Competence. Integrity. Commitment.

COURT OF TAX APPEALS DECISIONS

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

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

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

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

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

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

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

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

BUREAU OF INTERNAL REVENUE ISSUANCES

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

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

Revenue Memorandum Circular No. 092-2025

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

Revenue Memorandum Order No. 046-2025

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

BIR RULINGS 

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

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

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

BIR ISSUANCE

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

COURT OF TAX APPEALS DECISIONS

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

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

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

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

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

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

COURT OF TAX APPEALS (CTA) DECISIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SECURITIES AND EXCHANGE COMMISSION

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

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

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

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

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

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

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

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

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

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

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

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

REVENUE REGULATIONS 

Revenue Regulations No. 022-2025

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

Revenue Regulations No. 024-2025

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

REVENUE MEMORANDUM CIRCULAR

Revenue Memorandum Circular No. 084-2025

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

Revenue Memorandum Circular No. 088-2025

BIR RULINGS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dear Clients, Colleagues, and Friends,

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

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

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

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

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

Warm regards,

Dumlao & Co.

COURT OF TAX APPEALS (CTA) DECISIONS

AN ASSESSMENT ISSUED WITHOUT A VALID LETTER OF AUTHORITY AND WITHOUT DUE CONSIDERATION OF THE TAXPAYER’S DEFENSES IS VOID AB INITIO. The Court of Tax Appeals ruled that the Formal Letter of Demand (FLD) issued against Zambales Diversified Metals Corporation was void ab initio for violation of due process. Jurisprudence consistently requires a valid Letter of Authority (LOA) before revenue officers may conduct an audit, and any reassignment without issuance of a new LOA renders the audit and resulting assessment invalid. In this case, the audit was conducted by officers not named in the LOA, and further, the FLD was a mere verbatim reproduction of the Preliminary Assessment Notice without addressing the taxpayer’s reply or defenses, effectively depriving petitioner of its right to due process. Accordingly, the Court cancelled the assessment of deficiency taxes amounting to PhP 1.86 billion for taxable year 2014.(Zambales Diversified Metals Corporation v. Commissioner of Internal Revenue, CTA Case No. 10783, 7 April 2025).

A TAX ASSESSMENT IS VOID WHEN CONDUCTED BY REVENUE OFFICERS NOT COVERED BY A VALID LETTER OF AUTHORITY (LOA), AS A MEMORANDUM OF ASSIGNMENT (MOA) CANNOT SUBSTITUTE THE STATUTORY REQUIREMENT OF AN LOA. Jurisprudence is settled that the authority of a revenue officer to examine a taxpayer’s books flows exclusively from a validly issued Letter of Authority (LOA). A Memorandum of Assignment (MOA), Referral Memorandum, or similar internal document merely reassigns cases within the Bureau of Internal Revenue but cannot vest authority to audit. Otherwise, such practice usurps the statutory power of the Commissioner of Internal Revenue or his duly authorized representative. In this case, the audit of petitioner Schema Konsult, Inc. for taxable year 2013 was originally covered by an LOA issued to specific revenue officers. However, when those officers were reassigned, Revenue District Officer Emilia Combes issued a MOA designating other officers to continue the audit without the issuance of a new LOA in their names. These substitute officers, therefore, lacked valid authority to examine the petitioner's books. Since the audit was conducted without a valid LOA, the resulting Preliminary Assessment Notice, Final Assessment Notice, and Formal Letter of Demand are void. Consequently, the Warrant of Distraint and/or Levy issued to enforce the assessments must likewise be cancelled. (Schema Konsult, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10041, 3 April 2025).

A WAIVER UNDER RMO NO. 14-2016 WITH EXECUTION AND EXPIRY DATES VALIDLY EXTENDED THE BIR’S PERIOD TO ASSESS, BUT THE DEFICIENCY VAT ASSESSMENT WAS CANCELLED FOR LACK OF BASIS IN DISALLOWING INPUT TAX AND DENYING VAT ZERO-RATING ON ECOZONE SALES. Under RMO No. 14-2016, a waiver of the statute of limitations is valid so long as it contains the date of execution and the expiry date, without need of acceptance by the BIR. In this case, the waiver executed on May 7, 2021 validly extended the BIR’s period to assess until November 15, 2021, rendering the FLD issued on June 14, 2021 timely. The Court also found that the revenue officers who issued the FLD were duly authorized under a valid LOA. However, the assessment was fatally defective because the BIR disallowed petitioner’s carried-over input tax without citing any factual or legal basis and erroneously denied VAT zero-rating on sales to PEZA and SBMA-registered entities, contrary to law and jurisprudence. Since the taxpayer’s allowable input tax exceeded its output tax, the recomputation showed an overpayment rather than a deficiency, thereby cancelling the assessment.  (Ford Group Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10805, 4 April 2025).

ASSESSMENT AND WARRANT OF DISTRAINT AND/OR LEVY ARE VOID FOR BEING BASED ON MERE PRESUMPTIONS, LACKING DUE PROCESS. The CTA ruled that to properly resolve the validity of the Warrant of Distraint and/or Levy (WDL), it had to examine the underlying assessments, which were null and void because they were founded on unverified third-party information and not personally served to the taxpayer or its authorized representative, thereby failing due process. Testimonial evidence confirmed that the taxpayer had no transactions with the third party during the relevant period, and the BIR did not properly substantiate the assessments. As such, the WDL issued pursuant to these defective assessments was likewise invalid. The CTA En Banc affirmed the Division’s decision denying the Commissioner’s petition. (Commissioner of Internal Revenue v. Julio R. De Quinto, CTA EB No. 2830, 22 April 2025).

ELECTRIC COOPERATIVES REGISTERED WITH THE NEA ARE PERMANENTLY EXEMPT FROM INCOME TAX. Electric cooperatives duly registered with the NEA enjoy permanent income tax exemption under existing law, and such exemption remains valid despite withdrawals or modifications by subsequent laws or executive issuances that are inconsistent with this provision. In this case, petitioner Pampanga I Electric Cooperative, Inc., being registered with the NEA, is entitled to permanent income tax exemption, and thus the deficiency income tax assessment and related notices issued against it are null and void. (Pampanga I Electric Cooperative, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10961, April 23, 2025).

MARKET FEES COLLECTED BY WESM MEMBERS TO COVER OPERATIONAL COSTS ARE NOT SUBJECT TO INCOME TAX. A market operator is allowed to recover costs of administering and operating the Wholesale Electricity Spot Market (WESM) through charges imposed on WESM members. Since these market fees are intended solely to cover operational costs and are collected on a non-profit basis, they do not constitute gain or profit to the Market Operator and therefore do not qualify as taxable income. Accordingly, such fees are not subject to income or withholding tax. (Independent Electricity Market Operator of the Philippines, Inc. v. Commissioner of Internal Revenue & Secretary of Finance, CTA Case No. 10885, 5 May 2025).

NET SETTLEMENT SURPLUS (NSS) IS NOT SUBJECT TO INCOME TAX AS IT DOES NOT CONSTITUTE GAIN OR PROFIT. Income is taxable only if there is a realized gain or profit. NSS represents the reconciliation of amounts payable to sellers and receivable from buyers in the Wholesale Electricity Spot Market and arises from locational pricing and congestion differences. The ERC Resolutions governing NSS distribution ensure that neither the Market Operator nor its successor realizes actual gain or profit from NSS, as surpluses are flowed back or allocated to market participants. Consequently, NSS does not constitute taxable income. (Independent Electricity Market Operator of the Philippines, Inc. v. Commissioner of Internal Revenue & Secretary of Finance, CTA Case No. 10885, 5 May 2025).

ASSESSMENT BEYOND THE PRESCRIPTIVE PERIOD IS VOID EVEN IF DEFICIENCY NOTICES ARE ISSUED. Under Sections 203 and 222(a) of the NIRC of 1997, internal revenue taxes must generally be assessed within three years from filing of the return, with an extraordinary 10-year period allowed only for false or fraudulent returns with intent to evade tax. Mere errors or unintentional misstatements do not justify the 10-year period, and the BIR bears the burden of proving such intent with clear and convincing evidence. In this case, petitioner filed its 2011 return in April 2012, and although a waiver was executed extending the three-year period until December 31, 2015, the assessment notices were issued only in December 2020, well beyond the prescriptive period. The BIR failed to establish that the return was false or fraudulent, and the notices did not provide sufficient factual basis for assessment, depriving the petitioner of due process. Accordingly, the assessment is void. (Welte! Corporation v. Commissioner of Internal Revenue, CTA Case No. 10947, May 5, 2025).

SECURITIES AND EXCHANGE COMMISSION

SEC CLARIFIES NON-APPLICABILITY OF SRC REGISTRATION TO FREE DISTRIBUTION OF TIMESHARE EXCHANGE PROGRAM DOCUMENTS. The Securities Regulation Code requires registration only when securities are sold or offered for sale within the Philippines. Applying this to Marriott Ownership Resorts, Inc.’s (MORI) Marriot Vacation Club Destinations Exchange Program (MVCD-EP), the SEC held that the program does not constitute a sale or offer of securities since no monetary consideration is involved, and the distribution merely provides a free upgrade to existing timeshare owners, whose timeshares were not originally sold in the Philippines. Thus, registration under the SRC is unnecessary. (Applicability of SRC Registration Requirements to Timeshares, SEC-OGC Opinion No. 24-04, March 26, 2024).

SEC RULES THAT LGEPH MUST AMEND ARTICLES OF INCORPORATION TO INCLUDE BPO SERVICES UNDER SECONDARY PURPOSES. In resolving LG Electronics Philippines, Inc. 's (LGEPH) query, the SEC ruled that a corporation may only exercise powers expressly stated in its Articles of Incorporation or those reasonably incidental to its primary purpose under the Revised Corporation Code. Since BPO operations are neither expressly authorized nor incidental to LGEPH’s primary purpose as a wholesaler and distributor of electrical products, such activities cannot be undertaken without an amendment. The proper approach is to add BPO services under its secondary purposes, as a primary purpose amendment cannot cover unrelated or distinct business activities. (Amendment of Primary Purpose to Include Business Process Outsourcing (BPO) Services, SEC-OGC Opinion No. 24-05, April 2, 2024).

SEC ALLOWS LIQUIDATION BEYOND 3-YEAR WINDING UP PERIOD WITH DIRECTORS AS TRUSTEES. Under the Revised Corporation Code, a dissolved corporation retains a limited three-year existence to settle its affairs, dispose of property, and distribute assets. However, jurisprudence and SEC rulings recognize that liquidation may continue beyond this period through a receiver, trustee, or by the board of directors acting as trustees by legal implication. Applying this to L. Aznar-Alfonzo Realty and Holdings Corporation, whose registration was revoked in 2004, the SEC confirmed that it may still liquidate its remaining investment in Southwestern University-PHINMA despite the lapse of the winding-up period. (Liquidation Beyond the 3-Year Winding Up Period, SEC-OGC Opinion No. 24-06, April 4, 2024).

SEC CONFIRMS FLEXIBILITY ON BOARD COMPOSITION AND NON-RESIDENCY REQUIREMENT UNDER RCCP. The SEC clarified that the Revised Corporation Code (RCCP) removed the old residency requirement for directors, thus corporations may elect non-resident directors unless their bylaws expressly require otherwise. In Oracle (Philippines) Corporation’s case, its Articles of Incorporation and bylaws impose no such restriction, allowing the election of a majority or even all non-resident directors. The SEC likewise confirmed that corporations may fix the number of directors at fewer than five, since the RCCP did not reproduce the minimum limit under the old Corporation Code. Thus, Oracle may lawfully amend its Articles of Incorporation to provide for a three-or four-member board, subject to approval by the SEC. (Re: Section 22 of Republic Act No. 11232 or the Revised Corporation Code of the Philippines (RCCP), SEC-OGC Opinion No. 24-07, April 4, 2024).

SEC CLARIFIES NON-APPLICATION OF "DOING BUSINESS" TEST TO FOREIGN CORPORATIONS WITH PASSIVE INVESTMENTS AND OFFSHORE SERVICES. The Foreign Investments Act (FIA) draws a clear line between activities that qualify as "doing business" in the Philippines and those that do not. Acts implying continuity of commercial dealings or performance of business functions locally fall within the definition, while passive stock ownership, the exercise of shareholder rights, and isolated transactions are expressly excluded. In Lhotse Enterprises Limited’s case, the SEC clarified that its minority shareholdings in Philippine corporations and its service agreement with a local affiliate—where all services are rendered abroad—do not amount to doing business in the country. The SEC emphasized that so long as the corporation’s activities remain limited to equity investments, the service engagement is performed outside the Philippines, and there is no intent to establish continuous commercial operations locally, a license to do business is not required. (Re: Doing Business in the Philippines, SEC-OGC Opinion No. 24-09, April 24, 2024).

SEC OPINION ON THE NON-ALLOWANCE OF PERPETUAL TERM FOR CORPORATE OFFICERS UNDER THE RCC. The SEC clarified that while non-stock corporations may vary the term of their trustees under their by-laws, a lifetime or unlimited tenure for officers or trustees is not legally permissible. Officers are elected by the board of trustees, whose one-year term under by-laws necessarily limits the tenure of officers as well. Allowing perpetual terms would prevent future boards from exercising their statutory power to elect officers and deprive members of the opportunity to serve. The SEC emphasized that this long-standing prohibition is consistent with Section 24 of the Revised Corporation Code, which requires officers to be elected after the trustees’ election. On the related query, the SEC held that MCGI, as a registered non-stock religious corporation, remains subject to the general provisions on non-stock corporations, including the requirement of officer elections, notwithstanding constitutional protections on religious freedom. However, the Commission declined to opine on alternative organizational structures, stating it cannot act as private legal counsel. (Re: Perpetual Term of Officers, SEC-OGC Opinion No. 24-10, April 25, 2024).

MEMBERS MAY VALIDLY ELECT DIRECTORS VIA REMOTE COMMUNICATION IF AUTHORIZED BY A BOARD RESOLUTION, EVEN IF THE BY-LAWS PROVIDE ONLY FOR MANUAL VOTING.  The Revised Corporation Code, reinforced by SEC Memorandum Circular No. 6, s. 2020, permits members to vote through remote communication or in absentia when so authorized either by the by-laws or by a resolution of the majority of the board of directors or trustees, subject to the condition that such resolution applies only to the particular meeting or election. Applying these provisions, the SEC ruled that the Philippine Society of Mechanical Engineers (PSME) may validly conduct the election of its national board of directors through online remote communication based solely on a board resolution, notwithstanding that its by-laws only allow manual voting. However, the SEC strongly encouraged corporations to amend their by-laws to institutionalize remote voting and ensure members’ rights are adequately protected. (Re: Voting by Remote Communication Based on a Board Resolution, SEC-OGC Opinion No. 24-12, May 8, 2024).

SHAREHOLDERS’ INSPECTION RIGHTS UNDER THE RCC MAY BE LIMITED IF NOT FOR A LEGITIMATE PURPOSE OR IF IT RISKS DISCLOSING CONFIDENTIAL INFORMATION. The right of shareholders to inspect corporate records is grounded in Section 73 of the Revised Corporation Code (RCC), which grants stockholders access to corporate books and records to ensure transparency and good governance. However, this right is not absolute and may be denied if the request is made in bad faith, for an illegitimate purpose, or involves confidential information protected under laws such as the Intellectual Property Code and the Data Privacy Act. In the case of Flexi Finance Asia, Inc., the SEC noted that while shareholders like Mr. Ronnie Katona may validly exercise inspection rights, the corporation may raise defenses if the demand is overly broad, lacks sufficient justification, or compromises sensitive data. Ultimately, the burden rests on the corporation to prove that the purpose of inspection is improper. (Inspection Rights of Shareholders, SEC-OGC Opinion No. 24-14, May 21, 2024).

REVENUE MEMORANDUM CIRCULAR NO. 081-2025

BIR RULINGS

ONLY CONGRESS MAY GRANT TAX EXEMPTIONS; HENCE, THE REQUEST TO EXEMPT FISHING ACTIVITIES FROM INPUT VAT CANNOT BE ACTED UPON BY THE PRESIDENT. Section 105 of the National Internal Revenue Code provides that VAT is an indirect tax that may be shifted to the buyer and becomes part of the purchase price, while Article VI, Section 28(4) of the Constitution mandates that tax exemptions may only be granted through legislation passed by Congress. Applying these provisions, the request from a local legislative body to exempt fishing and fishery activities from VAT on petroleum-based inputs due to increasing fuel prices cannot be granted by the President, as such authority lies solely with Congress. The Bureau of Internal Revenue clarified that no current law provides such an exemption, and any tax relief must be enacted through a clear and express provision of law. (BIR Ruling No. VAT-129-2025, April 23, 2025)

A NON-STOCK, NON-PROFIT SCHOOL IS EXEMPT FROM INCOME TAX ON REVENUES USED EXCLUSIVELY FOR EDUCATIONAL PURPOSES, INCLUDING TUITION AND ON-SITE ANCILLARY SERVICES. Pursuant to Section 30(H) of the National Internal Revenue Code of 1997, as amended, a non-stock, non-profit educational institution is exempt from income tax on revenues actually, directly, and exclusively used for educational purposes. Applying this provision, the subject institution was granted a Certificate of Tax Exemption covering its tuition and school-related fees, as well as income from its cafeteria, dormitory, and bookstore, provided these are located within school premises and operated by the school itself. It is also exempt from VAT on educational services and from final tax on bank interest income used for educational purposes, subject to compliance with documentation and reporting requirements. However, the exemption does not extend to income from unrelated activities or property, which remains taxable, and the school must continue to comply with all regulatory conditions to maintain its exempt status. (Certificate of Tax Exemption No. SH30-131-136-2025, April 24, 2025)

DONATIONS TO NON-STOCK, NON-PROFIT EDUCATIONAL INSTITUTIONS ARE EXEMPT FROM DONOR’S TAX, SUBJECT TO THE 30% ADMINISTRATIVE USE LIMITATION. Donations made to non-stock, non-profit educational institutions are exempt from donor’s tax, provided that no more than 30% of the gift is used for administrative purposes. In this case, the Bureau of Internal Revenue issued a Certificate of Tax Exemption covering a donation of four parcels of land located in Cebu City, executed through a Deed of Donation dated July 19, 2023, in favor of a qualified educational institution. The properties are to be used in compliance with the requirements of the law. Additionally, the donation is not subject to documentary stamp tax under Section 196 of the Tax Code but is covered by the DST under Section 188. The exemption was granted based on the documents submitted, and remains valid unless contrary facts are later discovered upon BIR verification. (Certificate of Tax Exemption No. DT-137-2025, April 24, 2025)

DONATION TO A GOVERNMENT AGENCY IS EXEMPT FROM DONOR’S AND DOCUMENTARY STAMP TAXES; BUT SUBJECT TO VAT IF DONOR IS ENGAGED IN REAL ESTATE BUSINESS. Pursuant to Section 101(A)(1) of the National Internal Revenue Code (Tax Code) of 1997, as amended by the TRAIN Law, donations made to the government or any of its political subdivisions are exempt from donor’s tax. In line with this, a deed of donation dated August 29, 2017, involving 5,000 square meters of land located in Bacoor, Cavite, executed by a private real estate entity in favor of a government agency, qualifies for such exemption. Furthermore, the donation is exempt from documentary stamp tax (DST) under Section 196 of the Tax Code but is subject to the minimal DST of ₱30.00 under Section 188 for notarization. However, since the donor is engaged in the real estate business, all its real properties are treated as ordinary assets, and the donated property—originally held for sale or business use is subject to value-added tax (VAT) pursuant to Section 106(B)(1) of the same Code. (Certificate of Tax Exemption No. DT-138-2025, April 24, 2025)

BIR DEADLINES FROM SEPTEMBER 29 TO OCTOBER 5, 2025. A gentle reminder on the following deadlines, as may be applicable:

COURT OF TAX APPEALS (CTA) DECISIONS

A TAX ASSESSMENT IS VOID WHEN CONDUCTED WITHOUT A VALID LOA, AS SUBSTITUTION OF REVENUE OFFICERS REQUIRES A NEW OR AMENDED LOA, NOT A MERE REASSIGNMENT NOTICE. The Court ruled that a valid Letter of Authority (LOA) is indispensable for revenue officers to lawfully conduct an audit, and any substitution of officers must be supported by a new or amended LOA issued by the Commissioner of Internal Revenue or his duly authorized representative, as emphasized in Commissioner of Internal Revenue v. McDonald’s Philippines Realty Corp.. In this case, although the initially authorized specific revenue officers to audit Master Sports Corporation, they were replaced through a mere Re-Assignment Notice signed by a Revenue District Officer, without the issuance of a new LOA. Since the replacement officers proceeded with the audit absent proper authority, the resulting deficiency assessments were declared void. Consequently, the Court cancelled and set aside the assessment and enjoined the BIR from enforcing collection. (Master Sports Corporation v. Commissioner of Internal Revenue, CTA Case No. 10458, 2 May 2025).

LOA SERVED BEYOND 30 DAYS REMAINS VALID IF THE TAXPAYER ACCEPTS SERVICE AND PARTICIPATES IN THE AUDIT, AS BELATED OBJECTIONS ARE DEEMED MERE AFTERTHOUGHTS. While RAMO No. 1-10 required an LOA to be served within 30 days from issuance, RAMO NO. 1-2020 dated 17 September 2020 removed this provision, which was further clarified in RMC No. 82-2022, dated June 28, 2022. While the LOAs were served in 2019 or before the amendment, a taxpayer who accepts the LOA and submits to the audit without timely objection is deemed to have acquiesced to the BIR’s authority. In this case, the records showed that the taxpayer eventually accepted both LOAs, submitted documents, and participated in the audit. Following AFP General Insurance Corporation v. Commissioner of Internal Revenue, the Court held that petitioner’s belated challenge was merely an afterthought to evade liability, thereby upholding the validity of the LOAs’ service. (Pristine Energy Transfer Corporation v. Commissioner of Internal Revenue, CTA Case No. 10338, 6 May 2025.)

UNDER THE NIRC, DEFICIENCY ASSESSMENTS MUST BE ISSUED WITHIN THREE YEARS FROM THE DUE DATE OF FILING THE RETURN. The law provides that internal revenue taxes must generally be assessed within three (3) years from the deadline for filing the return. If no return is filed, or if a false return is filed, the BIR is given ten (10) years from discovery to assess. Since the BIR issued the assessment on 27 November 2019 (received 10 January 2020), its right to assess VAT for the first three quarters of 2016, as well as EWT and WTC for January to October 2016, had already been prescribed. Only VAT for the 4th quarter of 2016 and EWT and WTC for November and December 2016 were still within the 3-year period. As for DST, because no return was filed, the 10-year extraordinary period applied, and the assessment had not been prescribed. (Pristine Energy Transfer Corporation v. Commissioner of Internal Revenue, CTA Case No. 10338,6 May 2025.)

DUE PROCESS REQUIRES ACTUAL RECEIPT OF ASSESSMENT NOTICES BY THE TAXPAYER; SINCE THE BIR FAILED TO PROVE VALID SERVICE, THE ASSESSMENT IS VOID. Jurisprudence consistently holds that when a taxpayer denies receipt of a Preliminary Assessment Notice (PAN), Final Assessment Notice (FAN), and Formal Letter of Demand (FLD), the burden shifts to the BIR to prove that such notices were actually received. Proof of mailing alone is insufficient, especially when service is made to someone who is not authorized to receive documents on behalf of the taxpayer. An assessment that is not validly served violates due process and is void. In this case, the BIR claimed that the PAN and FAN/FLD were served through a courier service, but the evidence presented showed otherwise. The FAN/FLD was delivered to a security guard, who is not an authorized representative of the taxpayer. No competent proof was presented to establish actual receipt of the PAN. As a result, the BIR failed to discharge its burden to prove valid service of the assessment notices. Since the taxpayer was not properly informed of the legal and factual bases of the assessment, due process was violated, rendering the assessment void and without legal effect. Moreover, jurisprudence holds that a void tax assessment produces no legal effect and cannot serve as basis for collection. Without a valid assessment, subsequent collection measures such as a WDL are likewise void. Despite this, the BIR garnished PhP28,191,790.45 from the petitioner’s bank accounts. Since the assessment and collection were void, the government had no right to retain the amount, and the taxpayer is entitled to a refund of the illegally collected sum. (Fujitec, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10965, 7 May 2025.)

THE GOVERNMENT IS NOT LIABLE FOR DAMAGES OR LEGAL INTEREST SINCE THE COLLECTION, THOUGH LATER FOUND VOID, WAS NOT ATTENDED BY ARBITRARINESS AND NO LAW AUTHORIZES SUCH AWARD. Jurisprudence provides that interest on refunded taxes may only be awarded if expressly authorized by law or if the collection was arbitrary. Absent these conditions, the government cannot be compelled to pay damages or legal interest on amounts improperly collected. Arbitrariness exists only when there is inexcusable disregard of legal requirements, not when actions are based on a plausible interpretation of the law. In this case, while the BIR collected more than the amount stated in the WDL, the excess was attributed to its computation of interest and penalties, which it considered valid. Records also show that the BIR attempted to serve the Warrant of Garnishment and refrained from collecting the full available amounts once it deemed the liability satisfied. These actions negate arbitrariness. Since no statutory provision authorizes interest on tax refunds in this situation and the collection was not arbitrary, petitioner is not entitled to damages or legal interest. (Fujitec, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10965, 7 May 2025.)

A COMPROMISE SETTLEMENT REQUIRES EITHER REASONABLE DOUBT AS TO THE ASSESSMENT OR CLEAR INABILITY TO PAY; SINCE NEITHER WAS ESTABLISHED, THE DENIAL OF THE APPLICATION WAS PROPER. The Commissioner of Internal Revenue may compromise tax liabilities only in limited instances, specifically when there is reasonable doubt as to the validity of the assessment or when the taxpayer shows clear inability to pay. Such compromises must comply with regulatory approval procedures depending on the amount involved. Tax assessments, moreover, enjoy the presumption of correctness and regularity, and the burden lies with the taxpayer to prove otherwise. In this case, petitioner applied for a compromise settlement of its deficiency income tax on the ground of doubtful validity of the assessment. However, records showed that petitioner had in fact received the Final Assessment Notice, defeating its claim of non-receipt. Moreover, the assessment was supported by third-party data verified through the BIR’s no-contact audit system, which the petitioner failed to disprove with competent evidence. In the absence of proof that the assessment was arbitrary or baseless, no reasonable doubt existed as to its validity. Consequently, the National Evaluation Board acted within its authority in denying the application for compromise, and the Commissioner did not commit grave abuse of discretion in issuing the Notice of Denial. (Philippine Mining Development Corporation v. Commissioner of Internal Revenue, CTA Case No. 9292, 8 May 2025.)

A PETITION LACKING A VALID CERTIFICATION AGAINST FORUM SHOPPING MAY BE DISMISSED OUTRIGHT, ESPECIALLY WHEN THE PETITIONER FAILS TO CORRECT THE DEFECT DESPITE OPPORTUNITIES TO COMPLY. Courts strictly require a proper verification and certification against forum shopping as part of procedural due process. Failure to submit a compliant certification is a sufficient ground for dismissal, and repeated non-compliance despite extensions negates any claim of grave abuse of discretion by the court. Jurisprudence has consistently upheld dismissal where procedural defects remain uncorrected despite opportunities to cure. In this case, the petitioner was given equitable opportunities to submit a proper certification against forum shopping but failed to comply. No valid excuse or justification was presented for such failure. Applying the same principle, the First Division’s dismissal of the petitioner's prior petition was proper, and no grave abuse of discretion was committed.(Johnny Sy Co v. Bureau of Internal Revenue, et al., CTA EB No. 2832 (CTA Case No. 11024), 9 May 2025.)

TAX ASSESSMENTS ARE VOID IF THE BIR FAILS TO CONSIDER AND ADDRESS THE TAXPAYER’S ARGUMENTS AND EVIDENCE, AS THIS VIOLATES THE TAXPAYER’S RIGHT TO DUE PROCESS. In Commissioner of Internal Revenue v. Avon Products Manufacturing, Inc., the Supreme Court held that while the Commissioner need not accept a taxpayer’s explanations, she must provide specific reasons for rejecting them. The right to due process is violated when the BIR disregards evidence without explanation, since administrative adjudication requires considering the taxpayer’s defenses and giving reasons for conclusions. Here, petitioner filed a Reply to the PAN and a Request for Reinvestigation, setting forth arguments and submitting evidence. Despite this, the BIR simply reiterated the deficiency assessments in the FLD without addressing the taxpayer’s points. The FDDA’s generic statement that petitioner failed to provide relevant documents was insufficient, as it did not specify why the submitted arguments and evidence were disregarded. This failure to consider petitioner’s defenses constitutes a denial of due process, rendering the deficiency assessments void. (My Solid Technologies and Devices Corporation v. Commissioner of Internal Revenue, CTA Case No. 10598, 15 May 2025)

TAX ASSESSMENTS ARE VOID IF CONDUCTED BY REVENUE OFFICERS WITHOUT BEING SPECIFICALLY NAMED IN A VALID LOA. Jurisprudence, particularly Medicard Philippines, Inc. v. CIR and Lancaster Philippines, Inc. v. CIR, makes clear that only revenue officers specifically named in a Letter of Authority (LOA) may validly examine a taxpayer’s records, and that a Memorandum of Assignment (MOA) cannot cure the absence of such authority. In this case, while an LOA existed, it did not name RO Yu and GS Roldan, Jr., who actually conducted the audit. Their reliance on MOAs issued by the RDO, a subordinate official not empowered to issue LOAs, was insufficient. Since the audit was conducted without proper authority, the resulting deficiency VAT assessment was void (Commissioner of Internal Revenue v. Sellery Phils. Enterprises, Inc., CTA EB No. 2837, 20 May 2025).

LOA IS ALWAYS REQUIRED IN TAX AUDITS, WHETHER REGULAR OR MANDATORY, AND ITS ABSENCE RENDERS THE RESULTING ASSESSMENTS VOID. Under jurisprudence, particularly CIR v. Manila Medical Services, Inc., the issuance of a valid LOA is indispensable in all tax audits, as it is the authority that empowers revenue officers to examine a taxpayer’s records. The law makes no distinction between regular assessments and mandatory audits, such as those arising from applications for business retirement. In this case, the BIR argued that a mandatory audit dispensed with the need for an LOA and that errors in issuance should not prejudice government revenue. The Court rejected this, stressing that lack of a valid LOA is not a mere technicality but a due process violation that invalidates the entire assessment. The lifeblood doctrine cannot override the taxpayer’s right to due process. Accordingly, the CTA Division correctly cancelled and set aside the deficiency assessments for being null and void (Commissioner of Internal Revenue v. Sellery Phils. Enterprises, Inc., CTA EB No. 2837, 20 May 2025).

SECURITIES AND EXCHANGE COMMISSION

SEC OPINION NO. 24-01 INTERPRETED THE CONSTITUTIONAL AND STATUTORY RESTRICTIONS ON FOREIGN OWNERSHIP, CONTROL, AND ADMINISTRATION OF EDUCATIONAL INSTITUTIONS IN RELATION TO THE FOREIGN INVESTMENTS NEGATIVE LIST. Pursuant to the 1987 Constitution and the Foreign Investments Act (RA 7042), as implemented through the 12th Foreign Investments Negative List (E.O. 175, s. 2022), the Securities and Exchange Commission (SEC) issued an opinion on the proposed investment of a Japanese corporation in a Philippine subsidiary offering non-degree certification courses. The SEC affirmed that while educational institutions are generally subject to the 40% foreign equity cap and must be controlled and administered by Filipinos, the restriction does not extend to short-term, high-level skills development programs that are not part of the formal education system under B.P. 232. However, the Commission emphasized that jurisdiction over determining whether such programs qualify rests with CHED and TESDA, and that corporations engaged in technical-vocational education with certification fall under TESDA regulation. Thus, foreign ownership beyond 40% is permissible only if the proposed activities fall outside the scope of formal education. (SEC-OGC Opinion No. 24-01, Re: Foreign Ownership, Control, and Administration of Educational Institutions; Applicability of the Foreign Investments Negative List to Educational Institutions, January 2, 2024).
SEC OPINION NO. 24-02 CLARIFIED THAT UNDER THE CONDOMINIUM ACT, THE MASTER DEED AND DECLARATION OF RESTRICTIONS PREVAIL OVER THE ARTICLES OF INCORPORATION AND BY-LAWS IN DETERMINING THE COMPOSITION OF A CONDOMINIUM CORPORATION’S BOARD OF TRUSTEES. Pursuant to Republic Act No. 4726 (Condominium Act), as amended, and the Revised Corporation Code (RA 11232), the Securities and Exchange Commission (SEC) issued an opinion clarifying that in cases of inconsistency, the provisions of a condominium corporation’s Master Deed and Declaration of Restrictions (MDDR) prevail over its Articles of Incorporation (AOI) and By-Laws. The opinion addressed queries from The Cambridge Village Condominium Association, Inc., where the AOI and By-Laws provided for five trustees while the MDDR required seven. The SEC ruled that the MDDR must be followed, and the AOI and By-Laws must be amended accordingly. It further explained that, pending amendment, the number of trustees to be elected should still conform with the MDDR, and that delinquent members are not entitled to vote in determining quorum, by analogy to stock corporations under the RCC. (SEC-OGC Opinion No. 24-02, Re: Composition of Board of Trustees of a Condominium Corporation, January 19, 2024).

SEC OPINION NO. 24-03 CLARIFIED THE REQUIREMENTS FOR INVOKING RECIPROCITY IN EXEMPTING FOREIGN GOVERNMENT SECURITIES FROM REGISTRATION UNDER THE SECURITIES REGULATION CODE. Under Republic Act No. 8799 (Securities Regulation Code), the Securities and Exchange Commission (SEC) issued an opinion clarifying the scope of exempt securities under Subsection 9.1(b). In response to an inquiry from HSBC Philippines, the SEC explained that while securities issued or guaranteed by foreign governments with diplomatic relations with the Philippines may qualify as exempt from registration, invoking reciprocity requires more than proof of trading activity abroad. Instead, parties must submit competent and duly authenticated evidence—such as foreign laws or regulations—that Philippine government securities are likewise exempt from registration in the foreign jurisdiction. The SEC emphasized that Philippine courts do not take judicial notice of foreign law, which must be properly proven as a fact in accordance with evidentiary rules. (SEC-OGC Opinion No. 24-03, Re: Exempt Securities under Subsection 9.1(b) of the Securities Regulation Code, March 26, 2024)

REVENUE REGULATIONS

Revenue Regulations No. 021-2025
Based on Republic Act (RA) No. 12214, also known as the Capital Markets Efficiency Promotion Act (CMEPA), Revenue Regulations No. 021-2025 were issued to implement major amendments to the National Internal Revenue Code of 1997. The regulations introduce a simplified and uniform tax system for passive income, with a general effective date of July 1, 2025. This includes defining and clarifying terms like "securities" and "shares of stock" to encompass a wider range of financial instruments. The regulations also provide specific tax treatments for new income types, such as equity-based compensation, and establish that certain gains from financial instruments, like project-specific bonds and mutual fund redemptions, are now exempt from income tax. Furthermore, the regulations allow new allowable deductions for dealers in securities and clarify that interest income from various sources is considered sourced within the Philippines, irrespective of where the instrument was executed.

Tax Rates for Individuals (Effective July 1, 2025)
Citizen, Resident Alien, and Non-Resident Alien Engaged in Trade or Business

Tax Rates for Corporations (Effective July 1, 2025)
Domestic and Resident Foreign Corporations

Non-Resident Foreign Corporations

BIR RULINGS

RETIREMENT BENEFITS ARE EXEMPT FROM WITHHOLDING TAX FOR EMPLOYEES WHO MEET THE AGE AND SERVICE DURATION REQUIREMENTS. Section 32 (B) (6) (a) of the National Internal Revenue Code of 1997 and Republic Act (RA) No. 7641, retirement benefits for two employees are exempt from withholding tax. The exemption applies because the employer does not have a BIR-approved retirement plan. The application of facts shows that both employees meet the conditions under RA No. 7641, which requires an employee to have at least five years of service and be between 60 and 65 years old at the time of retirement. One employee had 20.5 years of service, and the other had 16.19 years of service, both exceeding the minimum five-year requirement. The ruling also notes that the exemption does not cover salaries, 13th-month pay, or other benefits that exceed the P90,000 threshold. Additionally, unused monetized vacation leave credits of up to ten days are not subject to income or withholding tax, but sick leave credits are not included in this exemption. (BIR Ruling No. OT-121-2025, April 23, 2025)

A NON-STOCK SAVINGS AND LOAN ASSOCIATION IS EXEMPT FROM 20% FINAL WITHHOLDING TAX ON INTEREST INCOME FROM DEPOSITS. Under Republic Act (RA) No. 8367, a non-stock savings and loan association is exempt from certain taxes. The application of this law to a specific association shows that it is not subject to a 20% final withholding tax on its interest income from deposits and deposit substitutes. This exemption applies to the association's income and interest earned on its deposits with banks. However, the tax exemption does not cover income derived from any of its properties, real or personal, or any activities conducted for profit. The association, which is a non-stock corporation and is registered with the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP), had requested a revalidation of its tax exemption certificate. The ruling is based on the provided facts and will be considered null and void if a later investigation reveals the facts were different. (BIR Ruling No. OT-124-2025, April 23, 2025)

A NON-STOCK SAVINGS AND LOAN ASSOCIATION CAN BE EXEMPT FROM GROSS RECEIPTS TAX (GRT) IF IT PROVES DURING AN AUDIT THAT IT OPERATES SOLELY FOR THE BENEFIT OF ITS MEMBERS AND DOES NOT ACQUIRE FUNDS FROM THE PUBLIC. Based on Republic Act No. 8367, Revenue Regulations No. 9-2004, and Revenue Memorandum Circular No. 9-2016, an organization, representing itself as a non-stock savings and loan association (NSSLA) and seeking exemption from the gross receipts tax (GRT), was advised that its claim for exemption cannot be granted based on mere representation. The Bureau of Internal Revenue (BIR) determined that while NSSLAs are generally exempt from certain taxes, they are subject to GRT if they function as a Non-Bank Financial Intermediary (NBFI) by obtaining funds from the public. Therefore, to qualify for the exemption, the association must prove through a factual determination by the Revenue District Office (RDO) that it exclusively serves its members, does not transact business with the public, and does not obtain funds from the public. The ruling emphasizes the principle that tax exemptions are construed strictly against the taxpayer and that the burden of proof rests on the entity claiming the exemption. (BIR Ruling No. OT-125-2025, April 23, 2025)

DONATIONS TO PRIVATE ENTERPRISES, EVEN IF FACILITATED BY A GOVERNMENT-OWNED AND CONTROLLED CORPORATION (GOCC), ARE SUBJECT TO THE 6% DONOR'S TAX. Pursuant to PD No. 1177, PD No. 1931, and EO No. 93, which withdrew tax exemptions for government-owned and controlled corporations (GOCCs), donations channeled through a GOCC to private enterprises are subject to donor's tax. Specifically, a transfer of equipment from an intergovernmental organization to private enterprises, facilitated by a GOCC, is subject to the 6% donor's tax on the total gift amount exceeding PHP 250,000, as provided by Sections 98 and 99 of the National Internal Revenue Code (NIRC). Although the GOCC itself, as the implementing arm of the project, may be exempt from certain taxes under its charter (PD No. 205), this exemption does not extend to the private enterprise-donees, which are not tax-exempt entities. (BIR Ruling No. OT-126-2025, April 23, 2025)

A COMPANY IS GRANTED APPROVAL TO CHANGE ITS INVENTORY VALUATION METHOD FROM WEIGHTED AVERAGE TO FIFO, AS THIS CHANGE ALIGNS WITH ITS PARENT COMPANY'S ACCOUNTING PRACTICES AND WILL NOT MISREPRESENT ITS INCOME. Pursuant to Section 41 of the Tax Code and Section 145 of Revenue Regulations No. 2, which require that a change in accounting method must be approved by the Commissioner of Internal Revenue, a request to change an inventory valuation method is granted. The company's request to switch from the weighted average method to the First-In, First-Out (FIFO) method is approved, effective January 1, 2022. This approval is based on the company's need to align its financial reporting with its parent company and affiliates, a change deemed to be in line with "best accounting practice" and one that will not significantly impact the company's reported income. The BIR concluded that the change would clearly reflect the company's income and is therefore permissible. (BIR Ruling No. OT-127-2025, April 23, 2025)

THE TAX CODE ALLOWS A 10-YEAR PRESCRIPTIVE PERIOD IN CASES INVOLVING PRIMA FACIE EVIDENCE OF FRAUD, MAKING A REQUEST FOR CANCELLATION OF TAX AUTHORITY BASED ON THE 3-YEAR RULE INAPPLICABLE. Under the National Internal Revenue Code, the standard three-year prescriptive period for tax assessments does not apply when fraud is present, in which case a ten-year period governs. In this case, the discovery of under-declared purchases amounting to over 70% of actual purchases was deemed prima facie evidence of fraud, thereby justifying the application of the extended prescriptive period and the denial of the request for cancellation of the electronic letter of authority. (BIR Ruling No. OT-128-2025, April 23, 2025)

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