Month: May 2025

COURT OF TAX APPEALS DECISIONS

A PETITION FILED WITH THE CTA DUE TO THE COMMISSIONER'S INACTION WITHIN 180-DAYS IS DISMISSIBLE FOR LACK OF JURISDICTION. In Nueva Ecija II Electric Cooperative, Inc. Area II v. Commissioner of Internal Revenue, G.R. No. 258101 (Notice), Apri119, 2022, the Supreme Court categorically held that no new or separate 180-day period is granted to the Commissioner of Internal Revenue (CIR) to act on the Administrative Appeal. The 180-day period is counted from the filing of protest to the Regional Director, not in the CIR’s administrative appeal. (CTA Case No. 10818, February 4, 2025)

AN ASSESSMENT IS VOID IF THE GROUP SUPERVISOR WHO RECOMMENDED THE NOTICE OF DISCREPANCY AND PRELIMINARY ASSESSMENT NOTICE IS NOT NAMED IN THE LETTER OF AUTHORITY; MEMORANDUM OF ASSIGNMENT CANNOT REPLACE A LOA. The issuance of a Letter of Authority (LOA) is a necessary prerequisite for the lawful examination of a taxpayer’s books and other accounting records by any Revenue Officer (RO). Without it, any resulting assessment is invalid. Furthermore, any reassignment or transfer of a case to another RO, as well as any revalidation of an expired LOA, must be accompanied by the issuance of a new LOA. In this case, although Group Supervisor Dominic Morales recommended the issuance of the Notice of Discrepancy and the Preliminary Assessment Notice, his name does not appear in any of the applicable LOAs—which list only Group Supervisors Ronaldo Camba and Constate Jr. Reinante. Consequently, the assessment is rendered void. (Helix Aggregates, Inc. (formerly Lafargeholcim Aggregates, Inc., v. CIR, CTA Case No. 10852, March 3, 2025); A Memorandum of Assignment cannot substitute a LOA is not valid and sufficient authority, even if the LOA was belatedly issued (Productivity Technologies Services, Inc. v. CIR, CTA Case No. 10873, March 7, 2025; Barrio Fiesta Manufacturing Corporation v. CIR, CTA Case no. 10213, MARCH 17, 2025)

ASSOCIATION DUES, MEMBERSHIP FEES, AND OTHER CHARGES COLLECTED BY HOMEOWNERS' ASSOCIATIONS ARE NOT SUBJECT TO VALUE-ADDED TAX (VAT). This is because such collections do not constitute a sale of services as defined under Section 105 of the National Internal Revenue Code (NIRC), which outlines the transactions subject to VAT. There is no commercial activity involved that can be considered taxable under VAT laws. These fees are merely collected to cover expenses related to the maintenance, repair, improvement, reconstruction, and administrative operations necessary for the association to provide services to its members. Moreover, Revenue Memorandum Circular (RMC) No. 9-2013 is null and void to the extent that it seeks to impose VAT on these collections, as it contradicts the clear provisions of Section 105 of the NIRC. (Pasig Green Park Village Homeowners Association, Inc. v. CIR, CTA Case No. 10149, February 6, 2025)

FAILURE TO SPECIFY THE NEWLY DISCOVERED EVIDENCE OR ADDITIONAL EVIDENCE; FAILURE TO SUBMIT DOCUMENTS WITHIN 60 DAYS FROM FILING OF REQUEST FOR REINVESTIGATION; OR SUBMISSION BEYOND THE 60-DAY PERIOD -  RENDERS THE ASSESSMENT FINAL AND UNAPPEALABLE. Under Section 3 of Revenue Regulations No. 12-99, as amended by RR No. 18-2013, a taxpayer may administratively protest a tax assessment by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment, in the manner prescribed by the implementing rules. For a request for reinvestigation, all relevant supporting documents must be submitted within sixty (60) days from the date of filing the protest; otherwise, the assessment shall become final. Additionally, the request must specify any newly discovered or additional evidence the taxpayer intends to present. In the present case, although the petitioner timely filed a protest on November 15, 2018, requesting a reinvestigation of the assessment for taxable year 2015, it failed to submit the required supporting documents by January 14, 2019, and did not identify any new or additional evidence as mandated. Instead, the petitioner merely made a general reservation to submit further documents without actual compliance. As a result, the tax assessment became final and unappealable, and the petitioner’s subsequent appeal was deemed premature, depriving the Court of jurisdiction to hear the case. (Suburbia Automotive Ventures, Inc. v. CIR, CTA Case No. 10128, March 3, 2025) In another case, the petitioner filed its Request for Reinvestigation on May 16, 2019, giving it until July 15, 2019 to complete the submission of all relevant documents. However, it only submitted the necessary supporting documents on August 28, 2019—104 days after the request and 44 days beyond the deadline. This delay signified that the protest was not properly or timely substantiated, resulting in the tax assessment becoming final, executory, and unappealable. The petitioner’s reliance on previous court decisions was misplaced, as those cases involved taxpayers who had submitted what they considered to be complete documentation within the prescribed period. In contrast, the petitioner’s subsequent submission of documents after the deadline indicated that the initial filing was incomplete. Furthermore, the Court rejected the petitioner’s interpretation that the 60-day rule is without consequence, as this would effectively nullify the clear directive of Section 228 of the NIRC. Since vital supporting documents—such as VAT invoices and official receipts—were only submitted after the lapse of the period, the protest lacked factual and legal basis within the required timeframe, rendering the request for reinvestigation invalid and the assessment final.(My Solid Technologies & Devices Corporation v. CIR, CTA Case no. 10293, February 6, 2025)

REVENUE REGULATIONS

Revenue Regulations No. 9-2025

Implementing the provisions of Republic Act No. 12066 (CREATE MORE Act) concerning the tax treatment of local sales of goods and/or services by Registered Business Enterprises (RBEs). It clarifies the application of Value-Added Tax (VAT) to such transactions.

Revenue Regulations No. 10-2025

Amends the Consolidated VAT Regulations (RR No. 16-2005) to implement provisions of the National Internal Revenue Code (Tax Code) as amended by Republic Act No. 12066. These amendments focus on Value-Added Tax (VAT) zero-rating and refund procedures, particularly concerning export-oriented enterprises.

Revenue Regulations No. 11

Implements provisions of the National Internal Revenue Code (Tax Code) as amended by Republic Act No. 12066, also known as the CREATE MORE Act.These regulations focus on enhancing tax compliance through the mandatory use of electronic invoicing and electronic sales reporting systems.

Revenue Regulations No. 12

Amends Section 5 of Revenue Regulations No. 3-69 to enhance due process in the service and execution of summary remedies, particularly concerning the Warrant of Distraint and/or Levy (WDL).

Revenue Memorandum Circular No. 14-2025

Provides clarifications and updates to the mandatory requirements for claiming tax credit certificates or cash refunds of excess/unutilized Creditable Withholding Tax (CWT) on income.These updates amend certain provisions of RMC No. 75-2024 to align with Sections 76(C), 204(C), and 229 of the National Internal Revenue Code (NIRC) of 1997, as amended.

Memorandum Circular No. 20-2025

Provides clarifications on the policies, guidelines, and procedures for processing and issuing the Tax Clearance Certificate for Final Settlement of Government Contracts (TCFG)

BIR RULINGS

CASH DISTRIBUTIONS FROM PHILIPPINE DEPOSITARY RECEIPTS (PDRS) TO A NONRESIDENT FOREIGN CORPORATION ARE TAXED AS INTEREST AND NOT AS DIVIDENDS SINCE PDRS DO NOT CONFER STOCK OWNERSHIP. Under Section 28(B)(5)(b) of the Tax Code, dividends paid by a domestic corporation to a nonresident foreign corporation (NRFC) are subject to a 15% income tax, provided the NRFC’s country of residence grants a tax credit for taxes deemed paid in the Philippines equivalent to that 15%. In the case of Mercury Media Holdings Finance I, Ltd. (Mercury Media), an NRFC, the cash distribution it received from Philippine Depositary Receipts (PDRs) issued by ABS-CBN Holdings Corporation over ABS-CBN Corporation shares is not considered a dividend. As a media entity, ABS-CBN cannot be owned by foreigners, and Mercury Media, being a foreign corporation, cannot be a stockholder. Moreover, PDRs do not represent ownership of shares. Accordingly, the cash distribution is not a dividend subject to the reduced 15% rate but is treated as interest income subject to the regular 30% tax rate. (BIR Ruling No. OT-006-2024, January 24, 2024; see also BIR Ruling No. OT-007 and 009)

THE TRANSFER OF MEMBERSHIP SHARES TO A NEW NOMINEE-TRUSTEE IS NOT SUBJECT TO CAPITAL GAINS TAX, DONOR’S TAX, OR DOCUMENTARY STAMP TAX AS IT INVOLVES NO MONETARY CONSIDERATION, NO CHANGE IN BENEFICIAL OWNERSHIP, AND NO INTENT TO DONATE. Landbank of the Philippines (LBP) transferred its Manila Polo Club, Inc. (MPC) membership shares from its former nominee-trustee to a new nominee-trustee pursuant to a Declaration of Trust. This transaction is exempt from capital gains tax because it involves no monetary consideration and no change in beneficial ownership. It is also not subject to donor’s tax, as a valid donation requires intent to freely give, which LBP lacks given the business nature of the transfer. Additionally, documentary stamp tax does not apply since there is no actual transfer or conveyance of beneficial ownership of the shares. (BIR Ruling No. OT-008-2024, February 21, 2024; see also BIR Ruling No. OT-010-2024, February 22, 2024)

A TAXPAYER MUST CONSISTENTLY USE THE SAME INVENTORY VALUATION METHOD UNLESS A CHANGE IS APPROVED BY THE COMMISSIONER, PROVIDED THE NEW METHOD FOLLOWS BEST ACCOUNTING PRACTICES AND CLEARLY REFLECTS INCOME. Under Section 41 of the 1997 NIRC, once a taxpayer adopts a specific inventory valuation method for a taxable year, that method must be used in all subsequent years unless the Commissioner authorizes a change. The chosen method must align with the best accounting practices in the industry and accurately reflect income. In this case, Netfarms, Inc. was permitted to switch from the FIFO method to the Moving Average Method due to its new computerized accounting system, as this change complies with sound accounting standards and clearly presents the company’s income. Inventory items include agricultural and construction supplies, spare parts, fuel, lubricants, office supplies, and others (BIR Ruling No. OT-011-2024, February 22, 2024).

REAL PROPERTIES ACQUIRED BY A REAL ESTATE DEALER ARE CLASSIFIED AS ORDINARY ASSETS AND SUBJECT TO APPLICABLE TAXES, EVEN IF THEY DO NOT MEET THE TYPICAL DEFINITIONS OF ORDINARY ASSETS. Ordinary assets include: (1) stock in trade or similar inventory at year-end; (2) real property held primarily for sale in the ordinary course of business; (3) real property used in business subject to depreciation under Section 34(F) of the Tax Code; and (4) other real property used in the taxpayer’s trade or business. According to Section 3(a)(1) of RR No. 07-03, all real properties acquired by a real estate dealer are considered ordinary assets. Although the properties are not inventory, not primarily held for sale, not depreciable, nor used in business, the taxpayer’s engagement in the real estate business—including activities such as purchasing, owning, leasing, and selling properties—classifies all its real properties as ordinary assets. Consequently, sales of these properties are subject to Creditable Withholding Tax (CWT), Documentary Stamp Tax (DST), and Value-Added Tax (VAT) (BIR Ruling No. OT-012-2024, February 22, 2024).

UNIVERSAL CHARGE FOR MISSIONARY ELECTRIFICATION (UCME) COLLECTED BY DISTRIBUTION UTILITIES IS NOT  AN INCOME AND NOT SUBJECT TO VAT, WHILE PAYMENTS FROM THE UCME FUND TO NEW POWER PROVIDERS ARE ZERO-RATED FOR VAT UNLESS THE PROVIDERS ARE VAT-EXEMPT ELECTRIC COOPERATIVES. The BIR, in BIR Ruling No. 020-02, March 13, 2022, held that Universal Charge for Missionary Electrification (UCME) to be collected by the distribution utilities do not belong to PSALM and since they would not redound to its benefit, the same would not be considered an income. The UCME subsidy fund collected by the distribution utilities and/or electric cooperatives from its consumers, are eventually remitted in trust to PSAM for transfer to NPC and cannot be considered as part of their gross receipts. Thus, the same is not subject to VAT. On the part of the New Power Providers (NPPs)/ Qualified Third Parties (QTPs) who take over the generation function of NPC in the remote and unviable areas in the off-grid under Alternative Electric Service for Isolated Villages scheme, such payment to NPPS/QTPs from UCME fund for merchant electrification is subject to zero-rated VAT pursuant to Section 6 of RA No. 9136, unless such NPPs/QTPs are registered with the Cooperative Development Authority and considered as electric cooperatives enjoying VAT-exempt privilege pursuant to RA No. 9520. (BIR Ruling No. OT-013-2024, February 22, 2024)

VAT ZERO-RATING ON LOCAL PURCHASES UNDER THE CREATE LAW APPLIES ONLY TO GOODS AND SERVICES EXCLUSIVELY USED IN REGISTERED EXPORT PROJECTS; NON-EXPORT ENTERPRISES ARE SUBJECT TO REGULAR VAT. Section 5, Rule 18 of the amended Implementing Rules and Regulations of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Law) states that VAT zero-rating on local purchases applies solely to goods and services directly attributable to and exclusively used in the registered project or activity of registered export enterprises during the transitory period. Although registered export enterprises (REEs) may still avail of VAT zero-rating, it is limited to qualifying goods and services. Since Baliwag State University, despite being registered with PEZA as developer/operator for an Information Technology Park, is a non-export enterprise, payments for its construction project are subject to the regular 12% VAT. (BIR Ruling No. OT-014-2024, February 22, 2024).

BIR DEADLINES FROM MAY 26 TO JUNE 1, 2025. A gentle reminder on the following deadlines, as may be applicable:

COURT OF TAX APPEALS DECISIONS

Receipt of Preliminary Assessment Notice (PAN) by a person who is not an employee renders the assessment void. According to Revenue Regulations No. 12-99, Section 3.1.6, as amended,, tax notices such as the PAN and Formal Letter of Demand (FLD) must be served personally. If personal service is not possible, substituted service is allowed under certain conditions—such as delivering the notice to a clerk, a person in charge at the business, or to a barangay official with witnesses if no one is present at the registered address. Here, the PAN was received by Richard Alarcon, an employee of Prime Pacific Grill. However, he was not employed by the taxpayer (James Fausto Cor.) Since he was neither a person in charge nor a qualified recipient under the rules, the service of the PAN was invalid, rendering the assessment void. (James Fausto Corp., v. CIR, CTA Case No. 10775, January 16, 2025)

The BIR must consider the taxpayer's explanations before issuing a Final Assessment Notice (FAN); if the basic tax amount remains unchanged and the BIR fails to justify rejecting the taxpayer’s response, the assessment is invalid. The BIR is required to rule on the PAN and must take into account the taxpayer’s explanations or arguments before issuing a FAN. Failure to do so renders the assessment invalid. If a comparison of the PAN and FAN shows that the basic tax amount remains the same, and the BIR merely reiterates the findings in the PAN without providing any justification for rejecting the taxpayer’s response, the assessment is considered void. (James Fausto Corp., v. CIR, CTA Case No. 10775, January 16, 2025)

Unverified third-party information (TPI) cannot form the basis of a tax assessment, and if the BIR fails to provide TPI sworn statement or requests, the assessment is void. Unverified TPI cannot constitute a valid factual basis for a tax assessment. If the assessment originates solely from the BIR’s data-matching with such third-party information—without any supporting sworn statement or verification from the source—and the BIR fails to formally offers in evidence the letter requests, the assessment is rendered void. (James Fausto Corp., v. CIR, CTA Case No. 10775, January 16, 2025)

A new Letter of Authority (LOA) is required when an examination is reassigned to a different revenue officer, and if an unauthorized officer conducts the examination, the assessment is void. A new LOA is required in cases where the examination is reassigned or transferred to a different revenue officer (RO). If the original LOA designates RO Cajuday and GS Pre, but the taxpayer’s logbook records show that RO Mandigma and GS Carim conducted the examination, with a visitor’s pass issued to Mandigma or Carim, and GS Carim received the submitted documents and was named in the PAN and FLD/FAN, despite not being authorized under the LOA, then the assessment is void. (Fabtech Kitchens Unlimited, Inc. v. CIR, CTA Case No. 10798, February 12, 2025)

A Memorandum of Assignment (MOA) cannot replace a LOA, and if unauthorized officers conduct the audit, the assessment is invalid. A MOA cannot replace a LOA as it does not grant the authority to conduct an examination or assessment. While the LOA authorized RO Bacorro and GS Arce to inspect the taxpayer’s books of accounts, RO Bacorro was transferred to a different district. Consequently, RO Sengco and GS Qunto carried out the audit, but since they were not named in the LOA—only in the MOA prepared by the Revenue District Officer—their authority is deemed invalid. (Delsan Transport Lines, Inc. v. CIR, CTA Case No. 10798, March 12, 2025)

If the BIR issues a FLD/FAN before the 15-day response period from the receipt of the PAN expires, the assessment is void. The taxpayer has 15 days from the receipt of the PAN to respond before the BIR can issue the FLD/FAN. Failure to observe this 15-day period renders the assessment void. In this case, assuming the PAN was received on December 19, 2016, the taxpayer had until January 3, 2017, to reply. However, since the BIR issued the FLD/FAN on December 29, 2016, before the 15-day period had expired, the FLD/FAN is considered void. (Delsan Transport Lines, Inc. v. CIR, CTA Case No. 10798, March 12, 2025)

Assessment notices can be personally served or mailed, but if delivery is disputed, the BIR must prove receipt; failure to do so, along with returned mail, violates the taxpayer's right to due process. Assessment notices may be served personally to the party. If personal service is not feasible, the assessment notices can be delivered by mail. In cases where the taxpayer denies receiving the assessment, the BIR bears the burden of proving that the notice was actually received. In this instance, the BIR failed to explain the taxpayer's claim of not receiving the PAN and the FLD/FAN, which were sent via registered mail. Furthermore, the FAN/FLD was marked "Return to Sender," and the examiner testified that the PAN was returned because the taxpayer could not be located at the registered address. As a result, the taxpayer's right to due process was violated. (Delsan Transport Lines, Inc. v. CIR, CTA Case No. 10798, March 12, 2025)

REVENUE REGULATIONS

Revenue Regulations No. 004-2025 increases the tax-exempt limits for clothing allowance to ₱7,000 and achievement awards to ₱10,000 under the “De Minimis” benefits, exempting them from income and fringe benefit taxes.

1. Clothing Allowance Increase: The tax-exempt limit for uniform and clothing allowance is raised from a lower amount to ₱7,000 per annum.
2. Achievement Awards: Tax-exempt employee achievement awards (e.g., for length of service or safety) are allowed up to ₱10,000 per year, whether given in cash, gift certificates, or tangible property, provided under a nondiscriminatory written plan.
3. Tax Exemption: These benefits are exempt from both income tax on compensation and fringe benefit tax.

Revenue Regulations No. 005-2025 imposes a 0.5% withholding tax on payments by credit card companies and digital platforms to merchants, amending RR No. 2-98 in accordance with RA No. 12066.

1. Credit Card Transactions: A 1/2% withholding tax is imposed on gross payments made by credit card companies to businesses for goods/services sold to cardholders.
2. Digital Platforms: A 1/2% withholding tax is also applied to gross remittances by electronic marketplace operators and digital financial services providers to merchants.

Revenue Regulations No. 006-2025 implements Sections 135 and 135-A of the Tax Code, as amended by Republic Act No. 12066, focusing on excise tax exemptions and refunds for petroleum products.

1. Excise Tax Exemption: Petroleum products sold to:
   • International carriers (Philippine or foreign) for consumption outside the Philippines.
   • Exempt entities/agencies under international agreements, provided reciprocity exists.
   • Entities legally exempt from direct and indirect taxes.
2. Refund of Excise Tax:
   • Suppliers must file a written refund claim within 2 years of payment.
   • BIR must act on complete claims within 90 days.
   • Denials can be reconsidered within 15 days (limited to legal issues).
   • Taxpayers can appeal to the Court of Tax Appeals within 30 days of denial or inaction.

Revenue Regulations No. 007-2025 reduces corporate income tax to 20% for qualified small corporations and RBEs under EDR, allows VAT input deductibility, and permits carryforward of excess tax payments.

1. Reduced Corporate Income Tax Rates:
   • 20% for domestic corporations with net taxable income not exceeding ₱5M and total assets not exceeding ₱100M (excluding land).
   • 20% for Registered Business Enterprises (RBEs) under the Enhanced Deductions Regime (EDR), effective November 28, 2024.
   • 25% for all other domestic and resident foreign corporations (effective July 1, 2020).
2. Scope of Reduced Rates: The 20% rate for RBEs only applies to income from registered projects; non-registered income is taxed at standard rates.
3. Deductibility of Input VAT: Input VAT on local purchases related to VAT-exempt sales is deductible from gross income under Section 34(C)(8).
4. Transitory Provision: RBEs that overpaid tax prior to these regulations may carry forward excess payments to the next period.

Revenue Regulations No. 008-2025 implements Sections 112(C) and 135-A of the Tax Code (as amended by R.A. No. 12066), specifically addressing procedures for requests for reconsideration on denied VAT and excise tax refund claims.

1. Scope: Covers reconsideration of denied refund claims for:
   • Creditable input VAT (Sections 112 A & B)
   • Excise tax on petroleum products (Section 135-A)
   • Applies to claims filed from April 1, 2025 onward.
2. Reconsideration Limits:
   • Only questions of law may be raised—not factual issues.
   • No new evidence allowed; only previously submitted documents are accepted.
   • Filing must occur within 15 days of receipt of the denial.
3. Procedural Rules:
   • Filed with appropriate BIR offices depending on the signatory of the denial.
   • Strict formatting and documentation requirements must be met.
   • Decision must be issued within 15 days from receipt of request.
   • If granted, refund must be processed within 20 days.
4. Appeals:
   • If denied or not acted upon within the prescribed period, taxpayers may appeal to the Court of Tax Appeals (CTA) within 30 days.

BIR RULINGS

Retirement pay is subject to tax if company has retirement plan registered with the BIR but employee completed only 6 years of service. Under the Tax Code, a retirement benefit plan that is duly registered with the BIR and classified as a reasonable private benefit plan is exempt from withholding tax, provided the employee has rendered at least 10 years of service with the same private employer and is at least 50 years old at the time of retirement. In the absence of a registered retirement plan, collective bargaining agreement, or any applicable employment contract, the Labor Code allows retirement benefits to be exempt from income tax if the employee has served for at least 5 years and is between 60 and 65 years old at retirement. However, if a taxpayer has a BIR-registered retirement plan but the employee has completed only 6 years of service, the retirement benefit will be subject to withholding tax. In such cases, the Tax Code takes precedence, even though the Labor Code allows tax exemption after 5 years of service (BIR Ruling No. OT-001-2024, January 9, 2024).

The transfer of property to a condominium corporation without consideration for the common benefit of unit owners is not subject to income tax, capital gains tax, VAT, or DST—except for DST on the notarial acknowledgment. The transfer of property to a condominium corporation without consideration, and solely for the purpose of project management for the common benefit of unit owners, does not result in taxable income and is not subject to capital gains tax. Additionally, documentary stamp tax (DST) is not applicable to conveyances of real property without consideration and not made in connection with a sale. VAT is also not imposed on property transfers where no payment is made and the beneficial ownership remains with the original party. In the case of Manila Jockey Club Inc., the landowner, and Alveo Land, the developer of Celadon Park Manila under a Joint Development Agreement, a condominium corporation (Celadon Park Manila Condominium Corporation) was established to hold title to the land and common areas of the project. The transfer of the land, facilities, utilities, and common areas to the Condominium Corporation without consideration is not subject to income tax, creditable withholding tax, VAT, or DST—except for the DST due on the notarial acknowledgment of the conveyance (BIR Ruling No. OT-002-2024, January 18, 2024).

Earnings of an employee trust fund are exempt from income and withholding tax if contributions are made for the exclusive benefit of employees and used solely for distributing earnings and principal. Earnings of employee trust fund are exempt from withholding tax if the following conditions are met: (1) Contributions to the trust are made by the employer, the employee, or both; (2) the contributions are intended for the distribution of both earnings and principal to employees; and (3) No part of the fund’s principal or income is used for purposes other than the exclusive benefit of the employees. Accordingly, when the University of the Philippines established a non-profit corporation to serve as a retirement fund for the benefit of its employees—intended to support retirement, resignation, or separation from employment—and where employees contribute to the fund for the purpose of receiving distributions, the earnings from bank deposits, interest, or other income derived from deposit substitutes, trust funds, and similar arrangements are exempt from income tax and withholding tax (BIR Ruling No. OT-003-2024, January 18, 2024).

A transfer of non-traded shares for a consideration, between spouses by an agreement in annulment proceedings, is treated as a sale and is subject to both capital gains tax and DST. A 15% capital gains tax is imposed on the transfer of shares of stock not traded on the stock exchange, whether through sale, barter, exchange, or other forms of disposition involving domestic shares. Accordingly, in a case involving annulment proceedings, where the spouses voluntarily executed a Memorandum of Agreement in which the husband agreed to transfer his shares in the Manila Polo Club to the wife for a consideration, the transaction is treated as a sale. As such, it is subject to both capital gains tax and DST (BIR Ruling No. OT-004-2024, January 18, 2024).

Transfers of real property as disturbance compensation are exempt from CGT and DST only if proven to result from the termination of tenancy due to land reclassification or conversion. Transfers of real property made as disturbance compensation are exempt from capital gains tax (CGT) and documentary stamp tax (DST). Disturbance compensation refers to payments made due to the termination of a tenancy relationship resulting from the reclassification or conversion of agricultural land into non-agricultural uses, such as residential, commercial, industrial, or other urban purposes. However, if land is transferred to assignees purportedly as disturbance compensation but there is no proof that the compensation arose from the extinguishment of a tenancy relationship due to land reclassification or conversion, the transaction will be subject to both CGT and DST (BIR Ruling No. OT-005-2024, January 18, 2024).