September 23, 2026 Tax Update

COURT OF TAX APPEALS (CTA) DECISIONS

LOA SERVED 860 DAYS AFTER ISSUANCE AND THE APPLICABLE 180-DAY AUDIT PERIOD HAD ALREADY EXPIRED RENDERS THE ASSESSMENT VOID. A revenue officer may examine a taxpayer and recommend a deficiency assessment only pursuant to a valid Letter of Authority (LOA), while the regulations require the LOA to be served within 30 days from issuance, otherwise it becomes null and void unless revalidated; consistent with this, the Supreme Court held that an unserved LOA that remains outstanding beyond 30 days becomes wholly unenforceable absent revalidation. Here, the LOA was served 860 days after issuance, with no showing that it had been revalidated. The Court therefore found that the LOA had already become void and unenforceable when served. Although the BIR regulations subsequently deleted the 30-day service requirement, and clarified that an LOA served beyond 30 days may still be considered valid, the Circular expressly limits this to cases where the applicable 180-day/240-day period for completion of the audit has not yet expired. That saving provision did not benefit the BIR because, when the LOA was eventually served, the 180-day audit period had already expired. The taxpayer’s failure to update its address and the BIR’s alleged difficulty in locating it likewise did not preserve the validity of the already expired LOA. Since the audit and examination were therefore conducted without a valid and enforceable LOA, the resulting deficiency assessment was void and ineffectual. (Floorcompany, Inc., v. Commissioner of Internal Revenue (“CIR”), CTA Case No. 11050, April 29, 2026)

LOA IS REQUIRED FOR AN ASSESSMENT OUTSIDE THE COVERED PERIOD; BIR CANNOT VALIDLY ARGUE THAT NEW LOA IS UNNECESSIARY FOR VAT ASSESSMENT DUE TO UTILIZATION OF EXCESS INPUT VAT. An RO may examine a taxpayer and perform assessment functions only pursuant to a valid LOA issued by the CIR or a duly authorized RD, and the LOA must identify the taxable period covered because it defines the extent of the RO’s authority and protects the taxpayer’s right to due process. The Supreme Court emphasized that an assessment made pursuant to an invalid LOA, or beyond the authority granted therein, is void and ineffectual; the RO cannot assess a taxpayer for a taxable period not covered by the LOA, since the RO must obtain another LOA if the BIR intends to expand the audit period. A LOA is required even when the BIR does not physically examine the taxpayer’s books, because the requirement depends on whether the taxpayer is subjected to an examination or audit, not on the manner by which the BIR obtains or verifies the information used in the assessment. Here, the BIR issued LOA authorizing the examination of books of accounts and other accounting records for all internal revenue taxes. Despite this limited authority, the BIR issued an Assessment Letter and a Denial of Protest for alleged deficiency VAT for the quarter ended June 30, 2021, a period clearly outside the coverage of the LOAs. The CIR argued that a new LOA was unnecessary because the deficiency VAT assessment resulted from utilization of excess input taxes rather than from an examination of books and accounting records. The Court rejected this argument, explaining that the BIR cannot avoid the LOA requirement simply by relying on information or systems that do not involve a physical examination of the taxpayer’s books; once the taxpayer is subjected to an examination or audit, the statutory requirement for prior authorization applies. Thus, the BIR should have issued another LOA specifically authorizing the examination and assessment for the quarter ended June 30, 2021. [CIR v. PMFTC, Inc., CTA EB No. 3009 (CTA Case No. 10714), April 13, 2026]

A TAXPAYER MAY BE TREATED AS CBL ONLY UPON PROOF OF THE REQUIRED BIR TAGGING AND PUBLICATION; THUS, WHERE THE BIR SHOWED ONLY CERTIFICATIONS OF UNSUCCESSFUL LOCATION EFFORTS BUT FAILED TO PROVE ACTUAL CBL DESIGNATION AND PUBLICATION, THE LOA REMAINED SUBJECT TO THE 30-DAY REVALIDATION AND 180-DAY AUDIT PERIODS, RENDERING IT AND THE RESULTING ASSESSMENTS VOID. A taxpayer may be given “Cannot Be Located” (CBL) status only after the BIR makes efforts to locate the taxpayer and obtains certifications from at least two specified offices or organizations that the taxpayer does not appear in their records; the taxpayer’s CBL status must then be reflected in the BIR records and submitted for publication on the BIR website and in at least two newspapers of general circulation. Here, although the BIR obtained certifications from the Makati City Business Permits Office and Barangays San Isidro and Bangkal indicating that taxpayer was not registered in their respective records, these certifications merely established efforts to locate taxpayer and did not prove that taxpayer was actually tagged as CBL in the BIR’s records. The only evidence offered was a Memorandum recommending that taxpayer be included in the CBL list and that the matter be referred for publication; the BIR presented no evidence that the CBL designation was actually made, or that taxpayer’s name was submitted and published on the BIR website and in at least two newspapers. The Court could not consider evidence that had not been formally offered. Consequently, the BIR failed to establish the factual predicate for exempting the LOA from the 30-day revalidation requirement and the 180-day audit-completion period. The LOA was therefore void, and because the assessments for taxable year 2017 were issued pursuant to an invalid LOA, they were likewise unenforceable and had to be cancelled and set aside. (Floorcompany, Inc., v. CIR, CTA Case No. 11050, April 29, 2026)

A WDL IS VALID ONLY WHEN THE TAX LIABILITY IS FINAL AND EXECUTORY; THUS, WDLS ARE PREMATURE BECAUSE THE TAXPAYER’S MR OF THE FDDA REMAINED PENDING; TAXPAYER CANNOT VALIDLY CHALLENGE THE ASSESSMENT FOR LACK OF A FINAL CIR DECISION. The Court of Tax Appeals has jurisdiction over “other matters” arising under the NIRC, including the validity of a Warrant of Distraint and/or Levy (“WDL”), but the BIR may resort to summary collection remedies only when the taxpayer’s liability has become delinquent, final, and executory, whether arising from self-assessed taxes or a final deficiency assessment. Here, the taxpayer received the second WDL and filed its Petition within the 30-day period; the first WDL was refused because its Motion for Reconsideration (“MR”) of the Final Decision on Disputed Assessment (“FDDA”) was still pending. The Court held that both WDLs were premature because the deficiency assessment had not become final and executory: the taxpayer timely protested the FLD/FAN, submitted supporting documents, and elevated the denial of its protest through an MR to the CIR. Collection through a WDL presupposes a final and executory liability; thus, the BIR could not enforce the assessment while the taxpayer’s administrative remedy remained pending. However, the Court could not rule on the merits of the deficiency assessment because, after denial of a protest by an authorized representative of the CIR, the taxpayer may either appeal to the CTA within 30 days or seek reconsideration from the CIR, and these remedies are mutually exclusive. Having chosen the latter, the taxpayer had to await the CIR’s action on its MR before seeking judicial review. Moreover, only one 180-day period is available for the CIR or his authorized representative to act, reckoned from submission of the supporting documents; the subsequent MR did not create a new 180-day period. Accordingly, the Court cancelled and set aside the WDLs and ordered the BIR to cease collection until the assessment becomes final and executory, but dismissed the Petition insofar as it sought review of the deficiency assessment, there being no final CIR decision on the pending MR. (Ivonclar Vivadent, Inc. v. CIR, CTA Case No. 11253, April 20, 2026)

TAXPAYER SHOULD APPEAL THE FDDA SIGNED BY THE CIR HIMSELF TO THE CTA; MOTION FOR RECONSIDERATION WILL NOT TOLL THE PERIOD. The CTA has jurisdiction over disputed assessments only when the taxpayer timely protests the assessment and timely appeals the CIR’s final decision to the CTA, while “other matters  include challenges to BIR collection remedies such as WDL and Warrant of Garnishment (“WOG”). Here, the CTA En Banc ruled that the original Petition for Review was only partly within the CTA’s jurisdiction. The FDDA signed by the CIR (Dulay) constituted the CIR’s final decision on taxpayer’s protest and the taxpayer should have appealed the FDDA to the CTA. Instead, taxpayer filed a letter-reply/motion for reconsideration with the CIR, which did not suspend or extend the period to appeal. Consequently, the assessments became final, executory, and demandable, depriving the CTA of jurisdiction to review their validity. The Court nevertheless recognized jurisdiction over the WOGs as “other matters.” The WDL, however, was challenged beyond the 30-day period; hence, the CTA had no jurisdiction over the WDL. In contrast, the WOGs were received within 30-day period deadline, giving the CTA jurisdiction over them. On the merits, the Court sustained the WOGs because taxpayer could not use a challenge to the collection remedy to indirectly reopen an assessment that had already become final. Taxpayer’s separate argument that the first LOA was invalid because it was served more than 30 days after issuance without revalidation was likewise rejected. The taxpayer did not object to the alleged defect when the LOA was served, nor did it raise the issue in its protest or original CTA petition; it surfaced only during cross-examination and was formally raised much later in a memorandum. Because the first LOA was valid, taxpayer’s challenge to the waivers extending the period to assess also failed. Accordingly, the CTA En Banc partially dismissed the Petition for lack of jurisdiction insofar as it sought nullification of the assessment and WDL, but denied it on the merits [Pentagon Gas Corporation v. CIR, CTA EB No. 3089 (CTA Case No. 10868), April 20, 2026]

15-DAY PERIOD TO FILE APPEAL TO CTA EN BANC IS RECKONED FROM DATE OF RECEIPT OF OSG, NOT BY THE BIR A Petition for Review to the CTA En Banc must be filed within 15 days from receipt of the Division’s resolution, with extension available only upon proper motion. Where the OSG is the government’s principal counsel, receipt by the OSG controls the appeal period, even if the resolution is received later by deputized BIR counsel. Thus, receipt by the OSG started the 15-day period, and petition filed by the BIR outside the 15-days period is dismissible. [CIR v. Sumitomo Corporation – Manila Branch, CTA EB No. 2998 (CTA Case No. 10412, April 7, 2026]

IN A DE NOVO CTA PROCEEDING, DOCUMENTS MERELY SUBMITTED DURING THE BIR AUDIT HAVE NO EVIDENTIARY VALUE ABSENT FORMAL OFFER; THUS, WHERE THE TAXPAYER FAILED TO FORMALLY OFFER THE ORS/SIS SUPPORTING ITS INPUT VAT CLAIM, THE CTA SUSTAINED THE DISALLOWANCE FOR FAILURE TO PROVE THE ASSESSMENT ERRONEOUS. The CTA is a court of record where cases are litigated de novo, requiring taxpayers to formally offer competent evidence to substantiate their claims; likewise, under the rules on evidence, allegations are not evidence and the burden of proof rests on the party asserting the claim. Here, the CIR disallowed input VAT because the supporting ORs and SIs were either missing or issued by non-VAT suppliers, and although taxpayer claimed that the documents were submitted during the BIR audit and that the amounts were instead treated as expenses/COS, it failed to formally offer the alleged ORs and SIs before the CTA. Since documents merely submitted to the BIR have no evidentiary value absent formal offer in court, taxpayer failed to prove that the assessment was erroneous; thus, the CTA sustained the disallowance of the unsupported input VAT (Joyland Industries Corporation v. CIR, CTA Case No. 11269, April 15, 2026)

INPUT VAT IS CREDITABLE ONLY UPON COMPLIANCE WITH PRESCRIBED INVOICING REQUIREMENTS. A taxpayer claiming input VAT must establish that the supporting VAT invoices/official receipts comply with the prescribed invoicing requirements, including the nature of payment/service, TIN, address, VAT breakdown, and other required details; input tax on local purchases of goods is creditable upon consummation of the sale, not upon payment. Here, the CTA found that taxpayer’s supporting invoices/receipts failed to comply with these requirements, and taxpayer could not shift the burden to its suppliers because it was incumbent upon it to exercise due diligence in ensuring that its documents were compliant; its cash-flow records also could not cure the absence of the required information. However, the Court cancelled the disallowance because the records showed that the taxpayer’s TIN was actually reflected in the supporting document. The Court likewise upheld the disallowance in “out-of-period” input VAT because the purchases involved goods acquired in a different year, for which the input tax became creditable upon consummation, rather than upon payment. Accordingly, the CTA sustained the invoicing-related disallowance (Joyland Industries Corporation v. CIR, CTA Case No. 11269, April 15, 2026)

TAXPAYER MUST CLEARLY RECONCILE ALLEGATION OF OVERCLAIMED INPUT VAT BY SUBMITTING RELEVANT AND VERIFIABLE SOURCE DOCUMENTS . The CTA is a court of record conducting trials de novo, and the taxpayer bears the burden of proving that an assessment is erroneous; assessments are prima facie presumed correct and made in good faith. Here, the BIR determined an overclaimed input VAT by comparing the Global Sources of Input Tax (GSIT) reflected in taxpayer’s AFS/AITR with the sources of input tax reported in its VAT returns. Although taxpayer presented reconciliations and claimed that its importation input VAT was supported by 664 pages of importation documents and that differences arose from the use of landed cost versus amounts recorded in the AFS/AITR, it failed to present the underlying importation documents and other supporting records necessary to verify these explanations and failed to adequately explain the variances in its reconciliations. Since the reconciliations, without the relevant source documents, could not be independently verified, and evidence not formally offered cannot be considered, taxpayer failed to discharge its burden of proving the assessment erroneous; thus, the CTA sustained the disallowance for overclaimed input tax. (Joyland Industries Corporation v. CIR, CTA Case No. 11269, April 15, 2026)

REVENUE ISSUANCES

Pursuant to Revenue Memorandum Circular (RMC) No. 97-2026 and under the National Internal Revenue Code (NIRC) of 1997, as amended, allowable system loss charges billed by electric distribution utilities to consumers are excluded from the 12% Value-Added Tax (VAT) computation to directly reduce end-user energy costs.

BIR DEADLINES FROM SEPTEMBER 21, 2026 TO SEPTEMBER 27, 2026. A gentle reminder on the following deadlines, as may be applicable: