTA AC No. 304, June 13, 2025); a valid local tax assessment must inform the taxpayer of the nature, legal basis, period covered, and the specific deficiency tax, surcharge, interest, and penalties, the SOA issued to Royal Cargo cannot qualify as an assessment because it merely listed fees required for business permit renewal and was not issued after an examination of books. Applying this rule, the Court held that the SOA failed to apprise the taxpayer of the factual and legal bases of any deficiency, rendering Section 195 inapplicable and validating Royal Cargo’s recourse to a refund under the remedy for erroneous or illegal collection. (City Treasurer of Parañaque City v. Royal Cargo Inc., CTA EB No. 2908 (CTA AC No. 270), April 15, 2025)

CIVIL LIABILITY FOR UNPAID TAXES ARISES ONLY FROM A VALID TAX ASSESSMENT; A VOID FLD/FAN NEGATES BOTH CRIMINAL AND CIVIL LIABILITY UNDER SECTION 255 OF THE NIRC. Section 255 of the 1997 NIRC, as amended, penalizes any person who willfully fails to pay taxes, file returns, keep proper records, or remit withheld taxes when required by law or regulations, imposing both criminal and potentially civil consequences. While the general rule holds that a criminal acquittal does not automatically extinguish civil liability, which can be pursued based on preponderance of evidence, such liability is contingent upon the existence of a legally valid act or obligation. Here, the respondent was acquitted because the Bureau of Internal Revenue’s FLD/FAN was found void, as it failed to specify a clear due date for payment, rendering the assessment legally ineffective. Consequently, the Court emphasized that extinction of the penal action does not affect civil liability only when the underlying obligation is recognized in law, which is absent here. It was also ruled that Mendez case will not apply because in that case, there was no final assessment, unlike in this case, there is an assessment only that it was found void (People of the Philippines v. Enrico Candelaira Tuazon, CTA EB Crim. No. June 9, 2025).

APPEAL PERIOD IS COUNTED FROM RECEIPT BY THE PRINCIPAL COUNSEL (DOJ) NOT THE DEPUTIZED PROSECUTOR (BIR); HERE, DOJ’S EARLIER RECEIPT MADE THE PETITION LATE. Appeal periods are reckoned from receipt of the assailed ruling by the principal counsel—not a deputized lawyer—the filing period in this case must be computed from the DOJ’s receipt of the assailed Resolution, as the deputized BIR prosecutor acts only as the DOJ’s representative while the DOJ retains control of the prosecution. Applying this rule, the 15-day period deadline to file the petition began on May 2, 2024, when the DOJ received the Resolution, and expired on May 17, 2024. Because the Petition for Review was filed only on May 22, 2024, it was filed out of time. (People of the Philippines v. Lemuel Sibuma Consolacion, CTA EB Crim. No. 150, CTA Crim Case No. O-983, May 29 2025)

CONDOMINIUM CORPORATIONS ARE NOT SUBJECT TO LOCAL BUSINESS TAX (LBT) UNLESS THEY ENGAGE IN PROFIT-ORIENTED ACTIVITIES, WHICH SHOULD BE PROVED BY THE LGU. Condominium corporations are generally not subject to LBT because their statutory purposes under the Condominium Act are limited to holding and managing common areas and performing activities necessary to maintain the condominium project—not to earn profit. Applying this rule, the MeTC, RTC, and the Court En Banc uniformly found that LGU’s collection of association dues and alleged rental fees fell within its lawful, non-profit functions as a condominium corporation, and LGU failed to present any evidence showing that the Company is engaged in profit-oriented activities that would remove it from the general exemption. Further, the Court held that the Environmental Inspection Fee (EIF) and Business Permit Fee (BPF) are regulatory fees—not taxes—and thus fall outside its jurisdiction. Accordingly, while the petition was procedurally cognizable, the substantive claims on LBT and costs of suit lack merit. (CTA EB No. 2843, RTC SCA Case No. 285, Amended Decision dated Aril 7, 2025; see also Taguig City Treasurer and the City Government of Taguig v. Forbeswood Heights Condominium, CTA EB No. 2888, May 15, 2025)