(Update) Decemeber 5 2025 Tax Updates

COURT OF TAX APPEALS DECISIONS

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

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

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

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

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

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

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

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

BUREAU OF INTERNAL REVENUE ISSUANCES

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

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

Revenue Memorandum Circular No. 092-2025

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

Revenue Memorandum Order No. 046-2025

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

BIR RULINGS 

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

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

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