Month: June 2025

COURT OF TAX APPEALS DECISIONS

An assessment is void for violating due process when the BIR issues a Formal Letter of Demand/Final Assessment Notice (FLD/FAN) before the lapse of the 15-day period to respond to a Preliminary Assessment Notice (PAN). The BIR must observe due process by granting the taxpayer 15 days from receipt of the PAN to file a response before issuing a FLD/FAN. The Court emphasized that the taxpayer must be afforded the full 15-day period to respond to the PAN, and failure to do so renders the subsequent assessment void. (CIR v. D.M. Wenceslao & Associates, Inc., CTA EB No. 2802, CTA Case No. 9764, February 6, 2025)

A petition filed by the BIR without written authorization from the Office of the Solicitor General is invalid and only the Solicitor General, as a general rule, may represent the government in appellate proceedings.  Under established jurisprudence and the general rule that only the Office of the Solicitor General (OSG) is authorized to represent the government in appellate proceedings—including those involving the Bureau of Internal Revenue (BIR)—a petition filed without the OSG’s authorization is not validly instituted. While Section 220 of the Tax Code allows BIR legal officers to initiate civil and criminal actions, the Supreme Court in CIR v. La Suerte, G.R. No. 144942, July 4, 2002, clarified that this does not extend to appellate proceedings. In this case, the Commissioner of Internal Revenue (CIR) filed a Petition for Review without any written authorization or deputization from the OSG. As none of the recognized exceptions apply, and no proof of OSG authority was presented, the Petition was deemed invalidly filed, resulting in the finality of the assailed Decision and Resolution. (CIR v. One Cypress Agri-Solution, Inc. CTA EB No. 2813, CTA Case No. 9937, March 5, 2025)

Failure to submit proof of actual receipt or required documents —such as return cards, postmaster certifications, or a sworn service report—rendered the FLD/FANs void for violating due process requirements. The issuance of a valid assessment requires that the taxpayer be duly notified through proper service of the FLD/FAN, thereby ensuring the taxpayer’s right to due process is upheld. In this case, while the BIR claimed service of the FLD/FANs by registered mail after a failed personal delivery, it merely submitted registry receipts without accompanying return cards, postmaster certifications, or a sworn report detailing the manner, date, and recipient of service as required by regulations. These deficiencies, combined with the express denial of receipt by the taxpayer, failed to overcome the disputable presumption of receipt by mail. Without competent proof of actual receipt or compliance with procedural requirements, the Court found that the BIR did not validly serve the assessment notices, and thus, any resulting assessment is void and unenforceable for lack of due process. (CIR v. One Cypress Agri-Solution, Inc. CTA EB No. 2813, CTA Case No. 9937, March 5, 2025)

Failure to appeal the warrants of distraint and garnishment within the 30-day reglementary period bars the CTA from acquiring jurisdiction over the case. The Court of Tax Appeals has jurisdiction over “other matters arising under the NIRC,” including the issuance of collection remedies such as warrants of distraint and levy (WDL) and garnishment (WOG); however, jurisdiction is also subject to compliance with procedural rules which require the filing of an appeal within 30 days from receipt of the questioned measure — and since petitioner received the WDL and WOG as early as March or April 2022 but only filed the Petition for Review on October 26, 2022, after making belated letter-requests to the Regional Director that did not toll the period, the Court in Division correctly dismissed the case for being filed out of time and for lack of jurisdiction. (Danile N. Matias v. CIR, CTA EB No. 2824, CTA Case No. 11025, March 4, 2025)

An assessment is void for violating due process when conducted by revenue officers not named in a valid LOA and issued by an unauthorized BIR official. Pursuant to Sections 6(A) and 13 of the NIRC of 1997, as amended, and RMO No. 43-90, only revenue officers specifically named in a duly issued Letter of Authority (LOA) by the CIR, Deputy Commissioner, or Regional Director may validly examine a taxpayer’s books; in this case, although the instant LOA authorized Revenue Officers (RO) San Pedro-Anaban, Budano, and Maniego, the audit and issuance of the PAN and FLD/FAN were instead performed by ROs Ancheta and Monforte, who were not named in any valid LOA but merely referenced in a letter signed by Chief of the LT Regular Audit, who lacked authority to issue LOAs, thus rendering the assessment void for violating the taxpayer's right to due process. (CIR v. Concepcion Industries, Inc., CTA EB No. 2863, CTA Case No. 10305, January 22, 2025)

Lack of due date in the FLD/FAN renders the assessment void. A valid FLD/FAN must include a definite due date to constitute a proper demand for payment and to trigger the accrual of delinquency interest. In this case, the FLD/FAN lacked any indication of a due date, thereby depriving the taxpayer of essential information needed to determine remedies and properly respond to the assessment. This omission constitutes a violation of due process, rendering the assessment null and void and justifying the Court in Division’s ruling enjoining the collection of the assessed amounts. (CIR v. Concepcion Industries, Inc., CTA EB No. 2863, CTA Case No. 10305, January 22, 2025)

The right to collect prescribes when no WDL was served within the 3-year period from the issuance of the assessment. Under Section 203 of the NIRC, as interpreted in CIR v. QL Development, Inc., the BIR must initiate collection of assessed taxes within three years from the date of assessment, unless interrupted by actions specifically enumerated in Section 223(d), such as the valid service of a WDL. In this case, the FLD/FAN was issued on October 15, 2002, but the first valid act of collection—a Warrant of Garnishment dated March 18, 2008—was served 1,981 days later. The November 6, 2003 letter merely reiterated the demand for payment and did not constitute valid collection under the law. As the WDL was served well beyond the 3-year prescriptive period, and no other interrupting act occurred, petitioner’s right to collect had clearly prescribed. (CIR v. Canlubang Waterworks Corporation, CTA EB No. 2917, CTA Case No. 10682, February 27, 2025)

REVENUE ISSUANCES

Revenue Memorandum Circular No. 45, 2025, April 30, 2025

The Bureau of Internal Revenue informs all concerned of the issuance of CDA-DOF-BIR Joint Administrative Order No. 001-2025, which sets the rules for implementing the penalty provision under Section 308 of the Tax Code, as amended by the CREATE Act and implemented by DOF-DTI JAO No. 001-2023; the Order takes effect on March 28, 2025, as confirmed by FIRB Advisory 002-2025, following its publication on March 13, 2025.

Summary of CDA-DOF-BIR Joint Administrative Order No. 001-2025:

Section	Subject	Details
Scope	Covered Parties	·         CDA-registered cooperatives with valid CTEs availing tax incentives ·         CDA officials/employees responsible for reporting
Reportorial Requirements	Reports to be Submitted	By Cooperatives: ·         ATIR (Annex A) — within 30 days from tax return filing deadline ·         ABR (Annex B) — on or before May 15 annually By CDA: ·         Consolidated ATIR (Annex C) ·         Consolidated ABR (Annex D) ·         Master list (Annex E) — by Jan 30 yearly
Penalties (for Cooperatives)	Based on Offense	·         1st Offense: ₱100,000 fine ·         2nd Offense: ₱500,000 fine ·         3rd Offense: Revocation of CTE by BIR
Penalties (for CDA Officials)	Sanctions	·         Fine: 1 to 6 months' salary ·         Suspension: Up to 1 year ·         Other administrative/criminal penalties as applicable
Effect of CTE Revocation	Tax Liability	·         Liable for all taxes, surcharges, interest, and penalties ·         May re-apply for CTE after prohibition period and upon compliance
Installment Payments	For Monetary Penalties	·         Allowed for up to 2 years ·         Up to 3 years for micro-cooperatives with proven financial incapacity
Waiver of Penalties	Exemptions	Granted if due to force majeure/Acts of God, upon submission of: ·         Application letter ·         LGU/Barangay Certificate ·         Supporting documents
Request for Reconsideration	One-time Option	Allowed once during cooperative’s existence for valid grounds ·         Final approval by CDA Board
Grace Period	Request by CDA	·         Up to 30 days for submission of Annexes C, D, and E ·         Must request at least 5 days before deadline
Transitory Provisions	Implementation Phases	For Taxable Year 2023: ·         ATIR/ABR due 60 days from effectivity ·         CDA reports due 90 days from effectivity Penalty Application: ·         2024 – Large & Medium cooperatives ·         2025 – Small cooperatives ·         2026 – Micro-cooperatives
Effectivity	Effective Date	March 28, 2025 (15 days after publication in The Philippine Star on March 13, 2025)

Revenue Memorandum Circular No. 47, 2025, May 7, 2025

The BIR clarifies the VAT obligations of Nonresident Digital Service Providers (NRDSPs). It confirms registration, filing, payment, invoicing, and enforcement rules related to VAT on cross-border digital services consumed in the Philippines.

Topic	Clarification / Requirement
Registration Requirement	All NRDSPs must register with the BIR, whether B2B, B2C, or both
Filing Obligation	All NRDSPs must file VAT returns to report digital transactions
Registration Method	Initially via ORUS; later through the VAT on Digital Services (VDS) Portal
Registration Deadline	On or before June 1, 2025 (120 days from RR 3-2025 effectivity)
Required Documents	Government-issued registration documents from country of origin
Local Representative	Not mandatory; may appoint a resident third-party service provider
Manual Registration	Allowed via BIR RDO No. 39–South Quezon City
Tax Type and Liability	Registered for 12% VAT on gross sales
Noncompliance Penalty	Subject to fines and possible suspension of operations
Proof of Registration	BIR Form No. 2303 (Certificate of Registration) with TIN
B2B Treatment	VAT is withheld and remitted by the PH buyer under reverse charge
B2C Treatment	NRDSP must directly file and pay VAT via simplified regime
Marketplace Transactions	If platform controls key aspects, it is deemed the DSP and liable
Invoicing Requirement	No format required; invoice must contain transaction details and VAT info
VAT Applicability Date	Effective June 2, 2025 (120 days from RR effectivity)
VAT Return Form	Use BIR Form No. 2550-DS for filing/payment; B2B buyers use 1600-VT
Input Tax Credit	Not allowed for NRDSPs
Refund for Erroneous VAT	Not allowed; may carry over excess to next return
Marketplace Liability	Not liable if payment goes directly to NRDSP
Service Fees via Marketplace	Still subject to VAT even if tied to physical goods
Scope of Taxable Digital Services	Includes online platforms, marketplaces, search engines, cloud services, media, etc.
Example – Teleconsultation	Online medical platforms are subject to VAT as digital service
Educational Institutions	No tax exemption certificate needed—DepEd/CHED/TESDA recognition suffices
RBEs and EOEs	Exempt if digital services are directly attributable to registered activities
Business Verification	Buyer may be verified via TIN, questionnaires, or registration documents
Substantiating Input VAT	Buyer may use filed BIR Form 1600-VT
Advance Payments for 2025	VAT still applies to services rendered from June 2, 2025, onward
Cost Sharing Arrangements	Shared costs for digital services consumed in PH are subject to VAT

Revenue Memorandum Circular No. 48, 2025, May 8, 2025

This BIR provides clear guidance on the correct foreign exchange (forex) rates to use in computing excise tax on mineral products, covering both export and domestic sales.

Particulars	Provision	Forex Reference	Basis Date	Other Notes
Export Sales – Provisional Excise Tax	For export permit application	BAP Spot Rate	Date of export permit application	Used for temporary computation
Export Sales – Final Excise Tax	After final assay and invoice	BAP Weighted Average Rate	Date of shipment	Shipment is deemed on bill of lading date
Export Sales – Final Invoice Deadline	Invoice issuance	N/A	Within 90 days from shipment date	Based on actual market value
Domestic Sales – Provisional Excise Tax	For transport permit (when denominated in foreign currency)	BAP Spot Rate	Date of transport permit application	Applies to local sales to processors
Domestic Sales – Final Excise Tax	After final assay and invoice	BAP Weighted Average Rate	Date of final sales invoice	Adjusts based on actual values
When is Product Considered Shipped	Determination of shipment date	N/A	Date of bill of lading	Used for final tax basis
Refund Due to Overpayment	Allowed if final tax is lower than provisional	N/A	Refund claim allowed under Section 229, NIRC	Must be supported by documents
Refund Filing Deadline	For excess excise tax payments	N/A	Within 2 years from date of payment	Subject to BIR refund rules

Revenue Memorandum Circular No. 49, 2025, May 7, 2025

• This BIR announces the release of the Offline eBIRForms Package Version 7.9.5, which may now be downloaded from the BIR website.
• The new version includes updated tax forms and multiple enhancements such as additional Alphanumeric Tax Codes (ATCs), a new treaty code for Brunei, and bug fixes. Certain forms are available for filing only through the Electronic Filing and Payment System (eFPS).

Revenue Memorandum Circular No. 52, 2025, May 30, 2025

This BIR announces the release of BIR Form No. 2550-DS (January 2025 version), designed specifically for nonresident digital service providers (NDSPs) to file their Value-Added Tax (VAT) returns, in line with Republic Act No. 12023 and Revenue Regulations No. 3-2025. The BIR will issue a separate revenue issuance containing detailed guidelines on the filing and payment procedures.

Provision	Details
Form Introduced	BIR Form No. 2550-DS (Jan 2025)
Purpose	For use by Nonresident Digital Service Providers in filing VAT returns
Legal Basis	Republic Act No. 12023 and Revenue Regulations No. 3-2025
Coverage	VAT due from digital services provided by nonresident entities to persons in the Philippines
Implementation Notes	Filing and payment procedures to be covered in a separate revenue issuance

BIR RULINGS

The transfer of the club share from one trustee to another is not subject to CGT, DST, or donor's tax as there is no consideration or change in beneficial ownership, which remains with the appointing entity. Under the Tax Code of 1997 and relevant jurisprudence, the transfer of the Manila Polo Club, Inc. (MPCI) proprietary share from one trustee to another is not subject to capital gains tax (CGT), documentary stamp tax (DST), or donor's tax, as there is no change in beneficial ownership. Applying the Supreme Court’s ruling in Sime Darby Pilipinas, Inc. v. Mendoza, HSBC remains the beneficial owner of the MPCI share while the legal title is merely held by the trustee to comply with MPCI’s requirement that only natural persons may be registered members. The assignment is solely to allow the trustee to enjoy club privileges during his employment with HSBC, with no consideration given and no intent to donate. As clarified under Revenue Regulations No. 13-2004, DST is not due since there is no transfer of beneficial ownership, and similarly, donor’s tax does not apply as there is no intent of liberality or patrimonial increase on the part of the trustee. (BIR Ruling No. OT-35-2024, September 4, 2024; BIR Ruling No. OT-38-2024, September 4, 2024; BIR Ruling No. OT-39-2024, September 11 2024; BIR Ruling No. OT-40-2024, September 11, 2024; BIR Ruling No. OT-41-2024, September 11, 2024)

Payments to a non-resident consultant for services performed entirely abroad—including reports, online workshops, and virtual meetings—are not subject to Philippine income tax, withholding tax, or VAT, as the income is considered foreign-sourced under the Tax Code. Under Sections 23(D), 25(B), and 42(C)(3) of the Tax Code, non-resident alien individuals not engaged in trade or business in the Philippines are taxable only on income derived from sources within the Philippines, with compensation for services being considered foreign-sourced if the services are performed outside the country. Section 108(A) similarly limits VAT to services performed within the Philippines. Applying these provisions, the compensation paid to the non-resident Canadian consultant under the Renewal Contract and Consultancy Services Agreement—covering advisory services, reports, virtual workshops, and communications conducted entirely outside the Philippines—is not subject to Philippine income tax, withholding tax, or VAT, as the income is foreign-sourced and the services were performed abroad. However, any portion of the services rendered physically within the Philippines, such as in-country missions or trainings, would be subject to Philippine income tax, withholding tax, and VAT. (BIR Ruling No. OT-049-2024, October 7, 2024)

 

 

BIR DEADLINES FROM JUNE 23 TO JUNE 30, 2025. A gentle reminder on the following deadlines, as may be applicable:

 

DATE	FILING/SUBMISSION
June 25, 2025	SUBMISSION - Quarterly Summary List of Sales/Purchases/Importations by a VAT Registered Taxpayer - Non-eFPS Filers – Fiscal Quarter ending May 31, 2025   Sworn Statement of Manufacturer’s or Importer’s Volume of Sales of each particular Brand of Alcohol Products, Tobacco Products and Sweetened Beverage Products – Fiscal Quarter ending May 31, 2025   e-FILING/FILING & e-PAYMENT/PAYMENT - BIR Form 2550Q (Quarterly Value-Added Tax Return) - eFPS & Non-eFPS Filers – Fiscal Quarter ending May 31, 2025   BIR Form 2551Q (Quarterly Percentage Tax Return) - Fiscal Quarter ending May 31, 2025
June 29, 2025	e-FILING/FILING & e-PAYMENT/PAYMENT - BIR Form 1702Q (Quarterly Income Tax Return for Corporations, Partnerships and Other Non-Individual Taxpayers) and Summary Alphalist of Withholding Taxes (SAWT) – Fiscal Quarter ending April 30, 2025
June 30, 2025	ONLINE REGISTRATION (thru ORUS) - Computerized Books of Accounts and Other Accounting Records – Fiscal Year ending May 31, 2025
	SUBMISSION - Soft copies of Inventory List and Schedules stored and saved in DVD-R/USB properly labeled together with Notarized Sworn Declaration – Fiscal Year ending May 31, 2025
	Manufacturers’/Assemblers’/Importers’ Sworn Statement of each Particular Brand/Model of Automobile, Alcohol Products, Tobacco Products and Sweetened Beverage Products -1st Semester of 2025
	Soft copies of Inventory List and Schedules stored and saved in DVD-R/USB properly labeled together with Notarized Sworn Declaration – Fiscal Year ending May 31, 2025
	Proof of eFiled BIR Form 1702 – RT/EX/MX with Audited Financial Statements (AFS), 1709 (if applicable), and Other Attachments through Electronic Audited Financial Statements (eAFS) or Manually – Fiscal Year ending February 28, 2025
	e-SUBMISSION - Quarterly Summary List of Sales/Purchases/Importations by a VAT Registered Taxpayers - eFPS Filers – Fiscal Quarter ending May 31, 2025

 

COURT OF TAX APPEALS DECISIONS

The tax assessment is void if the BIR failed to prove proper service of the Notice of Informal Conference and Preliminary Assessment Notice (PAN); procedural requirements in substituted serve must be complied with; unverified sources like newspaper clippings and third party sources cannot be a valid basis for assessment.

Due process in tax assessments requires that taxpayers be informed in writing of the law and facts on which the assessment is based, beginning from Notice of Informal Conference (NIC), followed by a Preliminary Assessment Notice (PAN), and ultimately a Formal Letter of Demand (FLD). Where  there was no evidence that the NIC was received, and the PAN was served without complying with the requirements for valid substituted service, including the absence of corroborating documents such as a barangay official's acknowledgment or a postmaster's certification;  where the revenue officer who allegedly served the PAN did not testify, and the BIR's witness lacked personal knowledge, the FLD and all related assessment notices for deficiency taxes are void for violating the petitioner’s right to due process. (Rex Jayson Miraflor Tuozo v. CIR, CTA Case No. 10638, March 24, 2025; see also Apex 5678 Rockwell, Inc. v. CIR, CTA Case No. 10673, February 19, 2025 and Diamond Drilling Corporation of the Philippines v. CIR, CTA Case No. 10661, January 20, 2025); where the Acknowledgment Receipt for the PAN was incomplete, with the section indicating the reason for substituted service left blank, and the witnesses’ identities and roles not properly specified; where the Written Report also failed to prove that no person was found at the address or that the barangay official who allegedly received the notice was properly identified or authenticated, the assessment notices, and the consequent Warrant of Distraint and Levy (WDL) and Warrant of Garnishment (WOG), were declared void and without legal effect. (Regus Plt Centre, Inc. v. CIR, CTA Case No. 10778, March 11, 2025); where the Formal Letter of Demand (FLD) did not adequately explain how the alleged income was computed and failed to identify or attach the documents that formed the basis of the assessment—such as news clippings and third-party sources; where documents were also not presented during administrative proceedings, denying the respondents the opportunity to examine and refute them, the unverified sources like newspaper articles, without proper corroboration, constitute hearsay and lack probative value. Given the absence of verified factual support and the failure to inform the taxpayers of the detailed basis of the assessment, the Court ruled that the assessment violated the respondents' right to due process and was therefore void. (CIR v. Sps. Emmanuel D. Pacquiao and Jinkee J. Pacquiao, CTA EB No. 2737, CTA Case No. 8639, January 23, 2025)

CMC No. 131-2019, being an interpretative rule that merely implements EO No. 23, s. 2017, is valid without prior publication; District Collectors are not indispensable parties since a final and complete resolution can be made without affecting their individual interests, given they acted under the authority of the BOC Commissioner. 

Under established jurisprudence, interpretative administrative rules do not require publication to be effective, as they merely clarify or implement existing law without adding new obligations; applying this to the case, CMC No. 131-2019, addressed solely to Bureau of Customs personnel, merely reiterated the duty rates under EO No. 23, s. 2017 and did not create new rights or impose additional burdens on the public, making its implementation valid even without prior publication. Moreover, an indispensable party is one whose interest in the controversy is such that a final adjudication cannot be made without affecting that interest or rendering the decision ineffective. Applying this principle, the Court held that the District Collectors who issued the demand letters are not indispensable parties because the petition primarily seeks to nullify CMC No. 131-2019 for lack of prior publication, with the demand letters being merely consequential to that issuance. Even if the demand letters were the main subject, the District Collectors, being under the authority of the BOC Commissioner and lacking a distinct legal interest in the controversy, are not necessary for a complete and binding resolution of the case. (Fabrossi Food Group Inc. et. al, v. Bureau of Customs, CTA EB No. 2742, CTA Case No. 10111, February 28, 2025)

Taxpayer must file a protest within 30 days from receipt of the Final Assessment Notice (FAN); FAN received on December 17, 2018, but protested to only on April 12, 2019—well beyond the prescribed period -  renders the assessment final, executory, and placing it beyond the Court’s jurisdiction.

Section 228 of the NIRC of 1997, as amended, and RR No. 12-99, as amended, require that a taxpayer must file an administrative protest—either a request for reconsideration or reinvestigation—within 30 days from receipt of the FLD/FAN lest the tax assessment becomes final, executory, and demandable. Where the petitioner received the FLD/FAN on December 17, 2018, through an employee authorized to receive official communications, as confirmed by petitioner’s own witness, but petitioner filed its protest only on April 12, 2019—well beyond the 30-day deadline which expired on January 16, 2019, the assessment becomes final and executory. Although petitioner claimed it became aware of the assessment only upon receipt of the Final Notice Before Seizure on April 1, 2019, this was contradicted by its own admission that it received the FLD/FAN on December 27, 2018. Due to the failure to timely protest the FLD/FAN, the assessment became final, and the Court in Division correctly ruled it had no jurisdiction to hear the case. (E-Power Security and Investigation Services Inc., v. CIR, CTA EB No. 2747, CTA Case No. 10143, February 21, 2025)

Assessment is void if the BIR failed to specify the factual and legal bases in the PAN, FAN, and FDDA, and did not address the taxpayer’s arguments on trade discounts versus senior citizen discounts. Under Section 228 of the NIRC of 1997, as amended, and implementing rules under RR No. 12-99, a tax assessment is void if the taxpayer is not properly informed in writing of the legal and factual bases for the assessment, as this violates due process. In this case, the BIR failed to address and consider the respondent’s detailed arguments in both its Reply to the PAN and Protest to the FLD/FAN, particularly concerning the nature of the disallowed sales discount and the inapplicability of RR No. 7-2010. Despite repeated contentions that the discounts were trade-related and not senior citizen discounts, the BIR’s findings in the FAN/FLD and FDDA lacked any reasoned explanation or citation of specific facts and law for rejecting the respondent’s position. This omission constitutes a clear denial of due process, thereby rendering the deficiency VAT assessment void and unenforceable. (CIR v. Ajanta Pharma Philippines, Inc., CTA EB o. 2761, CTA Case No. 10057, January 31, 2025)

Under Section 228 of the NIRC and relevant jurisprudence, the 30-day appeal period is reckoned from the receipt of the PCLs—not the earlier denial letter—as only the PCLs clearly constituted a final, appealable decision.

Under Section 228 of the NIRC and established jurisprudence, a final decision on a disputed assessment must be clearly and unequivocally communicated to the taxpayer to trigger the 30-day period to appeal to the Court of Tax Appeals (CTA). Applying this, the July 30, 2018 letter from the Regional Director merely cited the taxpayer’s failure to submit supporting documents and referenced procedural rules, but did not convey a clear final determination or demand for payment; hence, it could not be deemed a final decision appealable to the CTA. In contrast, the Preliminary Collection Letters (PCLs) received on April 4, 2019, contained a definitive demand for payment and warned of summary remedies in case of non-compliance, satisfying the legal requirement of finality. As such, the 30-day appeal period began from the receipt of the PCLs, and since the petition was filed on April 11, 2019, it was timely. Accordingly, the Court in Division properly exercised jurisdiction over the case. (CIR v. Joselito B. Yap, CTA EB No. 2792, CTA Case No. 10063, February 11, 2025)

The CTA may consider issues like improper service of LOAs even if raised for the first time on appeal, as it decides cases de novo and addresses matters affecting assessment validity.

The CTA is a court of record that decides cases de novo, allowing it to consider all evidence and issues necessary for a just resolution, even if not previously raised at the administrative level. Applying this, the Court in Division correctly ruled on the issue of improper service of Letters of Authority and assessment notices despite it being raised for the first time on appeal, since such issue pertains to the intrinsic validity of the assessments. Moreover, the CTA is not confined to the issues initially stipulated by the parties and may address related matters to ensure an orderly and complete disposition of the case. (CIR v. Joselito B. Yap, CTA EB No. 2792, CTA Case No. 10063, February 11, 2025)

Taxpayer is estopped from challenging the service of LOAs and assessment notices, having acknowledged receipt and failed to timely object at the administrative level.

Under the doctrine of estoppel, a party is precluded from taking a position inconsistent with one previously assumed, especially when the other party has relied on such representation in good faith. Applying this principle, the taxpayer is estopped from questioning the validity of the service of the LOAs and assessment notices for taxable years 2011 to 2013, as he repeatedly admitted in his Legal Protest Notices that he received the Preliminary Assessment Notices (PANs), Final Assessment Notices (FANs), and Formal Letters of Demand (FLDs). These notices were received by individuals who acted as his authorized representatives, and respondent never objected to their authority or the propriety of service during the administrative proceedings. Moreover, by submitting documents in compliance with the LOAs without objecting, respondent confirmed their receipt and validity. Failure to timely object to alleged defects in service at the administrative level bars a taxpayer from raising such issues for the first time on appeal, as doing so would undermine orderly tax administration and judicial review. (CIR v. Joselito B. Yap, CTA EB No. 2792, CTA Case No. 10063, February 11, 2025)

Electric cooperatives registered with the National Electrification Administration (NEA) remain exempt from income tax despite lack of Cooperative Development Authority (CDA) registration.

The legal basis for income tax exemption of electric cooperatives is Section 39(a) of P.D. No. 269, which grants permanent exemption to those registered with the NEA. While E.O. No. 93 later withdrew these exemptions, FIRB Resolution No. 24-87 partially restored them but maintained the taxability of income from electric operations. However, R.A. No. 6938, as amended, repealed laws inconsistent with its provisions but preserved P.D. No. 269. In Samar-I Electric Cooperative v. CIR, the Supreme Court ruled that CDA registration is optional for NEA-registered cooperatives and that E.O. No. 93 was effectively repealed by R.A. No. 6938. Applying this precedent, the taxpayer, though not registered with the CDA, retains its income tax exemption under P.D. No. 269, and thus cannot be held liable for income tax. (CIR v. MORESCO-II, CTA EB No. 2796, CTA Case No. 10145, February 28, 2025)       

 

BIR RULINGS

Income from PAGCOR’s purchase of slot machines from a non-resident supplier used in gaming operations is subject only to 5% final withholding tax in lieu of all other taxes, including the 25% income tax and VAT.

Under Section 13 of Presidential Decree No. 1869, as amended, PAGCOR and its contractees—whether domestic or foreign, resident or non-resident—are subject only to a 5% franchise tax on gross revenue from gaming operations, in lieu of all other national and local taxes, including corporate income tax and VAT. This exemption is affirmed by jurisprudence, including the Supreme Court rulings which emphasized that tax incentives extend to PAGCOR’s suppliers and licensees without distinction. In application, the BIR ruled that PAGCOR’s purchase of slot machines from a non-resident supplier falls under this exemption, as the machines are used in PAGCOR’s gaming operations. Accordingly, the non-resident supplier is subject only to a 5% final withholding tax (as franchise tax), and not to the 25% income tax under RA No. 11534 or VAT. However, income from non-gaming operations remains taxable under regular rules. (BIR Ruling No. VAT-027-2024, May 13, 2024)

CWT and DST on the installment sale of real property must be computed based on the higher of the zonal value or market value at the time the Agreement to Purchase and Sale was executed.

Pursuant to Section 3(J) of Revenue Regulations No. 17-2003, for sales of real property classified as ordinary assets on an installment basis—wherein payments in the year of sale do not exceed 25% of the agreed consideration—the creditable withholding tax (CWT) is computed on each installment, based on the ratio of actual collection to the total consideration, applied to the gross selling price or fair market value at the time of the execution of the contract to sell, whichever is higher; while the documentary stamp tax (DST) accrues upon execution of the deed of absolute sale, it is also based on the gross selling price or fair market value at the time of the contract to sell. Applying this to the transaction between Fine Properties, Inc. (FPI) and Prime Asset Ventures, Inc. (PAVI), the BIR confirmed that since the agreement to purchase and sell was executed on June 24, 2021 and clearly structured as an installment sale (with less than 25% paid initially and the balance due in 2023), the CWT and DST should be computed based on the higher of the zonal or market value of the subject property at that date. The subsequent execution of the deed of absolute sale upon full payment merely consummates the sale, and the legal and tax consequences are deemed to have retroacted to the date of perfection of the contract. (BIR Ruling No. OT-028-2024, May 29, 2024)

The assignment of rights under a Contract to Sell, with no gain realized and no transfer of ownership, is not subject to CGT, EWT, VAT, or DST—except DST on notarial acknowledgment, with DST due upon execution of the Deed of Absolute Sale.

Pursuant to Section 24(D)(1) of the Tax Code and Revenue Regulations No. 02-98, as amended, capital gains tax (CGT) or expanded withholding tax (EWT) applies only when there is a realized gain from the sale, exchange, or assignment of real property interests. In this case, since the original buyer assigned its rights under a Contract to Sell before completing full payment and the amount paid by the assignee equaled the assignor's payment to the original sellers, no gain was realized; hence, the assignment is not subject to CGT or EWT. Further, the assignment of rights is not considered a sale of real property and thus not subject to value-added tax (VAT). Likewise, under Section 196 of the Tax Code, documentary stamp tax (DST) does not apply to the assignment of rights as it is not a sale or conveyance of real property itself. However, the notarial acknowledgment of the Deed of Assignment is subject to a fixed DST of ₱30.00, and the eventual Deed of Absolute Sale executed by the assignee will trigger DST based on the original Contract to Sell’s terms. (BIR Ruling No. OT-029-2024, May 29, 2024)

Under RA No. 8047 and Section 109(1)(R) of the Tax Code, VAT exemption applies to sales and publication of qualified educational materials, but not to non-exempt services or purchases which remain subject to 12% VAT.

Under Section 12 of RA No. 8047 and Section 109(1)(R) of the Tax Code, sales, printing, or publication of books, newspapers, and other educational reading materials that are not principally devoted to paid advertisements and are compliant with National Book Development Board (NBDB) requirements are exempt from VAT. Applying these provisions, Inteligente Publishing, Inc., as a registered book publisher and seller under the NBDB, may claim VAT exemption for its core activities involving the sale and publication of qualified educational materials. However, activities not covered by the exemption—such as bookbinding, engraving, printing of brochures or trade books—are subject to 12% VAT, requiring the Company to register as a VAT-registered entity and issue separate VAT invoices for those transactions. Moreover, while its core sales may be VAT-exempt, its purchases of goods or services from VAT-registered suppliers remain subject to VAT since tax exemption does not prohibit the passing on of VAT to buyers under Section 107 of the Tax Code. (BIR Ruling No. VAT-030-2024, June 5, 2024)

Exemption from donor’s tax under RA 6657 is denied as the law covers only capital gains tax and the land remains agriculturally classified, lacking proof of reclassification.

Under Section 66 of Republic Act No. 6657, also known as the Comprehensive Agrarian Reform Law of 1988, land transfers made under the Act—such as those involving disturbance compensation arising from the lawful termination of tenancy due to land reclassification or conversion to non-agricultural use—are exempt from capital gains tax, registration fees, and related taxes and fees. However, the law does not expressly provide exemption from donor’s tax, and tax exemptions, being in derogation of sovereign power, must be strictly construed against the taxpayer. In the present case, while the transfer of a portion of land from BBB to the tenant was executed as disturbance compensation, there is no showing that the land has been officially reclassified or converted by competent authorities for residential, commercial, or industrial use as required under Section 36(1) of RA No. 3844, which remains applicable. All supporting documents submitted show that the land remains classified as agricultural in actual use. Therefore, in the absence of proof of reclassification or conversion and without a clear legal basis for donor’s tax exemption, the request cannot be granted, and the transaction remains subject to donor’s tax.(BIR Ruling No. OT-031-2024, June 5, 2024)

Insurance policies issued by GSIS to IPAs and their registered business enterprises are subject to DST (borne by the non-exempt party) and 12% VAT, unless the enterprise is under the 5% SCIT regime and the insurance—such as for assets or employees directly involved in the registered activity—is proven to be directly and exclusively used therein and certified by the concerned IPA for VAT zero-rating.

Insurance policies issued by the GSIS to Investment Promotion Agencies (IPAs) and their registered business enterprises (RBEs) are generally subject to both documentary stamp tax (DST) and value-added tax (VAT), unless otherwise expressly exempted by law. While the GSIS is exempt from DST under Section 39 of RA No. 8291, liability shifts to the other contracting party pursuant to Section 173 of the NIRC. IPAs are not exempt from DST or VAT, as the 5% special corporate income tax (SCIT) in lieu of all national and local taxes applies only to registered business enterprises, not to the IPAs themselves. For RBEs, those under the ITH regime are liable for DST, while those under the 5% SCIT regime are not, since the SCIT covers DST. As to VAT, registered export enterprises (REEs) may avail of the VAT zero-rating on local purchases (including insurance premiums) only if such purchases are directly and exclusively used in their registered project or activity, supported by a VAT zero-rating certificate issued by the concerned IPA, in accordance with RR No. 3-2023. Insurance related to assets or employees integral to the project may qualify for zero-rating, provided proper attribution is possible. Otherwise, or in the case of Domestic Market Enterprise, (DME) the purchase is subject to 12% VAT, which becomes part of the cost if the DME is under SCIT. Supporting documents such as the insurance policy, tax incentive registration status (ITH or SCIT), and the VAT zero-rating certificate must be submitted to avail of these tax benefits, subject to possible post-audit by the BIR. (BIR Ruling No. OT-032-2024, June 5, 2024)

The transfer of legal title to a new nominee-trustee of shares is not subject to CGT, donor’s tax, or DST, as there is no consideration or change in beneficial ownership.

Capital gains tax (CGT) and documentary stamp tax (DST) apply only where there is a sale, exchange, or transfer involving consideration or a change in beneficial ownership. DST applies only when there is an actual or constructive transfer of beneficial ownership. In this case, Nestlé Philippines, Inc. (NPI), the true and beneficial owner of a Manila Polo Club (MPC) membership share, merely transferred legal title from its former nominee BBB to new nominee CCC due to the end of BBB’s employment. The transfer was made under a Declaration of Trust confirming that CCC holds the share solely for NPI’s benefit, with no consideration and no transfer of beneficial ownership. As such, the transaction is not subject to CGT, donor’s tax (as there is no intent to donate), or DST. Only the notarization of the trust document is subject to DST under Section 185 of the Tax Code. (BIR Ruling No. OT-034-2024, September 4, 2024)

BIR DEADLINES FROM JUNE 9 TO MAY 18 2025. 

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

 

BIR DEADLINES FROM JUNE 16 TO JUNE 20, 2025. 

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

 

DATE	FILING/SUBMISSION
June 16, 2025	Estate Tax Amnesty
	Consolidated Return of All Transactions based on the Reconciled Data of Stockbrokers - June 1-15, 2025
June 20, 2025	e-FILING/FILING & e-PAYMENT/PAYMENT - BIR Form 1600 WP (Remittance Return of Percentage Tax on Winnings and Prizes Withheld by Race Track Operators) – eFPS & Non-eFPS Filers – Month of May 2025

 

 

COURT OF TAX APPEALS (CTA) DECISIONS

Different due dates renders the assessment void for lack of a clear, unequivocal payment deadline. A valid Final Assessment Notice/Formal Letter of Demand (FAN/FLD) must contain two essential elements: a definite demand for a specific amount of tax liability and a clear, unequivocal due date for payment. In the present case, the FAN/FLD is flawed because it contains two inconsistent due dates—one indicating payment is due within 15 days from receipt of the Preliminary Assessment Notice (PAN) or February 12, 2020, and another stating a later due date (the due date for the payment on the assessment notices was February 29, 2020) thereby creating confusion and failing to provide a single, clear deadline for payment. Thus, the assessment is void (Kingston Aluminum and Stainless Sales Corp., v. CIR, CTA Case No. 10326, February 24, 2025)

Failure of the Bureau of Internal Revenue (BIR) to prove willful falsity prevents application of the 10-year prescriptive period, rendering the assessment barred by prescription. Internal revenue taxes must be assessed within three years from the filing or due date of the tax return or the ten-years in case of false or fraudulent returns filed with intent to evade tax or failure to file a return. The Supreme Court, in McDonald’s Philippines Realty Corp. v. CIR, clarified that to apply the extended ten-year period, the BIR must prove with clear and convincing evidence that the taxpayer deliberately or willfully filed a false return containing material misstatements or omissions. Additionally, the taxpayer must be properly notified that the extended period is invoked, with the factual and legal basis clearly stated. In this case, although the BIR alleged false returns based on discrepancies in foreign exchange valuation and imposed a surcharge, the BIR failed to present clear and convincing evidence that the taxpayer acted with deliberate or willful intent to evade tax. Consequently, the period to assess has prescribed, rendering the deficiency Capital Gains Tax assessment invalid. (Holcim Philippines Manufacturing Corporation v. CIR, CTA Case No. 10414, February 14, 2025)

Value-Added Tax (VAT) cannot be imposed on presumed unaccounted expenses; it must be based on actual sales or service income. VAT is imposed on gross selling price or gross receipts from sales or services—not from disbursements or expenses. In this case, the BIR treated the discrepancy between the taxpayer’s AFS/ITR and 1604CF/1601-E as undeclared income and subjected it to VAT based solely on presumed unaccounted expenses. However, the Court found this assessment legally baseless, as VAT liability must be based on actual sales or service income, not inferred from expenditures. (Ebar Abstracting Company, Inc. v. CIR, CTA Case No. 10681, January 15, 2025)

In VAT zero-rating, Certificate or Articles of Foreign Incorporation and a SEC Certificate of Non-Registration of the NRFC must be provided; separate personality of the taxpayer and NRFC parties must be respected even if they are related parties; proof that services were performed in the Philippines is required. VAT zero-rating on the sale or supply of services applies only if certain requirements are met: (1) the recipient is a non-resident foreign corporation (NRFC) not engaged in business in the Philippines; (2) the services are not related to processing, manufacturing, or repacking; (3) the services are performed in the Philippines by a VAT-registered person; and (4) payment is made in acceptable foreign currency. To establish NRFC status, the taxpayer must present a Certificate or Articles of Foreign Incorporation and a SEC Certificate of Non-Registration. In this case, petitioner adequately proved that Innodata, Inc. is a foreign entity not doing business in the Philippines by submitting the required documents, and the Court emphasized that the separate corporate personality of Innodata, Inc. must be respected despite its relationship with petitioner. However, petitioner failed to meet the third requirement, as there was no clear indication in the service agreement or supporting evidence that the services were actually performed in the Philippines. Without proof of the place of service, one of the essential elements for VAT zero-rating remains unproven, rendering the claim for zero-rated VAT treatment incomplete. (Ebar Abstracting Company, Inc. v. CIR, CTA Case No. 10681, January 15, 2025)

Disallowing excess input ax carried forward to succeeding period without written legal and factual basis violates Section 228's due process, rendering the assessment void. A tax assessment must inform the taxpayer in writing of the legal and factual bases on which it is made; failure to do so renders the assessment void. In this case, respondent disallowed input tax carried forward to succeeding period without providing any explanation or legal justification for the disallowance. This lack of disclosure violates the due process requirement under Section 228, and as such, the disallowed input tax must be cancelled for being invalid. (Ebar Abstracting Company, Inc. v. CIR, CTA Case No. 10681, January 15, 2025)

A BIR letter not clearly stating it as a final decision on disputed assessment is not an appealable Final Decision on Disputed Assessment appealable to the CTA. The CTA has exclusive appellate jurisdiction over decisions of the Commissioner of Internal Revenue (CIR) involving disputed assessments, which must be based on an FDDA. An FDDA must clearly state the facts, applicable laws or jurisprudence, and must explicitly indicate that it constitutes the final decision of the Commissioner or his duly authorized representative. In this case, the taxpayer erroneously treated the letter issued by the Regional Director as an FDDA, due to the letter's failure to clearly and categorically state that it was the final decision on the disputed assessment. As such, the letter cannot be considered an appealable FDDA, and the CTA correctly dismissed the petition for lack of jurisdiction. (Bukidon II Electric Cooperative, Inc. v. CIR, CTA Case No. 10822, March 25, 2025)

Issuance of the FLD/FAN before the expiration of the 15-day period to respond to the PAN violates due process, rendering the tax assessment void. Taxpayers who received a PAN are given fifteen (15) days from receipt thereof to respond before FLD/FAN may be issued. This procedural safeguard ensures compliance with the taxpayer's right to due process. In this case, the taxpayer received the PAN on January 4, 2016 and had until January 19, 2016 to respond. However, the BIR issued the FLD/FAN prematurely on January 12, 2016—before the expiration of the 15-day period—thereby depriving the petitioner of the opportunity to be heard. The BIR’s failure to observe this mandatory period constitutes a violation of due process, rendering the subject tax assessments null and void and without legal effect. (Vibal Group, Inc. v. CIR, CTA Case No. 10291, January 20, 2025)

Delayed service of the assessment after its payment deadline violates due process, rendering the assessment invalid. Tax authorities must inform the taxpayer of the legal and factual bases of the assessment, including a clear amount due and a date to comply. In this case, although the FLD/FAN was dated October 29, 2018 and required payment by October 31, 2018, it was only served on DMCI Masbate Power on November 5, 2018—after the deadline had lapsed. This deprived the taxpayer of a fair opportunity to pay within the prescribed period, thereby violating its right to due process. (DMCI Masbate Power Corporation v. CIR, CTA Case No. 10424, March 13, 2025)

 

REVENUE REGULATIONS

 

Revenue Regulations No. 012-2025, November 29, 2024

 

Provision	Details
Warrant of Distraint/Levy (WDL)	Must be served personally to the taxpayer or their authorized representative
If Taxpayer is Absent/Refuses	WDL may be constructively served in presence of 2 credible witnesses (preferably barangay officials); Leave copy at premises
Additional Communication	Send a copy of the WDL via registered mail and/or email
Resurfaced Taxpayers	Applies to those previously tagged as "Cannot Be Located" (CBL) but have appeared at any BIR office had whereabouts legally determined
	Must be simultaneously served with other related documents directly to the taxpayer or authorized representative

 

Revenue Regulations No. 014- 2025, April 2, 2025

 

Category	Details
Issued	April 2, 2025
Who’s Affected	Non-Resident Digital Service Providers
Registration Deadline	June 1, 2025 via ORUS or VDS Portal
VAT Liability Starts	June 2, 2025, regardless of registration status
BIR Authority	Commissioner may extend the registration deadline as needed

 

 

Revenue Regulations No. 015-2025, April 29, 2025

 

Category	Details
Issuance Date	April 29, 2025
Purpose	Updates rules for tax-qualified private retirement plans (RA 4917, Tax Code)
Covered Plans	Pension, Gratuity, Provident, Profit-sharing, Stock Bonus
Tax Benefits	Retirement benefits & trust income: Tax-exempt Employer contributions: Tax-deductible
Employee Eligibility	Minimum 50 years old At least 10 years of service Must not have availed similar tax benefits before
Application	Submit documents (trust agreements, actuarial report, etc.) within 30 days of effectivity

 

BIR RULINGS

Unutilized input VAT from zero-rated sales cannot be deducted as an expense. Under Revenue Memorandum Circular No. 57-2013, unutilized input VAT attributable to zero-rated sales may only be recovered through a refund or tax credit claim. The Tax Code provides no legal basis for treating such amounts as deductible expenses. Furthermore, per the Supreme Court ruling in United Coconut Planters Bank v. Spouses Uy, only decisions of the Supreme Court establish binding precedent, rendering rulings of lower courts like the Court of Tax Appeals merely persuasive. Applying these principles, the BIR denied Norteam Shipping Service, Inc.’s request to record its denied VAT refund claim as a miscellaneous expense for income tax purposes. Despite NSSI citing the CTA decision in Maersk Global Service Center, the absence of a supporting Supreme Court ruling and the clear guidance of RMC No. 57-2013 preclude the deductibility of unutilized input VAT as an income tax expense. (BIR Ruling No. OT-016-2024, February 28, 2024)

Sales of herb-roasted chicken for take-out are VAT-exempt as simple-processed agricultural products. The sale of agricultural and poultry products that have undergone simple processes such as roasting remains VAT-exempt, including those prepared for market using methods like roasting or broiling. Applying this to Agros Trofi Corporation, which sells herb-roasted chicken solely on a take-out basis without dine-in facilities, the BIR confirmed that such sales fall within the scope of VAT-exempt transactions, consistent with the legislative intent to exclude common food items like roasted chicken from VAT, as reflected in the Bicameral Conference Committee records. (BIR Ruling No. VAT-017-2024, February 28, 2024)

Proceeds from electronic gift certificates are not taxable income or VATable sales, but related service fees and unspent balances are subject to VAT and taxes under the NIRC and RA 10962. Amounts received as proceeds from electronic gift certificates (eGCs) represent value held in trust by the issuer on behalf of the beneficiary and thus do not constitute taxable income or VATable sales. Thus, the face value proceeds from eGCs issued to clients are not subject to income tax, expanded withholding tax, or VAT, making the issuance of acknowledgment receipts proper. However, service fees for facilitation, administration, or marketing are subject to 12% VAT and EWT, requiring issuance of official receipts, while revenue from unspent eGCs and commissions paid to merchants are taxable accordingly. (BIR Ruling No. OT-018-2024, March 8, 2024)

Importation of a MARINA-approved passenger vessel for domestic transport qualifies for VAT exemption, subject to regulatory compliance. The Tax Code exempts from VAT the sale, importation, or lease of passenger vessels for domestic transport operations, subject to compliance with MARINA’s importation restrictions and vessel retirement program. Applying this, Montenegro Shipping Lines, Inc.’s importation of the 2023-built RORO passenger vessel MV "Binibining Coron," duly authorized by MARINA and necessary for its operations, qualifies for VAT exemption, provided it adheres to MARINA’s conditions. (BIR Ruling No. VAT-019-2024, March 14, 2024)

Income payments to persons enjoying income tax exemptions under the Omnibus Investment Code of 1987 is exempted from withholding tax. Thus, a domestic corporation registered with the Board of Investment as a Domestic Market Enterprise is exempt from CWT on revenues generated exclusively from its registered production of bean sprouts and alfalfa sprouts This exemption is granted under the terms of Executive Order No. 226 and subject to compliance with the specific terms and conditions set forth in the taxpayer BOI Registration Agreement. (BIR Ruling No. 020-2024, March 14, 2024)

Property dividends are subject to VAT despite non-VAT registration status; exemption claim is denied due to lack of proof and documentary compliance. Property dividends constituting stocks in trade or properties primarily held for sale or lease, when distributed by a corporation, are subject to VAT based on their fair market value or zonal valuation, whichever is higher. In the case of M.C. Holdings Corporation, despite its claim of being a non-VAT registered entity, the denial of its request for exemption is based on the principle that VAT liability is determined by the Tax Code regardless of registration status. The corporation’s failure to meet the burden of proof to establish exemption, along with noncompliance with documentary requirements under Revenue Memorandum Order No. 9-2014, justified the denial. Thus, M.C. Holdings Corporation remains subject to VAT on the distribution of property dividends as ruled, and the claim for exemption was properly denied. (BIR Ruling No. 023-2024, April 11, 2024)

Termination fee as compensation for breach of contract and services rendered related to its business operations is subject to both VAT and income tax. A VAT is imposed on any person engaged in the course of trade or business on the sale, barter, exchange, lease of goods or properties, and the rendering of services in the Philippines. In this case, the termination fee received by Air Liquide Philippines, Inc. from Pilipinas Shell Petroleum Corporation under the Termination Agreement is subject to VAT because it constitutes compensation not only for breach of contract but also for services rendered and related costs incurred in the construction and installation of specialized plants, which are directly connected to Air Liquide’s business operations. Additionally, the termination fee is subject to income tax under Section 27(A) of the Tax Code as it represents income “from whatever source derived,” including compensation for loss of anticipated profits. Thus, both VAT and income tax apply to the termination fee received by Air Liquide. (BIR Ruling No. OT-022-2024, April 11, 2024)

Amounts received by Easytrip for loads/reloads are not income and exempt from EWT, but its service fees and income from holding these funds are taxable and subject to EWT and VAT. Withholding tax is imposed on income payments where there is a flow of wealth to the recipient, and taxes withheld serve as advance payments of the recipient’s income tax. In the case of Easytrip Services Corporation, amounts received from banks, credit card companies, authorized merchants, and corporate clients for loads and reloads are considered cash advances or liabilities held in trust for remittance to toll operators and therefore do not constitute income, making them exempt from EWT. However, the service fees charged by Easytrip for its electronic toll collection services, as well as any income earned from holding the cash advances or refunds on unused loads, do constitute income and are subject to income tax, creditable withholding tax, and VAT. (BIR Ruling No. OT-024-2024, April 25, 2024)

Maxicare’s sale of prepaid HMO services is subject to 12% VAT, as no law exempts such transactions from VAT. The Tax Code imposes VAT on gross receipts from the sale of services rendered “in the course of trade or business,” including health maintenance organization (HMO) services, unless specifically exempted by law. Revenue Memorandum Circular No. 56-2002 clarifies that HMO providers like Maxicare are subject to VAT because they provide prepaid membership services rather than direct medical services. (BIR Ruling No. VAT-025-2024, April 29, 2024)