COURT OF TAX APPEALS DECISIONS
EXEMPTION FROM RPT INVOLVES MIXED QUESTIONS OF LAW AND FACT; DISPUTE REQUIRES PAYMENT UNDER PROTEST. The proper procedure for contesting a real property tax (RPT) assessment depends on the nature of the issues raised. Where the dispute involves the correctness or reasonableness of the assessment, including claims of tax exemption that require factual determination, the taxpayer must first comply with the following administrative remedies: pay the assessed tax under protest, file a protest with the local treasurer, and, if denied, appeal successively to the Local Board of Assessment Appeals (LBAA), the Central Board of Assessment Appeals (CBAA), and finally the CTA En Banc. Direct recourse to the courts is allowed only where the assessment is illegal and the issues raised are purely legal, without requiring the evaluation of evidence. Thus, the Court found that the taxpayer’s challenge – asserting that its electrical poles and distribution transformers were exempt from RPT because they were not taxable real property and were not exclusively used by the taxpayer – involved mixed questions of law and fact requiring factual evaluation by the LBAA. Despite receiving the notice of assessment and subsequent collection notices, the taxpayer neither paid the assessment under protest nor pursued the mandatory administrative remedies before the LBAA and CBAA. Instead, it directly filed an action before the Regional Trial Court, rendering the assessment final and executory for failure to exhaust administrative remedies. Accordingly, the CTA En Banc denied the petition and affirmed the CTA Division’s ruling. [Manila Electric Company (MECO) v. Municipality of Cordova, CTA EB No. 2957 (CTA AC No. 258), February 2, 2026]
WHILE REAL PROPERTY OWNED BY THE GOVERNMENT IS EXEMPT FROM RPT, THE CONCESSIONAIRE/OPERATOR IS LIABLE FOR RPT UNDER THE BENEFICIAL USE DOCTRINE BECAUSE IT HAD POSSESSION, CONTROL, AND EXCLUSIVE ECONOMIC BENEFIT FROM OPERATING THE TOLLWAY, AND NO LAW EXPRESSLY GRANTED IT A TAX EXEMPTION; TAX DECLARATION SHOULD BE ISSUED UNDER THE NAME OF THE OPERATOR. While real property owned by the Republic of the Philippines is generally exempt from RPT, the exemption does not apply when the beneficial use of the property has been granted, for consideration or otherwise, to a taxable person. The “beneficial use principle” imposes RPT liability on the taxable entity that actually possesses, controls, and derives economic benefit from the government property, regardless of legal ownership. Applying these principles, the Court held that the taxpayer, as the operator of the STAR Tollway under the Toll Concession Agreement (TCA) and Operations and Maintenance Agreement (OMA), had beneficial use of the subject property because it exercised possession and control over the tollway, collected and owned the toll revenues, and operated the facility for its own revenue-generating business. The Court rejected taxpayer’s argument that the public enjoyed the beneficial use, explaining that only paying toll road users could access the facility and that the taxpayer could deny entry to non-paying motorists, demonstrating its exclusive control and economic benefit. The Court further ruled that the government’s supervisory powers through the Toll Regulatory Board did not negate the taxpayer’s beneficial use, as such oversight merely ensured compliance with the concession agreements. Moreover, the taxpayer failed to identify any law granting it exemption from RPT, and the TCA and OMA expressly obligated the concessionaire and operator to pay all taxes unless specifically exempted by law, reinforcing the rule that tax exemptions must be clearly and expressly granted. Consequently, the City Assessor correctly issued the tax declaration in the taxpayer’s name, which requires government-owned property subject to beneficial use by a taxable person to be assessed in the name of the possessor or grantee. Accordingly, the Court sustained the RPT assessment and denied the petition [South Luzon Tollway Corporation v. City Assessor of Lipa, et al., CTA EB No. 2943 (CBAA Case No. L-145-2020), February 4, 2026]
AN INDEPENDENT POWER PRODUCER UNDER A BOT CONTRACT WITH A GOCC THAT HAD ALREADY PAID VALID RPT WAS ENTITLED TO A REFUND OF THE EXCESS RPT RESULTING FROM THE STATUTORY REDUCTION; NO SEPARATE WRITTEN REFUND CLAIM WAS REQUIRED. A taxpayer may file a written claim for refund or credit of RPT and interests only when an assessment is found to be illegal or erroneous and the tax is thereafter reduced or adjusted. In this case, the Supreme Court had already ruled that the RPT assessments imposed by the Province of Nueva Vizcaya against CE Casecnan Water and Energy Company, Inc. were valid, although the amount payable must be recomputed. The law provides for the reduction and condonation of RPT liabilities, including special levies, penalties, and interests, on properties, machinery, and equipment actually and directly used by independent power producers (IPPs) in the production of electricity under build-operate-transfer (BOT) contracts with government-owned or controlled corporations (GOCCs). Since CE Casecnan was an IPP that entered into a BOT agreement with the National Irrigation Administration (NIA), a GOCC, it was entitled to the benefits of the law. The Supreme Court further held that the reduced RPT amount should be deducted from the amount already paid by CE Casecnan, even though the taxes had already been settled, because the law does not distinguish between unpaid liabilities and taxes already paid at the time of its effectivity. Accordingly, the Supreme Court remanded the case to the Central Board of Assessment Appeals (CBAA) to determine the refundable amount, if any. The Court En Banc held that CE Casecnan was not required to file a separate written claim for refund under Section 253 of the LGC, because the refund arose directly from the final and executory judgment of the Supreme Court, and requiring another claim would result in the re-litigation of issues already conclusively resolved and would violate the doctrine of immutability of final judgments. The CBAA therefore correctly proceeded to compute the refund and determined that CE Casecnan was entitled to refund. The Court sustained the CBAA’s factual findings, recognizing that the CBAA was in the best position to evaluate the documents and records submitted by the parties, and found no grave abuse of discretion in its determination. (Province of Nueva Vizcaya v. CE Casecnan Water and Energy Company, Inc., CTA EB Case No. 2979, February 12, 2026)
A CITY’S AUTOMATIC INCREASE OF ITS LFT RATE FROM 50% OF 1% TO 75% OF 1% IN THE SAME REVENUE ORDINANCE WAS VOID BECAUSE TAX RATE INCREASES MUST BE MADE THROUGH A SUBSEQUENT ORDINANCE, NOT MORE THAN ONCE EVERY FIVE YEARS, AND BY NO MORE THAN 10% OF THE PREVAILING RATE, RESULTING IN THE CANCELLATION OF THE ADDITIONAL LFT ASSESSMENTS. While cities may impose a local franchise tax (LFT) of up to 75% of 1% of gross annual receipts, any increase in tax rates must comply with the law by being effected through a subsequent tax ordinance, imposed not more often than once every five years, and limited to a maximum 10% adjustment from the prevailing rate. Applying these principles, the CTA held that the City’s automatic increase of the LFT rate from 50% of 1% to 75% of 1%, contained in the same revenue ordinance, was ultra vires and invalid because the adjustment was not made through a separate ordinance and exceeded the allowable 10% increase from the existing tax rate. Consequently, the CTA reversed the RTC, declared the franchise tax adjustment void, and cancelled the additional LFT assessments (Manila Electric Company v. San Jose del Monte City et. al., CTA AC No. 329, November 12, 2025)
A MUNICIPALITY VALIDLY INCREASED THE LBT RATE ON CONTRACTORS FROM 0.55% TO 0.60% BECAUSE THE ADJUSTMENT WAS MADE SIXTEEN YEARS AFTER THE PREVIOUS ORDINANCE AND DID NOT EXCEED THE 10% INCREASE LIMIT PRESCRIBED BY THE LOCAL GOVERNMENT CODE. Local government units may adjust tax rates not more than once every five years, provided that the increase does not exceed ten percent (10%) of the rates fixed under the existing ordinance. Jurisprudence likewise clarifies that the 10% limitation is reckoned from the tax rate imposed under the immediately preceding valid tax ordinance. Applying these principles, the Court found that the Municipality of Pagbilao validly increased the local business tax (LBT) rate on contractors from 55% of 1% (0.55%) under the 2001 Revised Revenue Code to 60% of 1% (0.60%) under the 2017 Revised Revenue Code, as the ordinances were enacted sixteen years apart and the 0.05% increase was within the allowable 10% ceiling of the previous rate. Accordingly, the Court upheld the validity and legality of the contractor’s LBT rate under the 2017 Revised Revenue Code. (The Municipality of Pagbilao, Shierre Ann Portes-Palicpic, in her capacity as Municipal Mayor of the Municipality of Pagbilao, and Rizalino P. Tina, in his capacity as Assistant Municipal Treasurer of the Municipality of Pagbilao v. Team Energy Corporation, CTA AC Case No. 350, March 13, 2026)
A NON-STOCK, NON-PROFIT MUTUAL BENEFIT ASSOCIATION PROVIDING WELFARE BENEFITS EXCLUSIVELY TO ITS MEMBERS IS NOT AN INSURANCE COMPANY OR OTHER FINANCIAL INSTITUTION UNDER THE INSURANCE CODE AND, ABSENT AN EXPRESS STATUTORY IMPOSITION, IS NOT SUBJECT TO LBT WARRANTING THE REFUND OF THE ERRONEOUSLY COLLECTED LBT. LBT may be imposed only on businesses operated for profit and on banks and other financial institutions, including insurance companies, as defined under applicable laws. The Insurance Code expressly excludes mutual benefit associations (MBAs) from the definition of insurance companies, and the Department of Finance likewise recognizes that MBAs are not insurance companies subject to LBT. Applying these provisions, the CTA found that the taxpayer is a duly organized non-stock, non-profit mutual benefit association whose primary purpose is to provide financial assistance, retirement, and welfare benefits to its members, who are personnel of public safety offices, and not to engage in commercial or profit-making insurance business. Its Articles of Incorporation and By-Laws established that its operations are conducted solely for the mutual benefit of its members and not as a means of livelihood or with a view to profit. Consequently, the taxpayer is neither an insurance company nor any other financial institution and cannot be subjected to LBT on its mutual benefit operations. The CTA further emphasized that the taxpayer was not invoking a tax exemption but merely asserting that no law expressly imposed LBT on mutual benefit associations, reiterating the settled rule that taxes cannot be imposed by implication and any ambiguity in tax imposition must be resolved in favor of the taxpayer. Finding no statutory basis for the assessment, the CTA reversed the RTC and ordered the City of San Juan to refund the erroneously collected LBT [(Public Safety Mutual Benefit Fund, Inc. v. San Juan City Treasurer (CTA Case No. 308, February 3, 2026)]
WHERE A CITY MERELY ISSUED BILLING STATEMENTS DURING BUSINESS PERMIT RENEWAL WITHOUT A VALID DEFICIENCY TAX ASSESSMENT, THE FILING OF ADMINISTRATIVE AND JUDICIAL CLAIMS WITHIN TWO YEARS FROM PAYMENT IS A PROPER REMEDY. Section 195 of the Local Government Code applies only when the local treasurer issues a valid notice of assessment for deficiency taxes, which must state the nature of the tax, the amount of deficiency, and the corresponding surcharges, interests, and penalties. Absent such a valid assessment, the taxpayer’s remedy is governed by Section 196, which allows the filing of an administrative and judicial claim for the refund of taxes erroneously or illegally collected within two years from payment. Applying these principles, the Court held that the Billing Statements issued by the Business Permits and Licensing Office during the renewal of respondent’s business permits were not notices of assessment under Section 195 because they merely reflected the business taxes and regulatory fees due, without assessing any deficiency tax, surcharge, interest, penalty, or demand for payment. The city’s own witness likewise admitted that no notices of assessment were issued. Consequently, the taxpayer was not required to file a protest under Section 195 but properly availed itself of the refund remedy under Section 196 by filing its administrative and judicial claim, both within the applicable two-year prescriptive period. Accordingly, the Court sustained the timeliness of respondent’s refund claims and ruled that Section 196, rather than Section 195, governed the case. (Atty. Voltaire Enriquez, in his capacity as City Treasurer of Taguig v. Dacon Corporation, CTA AC No. 321, November 6, 2025; see also Royal Cargo, Inc. v. City Treasurer of Parañaque, CTA AC No. 337, Civil Case No. 2021-010, February 18, 2026)
A HOLDING COMPANY WHOSE BUSINESS IS MERELY OWNING SHARES AND RECEIVING DIVIDENDS IS NOT A NON-BANK FINANCIAL INTERMEDIARY SUBJECT TO LBT; A LOCAL ORDINANCE TAXING ITS DIVIDEND INCOME IS VOID. Local government units are authorized to impose LBT on dividend income only when received by banks and other financial institutions, including non-bank financial intermediaries (NBFIs). A holding company does not become an NBFI merely because it owns shares or receives dividends from its investments; to qualify as an NBFI, it must be authorized to perform quasi-banking functions and regularly engage in financial intermediary activities. Applying these principles, the Court found that the taxpayer’s Articles of Incorporation established that its primary purpose was to own and hold shares of stock and manage its subsidiaries, not to perform quasi-banking or financial intermediary functions. Accordingly, the taxpayer was a holding company, not a bank or NBFI, and its receipt of dividend income did not subject it to LBT. The Court further ruled that Taguig Ordinance, which imposed LBT on dividend income received by holding companies, was invalid because it expanded the taxing authority granted under the Local Government Code and therefore contravened the statute. As local government units possess only delegated taxing powers, they cannot impose taxes beyond those authorized by Congress. Consequently, the Court affirmed the refund of the LBT erroneously collected on the taxpayer’s dividend income. (Atty. Voltaire Enriquez, in his capacity as City Treasurer of Taguig v. Dacon Corporation, CTA AC No. 321, November 6, 2025)
THE CTA HAS NO APPELLATE JURISDICTION OVER CHALLENGES TO A REGULATORY ENVIRONMENTAL FEE BECAUSE AN EXACTION IMPOSED PRIMARILY TO FUND WATERSHED PROTECTION UNDER A CITY’S POLICE POWER IS A REGULATORY FEE – NOT A LOCAL TAX – EVEN IF IT INCIDENTALLY GENERATES REVENUE. The Court of Tax Appeals has appellate jurisdiction only over decisions of Regional Trial Courts involving local tax cases. Whether an exaction constitutes a tax or a regulatory fee depends on its primary purpose – if imposed primarily to generate revenue, it is a tax; if imposed principally to regulate under the police power, any revenue generated is merely incidental. Applying these principles, the Court held that the Environmental Tax under a Davao City Ordinance was not a local tax but a regulatory fee, as its primary purpose was to fund the protection, conservation, and management of the city’s watershed pursuant to the local government’s police power and environmental mandates under the Local Government Code. Since the exaction was regulatory rather than revenue-raising, it did not constitute a local tax. Consequently, the CTA lacked jurisdiction to entertain the appeal and dismissed the petition for lack of jurisdiction (Dole Philippines, Inc. – Stanfilco Division v. The Sangguniang Panlungsod of the City of Davao, et. al., CTA AC No. 325, March 11, 2026)
A LOCAL GOVERNMENT UNIT CANNOT REFUSE TO ACCEPT LBT PAYMENTS FOR FAILURE TO PRESENT PROOF OF UPDATED RPT PAYMENT. The Local Government Code does not require payment of RPT as a prerequisite to the payment of LBT. Courts cannot read into the law conditions that are not expressly provided. Likewise, the LGU’s Revenue Code merely prescribes the requirements for the issuance of a business permit and do not authorize local officials to refuse acceptance of LBT payments due to unpaid RPT. Applying these principles, the Court held that the municipality had no legal basis to reject the taxpayer’s LBT payments solely because of the absence of proof of updated RPT payment; consequently, the surcharges and penalties imposed on such refusal were invalid, and the trial court correctly ordered their refund (The Municipality of Pagbilao, Shierre Ann Portes-Palicpic, in her capacity as Municipal Mayor of the Municipality of Pagbilao, and Rizalino P. Tina, in his capacity as Assistant Municipal Treasurer of the Municipality of Pagbilao v. Team Energy Corporation, CTA AC Case No. 350, March 13, 2026)
A TAXPAYER MAY DIRECTLY CHALLENGE THE VALIDITY OF AN INCREASED LBT RATE IN COURT WITHOUT FIRST APPEALING TO THE SECRETARY OF JUSTICE WHEN THE ISSUE IS A PURE QUESTION OF LAW INVOLVING COMPLIANCE WITH THE LOCAL GOVERNMENT CODE, MAKING THE DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES INAPPLICABLE. The doctrine of exhaustion of administrative remedies does not apply when the issue raised is a pure question of law, as the interpretation and application of laws are matters within the exclusive competence of the courts. Jurisprudence recognizes that a taxpayer need not first exhaust administrative remedies, such as an appeal to the Secretary of Justice, where the controversy does not involve disputed facts but solely the determination of what the law provides under established circumstances. Applying this principle, the Court held that taxpayer was not barred from questioning the validity of the increased LBT rate under the Revised Revenue Code because the issue involved only the legal question of whether the increase complied with the limitations imposed by the Local Government Code. Since no factual matters were in dispute, the Court validly exercised jurisdiction despite the taxpayer’s failure to appeal before the Secretary of Justice (The Municipality of Pagbilao, Shierre Ann Portes-Palicpic, in her capacity as Municipal Mayor of the Municipality of Pagbilao, and Rizalino P. Tina, in his capacity as Assistant Municipal Treasurer of the Municipality of Pagbilao v. Team Energy Corporation, CTA AC Case No. 350, March 13, 2026)
ALTHOUGH LBT ACCRUES ON JANUARY 1, AN INCREASED TAX RATE UNDER A NEW REVENUE ORDINANCE APPLIES ONLY FROM THE FIRST DAY OF THE SUCCEEDING QUARTER AFTER THE ORDINANCE’S EFFECTIVITY, ENTITLING THE TAXPAYER TO A REFUND OF THE EXCESS LBT COLLECTED USING THE HIGHER RATE BEFORE IT BECAME EFFECTIVE. While local taxes generally accrue on the first day of January, any new tax or adjustment in tax rates takes effect only on the first day of the quarter following the effectivity of the ordinance imposing such change. Applying this rule, the Court held that although taxpayer’s LBT for Calendar Year 2018 was initially assessed under the 2001 Revised Revenue Code, the enactment of the 2017 Revised Revenue Code on 21 May 2018 required the application of the new contractor’s tax rate of 60% of 1% beginning only in the third and fourth quarters of 2018, while the first and second quarters remained subject to the 2001 rate. Recomputing the taxpayer’s tax liability using the proper quarterly rates, the Court found that the correct LBT for each of the third and fourth quarters resulted in an overpayment. Consequently, while affirming the RTC’s ruling that the 2017 Revised Revenue Code governed the latter half of 2018, the Court modified the computation and ordered the municipality to refund the excess LBT. (Mayor of the Municipality of Pagbilao, and Rizalino P. Tina, in his capacity as Assistant Municipal Treasurer of the Municipality of Pagbilao v. Team Energy Corporation, CTA AC Case No. 350, March 13, 2026)
REVENUE ISSUANCES
Revenue Memorandum Circular No. 084-2026, July 2026.
The BIR clarifies certain provisions of Revenue Regulations No. 004-2026, prescribing the guidelines and procedures for the availment of the one-time abatement of taxes and/or penalties for micro taxpayers
| Certificate of Existence of Outstanding Tax Liability/ies | Controlling document to determine the liability/threshold; to be requested from Issuing Offices (i.e. RDO for open stop-filer cases) |
| Mixed income earners | May avail of abatement |
| Taxpayer classification |
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| Place of filing | RDO where Micro Taxpayer is registered (BIR Form No. 2121); RDO of head office (for multiple branches) |
| Pending compromise settlement and abatement of penalties |
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| Covered taxes |
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| Covered penalties |
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| RATE cases and Fraud cases |
General rule: Not covered
Exception: if allowed by the CIR or his duly authorized representative. |
| Multiple years involved |
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| Unfiled returns |
No need to file unfiled returns
Covered liabilities are cancelled and considered settled upon issuance of the Certificate of Availment and completion of the prescribed procedures |
| Regularizing the records (for micro taxpayers who ceased operations but wish to update and rectify registration/records) |
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| Surcharge and interest |
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| All taxes per taxable year |
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| Reducing basic tax to meet the threshold by payment |
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| Reasons for denial | Taxpayer’s classification; timeliness; out of scope; out of coverage; threshold; non-payment of abatement fee; incomplete application; lack of required approval for RATE cases; and material misrepresentation |
| Non submission of proof of payment within 5 days |
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| Application processed after December 31, 2026 | Still timely as long as application is filed on or before December 31, 2026 |
| No collection enforcement upon filing of application | Suspended until application is denied, voided and withdrawn |
| Certificate of Availment |
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| No more audit | No field audit or new investigation by reason of application for the taxable year; application is evaluated on the documents submitted |
BIR DEADLINES FROM AUGUST 3, 2026 TO AUGUST 9, 2026. A gentle reminder on the following deadlines, as may be applicable:
| DATE | FILING/SUBMISSION |
| AUGUST 5, 2026 |
SUBMISSION – Summary Report of Certification issued by the President of the National Home Mortgage Finance Corporation (NHMFC). Month of July 2026
e-FILING & PAYMENT (Online/Manual) – BIR Form 2000 (Monthly Documentary Stamp Tax Declaration/Return). Month of July 2026 e-FILING & PAYMENT (Online/Manual) – BIR Form 2000-OT (Documentary Stamp Tax Declaration/Return One Time Transactions). Month of July 2026 |
| AUGUST 8, 2026 |
SUBMISSION – All Transcript Sheets of Official Register Books (ORBs) used by Dealers/Manufacturers/Toll Manufacturers/Assemblers/Importers of Alcohol Products, Tobacco Products, Petroleum Products, Non-Essential Goods, Sweetened Beverage Products, Mineral Products & Automobiles. Month of July 2026
e-SUBMISSION – Monthly e-Sales Report for All Taxpayers using CRM/POS and/or Other Similar Business Machines whose last digit of 9-digit TIN is Even Number. Month of July 2026 |