COURT OF TAX APPEALS DECISIONS
TAX ORDER PAYMENTS (TOP) ARE NOT CONSIDERED ASSESSMENT UNDER SECTION 195 OF THE LOCAL GOVERNMENT CODE IF THEY FAIL TO SPECIFY SURCHARGE, INTEREST, PENALTY AND BASIS FOR THE ASSESSMENT; PAYMENT INCLUDING REFUND WITHIN 2 YEARS UNDER SECTION 196 IS A VALID REMEDY. In questioning local business taxes, the applicable remedy hinges on the existence of a valid assessment: Section 195 governs protests against assessments that must state the nature of the tax, deficiency amount, and applicable surcharges, interests, and penalties, and must be protested within 60 days; while Section 196 applies where taxes are erroneously or illegally collected, even without a prior assessment, provided a written claim is filed within two years from payment. A valid assessment must sufficiently inform the taxpayer of both the factual and legal bases to enable an intelligent protest. Applying these principles, the Court found that the 2022 and TOPs, although indicating the nature and amount of taxes, failed to specify any deficiency assessment, surcharges, interest, penalties, and the factual and legal bases, thus not constituting valid notices of assessment under Section 195. Consequently, the taxpayer correctly availed of Section 196, having paid the local business taxes; it then timely filed its administrative claim for refund, both within the two-year prescriptive period reckoned from such earliest payment. Accordingly, the Court held that the trial court erred in dismissing the case for failure to protest under Section 195 and remanded the case for further proceedings to determine, based on evidence, whether the petitioner is entitled to a refund or tax credit of the alleged excess local business taxes paid. [Team (Philippines) Energy Corporation v. The Municipality Pagbilao, Quezon, et. al., CTA AC No. 331, August 11, 2025]
BANGKO SENTRAL NG PILIPINAS (BSP) IS EXEMPT FROM DOCUMENTARY STAMP TAX (DST) ON ACQUISITION OF FORECLOSED PROPERTY. DST is imposed on deeds, conveyances, donations, or other instruments transferring real property, calculated based on the consideration or fair market value, but all contracts, deeds, documents and transactions related to the conduct of business of the BSP are exempt. In this case, BSP extended an emergency loan to the Rural Bank of San Miguel, which was secured by a real estate mortgage. Upon the borrower’s default, the mortgaged properties were foreclosed, and BSP, as the highest bidder, acquired the property. BSP paid the capital gains tax on the foreclosure sale, but the BIR assessed additional DST. BSP paid this DST under protest, asserting that as a government financial institution acting within its statutory mandate to grant loans and acquire foreclosed properties, it is exempt from DST. The Court agreed that the acquisition of foreclosed properties forms part of BSP’s business operations and that the DST assessment was therefore erroneous. Accordingly, the Court ordered the BIR to refund or issue a tax credit certificate representing the erroneously paid DST on the foreclosure transaction. (Bangko Sentral ng Pilipinas v. CIR, CTA Case No. 10106, September 1, 2025; Bangko Sentral ng Pilipinas v. CIR, CTA Case No. 11147, September 29, 2025)
IN ZERO-RATED SALES TO ECOZONES, GOODS AND SERVICES MUST ACTUALLY BE CONSUMED OR RENDERED WITHIN THE ECOZONE, AND THE PLACE OF TRANSACTION MUST BE INDICATED. Zero-rated VAT applies to export sales by VAT-registered persons and to services rendered to entities whose exemption under special laws effectively subjects such services to zero percent VAT. Special laws establish ECOZONES as separate customs territory, allowing sales from the Philippine customs territory to PEZA-registered entities within ECOZONES to be treated as exports for VAT purposes. In the case of Sankyu-Ats Consortium-B, while it is VAT-registered and sold exclusively to a PEZA-registered entity, it failed to establish that the goods and services were actually consumed or rendered within the ECOZONE, a critical element for zero-rating under the Cross-Border Doctrine and Destination Principle. Documents did not indicate the locus of transactions, nor were purchase orders or contracts provided to substantiate consumption within the ECOZONE. Consequently, petitioner did not satisfy the essential requisites for zero-rated sales, and its claim for refund of input taxes was denied. (Sankyu-Ats Consortium-B v. CIR, CTA Case No. 10676, September 2, 2025)
ZERO-PERCENT VAT APPLIES TO SERVICES RENDERED BY VAT-REGISTERED PERSONS TO RENEWABLE ENERGY (RE) DEVELOPERS IF TWO CONDITIONS ARE MET: (1) THE RE DEVELOPER IS DULY REGISTERED WITH BOTH THE DEPARTMENT OF ENERGY (DOE) AND THE BOARD OF INVESTMENTS (BOI), AND (2) THE SERVICES OR LOCAL PURCHASES ARE NECESSARY FOR THE DEVELOPMENT, CONSTRUCTION, AND INSTALLATION OF PLANT FACILITIES OR FOR THE WHOLE PROCESS OF EXPLORATION AND DEVELOPMENT OF RENEWABLE ENERGY SOURCES UP TO CONVERSION INTO POWER. In this case, Air Drilling Associates Pte Ltd., claimed input VAT refund for excess or unutilized VAT arising from services allegedly rendered to EDC and PGPC. The Court denied the refund because Air Drilling failed to prove PGPC’s BOI registration and that not all EDC projects were BOI-registered. Moreover, Air Drilling failed to present admissible evidence that services were actually rendered during the claim period: the original contract had expired in 2017, and the submitted amended contract extending the term to December 31, 2019, was disallowed; and the billing invoices and VAT official receipts were insufficient to establish that services were performed in connection with RE development during the relevant period. (Air Drilling Associates Pte Ltd., v. CIR, CTA Case No. 10752, August 13, 2025).
IN INPUT VAT REFUND CASES FILED WITH THE REVENUE DISTRICT OFFICE (RDO), ONLY THE DECISION OF THE REGIONAL DIRECTOR, NOT THE RDO, IS APPEALABLE TO THE CTA. The Court of Tax Appeals (CTA) has exclusive appellate jurisdiction to review decisions, rulings, or inactions of the Commissioner of Internal Revenue (CIR) or duly authorized officials, and such appeal must be filed within 30 days from receipt of the decision. Revenue issuances clarify that for VAT refund claims filed with a Revenue District Office (RDO), the Regional Director or higher authorized official has the authority to approve or deny the claim, and only the decision of such official is appealable to the CTA. In this case, Sankyu-ATS Consortium-B filed a VAT refund claim, which was denied by Revenue District Officer. Since the RDO officer lacks authority to issue an appealable denial, the CTA has no jurisdiction to entertain the petition, and the proper appealable decision would have been that of the Regional Director. Accordingly, the petition was dismissed on jurisdictional grounds (Sankyu-Ats Consortium-B v. CIR, CTA Case No. 10768, July 11, 2025)
IN CLAIMS FOR INPUT VAT REFUND INVOLVING OFFSETTING, THERE MUST BE A CLEAR AGREEMENT EXPRESSLY ALLOWING ADVANCES TO BE OFFSET AGAINST RECEIVABLES, WITH SPECIFIC DETAILS OF THE ACTUAL OFFSETTING UNDERTAKEN. Services performed in the Philippines by a VAT-registered person for a foreign corporation or a non-resident person outside the Philippines are subject to zero percent (0%) VAT, provided, among others, the consideration is paid in acceptable foreign currency and duly accounted for in accordance with Bangko Sentral ng Pilipinas (BSP) rules. Pursuant to the BIR rules, an offsetting arrangement where receivable from services is offset against advances is allowed as alternative document. In this case, while the taxpayer submitted the Short-Term Credit Facility Agreement (STCFA) and related documents showing loan transactions in foreign currency, these documents failed to prove that such advances could be validly offset against receivables from services provided to other affiliates. The STCFA governs loans, not inter-affiliate offsets, and no separate agreement establishing such offsets between taxpayer and other affiliates was presented. The Schedule of Offsetting of Receivables also did not detail actual offsets corresponding to specific service invoices, showing only movements in the group account balance, which the Court deemed insufficient to establish that the loans served as payments for services. (Avaloq Philippines Operating Headquarters v. CIR, CTA Case No. 10922, August 29, 2025)
ROYALTY TAXES TWICE PAID CAN BE REFUNDED. A taxpayer is entitled to a refund or tax credit if it can establish that it erroneously paid a tax Taxpayer further established that it erroneously paid both Withholding Value-Added Tax (WVAT) and Final Withholding Tax (FWT) on its 2020 sales. These sales were subjected to a 25% royalty under a first agreement and simultaneously to a 20% royalty the second agreement, resulting in double payment of taxes. Evidence supporting the claim included the Schedule of Net Sales, audited financial statements, the schedule of royalties reported, and permits. Witnesses testified that the double-counting of royalties was unintentional and was discovered, upon which the 20% royalty expense and related taxes were reversed in the books. The Court recognized that the WVAT and FWT corresponding to the 20% royalties were indeed erroneously paid, as the basis for taxation no longer existed due to the reversal and refund of the royalties. Accordingly, the Court ordered the BIR to refund the erroneously paid WVAT and FWT. (Syngena Philippines, Inc., v. CIR, CTA Case No. 11067, August 27, 2025)
IN AN INPUT VAT REFUND CASE, A TAXPAYER’S PETITION FILED WITH THE CTA PRIOR TO THE RECEIPT OF THE CIR’S DECISION OR BEFORE THE LAPSE OF THE PERIOD FOR INACTION IS DISMISSIBLE. The Court of Tax Appeals (CTA) has exclusive appellate jurisdiction to review decisions, rulings, or inactions of the CIR in cases involving disputed assessments, tax refunds, fees, or other matters under the National Internal Revenue Code (NIRC), and an appeal must be filed within 30 days from receipt of the decision or after the expiration of the period fixed by law for action, with inaction being considered a “deemed denial.” The CIR has 90 days from receipt of a complete administrative claim for VAT refund or tax credit to act on the claim, after which inaction is deemed a denial and appealable to the CTA. Here, the taxpayer filed its administrative claim for VAT refund on July 30, 2020, well within the two-year prescriptive period from the issuance of its tax clearance, giving the BIR until October 28, 2020, to act. However, taxpayer prematurely filed the judicial Petition for Review on August 3, 2020, before the expiration of the 90-day period and before receipt of the BIR’s denial on October 30, 2020, meaning neither was there a decision nor a deemed denial to appeal. Thus, the petition was properly dismissed for lack of jurisdiction. (British American Tobacco (Philippines), Limited v. CIR, CTA Case o. 10322, July 31, 2025)
REVENUE ISSUANCES
Revenue Memorandum Circular No. 21-2026
Tax exemptions previously granted to a former foreign assistance agency are officially extended to the newly established foreign assistance section of the diplomatic mission.
| Purpose | Transfer the tax privileges and exemptions previously granted to the former foreign assistance agency (USAID) to the newly established Foreign Assistance Section of the U.S. Embassy (US-FAS). |
| Entity Transition | Effective July 1, 2025, the US-FAS replaced USAID as the recognized special technical and economic mission in the Philippines. Consequently, all references to “USAID” in prior guidelines are replaced with “US-FAS”. |
| Tax Privileges | US-FAS and its agents keep the same VAT zero-rating and tax exemptions that USAID had. |
| Terminology Update | The terms “receipt” and “official receipt” are deleted from the guidelines, leaving only the term “invoice”. |
| Transitory VAT Rules | VAT-registered taxpayers must continue to apply a zero-percent (0%) VAT rate and honor existing VAT Exemption Certificates (VECs) issued to USAID for 30 days following the issuance of this Circular. |
| Surrender of VECs | The US-FAS has 30 days to surrender old VECs for ongoing projects to the International Tax Affairs Division (ITAD). VECs not returned within this period will be automatically revoked and rendered ineffective. |
Revenue Regulations No. 2-2026
Eligible participants and generation facilities can avail of VAT exemptions and other tax incentives for the trade and utilization of indigenous natural gas.
| VAT Exemption | The purchase and sale of indigenous natural gas, aggregated gas, and power generated from these gases are exempt from Value-Added Tax (VAT). For aggregated gas, the exemption applies only to the portion attributed to indigenous natural gas. |
| Incentives | Philippine Downstream Natural Gas Industry (PDNGI) Facilities certified by the Department of Energy (DOE) can avail of tax incentives under Title XIII of the Tax Code, provided they are registered with the Board of Investments (BOI) and included in the Strategic Investment Priority Plan (SIPP). |
| Documentary Requirements (Participants) | To claim VAT exemption, participants must attach a DOE-OIMB endorsement, a certification of the volume/percentage of indigenous natural gas sold, and a Certified True Copy of the DOE Permit to their Quarterly VAT Declaration (BIR Form No. 2550Q). |
| Documentary Requirements (Generation Facilities) | Generation facilities must attach a DOE-EPIMB endorsement confirming the use of indigenous natural gas, a certification of the power produced from it, and a Certified True Copy of the DOE Permit to their Quarterly VAT Declaration. |
| Tax Form Declaration | Taxpayers must explicitly state the legal basis for the VAT exemption (Section 38 of R.A. No. 12120) on Field Item Number 14A of the Quarterly VAT Declaration. |
BIR DEADLINES FROM MARCH 30, 2026 TO APRIL 5, 2026. A gentle reminder on the following deadlines, as may be applicable:
| DATE | FILING/SUBMISSION |
| March 30, 2026 | SUBMISSION – Proof of eFiled BIR Form 1702 – RT/EX/MX with Audited Financial Statements (AFS), 1709 (if applicable), and Other Attachments through Electronic Audited Financial Statements (eAFS). Fiscal Year ending November 30, 2025 |
| SUBMISSION – Soft Copies of Inventory List and Schedules stored and saved in DVD-R/USB properly labeled together with Notarized Sworn Declaration. Fiscal Year ending February 28, 2026 | |
| e-SUBMISSION – Quarterly Summary List of Sales/Purchases/Importations by a VAT Registered Taxpayers – eFPS Filers. Fiscal Quarter ending February 28, 2026 | |
| ONLINE REGISTRATION (thru ORUS) – Computerized Books of Accounts and Other Accounting Records. Fiscal Year ending February 28, 2026 | |
| April 1, 2026 | SUBMISSION – Consolidated Return of All Transactions based on the Reconciled Data of Stockbrokers. March 16 – 31, 2026 |
| SUBMISSION – Engagement Letters and Renewals or Subsequent Agreements for Financial Audit by Independent CPAs. Fiscal Year beginning June 1, 2026 | |
| e-FILING & PAYMENT (Online/Manual) – BIR Form 1702Q (Quarterly Income Tax Return For Corporations, Partnerships and Other Non-Individual Taxpayers) and Summary Alphalist of Withholding Taxes (SAWT). Fiscal Quarter ending January 31, 2026 | |
| April 5, 2026 | SUBMISSION – Summary Report of Certification issued by the President of the National Home Mortgage Finance Corporation (NHMFC). Month of March 2026 |
| e-FILING & PAYMENT (Online/Manual) – BIR Form 2000 (Monthly Documentary Stamp Tax Declaration/Return). Month of March 2026 | |
| e-FILING & PAYMENT (Online/Manual) – BIR Form 2000-OT (Documentary Stamp Tax Declaration/Return One-Time Transactions). Month of March 2026 |