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.

Best regards,

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)

COURT OF TAX APPEALS (CTA) DECISIONS

ABSENCE OF A VALID LETTER OF AUTHORITY (LOA) BEFORE THE CONDUCT OF TAX AUDIT RENDERS THE ASSESSMENT VOID FOR VIOLATION OF DUE PROCESS. Jurisprudence consistently requires that a revenue officer’s authority to examine and assess a taxpayer must emanate from an LOA duly issued by the CIR or his authorized representative; otherwise, the resulting assessment is a nullity. In this case, the Bureau of Internal Revenue (BIR) relied only on a Letter Notice (LN), which cannot substitute for an LOA. The Court further found that the assessment lacked a factual basis, being founded merely on presumptions derived from computerized data matching without supporting evidence. Thus, the Court En Banc affirmed the First Division’s ruling that the assessment was void and unenforceable. (Commissioner of Internal Revenue v. Ermilo Tan Ng Hua, CTA EB No. 2734 [CTA Case No. 9912], 14 April 2025).

FAILURE TO PROPERLY SERVE THE FAN/FLD ON THE TAXPAYER OR ITS DULY AUTHORIZED REPRESENTATIVE RENDERS THE ASSESSMENT AND THE RESULTING WDL VOID FOR VIOLATION OF DUE PROCESS. Assessment notices must be duly served upon the taxpayer or its authorized representative to comply with due process. In this case, the Court found that the Bureau of Internal Revenue (BIR) failed to validly serve the Formal Assessment Notice (FAN) and Final Letter of Demand (FLD), as they were delivered to a different, unregistered address and received by a person merely identified as the “daughter” of one of the taxpayer’s officers, without proof of authority to accept official notices. Such service does not constitute valid substituted service. The Court ruled that the lack of proper service rendered the FAN/FLD void, and consequently, the Warrant of Distraint and Levy (WDL) issued pursuant thereto was likewise invalid for violation of the taxpayer’s right to due process. (Weltel Corporation v. Commissioner of Internal Revenue, CTA Case No. 10947, 30 April 2025).

ASSESSMENT ISSUED BEYOND THE THREE-YEAR PRESCRIPTIVE PERIOD IS VOID; THE BIR’S BELATED INVOCATION OF THE TEN-YEAR PERIOD WAS IMPROPER AS IT FAILED TO PROVE FRAUD OR FALSITY. The Court held that the BIR’s right to assess the taxpayer had been prescribed, as the assessment was issued more than three years after the filing of the 2011 tax return and beyond the extended period under the executed waiver. The BIR’s reliance on the ten-year extraordinary prescriptive period was unwarranted because it failed to establish with clear and convincing evidence that the return was false or fraudulent, as required by law. The assessment notices merely cited general references to under-declaration and did not present any factual basis or computation to substantiate fraud. Moreover, the use of a waiver indicated that the BIR itself recognized the application of the ordinary three-year period, making its later invocation of the ten-year period a mere afterthought. Consequently, the Court ruled that the assessment was void for having been issued beyond the prescriptive period and without due process, entitling the taxpayer to a refund of the garnished amount.(Weltel Corporation v. Commissioner of Internal Revenue, CTA Case No. 10947, 30 April 2025).

THE FAN IS VALID FOR CONTAINING A DEFINITE TAX LIABILITY AND DUE DATE AS POSSIBLE INTEREST ADJUSTMENTS DID NOT RENDER THE ASSESSMENT UNCERTAIN. The Court ruled that the Final Assessment Notice (FAN) issued to the taxpayer was valid and complied with due process requirements, as it clearly indicated both the specific amount of tax due and the corresponding payment deadline. This distinguishes the case from Commissioner of Internal Revenue v. Fitness by Design, Inc., where the assessment was void for lacking definite figures and dates. The Court clarified that the inclusion of a reminder about possible interest adjustments did not render the assessment uncertain, as the taxpayer was still clearly informed of the amount and due date of payment. (Quartz Business Products Corporation v. Commissioner of Internal Revenue, CTA Case No. 11096, 19 May 2025).

ASSESSMENT FOR ALLEGED UNACCOUNTED INCOME AND CORRESPONDING VAT WAS VOID FOR LACK OF FACTUAL AND LEGAL BASIS, AS NO ACTUAL INCOME OR SALE WAS PROVEN. The Court held that the deficiency income tax and VAT assessments based on alleged unaccounted income were without legal and factual foundation. Jurisprudence requires that income tax may only be imposed when there is actual or constructive receipt of income, representing a realized gain or profit. In this case, the Bureau of Internal Revenue (BIR) merely presumed undeclared income from the supposed discrepancy between the Summary List of Purchases (SLP) and the alphalist of payees, treating it as an “unaccounted source of cash.” The Court found such presumption insufficient, as there was no proof that petitioner derived any actual income or profit from the alleged unaccounted payments. Further, even assuming that undeclared purchases existed, such omission does not automatically constitute undeclared income, since taxpayers are not legally bound to claim all allowable deductions. With respect to VAT, the Court emphasized that VAT applies only to sales of goods or services where consideration is received, not to mere purchases or disbursements. As there was no showing that the petitioner sold any goods or services or received consideration therefore, the corresponding VAT assessment had no basis. Accordingly, both the deficiency income tax and VAT assessments arising from the alleged unaccounted income were properly cancelled. (Quartz Business Products Corporation v. Commissioner of Internal Revenue, CTA Case No. 11096, 19 May 2025).

EXCESS TAX CREDITS VALIDLY CARRIED OVER TO THE SUCCEEDING TAXABLE YEAR MAY BE RECAPTURED BY THE BIR, PROVIDED THE COMPUTATION REFLECTS THE CORRECT AMOUNT AS SHOWN IN THE TAXPAYER’S RETURN. The Court affirmed the validity of the BIR’s recapture of the taxpayer’s excess income tax credits carried over to the succeeding period, consistent with the rule on the irrevocability of the carry-over option. Once a corporation elects to carry over excess tax credits to the next taxable year, such choice becomes final and binding; the same credits may not thereafter be claimed as a refund or applied twice. In this case, the BIR correctly recognized the taxpayer’s election to carry over its excess tax credits but erred in the amount used for the adjustment. The Court emphasized that the recapture of excess tax credits does not invalidate the taxpayer’s carry-over election but rather enforces it by ensuring that credits are properly applied against future income tax liabilities. Allowing the taxpayer to again use the same excess credits without proof of their availability would result in double benefit and prejudice the government. Thus, while the BIR’s recapture was upheld, the assessment must be corrected to reflect the proper amount per the taxpayer’s ITR. (Quartz Business Products Corporation v. Commissioner of Internal Revenue, CTA Case No. 11096, 19 May 2025).

DEFICIENCY VAT ASSESSMENTS FOR PRESCRIBED PERIODS WERE DEEMED TIME-BARRED; HOWEVER, THE ENTIRE ASSESSMENT WAS SUSTAINED DUE TO THE TAXPAYER’S FAILURE TO PROVE WHICH PORTIONS PERTAINED TO THE PRESCRIBED MONTHS. The Court applied the general three-year prescriptive period for the assessment of internal revenue taxes, reckoned from the due date or actual filing of the quarterly VAT returns. Based on the filing and due dates, the BIR’s right to assess deficiency VAT for the first three quarters of taxable year (TY) 2011 had already been prescribed, while the assessment for the fourth quarter remained within the allowable period. However, the taxpayer failed to substantiate which portions of the assessed deficiency VAT corresponded to the prescribed quarters. The Court reiterated that tax assessments enjoy the presumption of correctness and regularity, and the burden rests upon the taxpayer to prove not only that the assessment is erroneous but also to specify the correct computation. Since the petitioner failed to present copies of its VAT returns or other documentary evidence showing when the taxable transactions occurred, the Court had no basis to segregate the prescribed and unprescribed portions. Consequently, the entire deficiency VAT assessment was deemed attributable to the unprescribed fourth quarter of TY 2011 and thus upheld as valid. (Quartz Business Products Corporation v. Commissioner of Internal Revenue, CTA Case No. 11096, 19 May 2025).

UNSUPPORTED VAT ZERO-RATED AND EXEMPT SALES WERE SUSTAINED DUE TO LACK OF SUBSTANTIATING EVIDENCE FROM THE TAXPAYER. The Court upheld the deficiency VAT assessments on the taxpayer’s alleged unsupported zero-rated sales and exempt sales. Under tax regulations, the entitlement to VAT zero-rating or exemption must be sufficiently established by competent evidence. Tax exemptions are strictly construed against the taxpayer and liberally in favor of the taxing authority, and the party claiming such exemption bears the burden of proving entitlement thereto. Applying this principle, the Court found that the petitioner neither presented documents nor raised arguments to substantiate its claim of zero-rated and exempt transactions in its Petition for Review or Memorandum. Absent any supporting evidence, the presumption of regularity and correctness of the tax assessment stands. Consequently, the deficiency VAT assessments corresponding to the alleged unsupported zero-rated and exempt sales were properly retained.  (Quartz Business Products Corporation v. Commissioner of Internal Revenue, CTA Case No. 11096, 19 May 2025).

A LETTER OF AUTHORITY (LOA) IS REQUIRED EVEN IN MANDATORY AUDITS CONDUCTED IN RELATION TO BUSINESS RETIREMENT APPLICATIONS. The Court held that the absence of a valid Letter of Authority (LOA) renders any tax assessment void, regardless of whether it arises from a regular assessment or a mandatory audit in connection with the retirement of business. Under the National Internal Revenue Code, only revenue officers duly authorized through an LOA may conduct an examination of a taxpayer’s books and records. The law does not distinguish between the types of assessments, and courts are bound not to create such distinctions. Applying this rule, the Court rejected the petitioner’s argument that a mandatory audit in relation to business closure does not require an LOA. The Court emphasized that the requirement of an LOA is grounded on the taxpayer’s right to due process, ensuring that the taxpayer is properly informed of the authorized officers conducting the audit. Hence, even in mandatory audits, a valid LOA remains an indispensable requirement for a lawful assessment. (Commissioner of Internal Revenue v. Sellery Phils. Enterprises, Inc., CTA EB No. 2837 [CTA Case No. 10049], 20 May 2025).

TAX ASSESSMENTS MUST CLEARLY STATE THE FACTUAL AND LEGAL BASES AND CONSIDER THE TAXPAYER’S REPLY; FAILURE TO DO SO VIOLATES DUE PROCESS AND RENDERS THE ASSESSMENT VOID. Under the National Internal Revenue Code and its implementing regulations, tax assessments must inform the taxpayer in writing of the factual and legal bases of the deficiency and must consider any reply to the Preliminary Assessment Notice; otherwise, the assessment is void for violation of due process. The Court of Tax Appeals found that the Bureau of Internal Revenue issued a Formal Letter of Demand and Final Assessment Notice identical to the Preliminary Assessment Notice, without addressing the taxpayer’s explanations or evidence submitted in its reply. This disregard of the taxpayer’s defenses and failure to provide specific reasons for rejecting them demonstrated noncompliance with due process requirements. The Court ruled that both the FLD/FAN and the subsequent Warrant of Distraint and/or Levy were void, emphasizing that while the government has authority to collect taxes, it must do so with fairness and strict adherence to the law. (Conveying and Packaging Co. Inc. v. Commissioner of Internal Revenue, CTA Case No. 10844, 26 May 2025)

UNDER THE NIRC, INPUT TAXES ATTRIBUTABLE TO VAT-EXEMPT TRANSACTIONS ARE NOT CREDITABLE; PETITIONER’S FAILURE TO PROPERLY ALLOCATE SUCH INPUT TAXES WARRANTS DISALLOWANCE. Pursuant to the NIRC and its implementing regulations, input taxes directly or proportionately attributable to VAT-exempt transactions cannot be credited against output VAT. In this case, the petitioner engaged in both taxable and exempt sales but failed to properly allocate the corresponding input taxes, resulting in the disallowance of input VAT. The Court of Tax Appeals held that such disallowance was justified, as the petitioner’s argument that its available input VAT could offset the deficiency was contrary to the rule against using excess input tax carry-overs to settle deficiency VAT. The Court emphasized that allowing such offset would lead to double benefit and administrative inefficiency, further citing the principle that taxes cannot be the subject of set-off or compensation since they are the lifeblood of the government. (National Reinsurance Corporation of the Philippines v. Commissioner of Internal Revenue, CTA Case No. 10791, Decision dated 4 June 2025).

TAX ASSESSMENTS ARE PRESUMED CORRECT, AND THE TAXPAYER BEARS THE BURDEN OF PROVING OTHERWISE; PETITIONER FAILED TO SUBSTANTIATE ITS CLAIM THAT IT HAD SUFFICIENT INPUT VAT TO OFFSET THE DISALLOWED AMOUNT.  Under the National Internal Revenue Code, a tax assessment issued by the Bureau of Internal Revenue is presumed correct, and the taxpayer has the burden to prove both that the assessment is erroneous and that its own computation is accurate. Here, the petitioner merely asserted that it had sufficient input VAT credits to offset its alleged deficiency but failed to present supporting evidence to disprove the respondent’s findings. The Court held that bare allegations cannot overcome the presumption of correctness of an assessment, and since the petitioner failed to discharge its burden of proof, the petition was denied for lack of merit. (National Reinsurance Corporation of the Philippines v. Commissioner of Internal Revenue, CTA Case No. 10791, Decision dated 4 June 2025).

UNDER THE LOCAL GOVERNMENT CODE, PAYMENT UNDER PROTEST IS NOT REQUIRED TO QUESTION A LOCAL BUSINESS TAX ASSESSMENT; THUS, THE PETITIONER’S PROTEST WAS VALID DESPITE NONPAYMENT OF THE ASSESSED AMOUNT. The CTA ruled that the validity of a protest or judicial action is not contingent upon prior payment. It further held that the local ordinance provision requiring payment before protest was void for being inconsistent with the Local Government Code. (Takenaka Corporation – Philippine Branch v. City of Makati and Hon. Jesusa E. Cuneta, CTA AC No. 307, 4  June 2025)

THE TAXPAYER BEARS THE BURDEN OF PROVING PAYMENT OF ASSESSED TAXES; PETITIONER FAILED TO SUBSTANTIATE ITS CLAIM OF PRIOR PAYMENT OF LOCAL BUSINESS TAXES WITH COMPETENT EVIDENCE. The Court held that financial statements, tax returns, business permits, and certifications from other local government units were insufficient to prove payment, emphasizing that receipts are the best evidence thereof.(Takenaka Corporation – Philippine Branch v. City of Makati and Hon. Jesusa E. Cuneta, CTA AC No. 307, 4  June 2025)

UNDER THE LOCAL GOVERNMENT CODE, A NOTICE OF ASSESSMENT MUST CLEARLY STATE THE FACTUAL AND LEGAL BASES OF THE TAX DEFICIENCY; FAILURE TO DO SO VIOLATES DUE PROCESS AND RENDERS THE ASSESSMENT VOID. The Local Government Code mandates that a notice of assessment must inform the taxpayer of the nature and basis of the tax deficiency to satisfy the requirements of due process. In this case, the City of Makati’s Notice of Assessment (NOA) against the taxpayer failed to indicate the specific statutory provision supporting the alleged local business tax (LBT) deficiency. Neither the NOA nor the subsequent demand letters provided clear factual or legal bases for the assessment, resulting in the taxpayer being deprived of the opportunity to intelligently protest or appeal the same. The Court held that such deficiency assessments, issued without proper notice of the law and facts relied upon, are null and void for violating the taxpayer’s right to due process. Moreover, the assessments for certain taxable years were also declared. Accordingly, the Court cancelled the assessments and enjoined the City of Makati from collecting the disputed amounts. (Takenaka Corporation – Philippine Branch v. City of Makati and Hon. Jesusa E. Cuneta, CTA AC No. 307, 4  June 2025)

TIMELY PAYMENT OF DOCKET FEES WITHIN FIVE DAYS FROM ELECTRONIC FILING SATISFIES THE CTA’S FILING REQUIREMENTS, EVEN IF THE COURT WAS CLOSED ON THE INITIAL FILING DATE.  The Court of Tax Appeals held that the petitioner duly complied with the payment of docket fees under the CTA’s En Banc Resolution on electronic filing, which allows payment and submission of proof within five (5) calendar days from the date of electronic filing. The petitioner attempted to file the Original Petition physically on November 5, 2021, but the Court had closed early for disinfection, prompting the petitioner to file via email on the same date. Since payment of the filing fees on November 5 was impossible due to the closure, the petitioner settled the docket fees and submitted the official receipts on November 8, 2021, within the prescribed five-day period. The Court ruled that such compliance was sufficient and that respondent’s claim of untimely payment lacked merit. (CIC Property Venture Holdings, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10668, June 11, 2025)

DUE PROCESS IN TAX ASSESSMENTS — ASSESSMENT VOID FOR INDEFINITENESS OF DUE DATE AND FAILURE TO EXPLAIN REJECTION OF PROTEST.  The Court of Tax Appeals (CTA) held that the assessment issued by the Bureau of Internal Revenue (BIR) was void for violating due process, as the Formal Letter of Demand and Final Assessment Notice contained contradictory payment due dates, rendering the assessment indefinite, and because the BIR failed to clearly communicate the reasons for rejecting the taxpayer’s protest. Applying the due process standards established in Commissioner of Internal Revenue v. Avon Products Manufacturing, Inc., the Court ruled that such failures deprived the taxpayer of a meaningful opportunity to contest the assessment. Accordingly, the CTA denied the BIR’s Motion for Reconsideration and granted the taxpayer’s motion to amend the dispositive portion of its earlier decision to correctly refer to the taxable year 2017. (Kingston Aluminum and Stainless Sales Corp. v. Bureau of Internal Revenue–Revenue Region No. 9A, CTA Case No. 10326, Amended Decision, 17 June 2025). Where the BIR issued the FAN merely one day after the petitioner’s reply and without considering its contents, showing that the assessment was predetermined, such omission rendered the PAN, FAN, and Final Decision on Disputed Assessment null and void, as well as the Warrant of Distraint and/or Levy issued pursuant thereto. The Court emphasized that due process demands not only that a taxpayer be heard but that the BIR meaningfully consider the evidence presented. (CIC Property Venture Holdings, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10668, June 11, 2025)

WARRANT OF DISTRAINT AND LEVY VOID FOR LACK OF VALID ASSESSMENT AND IMPROPER SERVICE. The Court of Tax Appeals ruled that the Warrant of Distraint and/or Levy (WDL) issued against Diageo Philippines, Inc. was void for having been based on an invalid assessment and for not being properly served. The CTA reiterated that a valid assessment is a substantive prerequisite for tax collection and that void assessments produce no legal effect. The WDL was also deemed improperly served, as it was merely left with a lobby receptionist who was neither an employee nor an authorized representative of the taxpayer, and no barangay official or disinterested witnesses were present to validate substituted service. Given these due process violations, the Court cancelled and set aside both the deficiency tax assessments and the resulting WDL, and enjoined the BIR from enforcing collection. (Diageo Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10452, Decision, 19 June 2025)

ASSESSMENT IS VOID FOR LACK OF VALID LETTER OF AUTHORITY (LOA) TO CONDUCT AUDIT. The Court of Tax Appeals ruled that the deficiency tax assessment issued against Pro Star Sports Philippines, Inc. was void for having been conducted by revenue officers who were not armed with a valid Letter of Authority (LOA). The CTA emphasized that an LOA is a mandatory statutory requirement granting authority to revenue officers to examine a taxpayer’s books and issue assessments, and any audit conducted without such authority is a nullity. In this case, although an LOA was originally issued to other revenue officers, the subsequent reassignment of the audit to different officers was made through a mere Memorandum of Assignment without the issuance of a new or amended LOA, contrary to established rules and due process. Accordingly, the Court cancelled and set aside the deficiency income tax assessment and enjoined the BIR from collecting the assessed amount. (Pro Star Sports Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11037, Decision, 24 June 2025); while the LOA named RO Tan and GS Hernandez, the audit and subsequent issuance of the assessment were instead conducted by RO Tan and GS Enriquez, who was not authorized under any LOA. The Court held that GS Enriquez’s unauthorized participation rendered the resulting deficiency tax assessment null and void, as an audit without proper authority violates due process and produces no valid tax liability. Consequently, the assessment, warrants, and garnishment were cancelled, and the BIR was ordered to refund the garnished amount to the taxpayer. (Brilliant Creations Publishing, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11043, 20 June 2024)

TAX EXEMPTION OF COOPERATIVES ARISES FROM LAW, NOT FROM A BIR-ISSUED CERTIFICATE OF TAX EXEMPTION. Under the Philippine Cooperative Code, the grant of tax incentives and exemptions to duly registered cooperatives emanates directly from the law itself, not from any confirmatory issuance of the Bureau of Internal Revenue (BIR). The BIR’s Certificate of Tax Exemption merely serves as an administrative confirmation of the cooperative’s entitlement to exemptions already provided by statute and does not constitute the legal source of such privilege. Consequently, the absence or non-renewal of a Certificate of Tax Exemption does not automatically negate a cooperative’s tax-exempt status if it otherwise meets the legal requirements under the Code. In Commissioner of Internal Revenue v. Co, et al., G.R. No. 241424, February 26, 2020, the Supreme Court held that no prior confirmatory ruling is required for exemption or refund, as rulings merely operate to confirm conditions already existing under law. Applying the same principle, the Court ruled that the petitioner cooperative’s entitlement to exemption subsists by operation of law, and the BIR cannot deny such benefit solely for lack of a renewed Certificate of Tax Exemption. (CCT Multi-Purpose Cooperative [formerly CCT Credit Cooperative] v. Commissioner of Internal Revenue, CTA Case No. 10351, June 24, 2025)

COOPERATIVE EXEMPT FROM INCOME TAX BUT LIABLE FOR VAT, EWT, AND DST DUE TO TRANSACTIONS WITH NON-MEMBERS. Under the Philippine Cooperative Code, duly registered cooperatives that transact exclusively with their members are exempt from all internal revenue taxes, while those transacting with both members and non-members are exempt only on transactions with members, subject to income tax exemption granted to all cooperatives upon registration with the Cooperative Development Authority (CDA). In this case, the Court found that the petitioner cooperative failed to prove that it transacted solely with its members for taxable year 2016, as the Court-commissioned independent CPA confirmed that only 38% of its loan transactions were verified as member-related. Consequently, the cooperative was deemed to have dealt with non-members and was held liable for value-added tax (VAT), expanded withholding tax (EWT), and documentary stamp tax (DST). Nonetheless, since the cooperative was duly registered with the CDA and its registration remained valid, it was conclusively entitled to exemption from income tax under the law.(CCT Multi-Purpose Cooperative [formerly CCT Credit Cooperative] v. Commissioner of Internal Revenue, CTA Case No. 10351, June 24, 2025)

COOPERATIVE FAILED TO ESTABLISH ENTITLEMENT TO VAT AND EWT EXEMPTIONS, AND THE ASSESSMENTS WERE HELD VALID AND NOT PRESCRIBED. Under the Philippine Cooperative Code and its implementing rules, cooperatives with accumulated reserves exceeding PhP10,000,000.00 that transact with both members and non-members are subject to VAT and EWT on non-member transactions unless they prove compliance with statutory conditions for exemption, such as returning at least 25% of net income to members. In this case, the petitioner failed to substantiate that the VAT assessment pertained solely to transactions with members or that it complied with the income return requirement. It likewise failed to present evidence showing that the corresponding VAT and EWT returns were filed for taxable year 2016; hence, the Court applied the ten-year prescriptive period for assessment due to the presumed failure to file returns. Consequently, both the VAT and EWT assessments were upheld for lack of proof of exemption and prescription. (CCT Multi-Purpose Cooperative [formerly CCT Credit Cooperative] v. Commissioner of Internal Revenue, CTA Case No. 10351, 24 June  2025)

SECURITIES AND EXCHANGE COMMISSION

NUMBER OF DIRECTORS IN A FINANCING COMPANY (SEC-OGC OPINION NO. 24-37, NOVEMBER 19, 2024).. The Financing Company Act of 1998, as implemented by SEC Memorandum Circulars Nos. 5, 6, 14, and 16, financing companies—being stock corporations imbued with public interest—are generally required to have a Board of Directors composed of at least five (5) but not more than fifteen (15) members, with at least two (2) serving as independent directors. However, if the financing company qualifies as a close corporation and complies with the conditions under SEC MC No. 14, or if it does not possess the qualifications under SEC MC No. 5 that subject it to the Revised Code of Corporate Governance, it may operate with a minimum of two (2) regular directors. (Re: Number of Directors in a Financing Company, SEC-OGC Opinion No. 24-37, November 19, 2024.)

MANDATORY TENDER OFFER RULE (SEC-OGC OPINION NO. 24-38, NOVEMBER 26, 2024). Pursuant to the Securities Regulation Code (RA 8799) and its Implementing Rules and Regulations, as clarified in Cemco Holdings, Inc. v. National Life Insurance Co. of the Philippines, the mandatory tender offer rule applies to any transaction resulting in the acquisition of control or more than 50% of a public company’s outstanding equity, whether by cash subscription or debt-to-equity conversion. Thus, if a shareholder—such as Shareholder A—subscribes to additional unissued shares of Consolidated Mines, Inc. and thereby exceeds the 50% ownership threshold, a mandatory tender offer must be made to all remaining stockholders at a fair price supported by an independent fairness opinion. Failure of other stockholders to subscribe does not constitute waiver of their rights, and pre-emptive rights cannot be assigned to other shareholders. (Re: Mandatory Tender Offer Rule, SEC-OGC Opinion No. 24-38, November 26, 2024.)

RETAIL TRADE LIBERALIZATION ACT OF 2000, AS AMENDED (R.A. NO. 8762, AS AMENDED BY R.A. NO. 11595) – DEFINITION OF PAID-UP CAPITAL INCLUDES ADDITIONAL PAID-IN CAPITAL (APIC). Under the Retail Trade Liberalization Act (RTLA) and its Implementing Rules and Regulations, the term paid-up capital refers to the total investment paid into a corporation, which includes both par value and any additional paid-in capital or share premium. This interpretation aligns with the law’s liberal intent to attract foreign investments and promote market competitiveness by lowering barriers to entry in retail trade. Applying this to Electrolux Philippines, Inc., the Securities and Exchange Commission confirmed that its share premium or APIC should be included in determining compliance with the minimum paid-up capital requirement under the RTLA, as the premium forms part of the company’s total capital investment once infused. (Definition and Composition of Paid-Up Capital under the Retail Trade Liberalization Act of 2000, as Amended, SEC-OGC Opinion No. 24-39, November 26, 2024.)

BUY-BACK OF SHARES AFTER AUTOMATIC DELISTING (SEC-OGC OPINION NO. 24-40, DECEMBER 9, 2024). A corporation may reacquire its own shares provided it has unrestricted retained earnings and the buy-back serves a legitimate corporate purpose. Applying this to the case of PNOC Exploration Corporation (PNOC EC), which was involuntarily delisted from the Philippine Stock Exchange for non-compliance with the minimum public ownership requirement, the SEC held that PNOC EC may validly buy back its shares as long as these conditions are met. Considering that the shares subject to repurchase constitute only 0.21% of its total outstanding shares, the mandatory tender offer rules do not apply, although PNOC EC may choose to follow the tender offer procedures by analogy for transparency and fairness. (Re: Buy-Back of Shares After Automatic Delisting, SEC-OGC Opinion No. 24-40, December 9, 2024.)

MASS MEDIA AND ADVERTISING; FOREIGN OWNERSHIP RESTRICTIONS – ONLINE PLATFORM PROVIDING USER-GENERATED CONTENT IS NOT ENGAGED IN ADVERTISING (SEC-OGC OPINION NO. 24-41, DECEMBER 9, 2024). The SEC, interpreting these provisions alongside related laws such as R.A. No. 7394 (Consumer Act) and R.A. No. 9211 (Tobacco Regulation Act), reiterated that what characterizes a mass media entity is the dissemination of information or ideas to the public, not necessarily editorial control over content. Applying this principle, the Commission found that Pinoy Internet Ventures Online, Inc. (PIVOI), which operates a website allowing users to upload property listings and other user-generated content, is not engaged in mass media or advertising since it merely provides a digital platform and does not create, control, or disseminate content or advertising materials. However, the SEC emphasized that whether an online platform constitutes mass media depends on its use and extent of content dissemination. (Disini Law, Re: Entities Engaged in Mass Media and Advertising; Foreign Ownership Restrictions, SEC-OGC Opinion No. 24-41, December 9, 2024)

APPLICABILITY OF THE RULES ON MATERIAL RELATED PARTY TRANSACTIONS FOR PUBLICLY-LISTED COMPANIES (“MRPT”) (SEC-OGC OPINION NO. 24-42, DECEMBER 12, 2024). The regulation applies only to transactions between a reporting publicly-listed company (PLC) and its related parties to ensure transparency and prevent conflicts of interest. In SEC-OGC Opinion No. 24-42 (December 12, 2024), the SEC clarified that transactions by a subsidiary or affiliate of a PLC with a non-related party do not fall within the scope of the MRPT Rules, even if such subsidiary’s financials are consolidated with those of the parent PLC. Consolidation serves only for reporting and does not merge or disregard the distinct juridical personality of each entity. This principle is supported by Velarde v. Lopez, Inc., G.R. No. 153886 (January 14, 2004), which affirms the separate corporate personality of a subsidiary from its parent company.

SEC OPINION ON THE CAPACITY OF A FOREIGNER TO SIT AS PRESIDENT OF A FREIGHT FORWARDING CORPORATION. The SEC, citing the Revised Corporation Code and the Anti-Dummy Law, explained that while there is no express citizenship or residency requirement for a corporate president, foreigners are prohibited from managing or controlling corporations engaged in nationalized activities. The Commission examined PTO Air Express Corp.’s purpose of engaging in cargo and freight forwarding and, considering the amendments introduced by Republic Act No. 11659 to the Public Service Act, clarified that freight forwarding no longer constitutes a public utility activity restricted to Filipino citizens. Accordingly, a foreign national such as Ms. Kaikai Wu may lawfully serve as president of PTO Air Express Corp., provided that the company is not engaged in nationalized operations and remains compliant with other applicable laws and regulations. (SEC-OGC Opinion No. 25-01, Re: Capacity to Sit as President, February 10, 2025)

SEC OPINION ON THE AUTHORITY OF A FINANCING COMPANY TO INTRODUCE A NEW FINANCING PROGRAM UNDER ITS CORPORATE POWERS. Toyota Financial Services Philippines Corporation (TFSPC), being a duly registered financing company, may lawfully implement its proposed Lexus Financial Services (LFS) Program, as such activity is consistent with its primary purpose of financing and leasing motor vehicles under its Articles of Incorporation. Citing the Financing Company Act and jurisprudence, the Commission emphasized that a corporation possesses express and incidental powers necessary to fulfill its stated objectives, and acts performed within those limits are valid. However, since the LFS Program is a new product not yet reflected in TFSPC’s approved business plan, the company must first submit and secure approval of an amended plan before implementation. (SEC-OGC Opinion No. 25-05, Re: Implementation of New Financing Program; Corporate Powers; Purpose Clause, March 5, 2025)

PROHIBITION ON DIRECT LENDING BY CORPORATE DEBT VEHICLES (SEC-OGC OPINION NO. 25-06, MARCH 6, 2025). Under the Investment Company Act (ICA) and its Implementing Rules, as reinforced by SEC Memorandum Circular Nos. 23-20 and 33-20, Corporate Debt Vehicles (CDVs) are limited to investing in transferable securities and are expressly prohibited from engaging in direct lending of monies. In the case of Puyat Jacinto and Santos Law Office (for ATRAM Unitized Corporate Debt Vehicle, Inc.), the SEC clarified that investing in corporate debt securities such as bonds and notes does not equate to direct lending, as the former involves impersonal, market-based transactions distinct from a debtor-creditor relationship under a loan. Accordingly, the SEC ruled that ATRAM, as a CDV, cannot engage in direct lending activities. (SEC-OGC Opinion No. 25-06, “Prohibition on Direct Lending by Corporate Debt Vehicles,” March 6, 2025)

SEC CLARIFIES THAT ONLY DEPRECIATION ON REVALUATION INCREMENT MAY BE USED FOR DIVIDEND DECLARATION. The Securities and Exchange Commission (SEC) clarified that only the depreciation on the revaluation increment—and not the revaluation surplus itself—may be considered in determining the amount available for dividend declaration. In Opinion No. 25-08 (June 23, 2025), the SEC ruled that revaluation increments or appraisal surplus cannot be used directly as the basis for declaring dividends, as they do not represent actual earnings. However, when the depreciation on the appraisal increment has been charged to operations, that portion may be added back to retained earnings and made available for dividends, provided that (1) the company has sufficient operational income, (2) there is no deficit at the time the charge was made, and (3) the amount has not been impaired by subsequent losses.  (SEC-OGC Opinion No. 25-08, Re: Depreciation on Revaluation Increment Available for Dividend Declaration, June 23, 2025)

SEC CONFIRMS THAT REPRESENTATIVE OFFICES CANNOT ENGAGE IN INCOME-GENERATING ACTIVITIES. A representative office may conduct only non-income-generating activities such as information dissemination, product promotion, and quality control. It cannot import products for distribution or sale in the Philippines, as such activities constitute income-generating transactions that are beyond its allowed functions under the Revised Corporation Code and the Foreign Investments Act. In SEC-OGC Opinion No. 25-09 (June 24, 2025), the SEC clarified that a representative office, being an extension of its foreign parent company, does not have a separate legal personality and may only engage in activities such as information dissemination, product promotion, and quality control. While it may establish a physical office, employ personnel (including foreign nationals, subject to labor and immigration laws), and enter into lease contracts through its parent company, it is strictly prohibited from engaging in income-generating activities, including importing products for local distribution or sale. The SEC emphasized that importation for marketing or “market penetration” purposes that involves consideration or sale falls outside the permissible scope of a representative office’s functions.(SEC-OGC Opinion No. 25-09, Re: Limitations on Activities of Representative Offices, June 24, 2025)

SEC AFFIRMS THAT INCORPORATED JOINT VENTURES ARE GOVERNED BY THE REVISED CORPORATION CODE. Incorporated joint ventures (JVs) formed as domestic corporations are governed by the Revised Corporation Code of the Philippines (RCCP), not by the Civil Code provisions on partnerships, regardless of the parties’ contractual stipulations or choice of foreign law. The SEC held that when parties choose to form a joint venture as a corporation under Philippine law, such entity—referred to as an incorporated JV—is subject to the Revised Corporation Code and possesses a separate juridical personality distinct from its incorporators or shareholders. Even if the joint venture agreement provides that foreign law governs the arrangement or that the parties do not intend to form a partnership, the incorporated entity (Entity X) remains a Philippine domestic corporation bound by Philippine corporate law. The SEC emphasized that the shareholders’ agreement between the parties is valid only to the extent that it does not contravene mandatory provisions of the RCCP or public policy, reiterating that corporate laws take precedence over conflicting contractual terms.(SEC-OGC Opinion No. 25-12, Re: Governing Law Applicable to Incorporated Joint Ventures, July 14, 2025)

REVENUE REGULATIONS 

Revenue Regulations No. 022-2025

Pursuant to Sections 244 and 245 of the National Internal Revenue Code, in relation to Section 9 of Republic Act No. 12214 (Capital Markets Efficiency Promotion Act), Revenue Regulations No. 022-2025 further amends RR No. 17-2011 to allow private employers to deduct from gross income their qualified contributions to employees’ Personal Equity and Retirement Accounts (PERA) under RA No. 9505.

Revenue Regulations No. 024-2025

Sections 244 and 245 of the NIRC, RR No. 024-2025 imposes updated creditable withholding tax rates on income payments by top withholding agents to local suppliers of goods and services.

REVENUE MEMORANDUM CIRCULAR

Revenue Memorandum Circular No. 084-2025

Pursuant to DOF Department Order No. 012-2025 and Revenue Memorandum Circular No. 084-2025, the Department of Finance issued a revised schedule of filing fees for applications for Tax Exemption Indorsements (TEIs) and non-TEIs to update the 25-year-old rates under DO No. 54-2000, ensuring alignment with current economic conditions and streamlining processing in accordance with the Ease of Doing Business Act. (Circularizing DOF Department Order No. 012-2025, Revenue Memorandum Circular No. 084-2025, September 9, 2025)

Revenue Memorandum Circular No. 088-2025

BIR RULINGS

DONATION TO A RELIGIOUS CORPORATION IS EXEMPT FROM DONOR’S TAX. Donations made in favor of religious, charitable, and social welfare institutions, provided that not more than thirty percent (30%) of the donation is used for administrative purposes, are exempt from donor’s tax. Applying this, the Declaration of Heirship with Deed of Donation executed by the Donors in favor of a Religious Corporation, covering several parcels of land, qualifies for donor’s tax exemption. In accordance with Section 196 of the NIRC, the donation is also exempt from documentary stamp tax, except for the payment of ₱15.00 under Section 188 since it was made prior to the effectivity of the TRAIN Law. Accordingly, a Certificate of Tax Exemption was issued confirming such exemption. (Certificate of Tax Exemption No. DT-150-2025, DT-151-2025, April 25, 2025)

EXPORT SALES AND SERVICES PAID IN FOREIGN CURRENCY AND ACCOUNTED PER BSP RULES MAY BE SUBJECT TO 0% VAT, BUT NO RULING WAS ISSUED AS IT FALLS UNDER “NO-RULING AREAS.” Pursuant to Sections 106(A)(2)(a)(1) and 108(B)(2) of the National Internal Revenue Code (NIRC) of 1997, as amended, export sales of goods and services rendered to a non-resident foreign entity are subject to zero percent (0%) Value-Added Tax (VAT) when the consideration is paid in acceptable foreign currency and properly accounted for in accordance with Bangko Sentral ng Pilipinas (BSP) regulations. In this case, a VAT-registered domestic seller engaged in the sale of Uninterrupted Power Supply (UPS) units and related accessories entered into a transaction with a foreign buyer based outside the Philippines, with payment made in foreign currency and accounted per BSP rules, thus meeting the conditions for zero-rating under the law. However, the tax authority declined to issue a confirmatory opinion since the VAT treatment of export sales and services is classified as a “No-Ruling Area,” while emphasizing the seller’s obligation to comply with invoicing requirements under Section 113 of the NIRC, as amended by the Ease of Paying Taxes Act, including the proper labeling of sales as “zero-rated.” (BIR Ruling No. VAT-156-2025 April 25, 2025)

INCOME FROM SERVICES IS TAXABLE AND SUBJECT TO VAT IF THE INCOME-PRODUCING ACTIVITY IS PERFORMED WITHIN THE PHILIPPINES. Pursuant to Sections 23(F), 42(A)(3), and 108(A) of the National Internal Revenue Code (NIRC), a non-resident foreign entity is taxable only on income derived from sources within the Philippines, and services are considered sourced in the country if the income-generating activity or inflow of economic benefit occurs within Philippine territory. In this case, although the advertising services were carried out abroad, the income was derived from consumer activities and transactions within the Philippines resulting from such advertisements, showing that the income-producing activity was effectively performed locally. Accordingly, the service fees paid for these activities are subject to Philippine income tax, VAT, and applicable withholding tax. (BIR Ruling No. OT-168-2025, April 25, 2025)

SERVICES RENDERED ABROAD THAT GENERATE CUSTOMER LEADS AND ECONOMIC BENEFITS WITHIN THE PHILIPPINES ARE DEEMED PERFORMED LOCALLY AND ARE THEREFORE SUBJECT TO INCOME TAX, WITHHOLDING TAX, AND VAT. Pursuant to Sections 23(F), 42(A)(3), and 108(A) of the National Internal Revenue Code, income of a non-resident foreign corporation (NRFC) is taxable only if derived from sources within the Philippines, and services are considered sourced in the Philippines if performed therein. Applying this, the Bureau of Internal Revenue held that advertising and lead-generation services rendered abroad but resulting in customer engagement and economic benefits within the Philippines are deemed performed in the Philippines; thus, the related payments are subject to income tax, withholding tax, and VAT, as the income source and inflow of benefits occurred within Philippine territory. (BIR Ruling No. OT-169-2025, April 25, 2025)

PWDS ARE ENTITLED TO A 20% DISCOUNT AND VAT EXEMPTION ON SPECIFIED GOODS AND SERVICES, WHILE EMPLOYERS HIRING THEM MAY CLAIM AN ADDITIONAL 25% INCOME DEDUCTION. Pursuant to Republic Acts Nos. 9442 and 10754, which amend the Magna Carta for Persons with Disability (RA No. 7277), persons with disability (PWDs) are granted a 20% discount and exemption from the 12% value-added tax (VAT) on the purchase of specific goods and services such as medicines, medical and dental services, transportation, accommodations, and recreational activities, provided that a valid PWD ID is presented. While gainfully employed PWDs remain subject to income tax, employers hiring PWDs are entitled to an additional 25% deduction from gross income based on the salaries and wages paid to such employees. (BIR Ruling No. OT-170-2025, May 6, 2025)

MATERNITY LEAVE BENEFITS—INCLUDING SSS PAYMENTS AND EMPLOYER-PAID SALARY DIFFERENTIALS—ARE EXEMPT FROM INCOME AND WITHHOLDING TAXES FOR ELIGIBLE EMPLOYEES. Pursuant to Republic Act No. 11210 (Expanded Maternity Leave Law), Section 2.78.1(B)(1)(e) of Revenue Regulations No. 2-98, and Revenue Memorandum Circular No. 105-2019, maternity leave benefits consisting of the Social Security System (SSS) maternity benefit and the employer-paid salary differential are exempt from income and withholding taxes. In this case, the maternity benefits granted to employees of a government-owned or controlled corporation (GOCC) without a charter, duly registered with the SSS, fall within this exemption since the full pay during maternity leave is considered a benefit under the SSS law. (BIR Ruling No. OT-171-2025, May 6, 2025)

COMPENSATION FOR SUBTERRANEAN EASEMENT RIGHTS IS TREATED AS A TAXABLE TRANSFER OF REAL PROPERTY SUBJECT TO CGT OR FINAL INCOME TAX AND DST, THOUGH TITLE TRANSFER AND ECAR ISSUANCE ARE NOT REQUIRED. Pursuant to Sections 24(D)(1) and 196 of the National Internal Revenue Code (NIRC) of 1997, as amended, and Republic Act No. 10752, compensation received for the subterranean easement of right of way constitutes a transfer of real property subject to either capital gains tax (CGT) or final income tax at the taxpayer’s election, as the relinquishment of sub-terrain rights is deemed a disposition of real property under the law. Likewise, the transaction is subject to documentary stamp tax (DST) under Section 196 since it involves the conveyance of real property rights for consideration, although ownership of the surface land remains with the property owner. However, annotation of the easement on title may proceed without an eCAR since no actual transfer of ownership occurs. (BIR Ruling No. OT-173-2025, May 7, 2025)

THE PUBLIC AUCTION SALE OF GOVERNMENT-SEIZED ASSETS IS EXEMPT FROM CAPITAL GAINS TAX AND DOCUMENTARY STAMP TAX AS IT ARISES FROM THE EXERCISE OF ESSENTIAL GOVERNMENTAL FUNCTIONS. Pursuant to Section 32(B)(7)(b) of the National Internal Revenue Code of 1997, as amended, and Executive Orders Nos. 286 and 149, income derived by the government or its agencies from the exercise of essential governmental functions is exempt from income tax and related taxes. Since the sale of sequestered assets through public auction was conducted in the performance of the government’s mandate to dispose of forfeited properties, such a transaction is exempt from capital gains tax and documentary stamp tax in accordance with the statutory and executive exemptions granted to the Presidential Commission on Good Government (PCGG) as successor to the Sequestered Assets Disposition Authority (SADA). (BIR Ruling No. OT-174-2025, May 13, 2025)

INCOME DIRECTLY DERIVED FROM DULY REGISTERED BOI PROJECTS QUALIFIES FOR INCOME AND WITHHOLDING TAX EXEMPTION, WHILE NON-QUALIFYING OR EXCESS ACTIVITIES REMAIN SUBJECT TO REGULAR TAXATION. Entities registered with the Board of Investments (BOI) are granted exemption from income tax and creditable withholding tax on income directly attributable to their registered projects for a specified period. Accordingly, the certificates confirm tax exemption for revenues derived from BOI-registered activities, such as economic and low-cost housing projects and a petroleum distribution project, while maintaining that sales beyond the approved unit limits, commercial uses, or activities outside the registered scope remain taxable. (Certificate of Tax Exemption No. BOI-LEH-175-2025, BOI-LEH-176-2025, BOI-LEH-179-2025, May 15, 2025)

THE DONATION OF LAND TO A PUBLIC SCHOOL IS EXEMPT FROM DONOR’S TAX AND FROM DST, BEING A GIFT TO A GOVERNMENT ENTITY. Pursuant to Section 101(A)(2) of the National Internal Revenue Code of 1997, as amended, a donation made in favor of the government or any of its agencies is exempt from donor’s tax. Accordingly, the Deed of Donation executed by a local government unit in favor of a public educational institution over a parcel of land in Cabatuan, Iloilo qualifies for such exemption as it constitutes a gift to a government entity. The transaction is likewise not subject to documentary stamp tax (DST) under Section 196 of the Tax Code but is only liable to the DST imposed under Section 188 thereof. (Certificate of Tax Exemption No. DT-178-2025, May 15, 2025)

NPC-PAYOR IS RESPONSIBLE FOR WITHHOLDING AND REMITTING WITHHOLDING TAX COMPENSATION EVEN THOUGH PSALM ASSUMED NPC’S LIABILITY; HENCE, NPC’S TIN MUST BE USED FOR TAX REMITTANCE. Pursuant to Sections 2.57 and 2.57.3 of Revenue Regulations No. 2-98, as amended by RR No. 11-2018, the obligation to deduct, withhold, and remit withholding taxes rests upon the payor of income. In this case, although PSALM assumed the liabilities of the National Power Corporation (NPC) under the Electric Power Industry Reform Act (EPIRA), NPC acted as the processor and payor of the separation benefits due to its former employees. As confirmed by submitted documents and Board resolutions, NPC disbursed the payments, maintained access to employee records, and filed the related withholding tax returns; thus, the Bureau of Internal Revenue ruled that NPC’s Tax Identification Number (TIN) shall be used for remitting the taxes withheld on said separation benefits. (BIR Ruling No. OT-180-2025, May 29, 2025)

PROCEEDS FROM THE PRIVATIZATION OF A GOVERNMENT-OWNED POWER PLANT UNDER EPIRA ARE NOT SUBJECT TO INCOME TAX, WITHHOLDING TAX, OR VAT, AS THE TRANSACTION CONSTITUTES AN EXERCISE OF GOVERNMENTAL FUNCTION, NOT A COMMERCIAL ACTIVITY. Under Section 27(C) of the Tax Code, government-owned or controlled corporations (GOCCs) are generally subject to income tax only when engaged in commercial activities similar to those of private entities. However, Section 32(B)(7)(b) exempts income derived from the exercise of essential governmental functions, and Section 105 further limits VAT liability to transactions made in the course of trade or business. In this case, the sale of a hydroelectric power plant by two government entities to a private corporation was conducted under the mandate of the Electric Power Industry Reform Act (EPIRA) for the purpose of privatizing state-owned generation assets. Since this activity is legally recognized as a governmental function aimed at restructuring the energy sector and not a profit-driven business venture, the proceeds from the transaction are not subject to income tax, withholding tax, or VAT. (BIR Ruling No. OT-182-2025, June 10, 2025)

IMPORTATION OF LIQUEFIED NATURAL GAS (LNG) IS NOT SUBJECT TO EXCISE TAX AS THERE IS NO SPECIFIC PROVISION IMPOSING SUCH TAX ON IMPORTED LNG. Pursuant to Section 151(A)(2) of the Tax Code, as amended, excise tax is imposed only on specified mineral products, and it expressly exempts locally extracted natural gas and liquefied natural gas (LNG) from such tax. While this provision references local extraction, imported articles are subject to the same excise tax rules as their locally manufactured counterparts. Since LNG derived from locally extracted gas is tax-exempt and there is no separate provision for taxing imported LNG, the importation of LNG by a power-generating corporation for use in its Batangas-based plant is likewise not subject to excise tax. This interpretation is consistent with Revenue Regulations No. 8-96, relevant jurisprudence emphasizing strict construction against taxation, and the BIR's prior ATRIGs confirming the tax-exempt status of the corporation’s LNG imports. (BIR Ruling No.  OT-183-2025, July 29, 2025)

BIR DEADLINES FROM OCTOBER 20 TO OCTOBER 26, 2025. A gentle reminder on the following deadlines, as may be applicable:

Dear Clients, Colleagues, and Friends,

We are pleased to share that our firm has been named a finalist at the Asian Legal Business (ALB) Philippine Law Awards 2025 held at the Shangri-la Fort Taguig, BGC last October 8, in the following categories:

• Tax and Trusts Law Firm of the Year
• Boutique Law Firm of the Year
• Rising Law Firm of the Year
• Managing Partner of the Year – Atty. Rhondee E. Dumlao, CPA

This recognition is truly your achievement as well as our partner. We owe this milestone to your continued trust, support, and the opportunities you have given us to serve you.

We are also deeply grateful to those who took the time to nominate our firm; your confidence inspires us to keep striving for excellence and to deliver the highest quality of legal service.

As we celebrate this honor, we look forward to working with you on more meaningful projects and partnerships ahead.

Warm regards,

Dumlao & Co.