Month: July 2025

COURT OF TAX APPEALS DECISIONS

ONLY THE DEPARTMENT OF JUSTICE’S (DOJ) RECEIPT OF THE DECISION, NOT THAT OF DEPUTIZED BIR COUNSEL, STARTS THE APPEAL PERIOD. Criminal cases must be prosecuted under the direction and control of the public prosecutor. Deputized legal officers, such as BIR lawyers, merely assist and remain under the supervision of the DOJ, which retains principal prosecutorial authority. Service of a decision on deputized counsel does not bind the principal counsel; instead, only receipt by the DOJ triggers the reglementary period for appeal. In this case, the DOJ received the Division’s Resolution on December 29, 2023, giving plaintiff-appellant until January 15, 2024 to file a Petition for Review. However, the Motion for Extension of Time was filed only on January 24, 2024 via registered mail, beyond the allowable 15-day period. Since the motion was granted only on condition that it was timely filed, the Court deemed it denied. Consequently, no valid Petition for Review or motion to extend was filed within the reglementary period, rendering the assailed Resolution final and executory. The Court En Banc thus dismissed the Petition for lack of jurisdiction. (People of the Philippines v. SKI Construction Group, Inc. et. al., CTA EB Crim No. 139, CTA Crim Case No. A-17, February 17, 2025)

A CLAIM FOR EXEMPTION FROM REAL PROPERTY TAX (RPT) INVOLVES A QUESTION OF FACT CONCERNING THE CORRECTNESS OF THE ASSESSMENT, WHICH IS WITHIN THE JURISDICTION OF THE LOCAL BOARD OF ASSESSMENT APPEALS (LBAA)  AND CENTRAL BOARD OF ASSESSMENT APPEALS (CBAA); THUS, EXEMPTION CLAIM SHOULD HAVE BEEN RESOLVED AT THE ADMINISTRATIVE LEVEL, NOT DISMISSED AS A PURE QUESTION OF LAW. A taxpayer claiming exemption from RPT must submit sufficient documentary evidence to the assessor, thereby placing the burden on the taxpayer to prove factual grounds for exemption. Such claims pertain to the reasonableness or correctness of the assessment and are questions of fact, distinct from questions of law involving authority to assess or collect, which fall under the jurisdiction of the LBAA and CBBA. In this case, Qualfon Philippines, Inc. (QPI) challenged the assessment of its desktop computers, claiming they are exempt from RPT. The CBAA erroneously ruled the issue as a pure question of law, despite its own exercise of jurisdiction when it rendered a decision upholding RPT liability and ordering reassessment. In line with the legal framework and jurisprudence, QPI’s claim involved factual determination of its entitlement to exemption and should have been properly evaluated by the LBAA and CBAA. (Qualfon Philippines, Inc. v. The City of Dumaguete, et al., CTA EB No. 2741, July 2025)

A PROTEST MUST BE IN WRITING AND FILED WITHIN 30 DAYS FROM PAYMENT OF THE ASSESSED REAL PROPERTY TAX (RPT); THE TAXPAYER’S AUGUST 8, 2017 LETTER OF MANIFESTATION WAS NOT A VALID WRITTEN PROTEST, AND ITS FAILURE TO TIMELY APPEAL RENDERED THE ASSESSMENT FINAL AND UNAPPEALABLE. Section 252(a) of the 1991 Local Government Code requires that a protest to an RPT assessment be made in writing within 30 days from payment, and any denial must be appealed to the LBAA within 60 days from receipt. Qualfon Philippines, Inc. (QPI) contended that its August 8, 2017 Letter of Manifestation constituted its formal protest following the City Treasurer’s denial dated July 25, 2017. However, the Court ruled that the letter was merely a manifestation, with no accompanying formal protest submitted to the records. The claim that the Treasurer's early denial deprived QPI of the 30-day protest period was also rejected, as the law imposes the 30-day period on the taxpayer to act, not on the Treasurer to wait. The Court emphasized that statutory periods must be strictly followed, and failure to do so is fatal. As QPI failed to file a timely appeal by the September 25, 2017 deadline, the assessment became final and executory. (Qualfon Philippines, Inc. v. The City of Dumaguete, et al., CTA EB No. 2741, July 2025)

WHERE THERE IS NO NOTICE OF ASSESSMENT (NOA) ISSUED, THE PROPER REMEDY FOR THE TAXPAYER IS UNDER SECTION 196 OF THE LOCAL GOVERNMENT CODE (LGC) ON REFUND OF ERRONEOUSLY PAID OR ILLEGALLY COLLECTED TAXES, NOT UNDER SECTION 195, WHICH PRESUPPOSE A FORMAL DEFICIENCY TAX ASSESSMENT. Under Section 196 of the LGC, a taxpayer may file a claim for refund of taxes that were erroneously or illegally collected, without the need for a prior assessment or protest. This provision applies when there is no finding of deficiency and, consequently, no Notice of Assessment (NOA) issued by the local treasurer. In this case, the Court held that the billing statements issued to respondent after the renewal of its business permit were not formal NOAs as contemplated under Section 195 of the LGC. Since there was no NOA finding a deficiency, the respondent was not required to file a protest within 60 days under Section 195. As such, the respondent properly availed of the remedy under Section 196 by filing a claim for refund within the two-year prescriptive period. Therefore, Section 7B.14(b) and (c) of the Revised Makati Revenue Code, which mirror Section 195, do not apply. (City of Makati and the Office of the City Treasurer of Makati through Jesusa E. Cuneta v. Casas+Architects, CTA EB No. 2771 [CTA AC No. 259], April 29, 2025).

LOCAL GOVERNMENTS ARE PROHIBITED FROM IMPOSING BUSINESS TAXES ON PROFESSIONALS SOLELY ENGAGED IN THE PRACTICE OF THEIR PROFESSION; SINCE CASAS+ARCHITECTS OPERATES EXCLUSIVELY AS A PROFESSIONAL PARTNERSHIP OF ARCHITECTS, IT IS EXEMPT FROM LOCAL BUSINESS TAX (LBT) AND ENTITLED TO A REFUND OF THE AMOUNTS PAID. Section 133(j) of the LGC prohibits local government units from levying taxes on professionals who are exclusively engaged in the practice of their profession. In this case, the Court affirmed that Casas+Architects is a professional partnership engaged solely in the practice of architecture, including interior design and landscaping, which fall within the lawful scope of the architectural profession. The Court in Division found no evidence that the Casas+Architects was involved in interior decorating or any other commercial activity that would remove it from the ambit of tax exemption. Given this, the imposition of LBT by the City of Makati was unlawful. (City of Makati and the Office of the City Treasurer of Makati through Jesusa E. Cuneta v. Casas+Architects, CTA EB No. 2771 [CTA AC No. 259], July 2025).

FOREIGN CURRENCY EXCEEDING USD10,000 BROUGHT INTO THE PHILIPPINES WITHOUT FULL DECLARATION IS SUBJECT TO LAWFUL SEIZURE BY CUSTOMS AUTHORITIES, AS CORRECTLY APPLIED WHEN MOHAMMAD FAILED TO DECLARE USD501,600 OUT OF THE USD649,600 HE CARRIED UPON ARRIVAL FROM HONG KONG. Custom Modernization and Tariff Act (CMTA) authorizes customs officers to seize goods subject to forfeiture, including undeclared items under Section 1113(l)(2), while Section 1404 specifically mandates seizure for failure to declare dutiable goods—including foreign currency—upon arrival. Section 4.1 of Customs Administrative Order (CAO) No. 1-2017 requires arriving passengers carrying foreign currency in excess of USD 10,000 to declare the entire amount using a Foreign Currency Declaration Form (FCDF), consistent with Bangko Sentral ng Pilipinas (BSP) rules. In this case, Mohammad arrived at NAIA from Hong Kong carrying USD 649,600 in his baggage, but declared only USD 148,000 in the FCDF. As this left USD 501,600 undeclared, the District Collector of NAIA rightfully exercised the authority to seize the amount through a Warrant of Seizure and Detention (WSD). (Chang L. Mohammad, et al. v. Commissioner of Customs, CTA EB No. 2784, July 2025).

SETTLEMENT OF SEIZURE CASES WHEN FRAUD IS PRESENT IS PROHIBITED; THE DELIBERATE NON-DECLARATION OF USD 491,600 CONSTITUTED FRAUD THAT DISQUALIFIED THE CASE FROM COMPROMISE. Section 1124 of the CMTA authorizes the District Collector, with the approval of the Commissioner, to settle seizure cases through payment of a fine or redemption of forfeited goods. However, such settlement is expressly disallowed when fraud is involved, the importation is prohibited, or the release of goods would be contrary to law. In this case, the Commissioner of Customs acted within the legal bounds of his discretion when he upheld the denial of petitioners’ Motion to Enter Into Compromise Settlement. Although petitioners contended that none of the statutory exceptions applied, the record shows that petitioner Mohammad declared only USD 148,000 out of the USD 649,600 he carried upon arrival in the Philippines. This substantial discrepancy, involving over USD 491,000 in undeclared funds, was found to be a deliberate act of concealment—an indicium of fraud. Accordingly, in view of the fraud attending the undeclared importation, settlement of the seizure case was legally barred under Section 1124.
(Chang L. Mohammad, et al. v. Commissioner of Customs, CTA EB No. 2784, July 2025).

FORFEITURE OF THE UNDECLARED USD 491,600 WAS PROPER AND NOT EXCESSIVE, AS IT IS A PENALTY EXPRESSLY ALLOWED UNDER SECTION 1124 OF THE CMTA, AND NEITHER PROVISIONAL DECLARATION UNDER SECTION 403 NOR AMENDMENT UNDER SECTION 408 APPLIED, GIVEN THE COURT’S FINDING OF FRAUD AND THE ABSENCE OF VALID JUSTIFICATION. The penalty of forfeiture is authorized under CMTA  when fraud attends the importation of goods, and may not be settled by payment of a fine. Petitioners’ reliance on CAO 10-2020, Section 14-4, and CMTA Sections 403 and 408—on provisional and amended declarations—is misplaced, as these provisions do not apply when the declarant is aware of material facts but deliberately fails to disclose them. In this case, the Court found that petitioner Mohammad knew he was carrying USD 491,600, despite his claim that some of the money belonged to another person and was verbally declared. His failure to lodge a proper written declaration or request an amendment before examination, without any valid justification, disqualified him from the remedial provisions of the CMTA. The presence of prima facie evidence of fraud warranted the denial of the motion for settlement and justified the forfeiture. (Chang L. Mohammad, et al. v. Commissioner of Customs, CTA EB No. 2784, July 2025).

CAPITAL GAINS TAX (CGT) MUST BE BASED ON THE CORRECT ZONAL VALUE, AND SINCE THE BIR USED AN INCORRECT AND UNSUBSTANTIATED VALUATION, RESULTING IN OVERPAID TAX, THE TAXPAYER IS ENTITLED TO A REFUND. A CGT on the sale of land by a domestic corporation is imposed at 6% based on the higher of the gross selling price or the fair market value (FMV), which may either be the zonal value prescribed by the BIR or the value stated in the city assessor’s schedule. In this case, the BIR computed CGT based on a zonal value of ₱10,650/sqm, amounting to ₱5.75 million in CGT liability, which the petitioner contested as erroneous. The Court found merit in the petitioner’s claim that the property should be assessed using a zonal value of ₱4,725/sqm, citing a certified BIR document (Exhibit “P-4”) that accurately reflected the applicable rates for the property’s classification. Although the petitioner also proposed a lower ₱7,500/sqm valuation based on “Interior Lot” classification, this claim lacked evidentiary support. Nonetheless, the Court determined that the BIR misapplied the higher rate applicable only to “Along-the-road” properties, and thus used the ₱4,725/sqm rate as the correct basis. With this adjustment, the correct CGT was computed at ₱2.55 million, and taking into account initial and subsequent payments, the Court found an overpayment of ₱3.2 million in CGT alone. Furthermore, the Court ruled that the surcharge of ₱1.44 million and excessive interest of over ₱1 million were unjustified under Sections 248 and 249 of the NIRC, because no grounds for civil penalties were established. In total, the petitioner was held to have overpaid by ₱5,677,373.22 and was awarded a refund of this amount.
(Bangko Sentral ng Pilipinas v. CIR, CTA Case No. 10083, Amended Decision dated February 19, 2025).

BOTH ADMINISTRATIVE AND JUDICIAL CLAIMS FOR REFUND MUST BE FILED WITHIN TWO YEARS FROM TAX PAYMENT, AND THE COURT DISMISSED THE PETITION FOR LACK OF JURISDICTION BECAUSE THE PETITIONER FAILED TO PROVE ACTUAL FILING AND RECEIPT OF ITS ADMINISTRATIVE REFUND CLAIM WITH THE BIR. Sections 204(C) and 229 of the 1997 National Internal Revenue Code (NIRC), as amended, provide that a taxpayer seeking refund of taxes erroneously or illegally collected must file a written administrative claim with the BIR within two years from the date of payment, and only thereafter may it file a judicial claim before the Court. In this case, the Bangko Sentral ng Pilipinas (BSP) sought the refund of documentary stamp tax (DST) paid on a property acquired through extrajudicial foreclosure, asserting exemption under the NIRC. However, while BSP claimed it filed an administrative claim dated June 18, 2018 and a follow-up letter dated April 10, 2019, the Court found these insufficiently substantiated. The LBC receipt submitted as proof for the June 18 letter merely showed delivery to a certain "Mary Ann G. Salazar" but bore no stamp or acknowledgment from BIR RDO No. 23-B confirming actual receipt. During cross-examination, BSP’s witness admitted there was no BIR stamp on the document. Similarly, the April 10 follow-up letter, filed via registered mail, was returned undelivered with a “Moved Out” notation, and BSP’s representative testified that no one signed the return card. As no other evidence or testimony established proper filing or receipt of the administrative claim, the Court ruled that BSP failed to meet the jurisdictional requirement of prior administrative filing, which rendered the judicial claim premature and void of jurisdiction. (Bangko Sentral ng Pilipnas v. CIR, CTA Case No. 10106, Amended Decision dated March 13, 2024).

BIR ISSUANCES

Revenue Memorandum Circular No. 75-2025, July 23, 2025

BIR RULINGS

FRANCHISE FEES ARE SUBJECT TO REGULAR CORPORATE INCOME TAX AS ORDINARY BUSINESS INCOME AND A 2% EXPANDED WITHHOLDING TAX IF THE PAYOR IS A TOP WITHHOLDING AGENT. Pursuant to Sections 27 (A) and (D) and 42 (A) (4) of the Tax Code, as amended, and Revenue Regulations No. 2-1998, as amended, along with the Supreme Court's interpretation of passive income, franchise fees are generally subject to regular corporate income tax rather than the final withholding tax (FWT) on royalties. This is because such fees are considered ordinary business income derived from the active pursuit of a corporation's primary purpose, which includes activities such as developing and licensing intellectual property rights, as well as providing training and systems for franchisees. Consequently, these fees are subject to the regular corporate income tax rate of 25% for income earned after July 1, 2020 (or 30% for income earned before that date). Furthermore, suppose the payor of these franchise fees is designated as one of the top withholding agents by the Bureau of Internal Revenue (BIR). In that case, the fees will also be subject to an expanded withholding tax (EWT) of 2%. Otherwise, if the payor is not a top withholding agent, the EWT will not apply. (BIR Ruling No. OT-015-2025, January 7, 2025)

RECONVEYANCE OF LAND WITHOUT CONSIDERATION BY A REAL ESTATE BUSINESS IS A TAXABLE TRANSFER OF AN ORDINARY ASSET, INCURRING CORPORATE INCOME TAX, VAT FOR THE TRANSFEROR, AND CWT (BASED ON HIGHER OF SELLING PRICE OR FAIR MARKET VALUE) AND DST FOR THE TRANSACTION. Under Section 27(A) and 196 of the Tax Code, as amended, and Revenue Regulations No. 2-98 and No. 7-2003, the reconveyance of a parcel of land, even without consideration, is considered a taxable transfer if the transferor is engaged in the real estate business. As such, the reconveyed land by Cityland Development Corporation to original owners due to overlapping of structures, which treated as an ordinary asset, is considered subject to corporate income tax and value-added tax for the transferor. Consequently, the transaction is also subject to creditable withholding tax (CWT) by the transferee, based on the gross selling price or fair market value (whichever is higher) and depending on the property's value, and a documentary stamp tax (DST). (BIR Ruling No. OT-016-2025, January 7, 2025)

THE BIR DOES NOT ISSUE RULINGS SUCH AS REQUESTS TO CANCEL A LETTER OF AUTHORITY IF THE MATTER IS ALREADY UNDER AUDIT OR INVESTIGATION. Pursuant to Section 2 (r) of Revenue Bulletin No. 01-03, the Bureau of Internal Revenue (BIR) considers requests for rulings on matters that are already the subject of an ongoing audit or investigation as "No-Ruling Areas." Therefore, a request to cancel a Letter of Authority due to an existing audit/investigation falls under this "No-Ruling Area" policy. (BIR Ruling No. OT-017-2025, January 7, 2025)

ONLY IMPORTED SWEETENED BEVERAGES EXCLUSIVELY USING COCONUT SAP SUGAR OR STEVIOL GLYCOSIDES ARE EXCISE TAX-EXEMPT; NO ADDED CALORIC/NON-CALORIC SWEETENERS REMAIN TAXABLE. Under Section 47 of Republic Act No. 10963 (TRAIN Law) and Section 3 of Revenue Regulations No. 20-2018, only sweetened beverages using purely coconut sap sugar and purely steviol glycosides are exempt from excise tax; therefore, imported sweetened beverages, even if certified by the FDA as having no added caloric and non-caloric sweeteners, remain subject to excise tax if they do not exclusively use the exempted sweeteners, especially if the presence of high fructose corn syrup is not explicitly ruled out. (BIR Ruling No. OT-018-2025, January 7, 2025).

A RETIREMENT FUND, WHILE TAX-EXEMPT, IS STRICTLY PROHIBITED FROM INVESTING IN THE EMPLOYER'S BUSINESS VENTURES TO PREVENT DIVERSION OF FUNDS, SAFEGUARD EMPLOYEE BENEFITS, AND MAINTAIN FINANCIAL SEPARATION. Under Section 60(B) of the Tax Code, as amended, and Section 5 of Revenue Regulations No. 1-68, as amended, a retirement fund, while a separate taxable entity with income generally exempt from tax, must operate exclusively for the benefit of its employees. Consequently, investing the retirement fund in the employer's business ventures is prohibited as it could lead to a substantial diversion of income or corpus, jeopardize the fund's sufficiency to pay benefits due to the variability of business operations, and compromise the crucial separation of funds, potentially facilitating tax evasion. (BIR Ruling No. OT-019-2025, January 7, 2025)

INCOME FROM PHILIPPINE INVESTMENTS BY FOREIGN GOVERNMENT-OWNED ENTITIES IS ONLY TAX-EXEMPT IF THEY ARE RECOGNIZED "FINANCING INSTITUTIONS," NOT "INVESTMENT COMPANIES", THUS MAKING THE SUBJECT COMPANIES' INCOME FROM PHILIPPINE STOCKS, BONDS, OR OTHER DOMESTIC SECURITIES FULLY TAXABLE. Pursuant to Section 32 (B) (7) (a) of the Tax Code, as amended, and considering the distinctions between "financing companies" (as defined by R.A. No. 5980, as amended by R.A. No. 8556) and "investment companies" (as per Section 4 of R.A. No. 2629), income derived from Philippine investments by entities owned by foreign governments is exempt from income tax only if they are recognized as financing institutions or international/regional financial institutions established by foreign governments. In this case, the Companies, despite being wholly owned subsidiaries of a foreign sovereign wealth fund, are primarily engaged in investing and trading securities, which classifies them as investment companies rather than financing institutions. Therefore, their income from investments in Philippine stocks, bonds, or other domestic securities is subject to Philippine income tax and withholding taxes. (BIR Ruling No. OT-020-2025, January 7, 2025).

BIR DEADLINES FROM JULY 28 - AUGUST 03, 2025. A gentle reminder on the following deadlines, as may be applicable:

COURT OF TAX APPEALS DECISIONS

A criminal case for willful failure to pay tax prescribes after 5-years from finality of the tax assessment; thus, should be dismissed if assessment becomes final on February 10, 2013, but the Information was filed only on January 28, 2020. Violations of tax laws prescribe in five (5) years from the date of commission or, if unknown, from discovery and institution of judicial proceedings. Jurisprudence such as Lim v. Court of Appeals (G.R. No. L-48134-37, October 18, 1990) and Tupaz v. Ulep (G.R. No. 127777, October 1, 1999) clarifies that for failure to pay taxes despite demand, prescription begins upon finality of the assessment coupled with willful refusal to pay. In this case, the assessment became final on February 10, 2013 or thirty days after the Final Letter of Demand was mailed on January 10, 2013, and thus, the prescriptive period ended on February 10, 2018. Since the Information was filed only on January 28, 2020, it was filed nearly two years beyond the allowable period. Consequently, the government's right to prosecute had already prescribed, warranting the dismissal of the case. (People of the Philippines v. Cosco Petroleum Cmpan, Inc. Michael T. Co Say, CTA Crim. No. O-805, January 20, 2025; see also People of the Philippines v. Buensol Construction Co.,et. al., CTA Crim. No. O-969, January 21, 2025)

Prosecution must prove beyond reasonable doubt the willful failure to pay tax; thus, accused should be acquitted due to invalid assessment for lack of valid Letter of Authority (LOA) and absence of proof of receipt of the Preliminary Assessment Notice (PAN) and Formal Letter of Demand (FLD). Under Section 255 of the NIRC of 1997, as amended, conviction for willful failure to pay taxes requires proof that (1) the accused is required to pay tax, (2) failed to do so, and (3) such failure was willful. However, the BIR’s assessment was rendered void due to a lack of a valid LOA authorizing Revenue Officer Galagac to conduct the examination. As a result, there was no valid deficiency tax liability to trigger the legal duty to pay. Even assuming that an obligation existed, the prosecution failed to establish willfulness, as it could not prove that the accused received the PAN and FLD due to the absence of return cards and failure to authenticate registry receipts. Thus, the Court held that all three elements of the crime were not established, warranting acquittal. (People of the Philippines v. Cosco Petroleum Cmpan, Inc. Michael T. Co Say, CTA Crim. No. O-805, January 20, 2025 )

Accused incurs no civil liability if the government fails to present competent evidence, apart from the void assessment. In Mendez and reaffirmed in People v. Tiotangco, the Supreme Court ruled that in criminal tax cases, civil liability for unpaid taxes must be established by competent evidence independent of the tax assessment. A void assessment, without more, is insufficient to support a civil judgment. In the present case, the prosecution relied solely on documents and testimony derived from an invalid assessment conducted without lawful authority. No independent or competent evidence was presented to substantiate the tax deficiency. Consequently, the Court found no factual or legal basis to impose civil liability on the accused. (People of the Philippines v. Cosco Petroleum Cmpan, Inc. Michael T. Co Say, CTA Crim. No. O-805, January 20, 2025 )

Accused should be acquitted for prosecution’s failure to establish a valid assessment or prove the willful non-payment of taxes beyond reasonable doubt, due to the prescription of the assessment, lack of due process, and insufficient evidence of intent. Under Section 255 of the National Internal Revenue Code (NIRC), as interpreted in People v. Mendez, criminal liability for willful failure to pay taxes requires proof beyond reasonable doubt of three elements: (1) the legal obligation to pay tax, (2) failure to pay at the time required by law, and (3) that such failure was willful (i.e., done knowingly, voluntarily, and intentionally in disregard of a known legal duty). In the present case, although the prosecution established that Buensol was a registered taxpayer in 2012 and that accused Solis was a responsible officer, it failed to prove that a valid and enforceable assessment existed. The FLD/FAN issued by the BIR was declared void for being time-barred under Section 203 of the NIRC, as it was issued more than three years after the due date for filing the 2012 tax return. Additionally, the assessment was based on unverified third-party information without the required confirmations under RMO No. 28-2007, and failed to indicate a clear and definite due date for payment, violating due process (the FLD stated the accused is only “requested” to pay tax;  “Due date: February 22” may refer to due date when the FLD/FAN should be delivered; deadline of February 22, 2017 is confusing as interest is computed until February 24, 2017). These defects rendered the assessment invalid and incapable of supporting a criminal charge. Further, the prosecution failed to establish that Solis was aware of a final tax liability and deliberately refused to pay it. Mere receipt of notices by family members through substituted service was insufficient to prove the accused’s willful intent to evade taxes. Given these substantial procedural and evidentiary lapses, the Court held that the essential elements of the offense were not proven, and thus acquitted the accused. (People of the Philippines v. Buensol Construction Co.,et. al., CTA Crim. No. O-969, January 21, 2025 )

The petition was dismissed for lack of jurisdiction as petitioner failed to timely appeal within the 30-day period from the deemed affirmed decision of the Commissioner of Customs (COC), pursuant to Section 1126 of the Custom Modernization and Tariff Act (CMTA) and Section 11 of RA No. 1125. a person aggrieved by the decision of the District Collector may elevate an appeal to the COC within 15 days from the receipt of the decision. The COC shall have 30 days from the receipt of the records to decide on the case. If no such decision is rendered within the said 30-day period, the decision of the District Collector shall be deemed affirmed, and an aggrieved party must then file a petition for review with the CTA within 30 days from such deemed affirmed decision. In this case, the records of petitioner Sigrid Carandang’s appeal were received by the Commissioner on January 14, 2021, and no action was taken within the 30-day period, resulting in a deemed affirmed decision on February 13, 2021. Instead of appealing to the CTA within the required period, petitioner filed a motion for reconsideration before the Commissioner, an unauthorized remedy not provided under the CMTA, which further delayed her filing of the petition for review until May 20, 2021, well beyond the March 15, 2021 deadline. The CTA emphasized that jurisdiction over the subject matter is conferred strictly by law, and that failure to comply with the statutory appeal period is fatal, thereby leaving the Court without authority to take cognizance of the case or rule on its merits. (Sigrid Carandang v. Hon. Rey Lenardo B. Guerrero, Commissioner of Customs et. al., CTA Case No. 10523)

An environmental fee is not a tax and  thus not within the jurisdiction of the CTA. The CTA’s appellate jurisdiction over regional trial court’s decisions become operative only when the case involves a tax. Tax and fees are different from each other. An imposition is considered a tax if the generation of revenue is the primary purpose; otherwise, it is a regulatory fee. An environmental tax is not a tax but a regulatory fee, as it is imposed for purposes of watershed protection, conservation and management program under  the Watershed Code. Thus, the CTA has no jurisdiction in assailing the environmental fee. (DOLE Philippines Inc. – Stanfilco Division v. The Sangguniang Panlungsod of the City of Davao et. al., CTA AC no. 306, February 17, 2025);

The BIR must collect assessed taxes within three years from the date of assessment, and since the valid FLD was issued on December 1, 2014 and no valid suspension occurred, the BIR’s collection efforts initiated only in 2017 and 2021 were made beyond the prescriptive period and thus barred. Under Section 203 of the NIRC, the BIR is given three years from the date of assessment to collect internal revenue taxes, either by distraint, levy, or court action, unless the period is suspended under Section 224 (e.g., when a reinvestigation is granted) or extended under Section 223 (e.g., via a written agreement). In this case, the Court found that a valid FLD was received by the accused on December 1, 2014, which served as the valid assessment notice. From this date, the BIR had until December 1, 2017 to collect. The taxpayer filed a protest with a request for reinvestigation, but failed to submit supporting documents within 60 days as required under RR No. 18-13 and Section 228 of the NIRC, rendering the protest void. Moreover, the BIR did not prove that it granted the reinvestigation or that the Final Decision on Disputed Assessment (FDDA) issued in 2017 was validly received. Consequently, there was no valid suspension of the prescriptive period. Since the BIR only issued the Warrant of Distraint and/or Levy on December 13, 2017, and filed criminal Informations in March 2021, both actions occurred after the three-year period had lapsed, making the BIR’s collection efforts prescribed. Thus, the Court ruled that the taxpayer can no longer be compelled to pay the assessed deficiency taxes, and revoked the BIR’s authority to enforce collection.

The five-year prescriptive period for criminal tax violations, if unknown, begins from discovery and referral for preliminary investigation, and since more than five years lapsed before the Information was filed in court, the criminal case is barred by prescription. Section 281 of the National Internal Revenue Code (NIRC) states that violations of tax laws prescribe after five (5) years, which is reckoned either from the date of the violation or, if unknown, from the date of discovery and the institution of judicial proceedings for its investigation and punishment. Further, Section 2, Rule 9 of the RRCTA provides that only the filing of the Information in the CTA interrupts the prescriptive period and not the filing of a complaint with the DOJ. The Court rejected petitioner’s argument that the complaint’s filing with the DOJ already interrupted prescription. The CT ruled that for unknown violations, the prescriptive period starts only upon discovery and referral for preliminary investigation, and that the period from that point up to the filing of the Information in court must not exceed five years. In this case, while the violation was discovered and referred for preliminary investigation, the Information was filed beyond the five-year limit, and the Court ruled that the case had already prescribed, leading to the dismissal of the criminal action. (People of the Philippines v. Ma. Luisa Reyes Angulo, CTA Crim Case Nos. O-867 and O-868, February 13, 2025)

Rappler Holdings Corporation (RHC) is not a dealer in securities as it was not regularly engaged in buying and selling securities for profit, and its issuance of Philippine Depositary Receipts (PDRs) was a legitimate capital-raising activity of a financial holding company, which is not a taxable event. Under Securities Regulation Code (SRC), and Revenue Regulations No. 06-08, a "dealer in securities" must be regularly engaged in the purchase and resale of securities to customers for profit, or in the ordinary course of business. The CTA En Banc upheld the Division’s ruling that RHC did not fall under this definition. The evidence showed that RHC issued PDRs to NBM and Omidyar Network for the sole purpose of raising capital for its subsidiary, Rappler Inc., in line with its purpose as a financial holding company, not as a merchant of securities. The Court noted that RHC neither bought securities from its subsidiary nor resold them to third parties, and that its Articles of Incorporation expressly prohibited it from acting as a dealer or stockbroker. Furthermore, the PDRs did not convey ownership or economic rights over the underlying shares unless exercised and subject to legal limitations on foreign ownership. Therefore, the PDR issuance was an investment arrangement, not a taxable sale or trading transaction, and there was no grave abuse of discretion in the Division’s factual findings to that effect. (People of the Philippines and Bureau of Internal Revenue v. Rappler Holdings Corporation and Maria Ressa, CTA EB Crim No. 126, CTA Crim Case Nos. O-679, O-680, O-681 and O-682, February 21, 2025)

BIR ISSUANCES

Revenue Memorandum Circular No. 061-2025, June 19, 2025

Repealed/Modified Tax Exemptions under Capital Markets Efficiency Promotions Act (CMEPA)

• All the above exemptions are revoked starting July 1, 2025.
• Affected transactions are now subject to income tax, capital gains tax, dividends tax, and/or documentary stamp tax, depending on the transaction type.

Revenue Memorandum Circular  No. 066-2025, July 2, 2025

Revenue Memorandum Circular No. 065-2025, July 2, 2025

BIR RULINGS

Income earned by CDPQ, a government-owned entity of Quebec, from investments in the Philippines is exempt from income tax and withholding tax as it qualifies as a foreign government agency. Under Section 32(B)(7)(a)(i) of the Philippine Tax Code, income derived by foreign governments or their controlled financing institutions from investments in Philippine securities is exempt from income tax and withholding tax. CDPQ, created by a legislative act of the National Assembly of Quebec and mandated to manage public pension and insurance funds, is a government instrumentality of the State of Quebec. Its structure, control, and ownership—along with its public mandate and accountability to Quebec's Ministry of Finance—qualify it as a "foreign government" for tax purposes. As such, income from its Philippine investments, including dividends and interest, falls within the scope of this tax exemption. Accordingly, the BIR confirmed that CDPQ’s current and future Philippine-sourced investment income is not subject to Philippine income or withholding taxes (BIR Ruling No. OT-001-2025, January. 3, 2025).

If a homeowners association remains a validly registered homeowners' association with an existing BIR registration and Authority to Print (ATP), no subsequent ATP may be issued to another group without first properly canceling the original. Under Section 4 of the Tax Code, the CIR has exclusive authority to interpret tax laws and rule on matters under the BIR’s jurisdiction, including the issuance of Authorities to Print (ATP). Section 238 of the Tax Code further requires taxpayers to secure an ATP prior to printing official receipts, which must contain required tax details. Consistent with RMO No. 83-99, a validly issued ATP remains in force unless revoked due to the taxpayer’s dissolution or loss of registration with a competent agency. In BIR Ruling No. OT-002-2025, the BIR confirmed that Sun Valley Residential Estates Homeowners Association, Inc. (SVREHAI), Phases 1-2, remains duly registered with the BIR and the Department of Human Settlements and Urban Development (DHSUD), and was validly issued an ATP. Given that its ATP has not been canceled or invalidated following the required procedures, the issuance of a separate ATP to a different faction is improper. The intra-association dispute is not within the BIR’s jurisdiction and does not independently affect the validity of the existing ATP. (BIR Ruling No. OT-002-2025, January 6, 2025)

SKK, a Top 10,000 Corporation, failed to withhold 2% EWT from payments to PSALM as required under RR No. 2-1998; while PSALM is not liable to refund since it reported and paid taxes on the income, SKK remains liable for penalties. Under Sections 2.57.2 to 2.57.5 of Revenue Regulations No. 2-1998, as amended, Top 10,000 Corporations like SKK Steel Corporation are mandated to withhold 1% or 2% expanded withholding tax (EWT) from payments to regular suppliers—including government-owned and controlled corporations (GOCCs) such as PSALM—at the time of payment or when the expense is recorded, whichever is earlier. Section 2.57.3 clearly places the withholding obligation on the buyer-payor, while failure to comply is subject to penalties under Sections 251 and 255 of the Tax Code. In this case, SKK failed to withhold the required EWT on its earlier payments to PSALM. After a BIR audit in 2014 revealed this lapse, SKK unilaterally deducted the back taxes from PSALM’s billing and claimed to have remitted the amount to the BIR. However, PSALM objected and billed SKK for the deducted amount plus interest, citing lack of BIR Form 2307 as proof of remittance. The BIR ruled that although SKK failed in its withholding obligation, PSALM had already reported the income in its tax returns without claiming deductions, and paid the corresponding taxes—thereby satisfying the substance of the withholding system. As a result, PSALM has no obligation to refund the deducted amount or the interest. Nonetheless, SKK may still be penalized for its failure to withhold and may claim a tax refund from the BIR upon submission of proper documentation (e.g., Form 2307) proving actual remittance (BIR Ruling No. OT-003-2025, January 6, 2025).

Technical fees paid by AAPPI to AMPL for remote services performed abroad are deemed Philippine-sourced royalties, and are thus subject to income tax, withholding tax, and VAT. Under Sections 23(F), 28(B)(1), and 42(C)(3) of the Tax Code, a non-resident foreign corporation (NRFC) is generally taxed only on income derived from sources within the Philippines, and compensation for services performed abroad is considered foreign-sourced and not subject to Philippine tax. However, Section 42(A)(4)(c) creates an exception: income derived from the supply of scientific, technical, industrial, or commercial knowledge or information is treated as royalties from Philippine sources if such knowledge is used in the Philippines. In this case, although the services rendered by Allegiance Marketing Pty. Ltd. (AMPL), an Australian NRFC, under a Technical Services Agreement were performed remotely from Australia and supported by a certification of non-rendition in Philippine territory, the BIR determined that the services involved the supply of technical knowledge used by Accor Advantage Plus Philippines, Inc. (AAPPI) in its operations in the Philippines. Therefore, the technical fees constitute Philippine-sourced royalties subject to income tax and final withholding tax under Section 28(B)(1), and to 12% VAT pursuant to Section 108(A)(3) of the Tax Code. (BIR Ruling No. OT-004-2025, January 6, 2025).

Tanay Water District is exempt from income tax, but remains liable for the 2% franchise tax under Section 119 and for 2% creditable withholding by government entities. Section 27(C) of the Tax Code, as amended by Republic Act No. 10026, exempts local water districts (LWDs) from the corporate income tax otherwise imposed on government-owned and controlled corporations (GOCCs). This means that Tanay Water District is not liable to pay the regular 25% income tax imposed on domestic corporations, nor is it subject to creditable withholding tax (CWT) on its income. However, the same law does not provide an exemption from the 2% franchise tax under Section 119 of the Tax Code, which applies to all franchise holders, including water utilities, regardless of whether they are GOCCs or not. Section 119 specifically imposes a 2% tax on gross receipts derived from the business covered by the franchise, which in this case includes water distribution services. In addition, Section 5.116(A)(4)(b) of Revenue Regulations No. 2-98, as amended, requires all government agencies, instrumentalities, GOCCs, LGUs, and their subsidiaries to withhold 2% franchise tax from gross payments made to franchise holders operating water utilities. Applying these provisions, while Tanay Water District enjoys income tax exemption, it is still liable for the 2% franchise tax on its gross receipts and must account for the corresponding withholding made by government payors, which can be credited against its franchise tax liability. The BIR thus affirmed that Tanay Water District remains subject to the franchise tax and related withholding requirements despite its income tax exemption (BIR Ruling No. OT-005-2025).

BIR DEADLINES FROM JULY 21 - 27 2025. A gentle reminder on the following deadlines, as may be applicable:

COURT OF TAX APPEALS DECISIONS

A non-stock, non-profit mutual benefit association is not subject to Local Business Tax (LBT) as it is neither engaged in business nor classified as a financial institution or insurance company. Under Sections 131(d) and 143(f) of the Local Government Code (LGC), LBT may only be imposed on entities engaged in business or profit-driven financial activities, while Sections 190 and 403 of the Insurance Code expressly exclude mutual benefit associations (MBAs) from the definitions of “insurance companies” and “financial institutions”; applying these provisions, the Supreme Court held that a non-stock, non-profit MBA operating solely for the benefit of its members by providing financial assistance such as sickness, death, and unemployment benefits is not engaged in business or profit-seeking activity and therefore cannot be subjected to LBT, rendering the assessment and issuance of a tax order of payment void for lack of legal basis. (Public Safety Mutual Benefits Fund., Inc. v. Laquian, CTA Case No. 289, February 12, 2025)

A Tax Order Payment (TOP) is considered an assessment if it states the nature and amount of the tax and penalties even without citing the exact ordinance provision as long as it sufficiently informs the taxpayer (tax type, base, implied rate, and surcharges). Section 195 of the Local Government Code requires that a local tax assessment must include the nature of the tax, the amount of deficiency, and the applicable surcharges, interest, and penalties for it to be valid; applying this, the TOP issued was deemed sufficient as it clearly indicated the tax type (“FINANCIAL INSTITUTION – INSURANCE COMPANIES”), the tax base, rate (implied at 60% of 1%), and total amount due including penalties, which aligns with the rate prescribed under Section 21.02(1) of the City of San Juan Revenue Code of 2013, thereby upholding its validity and showing no due process violation despite the taxpayer’s failure to recognize the ordinance provision cited. (Public Safety Mutual Benefits Fund., Inc. v. Laquian, CTA Case No. 289, February 12, 2025)

Accused is acquitted for alleged willful failure to pay tax, ruling that the assessment was void due to improper service of the LOA and FAN/FLD, which violated her right to due process. Under Section 255 of the National Internal Revenue Code (NIRC) of 1997, as amended, a taxpayer who willfully fails to pay any tax, file a return, or supply accurate information may be held criminally liable. Here, the CTA acquitted the accused, Lanila Madayag Diaz-Salayog, for failure of the prosecution to prove her guilt beyond reasonable doubt. The Court held that the Bureau of Internal Revenue (BIR) failed to properly serve the Letter of Authority (LOA) and Final Assessment Notice/Formal Letter of Demand (FAN/FLD), both of which are essential to establish a valid tax assessment and a willful failure to pay taxes. The LOA was improperly delivered to an unauthorized person at an address different from the taxpayer's registered address, and there was no competent justification or proof for the substituted service. Similarly, the FAN/FLD lacked proper evidence of mailing and receipt, such as registry receipts or an affidavit of service. Due to these procedural lapses, the assessment was rendered void, and without a valid assessment, neither criminal liability nor civil liability for the alleged ₱10.67 million deficiency income tax for 2014 could arise (People of the Philippines v. Lanila Madayag Diaz, CTA Crim Case No. O-999, January 15, 2025)

Accused was acquitted as the cigarettes found in his van were inadmissible evidence, seized through an invalid warrantless search lacking probable cause despite his admitted possession.  A mere unexplained possession of imported articles subject to excise tax, for which no tax has been paid, is punishable regardless of ownership. In this case, Victor Gaw Sy was apprehended driving a van containing 5,000 reams of imported “Two Moon” and “Blue Moon” cigarettes with unpaid excise taxes amounting to ₱1.75 million. Although Sy claimed he was unaware of the contents and was merely hired to transport the van, the Court found he had animus possidendi (intent to possess) due to his conscious physical control of the goods. However, the Court ruled that the warrantless search and seizure of the vehicle and cigarettes was unconstitutional due to the absence of probable cause and irregularities in the checkpoint procedure, rendering the seized evidence inadmissible and ultimately acquitting the accused. (People of the Philippines v. Victor Gaw Sy, CTA Case No. O-1050, January 15, 2025)

The tax assessment against Smart Communications was cancelled because it was partly prescribed, issued without jurisdiction over receipts recorded in Tuguegarao City, and based on arbitrary estimates unsupported by an audit of its records. Provinces may impose a franchise tax on businesses operating within their territorial jurisdiction based on gross receipts. Moreover, the law limits the assessment of local taxes to within five years from the date they become due. In this case, Smart Communications Inc. was assessed by the Province of Cagayan for local franchise taxes amounting to ₱48.59 million covering the years 2011 to 2015. Smart argued that it was exempt under its legislative franchise (R.A. No. 7294) which included a “tax in lieu of all taxes” clause, and also invoked the Public Telecommunications Policy Act’s equality clause. The Court rejected these defenses, affirming prior Supreme Court rulings that the “in lieu of all taxes” clause covers only national taxes, not local ones, and that Section 23 of the PTPA does not grant a tax exemption. However, the Court held that the 2011 assessment had prescribed, the Province had no authority to tax gross receipts recorded in Tuguegarao City, and that the assessments were invalid for being based on arbitrary, uniform estimates without examining Smart’s books. Thus, the Court cancelled the entire tax assessment and enjoined its collection (Smart Communications Inc. v. Province of Cagayan, CTA AC No. 291, Civil Case No. 8456, February 17, 2025)

The Regional Trial Court (RTC) correctly dismissed the petition, ruling that appeals from a local treasurer’s denial of tax protest under Section 195 of the LGC are original actions, as it involves judicial review of a non-judicial entity’s ruling. Under Section 195 of the Local Government Code (LGC) of 1991, a taxpayer may file an appeal with a court of competent jurisdiction within 30 days from receipt of the denial of a protest issued by the local treasurer against a local tax assessment. The Supreme Court clarified that such appeal is an exercise of original jurisdiction by the RTC because the local treasurer, as a non-judicial entity, does not render judicial decisions subject to appellate review. Applying this to the case, the RTC of Taguig City correctly dismissed the petition on the ground that appeals under Section 195 of the LGC are original actions, not appellate in nature, thus affirming its authority to exercise original jurisdiction over the taxpayer’s challenge to the local treasurer’s denial of protest (Lucio Tan Group, Inc. v J. Voltaire R. Enriquez, in his capacity as City Treasurer of Taguig City, CTA AC No. 300, February 12, 2025)

Under Section 196 of the Local Government Code (LGC), a refund claim applies in the absence of a valid assessment, which must state the nature, amount, and legal basis of the tax; otherwise, any court action without prior refund claim is premature. Under Section 196 of the LGC of 1991, a taxpayer may claim a refund of erroneously or illegally collected taxes by first filing a written claim with the local treasurer, and only after doing so may initiate a judicial action, provided both actions are filed within two years from the date of payment. In this case, petitioner paid local taxes on March 27, 2023 to the City Treasurer of Taguig as alleged deficiency business tax on dividend income, and subsequently filed a Petition for Review before the RTC without first submitting a written claim for refund. The document titled “Tax Deficiency Assessment for the Year 2022” lacked the necessary elements of a valid assessment under Section 195, such as the nature of the tax, factual and legal bases, and clear reference to applicable laws or ordinances. As such, Section 195 was inapplicable, and the proper remedy was under Section 196. However, petitioner’s letters to the City Treasurer only protested the assessment but did not specifically request a refund, thus failing to comply with the administrative prerequisite. Because no valid administrative claim for refund was filed prior to seeking judicial relief, the Petition for Review was dismissed for prematurity and failure to exhaust administrative remedies, despite the payment having been made within the allowable two-year period (Lucio Tan Group, Inc. v J. Voltaire R. Enriquez, in his capacity as City Treasurer of Taguig City, CTA AC No. 300, February 12, 2025)

BIR RULINGS

Prior service in a merged entity may be counted toward the ten-year requirement for tax-exempt retirement benefits, provided the merger was beyond the employee’s control and no separation pay was received. Pursuant to Section 32(B)(6)(a) of the National Internal Revenue Code (Tax Code), retirement benefits received by employees are exempt from income tax if the employee has rendered at least ten (10) years of service in the same employer and is at least fifty (50) years old at retirement. Under the Certificate of Qualification granted by the Bureau of Internal Revenue (BIR) to the BPI Group of Companies, and guided by relevant rules and jurisprudence, the ten-year service requirement may include aggregate years of service rendered by BFSBI employees prior to their absorption into BPI, provided the transfer was due to a valid merger beyond the employees' control and no separation benefits were received. Accordingly, in the context of the approved merger between BPI and BFSBI effective January 1, 2022, the BIR confirms that: (1) the BFSBI employees' prior service may be credited toward the tenure requirement under the Retirement Plan; and (2) the tax-exempt status of retirement benefits, the tax exemption of Retirement Fund investment income, and the deductibility of employer contributions to the Retirement Fund remain unaffected, so long as the conditions under the law and Certificate of Qualification continue to be met. (BIR Ruling No. OT-068-2024, December 26, 2024)

Sale and printing of educational books not principally for advertisements and compliant with NBDB rules are VAT-exempt, and thus not subject to 5% creditable withholding VAT by government purchasers. Pursuant to Section 109(1)(R) of the National Internal Revenue Code of 1997, as amended, in relation to Republic Act No. 8047 and Revenue Regulations No. 16-2005, the sale, importation, printing, or publication of books and educational materials—including digital formats—is exempt from Value-Added Tax (VAT), provided such materials are not principally for paid advertisements and comply with National Book Development Board (NBDB) requirements. Applying this provision, the Bureau of Internal Revenue confirmed that Mexico Printing Company, Inc. (MPCI), as an NBDB-registered book publisher and printer engaged in contracts with the government, is exempt from the 12% VAT on qualified transactions. Consequently, government entities purchasing such VAT-exempt materials from MPCI are not required to withhold the 5% creditable VAT under RMO No. 23-2014. However, MPCI’s non-exempt printing activities remain subject to VAT, and its purchases from suppliers are still subject to 12% VAT, as VAT exemptions apply only to its sales of qualified educational materials and not to its inputs. (BIR Ruling No. VAT-067-2024, December 18, 2024)

Coconut sap sugar processed through simple boiling with polarization below 99.5° and color above 800 ICU is considered in its original state and thus exempt from VAT. Pursuant to Section 109(1)(A) of the National Internal Revenue Code of 1997, as amended, and in relation to Revenue Regulations No. 8-2015, agricultural food products in their original state, including those that undergo simple processes such as boiling, may be exempt from VAT. Applying this provision, coconut sap sugar, produced through basic farm-level processes like boiling and drying, and meeting the specified thresholds of polarization (below 99.5°) and color (above 800 ICU), is deemed to be in its original state and thus qualifies as a VAT-exempt agricultural product. (BIR Ruling No. VAT-066-2024, November 15, 2024)

Leases and local purchases directly used in the development and installation of a certified renewable energy project are subject to 0% VAT. Pursuant to Section 15(g) of Republic Act No. 9513 (Renewable Energy Act) and Section 108(B)(3) of the Tax Code, as amended, purchases and leases of goods, properties, and services by a Department of Energy-certified renewable energy developer are subject to zero percent (0%) VAT, provided they are directly used in the development, construction, and installation of renewable energy facilities. Applying this, transactions such as the lease of land and procurement of local supplies and services for a certified solar power project are VAT zero-rated, subject to post-audit by the BIR to ensure the inputs were indeed utilized for the qualified activities. (BIR Ruling No. OT-065-2024, November 13, 2024)

Property transfers pursuant to a court-approved Declaration of Nullity of Marriage and adjudication to common children as presumptive legitimes are not subject to CGT, donor’s tax, or DST. Under Sections 24(D)(1), 98(A), and 188 of the Tax Code, as amended, and relevant BIR rulings, transfers of real properties arising from a court-approved Declaration of Nullity of Marriage are not subject to capital gains tax, donor's tax, or documentary stamp tax (DST), as these are not considered sales, donations, or dispositions with monetary consideration but rather judicial partitions or distributions in compliance with property settlement. Additionally, the adjudication of property to common children as presumptive legitimes is also exempt from CGT and DST but must be annotated on the titles and will form part of the gross estate for estate tax purposes upon the death of either parent. (BIR Ruling No. OT-062-2024, October 18, 2024)

Tax exemption was denied due to private inurement arising from excessive fringe benefits comprising 40% of operating expenses, violating the non-profit requirement. Under Par. 3, Sec. 4, Art. XIV of the 1987 Constitution and Section 30(H) of the NIRC of 1997, non-stock, non-profit educational institutions are exempt from income tax only if their revenues are actually, directly, and exclusively used for educational purposes; however, due to substantial fringe benefits and incentives comprising 40% of operating expenses, which constitute private inurement, the institution failed to meet the non-profit requirement and was thus denied income tax exemption and reclassified as a proprietary educational institution subject to the 10% preferential tax under Section 27(B). (BIR Ruling No. SH30-063-2024, October 18, 2024)

The transfer of real properties via deeds of assignment by a liquidating government entity to the National Government, though akin to dacion en pago, is exempt from CGT, donor’s tax, and DST as it is a non-profit governmental function pursuant to its statutory mandate. Pursuant to Sections 24(D)(1), 98, 99, 101, 173, 188, 196, and 199 of the NIRC of 1997, as amended, Section 132(e) of R.A. No. 7653 (New Central Bank Act), and Section 66 of R.A. No. 6657 (CARL), the deeds of assignment executed by the CB-Board of Liquidators (CB-BOL) in favor of the Republic of the Philippines (ROP), although containing provisions similar to a dacion en pago and ordinarily taxable as a sale or disposition, are not subject to capital gains tax (CGT), donor’s tax, or documentary stamp tax (DST), as the transfers were made in performance of CB-BOL’s statutory duty to liquidate residual assets not transferred to the BSP, and such disposition by a government entity to the National Government is considered a governmental act not undertaken for profit, and therefore entitled to tax exemptions. (BIR Ruling No. OT-061-2024, October 8, 2024)

BIR DEADLINES FROM JULY 8, TO MAY 13 2025. A gentle reminder on the following deadlines, as may be applicable: