Competence. Integrity. Commitment.

COURT OF TAX APPEALS (CTA) DECISIONS

IN VAT REFUND CLAIMS, WHERE THE CIR FAILS TO ACT WITHIN THE 90-DAY PERIOD, THE CLAIM IS DEEMED DENIED AND MUST BE APPEALED WITHIN 30 DAYS; SEE DISSENTING OPINION. The CTA has jurisdiction over decisions and inaction of the CIR involving VAT refund claims, and the CIR’s failure to act within the prescribed 90-day period constitutes a deemed denial, which must be appealed to the CTA within 30 days from the expiration of such period; applying these rules, the CIR failed to act within the 90-day period, which expired on October 13, 2020, such that the taxpayer had until November 12, 2020 to file its judicial claim, and the subsequent VAT refund notice issued beyond the 90-day period did not revive or extend the appeal period, rendering the Petition for Review filed only on November 20, 2020 late and depriving the CTA of jurisdiction. Dissenting opinion: The TRAIN Law did not eliminate the taxpayer’s right to appeal either the CIR’s inaction or a denial issued after the 90-day processing period. The TRAIN Law deleted the language referring to inaction and shortened the processing period to 90 days; however, CTA Charter continued to expressly grant the CTA jurisdiction over CIR inaction. A taxpayer could still either appeal the CIR’s deemed denial within 30 days after the lapse of the 90-day period or wait for the CIR’s actual decision and appeal within 30 days from receipt, even if the decision was issued after the 90-day period. [Franklin Baker Company of the Philippines v. CIR, CTA EB No. 3025 (CTA Case No. 10407), February 10, 2026]

A TAXPAYER CLAIMING A CWT REFUND MUST PROVE THAT THE INCOME PAYMENTS SUBJECT TO CWT WERE INCLUDED IN ITS GROSS INCOME. The Court generally cannot consider evidence that was not formally offered, and even when this rule is relaxed, the evidence must have been identified through testimony and incorporated into the record; applying this rule, the taxpayer failed to prove that the income payments subjected to the claimed CWTs were included in its gross income because its AITR, AFS, and GL reflected a discrepancy, and it did not adequately reconcile the difference or trace the income payments reported in the SAWT and CWT certificates to the revenues declared in its AITR. Although the taxpayer presented reconciliation tables attributing the discrepancy to accounting adjustments, revenues not subjected to CWT, and timing differences, these were presented for the first time on appeal, were not testified to by its witnesses, were unsupported by specific evidence, and were not evaluated by the Court in Division; hence, they constituted mere allegations that could not establish entitlement to the claimed CWT refund. The Court likewise emphasized that the findings of the Court-commissioned ICPA were not conclusive and could not relieve taxpayer of its burden to independently substantiate its refund claim. [Ford Group Philippines v. Commissioner of Internal Revenue, CTA EB No. 3026 (CTA Case No. 10507), February 4, 2026]

ONLY A FINAL DECISION OR INACTION OF THE CIR OR A DULY AUTHORIZED REPRESENTATIVE IS APPEALABLE TO THE CTA; AN RDO’S LETTER IS NOT AN APPEALABLE DENIAL SINCE HE IS NOT CONSIDERED AS AUTHORIZED REPRESENTATIVE. Only a decision or inaction of the CIR, or of a duly authorized representative acting pursuant to a valid delegation of authority, is appealable to the CTA; although the CIR may delegate the authority to decide refund claims to qualified subordinate officials, such delegation must comply with the applicable rules, which provide that VAT refund claims are processed by the RDO but their approval or denial must be made by the Regional Director or the appropriate authorized official. Applying these rules, the letter issued by RDO and received by the taxpayer was not an appealable decision because an RDO, acting alone, lacked authority to finally deny the refund claim, and the letter itself did not convey a tenor of finality, stating merely that the taxpayer failed to prove its entitlement to the refund and providing the information for its guidance. The actual appealable denial was the subsequent letter signed by Regional Director, categorically denying the VAT refund for lack of legal and factual basis; however, the taxpayer had already filed its Petition for Review before receipt of the authorized denial, making the CTA petition premature and depriving the Court of jurisdiction. [Firmenich (Philippines), Inc. v. Commissioner of Internal Revenue, CTA EB No. 2992 (CTA Case No. 10209), December 15, 2025]

 A FACILITY CONDUCTING BUSINESS IS CONSIDERED AS A BRANCH, WHICH IS REQUIRED TO BE VAT-REGISTERED FOR INPUT VAT REFUND PURPOSES. Every person subject to internal revenue tax must register with the appropriate RDO before commencement of business, and every separate or distinct establishment or facility where sales transactions are conducted must be registered as a branch and subjected to the corresponding annual registration fee; this registration requirement is likewise a prerequisite to being considered a VAT-registered person entitled to claim an input VAT refund. Applying these rules, although the Palawan Facility and Technopoint Facility were denominated as facilities, the taxpayer generated sales of call center services to, thereby making the facilities branches for VAT registration purposes; however, the taxpayer failed to register them as branches and pay the corresponding annual registration fees on or before the sales transactions occurred. Consequently, the taxpayer was not a VAT-registered person during the period covered by the refund claim [Foundever Philippines Corporation (formerly Sitel Philippines Corporation) v. Commissioner of Internal Revenue, CTA EB No. 2942 (CTA Case No. 10200), December 18, 2025]

A TAXPAYER CLAIMING AN EXCISE TAX REFUND MUST SUFFICIENTLY IDENTIFY AND TRACE THE PETROLEUM PRODUCTS SOLD TO TAX-EXEMPT ENTITIES TO THE PRODUCTS ON WHICH THE EXCISE TAX SUBJECT OF THE REFUND CLAIM WAS ACTUALLY IMPOSED AND PAID. The taxpayer bears the burden of substantiating its entitlement by competent evidence establishing a clear nexus between the excise taxes paid and the petroleum products subsequently sold to tax-exempt entities; moreover, the Court is not bound by the findings of the ICPA, and evidence submitted to the ICPA does not constitute evidence formally offered before the Court. Applying these rules, the taxpayer failed to establish that the bunker fuel oil (BFO) and special fuel oil (SFO) sold to tax-exempt entities were the same petroleum products on which it paid excise taxes, as it did not submit the Official Registry Books (ORBs), complete and properly supported fuel-oil inventory records, and all relevant sales invoices; the missing invoices further prevented the Court from tracing the inventory using the first-in, first-out method. The Court also rejected petitioner’s claim that the ORB requirement was introduced later, noting that ORBs had previously been utilized in jurisprudence and tax refund examinations, and held that the taxpayer could not rely on its submission of the ORBs to the ICPA because such submission was not equivalent to a formal offer of evidence before the Court. [SL Harbor Bulk Terminal Corporation v. Commissioner of Internal Revenue, CTA EB No. 2982 (CTA Case No. 10320), December 23, 2025 and CTA EB No. 2981 (CTA Case No. 10440), February 2, 2026]

LACK OF DESCRIPTION IN INVOICE WARRANTS THE DISALLOWANCE OF INPUT VAT REFUND; CROSS-REFERENCING TO BILLING STATEMENTS IS NOT SUFFICIENT. Admissibility of evidence must be distinguished from its probative value, and a taxpayer seeking an input VAT refund bears the burden of proving its legal and factual entitlement through sufficient, competent, complete, and legible evidence; moreover, strict compliance with VAT substantiation and invoicing requirements is necessary because the VAT invoice or official receipt serves as the primary evidence of creditable input VAT and ensures an accurate audit trail. Applying these rules, although the taxpayer’s physical copies of the official receipts were admitted in evidence, the scanned copies submitted for the Court’s appreciation were blurred and unreadable, preventing the Court from properly examining and verifying the input VAT credits claimed; hence, their admission did not establish their probative value. The taxpayer likewise failed to comply with the requirement that VAT official receipts for services indicate the nature of the service, and its admission that the subject ORs lacked such description could not be cured by identifying the suppliers or cross-referencing billing statements and invoices, since other documents cannot substitute for the required VAT receipts themselves. The Court further held that the principle of VAT neutrality cannot override the NIRC’s mandatory invoicing and documentary requirements, which are substantive requirements rather than mere technicalities. [Commissioner of Internal Revenue v. New York Bay Philippines, Inc., CTA EB Nos. 2915 & 2916 (CTA Case No. 10417), December 2, 2025]

Defective verification is not fatal and may be corrected or dispensed with when warranted by the circumstances, while a defect in the certification against forum shopping is generally not curable by subsequent submission unless there is substantial compliance or special or compelling circumstances; applying these rules, the Court found substantial compliance because the petitioner expressly explained that it could not initially submit the authenticated documents due to distance and time constraints and subsequently filed the Apostilled Verification and Certification of Non-Forum Shopping and Director’s Certificate as soon as these were secured, thus satisfying the mandatory purpose of the requirements without unduly rigid application that would defeat the orderly administration of justice [Commissioner of Internal Revenue v. Grid Solutions (US) LLC., CTA EB No. 2814 (CTA Case No. 10146)]

DOE REGISTRATION IS REQUIRED FOR ZERO-VAT SALE ON SALE OF ELECTRICITY GENERATED FROM RENEWABLE ENERGY SOURCES. Sales of electricity generated from renewable energy sources may qualify for 0% VAT, but the incentive is subject to the statutory and regulatory conditions imposed on Renewable Energy Developers, including registration with the DOE, and the taxpayer must still prove through competent evidence that it actually made zero-rated sales; applying these rules, the Court held that the taxpayer’s reliance on the NIRC alone was misplaced because R.A. No. 9513 is a later and special law specifically governing fiscal incentives for RE Developers, and its express repealing clause and IRR require an RE Developer to secure DOE registration to qualify for the incentives, including VAT zero-rating. Although the taxpayer submitted a BOI Certificate of Registration, it failed to timely present the required DOE Certificate of Registration, which it attached only to its Motion for Reconsideration; evidence that could have been presented during trial but was belatedly submitted without justification constitutes forgotten evidence and cannot be admitted on appeal. More importantly, even assuming the taxpayer could qualify for the incentive, it still failed to prove the actual existence of zero-rated sales. Its Quarterly VAT Return reported no zero-rated sales; its AFS and AITR showed only interest income and no operating revenue from electricity generation; and taxpayer itself admitted that it had no recorded sale of electricity because it only began generating electricity in the subsequent year. Its subsequent reliance on its later AITR was likewise insufficient because the return merely reflected aggregate revenue without identifying the nature of the transactions or establishing that they were zero-rated sales. The official receipts submitted for the first time before the Court En Banc were also inadmissible forgotten evidence because they had not been formally offered during the proceedings before the Court in Division and no justification was given for their late submission. [YH Green Energy Incorporated v. Commissioner of Internal Revenue, CTA EB No. 2995 (CTA Case No. 9784), February 10, 2026]

NON-RESIDENT FOREIGN CORPORATION’S SALE OF SHARES IN A DOMESTIC CORPORATION IS EXEMPT FROM CGT IF DOMESTIC CORPORATION’S PROPERTY AND EQUIPEMENT DOES NOT EXCEED THE 50% THRESHOLD. A claim for refund of erroneously or illegally collected taxes must be supported by timely administrative and judicial claims, and the claimant must establish its right to the refund, including the specific legal basis for any claimed tax exemption; applying these rules, the taxpayer established its entitlement to a refund of the CGT paid on the sale of domestic company shares because RP-US Tax Treaty grants the exclusive taxing right over gains from the sale of shares to the seller’s country of residence, unless the shares represent an interest in a corporation whose assets principally consist of Philippine real property, and the domestic corporation’s financial statements showed that its Philippine property and equipment well below the 50% threshold; the Philippines had no taxing right over the capital gain, and the statutory taxpayer/seller had standing to claim the refund. [Commissioner of Internal Revenue v. Grid Solutions (US) LLC., CTA EB No. 2814 (CTA Case No. 10146)]

REVENUE ISSUANCES

BIR RMO No. 22-2026, August 24, 2026

The BIR prescribes the consolidated and revised policies, guidelines and procedures for the BIR audit program

• Taxpayer (TP) is subject to only 1 Letter of Authority (eLA) for a given year covering all applicable internal revenue tax type
• Audit shall be system-assisted, risk-based. TP identity remained concealed during the selection and assignment stage to ensure impartiality and prevent undue influence.
• Mandatory cases:
  • 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;
  • ONETT where findings resulted in tax deficiency or real property transactions with findings in the eCAR system (should be limited only to a specific ONETT and conducted by the investigating office which issued the eCAR and which has proper jurisdiction; if eCAR is used by the office which has no jurisdiction, referral to the appropriate office to be made and corresponding eLA is used)
  • Using tax exemptions or special incentives;
  • Non-compliance with tax obligations arising from Spontaneous Exchange of Information (EOI);
  • ТP requesting for tax clearance whose gross sales for the immediately preceding year exceed Php3M or gross assets is more than Php8M, 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
  • TP who failed to respond to Third Party Information (TPI) request
  • TP with validated discrepancies or material inconsistencies identified through the system.
  • TP with refund claims

• Mandatory cases do not require CIR’s approval. Approving authority is regional director or ACI R for LTS; Effect of misclassification – administrative sanction
• Taxpayer enjoying tax exemptions or incentives is not automatically subjected to audit, and subject to risk-based evaluation
• Failure to respond to request for confirmation of TPI data matching within the period – TP shall be subject to mandatory audit
• For refunds of income tax under Section 58 (e) and 76(C), LOA and TVN will be issued
• Service of LOA requires First and Second/Final notice if taxpayer fails to comply within 10 days
• Place of examination – place of business or BIR office; if documents are voluminous or transport or examination at the BIR would be impractical, burdensome or disruptive to business operation, TP has option on the venue and manner of examination; TP consent on audit venue to be accomplished
  • If at BIR office – taxpayer may opt to physically submit the BIR records
  • If principal place of business – TP to coordinate with RO; TP shall provide suitable area
    • Photocopies may be accepted; TP or authorized representative must certify that the documents are true and faithful reproduction of the original. BIR may require presentation of original for solely for verification. 
    • SDT – no option for venue; venue is BIR office specified in the SDT
• Minutes of Meeting after NOD is issued are required
• Prescriptive period suspended – when issuance of SDT or EOI BIR is requested; effectivity date: upon date of receipt of request by concerned office; to resume when BIR officer receives the requested information
• Termination Letter – to be prepared for all paid cases or cases with no findings or discrepancies; issued by Regional office; LTS, HREA-EAS; 
• Priority cases (electronically selected based on risk-based criteria; uses the data from filed tax returns and other information in the BIR system)
  • Drastic decrease in reported sales or VAT payments
  • Large increases in sales that are zero-rated or exempt from tax
  • TP with Discrepancy Notices
  • Differences between current VAT filings and what was carried over from previous months
  • Claiming input VAT that cover more than 75% of the total output tax
  • Paying income tax that is less than 2% of the gross sales/revenues
  • TP filing percentage tax returns exceededing the VAT threshold
  • Reporting a net loss despite having substantial sales
  • Operating for more than five years without ever being audited
  • Taxpayers with increase in assets of more than 50% from the previous year but with reported net loss
  • Claims for damages from natural disasters or for old inventory
  • Getting almost all income from a parent company or affiliate
  • Taxpayers claiming write-off of input tax as allowable deduction in its annual income tax
  • Sharing expenses between different branches or companies in a group. 

• Recommendations by the heads of investigating office must be supported by written justification. IT shall include the audit selection criteria; subject to approval of the CIR upon recommendation of the DCIR-OG, DCIR-SRG before the eLA is issued
• Effectivity: immediately (august 24, 2026)

BIR DEADLINES FROM AUGUST 24, 2026 TO AUGUST 30, 2026. A gentle reminder on the following deadlines, as may be applicable.

COURT OF TAX APPEALS (CTA) DECISIONS

TAXPAYER CANNOT CLAIM REFUND FOR VAT ERRONEOUSLY PASSED ON BY SUPPLIERS ON ZERO-RATED PURCHASES; THE PROPER REMEDY IS REIMBURSEMENT FROM THE SUPPLIERS. A taxpayer that is entitled to zero-rated purchases is not the proper party to claim a refund of VAT erroneously passed on by its suppliers; the buyer’s remedy is to seek reimbursement from the supplier. Applying these principles, even assuming that taxpayer’s purchases from renewable energy suppliers were zero-rated, the VAT allegedly shifted to the taxpayer should not have been charged in the first place; the taxpayer therefore cannot recover the erroneously passed-on VAT through a Section 112 refund claim merely because it bore the economic burden. The Supreme Court held that the proper recourse of a buyer mistakenly charged VAT on zero-rated purchases is against its supplier and the same principle extends to  renewable energy developers. Thus, the Court held that the taxpayer was not the proper party to claim a refund of the input VAT erroneously passed on by its suppliers, without prejudice to its right to seek reimbursement from them. [Pure Essence International, Inc. v. Commissioner of Internal Revenue, CTA EB No. 3023 (CTA Case No. 10411), February 27, 2026]

THE INCENTIVES GRANTED TO RE DEVELOPERS EXPRESSLY COVER BOTH POWER AND NON-POWER APPLICATIONS; INPUT VAT RELATED TO NON-POWER APPLICATION CANNOT BE VALIDLY SUBJECT OF INPUT VAT REFUND. The law (third paragraph) provides zero-rated VAT on local purchases of goods, properties, and services needed for the whole process of exploring and developing renewable energy sources up to their conversion into power. The Court held that the third paragraph does not distinguish between power and non-power applications: the phrase “whole process of exploring and developing renewable energy sources” sufficiently covers non-power applications, while the succeeding phrase “up to its conversion into power” merely extends the coverage to power applications and does not exclude non-power RE developers. Since petitioner was accredited by the DOE as a biomass RE developer for non-power application, specifically a biofuel manufacturer producing biodiesel/Coconut Methyl Ester, its purchases falling within the statutory coverage were entitled to VAT zero-rating. Accordingly, the input VAT pertaining to purchases entitled to zero-rating should be disallowed from the taxpayer’s VAT refund claim. [Pure Essence International, Inc. v. Commissioner of Internal Revenue, CTA EB No. 3023 (CTA Case No. 10411), February 27, 2026]

INPUT VAT ON CAPITAL GOODS EXCEEDING PHP MILLION MUST BE PROPERLY SUBSTANTIATED BY INVOICE AND AMORTIZATION SCHEDULE; PRIOR YEAR INPUT VAT RETURN IS NOT SUFFICIENT. Input VAT on capital goods with an aggregate acquisition cost exceeding Php1 million may be spread over 60 months or the capital goods’ estimated useful life, whichever is shorter, but the taxpayer must properly substantiate the capital-goods purchases and the corresponding amortization; supporting documents are necessary to establish the nature of the purchases as capital goods and to verify the proper amortization of the input VAT. Applying this rule, although the taxpayer claimed that the deferred input VAT carried over from CY 2017 was supported by its Q4 CY 2017 VAT return and that it represented the remaining amortized input tax, the taxpayer failed to present the underlying documents establishing the capital-goods purchases and the correctness of the amortization computation; even its independent CPA reported that the supporting documents for the capital-goods input taxes deferred and amortized in CY 2018 had not been provided. Thus, the mere appearance of the amount in the prior-period VAT return was insufficient substantiation, and the Court properly disallowed the deferred input VAT from the refund claim. [Pure Essence International, Inc. v. Commissioner of Internal Revenue, CTA EB No. 3023 (CTA Case No. 10411), February 27, 2026]

INPUT VAT MAY BE SUPPORTED BY PHOTOCOPIES. A duplicate, including a photocopy, is admissible to the same extent as an original unless a genuine question is raised regarding the authenticity of the original or admission of the duplicate would be unjust or inequitable. The Supreme Court recognized that a photocopy falls within the definition of a duplicate and is therefore admissible as an original. Applying this rule, the Court held that the input VAT supported by photocopies of sales invoices and official receipts should not have been disallowed, since the BIR did not question the authenticity of the originals nor establish that admitting the photocopies would be unjust or inequitable. Accordingly, the disallowance was reversed and the amount was added back to the taxpayer’s valid input VAT for CY 2018. [Pure Essence International, Inc. v. Commissioner of Internal Revenue, CTA EB No. 3023 (CTA Case No. 10411), February 27, 2026]

A VAT-REGISTERED TAXPAYER CLAIMING INPUT VAT ATTRIBUTABLE TO ZERO-RATED SALES HAS TWO ALTERNATIVE OPTIONS: (1) CHARGE THE INPUT VAT AGAINST OUTPUT VAT FROM REGULAR 12% VATABLE SALES AND CLAIM A REFUND ONLY OF ANY RESULTING EXCESS INPUT VAT, OR (2) CLAIM THE ENTIRE INPUT VAT ATTRIBUTABLE TO ZERO-RATED SALES FOR REFUND OR TAX CREDIT. The Court cannot impose the first method when the taxpayer chose the second. In this case, however, the Court found that the taxpayer original Petition for Review and its own computation showed that it chose the first option, as it first allocated input VAT to VATable sales and determined whether such input VAT exceeded its declared output VAT before arriving at the refundable amount. Thus, the Court in Division properly charged the substantiated input VAT against petitioner’s output VAT. The Court En Banc determined valid input VAT, of which an amount was allocated to VATable sales, leaving  output VAT still due; the remaining input VAT allocated to zero-rated sales was likewise insufficient to produce any excess input VAT refundable to petitioner. Accordingly, despite the adjustment recognizing the photocopied supporting documents, the taxpayer still had no excess input VAT for refund and failed to satisfy the requisites under Section 112. [Pure Essence International, Inc. v. Commissioner of Internal Revenue, CTA EB No. 3023 (CTA Case No. 10411), February 27, 2026]

INVOICE ISSUED PRIOR TO DATE OF ATP CANNOT VALIDLY SUBSTANTIATE INPUT VAT; ANTE-DATING IS NOT ALLOWED. Taxpayers are required to issue a duly registered invoice at the point of each sale, and the supporting invoice must be covered by a valid and subsisting Authority to Print (ATP) applicable to the date of the transaction. Applying this rule, the Court rejected the taxpayer’s argument that the subject document remained valid merely because they were eventually registered with the BIR under an ATP dated earlier than ATP date, and that the NIRC does not expressly prohibit antedating. The Court clarified that antedating itself was not the decisive issue; rather, the receipts (now invoice) were disallowed because they were not duly registered receipts at the point of each sale, constituting non-compliance with the invoicing and substantiation requirements. The official receipts (now invoice) covering transactions dated earlier should have been supported by an ATP valid and subsisting on those dates, but the receipts (now invoice) bore serial numbers outside the range authorized by  a later ATP. Consequently, the receipts could not substantiate the claimed input VAT. [Mastercard Transaction Services (Philippines) Inc. v. Commissioner of Internal Revenue, CTA EB Nos. 3062 & 3066 (CTA Case No. 10628), March 18, 2026]

AN EXPORT SALE IS SUBJECT TO ZERO PERCENT VAT ONLY WHEN THE SALE IS MADE BY A VAT-REGISTERED PERSON, THERE IS AN ACTUAL SALE AND SHIPMENT OF GOODS FROM THE PHILIPPINES TO A FOREIGN COUNTRY, AND THE SALE IS PAID FOR IN ACCEPTABLE FOREIGN CURRENCY AND ACCOUNTED FOR IN ACCORDANCE WITH BSP RULES. The taxpayer bears the burden of strictly proving both the factual basis of its zero-rated sales and compliance with the statutory and documentary requirements, since a VAT refund is in the nature of a tax exemption; moreover, a CTA case is litigated de novo, and the judicial claim must be established by the evidence formally presented before the CTA. Applying these rules, the taxpayer failed to prove that its reported sales actually qualified for VAT zero-rating. The Court found that some of reported sales had no valid VAT zero-rated sales invoices or lacked corresponding bills of lading and/or export declarations; or bills of lading that were inadmissible, missing from the records, did not correspond with the exhibits offered, or were illegible. The taxpayer likewise failed to establish the third requirement because its inward remittance certifications and bank transaction reports did not correspond with the amounts stated in the sales invoices; its explanations that the discrepancies resulted from advance payments, prior-period receivables, or the practice of splitting or consolidating invoice amounts were merely bare assertions unsupported by sales invoices, official receipts, bank credit advices, or reconciliation schedules. Because the taxpayer failed to first establish the existence of valid zero-rated sales to which the claimed unutilized input VAT could be attributed, the Court found it unnecessary to examine the remaining requisites for the refund. [Agri Exim Global Philippines, Inc. v. CIR, CTA EB No.3075, CTA Case No. 10621, March 24, 2026]

WHERE THE TAXPAYER IMPORTED JET A-1 FUEL AND SUBSEQUENTLY SOLD IT TO QUALIFIED INTERNATIONAL CARRIERS FOR USE OUTSIDE THE PHILIPPINES, THE FUEL BECAME EXEMPT. Under the applicable provisions on excise tax and tax exemption of petroleum products sold to international carriers, excise tax is an indirect tax imposed on the article itself, with the statutory liability attaching to the importer or manufacturer, while the economic burden may be passed on to the buyer; hence, the buyer is not the statutory taxpayer entitled to claim the exemption. Applying this rule, the Court held that the international carriers that purchased the Jet A-1 fuel merely bore the economic burden of the excise tax, while the taxpayer, as the importer and statutory taxpayer, was the proper party to claim the exemption and refund. Although the excise tax became due upon importation, the subsequent sale of the Jet A-1 fuel to qualified international carriers for use and consumption outside the Philippines rendered the petroleum products exempt, resulting in the excise taxes previously paid being erroneously or illegally collected and therefore refundable. The taxpayer sufficiently proved through competent evidence that it imported the Jet A-1 fuel and subsequently sold it to international carriers; thus, the CTA in Division correctly granted the refund. [(CIR v. Pilipinas Shell Petroleum Corporation, CTA EB No. 3027, CTA Case NO. 10352, March 11, 2026)]

UNDER THE 2-YEAR PRESCRIPTIVE PERIOD FOR TAX REFUNDS, THE PERIOD RUNS FROM PAYMENT OF THE ERRONEOUSLY OR ILLEGALLY COLLECTED TAX; THUS, BECAUSE THE TAXPAYER IMPROPERLY RECOGNIZED DEFERRED SUBSCRIPTION REVENUE IN 2017 AND PAID THE CORRESPONDING INCOME TAX IN APRIL 2018, ITS REFUND CLAIMS FILED ONLY IN APRIL AND MAY 2021 WERE PRESCRIBED; WITH DISSENTING OPINION. Both the administrative and judicial claims for refund of erroneously or illegally collected taxes must be filed within  2 years from the date of payment of the tax, with timely filing being mandatory and jurisdictional; applying these provisions, the Court En Banc held that the erroneous payment arose not in CY 2018 but in CY 2017, when the taxpayer improperly included Php200M of deferred subscription revenue, collected but not yet earned, in its 2017 taxable income and paid the corresponding income tax in April 2018. Since the taxpayer uses the accrual method, income should be recognized when earned, and the deferred subscription revenue was properly earned only in 2018; thus, the two-year period commenced in April 2018 and, considering the applicable COVID-19 extensions, taxpayer had only until June 2020 to file its claims. However, the taxpayer filed its administrative claim only in April 2021 and its judicial claim in May 2021, both beyond the prescriptive period, depriving the CTA of jurisdiction and requiring dismissal of the refund case. Dissenting Opinion: The two-year prescriptive period should be reckoned from its 2018 income tax payment, not from 2017 when the taxpayer reported the cash deposits or advances as income when received in 2017 in compliance with RMC No. 16-2013; the Court should respect the accounting method adopted by the taxpayer [SAS Institute (Philippines) Inc. v. Commissioner of Internal Revenue & Commissioner of Internal Revenue v. SAS Institute (Philippines) Inc., CTA EB Nos. 2991 & 2994 (CTA Case No. 10537), March 4, 2026.]

REVENUE ISSUANCES

RMC No. 95-2026, August 14, 2026

The BIR provides extension of the deadlines for the filing of tax returns of corresponding taxes due thereon, including submission of required documents for taxpayers due to unavailability of eBIR forms offline package

BIR DEADLINES. A gentle reminder on the following deadlines, as may be applicable:

BIR DEADLINES FROM AUGUST 10, 2026 TO AUGUST 16, 2026. A gentle reminder on the following deadlines, as may be applicable:

COURT OF TAX APPEALS DECISIONS

REASONS FOR DISALLOWANCE OF CWT. A taxpayer is entitled to a refund of excess Creditable Withholding Taxes (CWT) if, among others, the income payments subject of the CWTs are declared as part of the taxpayer’s gross income in its annual ITR and the fact of withholding is established through duly issued BIR Form No. 2307, without requiring proof of the withholding agent’s actual remittance or the submission of a SAWT. Here, while the taxpayer substantiated most of its claimed CWTs through valid BIR Forms 2307, the Court disallowed some CWT due to defective withholding certificates and further denied CWT corresponding to income payments that were not sufficiently proven to have been reported as part of gross income. Reasons for the disallowance: variance between sales invoice and schedule; unreadable invoice; cancelled sales invoice, untraced payment file; incorrect TIN of the taxpayer; the TIN of the Head Office was indicated but the address is the Branch Office; Incomplete address of the taxpayer; BIR Forms 2307 were dated outside of the claimed period; variance in the amount of CWT per BIR Form 2307 versus per books; CWT not within the period of claim; no signature of the payor-issuer/authorized representative; with alteration on taxpayer’s name without counter signature, alteration on the taxpayer’s TIN without counter signature; income payments not traced to the GL/supporting documents [Watsons Personal Care Stores (Philippines), Inc. v. CIR, CTA Case No. 10883, November 26, 2025; Watsons Personal Care Stores (Philippines), Inc., CTA Case No. 10504, February 16, 2026; see also Sonic Sales & Distribution, Inc. v. CIR, CTA Case No. 10888, February 18, 2026]

OSG’S RECEIPT OF THE RESOLUTION, NOT BIR’S, IS THE RECKONING PERIOD TO APPEAL TO THE CTA EN BANC. An aggrieved party may appeal a CTA Division decision or resolution on a motion for reconsideration or new trial to the Court En Banc within 15 days from receipt thereof, while the Administrative Code vests in the Office of the Solicitor General (OSG) the authority and duty to represent the government in appellate proceedings, with deputized government lawyers remaining under its supervision and control. Service upon the deputized counsel or BIR Legal Division is insufficient; the OSG, as principal counsel, must receive the decision and has the authority to determine whether an appeal should be taken. In this case, although the BIR received the assailed Resolution in December, the OSG received it only in January the following year, while the BIR filed the Petition for Review in December, before the OSG had even received the Resolution. There was also no evidence that the BIR had been duly authorized by the OSG to file the appeal. Thus, the petition lacked the requisite OSG authority, and the 15-day appeal period could not be reckoned from the BIR’s receipt of the Resolution. Consequently, the appeal was not properly perfected, causing the assailed Resolution to attain finality (CIR v. MSCI Hongkong Limited, CTA EB No. 3047, CTA Case No. 10474, February 19, 2026)

A DUPLICATE COPY, INCLUDING A PHOTOCOPY, OF A DOCUMENT IS ADMISSIBLE TO THE SAME EXTENT AS AN ORIGINAL UNLESS (1) A GENUINE QUESTION IS RAISED AS TO THE AUTHENTICITY OF THE ORIGINAL, OR (2) IT WOULD BE UNJUST OR INEQUITABLE TO ADMIT THE DUPLICATE IN LIEU OF THE ORIGINAL; DISSENTING OPINION Consistent with Lastimosa Case, a photocopy of a paper-based document qualifies as a duplicate, abandoning the former distinction between electronic and paper-based documents. Applying this rule, the Court En Banc held that certain exhibits, which the Court in Division had excluded solely because the taxpayer failed to present the originals for comparison, should be admitted because the BIR did not question their authenticity and there was no showing that admitting the photocopies would be unjust or inequitable. Although the taxpayer failed to timely seek reconsideration of the earlier exclusion, the Court relaxed the procedural rules in the interest of substantial justice, consistent with the principle that procedural rules are meant to facilitate, rather than defeat, the just resolution of cases. Accordingly, the Court admitted the photocopied exhibits as duplicates under the amended Rules on Evidence. Dissenting Opinion: original documents should have been presented under the CTA rules; party should sufficiently explain the unavailability of the originals; taxpayer did not seek reconsideration of the CTA in Division’s resolution excluding the documentary exhibits; there was no proper tender of excluded evidence; strict application of law under tax refund cases [Schaeffler Philippines Inc. v. Commissioner of Internal Revenue, CTA EB No. 2947 (CTA Case No. 10358), February 20, 2026]

THE ABSENCE OF A SEPARATELY PROMINENT IMPRINT OF “ZERO-RATED SALE” DID NOT AUTOMATICALLY NEGATE THE ZERO-RATED CHARACTER OF THE TRANSACTIONS. A VAT invoice must prominently indicate “zero-rated sale,” while invoices covering mixed transactions must clearly show the breakdown of taxable, exempt, and zero-rated components; however, substantial compliance with these invoicing requirements may suffice when the invoice itself clearly identifies the amount as pertaining to zero-rated sales. In this case, although the Court in Division denied the taxpayer’s refund claim because the phrase “zero-rated sale” was not separately and prominently imprinted on the invoice/OR, the Court En Banc held that the invoices contained a detailed breakdown expressly identifying the sales amount under “Zero Rated Sales,” which sufficiently disclosed both the nature and monetary value of the transactions. The Court found that this presentation substantially complied with the invoicing requirement because there could be no other reasonable conclusion than that the stated amount pertained to zero-rated sales, and the clients’ PEZA registrations further established that the sales were indeed subject to zero percent VAT [Schaeffler Philippines Inc. v. Commissioner of Internal Revenue, CTA EB No. 2947 (CTA Case No. 10358), February 20, 2026; Commissioner of Internal Revenue v. MSCI Hong Kong Limited, CTA EB No. 2939 (CTA Case No. 9884), November 9, 2025]

REVENUE ISSUANCES

RMC No. 89-2026, August 10, 2026

The BIR provides extension of the deadlines for the filing of tax returns and payment of corresponding taxes due thereon, including submission of required documents for taxpayers within the jurisdiction of Revenue District Offices of the BIR that were affected by the continued heavy rainfall brought about by southwest monsoon.

BIR DEADLINES. A gentle reminder on the following deadlines, as may be applicable:

COURT OF TAX APPEALS DECISIONS

EXEMPTION FROM RPT INVOLVES MIXED QUESTIONS OF LAW AND FACT; DISPUTE REQUIRES PAYMENT UNDER PROTEST. The proper procedure for contesting a real property tax (RPT) assessment depends on the nature of the issues raised. Where the dispute involves the correctness or reasonableness of the assessment, including claims of tax exemption that require factual determination, the taxpayer must first comply with the following administrative remedies: pay the assessed tax under protest, file a protest with the local treasurer, and, if denied, appeal successively to the Local Board of Assessment Appeals (LBAA), the Central Board of Assessment Appeals (CBAA), and finally the CTA En Banc. Direct recourse to the courts is allowed only where the assessment is illegal and the issues raised are purely legal, without requiring the evaluation of evidence. Thus,  the Court found that the taxpayer’s challenge – asserting that its electrical poles and distribution transformers were exempt from RPT because they were not taxable real property and were not exclusively used by the taxpayer – involved mixed questions of law and fact requiring factual evaluation by the LBAA. Despite receiving the notice of assessment and subsequent collection notices, the taxpayer neither paid the assessment under protest nor pursued the mandatory administrative remedies before the LBAA and CBAA. Instead, it directly filed an action before the Regional Trial Court, rendering the assessment final and executory for failure to exhaust administrative remedies. Accordingly, the CTA En Banc denied the petition and affirmed the CTA Division’s ruling. [Manila Electric Company (MECO) v. Municipality of Cordova, CTA EB No. 2957 (CTA AC No. 258), February 2, 2026]

WHILE REAL PROPERTY OWNED BY THE GOVERNMENT IS EXEMPT FROM RPT, THE CONCESSIONAIRE/OPERATOR IS LIABLE FOR RPT UNDER THE BENEFICIAL USE DOCTRINE BECAUSE IT HAD POSSESSION, CONTROL, AND EXCLUSIVE ECONOMIC BENEFIT FROM OPERATING THE TOLLWAY, AND NO LAW EXPRESSLY GRANTED IT A TAX EXEMPTION; TAX DECLARATION SHOULD BE ISSUED UNDER THE NAME OF THE OPERATOR. While real property owned by the Republic of the Philippines is generally exempt from RPT, the exemption does not apply when the beneficial use of the property has been granted, for consideration or otherwise, to a taxable person. The “beneficial use principle” imposes RPT liability on the taxable entity that actually possesses, controls, and derives economic benefit from the government property, regardless of legal ownership. Applying these principles, the Court held that the taxpayer, as the operator of the STAR Tollway under the Toll Concession Agreement (TCA) and Operations and Maintenance Agreement (OMA), had beneficial use of the subject property because it exercised possession and control over the tollway, collected and owned the toll revenues, and operated the facility for its own revenue-generating business. The Court rejected taxpayer’s argument that the public enjoyed the beneficial use, explaining that only paying toll road users could access the facility and that the taxpayer could deny entry to non-paying motorists, demonstrating its exclusive control and economic benefit. The Court further ruled that the government’s supervisory powers through the Toll Regulatory Board did not negate the taxpayer’s beneficial use, as such oversight merely ensured compliance with the concession agreements. Moreover, the taxpayer failed to identify any law granting it exemption from RPT, and the TCA and OMA expressly obligated the concessionaire and operator to pay all taxes unless specifically exempted by law, reinforcing the rule that tax exemptions must be clearly and expressly granted. Consequently, the City Assessor correctly issued the tax declaration in the taxpayer’s name, which requires government-owned property subject to beneficial use by a taxable person to be assessed in the name of the possessor or grantee. Accordingly, the Court sustained the RPT assessment and denied the petition [South Luzon Tollway Corporation v. City Assessor of Lipa, et al., CTA EB No. 2943 (CBAA Case No. L-145-2020), February 4, 2026]

AN INDEPENDENT POWER PRODUCER UNDER A BOT CONTRACT WITH A GOCC THAT HAD ALREADY PAID VALID RPT WAS ENTITLED TO A REFUND OF THE EXCESS RPT RESULTING FROM THE STATUTORY REDUCTION; NO SEPARATE WRITTEN REFUND CLAIM WAS REQUIRED. A taxpayer may file a written claim for refund or credit of RPT and interests only when an assessment is found to be illegal or erroneous and the tax is thereafter reduced or adjusted. In this case, the Supreme Court had already ruled that the RPT assessments imposed by the Province of Nueva Vizcaya against CE Casecnan Water and Energy Company, Inc. were valid, although the amount payable must be recomputed. The law provides for the reduction and condonation of RPT liabilities, including special levies, penalties, and interests, on properties, machinery, and equipment actually and directly used by independent power producers (IPPs) in the production of electricity under build-operate-transfer (BOT) contracts with government-owned or controlled corporations (GOCCs). Since CE Casecnan was an IPP that entered into a BOT agreement with the National Irrigation Administration (NIA), a GOCC, it was entitled to the benefits  of the law. The Supreme Court further held that the reduced RPT amount should be deducted from the amount already paid by CE Casecnan, even though the taxes had already been settled, because the law  does not distinguish between unpaid liabilities and taxes already paid at the time of its effectivity. Accordingly, the Supreme Court remanded the case to the Central Board of Assessment Appeals (CBAA) to determine the refundable amount, if any. The Court En Banc held that CE Casecnan was not required to file a separate written claim for refund under Section 253 of the LGC, because the refund arose directly from the final and executory judgment of the Supreme Court, and requiring another claim would result in the re-litigation of issues already conclusively resolved and would violate the doctrine of immutability of final judgments. The CBAA therefore correctly proceeded to compute the refund and determined that CE Casecnan was entitled to refund. The Court sustained the CBAA’s factual findings, recognizing that the CBAA was in the best position to evaluate the documents and records submitted by the parties, and found no grave abuse of discretion in its determination. (Province of Nueva Vizcaya v. CE Casecnan Water and Energy Company, Inc., CTA EB Case No. 2979, February 12, 2026)

A CITY’S AUTOMATIC INCREASE OF ITS LFT RATE FROM 50% OF 1% TO 75% OF 1% IN THE SAME REVENUE ORDINANCE WAS VOID BECAUSE TAX RATE INCREASES MUST BE MADE THROUGH A SUBSEQUENT ORDINANCE, NOT MORE THAN ONCE EVERY FIVE YEARS, AND BY NO MORE THAN 10% OF THE PREVAILING RATE, RESULTING IN THE CANCELLATION OF THE ADDITIONAL LFT ASSESSMENTS. While cities may impose a local franchise tax (LFT) of up to 75% of 1% of gross annual receipts, any increase in tax rates must comply with the law by being effected through a subsequent tax ordinance, imposed not more often than once every five years, and limited to a maximum 10% adjustment from the prevailing rate. Applying these principles, the CTA held that the City’s automatic increase of the LFT rate from 50% of 1% to 75% of 1%, contained in the same revenue ordinance, was ultra vires and invalid because the adjustment was not made through a separate ordinance and exceeded the allowable 10% increase from the existing tax rate. Consequently, the CTA reversed the RTC, declared the franchise tax adjustment void, and cancelled the additional LFT assessments (Manila Electric Company v. San Jose del Monte City et. al., CTA AC No. 329, November 12, 2025)

A MUNICIPALITY VALIDLY INCREASED THE LBT RATE ON CONTRACTORS FROM 0.55% TO 0.60% BECAUSE THE ADJUSTMENT WAS MADE SIXTEEN YEARS AFTER THE PREVIOUS ORDINANCE AND DID NOT EXCEED THE 10% INCREASE LIMIT PRESCRIBED BY THE LOCAL GOVERNMENT CODE. Local government units may adjust tax rates not more than once every five years, provided that the increase does not exceed ten percent (10%) of the rates fixed under the existing ordinance. Jurisprudence likewise clarifies that the 10% limitation is reckoned from the tax rate imposed under the immediately preceding valid tax ordinance. Applying these principles, the Court found that the Municipality of Pagbilao validly increased the local business tax (LBT) rate on contractors from 55% of 1% (0.55%) under the 2001 Revised Revenue Code to 60% of 1% (0.60%) under the 2017 Revised Revenue Code, as the ordinances were enacted sixteen years apart and the 0.05% increase was within the allowable 10% ceiling of the previous rate. Accordingly, the Court upheld the validity and legality of the contractor’s LBT rate under the 2017 Revised Revenue Code. (The Municipality of Pagbilao, Shierre Ann Portes-Palicpic, in her capacity as Municipal Mayor of the Municipality of Pagbilao, and Rizalino P. Tina, in his capacity as Assistant Municipal Treasurer of the Municipality of Pagbilao v. Team Energy Corporation, CTA AC Case No. 350, March 13, 2026)

A NON-STOCK, NON-PROFIT MUTUAL BENEFIT ASSOCIATION PROVIDING WELFARE BENEFITS EXCLUSIVELY TO ITS MEMBERS IS NOT AN INSURANCE COMPANY OR OTHER FINANCIAL INSTITUTION UNDER THE INSURANCE CODE AND, ABSENT AN EXPRESS STATUTORY IMPOSITION, IS NOT SUBJECT TO LBT WARRANTING THE REFUND OF THE ERRONEOUSLY COLLECTED LBT. LBT may be imposed only on businesses operated for profit and on banks and other financial institutions, including insurance companies, as defined under applicable laws. The Insurance Code expressly excludes mutual benefit associations (MBAs) from the definition of insurance companies, and the Department of Finance likewise recognizes that MBAs are not insurance companies subject to LBT. Applying these provisions, the CTA found that the taxpayer is a duly organized non-stock, non-profit mutual benefit association whose primary purpose is to provide financial assistance, retirement, and welfare benefits to its members, who are personnel of public safety offices, and not to engage in commercial or profit-making insurance business. Its Articles of Incorporation and By-Laws established that its operations are conducted solely for the mutual benefit of its members and not as a means of livelihood or with a view to profit. Consequently, the taxpayer is neither an insurance company nor any other financial institution and cannot be subjected to LBT on its mutual benefit operations. The CTA further emphasized that the taxpayer was not invoking a tax exemption but merely asserting that no law expressly imposed LBT on mutual benefit associations, reiterating the settled rule that taxes cannot be imposed by implication and any ambiguity in tax imposition must be resolved in favor of the taxpayer. Finding no statutory basis for the assessment, the CTA reversed the RTC and ordered the City of San Juan to refund the erroneously collected LBT [(Public Safety Mutual Benefit Fund, Inc. v. San Juan City Treasurer (CTA Case No. 308, February 3, 2026)]

WHERE A CITY MERELY ISSUED BILLING STATEMENTS DURING BUSINESS PERMIT RENEWAL WITHOUT A VALID DEFICIENCY TAX ASSESSMENT, THE FILING OF ADMINISTRATIVE AND JUDICIAL CLAIMS WITHIN TWO YEARS FROM PAYMENT IS A PROPER REMEDY. Section 195 of the Local Government Code applies only when the local treasurer issues a valid notice of assessment for deficiency taxes, which must state the nature of the tax, the amount of deficiency, and the corresponding surcharges, interests, and penalties. Absent such a valid assessment, the taxpayer’s remedy is governed by Section 196, which allows the filing of an administrative and judicial claim for the refund of taxes erroneously or illegally collected within two years from payment. Applying these principles, the Court held that the Billing Statements issued by the Business Permits and Licensing Office during the renewal of respondent’s business permits were not notices of assessment under Section 195 because they merely reflected the business taxes and regulatory fees due, without assessing any deficiency tax, surcharge, interest, penalty, or demand for payment. The city’s own witness likewise admitted that no notices of assessment were issued. Consequently, the taxpayer was not required to file a protest under Section 195 but properly availed itself of the refund remedy under Section 196 by filing its administrative and judicial claim, both within the applicable two-year prescriptive period. Accordingly, the Court sustained the timeliness of respondent’s refund claims and ruled that Section 196, rather than Section 195, governed the case. (Atty. Voltaire Enriquez, in his capacity as City Treasurer of Taguig v. Dacon Corporation, CTA AC No. 321, November 6, 2025; see also Royal Cargo, Inc. v. City Treasurer of Parañaque, CTA AC No. 337, Civil Case No. 2021-010, February 18, 2026)

A HOLDING COMPANY WHOSE BUSINESS IS MERELY OWNING SHARES AND RECEIVING DIVIDENDS IS NOT A NON-BANK FINANCIAL INTERMEDIARY SUBJECT TO LBT; A LOCAL ORDINANCE TAXING ITS DIVIDEND INCOME IS VOID. Local government units are authorized to impose LBT on dividend income only when received by banks and other financial institutions, including non-bank financial intermediaries (NBFIs). A holding company does not become an NBFI merely because it owns shares or receives dividends from its investments; to qualify as an NBFI, it must be authorized to perform quasi-banking functions and regularly engage in financial intermediary activities. Applying these principles, the Court found that the taxpayer’s Articles of Incorporation established that its primary purpose was to own and hold shares of stock and manage its subsidiaries, not to perform quasi-banking or financial intermediary functions. Accordingly, the taxpayer was a holding company, not a bank or NBFI, and its receipt of dividend income did not subject it to LBT. The Court further ruled that Taguig Ordinance, which imposed LBT on dividend income received by holding companies, was invalid because it expanded the taxing authority granted under the Local Government Code and therefore contravened the statute. As local government units possess only delegated taxing powers, they cannot impose taxes beyond those authorized by Congress. Consequently, the Court affirmed the refund of the LBT erroneously collected on  the taxpayer’s dividend income. (Atty. Voltaire Enriquez, in his capacity as City Treasurer of Taguig v. Dacon Corporation, CTA AC No. 321, November 6, 2025)

THE CTA HAS NO APPELLATE JURISDICTION OVER CHALLENGES TO A REGULATORY ENVIRONMENTAL FEE BECAUSE AN EXACTION IMPOSED PRIMARILY TO FUND WATERSHED PROTECTION UNDER A CITY’S POLICE POWER IS A REGULATORY FEE – NOT A LOCAL TAX – EVEN IF IT INCIDENTALLY GENERATES REVENUE. The Court of Tax Appeals has appellate jurisdiction only over decisions of Regional Trial Courts involving local tax cases. Whether an exaction constitutes a tax or a regulatory fee depends on its primary purpose – if imposed primarily to generate revenue, it is a tax; if imposed principally to regulate under the police power, any revenue generated is merely incidental. Applying these principles, the Court held that the Environmental Tax under a Davao City Ordinance was not a local tax but a regulatory fee, as its primary purpose was to fund the protection, conservation, and management of the city’s watershed pursuant to the local government’s police power and environmental mandates under the Local Government Code. Since the exaction was regulatory rather than revenue-raising, it did not constitute a local tax. Consequently, the CTA lacked jurisdiction to entertain the appeal and dismissed the petition for lack of jurisdiction (Dole Philippines, Inc. – Stanfilco Division v. The Sangguniang Panlungsod of the City of Davao, et. al., CTA AC No. 325, March 11, 2026)

A LOCAL GOVERNMENT UNIT CANNOT REFUSE TO ACCEPT LBT PAYMENTS FOR FAILURE TO PRESENT PROOF OF UPDATED RPT PAYMENT. The Local Government Code does not require payment of RPT as a prerequisite to the payment of LBT. Courts cannot read into the law conditions that are not expressly provided. Likewise, the LGU’s Revenue Code merely prescribes the requirements for the issuance of a business permit and do not authorize local officials to refuse acceptance of LBT payments due to unpaid RPT. Applying these principles, the Court held that the municipality had no legal basis to reject the taxpayer’s LBT payments solely because of the absence of proof of updated RPT payment; consequently, the surcharges and penalties imposed on such refusal were invalid, and the trial court correctly ordered their refund (The Municipality of Pagbilao, Shierre Ann Portes-Palicpic, in her capacity as Municipal Mayor of the Municipality of Pagbilao, and Rizalino P. Tina, in his capacity as Assistant Municipal Treasurer of the Municipality of Pagbilao v. Team Energy Corporation, CTA AC Case No. 350, March 13, 2026)

A TAXPAYER MAY DIRECTLY CHALLENGE THE VALIDITY OF AN INCREASED LBT RATE IN COURT WITHOUT FIRST APPEALING TO THE SECRETARY OF JUSTICE WHEN THE ISSUE IS A PURE QUESTION OF LAW INVOLVING COMPLIANCE WITH THE LOCAL GOVERNMENT CODE, MAKING THE DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES INAPPLICABLE. The doctrine of exhaustion of administrative remedies does not apply when the issue raised is a pure question of law, as the interpretation and application of laws are matters within the exclusive competence of the courts. Jurisprudence recognizes that a taxpayer need not first exhaust administrative remedies, such as an appeal to the Secretary of Justice, where the controversy does not involve disputed facts but solely the determination of what the law provides under established circumstances. Applying this principle, the Court held that taxpayer was not barred from questioning the validity of the increased LBT rate under the Revised Revenue Code because the issue involved only the legal question of whether the increase complied with the limitations imposed by the Local Government Code. Since no factual matters were in dispute, the Court validly exercised jurisdiction despite the taxpayer’s failure to appeal before the Secretary of Justice (The Municipality of Pagbilao, Shierre Ann Portes-Palicpic, in her capacity as Municipal Mayor of the Municipality of Pagbilao, and Rizalino P. Tina, in his capacity as Assistant Municipal Treasurer of the Municipality of Pagbilao v. Team Energy Corporation, CTA AC Case No. 350, March 13, 2026)

ALTHOUGH LBT ACCRUES ON JANUARY 1, AN INCREASED TAX RATE UNDER A NEW REVENUE ORDINANCE APPLIES ONLY FROM THE FIRST DAY OF THE SUCCEEDING QUARTER AFTER THE ORDINANCE’S EFFECTIVITY, ENTITLING THE TAXPAYER TO A REFUND OF THE EXCESS LBT COLLECTED USING THE HIGHER RATE BEFORE IT BECAME EFFECTIVE. While local taxes generally accrue on the first day of January, any new tax or adjustment in tax rates takes effect only on the first day of the quarter following the effectivity of the ordinance imposing such change. Applying this rule, the Court held that although taxpayer’s LBT for Calendar Year 2018 was initially assessed under the 2001 Revised Revenue Code, the enactment of the 2017 Revised Revenue Code on 21 May 2018 required the application of the new contractor’s tax rate of 60% of 1% beginning only in the third and fourth quarters of 2018, while the first and second quarters remained subject to the 2001 rate. Recomputing the taxpayer’s tax liability using the proper quarterly rates, the Court found that the correct LBT for each of the third and fourth quarters resulted in an overpayment. Consequently, while affirming the RTC’s ruling that the 2017 Revised Revenue Code governed the latter half of 2018, the Court modified the computation and ordered the municipality to refund the excess LBT. (Mayor of the Municipality of Pagbilao, and Rizalino P. Tina, in his capacity as Assistant Municipal Treasurer of the Municipality of Pagbilao v. Team Energy Corporation, CTA AC Case No. 350, March 13, 2026)

REVENUE ISSUANCES

Revenue Memorandum Circular No. 084-2026, July 2026.

The BIR clarifies certain provisions of Revenue Regulations No. 004-2026, prescribing the guidelines and procedures for the availment of the one-time abatement of taxes and/or penalties for micro taxpayers

BIR DEADLINES FROM AUGUST 3, 2026 TO AUGUST 9, 2026. A gentle reminder on the following deadlines, as may be applicable:

COURT OF TAX APPEALS DECISIONS

PAGCOR LICENSEES OPERATING IN THE CLARK FREEPORT ZONE ARE SUBJECT TO THE SPECIAL 5% TAX ON GROSS INCOME EARNED (3% NATIONAL GOVERNMENT, 2% LGU) UNDER THE GOVERNING CFZ LAW, RATHER THAN THE GENERAL 5% FRANCHISE TAX UNDER THE PAGCOR CHARTER, MAKING THE CONTRARY PORTION OF RMC NO. 32-2022 NULL AND VOID; SEE DISSENTING OPINION. PAGCOR is subject to a 5% franchise tax on gross revenues or earnings from its gaming operations in lieu of all other national and local taxes, and this tax exemption extends to its licensees and contractees with respect to income derived from casino operations; however, PAGCOR licensees located within a special economic zone or freeport zone are likewise entitled to the special tax regime applicable to registered business enterprises in that zone. Applying these principles, although the PAGCOR Charter extends the 5% franchise tax regime to PAGCOR licensees, taxpayers here were registered businesses operating within the Clark Freeport Zone (CFZ), whose governing law grants registered business enterprises exemption from national and local taxes in exchange for a 5% tax on gross income earned (GIE), with 3% remitted to the National Government and 2% to the relevant LGU. The CFZ tax regime is a special law specifically applicable to businesses located in the zone and therefore prevails over the general 5% franchise tax regime under the PAGCOR Charter. The taxpayer’s Certificates of Registration and Tax Exemption likewise confirmed their entitlement to the 5% GIE regime. Applying the 5% franchise tax to PAGCOR licensees in the CFZ, while subjecting other registered businesses in the same zone to the 5% GIE tax, would defeat the legislative intent to provide uniform tax incentives to businesses located in the country’s ecozones and freeport zones. Thus, the assailed portion of RMC No. 32-2022, which provided that the gaming income of PAGCOR licensees in ecozones or freeport zones remains subject to the 5% franchise tax instead of the applicable 5% GIE regime, is null and void for being inconsistent with the governing law; accordingly, the taxpayers’ gaming income remained subject to the 5% tax on gross income earned, and not the 5% franchise tax. Dissenting Opinion:  The 5% franchise tax applies to the gaming revenues of PAGCOR licensees in lieu of other national and local taxes, even where the licensee operates in an ecozone or freeport. RMC No. 32-2022 merely clarified that the gaming income of PAGCOR licensees remains subject to the 5% franchise tax and not to the GIT, ITH, or corporate income tax, even if the licensee is located in an ecozone or freeport. The PAGCOR Charter prevails over the BCDA incentives regime, as it is the special law specifically governing the gaming industry. Lastly, the PAGCOR Charter governs the tax treatment of gaming income; while The BCDA regime may continue to apply to non-gaming income or matters not specifically covered by the PAGCOR Charter [BIR et al. v. BB International Leisure and Resort Development Corporation, et al., CTA EB No. 2975 (CTA Case No. 10841), February 23, 2026]

A CONDOMINIUM CORPORATION IS NOT SUBJECT TO LBT ABSENT PROOF OF A PROFIT-ORIENTED BUSINESS, AS ASSOCIATION DUES AND ASSESSMENTS COLLECTED SOLELY TO FUND THE MAINTENANCE AND ADMINISTRATION OF COMMON AREAS ARE NOT COMMERCIAL REVENUES; THUS, THE TAXPAYER WAS NOT A TAXABLE CONTRACTOR UNDER THE TAGUIG REVENUE CODE. The liability for Local Business Tax (LBT) presupposes that the taxpayer is engaged in “business,” meaning trade or commercial activity regularly pursued as a means of livelihood or with a view to profit; therefore, the mere receipt of money or collection of assessments does not, by itself, establish that an entity is engaged in a taxable business. Here, the taxpayer, a condominium corporation organized under the Condominium Act, was legally restricted to holding the common areas, managing and administering the condominium project, and undertaking acts necessary, incidental, or convenient to those purposes. Its Articles of Incorporation and By-laws were consistent with these statutory limitations and did not authorize activities directed toward the pursuit of livelihood or profit. The association dues, membership fees, and other assessments collected from unit owners were likewise not revenues earned from a commercial enterprise or consideration for services rendered for a fee; rather, they constituted a common fund used to pay for the maintenance, repair, improvement, reconstruction, and administrative expenses of the condominium project and common areas for the benefit of the unit owners. Consequently, the taxpayer could not be treated as a contractor under the Taguig Revenue Code merely because it collected these assessments, and the LGU failed to present sufficient evidence that the taxpayer was engaged in any other profit-oriented activity. The Supreme Court has recognized that condominium corporations generally do not engage in trade or business when managing and maintaining common areas for the benefit of unit owners and are therefore generally not subject to local business taxation, irrespective of a local ordinance attempting to impose such tax. Although a condominium corporation may potentially become liable for LBT if it is proven to have engaged in activities for profit, no such activities were alleged or established in this case; the assessment was based solely on the collection of assessments used to defray authorized condominium expenses.  [City Treasurer of Taguig City v. Cedacrest Condominium Corporation, CTA EB No. 3061 (RTC SCA No. 291), March 31, 2026; see also City Treasurer of Taguig City v.  Rosewood Pointe Residences Condominium Corporation, CTA EB No. 3008, (SCA Case No. 298 and MeTC Civil Case No. 22-4575) November 27, 2025]

A HOLDING COMPANY THAT MERELY OWNS SHARES AND RECEIVES DIVIDENDS, WITHOUT BSP AUTHORIZATION OR REGULAR FINANCIAL-INTERMEDIARY ACTIVITIES, IS NOT A BANK, FINANCIAL INSTITUTION, OR QUALIFIED NBFI SUBJECT TO LBT ON GROSS RECEIPTS UNDER THE LGC; ORDINANCE CANNOT EXPAND THE LGU’S DELEGATED TAXING POWER. An LGU may impose LBT on the gross receipts of banks and other financial institutions, including qualified non-bank financial intermediaries (NBFIs), but the taxing power of an LGU is merely delegated and must be strictly construed, with any doubt resolved against the municipality. LGC permits the imposition of LBT on the specified gross receipts of banks and other financial institutions, while LGU also defines the entities covered, and it generally prohibits LGUs from imposing income taxes, except on banks and other financial institutions. An entity is considered an NBFI only if the requisites for such classification concur, including BSP authorization to perform quasi-banking functions, principal functions involving the lending, investing, or placement of funds or evidence of indebtedness or equity, and the regular and recurring performance of recognized financial intermediary activities. Applying these rules, the taxpayer’s ownership of shares in a corporation and receipt of dividends did not make it a bank, financial institution, or NBFI because taxpayer was not authorized by the BSP to perform quasi-banking functions and did not regularly or recurringly receive funds from one group for lending or investment with another, principally acquire debt or equity securities using funds received, or borrow against, lend on, or trade in debt or equity securities. The taxpayer was instead a holding company, whose principal purpose was to hold shares in another company to control its policies, and any investment activity was merely incidental to that purpose. The Court therefore distinguished the taxpayer  from financial intermediaries that actively deal with public funds. Consequently, the assessment of LBT on the taxpayer’s dividends had no legal basis, and the local ordinance could not expand the taxing authority granted to the City by the LGC. [Atty. Voltaire Enriquez in his capacity as the City Treasurer of Taguig City v. La Lumiere Holdings, Inc., CTA AC No. 346, December 16, 2025; see also Enriquez v. Rice Creek Holdings, Inc., CTA AC NO 322 (RTC Civil Case No. 663) November 12, 2025, Enriquez v. Chrismon Investments, Inc., CTA AC No 323, February 4, 2026]

REVENUE ISSUANCES

Revenue Memorandum Order No. 14-2026

Pursuant to the Bureau of Internal Revenue’s authority to regulate tax administration, Revenue Memorandum Order (RMO) No. 14-2026 partially revokes certain procedural provisions of RMO No. 4-2025 (particularly Section E) regarding the verification and handling of Cannot Be Located (CBL) taxpayers.

REVENUE ISSUANCES

Revenue Memorandum Order No. 015-2026

Under the tax authority’s power to streamline administrative procedures, the Bureau of Internal Revenue (BIR) reiterates and standardizes the guidelines for processing Freedom of Information (FOI) requests to ensure uniform implementation and eliminate processing delays.

Revenue Memorandum Circular No. 75-2026 

Under the tax authority’s power to streamline administrative procedures, the Bureau of Internal Revenue (BIR) consolidates and clarifies the guidelines for processing the One-Time Transaction (ONETT) Computation Sheet (OCS) and the electronic Certificate Authorizing Registration (eCAR) to ensure uniform implementation and improve the ease of doing business. 

BIR DEADLINES FROM JULY 20, 2026 TO JULY 26, 2026. A gentle reminder on the following deadlines, as may be applicable:

Dear Valued Clients:

We hope this message finds you well.

Please be advised that Vince Noel Lupango is no longer connected with Dumlao Law Offices effective December 22, 2025, and has no affiliation whatsoever with the Firm after the said date. Any communication or transaction made by him after said date is undertaken solely in his personal capacity. Accordingly, the Firm shall not be responsible for, nor be bound by, any such communication or undertaking.

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Thank you for your continued support.

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Dumlao & Co.