Competence. Integrity. Commitment.

COURT OF TAX APPEALS DECISIONS

ACCREDITATION OF TAX AGENTS BEFORE THE BUREAU OF INTERNAL REVENUE (BIR) IS VALID AND DOES NOT ENCROACH UPON THE REGULATORY AUTHORITY OF THE PROFESSIONAL REGULATORY BOARD OF ACCOUNTANCY (BOA). Under the National Internal Revenue Code, as amended, the Commissioner of Internal Revenue (CIR) is expressly authorized to accredit and register tax agents, and administrative agencies may validly exercise not only powers expressly granted but also those implied and necessary to carry out their statutory mandates, consistent with the Supreme Court’s ruling in J. Accountants Party-List, Inc., which upheld agency accreditation of professionals as regulation of a specific activity rather than of the profession itself. Applying this doctrine, the Court held that the BIR’s accreditation of tax agents does not unduly restrict the practice of accountancy nor encroach upon the regulatory authority of the Professional Regulatory Board of Accountancy since what is regulated is not the accountancy profession per se but the distinct activity of tax representation before the BIR; the requirements on competence, continuing education, fees, and sanctions are reasonable mechanisms to ensure integrity and efficiency in tax administration and apply to all who seek to practice before the Bureau, not exclusively to CPAs. Consequently, the assailed regulations are neither ultra vires nor violative of the doctrine of non-delegation, but a valid exercise of the BIR’s delegated and incidental powers (Emilino T. Maestro v. CIR, CTA Case No. 11309, August 6, 2025)

HOLDING COMPANY IS NOT SUBJECT TO LOCAL BUSINESS TAX ON DIVIDENDS INCOME. A city, such as the City of Taguig, may impose local business taxes only on contractors and other independent contractors at the prescribed graduated rates, and on banks and other financial institutions within the allowable percentage of their gross receipts. Local business taxes are imposed on the privilege of engaging in business, meaning regular commercial activity undertaken for profit. However, the Local Government Code prohibits local government units from taxing income or gains already subject to national income tax, except in the case of banks and other financial institutions. The Court emphasized that dividends and interest may be subjected to local business tax only when they form part of the gross receipts of banks or other financial institutions. Thus, when the taxpayer is a holding company, as reflected in its articles of incorporation, and its audited financial statements show that it merely earns dividend, interest, and foreign exchange income, with no evidence that it operates as a bank or financial institution or is engaged in business activities contemplated by law, the assessment of local business tax on such income has no legal basis. (The City of Taguig et. al., v. Union Cement Holdings Corporation, CTA Case No. 294, 2025)

FRANCHISE TAX MAY BE IMPOSED ONLY BY THE LOCAL GOVERNMENT UNIT (LGU) WHERE THE TAXPAYER’S PRINCIPAL OFFICE IS LOCATED. A PROVINCE CANNOT LEVY FRANCHISE TAX MERELY BECAUSE THE SERVICES ARE RENDERED OR THE CUSTOMERS ARE SITUATED WITHIN THE PROVINCE BUT OUTSIDE THE TERRITORIAL JURISDICTION OF THE CITY OR MUNICIPALITY WHERE THE PRINCIPAL OFFICE IS LOCATED. A province or city may impose franchise tax only on businesses enjoying a special or secondary franchise and only on gross receipts derived from the exercise of such franchise within its territorial jurisdiction. The Supreme Court clarified that liability requires concurrence of two elements: the existence of a franchise and the actual exercise of rights or privileges thereunder within the taxing LGU’s territory, with situs determined by where the franchise privilege is exercised Thus, where the taxpayer has a special or secondary franchise, and  it  supplies power to DANECO, which is located in Montevista, a municipality within the jurisdiction of Province of Compostela Valley, and where DANECO in turns delivers the same to customers including municipalities of Province of Davao Del Norte; and there is no showing that the taxpayer’s principal office is located in Province of Davao Del Norte and Compostela Valey, Province of Davao Del Norte and Compostela Valley cannot impose franchise tax on gross receipts from Daneco (National Transmission Corporation v. Province of Davao Del Norte, CTA AC No. 298, 2025)

ENVIRONMENTAL IMPACT FEE AND BUSINESS PLATE/STICKER FEE ARE REGULATORY, AND NOT REVENUE, IN NATURE, AND ARE OUTSIDE THE JURISDICTION OF THE CTA. The Court of Tax Appeals (CTA) exercises appellate jurisdiction over decisions of the Regional Trial Courts in local tax cases, i.e., matters where the primary purpose of the exaction is to raise revenue. Applying this, the Environmental Impact Fee and the Business Plate/Sticker Fee are regulatory in nature rather than revenue-generating: the Environmental Impact Fee compensates for environmental and social costs and covers solid waste management, with liability imposed even on property owners or managers for tenant non-compliance, while the Business Plate/Sticker Fee is imposed to support inspection and regulation of businesses. Because these exactions primarily serve regulatory purposes, they are not considered local taxes, and therefore, the CTA lacks jurisdiction to rule on the petitioner’s refund claims regarding these fees, confining its review solely to the petitioner’s liability for the Local Business Tax. (Serendra Condominium Corporation v. Taguig City Government et. al, CTA AC Case No. 302, 2025)

CONDOMINIUM DUES ARE NOT SUBJECT TO LOCAL BUSINESS TAX DESPITE BEING CLASSIFIED AS “REVENUES” IN THE TAXPAYER’S AUDITED FINANCIAL STATEMENTS. A condominium corporation is organized as a non-stock, non-profit entity, existing primarily to hold title to common areas and manage the condominium project for the benefit of unit owners, and its collection of association dues, membership fees, and other assessments is incidental to that purpose and not profit-oriented. Applying this principle, the taxpayer’s classification of dues as “Revenues” in its 2016 AFS does not constitute an admission of business activity, as these fees are collected solely to defray expenses and maintain the condominium’s common areas. Moreover, under the Taguig Revenue Code, the taxpayer cannot be considered a “contractor” because it does not engage in trade or render services for profit. Accordingly, the taxpayer is not subject to Local Business Tax, not by virtue of an exemption, but because it is not engaged in any business activity as contemplated by law. (Serendra Condominium Corporation v. Taguig City Government et. al, CTA AC Case No. 302, 2025)

UNDER SECTION 196, A STATEMENT OF ACCOUNT ISSUED MERELY FOR BUSINESS PERMIT RENEWAL IS NOT A VALID ASSESSMENT, SO THE TAXPAYER’S REMEDY IS A REFUND CLAIM, NOT A PROTEST UNDER SECTION 195. Under Section 196 of the Local Government Code of 1991, a taxpayer may file a claim for refund or tax credit within two (2) years from payment of taxes that were erroneously or illegally collected, which applies when no valid assessment under Section 195 has been issued by the local treasurer. Jurisprudence establishes that a valid assessment must clearly state the nature of the tax, the amount of deficiency, and the corresponding surcharges, interests, and penalties, and that documents issued merely in connection with business permit issuance or renewal cannot be treated as notices of assessment. In this case, the Statement of Account issued by the City Treasurer was not intended to determine any tax deficiency but merely served to facilitate the renewal of petitioner’s business permit; it did not indicate any deficiency tax, surcharge, or interest, nor did it state the factual and legal basis for the alleged liability. Consequently, the Statement of Account does not constitute a valid assessment under Section 195, and since there was likewise no showing that the taxing authority made a formal determination that petitioner failed to pay the correct taxes, the applicable remedy is a refund claim under Section 196, rather than the protest procedure under Section 195. (Holcim Philippines, Inc. v. The City of anila et. al., CTA AC No. 315, 2025)

A TAXPAYER ENGAGED IN MANUFACTURING OR WHOLESALE DISTRIBUTION OF ESSENTIAL COMMODITIES (E.G., CEMENT) IS ENTITLED TO THE PREFERENTIAL LOCAL BUSINESS TAX RATE, EVEN WITHOUT PRIOR LGU REGISTRATION AS SUCH. Cities are authorized to impose local business taxes; however, the tax on manufacturers, millers, producers, wholesalers, distributors, dealers, or retailers of essential commodities, including cement, shall be limited to one-half of the rates imposed on ordinary manufacturers or wholesalers. The law does not require prior registration with the local government as a manufacturer or wholesaler of essential commodities in order to claim the preferential rate, since local government units possess no inherent power to tax and may not impose requirements beyond those authorized by law. In this case, although the LGU argued and the RTC ruled that the taxpayer could only avail of the preferential rate after amending its business registration in March 2022, the evidence on record, including documentary and testimonial proof, established that the petitioner was in fact engaged in the manufacturing and/or wholesale distribution of cement, which is classified as an essential commodity. Consequently, the taxpayer is entitled to the preferential local business tax rate, notwithstanding the absence of prior registration specifically identifying it as a manufacturer or wholesaler of essential commodities. (Holcim Philippines, Inc. v. The City of Manila et. al., CTA AC No. 315, 2025)

A LOCAL GOVERNMENT UNIT MAY APPLY A PRESUMPTIVE INCOME LOCAL ASSESSMENT (PILAA) WHEN A TAXPAYER EITHER NEGLECTS OR REFUSES TO DECLARE GROSS SALES OR RECEIPTS, OR SUBMITS AN INADEQUATE DECLARATION WITHOUT AUDITED FINANCIAL STATEMENTS, PROVIDED THAT SUCH APPLICATION IS EXPRESSLY AUTHORIZED BY ORDINANCE. In this case, although the taxpayer later submitted a Certification of gross sales with its administrative claim for refund in December 2021, no proof of gross sales or receipts was presented at the time the Statement of Account was issued in 2020, satisfying the first condition for PILAA. The second condition was likewise met because the use of a presumptive income assessment under such circumstances is permitted. Accordingly, the LGU properly applied PILAA in assessing the petitioner’s local business tax. (Holcim Philippines, Inc. v. The City of Manila et. al., CTA AC No. 315, 2025)

THE PROSECUTION FAILED TO ESTABLISH CRIMINAL LIABILITY FOR TAX NONPAYMENT BECAUSE IT DID NOT PROVE THAT THE BIR ASSESSMENT NOTICES WERE PROPERLY SERVED ON THE CORPORATION OR ITS AUTHORIZED REPRESENTATIVES, AND THUS THE CORPORATION WAS NOT SHOWN TO BE LEGALLY OBLIGATED TO PAY THE ALLEGED DEFICIENCY TAX; CORPORATE OFFICERS CANNOT BE HELD CRIMINALLY LIABLE FOR TAX VIOLATIONS BASED SOLELY ON THEIR TITLES IN THE CORPORATION, ABSENT PROOF OF THEIR ACTIVE PARTICIPATION, KNOWLEDGE OF, OR ABILITY TO PREVENT THE ALLEGED NONPAYMENT OF TAXES. A corporation and its responsible officers may be held criminally liable for willfully failing to file returns, pay taxes, or supply correct and accurate information. To sustain a conviction, the prosecution must establish: (1) that the corporate taxpayer was legally obliged to pay the tax; (2) that it failed to pay the tax at the time or times required by law or rules and regulations; and (3) that the accused officer willfully failed to pay, actively participated in, or had the power to prevent the violation. In this case, accused Chow Master Corporation (CMC), a Philippine corporation engaged in the restaurant business and registered with the BIR, was alleged to have deficiency income tax liability for TY 2011 arising from BIR assessments. However, the prosecution failed to show that notices and demands, including the Preliminary Assessment Notice (PAN) and Final Assessment Notice (FAN), were properly served to CMC or its duly authorized representatives in accordance with Section 3.1.6 of Revenue Regulations Nos. 12-99 and 18-2013, which provide for personal, substituted, or mail service with clear documentation of delivery. The prosecution’s sole witness, RO Balazo, testified only generally from records and did not personally witness service, nor could she verify the authority of the individuals allegedly receiving the notices to bind CMC. As a result, CMC was not shown to have been legally required to pay any deficiency tax. Regarding accused Rebecca Ann K. Sy and Alice Lao Yap, the prosecution relied on a 2010 General Information Sheet showing Sy as President and Yap as Corporate Secretary, but presented no evidence of their actual positions, roles, or duties at the time of the alleged violation. There was also no proof that they actively participated in, had knowledge of, or could have prevented the nonpayment of taxes. Consistent with the Supreme Court’s ruling in Suarez vs. People et al., G.R. No. 253429, October 6, 2021, mere titular office does not establish criminal liability; liability arises from active participation or the power to prevent the wrongful act. Accordingly, the elements of Section 255 were not established beyond reasonable doubt, warranting the acquittal of the accused.

ALL VIOLATIONS PRESCRIBE IN FIVE YEARS FROM COMMISSION OR DISCOVERY, INTERRUPTED BY PROCEEDINGS OR OFFENDER’S ABSENCE, AND IN THIS CASE, THE FILING OF THE COMPLAINT-AFFIDAVIT BEFORE THE DOJ. All violations of the Code prescribe after five (5) years, with the period running from the commission of the offense or, if unknown, from discovery and the institution of judicial proceedings. The prescriptive period is interrupted by the commencement of proceedings and does not run when the offender is absent from the Philippines. In this case, the alleged violations involved the accused corporation’s failure to remit withheld compensation taxes, which under the “pay-as-you-file” system could have been readily ascertained by the BIR from its Electronic Filing and Payment System. Accordingly, the prescriptive period for each WTC return was reckoned from the statutory due date of each return, ranging from January 15, 2017, to August 15, 2019. The earliest alleged offense, failure to pay the WTC return for December 31, 2016, would have prescribed on January 15, 2022. However, the filing of the Complaint-Affidavit before the Department of Justice on October 10, 2019, effectively interrupted prescription for all 16 counts, rendering the criminal action timely and within the five-year period. The Court further clarified that the Discovery Rule does not apply when the BIR could have reasonably detected the violation and that preliminary investigations suffice to toll prescription, ensuring the government’s right to prosecute was exercised within the legally prescribed period (People of the Philippines v. Reynaldo Y. Dia et. al., CTA Crim. Case No. 0-1002, July 2025).

CRIMINAL LIABILITY FOR FAILURE TO REMIT WITHHOLDING TAXES WAS DISMISSED DUE TO FINANCIAL INCAPACITY, DISCONTINUED PROJECTS, AND EFFORTS TO PAY ET. AL., DEMONSTRATING LACK OF WILLFULNESS. THE PRESIDENT CANNOT BE HELD LIABLE BASED ON TITULAR POSITION ALONE AND MUST BE PROVEN TO HAVE ACTIVELY PARTICIPATED AS A RESPONSIBLE OFFICER. Any person or corporation required to file returns, remit taxes withheld, or supply correct information, who willfully fails to do so, may be criminally liable, with penalties imposed on responsible officers of corporations. In this case, the accused was required to remit withholding taxes on compensation (WTC) for multiple periods from December 31, 2016, to July 31, 2019, as reflected in its eFPS filings, and records from the BIR indicated non-payment of several returns. However, the prosecution failed to establish that the accused acted willfully, as its failure to pay was due to financial incapacity, discontinued projects, terminated client relationships, labor cases, and other obligations, and it made efforts to settle unpaid taxes, including attempts to negotiate with the BIR and to apply for tax amnesty. Furthermore, the prosecution did not prove that the accused, the President, was a responsible officer actively involved in the preparation or payment of the tax returns, as mere titular position alone does not establish criminal liability. While the failure to remit WTC was undisputed, the absence of willful intent and lack of evidence linking the accused to the act resulted in acquittal for reasonable doubt. Nonetheless, the accused remains civilly liable to pay the deficiency WTC, although the extent of such liability requires reopening of the trial for determination (People of the Philippines v. Reynaldo Y. Dia et. al., CTA Crim. Case No. 0-1002, July 2025).

SECURITIES AND EXCHANGE COMMISSION 

SEC ISSUES REVISED BENEFICIAL OWNERSHIP DISCLOSURE RULES; APPLICATION: ENTITIES MUST IDENTIFY, DECLARE, AND REPORT BENEFICIAL OWNERS TO ENHANCE TRANSPARENCY AND COMPLY WITH AML/CFT STANDARDS. The Securities and Exchange Commission (SEC) issued Memorandum Circular No. 15, Series of 2025, effective January 1, 2026, establishing a framework requiring corporations and other covered entities to identify, declare, and report information on their beneficial owners. The Circular aims to enhance corporate transparency, prevent the misuse of corporate structures for illicit activities, and ensure compliance with international standards on anti-money laundering (AML) and combating the financing of terrorism (CFT). SEC Memorandum Circular No. 15, s. 2025 (2025).

SEC MEMORANDUM CIRCULAR NO. 4 SERIES OF 2026 AMENDS THE REVISED SRC RULE 68, INCREASING THE MANDATORY AUDIT THRESHOLD TO TOTAL ASSETS OR TOTAL LIABILITIES OF MORE THAN P3,000,000 TO ALIGN WITH NATIONAL MSME POLICY AND SUPPORT EASE OF DOING BUSINESS.

SEC ISSUED GUIDELINES REQUIRING OPCS TO TIMELY APPOINT OFFICERS AND SUBMIT REPORTORIAL FORMS, WITH PENALTIES FOR NON-COMPLIANCE. Under the regulatory authority of the Revised Corporation Code of the Philippines and the power of the Securities and Exchange Commission to enforce corporate governance standards, the Commission issued guidelines to monitor and regulate the compliance obligations of One Person Corporations (OPCs), particularly regarding the appointment of officers and submission of required forms and reports, and to establish uniform penalties for violations. (Guidelines on the Compliances of One Person Corporations (OPCs), SEC Memorandum Circular No. 10, Series of 2026, 16 February 2026).

REVENUE ISSUANCES

Revenue Regulation No. 001-2026

Revenue Regulations No. 001-2026 amends VAT rules for Registered Business Enterprises (RBEs) to clarify filing procedures, allow optional VAT registration, and extend system reconfiguration deadlines to December 31, 2026.

BIR DEADLINES FROM MARCH 9, 2026 TO MARCH 15, 2026. A gentle reminder on the following deadlines, as may be applicable:

COURT OF TAX APPEALS DECISIONS

TRUST FUND CONTRIBUTIONS BY PRE-NEED COMPANY IS EXCLUDED FROM GROSS RECEIPT FOR VAT PURPOSES; 19.75% UNDER-DECLARATION OF SALE WARRANTS THE APPLICATION OF 3-YEAR PRESCRIPTIVE PERIOD. Under the law, contributions to the trust fund are not included in the gross receipts of a pre-need company. Accordingly, when the taxpayer, as a pre-need company, made both initial trust fund contributions and subsequent additional contributions as required by the SEC, both amounts should be excluded in determining VAT liability. The BIR cannot validly exclude the initial contributions while including the additional ones in its VAT assessment. As to prescription, the BIR generally has three (3) years within which to issue an assessment. The period extends to ten (10) years only in cases the return is intentionally false or fraudulent. A prima facie presumption of falsity or fraud arises when there is an under-declaration of taxable sales exceeding thirty percent (30%) of the amount declared in the return. However, this presumption may be rebutted by the taxpayer upon showing that the discrepancy was due to inadvertence or error. In this case, the taxpayer demonstrated that the alleged under-declaration resulted from the BIR’s failure to exclude the additional trust fund contributions. Since the under-declaration amounted to only 19.75%, which is below the 30% threshold, the presumption of falsity does not apply. Consequently, the ordinary three-year prescriptive period governs. (CIR v. Pet Plans, Inc., CTA EB No. 2857, CTA Case No. 10002, September 2, 2025)

AN ASSESSMENT IS VOID WHEN THE EXAMINERS’ AUTHORITY TO AUDIT IS BASED ON MEMORANDUM OF ASSIGNMENT; CHIEF IS NOT AUTHORIZED TO ISSUE LETTER OF AUTHORITY; COURT MAY RULE ON EXAMINER’S LACK OF AUTHORITY EVEN NOT RAISED AS AN ISSUE. The Commissioner of Internal Revenue (CIR) or his duly authorized representatives, such as Regional Directors and Deputy Commissioners, have the authority to examine a taxpayer’s books of accounts; however, any reassignment of the examination to different revenue officers requires the issuance of a new Letter of Authority (LOA). A reassignment effected only through a Memorandum of Assignment (MOA), referral memorandum, or similar internal document, without a corresponding new LOA, constitutes a usurpation of the CIR’s authority, as an MOA cannot supplant or substitute for an LOA. Furthermore, a taxpayer’s failure to question the lack of authority does not bar the court from considering the issue, since it affects the intrinsic validity of the assessment itself. Thus, where an LOA originally authorized Revenue Officers Fernandez, Dizon, and Costales to conduct the audit, but the case was later reassigned to Examiners Benedicto and Santos without the issuance of a new LOA, relying only on a MOA signed by the Chief of Regular LT Audit Division II, who is not authorized to issue an LOA, the reassigned examiners lack legal authority, rendering the resulting assessment void. (CIR v. Metro Rail Transit Corporation, CTA EB No. 2862, CTA Case No. 9651, September 2, 2025)

ASSESSMENT BASED ON TAX VERIFICATION NOTICE (TVN), WITHOUT LOA, IS VOID. Under the National Internal Revenue Code, only the Commissioner of Internal Revenue or his duly authorized representative, specifically the Revenue Regional Director, may authorize the examination of a taxpayer through the issuance of a LOA and such authority may be exercised only in the manner expressly provided by law; jurisprudence consistently holds that an LOA is the exclusive and indispensable authority for a revenue officer to validly examine a taxpayer, the absence of which renders the assessment void for violation of due process. Applying these principles, a TVN issued by a Revenue District Officer cannot substitute for an LOA, as the NIRC, being a special law prevailing over the general provisions on agency under the Civil Code, does not recognize any equivalent document nor empower the Revenue Regional Director to delegate the issuance of LOAs through a TVN; thus, without a valid LOA authorizing the revenue officer’s examination, the resulting deficiency assessment is null and void. (CIR v. St. Paul Hospital Cavite, Inc., CTA EB No 2880, CTA Case No. 10815, August 15, 2025)

180-DAY PERIOD BASED ON INACTION IS COUNTED FROM THE FILING OF THE PROTEST AND NOT FROM APPEAL TO THE CIR. There is only one 180-day period reckoned from the filing of the protest or the submission of complete supporting documents. Thus, if the CIR’s duly authorized representative denies the protest within that 180-day period and the taxpayer elevates the matter to the CIR, the CIR is left with the balance of the same 180-day period to resolve the case. Should no action be taken within the remaining period, the taxpayer may appeal to the CTA within 30 days from the lapse thereof. Conversely, if the taxpayer opts to await the decision of the CIR’s representative and such decision is issued beyond the 180-day period, the taxpayer may still appeal the same to the CTA; in this situation, the 180-day period is no longer relevant, and the taxpayer’s recourse is to await the CIR’s final decision before seeking relief from the CTA if the ruling is adverse. (Benguet Electric Cooperative, Inc. (BENECO) vs. The Commissioner on Internal Revenue, CTA EB No. 2882, CTA Case No. 9667, September 2, 2025)

ASSESSMENT IS VOID IF THE BIR FAILED TO ADDRESS TAXPAYER’S ARGUMETNS IN THE PAN; VOID IF EXAMINER’S AUTHORITY IS MEMORANDUM OF ASSIGNMENT. Tax assessments must state in writing the factual and legal bases therefor and must be issued by revenue officers duly authorized through a valid LOA; otherwise, the assessments are void for violation of administrative due process and lack of authority, as consistently held in jurisprudence such as Avon Case. In this case, the BIR failed to address and consider the taxpayer’s refutations to the PAN, as the FLD merely reproduced the earlier findings without explaining the rejection of the defenses, thereby denying the taxpayer a meaningful opportunity to be heard; moreover, the deficiency assessments were recommended by a revenue officer who lacked a valid LOA at the time of the audit, her authority resting only on a Memorandum of Assignment issued by one not authorized to issue an LOA, rendering the examination and resulting assessments a nullity. Accordingly, the assessments were correctly declared void in  (CIR v. Will Team PH, Inc., CTA EB No. 2884, CTA Case No. 10154)

ASSESSMENT IS VOID IF NOT ALL EXAMINERS ARE NAMED IN THE LOA. Only the CIR or his duly authorized representatives—such as Revenue Regional Directors, Deputy Commissioners, Assistant Commissioners, and Head Revenue Executive Assistants—may issue a valid Letter of Authority (LOA) empowering revenue officers (ROs) to examine and audit a taxpayer’s books, and the LOA must specifically name the ROs performing the audit to satisfy due process; in this case, while the LOA for TY 2014 named ROs Pelayo, Guimbao, and GS Aviles, additional ROs Sison, Gomez, and Manuel participated in the examination without being named, tainting the audit with illegality and violating the taxpayer’s right to due process, and as a result, the Court of Tax Appeals in Division correctly nullified the 2014 deficiency tax assessments and enjoined the BIR from collecting them, (CIR V. Concepcion Industries, Inc., CTA EB No. 2920, CTA Case No. 10584 October 20, 2025)

30-DAY PERIOD TO FILE PETITION FOR REVIEW WITH THE CTA DIVISION IS NON-EXTENDIBLE. Under the National Internal Revenue Code of 1997, the 30-day period to appeal the Commissioner’s denial of a protest on a disputed assessment to the Court of Tax Appeals is mandatory and jurisdictional; failure to comply renders the assessment final, executory, and demandable, and such period cannot be extended by invoking Section 11 of Republic Act No. 1125 or Rule 42 of the Rules of Court, as the latter applies generally and yields to the specific substantive provision of Section 228. Here, the petitioner received the Final Decision on Disputed Assessment (FDDA) on July 15, 2024 and, instead of filing a Petition for Review within the 30-day period or until August 14, 2024, filed a Motion for Extension on August 13, 2024 seeking an additional 15 days; however, the Court En Banc held that it could not grant the extension because the appeal period under Section 228 is non-extendible, and procedural rules cannot override this statutory mandate. (Yokohama Tire Sales Philippines, Inc. v. CIR, CTA EB No. 3078, CTA Case No. 11590, October 24, 2025)

INTERCOMPANY LOAN IS NOT SUBJECT TO DST IF THE LOANED AMOUNT IS UTILIZED OUTSIDE  OF THE PHILIPPINES. Under Philippine law, documentary stamp tax (DST) is an excise tax imposed on transactions represented by documents, not on the documents themselves, and must be interpreted strictly against the government and liberally in favor of the taxpayer. DST on debt instruments applies only when the obligation or right arises from Philippine sources or when the object of the contract is located or used in the Philippines, reflecting the principle that a state’s taxing power is limited to subjects within its territorial jurisdiction. In the present case, Bloomberry’s loan agreements with its non-resident foreign affiliates were perfected outside the Philippines, as the loans were real contracts that required delivery of the proceeds, which were used in the Republic of Korea. Because the necessary jurisdictional connection, or situs, for DST is absent, the transactions cannot be taxed. Furthermore, the proviso in Section 173, which allows shifting of DST liability when one party is exempt, presupposes that the transaction is already taxable and does not create liability where none exists. Therefore, consistent with the legislative intent and the strict construction principle, Bloomberry’s loan transactions are not subject to DST. (CIR v. Bloomberry Resorts Corporation, CTA EB No. 2933, CTA Case No. 10193; Bloomberry Resorts Corporation v. CIR, CTA EB No. 2935, CTA Case No. 10193, August 6, 2025)

REVENUE ISSUANCES

BIR DEADLINES FROM FEBRUARY 23, 2026 TO FEBRUARY 28, 2026. A gentle reminder on the following deadlines, as may be applicable:

COURT OF TAX APPEALS DECISIONS

ASSESSMENT IS VOID IF THE BIR ISSUES FLD/FAN 3 WORKING DAYS AFTER TAXPAYER FILED ITS REPLY TO THE PAN, EVEN IF FLD/FAN IS ISSUED AFTER THE 15-DAY PERIOD REQUIREMENT. A taxpayer has 15 days from receipt of the PAN within which to submit a written response. Moreover, as part of due process, the BIR must address the taxpayer’s defenses, otherwise the assessment is void. Thus, where the taxpayer received the PAN on February 26, 2018 and filed a reply on March 9, 2018 (on the 11^th day), but the BIR issued the FAN on March 14, 2018 (even on the 16^th day from issuance of PAN but only after 5 calendar days or 3 working days from filing of reply), without indication that the reply was considered; where the FAN’s findings are mere verbatim of the findings in the PAN, save for interest, without acknowledging discussing or evaluating the defenses in the reply; where BIR changed the prescriptive period in the FAN from 3 years to 10 years without specifying the basis of the invocation. the assessment is void. (Folares Pharmaceuticals Inc. v. CIR, CTA Case No. 10331, October 27, 2025)

LOA REMAINS VALID AS LONG ONE EXAMINER HAS AUTHORITY EVEN THOUGH OTHER EXAMINERS DO NOT HAVE VALID AUTHORITY. Based on McDonald’s case, only the RO authorized in the LOA may conduct the audit. There is nothing in the McDonald’s case that states that the valid authority of the examiner is nullified or affected by the lack of authority of other revenue officers. Thus, where RO Sudano, Anaban and Monforte who prepared and signed the audit reports and memorandum were not authorized under the LOA, but RO Mendoza was authorized under the LOA to examine the books, the LOA remains valid despite other examiners lack authority (Grand Union Supermarket, Inc. v CIR,  CTA Case No. 10390, October 22, 2025)

A MEMORANDUM OF ASSIGNMENT SIGNED BY THE RDO IS NOT A LOA; RDO IS NOT AUTHORIZED TO ISSUE A LOA; A LOA BELATEDLY ISSUED AT THE REINVESTIGATION STAGE RENDERS THE ASSESSMENT VOID.  Under the Tax Code, a revenue officer must possess proper authorization to conduct an audit through a Letter of Authority (LOA), and jurisprudence holds that any reassignment of the examining officer necessitates the issuance of a new LOA. Only the Commissioner, Deputy Commissioner, Regional Directors, or officials duly authorized by the Commissioner may issue an LOA, meaning a Revenue District Officer (RDO) lacks such authority. In this case, since RO Dela Cruz and GS Lapuz, originally named in the LOA, were transferred or reassigned, and the audit was continued by RO Muti and GS Carim under a Memorandum of Assignment signed by the RDO, with a new LOA for GS Muti issued only after the taxpayer filed a Request for Re-Investigation following the PAN and FAN, the resulting assessment is rendered void. (Ebar Abstracting Company, Inc. v. CIR, CTA Case No. 10685, October 16, 2025)

AVON CASE WILL NOT APPLY IF THE REPLY TO THE PAN IS NOT SUPPORTED WITH DOCUMENTARY EVIDENCE. Due process requires that the assessment must state the fact and on which the assessment is based. In Avon Case, the Supreme Court ruled that the BIR is mandated not only to fully inform the taxpayer of the fact and law, but to comment or address the defenses and documents submitted by the taxpayer. Here, where the taxpayer’s protest to the PAN was not at all supported by any documentary evidence, despite the fact that it raised several factual issues that can be resolved by supporting documents. Thus, the BIR cannot be faulted if it merely reiterated the same findings, without giving any reason for rejecting the unsubstantiated refutations. Thus, Avon case does not apply. (TSPI Mutual Benefit Association, Inc. v. CIR, CTA Case No. 10691, October 14, 2025)

A COOPERATIVE IS EXEMPT FROM PERCENTAGE TAX ON LIFE INSURANCE PREMIUMS; REQUISITES. A cooperative association is exempt from paying taxes on life insurance premiums if it meets the following conditions: (1) it is managed by its members; (2) it operates using funds collected from its members; and (3) it is licensed for the mutual protection of its members rather than for profit. In this case, the taxpayer satisfies these requirements: the articles of incorporation grant each member one vote, all officers are members as confirmed by the General Information Sheet and minutes of meetings, the Mutual Benefit Association’s License classifies it as a nonstock, non-profit association providing death, medical, and similar benefits to members and their families, its revenue comes from member contributions and premiums, and the Insurance Commission’s license authorizes it to operate as a mutual benefit association. (TSPI Mutual Benefit Association, Inc. v. CIR, CTA Case No. 10691, October 14, 2025)

SUBSEQUENT BUYER OF THE PROPERTY SUBJECT TO NOTICE OF LIEN AND LEVY (NOTL) IS A REAL PARTY IN INTEREST; THE RUNNING OF THE PRESCRIPTIVE PERIOD FOR TAX COLLECTION IS SUSPENDED UPON THE VALID SERVICE OF A WARRANT OF DISTRAINT AND/OR LEVY (WDL), AND THE LAW DOES NOT PROVIDE FOR ANY AUTOMATIC RESUMPTION OF THE PERIOD ONCE SUSPENDED.  Where the BIR annotated Notices of Tax Lien and Levy (NOTL) on the taxpayer’s tax declarations covering certain real properties, and the taxpayer subsequently sold those properties to a buyer two years later, the buyer—although not the original taxpayer—qualifies as the real party-in-interest in challenging the validity of the NOTL. By acquiring the properties, the buyer likewise assumed the liabilities attached thereto. Being directly affected and potentially obliged to satisfy such liabilities, the buyer has a legal interest in seeking the lifting of the NOTL and stands to benefit from its cancellation.  Moreover, the Supreme Court in Republic v. Hizon, does not support the theory that prescription resumes after service of a WDL, but instead recognizes that summary collection proceedings may continue beyond the statutory period once seasonably initiated. Applying this, the CTA En Banc held that the BIR’s timely service of the WDL in 2011 validly suspended the prescriptive period; moreover, the advertisement and sale of the levied properties were not required to effect suspension. Consequently, the BIR’s right to collect the 2007 deficiency taxes did not prescribe, and there was no basis to lift the NOTL. (CIR v. Boast, Inc., CTA EB No. 2812, CTA Case No. 10484, September 16, 2025)

3-YEAR PRESCRIPTIVE PERIOD TO COLLECT APPLIES IF BIR FAILED TO PROVE BASIS FOR INVOKING THE 5-YEAR PRESCRIPTIVE PERIOD. Under Section 203 of the NIRC, internal revenue taxes shall be assessed within three years from the last day of filing the return, and once assessed, the BIR has another three years to collect; extraordinary periods under Section 222, allowing up to five years for collection, apply only in cases of fraud, false returns, or failure to file, which the BIR failed to prove. In this case, petitioner received the FAN on January 4, 2017, which became final and executory on February 3, 2017, and no evidence shows any protest, waiver, or exception to extend the period. Consequently, the regular three-year period to collect expired on February 3, 2020, and the issuance of the WDL on September 28, 2021, occurred well beyond this prescriptive period, rendering the BIR’s collection effort already prescribed. (Teknologix, Inc. v. CIR, CTA Case No. 10803, October 27, 2025)

BIR CANNOT ASSESS TAXPAYER BASED ON REVOKED RULING ON WHICH THE TAXPAYER RELIED ON ABSENT BAD FAITH. While the CIR has the authority to issue, modify, or revoke BIR rulings, any revocation cannot be given retroactive effect if it would prejudice a taxpayer who relied in good faith on a prior ruling, except in cases of misstatement of facts, materially different facts, or bad faith; moreover, applying the rule of expressio unius est exclusio alterius, only those rulings expressly revoked are deemed affected. Applying these principles, the CTA En Banc held that RMC No. 55-2010 expressly revoked only specific rulings issued to another taxpayer and did not include or expressly revoke Ruling No. 178-08 issued to the instant taxpayer, which was a specific interpretative ruling based on its distinct factual circumstances; absent proof of misrepresentation or bad faith, the taxpayer was entitled to rely on Ruling No. 178-08 in good faith, and the subsequent assessment for TY 2012, anchored on an implied revocation, would unjustly prejudice it. Accordingly, the deficiency assessment, FAN, and FDDA were properly cancelled. (CIR v. JTKC Land, Inc., CTA EB No. 2800, CTA Case No. 10059; JTKC Land, Inc. v. CIR, CTA EB No. 2808, CTA Case No. 10059, August 4, 2025)CTA MAY ORDER REFUND OF GARNISHED AMOUNT IN A DISPUTED ASSESSMENT CASE. The CTA may take cognizance of a petition for refund of taxes without requiring the prior filing of an administrative claim, particularly where such a requirement would be futile or result in unnecessary delay, as in cases involving disputed assessments or amounts paid under protest. Applying this to the present case, petitioner is entitled to the refund of the garnished amount of which was released by the bank to the BIR, because the deficiency assessments were null and requiring a prior administrative claim would have been a useless formality; accordingly, the Court properly entertained the Supplemental Petition for Review and found that the refund is in order. (The Philippine Stock Exchange, Inc. v. CIR, CTA Case No. 10781, July 4, 2025)

REVENUE ISSUANCES

Revenue Regulations No. 028-2025

Pursuant to Sections 244 and 245 of the National Internal Revenue Code, these regulations mandate the use of the Enhanced eDST System for specific industries for the affixation of documentary stamps.

Revenue Memorandum Circular No. 010-2026

Under the National Internal Revenue Code of 1997, cash donations must be filed through electronic platforms and supported by documentation, such as a notarized deed and proof of transfer, submitted to the BIR within thirty days. Notably, an Electronic Certificate Authorizing Registration (eCAR) is no longer required for these transactions because cash is not considered a registrable property requiring a formal transfer of title.

BIR DEADLINES FROM FEBRUARY 16, 2026 TO FEBRUARY 22, 2026. A gentle reminder on the following deadlines, as may be applicable:

We would like to share a VAT planning opportunity that may be particularly relevant to businesses with 70% export-related sales of goods and services.

Under the CREATE MORE Act (Republic Act No. 12066), VAT-registered exporters that meet the 70% export sales threshold for the preceding taxable year may apply for VAT zero-rating on local purchases through the Export Management Bureau (EMB) of the Department of Trade and Industry (DTI). Once approved, your local suppliers will no longer pass on VAT to you on qualified purchases.

This presents several practical advantages:

• No input VAT accumulation, as VAT is no longer passed on by suppliers
• No need to file VAT refund claims with the BIR or pursue costly and time-consuming cases before the CTA
• Improved cash flow, since VAT is no longer embedded in your purchase costs and tied up pending refund

Recent guidelines from the BIR highlights the importance of timely compliance. Under Revenue Memorandum Circular (RMC) No. 037-2025, for VAT refund claims covering periods beginning April 1, 2025, exporters who meet the 70% export threshold but fail to secure the required EMB VAT zero-rating certification will no longer be allowed to claim VAT refunds for VAT passed on by local suppliers. Instead, any unutilized input VAT may only be carried forward to future period despite the fact that export sales are VAT zero-rated. In short, without EMB certification, VAT may effectively become a stranded cost.

If this is something you would like to explore, we would be glad to walk you through the requirements, qualifying purchases, and implementation process to help you maximize the benefits under CREATE MORE.

Please let us know if you would like to schedule a discussion.

COURT OF TAX APPEALS DECISIONS

CERTIFICATE OF REGISTRATION WITH NATIONAL ELECTRIFICATION ADMINISTRATION (NEA) IS SUFFICIENT FOR NON-STOCK ELECTRIC COOPERATIVE TO BE EXEMPT FROM INCOME TAX. Electric Cooperatives registered with NEA are permanently exempted from income tax. Moreover, a registration with the Cooperative Development Authority is merely optional. Thus, where the taxpayer presented its Certificate its Registration with NEA, it becomes exempted from income tax. (Misamis Oriental Rural Electric Service Cooperative, Inc. (MORESCO 1), v. CIR, CTA Case No. 10987, October 15, 2025)

FORMAL LETTER OF DEMAND/FINAL ASSESSMENT NOTICE (FLD/FAN) ISSUED BEFORE THE LAPSE OF 15-DAY PERIOD TO REPLY TO THE PRELIMINARY ASSESSMEN NOTICE (PAN) IS VOID; A LETTER FOR EXTENSION BEFORE THE ISSUANCE OF THE FLD/FAN IS NOT CONSIDERED  A REPLY. As part of due process, the Tax Code and Revenue Regulations give taxpayer 15 days from receipt of the PAN to file a protest/response. It is only after the lapse of the 15-day period that the BIR may issue the corresponding FLD/FAN. Thus, where the PAN was received by the taxpayer on May 26, 2016, it has until June 10, 2016 to protest or respond to the PAN. Here, the BIR issued the FLD/FAN on June 7, 2016 before the lapse of the 15-day period. Moreover, a letter extension filed on June 6, 2016 after the issuance of the PAN and before the issuance of the FLD cannot be considered a reply to the PAN as it does not state any comment or argument against it. Thus, the taxpayer was not able to exhaust the 15-day period to respond to the PAN. Therefore, taxpayer’s due process was violated and the assessment is deemed void. (Pampanga Rural Electric Service Cooperative, Inc. v. CIR, CTA Case No. 10996. July 7, 2025; see also Getz Phrama (Phils.), Inc. v. CIR, CTA Case No. 9245)

BIR’S FAILURE TO SUFFICIENTLY AND ADEQUATELY EXPLAIN REJECTION OF TAXPAYER’S ARGUMENTS IN THE PAN (I.E. IMPOSITION OF 50% SURCHARGE WITHOUT SUFFICIENT EXPLANATION) RENDERS THE ASSESSMENT VOID; “MINIMUM” COMPLIANCE WITH DUE PROCESS IS NOT ACCEPTABLE. When a taxpayer protests an assessment, the BIR is required to address the arguments raised. Simply ignoring such arguments renders the assessment void, as that would be a violation of the taxpayer's right to due process. The BIR must acknowledge the taxpayer’s defenses and explain why the taxpayer’s argument is rejected. The BIR also cannot claim that it complied with the “minimum” due process.  Thus, where the taxpayer raised a number of arguments against the findings in the FAN (such as imposition of surcharge of 50%) such that taxpayer complained that the PAN failed to specifically allege the facts supporting the claim of false and fraudulent returns; the FAN failed to specify the specific returns filed by taxpayer which are false and fraudulent and the specific details made in the returns that the render them false or fraudulent; and the BIR failed to acknowledge the taxpayer’s arguments; the FAN and PAN are mostly identical, the assessment is void. (E.E. Black, Ltd. (Philippine Branch) v. CIR, CTA Case No. 11074)

BIR’S NOTICE OF DENIAL OF OFFER OF COMPROMISE BASED ON DOUBTFUL VALIDITY IS INVALID IF THE TAXPAYER’S APPLICATION IS BASED ON FINANCIAL INCAPACITY. Taxes may be compromised either based on reasonable doubt as to the validity of the claim (40% of the basic tax) or financial incapacity (10%). If the tax exceeds Php1M or the offer is less than the prescribed rates, the compromise must be approved by the National Evaluation Board (approved by the Commissioner and 4 deputy commissioners). The authority of the BIR is discretionary but should be exercised only within the bounds of law. Thus, where the taxpayer filed an offer of compromise based on financial incapacity, but the BIR evaluated the application based on doubtful validity as shown in the Resolution of the Regional Evaluation Board (REB) denying the offer of compromise, the BIR erroneously exercised its discretion within the parameters set by law. Such defect cannot be cured by the BIR’s answer or BIR witness. Thus, the Notice of Denial should be cancelled. Moreover, assuming that the Notice of Denial is valid based on doubtful validity, it remains invalid as the settlement offered is less than the prescribed minimum rates, and the evaluation of the REB is invalid without approval by the National Evaluation Board. (Spectrum Graphix, Inc. v. CIR, CTA Case No. 11117, 2025)

TAXPAYER CANNOT DISPUTE THE CORRECTNESS OF THE ASSESSMENT FOR FAILURE TO PROTEST THE ASSESSMENT; DUE DATE IN THE FAN, AND STATEMENT THEREIN THAT “INTEREST WILL BE ADJUSTED” WILL NOT AFFECT THE DEFINITENESS OF THE DEMAND; CTA MAY STILL RULE ON THE PRESCRIPTION TO COLLECT; OFFER OF COMPROMISE WILL NOT TOLL THE RUNNING OF 5-YEAR PRESCRIPTION TO COLLECT FOR FAILURE TO FILE RETURN. Tax assessment should be protested within 30 days from receipt thereof; otherwise, failure to protest will render the assessment final, executory and demandable.  Thus, where the BIR received the FAN on November 24, 2010 but taxpayer did not file a protest, the assessment becomes final, executory and demandable and the taxpayer cannot dispute the correctness of the assessment. Moreover, an assessment must contain a demand to pay tax, which must be a definite amount. Thus, where the FLD states that interest paid will be adjusted if paid after the date specified therein and the FAN states the due date for the payment (“please pay above amount or of before December 17, 2010”), the demand to pay is within a specific period and the amount is definite even if the interest will be adjusted, which is a logical consequence of imposing an interest. Moreover, the BIR has 3 years period to assess and another 3 years to collect. In case of failure to file return, the BIR has 10 years to assess and 5 years to collect. Collection could either be summary (by issuance of WDL) or judicial remedy (filing a complaint or filing an answer). Thus, where the taxpayer failed to file IAET return, BIR has 10 year to assess and 5 year to collect. Thus, where the assessment was received on November 24, 2010, the BIR has November 24, 2015 to collect. Here, the BIR did not initiate collection within these periods. Moreover,  the period to collect may be tolled or suspended, and  filing of an application for compromise settlement is not among the instances to interrupt the period to collect. Lastly, prescription to collect may be extended by a waiver. It should, among others be signed by the regional director and kind and amount of tax should be specified. Thus,  where a waiver was executed on April 24, 2013 to extend collection not later than December 17, 2016, was signed by the collection division, the waiver is invalid and the BIR’s right to collect has prescribed. (Spectrum Graphix, Inc. v. CIR, CTA Case No. 11117, 2025)

TAXPAYER MUST PRESENT TAX RETURNS TO INVOKE PRESCRIPTION. The BIR has 3 years to assess counted from the date of deadline to file the return or actual date of filing, whichever comes later. Prescription is a matter of defense, which means that the taxpayer must present evidence the pertinent tax returns for the concerned periods. Thus, where the taxpayer failed to offer in evidence its 2014 income tax return, Quarterly VAT returns and EWT returns, it cannot invoke prescription of the 2014 assessment. (Shirley Tan Festin v. CIR, CTA Case No. 10264, August 13, 2025)

FAILURE TO PROVE RECEIPT OF FAN/FLD, WHEN DENIED RECEIPT BY THE TAXPAYER, RENDERS THE ASSESSMENT VOID. When a BIR notice, such as the FLD/FAN was served via registered mail, taxpayer is presumed to receive it in the ordinary course of mail. When receipt is denied by the taxpayer, the BIR must prove actual receipt of the FLD/FAN. Thus, where during the trial, the BIR witnessed testified “I cannot see [the FLD] in the BIR records”, which means the BIR failed to prove that the FLD/FAN was served via registered mail,  due process is violated and assessment is void. (Shirley Tan Festin v. CIR, CTA Case No. 10264, August 13, 2025)

REVENUE ISSUANCES

Revenue Memorandum Circular No. 008-2026

The BIR has officially LIFTED its suspension of all tax audit and field operations pursuant to the previous RMC 107-2025.  All audit cases that were paused during the suspension period will now continue toward completion and the resumption covers all enforcement, verification, assessment, and collection activities that require audit or field presence.

Revenue Memorandum Order No. 1-2026

The RMO introduces the Single-Instance Audit Framework, which generally limits a taxpayer to one Electronic Letter of Authority (eLA) per taxable year covering all internal revenue tax types, including VAT to prevent fragmented or overlapping audits and promote transparency.

• Beginning 4 March 2026, all pending eLAs with ongoing investigations covering the same taxpayer and taxable year shall be automatically consolidated into one (1) eLA, without any action required from the taxpayer, except where a request for non-consolidation is allowed and filed.
• A consolidated replacement eLA shall be issued to cover all applicable internal revenue tax types for the taxable year concerned and shall be mandatorily conducted by the Revenue District Office (RDO) or Office Audit Section (OAS) of the Assessment Divisions for Regional Cases and Large Taxpayers (LT) Audit Divisions for Large Taxpayers Service (LTS) cases.
  • All eLAs subsumed in the consolidated eLA shall be deemed cancelled upon issuance of the replacement eLA.
  • NOTE: even prior the automatic cancellation date, nothing shall preclude the taxpayer from voluntarily settling assessed or admitted tax deficiencies through the modes allowed under existing issuances.
• Issuing multiple or overlapping eLAs for the same taxpayer and year is strictly prohibited. If the taxpayer wants to keep a VAT audit separate, a written request must be filed by February 16, 2026.
• New eLAs will be generated through information systems based on objective risk parameters. Taxpayer identities will remain concealed during the initial assignment of Revenue Officers (ROs) to prevent bias. Audit instruments must prominently display specific labels indicating their scope, such as "FULL EXAMINATION" for eLAs or "LIMITED SCOPE" for Tax Verification Notices (TVNs). The following are the possible triggers for the issuance of LOA.
  • Mandatory cases
    • Covered by a full audit notice (eLA)
      • Suspected fraud such as declaring 30% less income or 30% more expenses;
      • TP identified through specific industry knowledge, data from third parties, or publicly accessible information;
      • TP previously under a Mission Order where preliminary findings show a 30% or greater understatement of sales;
      • Transactions involving real property or other one-time events where review findings already indicate a tax deficiency;
      • Using tax exemptions or special incentives;
      • Noncompliance with tax obligations arising from Spontaneous Exchange of Information;
      • Тахраyers requesting for tax clearance whose gross sales is more than 1,000,000.00 or gross assets is more than 3,000,000.00, due to:
        • Death of the taxpayer; or 
        • Taxpayers retiring from business
        • Taxpayers undergoing merger/ consolidation/  split-up/ spin-off and;
        • other types of corporate reorganizations
  • Priority cases
    • Large drops in reported sales or VAT payments
    • Large increases in sales that are zero-rated or exempt from tax
    • Differences between current VAT filings and what was carried over from previous months
    • Claiming VAT credits that cover more than 75% of the tax actually owed
    • Paying income tax that is less than 2% of total sales
    • Reporting a net loss despite having large sales or seeing assets grow by 50%
    • Operating for more than five years without ever being audited
    • Claims for damages from natural disasters or for old inventory
    • Getting almost all income from a parent company or affiliate
    • Sharing large expenses between different branches or companies in a group. 
• Existing task forces created for audit functions (including the Run After Fake Transactions (RAFT) Task Force) are concluded, and their functions are absorbed by regular BIR offices. The VAT Audit Sections (VATAS) and Large Taxpayers VAT Audit Units (LTVAU) will wind up operations by May 15, 2026.
  • All existing LOAs issued under RAFT Task Force shall be considered cancelled for purposes of transition and replacement.
• To streamline audit procedures, Revenue Officers are now required to use a uniform checklist for document requests to minimize repetitive or unnecessary submissions. For voluminous records, taxpayers may opt to have the audit conducted at their principal place of business instead of transporting documents to the BIR.

Revenue Regulations No. 029-2025

Pursuant to Sections 4 and 244 in relation to Section 33 of the Tax Code of 1997, these regulations further amend RR No. 2-98 (as recently amended by RR No. 004-2025) to increase the ceiling of non-taxable "De Minimis" benefits exempt from income tax on compensation and fringe benefit tax.

BIR DEADLINES FROM FEBRUARY 1, 2026 TO FEBRUARY 8, 2026. A gentle reminder on the following deadlines, as may be applicable:

COURT OF TAX APPEALS (CTA) DECISIONS

AN ASSESSMENT IS VOID IF DUE DATES IN THE ASSESSMENT NOTICES WERE LEFT BLANK. Under the Tax Code and prevailing jurisprudence, an assessment must contain a demand of definite and fixed tax liability, within a specific period. Thus, where the Formal Letter of Demand (FLD) states that “please take note that the interest will have to be adjusted if paid beyond the date specified therein” but the accompanying Formal Assessment Notice (FAN) shows that the due dates were left blank, no proper demand within a specific period was validly made, thus, the assessment is void. (ePerformax Contact Centers (Cebu) Corp. v. Commissioner of Internal Revenue (CIR),  CTA Case No. 10572, September 9, 2025)

AN ASSESSMENT IS VOID IF THE BIR DID NOT PROVIDE EXPLANATIONS FOR REJECTING THE TAXPAYAYER’S ARGUMENTS IN ITS REPLY TO THE PRELIMINARY ASSESSMENT NOTICE (PAN). Under the Tax Code and prevailing jurisprudence, the taxpayer must be informed of the law and the facts on which the assessment is made, otherwise, the assessment is void. The BIR must give reason for rejecting the taxpayer’s explanations and must give the particular facts upon which his conclusions are based, especially as regards the adjustments made, and those facts must appear on record. Thus, where the assessments are similar to the findings in the PAN, except for the interest adjusted and compromise penalty imposed; the FLD did not address any explanations in the protest letter to the PAN; the details of discrepancy in the FAN was merely copied verbatim from the PAN; and the BIR did not provide sufficient explanation for the adjustment in the basic tax, the assessment is void (ePerformax Contact Centers (Cebu) Corp. v. CIR,  CTA Case No. 10572, September 9, 2025; see also BSFIL Technologies, Inc. v. CIR, CTA Case No. 10603, August 2025)

A WARRANT OF DISCTRAINT AND/OR LEVY ISSUED PENDING APPEAL WITH THE CIR IS VOID FOR BEING ISSUED PREMATURELY. The BIR may collect via distraint or levy in case of delinquency tax. Delinquency means that the taxpayer failed to pay within the period stated in the notice and demand and for which the taxpayer filed to file an appeal to the CTA or CIR within 30 days from receipt of the decision denying the request for reconsideration or reinvestigation. When the taxpayer timely appealed the Final Decision on Disputed Assessment (FDDA) to the CIR, the FDDA cannot be deemed final, executory or demandable as taxes are not yet delinquent, hence, the BIR cannot proceed with collection via WDL. Thus, where the taxpayer received the FDDA on August 25, 2020, and it appealed the same before the CIR on September 24, 2020, the WDL received on August 2, 2021, pending action of the CIR, is void for having been issued prematurely; moreover,  considering that the CIR has no decision yet, the CTA cannot rule on the validity of the assessment. (BSFIL Technologies, Inc. v. CIR, CTA Case No. 10603, August 2025)

A PROTEST IS A REQUEST FOR RECONSIDERATION IF THE TAXPAYER STATES SO AND IT FAILED TO SUBMIT ADDITIONAL DOCUMENTS WITHIN 60 DAYS. An assessment may be protested administratively by filing a request for reconsideration or reinvestigation, in such form and manner prescribed. “Form and manner” means that taxpayer must state the nature of the protest whether reconsideration or reinvestigation, and in case of reinvestigation, the taxpayer has 60 days to submit relevant supporting documents from filing of protest. Thus, where the taxpayer’s protest dated January 9, 2020 categorically refer to “request for reconsideration”, but it later on sent a letter dated March 9, 2020 clarifying that it is a request for reinvestigation, and there is no indication that the taxpayer submitted supporting documents to the BIR, the taxpayer belied its claim that its protest is a request for reinvestigation. (BSFIL Technologies, Inc. v. CIR, CTA Case No. 10603, August 2025)

PETITION IS DISMISSED IF FILED ONE-DAY LATE. The CTA has jurisdiction over other matters or cases that arise out of the NIRC or related laws administered by the  BIR. This includes issues on validity of the WDL and prescription. Appeal may be filed with the CTA 30 days from receipt of decision or ruling of the BIR. Thus, where the taxpayer received the WDL on June 14, 2021, but it filed the petition for review on July 15, 2021, or one day late, the CTA has no jurisdiction and the appeal should be dismissed. (Keys Realty and Development Corporation v. CIR, CTA Case no. 10589, July 7, 2025)

INACTION OF THE COMMISSIONER IS APPEALABLE TO THE CTA AFTER LAPSE OF 180 DAYS FROM FILING OF THE PROTEST, NOT FROM FILING OF REQUEST FOR RECONSIDATION BEFORE THE CIR. Under the Tax Code and jurisprudence, if CIR does not timely act on the protest, the options to either (a) file a Petition with the CTA under 180+30 rule from the filing of the protest; or (b) await the CIR's decision and file a Petition 30 days from receipt thereof, are mutually exclusive.  If the CIR does not act upon the protest and the taxpayer does not file a Petition within 30 days from the lapse of the 180-day period, the taxpayer's only recourse is to await the CIR's decision and file a Petition 30 days after that.  Thus, where the taxpayer protested the FAN on March 12, 2019, received the FDDA on November 23, 2021, but instead of filing a petition with the CTA, filed a Request for Reconsideration to the said FDDA on December 20, 2021, the counting of 180+30 days is from the filing of the protest, not on the filing of Request for Reconsideration. Therefore, the taxpayer had October 8, 2019 (180+30 days) to file the petition; and the petition based on inaction of the CIR, filed on July 18, 2022 or 210 days after its request for reconsideration, was filed out of time.(Empire Automation Phils. Inc., v. CIR, CTA Case No. 10924, September 15, 2025)

PETITION FILED OUTSIDE THE 30-DAY PERIOD FROM RECEIPT OF THE FDDA IS DISMISSIBLE; TAXPAYER CANNOT ARGUE THAT ITS ADMINISTRATIVE OFFICER HAS NO AUTHORITY TO RECEIVE THE FDDA WHEN THE PAN AND FLD WAS ALSO RECEIVED BY THE DESK RECEPTIONIST AND ADMINISTARTIVE SUERVISOR. The taxpayer has 30 days from receipt of the adverse decision of the CIR's duly authorized representative on the disputed assessment to file its appeal by way of Petition for Review before the CTA. Where the FDDA was received on March 6, 2020, the taxpayer has 30 days to file the petition until April 5, 2020. Thus, a petition filed on November 29, 2021 is belatedly filed.  Moreover, where the PAN and FAN were received by the desk receptionist and administrative supervisor, respectively, the taxpayer cannot question the service of the FDDA to an unauthorized person, if it was also signed received by its own administrative officer. (G2K Corporation v. CIR, CTA Case No. 10690, September 9, 2025)

ASSESSMENT IS VOID IF BIR FAILED TO PROVE THAT PAN WAS SERVED.  A PAN is a mandatory requirement of due process. It must be actually received by the taxpayer. If receipt is denied by the taxpayer, the BIR has the burden to prove that it was duly served. Thus, where the taxpayer denied receipt of the PAN and additional PAN; and BIR failed to provide evidence such as written report of service to actually show that the said documents were received by the taxpayer; and where during the trial, it was confirmed by the BIR witness that the BIR records failed to indicate that PAN was served, the taxpayer’s due process was violated. Moreover, the BIR cannot argue that the taxpayer should not be allowed to raise the issue for the first time on appeal which were not raised at the administrative level as the cases before the CTA are litigated de novo and the CTA can entertain arguments or even evidence not raised at the administrative level (Lakeside Food & Beverages Corp. v. CIR, CTA Case No. 10627, September 2025)

RECEIPT OF PAN AND FAN BY “PURCHASING OFFICER” AND “ASSISTANT LOGISTIC” IS VALID EVEN THOUGH NOT ALLEGEDLY AUTHORIZED BY THE TAXPAYER IF DURING TRIAL, THE WITNESS ADMITTED THAT THE SAID DOCUMENTS WERE RECEIVED BY THE TAXPAYER. Substituted service may be availed of only when it is shown that personal service is not practicable and when the party is not present at the registered or known address by leaving the assessment notices at the party's registered address, with “party’s clerk” or with a “person having charge” thereof. Where the taxpayer insists that the LOA, NIC, PAN and FAN were received by individuals not authorized representatives  (purchasing officer and assistant logistic) of the taxpayer to receive the same, but on trial, the witness, who has custody of the financial records, admitted that the same were received by the taxpayer, the service is proper and the taxpayer’s right to due process was not violated. (IBMS Technology Phils., Corporation v. CIR, CTA Case No. 10606, July 30, 2025)

SERVICE OF NOTICE OF INFORAL CONFERENCE (NIC), PAN AND FAN AFTER 180 DAYS FROM RECEIPT OF THE LOA WILL NOT RENDER THE ASSESSMENT VOID. Under the 2015 rules, a 180-day period for regional cases is prescribed to submit a report of investigation/verification but it does not state that the LOA shall be void if the period is not observed. Moreover, it also confirmed that that as early as 2010, a requirement to revalidate the LOA was withdrawn. Therefore, failure to revalidate the LOA does not affect the validity of the assessment; thus, where the BIR, served the LOA in 2018, but the NIC, PAN and FAN were served in 2020 or after 2 years from the receipt of the LOA, the taxpayer’s right is not violated. (IBMS Technology Phils., Corporation v. CIR, CTA Case No. 10606, July 30, 2025)

TAXES SHOULD BE ASSESSED WITHIN THE 3-YEAR PRESCRIPTIVE PERIOD BUT TAXPAYER SHOULD POINT OUT WHICH THE ASSESSED AMOUNT HAS PRESCRIBED. Internal revenue taxes should be assessed within 3 years from the date prescribed by law of the filing of the return or actual date of filing, whichever is later. Assessment refers to the service of the FAN. Thus, where the FAN was received on December 30, 2020, the assessment for 2017 for 1^st and 3^rd quarter VAT (should be assessed no later than October 25, 2020) and EWT for January to November, for 2017 (no later than December 13, 2020), have prescribed. However, the taxpayer should point out which portion of the assessment pertains to the prescribed tax. Thus, the entire assessment (for EWT) shall be considered as pertaining to the month of December 2017. (IBMS Technology Phils., Corporation v. CIR, CTA Case No. 10606, July 30, 2025)

TAXPAYER MAY BE ASSESSED FOR OVERCLAIMED DEPRECIATION FOR VEHICLES FOR FAILURE TO PROVE COST. Under the rules, only 1 vehicle for land transportation is allowable for depreciation per official or employee provided that the acquisition cost does not exceed Php2.4 Million. Thus, where the taxpayer failed to present proof that the acquisition cost of each vehicle did not exceed Php2.4. million threshold (i.e sales invoice, or deed of sale to prove the purchase price),, and that only 1 vehicle was assigned per employee, overclaimed depreciation is sustained. (IBMS Technology Phils., Corporation v. CIR, CTA Case No. 10606, July 30, 2025)

VAT-ZERO RATED SALES REQUIRES PEZA CERTIFICATION AND INVOICE/RECEIPTS COMPLIANT WITH INVOICING REQUIREMENTS. To determine whether sales are subject to zero-rated VAT, the following are the requirements: 1. Sale was made by VAT registered person and sale was made to an entity entitled to incentives under EO No. 226. For the first element, where the taxpayer failed to submit BIR Form 2303 to establish that is a VAT-registered person, the ORs and billing statements and FAN revealing the VAT registration of the taxpayer are sufficient. For the second requisite, the taxpayer must submit the invoice or official receipts and proof of zero rating. Where the taxpayer submitted sales invoice as proof of sale and PEZA certifications as proof of entitlement to zero-rating, but invoice does not comply with invoicing requirements (OR failed to indicate nature of service; OR failed to indicate the transactions as zero-rated), due to lack of proper substantiation, portion of zero-rated sales should be disallowed. (IBMS Technology Phils., Corporation v. CIR, CTA Case No. 10606, July 30, 2025)

EXCESS INPUT VAT MAY NOT BE APPLIED IF USED IN THE SUBSUQUENT QUARTER/S Under the NIRC, excess input VAT can be carried over to the succeeding quarters. Since, it will be offset to the output tax in subsequent period, it may redound to the benefit of the taxpayer in such future period. Thus, the taxpayer must prove that the input tax was not utilized in the succeeding quarter/s Thus, where the taxpayer failed to provide evidence to establish that the excess input tax was not carried over or applied in the succeeding period, ensuring that the taxpayer will not benefit twice from the same input tax credits (1) as deduction from the current assessment and (2) as credits against output tax liability in succeeding taxable quarter/period, the BIR correctly points out that the excess was not applied against the allowable input tax. (IBMS Technology Phils., Corporation v. CIR, CTA Case No. 10606, July 30, 2025)

REVENUE ISSUANCES

Revenue Memorandum Circular No. 04-2026

Extension of Registration Deadlines

Revenue Regulations No. 25-2025

The Bureau of Internal Revenue has suspended the mandatory excise tax bond for petroleum importers and manufacturers under Section 5 of RA 11032 and Section 160 of the Tax Code, recognizing the bond as a redundant cost since taxes are already settled prior to the release of goods.

Revenue Regulations No. 26-2025

Pursuant to Sections 244 and 245 of the National Internal Revenue Code, in relation to Sections 12 and 13 of Republic Act No. 12066 (CREATE MORE Act), the Bureau of Internal Revenue has extended the compliance deadline for the issuance of electronic invoices to December 31, 2026, for specific groups including e-commerce entities, Large Taxpayers, and users of Computerized Accounting Systems to allow for necessary system reconfigurations.

Revenue Regulations No. 27-2025

The Bureau of Internal Revenue has updated the tax rules for the sale of tax-exempt vehicles to non-exempt buyers, imposing a 16% annual depreciation rate (capped at 80%) for tax base computation, while disqualifying any depreciation if the transaction is found to be a scheme to circumvent excise taxes.

BIR RULINGS

DEFENSE CONTRACTOR IS ENTITLED TO INCOME TAX AND VAT INCENTIVES FOR ITS REGISTERED PROJECTS AND TAX-EXEMPT IMPORTATIONS OF NON-LOCALLY AVAILABLE DEFENSE MATERIAL, SUBJECT TO THE FULFILLMENT OF EXPORT REQUIREMENTS AND SPECIFIC REGISTRATION CONDITIONS. Pursuant to the provisions of Republic Act No. 11534, as amended by Republic Act No. 12066, and the Self-Reliant Defense Posture Revitalization Act (RA No. 12024), Registered Business Enterprises (RBEs) engaged in the manufacture of defense material are granted incentives such as Income Tax Holidays, a 5% Special Corporate Income Tax, and VAT exemptions on local purchases and importations of capital equipment and raw materials not locally available. In this case, the subject domestic enterprise, which manufactures firearms and ammunition for government agencies, possesses multiple BOI-registered projects that qualify for these fiscal benefits; however, the application of these facts confirms that the entitlement to incentives for specific projects is contingent upon meeting the 70% export threshold, and the exemption from national internal revenue taxes and VAT on imported materiel is restricted exclusively to items that cannot be sourced within the local market. (BIR RULING NO. OT-207-2025, October 28, 2025)

PAYMENTS FOR AIRPORT-RELATED FEES AND RENTALS MADE TO A GOVERNMENT AIRPORT AUTHORITY ARE EXEMPT FROM CREDITABLE WITHHOLDING TAX BECAUSE SUCH REVENUES CONSTITUTE INCOME DERIVED FROM THE EXERCISE OF ESSENTIAL GOVERNMENTAL FUNCTIONS EXCLUDED FROM GROSS INCOME. Pursuant to Section 32 (B) (7) (b) of the National Internal Revenue Code of 1997, as amended, and as supported by Executive Order No. 292, income derived by the Government or its political subdivisions from any public utility or from the exercise of essential governmental functions is excluded from gross income and exempt from taxation. Applying these laws to the facts, the subject international air carrier is not required to withhold taxes on payments made to the national airport authority for landing fees, rentals, and utility charges; while the passage of RA No. 11659 reclassified the airport authority from a "public utility" to a "public service," it remains a government instrumentality whose primary mandate providing safe and efficient airport facilities—is an essential governmental function rather than a proprietary one, thereby rendering its operational income exempt from income tax and the corresponding creditable withholding tax. (BIR Ruling No. OT-217-2025, November 12, 2025)

BIR DEADLINES FROM JANUARY 26 TO JANUARY 31, 2026. A gentle reminder on the following deadlines, as may be applicable: