COURT OF TAX APPEALS DECISIONS
NEW LOA IS REQUIRED IN CASE OF RE-ASSIGNMENT OF AUDIT TO ANOTHER RO; MOA IS NOT SUFFICIENT; BIR CANNOT VALIDLY REPRODUCE ITS FINDINGS IN THE FLD/FAN WITHOUT ADDRESSING THE TAXPAYER’S EXPLANATIONS. Only revenue officers specifically authorized under a valid Letter of Authority (LOA) may examine a taxpayer’s books of account, and any reassignment of the audit to another Revenue Officer (RO) must be covered by a new LOA issued by the Commissioner of Internal Revenue (CIR) or a duly authorized official. The same provisions likewise mandate that the Preliminary Assessment Notice (PAN), Formal Letter of Demand/Final Assessment Notice (FLD/FAN), and Final Decision on Disputed Assessment (FDDA) state the factual and legal bases of the assessment and meaningfully address the taxpayer’s explanations and evidence; otherwise, the assessment is void for violating due process. Applying these rules, the Court held that although the original LOA authorized ROs Rosario Arriola and Sheila Samaniego to conduct the audit, the actual examination was undertaken by RO Abigail Cayabyab pursuant only to a MOA, without the issuance of the required new LOA, rendering the audit unauthorized and the resulting assessments void. The Court further found that the BIR failed to observe due process because, despite the taxpayer’s timely protest to the PAN, the FLD/FAN merely reproduced verbatim the findings and computations contained in the PAN, without discussing or addressing the taxpayer’s explanations, defenses, and supporting documents, thereby showing that the protest was not genuinely evaluated. [Commissioner of Internal Revenue v. NCR Corporation Philippines, CTA EB No. 2967 (CTA Case No. 10498), March 23, 2026; see also Nationwide Health Systems Baguio, Inc. v. Commissioner of Internal Revenue (CTA Case No. 10686) November 7, 2025]
BIR’S FAILURE TO PROVE THAT PERSONAL SERVICE WAS IMPRACTICABLE BEFORE RESORTING TO SUBSTITUTED SERVICE AND FAILURE TO PRESENT THE REQUIRED WITNESSES AND PROOF OF MAILING CONSTITUTE A DENIAL OF DUE PROCESS. The Tax Code requires strict compliance with the prescribed modes and procedures for the valid service of assessment notices. Personal service is the primary mode, while substituted service or service by mail may only be resorted to when personal service is not practicable, subject to specific requirements. Here, the Court found that the Bureau of Internal Revenue (BIR) failed to establish that personal service of the PAN and FLD/FAN was impracticable, relying merely on the statement of the building guard without conducting reasonable verification. Further, the BIR failed to prove valid service by mail of the PAN as it presented only an LBC official receipt, which did not sufficiently identify the document sent, and failed to submit the required proof of delivery and sworn written report. Likewise, the substituted service of the PAN and FLD/FAN was invalid because the BIR failed to bring a barangay official and two disinterested witnesses to personally observe and attest to the taxpayer’s absence, as required by the regulations, and the notices were instead received by barangay staff member who was not shown to be a proper barangay official. Accordingly, the failure to strictly comply with the requirements for service deprived the taxpayer of due process, rendering the PAN, FLD/FAN, and the resulting Warrant of Distraint and/or Levy void and unenforceable. (Sabre Travel Network Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10848, November 4, 2025)
NO VIOLATION OF DUE PROCESS IF BIR SIGNIFICANTLY REDUCED ASSESSMENT. Administrative due process in tax assessment proceedings requires that the taxpayer be properly notified of the assessment, given a meaningful opportunity to present defenses and supporting evidence, and that the BIR duly consider such submissions and render a decision based on the evidence presented. Due process does not require that the taxpayer’s arguments be accepted, but only that the taxpayer’s defenses be fairly evaluated and that the administrative body explain the basis of its conclusions. Applying these principles, the Court En Banc held that the taxpayer was not denied due process despite its claim that the CIR allegedly ignored its protest and supporting documents until the issuance of the FDDA. The Court found that after the taxpayer filed its protest against the FAN, the CIR evaluated its arguments and evidence and issued the FDDA explaining the basis for sustaining or rejecting the taxpayer’s defenses. The fact that the CIR substantially considered taxpayer’s submissions only at the FDDA stage did not invalidate the assessment proceedings, as the taxpayer was afforded an opportunity to be heard and its defenses were ultimately considered. Moreover, the evaluation of taxpayer’s protest resulted in a significant reduction of the basic deficiency VAT assessment, demonstrating that the CIR did not disregard the taxpayer’s submissions but instead took them into account in resolving the assessment. Accordingly, the Court ruled that the requirements of administrative due process were substantially complied [CIR v. BASF Philippines, Inc., CTA EB No. 2754 (CTA Case No. 10221); BASF Philippines, Inc. v CIR, CTA EB No. 2755. CTA Case No. 10221), November 12 2025]
A STATEMENT THAT INTEREST AND THE TOTAL AMOUNT DUE SHALL BE ADJUSTED IF PAYMENT IS MADE AFTER THE DUE DATE DOES NOT RENDER THE ASSESSMENT VOID. A taxpayer must be informed of the specific amount of tax assessed and be given a definite period within which to pay the assessed liability. In determining the validity of an assessment, jurisprudence provides that an assessment is void when it fails to indicate a fixed and determinate amount of tax due and does not provide a specific due date for payment, thereby leaving the taxpayer uncertain as to the extent of its obligation. In the present case, however, the Court En Banc ruled that the FAN and the Amended Assessment Notice attached to the FDDA substantially complied with these requirements. Both notices clearly stated the basic deficiency VAT assessed, as well as the corresponding total amount due and the specific deadlines for payment, thereby providing the taxpayer with sufficient notice of its tax liability. The Court further held that the statement in the notices that the interest and total amount due would be adjusted if payment was made beyond the specified date did not make the assessment indefinite or uncertain. Such statement merely recognized that interest continues to accrue until full payment and that the final amount payable may increase due to the taxpayer’s delay in settlement. Hence, the FAN and FDDA issued against the taxpayer constituted a valid demand for payment containing a definite tax liability and due date, thereby complying with the requirements of administrative due process. [CIR v. BASF Philippines, Inc., CTA EB No. 2754 (CTA Case No. 10221); BASF Philippines, Inc. v CIR, CTA EB No. 2755. CTA Case No. 10221), November 12 2025]
IN CASE OF APPEAL DUE TO DEEMED DENIAL OF PROTEST, NO NEW 180-DAY PERIOD COMMENCES UPON THE FILING OF A REQUEST FOR RECONSIDERATION WITH THE OFFICE OF THE COMMISSIONER. A taxpayer who receives a FLD/FAN may protest the assessment and, if the protest is not acted upon within 180 days from the filing of the request for reconsideration or from the submission of complete supporting documents in case of a request for reinvestigation, may either appeal to the CTA within 30 days from the lapse of the 180-day period or await the final decision on the protest and appeal within thirty (30) days from receipt thereof. However, the 180-day period applies only to the initial administrative protest against the FLD/FAN and does not create a separate or fresh 180-day period for an administrative appeal or request for reconsideration filed after the issuance of a decision by the Commissioner’s duly authorized representative. In this case, the taxpayer submitted its Request for Reinvestigation on January 18, 2019 and completed the submission of supporting documents on February 6, 2019; hence, the CIR or his duly authorized representative had until August 6, 2019 to act on the protest. The Regional Director subsequently issued the FDDA dated March 15, 2021, which the taxpayer received on April 23, 2021, prompting the taxpayer to file a Request for Reconsideration before the Commissioner on May 24, 2021. The taxpayer erroneously assumed that the Commissioner was granted another 180-day period to act on the administrative appeal and consequently filed its Petition for Review on December 20, 2021, counting 30 days from the supposed lapse of the new 180-day period. The Court ruled that no such additional period exists. Since the FDDA had already resolved the administrative protest, the taxpayer’s remedy was either to appeal the FDDA within thirty (30) days from receipt or await the Commissioner’s final decision on the administrative appeal and appeal such decision within the prescribed period. Having filed its Petition for Review beyond the allowable period, the CTA was deprived of jurisdiction over the case; thus, the petition was dismissed without consideration of the merits of the deficiency tax assessment. (Allied Metals, Inc. v. CIR, CTA Case No. 10711, November 4, 2025)
BIR MUST CONDUCT A MINIMUM 10-DAY SURVEILLANCE PERIOD BEFORE CLOSING A BUSINESS ESTABLISHMENT; 4-HOUR VISIT NOT SUFFICIENT. The CIR may suspend business operations and temporarily close business establishments for specified violations, such as failure to issue receipts or invoices, understatement of taxable sales, or failure to file VAT returns. However, the regulations require the conduct of a duly authorized surveillance for a minimum of 10 days before a taxpayer may be classified as a non-compliant taxpayer and before the issuance of a 48-Hour Notice, 5-Day Notice of Violation Conference (VCN), or Closure Order. Applying these rules, the Court held that the BIR violated the taxpayer’s right to due process because, although the Mission Order expressly directed the RO to conduct surveillance for violations of bookkeeping rules, the evidence showed that the supposed surveillance consisted only of a single 4-hour visit, which plainly failed to satisfy the mandatory 10-day surveillance period. The BIR likewise failed to present any written authority extending, shortening, or exempting compliance with the surveillance requirement. The Court further rejected the BIR’s reliance on a later regulation, explaining that while it prescribes procedures for the post-evaluation of point-of-sale (POS) machines, it neither supersedes nor dispenses with the surveillance requirements under a prior regulation governing business closures. Since the post-evaluation relied solely on extracted POS data without the benefit of the mandatory surveillance, it did not constitute substantial evidence of the BIR’s alleged violations. Absent the mandatory surveillance, the BIR could not validly be classified as a non-compliant taxpayer, thereby rendering the 48-Hour Notice, 5-Day VCN, and Closure Order void for lack of factual and procedural basis and in violation of the BIR’s constitutional right to due process [Commissioner of Internal Revenue v. Rebecca D. Duka, CTA EB No. 3050 (CTA Case No. 10393), December 22, 2025)
A PCL AND A FNBS MAY BE ASSAILED BEFORE THE CTA AS “OTHER MATTERS” UNDER THE TAX CODE AND ARE NOT SUBJECT TO THE PROTEST PROCEDURES APPLICABLE TO FLD/FANS. The Tax Code prescribes the procedure for protesting a tax assessment and provides that a taxpayer may file a request for reconsideration or reinvestigation within 30 days from receipt of a valid assessment, with the corresponding judicial appeal to the Court of Tax Appeals to be filed within 30 days from receipt of the denial of the protest or from the lapse of the 180-day period without action. However, this presupposes the existence of a valid assessment, which jurisprudence defines as a written notice containing not only the computation of the taxpayer’s tax liability but also a demand for payment within a specified period, together with the legal and factual bases of such assessment. Consistent with this, the regulations provide that the administrative protest is directed specifically against an FLD/FAN and not against mere collection notices or other BIR communications. In this case, the Court held that the taxpayer incorrectly applied the procedures when it filed requests for reinvestigation against the Preliminary Collection Letter (PCL) and Final Notice Before Seizure (FNBS). The Court found that these documents were not assessments because they did not contain the essential elements of a valid assessment, such as the computation of the alleged deficiency taxes, the legal and factual bases supporting the liability, and a formal demand for payment within a definite period. Rather, the PCL and FNBS were merely collection letters issued by the BIR arising from the taxpayer’s alleged failure to settle deficiency taxes based on a prior FAN, which the taxpayer claimed it never received. Thus, the taxpayer’s recourse was not to file a protest but to directly challenge the BIR’s collection action as an “other matters”, such action must be appealed to the CTA within 30 days from receipt of the assailed BIR decision or action. Since the taxpayer received the PCL on June 11, 2018 and the FNBS on June 26, 2018, it should have filed its Petition for Review not later than July 11, 2018 and July 26, 2018, respectively. Its filing only on April 8, 2019 was therefore made beyond the prescribed period, causing the loss of its statutory right to appeal and depriving the CTA of jurisdiction to entertain the case. Accordingly, the Court affirmed the dismissal of the petition for being filed out of time. [Encore Receivable Management, Inc. v. Commissioner of Internal Revenue, CTA EB No. 2937 (CTA Case No. 10062), November 11, 2025]
CTA EN BANC HAS NO JURISDICTION OVER INTERLOCUTORY ORDERS. The Court En Banc has exclusive appellate jurisdiction only over decisions or resolutions on motions for reconsideration or new trial rendered by the Court in Division in the exercise of its jurisdiction over cases arising from administrative agencies, such as the BIR. However, jurisprudence consistently distinguishes between final judgments, which fully dispose of a case and leave nothing more to be done by the court, and interlocutory orders, which do not finally resolve the parties’ rights and liabilities and merely address incidental matters while the main case remains pending. The Court En Banc has no jurisdiction to review interlocutory orders of the Court in Division because allowing such appeals would result in piecemeal litigation, multiplicity of appeals, and unnecessary delay in the resolution of the main case. In this case, although the assailed Resolution was issued in relation to the taxpayer’s Motion for Reconsideration, the Court in Division’s finding that the BIR’s right to assess was preliminarily barred by prescription did not constitute a final adjudication of the tax case. The Court in Division expressly characterized its finding as preliminary, granted only the suspension of collection, lifted the Warrant of Distraint and/or Levy, and prohibited collection of the deficiency VAT, without making a definitive ruling on the validity of the assessment, the Assessment Notices, or the FDDA. [Commissioner of Internal Revenue v. Perf Restaurants, Inc., CTA EB No. 3132 (CTA Case No. 11231), November 6, 2025]
BIR FINDINGS BASED ON TPI WITHOUT COMPLIANCE WITH REQUIREMENTS ARE VOID. The regulations require the BIR to verify TPI obtained through the Reconciliation of Listings for Enforcement (RELIEF) System before using it as the basis of a tax assessment. These issuances mandate the sending of confirmation requests to the identified TPI sources, the procurement of sworn statements attesting to the accuracy of the reported data, and, where the TPI sources are located outside the investigating office’s jurisdiction, the service of confirmation requests by registered mail with registered return cards before proceeding with the assessment. Applying these rules, the Court sustained the cancellation of the deficiency VAT assessment for alleged undeclared sales because the BIR failed to properly validate the RELIEF-generated TPI. Although the BIR relied on TPI indicating undeclared sales with a VAT tax base, the confirmation letters were sent to only four of the seven customers, only one confirmation letter was allegedly received, and, most significantly, the BIR failed to present any registered return cards proving that the confirmation requests had been served on customers located outside the jurisdiction of the investigating office. Thus, the TPI remained unverified and could not constitute competent factual basis for the assessment. [CIR v. BASF Philippines, Inc., CTA EB No. 2754 (CTA Case No. 10221); BASF Philippines, Inc. v CIR, CTA EB No. 2755. CTA Case No. 10221), November 12 2025]
WHEN A TAX ASSESSMENT IS BASED ON THIRD-PARTY INFORMATION (TPI), THE RO MUST VERIFY THE ALLEGED DISCREPANCIES BY ISSUING CONFIRMATION REQUESTS TO THE THIRD-PARTY SOURCE AND OBTAINING DULY EXECUTED SWORN STATEMENTS ATTESTING TO THE ACCURACY OF THE DATA BEFORE SUCH INFORMATION MAY SERVE AS THE FACTUAL BASIS OF AN ASSESSMENT. Presumption of correctness of a tax assessment applies only when it is supported by actual facts and credible evidence, and cannot rest on unverified or self-serving data. Applying these principles, the Court held that the assessment for unsupported purchases was void because the BIR merely relied on system-generated TPI data comparing the taxpayer’s Summary List of Purchases with its supplier’s reported sales, without presenting duly notarized sworn statements or other competent evidence confirming the alleged discrepancies. The BIR’s reliance on the absence of a response from third-party sources was insufficient, rendering the assessment arbitrary and without factual foundation. [The Table Group Inc., represented by Mr. Walden Chu v. Commissioner of Internal Revenue (CTA Case No. 11091, November 12, 2025); see also CIR v. BASF Philippines, Inc., CTA EB No. 2754 (CTA Case No. 10221); BASF Philippines, Inc. v CIR, CTA EB No. 2755. (CTA Case No. 10221), November 12 2025]
BIR MAY ASSESS TAXPAYER BASED ON UNACCOUNTED SOURCE OF CASH. Tax assessments are presumed correct and made in good faith, and the burden rests upon the taxpayer to prove by substantial evidence that the assessment is erroneous; bare allegations, unsupported by competent documentary evidence, have no probative value and cannot overcome the presumption of correctness. Applying these principles, the Court sustained the assessment for an unaccounted source of cash because the BIR established a discrepancy between the additions to property and equipment reflected in the taxpayer’s Notes to the Audited Financial Statements and its Statement of Cash Flows, while the taxpayer’s explanation that the difference pertained to inventory purchases made in 2017 and later transferred to property and equipment was unsupported by any documentary evidence. Consequently, the taxpayer failed to discharge its burden of proving that the assessment was erroneous. (The Table Group Inc., represented by Mr. Walden Chu v. Commissioner of Internal Revenue, CTA Case No. 11091, November 12, 2025)
PRODUCTIVITY INCENTIVES GRANTED TO RANK-AND-FILE AND SUPERVISORY EMPLOYEES ARE SUBJECT TO WITHHOLDING TAX, NOT FBT; AN RO CANNOT VALIDLY SUBJECT THE ENTIRE AMOUNT TO FBT WITHOUT DETERMINING CLASSIFICATION OF EMPLOYEE. FBT applies only to fringe benefits granted by an employer to managerial or supervisory employees, while benefits given to rank-and-file employees, as well as certain de minimis benefits and productivity incentives within the limits prescribed by regulations, are excluded from FBT. In this case, the BIR assessed the taxpayer deficiency FBT on productivity incentives and bonuses, alleging that the taxpayer failed to withhold FBT on these payments. The taxpayer, however, established that the amounts represented productivity bonuses granted under its Efficiency Productivity System (EPS), which were subjected to withholding tax on compensation, and submitted its Guidance Document on the Productivity Point System showing that the incentives were granted to both rank-and-file and supervisory employees who exceeded production standards. The Court found that the revenue officer improperly subjected the entire amount to FBT without determining whether the recipients were managerial, supervisory, or rank-and-file employees, despite the exclusion of rank-and-file employees from FBT coverage. Moreover, the revenue officer’s testimony revealed uncertainty as to the proper tax treatment of productivity incentives, admitting that such incentives should instead be treated as compensation subject to withholding tax. Since the BIR failed to present evidence proving that the entire amount of incentives was exclusively granted to managerial or supervisory employees or otherwise fell within the scope of taxable fringe benefits, the assessment lacked sufficient factual and legal basis. Accordingly, the Court cancelled the deficiency FBT assessment against the taxpayer (Somnomed Philippines, Inc. v. CIR, CTA Case NO. 10845, March 19, 2026)
THE BIR CANNOT VALIDLY DISALLOW ADMINISTRATIVE SALARIES AND WAGES EXPENSES IF THE TAXPAYER IS AVAILING OF 5% GIT. An enterprise availing of the five percent (5%) Gross Income Tax (GIT) incentive is subject to tax based on its gross income earned, which refers to gross sales or revenues derived from business activities within the ecozone, less sales discounts, returns, allowances, and cost of sales or direct costs. Unlike ordinary taxpayers, administrative, marketing, selling, operating expenses, and incidental losses are not deducted in determining the taxable base under the GIT regime. In this case, the BIR disallowed salaries, wages, and benefits that were purportedly not subjected to withholding tax, after reconciling the taxpayer’s salaries and benefits per its Income Tax Return and Audited Financial Statements against its Monthly Remittance Returns of Income Taxes Withheld on Compensation. The taxpayer argued that the alleged deficiency had no effect on its tax liability considering that it was a PEZA-registered export manufacturing enterprise subject to the five percent (5%) GIT regime. The Court found merit in the taxpayer’s position, holding that the disallowance pertained to operating expenses and, therefore, could not affect the computation of the taxpayer’s GIT liability because such expenses are not deductible in arriving at gross income earned. Hence, there was no basis to sustain the BIR’s adjustment since the taxpayer sufficiently explained the discrepancy and the BIR failed to establish that the alleged non-withholding resulted in any deficiency tax liability. Accordingly, the assessment for disallowed salaries, wages, and benefits due to alleged non-withholding was cancelled for lack of factual and legal basis (Somnomed Philippines, Inc. v. CIR, CTA Case NO. 10845, March 19, 2026)
MEAL EXPENSES CAN BE DEDUCTED UNDER GIT REGIME IF SUBSTANTIATED AND TAXPAYER PROVED THAT THEY WERE INCURRED DIRECTLY RELATED TO PRODUCTION ACTIVITIES. Deductions from gross income must be supported by sufficient evidence, such as official receipts, invoices, and other relevant accounting records, to establish the fact, amount, and business purpose of the claimed expense. For PEZA-registered enterprises availing of the five percent (5%) GIT incentive, only costs of sales or direct costs are considered in arriving at gross income earned, while administrative, selling, marketing, and other operating expenses are excluded from the computation of the taxable base. Here, the Court found that the taxpayer had established that meal expenses were incurred and were directly related to its production activities, thereby forming part of its cost of sales and allowable direct costs under the GIT regime. The Court further considered the examination conducted by the taxpayer’s independent CPA of the supporting official receipts and invoices and determined that the majority of the claimed meal expenses were adequately substantiated. Nevertheless, the Court held that some expenses could not be allowed because they were either unsupported by sufficient documents, covered only by defective receipts, or could not be properly linked to the taxpayer’s business operations. (Somnomed Philippines, Inc. v. CIR, CTA Case NO. 10845, March 19, 2026)
TO EXCLUDE REIMBURSEMENTS RECORDED AS RECEIVABLES FROM UNDECLARED INCOME, THE TAXPAYER MUST PRESENT SUFFICIENT SUPPORTING EVIDENCE; MERE SCHEDULES DO NOT SUFFICE. All income from whatever source derived is taxable unless specifically excluded by law, and a taxpayer claiming that certain receipts constitute non-taxable reimbursements or a mere return of capital bears the burden of proving such claim through competent and sufficient evidence. Applying this rule, the Court sustained the deficiency assessment for undeclared income after the BIR compared the taxpayer’s VAT returns, annual income tax return, and trade receivables, revealing a discrepancy in reported income. The taxpayer’s contention that the trade receivables included reimbursements of airfare, visa fees, training, medical, and other pre-employment expenses advanced on behalf of its foreign clients was rejected because the schedules of trade and non-trade receivables it submitted merely reflected a breakdown of receivable balances and did not specifically trace or identify the alleged reimbursements. In addition, the schedules were unsupported by sufficient documentary evidence to verify their accuracy and reliability. (Supply Oilfield & Marine Personnel Services, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11048, December 17, 2025)
THE BIR MAY RELY ON THE PARTIES’ AGREEMENT TO DETERMINE A TAXPAYER’S REVENUE BY GROSSING UP THE INCOME PAYMENT BASED ON A PERCENTAGE OF SALES. All income from whatever source derived is taxable unless expressly excluded by law, and the taxpayer has the burden of proving, by competent and sufficient evidence, that the Commissioner’s assessment is erroneous or that the amounts assessed are not subject to income tax. Applying this rule, the Court upheld the deficiency assessment for undeclared income after the BIR recomputed the taxpayer’s sales based on the Trademark License Agreement which obligated the taxpayer to pay a royalty fee equivalent to 1% of its total sales, and found that the resulting sales exceeded those reported in the taxpayer’s income tax return. The Court rejected the taxpayer’s argument that the assessment was based on mere assumptions and that no undeclared income existed after accounting for an alleged over-recording of fees and deducting withholding taxes. It found that the Trademark License Agreement expressly provided only that total sales should be computed net of VAT or similar sales taxes and contained no provision authorizing the deduction of withholding taxes or showing that the taxpayer had contractually assumed such taxes. Likewise, the taxpayer’s claim of an over-recording of expenses was unsupported by receipts or other competent documentary evidence. In the absence of sufficient proof to substantiate its adjustments or disprove the BIR’s computation, the taxpayer failed to overcome the presumption of correctness of the assessment. (Supply Oilfield & Marine Personnel Services, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11048, December 17, 2025)
ARTICLES OF PARTNERSHIP AND BOA ACCREDITATION ARE INSUFFICIENT, BY THEMSELVES, TO PROVE THAT PAYMENTS TO A GENERAL PROFESSIONAL PARTNERSHIP (GPP) ARE EXEMPT FROM INCOME TAX; PROOF OF PAYMENT IS LIKEWISE REQUIRED. A taxpayer claiming that payments to GPPs are not subject to withholding tax must substantiate both the status of the recipients and the actual payments made. Applying these principles, the Court sustained the deficiency EWT assessment on the disallowed professional fees as the taxpayer merely submitted the Articles of Partnership of Magsalin, Magsalin, and Associates and the Board of Accountancy Certificate of Accreditation of Isla Lipana & Co., but failed to present invoices, official receipts, payment vouchers, or other documentary evidence establishing that the questioned professional fees were actually paid to these GPPs. (Supply Oilfield & Marine Personnel Services, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11048, December 17, 2025)
A TAXPAYER CANNOT ESTABLISH THE INCOME TAX EXEMPTION OF PAYMENTS MADE TO NRFC SOLELY THROUGH A SEC CERTIFICATE OF NON-REGISTRATION AND A BIR RULING THAT IS NOT SPECIFICALLY APPLICABLE TO THE TAXPAYER. A taxpayer claiming that payments to non-resident foreign corporations (NRFC) are exempt from Philippine income tax and withholding tax must establish through competent documentary evidence that the recipients are non-resident foreign corporations not engaged in trade or business in the Philippines and that the income is not derived from Philippine sources. Applying these principles, the Court sustained the deficiency EWT assessment on the disallowed professional fees. Although the taxpayer claimed that the amounts represented payments to Newrest Group International SAS and Newrest Group Services for consultancy services allegedly rendered outside the Philippines, it failed to prove that these entities qualified as non-resident foreign corporations, as the SEC Certificate of Non-Registration submitted for Newrest Group International SAS merely showed that it was not registered in the Philippines and did not establish its foreign corporate status. The Court likewise ruled that the taxpayer could not rely on a BIR ruling because it was issued exclusively in favor of Newrest Group Holding SL, and the taxpayer presented no evidence showing that its coverage extended to Newrest Group International SAS or Newrest Group Services. Moreover, the Court held that the Consultancy Agreement alone, although stating that Pocomwell Ltd. was organized under the laws of Hong Kong, was insufficient to establish its NRFC status, as the taxpayer failed to present a Certificate of Non-Registration from the SEC, proof of incorporation or registration in Hong Kong, a tax residence certificate, or any other competent evidence demonstrating that Pocomwell Ltd. was not engaged in trade or business in the Philippines. (Supply Oilfield & Marine Personnel Services, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11048, December 17, 2025)
LOCAL TREASURER’S FAILURE TO ACT WITHIN 60 DAYS FROM THE FILING OF A PROTEST IS DEEMED A DENIAL BY INACTION; AN APPEAL FILED BEYOND THE 60-DAY PERIOD IS OUT OF TIME. A taxpayer must appeal to the proper court within 30 days either from receipt of the local treasurer’s denial issued within the 60-day period to resolve the protest or, if no action is taken within that period, from the lapse of the 60-day period, as the treasurer’s inaction constitutes a deemed denial; failure to perfect the appeal within the prescribed period renders the assessment final, conclusive, and unappealable. Applying this rule, although the taxpayer timely protested, the local treasurer failed to act within the 60-day period, resulting in a deemed denial on May 12, 2019, from which the taxpayer had only until June 11, 2019 to file its appeal. Since the appeal was filed only on June 13, 2019, it was filed out of time, rendering the assessment final, executory, and unappealable, and the subsequent receipt of the actual denial on May 14, 2019 did not extend or reset the appeal period. [Public Safety Mutual Benefit Fund, Inc., represented by its President Emmanuel B. Peralta v. Rosette F. Laquian, Acting City Treasurer, San Juan City, CTA EB No. 3003 (CTA AC No. 245), December 22, 2025]
BIR FORM 2307 SUPPORTS INCOME TAX CREDITS. A taxpayer claiming CWT as tax credits must substantiate the claim with the corresponding BIR Form 2307 or certificates of creditable tax withheld; otherwise, the claimed tax credits may be disallowed. Applying these provisions, the Court sustained the BIR’s disallowance of the taxpayer’s claimed CWT because the taxpayer failed to present the required CWT certificates. (The Table Group Inc., represented by Mr. Walden Chu v. Commissioner of Internal Revenue, CTA Case No. 11091, November 12, 2025)
CGT CANNOT BE VALIDLY CLAIMED AS DEDUCTION FROM INCOME TAX. Although taxes paid or incurred in connection with the taxpayer’s trade or business are generally deductible from gross income, income taxes imposed under the Tax Code, including CGT, are expressly excluded from allowable deductions. Applying this provision, the Court sustained the BIR’s disallowance of the taxpayer’s claimed deduction representing CGT, holding that CGT is a final income tax and, by law, constitutes a non-deductible expense. (The Table Group Inc., represented by Mr. Walden Chu v. Commissioner of Internal Revenue, CTA Case No. 11091, November 12, 2025)
A CGT ASSESSMENT IS SUSTAINED WHERE THE TAXPAYER PRESENTS A DOCUMENT SHOWING A DIFFERENT BUYER THAN THE ONE IDENTIFIED BY THE BIR AND FAILS TO ESTABLISH THAT THE TWO BUYERS ARE RELATED PARTIES.
A CGT shall be paid upon the filing of the prescribed return, and the taxpayer claiming payment or exemption bears the burden of proving compliance through competent and admissible evidence. Here, the Court sustained the BIR’s deficiency CGT assessment arising from the taxpayer’s sale of 50% of its shares. Although the taxpayer maintained that the CGT had already been paid and submitted a Deed of Absolute Sale, BIR Form No. 1707 (CGT Return), and a Land Bank BIR payment slip, the Court held that these documents could not be considered because they were not admitted in evidence after the taxpayer failed to present their originals for comparison. The Court further ruled that, even if admitted, the documents would still be insufficient to establish that the CGT payment related to the transaction assessed by the BIR, since the assessment involved the sale of shares to Southern Capital, whereas the submitted documents pertained to Sufficient Grace PTE. Ltd. The taxpayer’s assertion that Sufficient Grace and Southern Capital were related entities likewise remained unsubstantiated, as no documentary evidence proving their relationship was presented. Significantly, the taxpayer’s own witness admitted during cross-examination that no proof of the relationship between the two corporations had been submitted during the administrative proceedings and merely committed to present additional evidence in the future. Accordingly, the taxpayer failed to establish either that the CGT had been paid on the transaction subject of the assessment or that the payment allegedly made in connection with Sufficient Grace corresponded to the sale of shares to Southern Capital. (The Table Group Inc., represented by Mr. Walden Chu v. Commissioner of Internal Revenue, CTA Case No. 11091, November 12, 2025)
SALE OF SHARES RESULTING IN A CHANGE IN OWNERSHIP DOES NOT GIVE RISE TO A DEEMED SALE OF INVENTORY FOR VAT PURPOSES; DEEMED SALE APPLIES ONLY WHEN THE BUSINESS CEASES OPERATIONS. VAT may be imposed on transactions deemed sale only in the specific instances enumerated by law, including retirement from or cessation of business with respect to inventories on hand. Jurisprudence likewise clarifies that a “change of ownership of business” constitutes a deemed sale only when it occurs as an incident of the taxpayer’s retirement from or cessation of business, and not merely because of a restructuring or disposition of assets. Applying these principles, the Court held that the BIR had no factual or legal basis for assessing VAT on the taxpayer’s inventories. Although the taxpayer reduced its ownership in its subsidiary through the sale of shares, the Court found that this transaction did not constitute a change in the taxpayer’s line of business from coffee manufacturing to a holding company. The taxpayer’s Amended Articles of Incorporation expressly authorized it not only to manufacture and sell coffee products but also, under its secondary purposes, to invest in other corporations. Thus, the sale of its investment was consistent with its corporate purposes and did not amount to a retirement from or cessation of business. Since the taxpayer continued its operations and none of the statutory circumstances giving rise to a deemed sale were present, the assessment for deficiency VAT on inventories was declared without factual and legal basis and was accordingly cancelled. (The Table Group Inc., represented by Mr. Walden Chu v. Commissioner of Internal Revenue, CTA Case No. 11091, November 12, 2025)
TO ESTABLISH THAT A SALE IS VAT-EXEMPT, THE TAXPAYER MUST PRESENT THE CERTIFICATE OF REGISTRATION AND TAX EXEMPTION (CRTE), WHICH MUST BE FORMALLY OFFERED AND ADMITTED IN EVIDENCE. A taxpayer claiming VAT-exempt sales bears the burden of proving its entitlement to the exemption through competent and admissible evidence. Correspondingly, the allocation of input tax to exempt sales applies only where the taxpayer has sufficiently established that such sales are indeed VAT-exempt. Applying these principles, the Court upheld the BIR’s deficiency VAT assessment on the taxpayer’s alleged unsupported VAT-exempt sales. Although the taxpayer claimed that certain sales were VAT-exempt and asserted that it had presented a CRTE issued by the Subic Bay Metropolitan Authority (SBMA), the records showed that it submitted only a photocopy of the CRTE, which the Court had previously denied admission as evidence. In the absence of any competent and admissible proof establishing the VAT-exempt status of the transactions, the taxpayer failed to substantiate its claim of exempt sales. Consequently, the Court likewise rejected the BIR’s adjustment disallowing as input tax allocable to exempt sales, holding that since the alleged exempt sales were not proven and were instead treated as taxable sales, there was no basis to allocate or deduct any portion of the allowable input tax as attributable to exempt sales. (The Table Group Inc., represented by Mr. Walden Chu v. Commissioner of Internal Revenue, CTA Case No. 11091, November 12, 2025)
VAT INVOICING REQUIREMENTS ARE ALSO APPLICABLE IN ASSESSMENT CASES AND NOT CONFINED TO CLAIMS FOR VAT REFUNDS. A taxpayer may claim creditable input VAT only when the same is supported by a valid VAT invoice or official receipt issued in accordance with the statutory invoicing requirements. Mandatory information that must appear on such document includes the seller’s VAT registration details, TIN, amount of VAT, date of transaction, description of goods or services, and other relevant particulars. In this case, the taxpayer argued that the strict enforcement of invoicing requirements should only apply to VAT refund claims and not to tax assessment proceedings. The Court En Banc, however, rejected this contention, holding that the law makes no distinction between refund cases and assessment cases in requiring compliance with invoicing rules. The Court ruled that the same statutory requirements govern all instances where a taxpayer seeks recognition of input VAT, whether as a credit against output VAT in an assessment case or as the basis for a refund claim. Thus, the validity of input VAT depends upon strict compliance with the invoicing requirements imposed by law, and a taxpayer cannot invoke a more lenient standard merely because the issue arises in an assessment proceeding rather than a refund application. [CIR v. BASF Philippines, Inc., CTA EB No. 2754 (CTA Case No. 10221); BASF Philippines, Inc. v CIR, CTA EB No. 2755. CTA Case No. 10221), November 12 2025]
MERE FAILURE TO DECLARE IMPORTATIONS OR PAY THE CORRESPONDING INPUT VAT CANNOT, BY ITSELF, ESTABLISH THE EXISTENCE OF UNDECLARED SALES SUBJECT TO OUTPUT VAT. VAT shall be imposed on every sale, barter, or exchange of goods or properties, and shall be paid by the seller or transferor based on the gross selling price or gross value in money of the goods or properties sold. Thus, before a transaction may be subjected to output VAT, there must first be sufficient proof that a taxable sale, barter, or exchange actually occurred. Importation, standing alone, does not constitute a sale transaction, and the mere failure to declare importations or pay the corresponding input VAT cannot, by itself, establish the existence of undeclared sales subject to output VAT. Applying these principles, the Court upheld the cancellation of the deficiency VAT assessment arising from the alleged undeclared sales attributed to unaccounted importations. The BIR alleged that discrepancies existed between the importation figures in the VAT returns and the importation data obtained from the Bureau of Customs, resulting in alleged undeclared importations reflected in its Summary List of Importations (SLI). Using the Cost Ratio Method, the BIR extrapolated these alleged unreported importations into presumed undeclared sales and imposed deficiency output VAT. However, the Court ruled that the BIR’s conclusion was based merely on an inference that imported goods necessarily resulted in sales, without presenting independent and competent evidence proving that such goods were actually sold in the course of the taxpayer’s business. No sales invoices, official receipts, inventory records, or other documentary evidence were presented to establish the occurrence and amount of the alleged taxable sales. Since VAT liability cannot arise from a presumption of sale based solely on importation discrepancies, the BIR failed to establish the factual basis for the assessment. Accordingly, the Court held that the deficiency VAT assessment was properly cancelled for lack of sufficient factual and evidentiary support. [CIR v. BASF Philippines, Inc., CTA EB No. 2754 (CTA Case No. 10221); BASF Philippines, Inc. v CIR, CTA EB No. 2755. CTA Case No. 10221), November 12 2025]
EXCESS INPUT VAT CREDITS FROM PRIOR PERIODS MUST BE PROVED BY SUFFICIENT DOCUMENTARY EVIDENCE. A taxpayer is allowed to claim input VAT credits only to the extent that such credits are properly substantiated and remain available for application against output VAT. A taxpayer claiming excess input VAT credits carried over from prior periods bears the burden of proving, through sufficient documentary evidence, that the credits were validly earned, properly recorded, and remained unutilized in subsequent taxable periods. In this case, the Court En Banc sustained the disallowance of claimed excess input VAT credits which it sought to apply against its assessed deficiency VAT liability. The Court found that the taxpayer failed to present adequate evidence showing that the alleged excess input VAT credits from prior periods had not yet been applied or exhausted and were still available for carry-over. [CIR v. BASF Philippines, Inc., CTA EB No. 2754 (CTA Case No. 10221); BASF Philippines, Inc. v CIR, CTA EB No. 2755. CTA Case No. 10221), November 12 2025]
ABSENCE OF FORMAL DEBT INSTRUMENT DOES NOT PRECLUDE IMPOSITION OF DST. DST is an excise tax imposed on the transaction itself rather than on the document evidencing it. Thus, loan agreements and similar transactions are subject to DST regardless of the form of the documentation, and the taxpayer bears the burden of proving either that the transaction is not subject to DST or that the corresponding tax has been properly remitted. The Court applied prevailing jurisprudence holding that the absence of formal debt instruments does not preclude the imposition of DST because the tax attaches to the loan transaction itself and not to the document evidencing it. Since the taxpayer neither disputed the existence of the advances nor presented proof that the corresponding DST had been paid, the Court sustained the deficiency DST assessment in full. (The Table Group Inc., represented by Mr. Walden Chu v. Commissioner of Internal Revenue, CTA Case No. 11091, November 12, 2025)
DST RETURN AND PROOF OF PAYMENT TO THE BIR CONSTITUTE THE BEST EVIDENCE OF PAYMENT OF DOCUMENTARY STAMP TAX; CHECK VOUCHERS ALONE ARE INSUFFICIENT. A DST is imposed on taxable documents and transactions, including lease agreements and certain advances, and the taxpayer asserting that the DST has already been paid or remitted bears the burden of proving actual payment to the BIR through competent and credible documentary evidence. Applying this rule, the Court sustained the deficiency DST assessment after the BIR found that the taxpayer failed to file and pay DST on its lease agreements and advances from related parties, as disclosed in its audited financial statements and supplementary information submitted to the BIR. Although the taxpayer maintained that it had already shouldered the DST by remitting the corresponding amounts to the other contracting parties for payment to the BIR, the Court held that such assertion was unsupported by sufficient proof. The lease agreement confirmed that the taxpayer was contractually liable for the DST, and while the corresponding check voucher showed payment its lessor, the taxpayer failed to present any documentary evidence, such as a DST return or proof of payment to the BIR, establishing that the lessor actually remitted the tax. Similarly, the check vouchers submitted to support the alleged payment on advances from related parties merely evidenced insurance-related payments and bore no relation to the payment or remittance of DST on the advances in question. (Supply Oilfield & Marine Personnel Services, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11048, December 17, 2025)
DST TO BE CLAIMED AS DEDUCTIBLE MUST BE SUPPORTED BY PROOF OF TAX PAYMENT. No deduction from gross income shall be allowed unless the taxpayer substantiates the claimed expense with sufficient evidence, such as official receipts or other adequate records, establishing both the amount of the expense and its direct connection to the taxpayer’s business. Banks and other specified financial institutions are responsible for remitting DST when they are parties to a taxable transaction. Applying these principles, the Court sustained the BIR’s disallowance of the taxpayer’s claimed DST expense. Although the taxpayer argued that the DST had already been withheld and remitted by the banks involved in its loan transactions, it failed to present competent evidence proving that the transactions were indeed entered into with banks or that the corresponding DST had actually been remitted. In the absence of adequate documentary support to substantiate the deduction and rebut the presumption of correctness of the assessment, the Court upheld the disallowance of the claimed DST expense. (The Table Group Inc., represented by Mr. Walden Chu v. Commissioner of Internal Revenue, CTA Case No. 11091, November 12, 2025)
BIR DEADLINES FROM JULY 13, 2026 TO JULY 19, 2026. A gentle reminder on the following deadlines, as may be applicable:
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DATE
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FILING / SUBMISSION
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July 13, 2026
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E-FILING – BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) – eFPS Filers under Group C. Month of June 2026
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July 14, 2026
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E-FILING – BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) – eFPS Filers under Group B. Month of June 2026
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July 15, 2026
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REGISTRATION (Online thru ORUS or Manual) – Permanently Bound Loose-Leaf Books of Account/Invoices and Other Accounting Records. Fiscal Year ending June 30, 2026
SUBMISSION – List of Medical Practitioners – For the Quarter ending June 30, 2026
SUBMISSION – Quarterly List (with Monthly Breakdown) of Contractors of Gov’t. Contracts entered into by the Provinces/Cities/Municipalities/Barangays – For the Quarter ending June 30, 2026
E-FILING & PAYMENT (Online/Manual) – BIR Form 1702-RT/1702-EX/1702-MX – Fiscal Year ending March 31, 2026
E-FILING & PAYMENT (Online/Manual) – BIR Form 1707-A (Annual Capital Gains Tax Return for Onerous Transfer of Shares of Stock Not Traded Through the Local Stock Exchange) – by Corporate Taxpayers. Fiscal Year ending March 31, 2026
E-FILING & PAYMENT (Online/Manual) – BIR Form 2200-M (Excise Tax Return for Mineral Products) – For the Quarter ending June 30, 2026
E-FILING & E-PAYMENT – BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) – eFPS Filers under Group A. Month of June 2026
E-PAYMENT – BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) – eFPS Filers under Group E, D, C & B. Month of June 2026
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July 16, 2026
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SUBMISSION – Consolidated Return of All Transactions based on the Reconciled Data of Stockbrokers. July 1–15, 2026
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