Articles

COURT OF TAX APPEALS (CTA) DECISIONS

 

A TAX ASSESSMENT IS VOID WHEN CONDUCTED WITHOUT A VALID LOA, AS SUBSTITUTION OF REVENUE OFFICERS REQUIRES A NEW OR AMENDED LOA, NOT A MERE REASSIGNMENT NOTICE. The Court ruled that a valid Letter of Authority (LOA) is indispensable for revenue officers to lawfully conduct an audit, and any substitution of officers must be supported by a new or amended LOA issued by the Commissioner of Internal Revenue or his duly authorized representative, as emphasized in Commissioner of Internal Revenue v. McDonald’s Philippines Realty Corp.. In this case, although the initially authorized specific revenue officers to audit Master Sports Corporation, they were replaced through a mere Re-Assignment Notice signed by a Revenue District Officer, without the issuance of a new LOA. Since the replacement officers proceeded with the audit absent proper authority, the resulting deficiency assessments were declared void. Consequently, the Court cancelled and set aside the assessment and enjoined the BIR from enforcing collection. (Master Sports Corporation v. Commissioner of Internal Revenue, CTA Case No. 10458, 2 May 2025).

 

LOA SERVED BEYOND 30 DAYS REMAINS VALID IF THE TAXPAYER ACCEPTS SERVICE AND PARTICIPATES IN THE AUDIT, AS BELATED OBJECTIONS ARE DEEMED MERE AFTERTHOUGHTS. While RAMO No. 1-10 required an LOA to be served within 30 days from issuance, RAMO NO. 1-2020 dated 17 September 2020 removed this provision, which was further clarified in RMC No. 82-2022, dated June 28, 2022. While the LOAs were served in 2019 or before the amendment, a taxpayer who accepts the LOA and submits to the audit without timely objection is deemed to have acquiesced to the BIR’s authority. In this case, the records showed that the taxpayer eventually accepted both LOAs, submitted documents, and participated in the audit. Following AFP General Insurance Corporation v. Commissioner of Internal Revenue, the Court held that petitioner’s belated challenge was merely an afterthought to evade liability, thereby upholding the validity of the LOAs’ service. (Pristine Energy Transfer Corporation v. Commissioner of Internal Revenue, CTA Case No. 10338, 6 May 2025.)

 

UNDER THE NIRC, DEFICIENCY ASSESSMENTS MUST BE ISSUED WITHIN THREE YEARS FROM THE DUE DATE OF FILING THE RETURN. The law provides that internal revenue taxes must generally be assessed within three (3) years from the deadline for filing the return. If no return is filed, or if a false return is filed, the BIR is given ten (10) years from discovery to assess. Since the BIR issued the assessment on 27 November 2019 (received 10 January 2020), its right to assess VAT for the first three quarters of 2016, as well as EWT and WTC for January to October 2016, had already been prescribed. Only VAT for the 4th quarter of 2016 and EWT and WTC for November and December 2016 were still within the 3-year period. As for DST, because no return was filed, the 10-year extraordinary period applied, and the assessment had not been prescribed. (Pristine Energy Transfer Corporation v. Commissioner of Internal Revenue, CTA Case No. 10338,6 May 2025.)

 

DUE PROCESS REQUIRES ACTUAL RECEIPT OF ASSESSMENT NOTICES BY THE TAXPAYER; SINCE THE BIR FAILED TO PROVE VALID SERVICE, THE ASSESSMENT IS VOID. Jurisprudence consistently holds that when a taxpayer denies receipt of a Preliminary Assessment Notice (PAN), Final Assessment Notice (FAN), and Formal Letter of Demand (FLD), the burden shifts to the BIR to prove that such notices were actually received. Proof of mailing alone is insufficient, especially when service is made to someone who is not authorized to receive documents on behalf of the taxpayer. An assessment that is not validly served violates due process and is void. In this case, the BIR claimed that the PAN and FAN/FLD were served through a courier service, but the evidence presented showed otherwise. The FAN/FLD was delivered to a security guard, who is not an authorized representative of the taxpayer. No competent proof was presented to establish actual receipt of the PAN. As a result, the BIR failed to discharge its burden to prove valid service of the assessment notices. Since the taxpayer was not properly informed of the legal and factual bases of the assessment, due process was violated, rendering the assessment void and without legal effect. Moreover, jurisprudence holds that a void tax assessment produces no legal effect and cannot serve as basis for collection. Without a valid assessment, subsequent collection measures such as a WDL are likewise void. Despite this, the BIR garnished PhP28,191,790.45 from the petitioner’s bank accounts. Since the assessment and collection were void, the government had no right to retain the amount, and the taxpayer is entitled to a refund of the illegally collected sum. (Fujitec, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10965, 7 May 2025.)

 

THE GOVERNMENT IS NOT LIABLE FOR DAMAGES OR LEGAL INTEREST SINCE THE COLLECTION, THOUGH LATER FOUND VOID, WAS NOT ATTENDED BY ARBITRARINESS AND NO LAW AUTHORIZES SUCH AWARD. Jurisprudence provides that interest on refunded taxes may only be awarded if expressly authorized by law or if the collection was arbitrary. Absent these conditions, the government cannot be compelled to pay damages or legal interest on amounts improperly collected. Arbitrariness exists only when there is inexcusable disregard of legal requirements, not when actions are based on a plausible interpretation of the law. In this case, while the BIR collected more than the amount stated in the WDL, the excess was attributed to its computation of interest and penalties, which it considered valid. Records also show that the BIR attempted to serve the Warrant of Garnishment and refrained from collecting the full available amounts once it deemed the liability satisfied. These actions negate arbitrariness. Since no statutory provision authorizes interest on tax refunds in this situation and the collection was not arbitrary, petitioner is not entitled to damages or legal interest. (Fujitec, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10965, 7 May 2025.)

 

A COMPROMISE SETTLEMENT REQUIRES EITHER REASONABLE DOUBT AS TO THE ASSESSMENT OR CLEAR INABILITY TO PAY; SINCE NEITHER WAS ESTABLISHED, THE DENIAL OF THE APPLICATION WAS PROPER. The Commissioner of Internal Revenue may compromise tax liabilities only in limited instances, specifically when there is reasonable doubt as to the validity of the assessment or when the taxpayer shows clear inability to pay. Such compromises must comply with regulatory approval procedures depending on the amount involved. Tax assessments, moreover, enjoy the presumption of correctness and regularity, and the burden lies with the taxpayer to prove otherwise. In this case, petitioner applied for a compromise settlement of its deficiency income tax on the ground of doubtful validity of the assessment. However, records showed that petitioner had in fact received the Final Assessment Notice, defeating its claim of non-receipt. Moreover, the assessment was supported by third-party data verified through the BIR’s no-contact audit system, which the petitioner failed to disprove with competent evidence. In the absence of proof that the assessment was arbitrary or baseless, no reasonable doubt existed as to its validity. Consequently, the National Evaluation Board acted within its authority in denying the application for compromise, and the Commissioner did not commit grave abuse of discretion in issuing the Notice of Denial. (Philippine Mining Development Corporation v. Commissioner of Internal Revenue, CTA Case No. 9292, 8 May 2025.)

 

A PETITION LACKING A VALID CERTIFICATION AGAINST FORUM SHOPPING MAY BE DISMISSED OUTRIGHT, ESPECIALLY WHEN THE PETITIONER FAILS TO CORRECT THE DEFECT DESPITE OPPORTUNITIES TO COMPLY. Courts strictly require a proper verification and certification against forum shopping as part of procedural due process. Failure to submit a compliant certification is a sufficient ground for dismissal, and repeated non-compliance despite extensions negates any claim of grave abuse of discretion by the court. Jurisprudence has consistently upheld dismissal where procedural defects remain uncorrected despite opportunities to cure. In this case, the petitioner was given equitable opportunities to submit a proper certification against forum shopping but failed to comply. No valid excuse or justification was presented for such failure. Applying the same principle, the First Division’s dismissal of the petitioner’s prior petition was proper, and no grave abuse of discretion was committed.(Johnny Sy Co v. Bureau of Internal Revenue, et al., CTA EB No. 2832 (CTA Case No. 11024), 9 May 2025.)

 

TAX ASSESSMENTS ARE VOID IF THE BIR FAILS TO CONSIDER AND ADDRESS THE TAXPAYER’S ARGUMENTS AND EVIDENCE, AS THIS VIOLATES THE TAXPAYER’S RIGHT TO DUE PROCESS. In Commissioner of Internal Revenue v. Avon Products Manufacturing, Inc., the Supreme Court held that while the Commissioner need not accept a taxpayer’s explanations, she must provide specific reasons for rejecting them. The right to due process is violated when the BIR disregards evidence without explanation, since administrative adjudication requires considering the taxpayer’s defenses and giving reasons for conclusions. Here, petitioner filed a Reply to the PAN and a Request for Reinvestigation, setting forth arguments and submitting evidence. Despite this, the BIR simply reiterated the deficiency assessments in the FLD without addressing the taxpayer’s points. The FDDA’s generic statement that petitioner failed to provide relevant documents was insufficient, as it did not specify why the submitted arguments and evidence were disregarded. This failure to consider petitioner’s defenses constitutes a denial of due process, rendering the deficiency assessments void. (My Solid Technologies and Devices Corporation v. Commissioner of Internal Revenue, CTA Case No. 10598, 15 May 2025)

 

TAX ASSESSMENTS ARE VOID IF CONDUCTED BY REVENUE OFFICERS WITHOUT BEING SPECIFICALLY NAMED IN A VALID LOA. Jurisprudence, particularly Medicard Philippines, Inc. v. CIR and Lancaster Philippines, Inc. v. CIR, makes clear that only revenue officers specifically named in a Letter of Authority (LOA) may validly examine a taxpayer’s records, and that a Memorandum of Assignment (MOA) cannot cure the absence of such authority. In this case, while an LOA existed, it did not name RO Yu and GS Roldan, Jr., who actually conducted the audit. Their reliance on MOAs issued by the RDO, a subordinate official not empowered to issue LOAs, was insufficient. Since the audit was conducted without proper authority, the resulting deficiency VAT assessment was void (Commissioner of Internal Revenue v. Sellery Phils. Enterprises, Inc., CTA EB No. 2837, 20 May 2025).

 

LOA IS ALWAYS REQUIRED IN TAX AUDITS, WHETHER REGULAR OR MANDATORY, AND ITS ABSENCE RENDERS THE RESULTING ASSESSMENTS VOID. Under jurisprudence, particularly CIR v. Manila Medical Services, Inc., the issuance of a valid LOA is indispensable in all tax audits, as it is the authority that empowers revenue officers to examine a taxpayer’s records. The law makes no distinction between regular assessments and mandatory audits, such as those arising from applications for business retirement. In this case, the BIR argued that a mandatory audit dispensed with the need for an LOA and that errors in issuance should not prejudice government revenue. The Court rejected this, stressing that lack of a valid LOA is not a mere technicality but a due process violation that invalidates the entire assessment. The lifeblood doctrine cannot override the taxpayer’s right to due process. Accordingly, the CTA Division correctly cancelled and set aside the deficiency assessments for being null and void (Commissioner of Internal Revenue v. Sellery Phils. Enterprises, Inc., CTA EB No. 2837, 20 May 2025).

 

SECURITIES AND EXCHANGE COMMISSION

 

SEC OPINION NO. 24-01 INTERPRETED THE CONSTITUTIONAL AND STATUTORY RESTRICTIONS ON FOREIGN OWNERSHIP, CONTROL, AND ADMINISTRATION OF EDUCATIONAL INSTITUTIONS IN RELATION TO THE FOREIGN INVESTMENTS NEGATIVE LIST. Pursuant to the 1987 Constitution and the Foreign Investments Act (RA 7042), as implemented through the 12th Foreign Investments Negative List (E.O. 175, s. 2022), the Securities and Exchange Commission (SEC) issued an opinion on the proposed investment of a Japanese corporation in a Philippine subsidiary offering non-degree certification courses. The SEC affirmed that while educational institutions are generally subject to the 40% foreign equity cap and must be controlled and administered by Filipinos, the restriction does not extend to short-term, high-level skills development programs that are not part of the formal education system under B.P. 232. However, the Commission emphasized that jurisdiction over determining whether such programs qualify rests with CHED and TESDA, and that corporations engaged in technical-vocational education with certification fall under TESDA regulation. Thus, foreign ownership beyond 40% is permissible only if the proposed activities fall outside the scope of formal education. (SEC-OGC Opinion No. 24-01, Re: Foreign Ownership, Control, and Administration of Educational Institutions; Applicability of the Foreign Investments Negative List to Educational Institutions, January 2, 2024).
SEC OPINION NO. 24-02 CLARIFIED THAT UNDER THE CONDOMINIUM ACT, THE MASTER DEED AND DECLARATION OF RESTRICTIONS PREVAIL OVER THE ARTICLES OF INCORPORATION AND BY-LAWS IN DETERMINING THE COMPOSITION OF A CONDOMINIUM CORPORATION’S BOARD OF TRUSTEES. Pursuant to Republic Act No. 4726 (Condominium Act), as amended, and the Revised Corporation Code (RA 11232), the Securities and Exchange Commission (SEC) issued an opinion clarifying that in cases of inconsistency, the provisions of a condominium corporation’s Master Deed and Declaration of Restrictions (MDDR) prevail over its Articles of Incorporation (AOI) and By-Laws. The opinion addressed queries from The Cambridge Village Condominium Association, Inc., where the AOI and By-Laws provided for five trustees while the MDDR required seven. The SEC ruled that the MDDR must be followed, and the AOI and By-Laws must be amended accordingly. It further explained that, pending amendment, the number of trustees to be elected should still conform with the MDDR, and that delinquent members are not entitled to vote in determining quorum, by analogy to stock corporations under the RCC. (SEC-OGC Opinion No. 24-02, Re: Composition of Board of Trustees of a Condominium Corporation, January 19, 2024).

 

SEC OPINION NO. 24-03 CLARIFIED THE REQUIREMENTS FOR INVOKING RECIPROCITY IN EXEMPTING FOREIGN GOVERNMENT SECURITIES FROM REGISTRATION UNDER THE SECURITIES REGULATION CODE. Under Republic Act No. 8799 (Securities Regulation Code), the Securities and Exchange Commission (SEC) issued an opinion clarifying the scope of exempt securities under Subsection 9.1(b). In response to an inquiry from HSBC Philippines, the SEC explained that while securities issued or guaranteed by foreign governments with diplomatic relations with the Philippines may qualify as exempt from registration, invoking reciprocity requires more than proof of trading activity abroad. Instead, parties must submit competent and duly authenticated evidence—such as foreign laws or regulations—that Philippine government securities are likewise exempt from registration in the foreign jurisdiction. The SEC emphasized that Philippine courts do not take judicial notice of foreign law, which must be properly proven as a fact in accordance with evidentiary rules. (SEC-OGC Opinion No. 24-03, Re: Exempt Securities under Subsection 9.1(b) of the Securities Regulation Code, March 26, 2024)

 

REVENUE REGULATIONS

 

Revenue Regulations No. 021-2025
Based on Republic Act (RA) No. 12214, also known as the Capital Markets Efficiency Promotion Act (CMEPA), Revenue Regulations No. 021-2025 were issued to implement major amendments to the National Internal Revenue Code of 1997. The regulations introduce a simplified and uniform tax system for passive income, with a general effective date of July 1, 2025. This includes defining and clarifying terms like “securities” and “shares of stock” to encompass a wider range of financial instruments. The regulations also provide specific tax treatments for new income types, such as equity-based compensation, and establish that certain gains from financial instruments, like project-specific bonds and mutual fund redemptions, are now exempt from income tax. Furthermore, the regulations allow new allowable deductions for dealers in securities and clarify that interest income from various sources is considered sourced within the Philippines, irrespective of where the instrument was executed.

 

Tax Rates for Individuals (Effective July 1, 2025)
Citizen, Resident Alien, and Non-Resident Alien Engaged in Trade or Business

Sections of the Tax Code	Particulars	Income Tax Rate
Sections 24 (B) (1) and 25 (A) (1), in relation to the last paragraph of Section 27 (D) (2)	Interest, yield, or any other monetary benefit earned from any currency bank deposit or deposit substitute, trust funds and other similar arrangements, regardless of their nature or tenure, except income of non-residents, whether individuals or corporations, from transactions with depositary banks under the expanded system which shall be exempt from income tax	20%
Sections 24 (B) (1) and 25 (A) (1)	Prizes (except prizes amounting to P10,000 or less which shall be subject to graduated tax rates under Section 24 [A] of the Tax Code)	20%
Sections 24 (B) (1) and 25 (A) (1)	Other Winnings (except winnings amounting to P10,000 or less from Philippine Charity Sweepstakes and Lotto which shall be exempt)	20%
Sections 24 (B) (2) and 25 (A) (2)	Cash and/or Property Dividends	10% — except for Non-Resident Alien Engaged in Trade or Business which is subject to income tax rate of 20%
Sections 24 (B) (3) and 25 (A) (1)	Capital Gains — Sale, exchange or other disposition of shares of stock in a domestic or foreign corporation not traded in a local or foreign stock exchange	15%
Sections 24 (B) (4) and 25 (A) (1)	Capital Gains from Sale of Real Property	6% on gains presumed to have been realized from the sale, exchange, or other disposition of real property (capital assets)
Sections 24 (B) (5) and 25 (A) (1)	Royalties earned as Passive Income	20%
Sections 24 (B) (5) and 25 (A) (1)	Royalties on books, as well as other literary works and musical compositions	10%
Section 25 (A) (3), in relation to Section 28	Cinematographic films and similar works by a Non-Resident Cinematographic Film Owner, Lessor or Distributor	25%
Section 27 (D) (2)	Any income of non-residents from transactions with depositary banks under the expanded system	Exempt

 

Tax Rates for Corporations (Effective July 1, 2025)
Domestic and Resident Foreign Corporations

Sections of the Tax Code	Particulars	Income Tax Rate
Sections 27 (D) (1) and 28 (A) (1)	Interest, yield, or any other monetary benefit earned from any currency bank deposit or deposit substitute, trust funds and other similar arrangements, regardless of their nature or tenure	20%
Sections 27 (D) (2) and 28 (A) (6)	Income derived by a depositary bank under the expanded foreign currency deposit system from foreign currency transactions with nonresidents, offshore banking units in the Philippines, local commercial banks including branches of foreign banks that may be authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business with foreign currency deposit system units and other depositary banks under the expanded foreign currency deposit system, except net income from such transactions as may be specified by the Secretary of Finance, upon recommendation by the Monetary Board to be subject to the regular income tax payable by banks	Exempt from all taxes
Sections 27 (D) (2) and 28 (A) (6)	Interest income from foreign currency loans granted by such depositary banks under said expanded systems to residents other than offshore banking units in the Philippines or other depositary banks under the expanded system	10%
Sections 27 (D) (3) and 28 (A) (1)	Intercorporate dividends received from a domestic corporation	Exempt
Section 27 (D) (4)	Capital Gains — Sale, exchange or other dispositions of shares of stock of a domestic or foreign corporation not traded in a local or foreign stock exchange	15%
Section 27 (D) (5)	Capital Gains Realized from the Sale, Exchange, or Disposition of Land and/or Buildings (for Domestic Corporations)	6% on the gain presumed to have been realized on the sale, exchange or disposition of lands and/or buildings (capital assets)
Sections 27 (D) (6) and 28 (A) (1)	Royalties earned as Passive Income	20%

 

Non-Resident Foreign Corporations

Sections of the Tax Code	Particulars	Income Tax Rate
Section 28 (B) (1), in relation to Section 28 (A) (6)	Interest, yield, or any other monetary benefit earned from any currency bank deposit or deposit substitute, trust funds and other similar arrangements, regardless of their nature or tenure, except income from transactions with depositary banks under the expanded system which shall be exempt from income tax	25% (or the tax treaty rate)
Section 28 (B) (5) (b)	Cash and/or Property Dividends received from a domestic corporation	15% subject to the condition that the country of residence of the corporate shareholder allows a credit of 10% tax deemed to have been paid in the Philippines or that the country of residence of the corporate shareholder does not impose any tax on the dividends (or the tax treaty rate)
Section 28 (B) (1)	Rents, royalties, salaries, premiums (except reinsurance premiums) annuities, compensation, emoluments, fixed or determinable annual, periodic or casual gains, profits, and income, and capital gains, except capital gains subject to tax under Sec. 28 (A) (1)	25% (or the tax treaty or other rate on royalties)
Section 28 (B) (5) (c)	Capital Gains — Sale, exchange or other dispositions of shares of stock of a domestic corporation not traded in a local or foreign stock exchange	15% (or the tax treaty rate)
Section 28 (A) (6) (b)	Any income of non-resident corporations from transactions with depositary banks under the expanded system	Exempt

 

BIR RULINGS

 

RETIREMENT BENEFITS ARE EXEMPT FROM WITHHOLDING TAX FOR EMPLOYEES WHO MEET THE AGE AND SERVICE DURATION REQUIREMENTS. Section 32 (B) (6) (a) of the National Internal Revenue Code of 1997 and Republic Act (RA) No. 7641, retirement benefits for two employees are exempt from withholding tax. The exemption applies because the employer does not have a BIR-approved retirement plan. The application of facts shows that both employees meet the conditions under RA No. 7641, which requires an employee to have at least five years of service and be between 60 and 65 years old at the time of retirement. One employee had 20.5 years of service, and the other had 16.19 years of service, both exceeding the minimum five-year requirement. The ruling also notes that the exemption does not cover salaries, 13th-month pay, or other benefits that exceed the P90,000 threshold. Additionally, unused monetized vacation leave credits of up to ten days are not subject to income or withholding tax, but sick leave credits are not included in this exemption. (BIR Ruling No. OT-121-2025, April 23, 2025)

 

A NON-STOCK SAVINGS AND LOAN ASSOCIATION IS EXEMPT FROM 20% FINAL WITHHOLDING TAX ON INTEREST INCOME FROM DEPOSITS. Under Republic Act (RA) No. 8367, a non-stock savings and loan association is exempt from certain taxes. The application of this law to a specific association shows that it is not subject to a 20% final withholding tax on its interest income from deposits and deposit substitutes. This exemption applies to the association’s income and interest earned on its deposits with banks. However, the tax exemption does not cover income derived from any of its properties, real or personal, or any activities conducted for profit. The association, which is a non-stock corporation and is registered with the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP), had requested a revalidation of its tax exemption certificate. The ruling is based on the provided facts and will be considered null and void if a later investigation reveals the facts were different. (BIR Ruling No. OT-124-2025, April 23, 2025)

 

A NON-STOCK SAVINGS AND LOAN ASSOCIATION CAN BE EXEMPT FROM GROSS RECEIPTS TAX (GRT) IF IT PROVES DURING AN AUDIT THAT IT OPERATES SOLELY FOR THE BENEFIT OF ITS MEMBERS AND DOES NOT ACQUIRE FUNDS FROM THE PUBLIC. Based on Republic Act No. 8367, Revenue Regulations No. 9-2004, and Revenue Memorandum Circular No. 9-2016, an organization, representing itself as a non-stock savings and loan association (NSSLA) and seeking exemption from the gross receipts tax (GRT), was advised that its claim for exemption cannot be granted based on mere representation. The Bureau of Internal Revenue (BIR) determined that while NSSLAs are generally exempt from certain taxes, they are subject to GRT if they function as a Non-Bank Financial Intermediary (NBFI) by obtaining funds from the public. Therefore, to qualify for the exemption, the association must prove through a factual determination by the Revenue District Office (RDO) that it exclusively serves its members, does not transact business with the public, and does not obtain funds from the public. The ruling emphasizes the principle that tax exemptions are construed strictly against the taxpayer and that the burden of proof rests on the entity claiming the exemption. (BIR Ruling No. OT-125-2025, April 23, 2025)

 

DONATIONS TO PRIVATE ENTERPRISES, EVEN IF FACILITATED BY A GOVERNMENT-OWNED AND CONTROLLED CORPORATION (GOCC), ARE SUBJECT TO THE 6% DONOR’S TAX. Pursuant to PD No. 1177, PD No. 1931, and EO No. 93, which withdrew tax exemptions for government-owned and controlled corporations (GOCCs), donations channeled through a GOCC to private enterprises are subject to donor’s tax. Specifically, a transfer of equipment from an intergovernmental organization to private enterprises, facilitated by a GOCC, is subject to the 6% donor’s tax on the total gift amount exceeding PHP 250,000, as provided by Sections 98 and 99 of the National Internal Revenue Code (NIRC). Although the GOCC itself, as the implementing arm of the project, may be exempt from certain taxes under its charter (PD No. 205), this exemption does not extend to the private enterprise-donees, which are not tax-exempt entities. (BIR Ruling No. OT-126-2025, April 23, 2025)

 

A COMPANY IS GRANTED APPROVAL TO CHANGE ITS INVENTORY VALUATION METHOD FROM WEIGHTED AVERAGE TO FIFO, AS THIS CHANGE ALIGNS WITH ITS PARENT COMPANY’S ACCOUNTING PRACTICES AND WILL NOT MISREPRESENT ITS INCOME. Pursuant to Section 41 of the Tax Code and Section 145 of Revenue Regulations No. 2, which require that a change in accounting method must be approved by the Commissioner of Internal Revenue, a request to change an inventory valuation method is granted. The company’s request to switch from the weighted average method to the First-In, First-Out (FIFO) method is approved, effective January 1, 2022. This approval is based on the company’s need to align its financial reporting with its parent company and affiliates, a change deemed to be in line with “best accounting practice” and one that will not significantly impact the company’s reported income. The BIR concluded that the change would clearly reflect the company’s income and is therefore permissible. (BIR Ruling No. OT-127-2025, April 23, 2025)

 

THE TAX CODE ALLOWS A 10-YEAR PRESCRIPTIVE PERIOD IN CASES INVOLVING PRIMA FACIE EVIDENCE OF FRAUD, MAKING A REQUEST FOR CANCELLATION OF TAX AUTHORITY BASED ON THE 3-YEAR RULE INAPPLICABLE. Under the National Internal Revenue Code, the standard three-year prescriptive period for tax assessments does not apply when fraud is present, in which case a ten-year period governs. In this case, the discovery of under-declared purchases amounting to over 70% of actual purchases was deemed prima facie evidence of fraud, thereby justifying the application of the extended prescriptive period and the denial of the request for cancellation of the electronic letter of authority. (BIR Ruling No. OT-128-2025, April 23, 2025)

 

BIR DEADLINES FROM SEPTEMBER 22 TO SEPTEMBER 28, 2025. A gentle reminder on the following deadlines, as may be applicable:

DATE	FILING/SUBMISSION
September 25, 2025	SUBMISSION – Quarterly Summary List of Sales/Purchases/Importations by a VAT Registered Taxpayer – Non-eFPS Filers – Fiscal Quarter ending August 31, 2025
	Sworn Statement of Manufacturer’s or Importer’s Volume of Sales of each particular Brand of Alcohol Products, Tobacco Products and Sweetened Beverage Products – Fiscal Quarter ending August 31, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 2550Q (Quarterly Value-Added Tax Return) – eFPS & Non-eFPS Filers – Fiscal Quarter ending August 31, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 2551Q (Quarterly Percentage Tax Return) – eFPS & Non-eFPS Filers – Fiscal Quarter ending August 31, 2025

REVENUE REGULATIONS

 

Revenue Regulations No. 018-2025

Under the National Internal Revenue Code of 1997, as amended by the Capital Markets Efficiency Promotion Act, pick-ups are no longer exempt and are now subject to excise tax.

 

Applicable Excise Tax Rates	Rates range from 4% to 50% based on selling price.
	Hybrid vehicles taxed at 50% of the rate.
	Purely electric vehicles remain exempt.
Duties of Manufacturers and Importers	Must submit sworn statements and inventory lists of pick-ups as of June 30, 2025.
Transitional Coverage Rules	Units in inventory as of June 30, 2025 are exempt if reported.
	Units in transit with filed entries before July 1, 2025 are also exempt.
Date of Effectivity	Effective on July 1, 2025

 

Revenue Regulations No. 019-2025

The Bureau of Internal Revenue issued Revenue Regulations No. 019-2025 to implement rate adjustments on documentary stamp tax (DST) and expand exemptions on certain documents and papers.

 

DST on Shares	0.75% DST on the original issue of shares, based on par value or actual consideration.
DST on Foreign Bonds	0.75% DST on bonds, debentures, and certificates of stock or indebtedness issued abroad.
DST on Debt Instruments	0.75% DST on the original issue of debt instruments, with a proportional tax for short-term loans. Only one DST is imposed on related instruments.
Exempt Documents	1.    Sale, exchange, redemption or other disposition of shares listed through foreign stock exchange 2.    Original issuance, redemption or other disposition of shares in a mutual fund company 3.    Issuance of certificate or other evidence of participation in a mutual fund or unit investment trust funds.
Effective Date	July 1, 2025

           

Revenue Regulations No. 20-2025

Republic Act No. 12214 (CMEPA), as implemented by Revenue Regulations No. 020-2025, imposes a 1% Stock Transaction Tax (STT) on sales of domestic shares traded in both local and foreign stock exchanges.

 

Stock Transaction Tax on Local Exchange	Taxed at 0.1% of the gross selling price/value.
Stock Transaction Tax on Foreign Exchange	Taxed at 0.1% of the gross selling price/value of domestic shares traded on foreign exchanges.
Dealer Transactions	Gains from sales by licensed dealers are considered ordinary income and taxed under regular income tax rates.
Reporting and Remittance	Stock brokers must collect and remit STT to the BIR within 5 banking days.
	Selling shareholders or their representatives must remit STT for foreign-traded shares within 10 banking days
	A weekly report of transactions and taxes must be submitted to the stock exchange secretary.
Non-Payment Consequences	Ownership transfer won’t be registered without proof of STT payment.
	Stock transfer agents, secretaries, or brokers who violate the rules are subject to penalties under the Tax Code.
Effective Date	July 1, 2025

 

BIR RULINGS

 

THE GRANT OF PER DIEMS TO TRUSTEES CONSTITUTES PRIVATE INUREMENT THEREBY DISQUALIFYING THE INSTITUTION FROM TAX EXEMPTION AND SUBJECTING IT TO THE REGULAR CORPORATE INCOME TAX.
A non-stock, non-profit educational institution may be exempt from income tax only if it is organized as such and its revenues are actually, directly, and exclusively used for educational purposes. However, the presence of provisions allowing compensation or per diems to trustees constitutes private inurement, which is prohibited for entities claiming non-profit status. Since this violates the requirement that no part of net income or assets shall benefit any individual, the application for tax exemption was denied, and the entity is instead subject to income tax. (BIR Ruling No. SH30-049-2025, April 4, 2025)

 

TRANSFER OF CLUB MEMBERSHIP SHARES THROUGH TRUSTEES IS NOT SUBJECT TO CAPITAL GAINS TAX, DONOR’S TAX, OR DOCUMENTARY STAMP TAX, AS IT INVOLVES NO CONSIDERATION, DONATION, OR TRANSFER OF BENEFICIAL OWNERSHIP; HOWEVER, THE NOTARIAL ACKNOWLEDGMENT OF THE DEED OF DECLARATION OF TRUST REMAINS LIABLE TO DST. The transfer of club membership shares through nominees acting as trustees is not subject to capital gains tax, as no consideration or change in beneficial ownership occurs; not subject to donor’s tax, as there is no intent to donate nor patrimonial benefit to the transferees; and not subject to documentary stamp tax, as no conveyance of beneficial ownership takes place. However, the notarial acknowledgment of the Deed of Declaration of Trust remains subject to DST under Section 188 of the Tax Code. (BIR Ruling No. OT-051-2025, April 4, 2025; BIR Ruling No. OT-053-2025, April 14, 2025; (BIR Ruling No. OT-063-2025, April 15, 2025)

CONSTRUCTION OF SOCIALIZED HOUSING UNITS UNDER THE NHA’S HOUSING PROGRAM THROUGH THE COMMUNITY-BASED INITIATIVE APPROACH IS EXEMPT FROM PROJECT-RELATED INCOME TAXES, CWT, AND VAT ON SALES WITHIN THE PRICE THRESHOLD, BUT PURCHASES REMAIN SUBJECT TO VAT WITH THE OBLIGATION TO ISSUE VAT-EXEMPT RECEIPTS. Pursuant to Section 20(d)(1) of Republic Act No. 7279, as amended by RA 10884, and Section 109(1)(P) of the NIRC of 1997, as amended, a developer engaged by a homeowners’ association for the construction of socialized housing units under the NHA’s Government Employees Housing Program through the Community-Based Initiative Approach is exempt from project-related income taxes and creditable withholding tax, while the sale of the housing units is VAT-exempt provided the selling price per unit does not exceed ₱3,199,200.00 and subject to VAT rules effective January 1, 2021. However, its purchases of goods and services remain subject to VAT since it is an indirect tax, with the developer required to issue VAT-exempt official receipts for its gross receipts from the project. (Certificate of Tax Exemption No. NSH-052-2025, April 14, 2025) NSH-68-2025, NSH-71-2025, NSH-72-2025, NSH-73-2025, NSH-77-2025, NSH-79-2025, NSH-80-2025, NSH-81-2025, NSH-82-2025, (April 15, 2025) NSH-84-2025, NSH-85-2025, NSH-86-2025 NSH-87-2025, NSH-88-2025, NSH-89-2025 (April 16, 2025)

 

TRANSFER OF A PROPRIETARY CLUB MEMBERSHIP SHARE FROM ONE CORPORATE OFFICER-TRUSTEE TO ANOTHER IS NOT SUBJECT TO CGT, DST, OR DONOR’S TAX AND RELEVANT BIR RULINGS, SINCE NO CONSIDERATION, DONATION, OR TRANSFER OF BENEFICIAL OWNERSHIP OCCURS. Under the Tax Code of 1997, as amended, a transfer of a proprietary club membership share from one officer-trustee to another does not give rise to capital gains tax under Sec. 24(C) since no monetary consideration or change in beneficial ownership is involved, consistent with the trust arrangement recognized in jurisprudence. Likewise, it is not subject to documentary stamp tax under Section. 175 and RR 13-2004, as no beneficial ownership is transferred but only legal title for purposes of club use, akin to a transfer between trustees. Finally, the donor’s tax under Sec. 98 does not apply, as the requisites of a donation—reduction of the donor’s patrimony, increase of the donee’s patrimony, and intent to donate—are absent. Accordingly, the transfer of the proprietary club membership share from one officer to another officer of the same entity is tax-exempt. (BIR Ruling No. OT-054-2025, April 14, 2025)

 

UNDER THE CREATE LAW, ITS IRR, RA 7916, AND RMC NO. 24-2022, ONLY GOODS AND SERVICES DIRECTLY AND EXCLUSIVELY USED IN A REGISTERED PROJECT OR ACTIVITY OF A PEZA EXPORT ENTERPRISE QUALIFY FOR VAT ZERO-RATING; CONSTRUCTION SERVICES PARTLY FOR PRODUCTION AND PARTLY FOR ADMINISTRATIVE AREAS DO NOT FULLY MEET THIS TEST. Pursuant to Section 5, Rule 2 of the CREATE Law IRR and clarified under RMC No. 24-2022, VAT zero-rating applies only to purchases indispensable to the registered activity of an export enterprise, without which the project cannot be carried out. In the present case, the construction and rehabilitation services for the factory roof involved costs attributable both to the production area and to the administration area. Since only the portion directly and exclusively related to production may qualify for zero-rating, and considering that the works are not indispensable to the registered activity, the BIR upheld the denial of the application for VAT zero-rating, leaving the taxpayer to avail of legal remedies provided under the Tax Code. (BIR Ruling No. OT-055-2025, April 14, 2025)

A DULY REGISTERED HOMEOWNERS’ ASSOCIATION’S DUES, FEES, AND RENTALS USED SOLELY FOR COMMUNITY SERVICES AND FACILITY MAINTENANCE ARE EXEMPT FROM INCOME TAX AND VAT/PERCENTAGE TAX.

Pursuant to the Magna Carta for Homeowners and Homeowners’ Associations (R.A. 9904) and BIR guidelines, a non-stock, non-profit homeowners’ association registered with the proper regulatory body is exempt from income tax and VAT/percentage tax on dues, rentals, and assessments collected on a reimbursement basis, when these are applied to services such as cleanliness, safety, security, and facility maintenance that the local government is unable to provide. However, income from trade, business, or other activities beyond such dues, as well as interest income and other taxable earnings, remains subject to applicable internal revenue taxes, including final withholding tax on passive income and VAT or percentage tax on commercial operations. The association must also comply with reporting, invoicing, and withholding obligations under the Tax Code. (BIR Ruling No. OT-056-2025, April 14, 2025)

LOCAL GOVERNMENT UNIT IS NOT EXEMPT FROM WITHHOLDING TAX ON RENTAL INCOME FROM LEASING ITS PROPERTIES, AS THE ACTIVITY IS CONSIDERED PROPRIETARY. Under Sections 27(C) and 32(B)(7)(b) of the National Internal Revenue Code (NIRC), income derived from government functions that are essential or public in nature is exempt from taxation, while income from proprietary activities is taxable. In this case, the local government unit’s leasing of property for profit is a proprietary activity and not part of any essential governmental function. Therefore, the rental income generated from such leasing is subject to withholding tax, and the lessee is required to withhold tax on the payments. (BIR Ruling No. OT-057-2025, April 14, 2025)

HOUSING PROJECT REGISTERED WITH THE BOARD OF INVESTMENTS (BOI) IS EXEMPT FROM INCOME TAX AND VAT ON SALES OF UNITS BELOW P3.6 MILLION, SUBJECT TO CONDITIONS, BUT COMMERCIAL OR EXCESS SALES ARE TAXABLE. Under Executive Order No. 226 and the Tax Code, the company is granted a tax exemption for income and creditable withholding taxes on revenue derived from its low-cost housing project, provided it complies with BOI registration and project-specific terms. The exemption applies to units used exclusively for family dwelling, with specific VAT exemptions for sales under P3,600,000, effective January 2024. However, sales exceeding the price threshold or intended for commercial use are subject to tax. The exemption is contingent on compliance with BIR filing and reporting requirements, with periodic audits to ensure adherence to the conditions set forth by the tax code and regulations; failure to do so may result in the invalidation of the exemption. (Certificate of Tax Exemption No. BOI-LEH-058-060-2025, April 15, 2025) BOI-LEH-083-2025 (April 15, 2025) BOI-LEH-093-2025 (April 16, 2025)

SERVICE FEES PAID TO A NON-RESIDENT FOREIGN CORPORATION ARE SUBJECT TO PHILIPPINE INCOME TAX, WITHHOLDING TAX, AND VAT, AS THE SERVICES BENEFIT A DOMESTIC CORPORATION. Pursuant to Sections 23 (F), 28 (B), 42 (A), and 108 (A) of the National Internal Revenue Code, income derived by foreign corporations from services performed in the Philippines is taxable. In this case, the domestic corporation’s payment to a non-resident foreign corporation for services like data preparation and project management was deemed taxable, as the ultimate beneficiary of the services is a domestic entity. Although the services were performed outside the Philippines, they were considered income sourced in the Philippines because the services were rendered for a local business. Consequently, the service fees were subject to Philippine income tax, withholding tax, and VAT, as they were linked to activities within the domestic market. (BIR Ruling No. OT-061-2025, April 15, 2025)

REAL ESTATE PROPERTIES HELD BY A CORPORATION ENGAGED IN REAL ESTATE BUSINESS ARE CLASSIFIED AS ORDINARY ASSETS, SUBJECT TO CREDITABLE WITHHOLDING TAX (CWT), VALUE-ADDED TAX (VAT), AND DOCUMENTARY STAMP TAX (DST) According to Section 39(A)(1) of the Tax Code of 1997, as amended, and Revenue Regulations No. 7-2003, real properties held by a taxpayer primarily for sale, or used in the taxpayer’s business, are classified as “ordinary assets” and not “capital assets.” The corporation in question, whose Articles of Incorporation show it is involved in the real estate business, holds real properties that qualify as ordinary assets. As such, any sale or conveyance of these properties is subject to |CWT, VAT, and DST, in line with the Tax Code and the relevant revenue regulations. (BIR Ruling No. OT-064-2025, April 15, 2025)

UNDER THE CREATE LAW AND ITS IRR, VAT ZERO-RATING APPLIES ONLY TO PURCHASES DIRECTLY AND EXCLUSIVELY USED IN A REGISTERED PROJECT; RENOVATION SERVICES WERE HELD NOT INDISPENSABLE AND THUS DENIED ZERO-RATING. Pursuant to Section 5, Rule 2 of the CREATE Law IRR, as clarified by RMC No. 24-2022, VAT zero-rating may be granted only to local purchases of goods and services that are directly and exclusively used in a registered export project or activity, meaning expenses without which the project cannot be carried out. In this case, a construction contractor provided renovation works for a registered export enterprise within a freeport zone to accommodate expansion of production. After evaluation, the BIR ruled that such renovation expenditures do not qualify as directly and exclusively used in the registered activity, and thus are subject to 12% VAT, with the option for the taxpayer to pursue available remedies under the Tax Code. (BIR Ruling No. OT-65-2025 (April 15, 2025)

SERVICE FEES TO A NON-RESIDENT FOREIGN CORPORATION ARE TAXABLE WHERE SOURCE OF INCOME IS NOT PROVEN TO BE OUTSIDE THE PHILIPPINES.

Non-resident foreign corporations are taxable in the Philippines only on income derived from sources within the country, with the situs of taxation determined by where the income-producing activity is actually performed. In a ruling involving a local distributor and a foreign service provider, the BIR emphasized that tax exemptions must be clearly supported by evidence, and the burden rests on the taxpayer to prove that income is foreign-sourced. If the local entity failed to establish that the software development and related services were performed abroad and that ownership of the developed software was duly transferred, the payments were deemed to constitute supply of scientific or technical knowledge within the Philippines. Accordingly, the service fees were held subject to Philippine income tax and consequently to withholding tax. (BIR Ruling No. OT-66-2025, April 15, 2025)

DONATIONS TO A GOVERNMENT AGENCY’S PRIORITY PROGRAM ARE EXEMPT FROM DONOR’S TAX AND FULLY DEDUCTIBLE IF INCLUDED IN THE NEDA NATIONAL PRIORITY PLAN; OTHERWISE, DEDUCTIBILITY IS LIMITED TO 10% OR 5%. Donations made to the government or its agencies are exempt from donor’s tax, while full deductibility from gross income is allowed if the donation finances activities certified under the National Economic and Development Authority’s (NEDA) National Priority Plan (NPP); otherwise, deductions are limited to 10% for individuals and 5% for corporations. Applying this, contributions to a government digital library project included in the NPP for 2017–2022 qualify for full deductibility, while donations outside such certified years are subject to the statutory percentage limitations. (BIR Ruling No. OT-67-2025 (April 15, 2025)

 

TAX EXEMPTIONS APPLY ONLY TO REVENUES FROM QUALIFIED SOCIALIZED HOUSING UNITS WITHIN THE PRESCRIBED PRICE CEILINGS, WHILE DST REMAINS PAYABLE. Pursuant to Batas Pambansa Blg. 220 in relation to Republic Act No. 7279, as amended, and Section 109(1)(P) of the National Internal Revenue Code (NIRC), income and creditable withholding tax exemptions are granted on revenues directly attributable to a registered socialized housing project, provided that each house and lot does not exceed ₱450,000. In addition, the sale of residential house and lot and other dwellings priced at not more than ₱3,600,000 beginning January 1, 2024 is exempt from VAT, although the sale of residential lot only, regardless of value, is subject to VAT. However, the exemption does not cover documentary stamp tax, which remains due under Section 196 of the NIRC based on the higher of the contracted price or fair market value. The grant of exemption is conditioned upon compliance with BIR rules, reporting requirements, and may be revoked if facts presented are found inconsistent. (Certificate of Tax Exemption No. PSH-69-70-74-75-76-78-2025 (April 15, 2025) PSH-90-2025, PSH-91-2025, PSH-92-2025 (April 16, 2025)

TRANSFER OF SOCIALIZED HOUSING LOTS TO QUALIFIED MEMBER-BENEFICIARIES IS EXEMPT FROM CGT, CWT, DONOR’S TAX, AND DST, EXCEPT ₱30 NOTARIAL DST. Pursuant to Republic Act No. 7279 (Urban Development and Housing Act of 1992) and the National Internal Revenue Code, as clarified in prior BIR rulings, the transfer of subdivided lots under the Community Mortgage Program to qualified member-beneficiaries is not subject to capital gains tax, creditable withholding tax, donor’s tax, or documentary stamp tax, since the beneficiaries are deemed the actual owners who purchased the property through the association. Only the notarial acknowledgment of the deed of conveyance is subject to the ₱30 DST under Section 188 of the Tax Code, and title transfer may be affected only upon issuance of a Certificate Authorizing Registration after submission of required documents. (BIR Ruling No. OT-94-2025 (April 16, 2025)

 

BIR DEADLINES FROM SEPTEMBER 15 TO SEPTEMBER 21, 2025. A gentle reminder on the following deadlines, as may be applicable:

 

DATE	FILING/SUBMISSION
September 15, 2025	REGISTRATION (Manual or Online thru ORUS) – Permanently Bound Loose-Leaf Books of Accounts/Invoices and Other Accounting Records – for the Fiscal Year ending August 31, 2025
	SUBMISSION – Monthly Summary Report/Schedule of Transferred Titled/Untitled Real Properties by City or Municipal Assessors, RDs & LRAs – for the Month of August 2025
	SUBMISSION – Summary List of Blank OCTs/TCTs/CCTs issued to all RDs – for the Month of August 2025
	FILING & PAYMENT – BIR Form 1702 – RT/EX/MX with Audited Financial Statements (AFS), 1709 (if appli cable), and Other Attachments – for the Fiscal Year ending May 31, 2025
	FILING & PAYMENT – 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 – for the Fiscal Year ending May 31, 2025
	e-FILING & e-PAYMENT – BIR Forms 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) and/or 0619-E (Monthly Remittance Form of Creditable Income Taxes Withheld-Expanded) and/or 0619-F (Monthly Remittance Form of Final Income Taxes Withheld) – eFPS Filers under Group A – for the Month of August 2025
	e-FILING & e-PAYMENT- BIR Form 1702 – RT/EX/MX – for the Fiscal Year ending May 31, 2025
	e-PAYMENT – BIR Forms 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) and/or 0619-E (Monthly Remittance Form of Creditable Income Taxes Withheld-Expanded) and/or 0619-F (Monthly Remittance Form of Final Income Taxes Withheld) – eFPS Filers under Group E, D, C & B – for the Month of August 2025
September 16, 2025	Consolidated Return of All Transactions based on the Reconciled Data of Stockbrokers – for the Month of September 1-15, 2025
September 20, 2025	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 1600 WP (Remittance Return of Percentage Tax on Winnings and Prizes Withheld by Race Track Operators) – eFPS & Non-eFPS Filers – for the Month of August 2025

 

COURT OF TAX APPEALS DECISIONS

THE CTA EN BANC RULED THAT THE 30-DAY PERIOD TO APPEAL A DENIED VAT REFUND RUNS FROM THE TAXPAYER’S OWN RECEIPT OF THE DENIAL LETTER, MAKING THE LATE FILING JURISDICTIONALLY FATAL DESPITE THE TAXPAYER’S CLAIM THAT ONLY ITS COUNSEL SHOULD HAVE BEEN SERVED. The Court of Tax Appeals En Banc stressed that under the Tax Code and applicable revenue regulations, the reckoning point for the 30-day period to appeal the denial of a refund claim is the taxpayer’s actual receipt of the denial, not the date its counsel is informed. The law explicitly requires that the denial be addressed and sent to the taxpayer-claimant, and such receipt constitutes valid service in administrative proceedings, unlike in judicial proceedings governed by the Rules of Court, where service on counsel is required. The Court explained that in tax cases, administrative service to the taxpayer is sufficient, and it is the taxpayer’s duty to communicate promptly with counsel. In this case, the petitioner admittedly received the denial letter directly but failed to relay it to its counsel in time, resulting in the appeal being filed beyond the statutory 30-day window. The En Banc characterized this lapse as plain negligence, not excusable neglect, and reiterated that the appeal period is mandatory and jurisdictional. It thus affirmed the Court in Division’s dismissal of the petition for lack of jurisdiction. (Manulife Data Services, Inc. v. CIR, CTA EB No. 2850, CTA Case No. 10138, February 26, 2025)

IN INPUT VAT REFUND FROM ZERO-RATED SALES, PROOF THAT SERVICES TO NONRESIDENTS WERE PERFORMED IN THE PHILIPPINES MUST BE SUBMITTED. The Tax Code grants a 0% VAT rate to certain services rendered to nonresident clients, provided four elements are met: (1) the services are other than processing, manufacturing, or repacking of goods; (2) they are performed in the Philippines by a VAT-registered person; (3) the recipient is a foreign corporation doing business outside the Philippines or a nonresident not engaged in business in the Philippines; and (4) payment is in acceptable foreign currency and accounted for under BSP rules. The Court found that petitioner’s call and administration services to Therapeutic Case Management Services Limited met the first element, but failed to establish the second element, performance in the Philippines, since the Service Agreement was silent on service location, no witness testified to such fact, and the Independent CPA’s conclusion lacked personal knowledge and was not binding under CTA rules. Applying the rule that tax refunds and exemptions are strictly construed against taxpayers, the Court ruled that petitioner did not discharge its burden of proof, leading to the denial of its claim for ₱1,782,368.41 in unutilized input VAT for the 3^rd and 4^th quarters of 2018. (Organisational Support Services, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 10525, February 14, 2025)

VAT OFFICIAL RECEIPTS MUST STATE THE ACTUAL NATURE OF SERVICES AND COMPLY WITH ALL INVOICING REQUIREMENTS. VAT official receipts must indicate, among others, the actual “nature of the service” and comply with all invoicing requirements, as these are mandatory for substantiating VAT refund claims. In this case, the petitioner’s receipts covering sales to PEZA-registered clients merely stated “downpayment” or “others,” which do not specify the actual services rendered, and were unsigned by the authorized signatory despite the petitioner’s own printed notation that such signature is required for validity. The Court held that strict compliance with invoicing and substantiation rules is essential to ensure accuracy and veracity in VAT claims; thus, the absence of the required details and signatures justified the denial of zero-rating for these sales. (Tetra Pak Philippines, Inc. v.  CIR, CTA Case No. 10546, Amended Decision, March 25, 2025)

TAXPAYER MUST PROVE THAT THAT THE BUYER IS AN EXPORT-ORIENTED ENTERPRISE – OVER 70% EXPORT SALES IN THE PRECEDING TAXABLE YEAR AND VALID FOR THE CLAIM PERIOD. Sales of raw or packaging materials to an export-oriented enterprise, defined as one whose export sales exceed 70% of total annual production in the preceding taxable year, qualify for 0% VAT, provided the enterprise’s status is established for the relevant period of sale. Petitioner sought VAT zero-rating based on DTI-EMB Certificates of Accreditation under RA No. 7844 and letters showing export percentages. However, the DTI-EMB list covered only July 2018, outside the 4th quarter 2018 claim period, and did not show its 2017 export sales ratio; another client’s list covered only January–February 2018 and reflected a 92% export rate based on 2016 data, not the required 2017 figures. The Court ruled that mere accreditation is insufficient without proof of export-oriented status for the specific claim period, thus sustaining the denial of VAT zero-rating for these sales. (Tetra Pak Philippines, Inc. v.  CIR, CTA Case No. 10546, Amended Decision, March 25, 2025)

INPUT VAT ON IMPORTATIONS IS REFUNDABLE ONLY IF TIED TO ZERO-RATED SALES WITHIN THE CLAIM PERIOD NOT WHEN PAID. VAT-registered taxpayer may claim refund of input VAT on importations only when such VAT is directly attributable to zero-rated sales made within the period of claim. Here, the petitioner sought reconsideration of disallowed input VAT on importations totaling ₱1,571,474.51, asserting that the refund period should be reckoned from the date of payment of VAT to the Bureau of Customs. The Court rejected this argument, clarifying that entitlement depends on when the related zero-rated sales were made, not when the VAT was paid. It found that certain importations either did not match the items sold under zero-rated invoices or, though related, pertained to sales outside the fourth quarter of CY 2018, rendering them ineligible. However, a small amount of ₱125.25 for matched sales was reconsidered as valid. Ultimately, the Court partially granted the petition, ordering a refund of ₱9,174,250.45 as excess and unutilized input VAT attributable to valid zero-rated sales for the quarter. (Tetra Pak Philippines, Inc. v.  CIR, CTA Case No. 10546, Amended Decision, March 25, 2025)

REASONS FOR DISALLOWANCE OF INPUT VAT DUE TO INVOICING REQUIREMENTS: Supporting documents which the Court noted as being partly blurred, blackened, and/or not properly scanned; input VAT on purchases of goods supported by documents other than VAT invoice; input VAT on purchases of service supported by documents other than VAT OR; input VAT on purchases of services reported as purchases of services supported by VAT ORs, but the nature of services were not indicated/statement not attached/nature of payment cannot be ascertained; input VAT on purchases of services supported by VAT ORs but input VAT amounts per OR are lower than the amounts per claim (Overclaimed input VAT); input VAT on purchases of services supported by VAT ORs but the input VAT amounts were not separately indicated; supporting documents not found in the scanned file but included in the  claim (Manulife Data Services, Inc. v. CIR, CTA Case No. 10666, January 2025); incomplete or incorrect name, address, or TIN of the petitioner; absence or inaccuracy of VAT amounts; missing unit cost, quantity, or VATable amount; use of the Liaison/Branch Office address with the Head Office TIN (or incomplete branch TIN); no indication of the nature of the payment for services; illegible or missing TIN; certain documents reflected prior period purchases, unsupported transactions, or payments not valid for input VAT claims. (Mindanao Container Corporation v. CIR, CTA Case No. 10513, February 19, 2025)

ZERO-RATING REQUIRES PROOF THAT SERVICES RENDERED TO A NONRESIDENT WERE PAID IN ACCEPTABLE FOREIGN CURRENCY AND ACCOUNTED FOR UNDER BSP RULES, WITH A CLEAR NEXUS BETWEEN PAYMENT AND THE ZERO-RATED SALE. A VAT refund for unutilized input tax on zero-rated sales requires, among others, proof that the sales are zero-rated and that payments received are in acceptable foreign currency, duly accounted for under BSP rules, and directly attributable to such sales. While PPD Pharma established its VAT registration, the nonresident status of its client PPD Global, and timely filing of claims, it failed to prove that the $7.5 million received was exclusively payment for zero-rated services rendered in Q3 and Q4 of 2018. Evidence, including Official Receipts, Proofs of Remittances, and bank certifications, merely showed foreign currency inflows without linking them to the alleged service fees, especially since the amounts could also represent advances or loans. The absence of billing statements or other documentation to establish this nexus led the court to deny the refund claim for insufficiency of evidence. (PPD Pharmaceutical Development Philippines. Corp. v. Commissioner of Internal Revenue, CTA Case No. 10466, February 6, 2025)

DEPARTMENT OF ENERGY (DOE) REGISTRATION IS MANDATORY TO AVAIL VAT INCENTIVES, BUT  HYDROPOWER SALES TO NPC STILL QUALIFIED FOR ZERO-RATING WARRANTING A VAT REFUND.  Under the Renewable Energy Act and its implementing rules, registration with the Department of Energy is required before a renewable energy developer can enjoy fiscal incentives such as the 0% VAT rate. This rule means that simply being engaged in renewable energy generation does not automatically grant such benefits. In this case, the Court found that CBK Power Company Limited, though operating a hydropower plant, was not entitled to VAT incentives under the RE Law due to its admitted non-registration with the DOE. However, the Court still recognized CBK’s sales of electricity to the National Power Corporation as zero-rated, given that hydropower is a renewable source. (Commissioner of Internal Revenue v. CBK Power Company Limited, CTA EB No. 2801 CTA Case No. 10137, January 17, 2025)

THE CTA EN BANC DISMISSED THE CIR’S PETITION FOR RELIEF FROM JUDGMENT FOR BEING FILED WAY PAST THE 60-DAY AND 6-MONTH PERIODS AND FOR FAILING TO SHOW THAT COUNSEL’S LAPSES AMOUNTED TO EXCUSABLE NEGLIGENCE, REITERATING THAT CLIENTS ARE BOUND BY THEIR LAWYERS’ ACTS. The Court of Tax Appeals En Banc emphasized that a petition for relief from judgment is an equitable, exceptional remedy subject to the strict “double-period” rule—both (1) within 60 days from actual knowledge of the judgment and (2) within six months from its entry. These periods must be met simultaneously; noncompliance is fatal as they are jurisdictional. In this case, judgment was entered on August 19, 2022, but the CIR filed its petition only on March 31, 2023, well beyond the 6-month cut-off of February 19, 2023. The CIR also failed to prove the exact date when it received or learned of the judgment, preventing verification of the 60-day requirement. On substance, the CIR argued excusable negligence due to Atty. Tejada’s inaction, but the Court ruled this unavailing since the case had multiple counsels who could have intervened. Under settled doctrine, clients are bound by counsel’s acts or omissions, absent compelling exceptions—which were not shown here. Consequently, the En Banc affirmed the Special Second Division’s denial, stressing that procedural deadlines for this remedy admit no leniency. (Commissioner of Internal Revenue v. Unnamed Respondent, CTA EB No. 2833, January 16, 2025)

 

BIR RULINGS

INCOME TAX EXEMPTION GRANTED FOR REVENUES USED EXCLUSIVELY FOR EDUCATIONAL PURPOSES BY A QUALIFIED NON-STOCK, NON-PROFIT INSTITUTION. Pursuant to Section 30(H) of the National Internal Revenue Code of 1997, as amended, a Certificate of Tax Exemption was issued to a non-stock, non-profit educational institution proven to operate exclusively for educational purposes. The exemption covers income derived from tuition and school fees, as well as revenues from cafeteria, dormitory, and bookstore operations located within school premises, provided they are owned and operated by the institution and used directly for educational activities. Interest income from bank deposits used exclusively for educational purposes is likewise exempt from final taxes, subject to documentary compliance. The institution remains liable for taxes on unrelated income or profit-driven activities and is subject to VAT, percentage tax, and withholding tax where applicable. The exemption is contingent on continued compliance with BIR rules, including annual reporting, record-keeping, and submission of certified financial and operational documents. (BIR Ruling No. SH30-027-2025, January 14, 2025); SH30-036-2025, February 26, 2025).

CAPITAL GAINS TAX EXEMPTION GRANTED FOR A COMMUNITY MORTGAGE PROGRAM LAND SALE TO A QUALIFIED HOMEOWNERS’ ASSOCIATION. The sale of a parcel of land located in Brgy. Riverside, Calinan, Davao City under the Community Mortgage Program (CMP) to a duly registered homeowners’ association is exempt from capital gains tax. However, the transaction remains subject to documentary stamp tax under Section 196 of the Tax Code. The exemption does not authorize the transfer of land title unless a Certificate Authorizing Registration (CAR) is secured following the submission of documents required under RMO No. 15-2003. (BIR Ruling No. CMP-028-2025, January 14, 2025)TRANSFER OF LEGAL TITLE OF A CLUB SHARE BETWEEN TRUSTEES, WITHOUT CHANGE IN BENEFICIAL OWNERSHIP, IS NOT SUBJECT TO CGT, DONOR’S TAX, OR DST. Pursuant to Sections 24(C), 175, and 176 of the National Internal Revenue Code, as amended, and consistent with established jurisprudence, the Bureau of Internal Revenue ruled that the transfer of legal title over a proprietary club membership share from a former corporate trustee to a newly designated trustee, under a valid Declaration of Trust, is not subject to capital gains tax, donor’s tax, or documentary stamp tax, as there is no monetary consideration, no intent to donate, and no transfer of beneficial ownership – the beneficial title remaining with the corporate principal. The transaction is purely for administrative compliance with club membership rules requiring natural persons as registered holders. However, the notarial acknowledgment of the Declaration of Trust remains subject to DST under Section 188, and no Certificate Authorizing Registration or Tax Clearance is required to affect the transfer. (BIR Ruling No. OT-029-2025, January 17, 2025; BIR Ruling No. OT-046-2025, April 4, 2025)

INCOME FROM GAMING OPERATIONS BY A PAGCOR LICENSEE IS EXEMPT FROM CIT AND VAT SUBJECT ONLY TO 5% FRANCHISE TAX. A licensed operator authorized by PAGCOR to conduct electronic gaming activities is exempt from corporate income tax and value-added tax on income solely derived from its gaming operations. The exemption, as clarified in jurisprudence, inures to the benefit of PAGCOR’s licensees and contractees, who, like PAGCOR, are subject only to a 5% franchise tax on gross revenue from gaming operations, in lieu of all other national and local taxes. However, income from unrelated or non-gaming services shall remain subject to regular corporate income tax and VAT. (BIR Ruling No. OT-032-2025, (January 21, 2025)

SALE OF EDUCATIONAL E-MATERIALS NOT DEVOTED TO ADVERTISEMENTS IS VAT-EXEMPT. The sale of e-journals, e-books, and other electronic materials used for educational purposes, and not principally devoted to paid advertisements, is exempt from the 12% value-added tax. A corporation engaged in such transactions qualifies for this VAT exemption. However, if the entity engages in other non-exempt services such as bookbinding, engraving, or printing, those transactions remain subject to VAT, requiring separate VAT registration and invoicing. Additionally, while exempt on its sales of educational materials, the corporation is not exempt from VAT passed on by suppliers on its purchases, as VAT is an indirect tax borne by the buyer. (BIR Ruling No. VAT-033-2025, February 05, 2025)

TAX EXEMPTION IS GRANTED FOR A GOVERNMENT-CONTRACTED SOCIALIZED HOUSING PROJECT. A tax exemption was granted to a contractor engaged by a national housing agency for a socialized housing project consisting of five five-storey low-rise buildings with 300 units in Caloocan City, intended as relocation for informal settler families affected by a government infrastructure project. The exemption covers income tax and creditable withholding tax directly related to the project, and the sale of residential units is exempt from VAT provided the selling price per unit does not exceed ₱3,600,000. However, purchases of goods or services related to the project remain subject to VAT, and VAT-exempt receipts must be issued. This certification does not substitute for a Certificate Authorizing Registration (CAR), which must still be secured from the BIR following the proper process. (BIR Ruling No. NSH-034-2025, February 26, 2025)

RECONVEYANCE OF PROPERTY UNDER A COURT-DECLARED TRUST IS NOT SUBJECT TO CGT OR DST. No capital gains tax or documentary stamp tax applies to a court-ordered reconveyance of real property where no consideration is involved and no capital gain is presumed to have been realized. In this case, two parcels of land registered in the name of a former director were judicially confirmed to be held in trust for a corporation, which had continuously possessed, used, and paid real estate taxes on the properties. A final and executory decision declared the existence of a resulting trust and ordered reconveyance to the true owner. As the transfer was merely to restore legal title to its rightful holder and did not involve a sale or exchange, it is not subject to CGT or DST, except for the ₱30.00 DST on the notarial acknowledgment under Section 188. (BIR Ruling No. OT-035-2025, February 26, 2025).

MANDATED TRANSFER OF SHARES TO THE REPUBLIC THROUGH A GOVERNMENT COMMISSION PURSUANT TO ADMINISTRATIVE ORDERS IS EXEMPT FROM CAPITAL GAINS TAX, DONOR’S TAX, AND DOCUMENTARY STAMP TAX.  The transfer of shares from certain corporations to the Republic of the Philippines through a government commission is not considered a sale, donation, or taxable conveyance. The transaction was undertaken solely to comply with the directives of the administrative orders, without any donative intent or commercial exchange. As such, the Bureau of Internal Revenue ruled that the transfer is exempt from capital gains tax due to the absence of a sale or disposition, from donor’s tax for lack of liberality, and from documentary stamp tax as it is not a taxable conveyance under the law (BIR Ruling No. OT- 40-41-2025, March 13, 2025).

DONATION OF REAL PROPERTIES TO A LOCAL GOVERNMENT UNIT IS EXEMPT FROM DONOR’S TAX AND DOCUMENTARY STAMP TAX (DST), EXCEPT FOR THE DST ON NOTARIZATION. Donations made to political subdivisions of the national government are exempt from donor’s tax. In this case, the transfer of parcels of land from a private entity to a local government unit qualifies for such exemption, being a gratuitous transfer to a political subdivision. The transaction is likewise exempt from documentary stamp tax, except for the P30 DST. (BIR Ruling No. DT-042-2025 (March 24, 2025).

THE SALE OF LAND TO A LOCAL GOVERNMENT FOR A SOCIALIZED HOUSING PROJECT IS EXEMPT FROM CAPITAL GAINS TAX BUT SUBJECT TO DOCUMENTARY STAMP TAX. The transfer of a parcel of raw land from private owners to a local government unit for use in a qualified socialized housing project is exempt from capital gains tax. However, the transaction remains subject to documentary stamp tax, and title transfer shall require an eCAR from the BIR with an annotation stating “Intended for Socialized Housing Project.” (BIR Ruling No. OT-043-44-2025, March 24, 2025).

SALE OF CARBON EMISSION CREDITS BY A REGISTERED RENEWABLE ENERGY DEVELOPER ARE EXEMPT FROM ALL TAXES. Republic Act No. 9513, as implemented by Revenue Regulations No. 7-2022, grants full tax exemption on proceeds from the sale of carbon emission credits by duly registered Renewable Energy developers. The developer transferred carbon emission credits generated from a solar rooftop project to a foreign government in exchange for funding, under an agreement fulfilling all requisites of a valid contract of sale – consent, determinate subject matter, and price certain in money. As the transaction constitutes a sale in substance and aligns with the objectives of the bilateral low-carbon growth partnership, the proceeds are exempt from income tax, VAT, and all other taxes pursuant to RA No. 9513 and related regulations. (BIR Ruling No. OT-045-2025, April 3, 2025)

REVENUES FROM SALES AND SERVICES BY A NON-STOCK, NON-PROFIT ENTITY ARE SUBJECT TO VAT AS TAXABLE INCOME, NOT EXEMPT CAPITAL CONTRIBUTIONS. Any person, including non-stock, non-profit organizations, engaged in the regular sale of goods or performance of services for a fee is liable for VAT regardless of profit intent, unless specifically exempt under Section 109. A non-profit religious institution sought VAT exemption for proceeds from sales of religious materials, facility rentals, training services, and licensing, asserting these were capital infusions. The BIR ruled that the receipts are payments for goods and services, not funds held in trust, and therefore constitute taxable income. Since the transactions fall within the statutory definition of sale of service and are not listed among VAT-exempt transactions, they are subject to VAT despite the entity’s non-profit status. (BIR Ruling No. OT-047-2025, April 4, 2025)

A REGISTERED DOMESTIC MARKET ENTERPRISE AVAILING OF THE 5% GROSS INCOME TAX BEFORE CREATE REMAINS EXEMPT FROM REGULAR INCOME TAX AND 5% CREDITABLE WITHHOLDING TAX ON RENTAL PAYMENTS FOR UP TO TEN YEARS. Income payments to entities registered in special economic zones and enjoying income tax exemption are not subject to creditable withholding tax. A domestic market enterprises already availing of the 5% tax on gross income prior to the CREATE Law’s effectivity may continue such incentive for a maximum of ten years. Applying this, a registered enterprise engaged in industrial development and leasing activities remains entitled to the 5% preferential tax rate in lieu of all national and local taxes during the transition period, and its lessees are not required to withhold the 5% creditable withholding tax on rental payments. BIR Ruling No. OT-048-2025 (April 4, 2025)

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. If you have clarification or concern or no longer wish to receive updates, please feel free to reach out to us.

BIR DEADLINES

BIR DEADLINES FROM AUGUST 18 TO AUGUST 24, 2025. A gentle reminder on the following deadlines, as may be applicable:

DATE	FILING/SUBMISSION
August 20, 2025	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 1600 WP (Remittance Return of Percentage Tax on Winnings and Prizes Withheld by Race Track Operators) – eFPS & Non-eFPS Filer – for the Month of July 2025s

COURT OF TAX APPEALS DECISIONS

AMORTIZED INPUT VAT MUST BE SUPPORTED BY INVOICE OR OFFICIAL RECEIPTS AND CERTIFIED TRUE COPY OF THE AMORTIZATION SCHEDULE.  Section 110(A)(2) of the NIRC of 1997, as amended, requires that input VAT on capital goods exceeding ₱1 million be amortized over 60 months or the estimated useful life of the asset, whichever is shorter. Only the portion that has ripened during the claim period may be applied for refund, and Section 110(A)(1) mandates that such claims be supported by valid VAT invoices or official receipts issued during the claim period. In this case, petitioner sought a refund of the ripened portion of its deferred input VAT on capital goods from prior years but failed to present the necessary VAT invoices or official receipts to substantiate the claim. Additionally, as required under Section 11(4)(b) of RMC No. 47-2019, a claimant referring to previously approved deferred input VAT must submit the amortization schedule marked as a “Certified True Copy from the Original” by the head of the processing office. However, the taxpayer submitted only photocopies marked “Authenticated from: Photocopy,” which did not satisfy the prescribed documentary standards. As a result, the Court found that both the lack of proper invoices and failure to submit duly certified documents justified the BIR’s disallowance of the input VAT claim. (Unilever Global Services B.V. Philippines Regional Operating Headquarters ROHQ v. CIR, CTA Case No. 10385, January 20, 2025)

IN VAT REFUND CASES, THE BIR CANNOT VALIDLY IMPOSE OUTPUT VAT, WITHHOLDING VAT AND COMRPOMISE PENALTY; EVEN ASSUMING FINAL WITHHOLDING VAT IS CORRECTLY IMPOSED, IT IS CREDTABLE TO THE TAXPAYER HENCE HAS NO EFFECT IN THE REFUND. Section 228 of the NIRC of 1997, as amended, and Revenue Regulations No. 12-99 require that any deficiency assessment such as output VAT, withholding VAT, or compromise penalties must go through proper assessment procedures, including the issuance of a notice of assessment and the opportunity for the taxpayer to protest.  Here, the BIR deducted from the taxpayer’s VAT refund claim several amounts on the ground that these represented unpaid output VAT on alleged VAT-able transactions, 12% final withholding VAT on interest payments to a foreign entity, and compromise penalties. The Court held that these deductions effectively constituted tax assessments, which are invalid when done within a refund proceeding without issuing a proper assessment and observing due process. Notably, the BIR’s deductions deprived the petitioner of the opportunity to refute the impositions administratively, which is contrary to the procedure mandated by law. Furthermore, the Court clarified that even if the 12% final withholding VAT on interest expense were correct, such VAT is creditable to the petitioner as a VAT-registered withholding agent, and would have no effect on the refund claim. Accordingly, the Court found that these deductions were improperly made and ordered their exclusion from the computation of the refundable amount. (Unilever Global Services B.V. Philippines Regional Operating Headquarters ROHQ v. CIR, CTA Case No. 10385, January 20, 2025)

TAXPAYER HAS OPTION TO OFFSET INPUT VAT FROM OUTPUT VAT OR PRORATE THE INPUT VAT BETWEEN VATABLE AND ZERO-RATED SALES. Under Section 112 of the NIRC of 1997, as amended, a VAT-registered taxpayer with zero-rated sales may apply for a refund or tax credit certificate (TCC) of its unutilized input VAT. In Chevron Holdings, Inc. v. CIR, the Supreme Court clarified that the taxpayer has two options: (1) charge the input VAT attributable to zero-rated sales against output VAT from taxable sales and claim only the excess for refund, or (2) claim the entire amount of input VAT attributable to zero-rated sales directly for refund. These remedies are cumulative but mutually exclusive for a given amount of input VAT. Here, the Court found that the taxpayer clearly opted for the first method, which is applying input VAT against output VAT. However, since petitioner’s input VAT directly allocated to VAT-able sales was insufficient to fully offset its output VAT liability, the input VAT originally allocated to zero-rated sales was partially used to settle the remaining output VAT due. The balance of the unutilized input VAT, attributable to zero-rated sales, was then computed and considered for refund. Thus, the Court applied proportional allocation based on sales volume and allowed the remaining unutilized portion of input VAT as refundable. (Unilever Global Services B.V. Philippines ROHQ v. CIR)

WITHOUT PROOF OF INWARD REMITTANCE OR VALID OFFSETTING, ZERO-RATED VAT REFUND UNDER SECTION 108(B)(2) OF THE NIRC CANNOT BE GRANTED. Under Section 108(B)(2) of the NIRC, services rendered in the Philippines to a non-resident foreign client may qualify for VAT zero-rating if paid in acceptable foreign currency and accounted for in accordance with BSP rules. Here, although petitioner proved that services were rendered locally, it failed to establish actual foreign currency remittance or a valid offsetting arrangement. The submitted credit facility agreement did not authorize inter-affiliate offsetting, nor was there sufficient documentation to show that payments were for services rendered. Hence, the claim for VAT refund was denied. (Avaloq Philippines Operating Headquarters v. Commissioner of Internal Revenue, CTA Case No. 10248, February 3, 2025)

FILING BEYOND THE 30-DAY PERIOD AFTER THE 90-DAY INACTION PERIOD UNDER SECTION 112(C) OF THE NIRC DEPRIVES THE CTA OF JURISDICTION. Section 112(C) of the NIRC requires that a judicial claim for VAT refund be filed within 30 days from either the receipt of the CIR’s decision or the lapse of the 90-day period to act on the administrative claim, whichever comes first. Here, the BIR failed to act within the 90-day period. Although petitioner later received a VAT Refund/Credit Notice and sought clarification, the Court ruled that the 30-day period must be reckoned from the lapse of the 90 days, not from any later correspondence. Since the petition was filed beyond this period, the CTA dismissed the case for lack of jurisdiction. (Schaeffler Philippines Inc. v. Commissioner of Internal Revenue, CTA Case No. 10268, January 24, 2025)

INVOICE AND OFFICIAL RECEIPTS REQUIREMENTS: MUST INDICATE “ZERO-RATED”, DATED WITHIN THE COVERED QUARTER, ATP MUST HAVE VAILIDITY PERIOD, MUST BE REGISTERED, MUST STATE THE NATURE OF THE SERVICE. Section 108(B) of the NIRC of 1997, as amended, provides that certain sales of services may qualify for VAT zero-rating if specific conditions are met, including payment in acceptable foreign currency and proper documentation. Meanwhile, Section 113(B), in relation to Section 237 and Revenue Regulations No. 16-2005, mandates that VAT official receipts must be BIR-registered and must clearly indicate essential details such as the nature of the services, TIN, and the phrase “zero-rated sale” for the sale to be considered validly zero-rated. Here, the receipts were either dated outside the covered quarter or ATP validity period, did not indicate “zero-rated” status, or were entirely unregistered. Even the amount supported by BIR-registered VAT ORs was denied because the receipts merely referenced “various invoices” without identifying the specific nature of services rendered, in violation of Section 113(B)(3), the taxpayer did not submit in evidence the said invoices, which could have been cross-referenced with the ORs and provided the necessary data that will confirm the nature and details of the supposed zero-rated sales. Consequently, the Court cannot ascertain on its own whether the payments received are indeed for the claimed services rendered by petitioner.  Given that tax refunds are in the nature of tax exemptions, they must be strictly construed against the taxpayer. The Court emphasized that it is the claimant’s burden to prove compliance with all legal and documentary requirements. For failure to comply with these mandatory invoicing and substantiation requirements, petitioner’s claim for refund of unutilized input VAT was denied. Nippon Express Philippines Corporation v. Commissioner of Internal Revenue, CTA Case No. 10416, February 27, 2025)

FAILURE TO PROVE THAT SERVICES WERE PERFORMED IN THE PHILIPPINES DEFEATS A CLAIM FOR VAT ZERO-RATING. Under Section 108(B)(2) of the NIRC of 1997, as amended, services rendered by a VAT-registered person may be subject to zero percent VAT if (1) the services are not processing, manufacturing, or repacking; (2) the services are performed in the Philippines; (3) the recipient is a nonresident or a foreign entity doing business outside the Philippines; and (4) payment is in an acceptable foreign currency accounted for per BSP rules. Here, the taxpayer claimed a refund of unutilized input VAT attributed to alleged zero-rated sales made to a foreign entity (TCMS) under a Service Agreement. While the nature of services met the first requirement, petitioner failed to prove the second, that the services were actually performed in the Philippines. The Service Agreement was silent on the place of performance, and no witness testified to establish this fact. The independent CPA’s report merely inferred performance in the Philippines based on the petitioner’s registration documents, which the Court found insufficient, citing that findings of an ICPA are not conclusive. Because the taxpayer failed to prove that a key element of Section 108(B)(2) was satisfied, the Court held that it need not evaluate the other requisites and denied the claim (Organisational Support Services, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10525, February 14, 2025)

BIR ISSUANCES

REVENUE MEMORANDUM CIRCULAR NO. 071-2025

Date Issued:	July 11, 2025
Subject:	Amendment of the Prescribed Format of VAT Zero-Rating Certificates Issued by Investment Promotion Agencies (IPAs)
Who Issues the Certificates	IPAs
To Whom Issued	Registered Business Enterprises (RBEs)
Templates Introduced	·         Template 1: For Registered Export Enterprises (REEs) and High-Value Domestic Market Enterprises (HVDMEs) under RA 12066 (CREATE MORE) ·         Template 2: For RBEs with incentives granted prior to RA 11534 (CREATE Act)

REVENUE MEMORANDUM CIRCULAR (RMC) NO. 76-2025

Date Issued	July 25, 2025
Subject	Extension of Deadlines for Filing Various Tax Documents due to Inclement Weather
Purpose	To provide relief to taxpayers affected by government work suspensions due to the Southwest Monsoon and Typhoons “Crising,” “Dante,” and “Emong”, through deadline extensions for tax filings and audit-related submissions.
Affected Areas	Metro Manila, and selected provinces in Regions I, II, III, IV-A, IV-B, V, and VI, including Ilocos Norte, Pangasinan, Baguio, Isabela, Bulacan, Cavite, Batangas, Mindoro, Palawan, Albay, Iloilo, and others (full list in issuance).
Covered Taxpayers	Taxpayers under the jurisdiction of: Large Taxpayers Service (LTS)Revenue District Offices (RDOs)Revenue Regional Offices (RROs) located in the affected areas
Covered Documents/Actions	Deadlines falling on July 21–25, 2025 (and any future dates covered by government work suspensions): ·         Position Papers and supporting documents (in response to Notice of Discrepancy) ·         Replies to Preliminary Assessment Notices (PAN) ·         Protest Letters to Final Assessment Notice / Final Letter of Demand (FAN/FLD) ·         Transmittal Letters and documents for Request for Reinvestigation ·         Requests for Reconsideration of Final Decision on Disputed Assessments (FDDA) ·         Submissions in response to First, Second and Final Notices, and Subpoena Duces Tecum ·         Requests for Reconsideration on Denied Tax Refund Claims ·         Applications for Tax Refund and Processing of Claims ·         Issuance/service of Assessment Notices, Warrants of Distraint and Levy, Garnishments ·         Other similar BIR correspondences and filings
Extended Deadline	10 calendar days from the last day of work suspension, as declared by the Office of the President via Memorandum Circulars
Rule for Future Suspensions	If government work is suspended again due to weather, the same 10-day extension rule applies to due dates falling within those suspension days.
If New Deadline Falls on a Holiday/Non-working Day	Filing or submission shall be made on the next working day.

BIR RULINGS

THE CIR MAY RE-ALLOCATE INCOME AND IMPOSE DST ON APIC AS CONSIDERATION, FINDING CONTROL AND NON-ARM’S-LENGTH PRICING IN A BELOW-BOOK-VALUE SHARE SALE AMONG RELATED PARTIES. Pursuant to Section 50 of the National Internal Revenue Code of 1997, as amended, and interpreted under RR No. 02-2013 and RR No. 20-2020, the Commissioner of Internal Revenue (CIR) may allocate income and deductions between controlled entities to reflect true taxable income and prevent tax evasion, even absent fraud or an actual share transfer. In this case, shares sold below book value were assessed based on the prescribed valuation rules for unlisted shares, using the latest audited financial statements. Additional Paid-In Capital (APIC), despite not resulting in new share issuance, was deemed part of the actual consideration under the original subscription agreement and thus subject to documentary stamp tax. The CIR also found that allocating APIC solely to certain share classes with special privileges, without proper value alignment, violated arm’s length principles, allowing the application of Section 50. Control was inferred based on the preferential rights of certain share classes, justifying the CIR’s exercise of authority to ensure income was properly reflected and taxed. BIR Ruling No. OT-006-2025 (January 6, 2025).

 

VESSELS CAPABLE OF WATER TRANSPORT AND USED FOR NON-PROFITABLE DISPLAY ARE CONSIDERED “INTENDED FOR PLEASURE” AND SUBJECT TO 20% EXCISE TAX. Pursuant to Section 150(c) of the National Internal Revenue Code of 1997, as amended, and interpreted alongside PD No. 474, PD No. 1158, and RA No. 9295, the importation of engineless pontoon boats intended solely for decorative display is subject to 20% excise tax as non-essential goods. While the boats lack engines and are not used for transportation, they meet the legal definition of a “vessel” as they are artificial contrivances capable of floating and transport using external motive power. The fact that the boats are used for non-profitable display purposes, as certified by the maritime authority, classifies them as being intended “for pleasure.” Hence, they fall squarely under the scope of luxury vessels taxable under the cited provision. BIR Ruling No. OT-007-2025 (January 6, 2025).

 

SERVICE FEES FOR WORK PERFORMED ABROAD BY A NON-RESIDENT FOREIGN CORPORATION ARE EXEMPT FROM PHILIPPINE TAX, BUT PAYMENTS FOR THE TRANSFER OF SOFTWARE IP ARE SUBJECT TO 25% FINAL TAX AND IMPORT VAT. Pursuant to Sections 23(F), 42(A)(3), and 108(A) of the Tax Code of 1997, as amended, payments made by a domestic financing company to a non-resident foreign corporation (NRFC) for software development services performed entirely abroad are not considered Philippine-sourced income and are therefore exempt from income tax, VAT, and withholding tax. However, under Section 28(B) and relevant BIR issuances, the transfer of exclusive intellectual property rights—including source code—of the developed software is treated as a transfer of copyright ownership and thus subject to a 25% final withholding tax on business income. Additionally, the electronic transfer of the software constitutes importation and is subject to 12% VAT, which must be withheld and remitted by the Philippine company prior to fund remittance. BIR Ruling No. OT-008-2025 (January 6, 2025).

 

SERVICES PERFORMED ABROAD MAY STILL BE TAXABLE IN THE PHILIPPINES IF THE INCOME-GENERATING ACTIVITY IS EFFECTIVELY RENDERED WITHIN PHILIPPINE TERRITORY. Pursuant to Sections 23(F), 42(A)(3), and 108(A) of the Tax Code, income and VAT are imposed only when the service is performed in the Philippines. Applying this, the tax authority found that the income-generating activity—measured by user actions triggered through online advertisements—occurred within the Philippines, as the value of the services rendered by the non-resident foreign entity depended on results achieved within Philippine territory. Despite the contractual performance being executed abroad, the economic benefit originated locally, thus making the income Philippine-sourced and subject to income tax, VAT, and withholding tax. The Supreme Court ruling in Aces Philippines guided the analysis by emphasizing that completion of services and inflow of economic benefit determine tax situs, not mere physical location of the service provider. BIR Ruling No. OT-009-2025 (January 6, 2025).

 

SERVICE FEES PAID TO A FOREIGN ADVERTISING PROVIDER ARE TAXABLE IN THE PHILIPPINES WHERE ECONOMIC BENEFITS ARISE LOCALLY. Under Sections 23(F), 42(A)(3), and 108(A) of the Tax Code, a non-resident foreign corporation is taxable on income from Philippine sources, including services deemed performed in the Philippines. In this case, a domestic financing firm engaged a UAE-based advertising service provider under a lead generation agreement where fees were computed based on statistical data linked to Philippine user actions such as sign-ups or purchases. Applying the Supreme Court’s ruling in Aces Philippines, the BIR concluded that the provider’s services—while initiated abroad—were effectively completed in the Philippines, as the inflow of economic benefit occurred locally upon user engagement. As such, the payments were held subject to income tax, VAT, and withholding tax, with the domestic entity failing to sufficiently establish that the income was sourced exclusively from outside the Philippines. (BIR Ruling No. OT-010-2025 (January 6, 2025).

 

ROYALTIES PAID TO A NON-RESIDENT FOR ACCESS TO COMMERCIAL INFORMATION USED IN THE PHILIPPINES ARE TAXABLE IN THE PHILIPPINES. Under Sections 28(B)(1) and 42(A)(4) of the Tax Code, royalties paid to a non-resident foreign corporation are considered income from Philippine sources if the right or information is used in the Philippines, making it subject to final withholding tax. In this case, a domestic financing company engaged a Hungarian service provider to grant access to a cloud-based machine learning platform used for customer profiling and fraud detection. Although the provider operated entirely from abroad, the platform enabled Philippine-based activities by allowing access to profiling data based on user information collected locally. The BIR ruled that such access constituted the supply of commercial information used in the Philippines, classifiable as royalty income and therefore subject to 25% final withholding tax. BIR Ruling No. OT-011-2025 (January 6, 2025).

 

PAYMENTS TO A FOREIGN SERVICE PROVIDER ARE NOT SUBJECT TO PHILIPPINE TAX WHERE SERVICES ARE RENDERED ENTIRELY ABROAD. Under Sections 23(F), 42(A)(3), and 108(A) of the Tax Code, a non-resident foreign corporation is taxable in the Philippines only on income derived from sources within the country, with the source of service income determined by the place of performance. In this case, a domestic financing firm engaged a Russian-based entity to perform risk engine development and IT technical support services, all of which were carried out in the provider’s head office abroad. Since no part of the service was performed in the Philippines, the income earned was not considered Philippine-sourced. As a result, the payments made were not subject to income tax, VAT, or withholding tax under Philippine law. BIR Ruling No. OT-012-2025 (January 6, 2025).

 

A HOMEOWNERS’ ASSOCIATION IS NOT ENTITLED TO INCOME TAX EXEMPTION WITHOUT PROOF THAT IT PERFORMS BASIC COMMUNITY SERVICES IN PLACE OF THE LOCAL GOVERNMENT UNIT, AND THAT ITS FUNDS ARE USED SOLELY FOR THOSE SERVICES. Under Section 30 of the Tax Code, tax exemption is granted only to specific types of non-stock, non-profit organizations, which do not include residential homeowners’ associations. While RA No. 9904 and RMC No. 9-2013 provide for conditional tax exemption on association dues and rental income, the benefit applies only if the association is duly recognized under RA No. 9904, performs basic community services in place of the local government unit, and proves that its funds are used solely for those services. In this case, the homeowners’ association failed to submit proof of compliance with these conditions, such as LGU certification and financial statements demonstrating proper use of funds, thereby disqualifying it from income tax exemption and subjecting its income to applicable withholding tax. BIR Ruling No. OT-013-2025 January 6, 2025.

 

SERVICE FEES PAID TO A NON-RESIDENT FOREIGN ADVERTISING PROVIDER ARE SUBJECT TO PHILIPPINE INCOME TAX AND WITHHOLDING TAX WHERE SERVICES ARE EFFECTIVELY RENDERED WITHIN THE PHILIPPINES. Under Section 42(A)(3) of the Tax Code, services are considered sourced within the Philippines and thus taxable if actually performed in the country. In this case, a domestic financing corporation engaged a Singapore-based non-resident foreign corporation to perform online advertising services under a lead generation agreement. Payment was based on statistical data generated from customer actions originating from the Philippines, evidencing that the income-generating activity occurred locally. Applying the Supreme Court ruling in Aces Philippines, the situs of income is determined by the completion of services that deliver economic benefits—in this case, the availment of services through online advertisements targeting Philippine users. Consequently, the payments made are subject to Philippine income tax, withholding tax, and 12% VAT, as the services were effectively rendered within Philippine territory. BIR Ruling No. OT-014-2025 (January 7, 2025)

 

BIR DEADLINES

BIR DEADLINES FROM AUGUST 4 TO AUGUST 10, 2025. A gentle reminder on the following deadlines, as may be applicable:

DATE	FILING/SUBMISSION
August 5, 2025	SUBMISSION – Summary Report of Certification issued by the President of the National Home Mortgage Finance Corporation (NHMFC) – for the month of July 2025
	e-FILING – BIR Form 2000 (Monthly Documentary Stamp Tax Declaration/Return) and BIR Form 2000-OT (Documentary Stamp Tax Declaration/Return One Time Transactions) – for the month of July 2025
August 8, 2025	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 – for the month of July 2025
	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 – for the month of July 2025
August 10, 2025	SUBMISSION – List of Buyers of Sugar Together with a Copy of Certificate of Advance Payment of VAT made by each buyer appearing in the List by a Sugar Cooperative. Information Return on Releases of Refined Sugar by the Proprietor or Operator of a Sugar Refinery or Mill. Monthly Report of DST Collected and Remitted by the Government Agency – for the month of July 2025
	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 Odd Number for the  month of July 2025
	FILING & PAYMENT/REMITTANCE – BIR Form 2200-M Excise Tax Return for the Amount of Excise Taxes Collected from Payment Made to Sellers of Metallic Minerals – for the month of July 2025
	FILING & PAYMENT – BIR Forms 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) and/or 0619-E (Monthly Remittance Form of Creditable Income Taxes Withheld-Expanded) and/or 0619-F (Monthly Remittance Form of Final Income Taxes Withheld) – Non-eFPS Filers. Month of July 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 2200-C (Excise Tax Return for Cosmetic Procedures) with Monthly Summary of Cosmetic Procedures Performed. BIR Form 0620 (Monthly Remittance Form of Tax Withheld on the Amount Withdrawn from the Decedent’s Deposit Account) – eFPS & Non-eFPS Filers. BIR Form 1600-VT (Monthly Remittance Return of Value-Added Tax) and/or 1600-PT (Other Percentage Taxes Withheld) and Monthly Alphalist of Payees (MAP) – eFPS & Non-eFPS Filers. BIR Form 1606 – (Withholding Tax Remittance Return for Onerous Transfer of Real Property Other Than Capital Asset Including Taxable and Exempt). Month of July 2025
	e-FILING & e-PAYMENT/REMITTANCE – BIR Form 1600-VT (Monthly Remittance Return of Value-Added Tax) and/or BIR Form 1600-PT (Other Percentage Taxes Withheld) and 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) – National Government Agencies (NGAs). Month of July 2025

COURT OF TAX APPEALS DECISIONS

ONLY THE DEPARTMENT OF JUSTICE’S (DOJ) RECEIPT OF THE DECISION, NOT THAT OF DEPUTIZED BIR COUNSEL, STARTS THE APPEAL PERIOD. Criminal cases must be prosecuted under the direction and control of the public prosecutor. Deputized legal officers, such as BIR lawyers, merely assist and remain under the supervision of the DOJ, which retains principal prosecutorial authority. Service of a decision on deputized counsel does not bind the principal counsel; instead, only receipt by the DOJ triggers the reglementary period for appeal. In this case, the DOJ received the Division’s Resolution on December 29, 2023, giving plaintiff-appellant until January 15, 2024 to file a Petition for Review. However, the Motion for Extension of Time was filed only on January 24, 2024 via registered mail, beyond the allowable 15-day period. Since the motion was granted only on condition that it was timely filed, the Court deemed it denied. Consequently, no valid Petition for Review or motion to extend was filed within the reglementary period, rendering the assailed Resolution final and executory. The Court En Banc thus dismissed the Petition for lack of jurisdiction. (People of the Philippines v. SKI Construction Group, Inc. et. al., CTA EB Crim No. 139, CTA Crim Case No. A-17, February 17, 2025)

A CLAIM FOR EXEMPTION FROM REAL PROPERTY TAX (RPT) INVOLVES A QUESTION OF FACT CONCERNING THE CORRECTNESS OF THE ASSESSMENT, WHICH IS WITHIN THE JURISDICTION OF THE LOCAL BOARD OF ASSESSMENT APPEALS (LBAA)  AND CENTRAL BOARD OF ASSESSMENT APPEALS (CBAA); THUS, EXEMPTION CLAIM SHOULD HAVE BEEN RESOLVED AT THE ADMINISTRATIVE LEVEL, NOT DISMISSED AS A PURE QUESTION OF LAW. A taxpayer claiming exemption from RPT must submit sufficient documentary evidence to the assessor, thereby placing the burden on the taxpayer to prove factual grounds for exemption. Such claims pertain to the reasonableness or correctness of the assessment and are questions of fact, distinct from questions of law involving authority to assess or collect, which fall under the jurisdiction of the LBAA and CBBA. In this case, Qualfon Philippines, Inc. (QPI) challenged the assessment of its desktop computers, claiming they are exempt from RPT. The CBAA erroneously ruled the issue as a pure question of law, despite its own exercise of jurisdiction when it rendered a decision upholding RPT liability and ordering reassessment. In line with the legal framework and jurisprudence, QPI’s claim involved factual determination of its entitlement to exemption and should have been properly evaluated by the LBAA and CBAA. (Qualfon Philippines, Inc. v. The City of Dumaguete, et al., CTA EB No. 2741, July 2025)

A PROTEST MUST BE IN WRITING AND FILED WITHIN 30 DAYS FROM PAYMENT OF THE ASSESSED REAL PROPERTY TAX (RPT); THE TAXPAYER’S AUGUST 8, 2017 LETTER OF MANIFESTATION WAS NOT A VALID WRITTEN PROTEST, AND ITS FAILURE TO TIMELY APPEAL RENDERED THE ASSESSMENT FINAL AND UNAPPEALABLE. Section 252(a) of the 1991 Local Government Code requires that a protest to an RPT assessment be made in writing within 30 days from payment, and any denial must be appealed to the LBAA within 60 days from receipt. Qualfon Philippines, Inc. (QPI) contended that its August 8, 2017 Letter of Manifestation constituted its formal protest following the City Treasurer’s denial dated July 25, 2017. However, the Court ruled that the letter was merely a manifestation, with no accompanying formal protest submitted to the records. The claim that the Treasurer’s early denial deprived QPI of the 30-day protest period was also rejected, as the law imposes the 30-day period on the taxpayer to act, not on the Treasurer to wait. The Court emphasized that statutory periods must be strictly followed, and failure to do so is fatal. As QPI failed to file a timely appeal by the September 25, 2017 deadline, the assessment became final and executory. (Qualfon Philippines, Inc. v. The City of Dumaguete, et al., CTA EB No. 2741, July 2025)

WHERE THERE IS NO NOTICE OF ASSESSMENT (NOA) ISSUED, THE PROPER REMEDY FOR THE TAXPAYER IS UNDER SECTION 196 OF THE LOCAL GOVERNMENT CODE (LGC) ON REFUND OF ERRONEOUSLY PAID OR ILLEGALLY COLLECTED TAXES, NOT UNDER SECTION 195, WHICH PRESUPPOSE A FORMAL DEFICIENCY TAX ASSESSMENT. Under Section 196 of the LGC, a taxpayer may file a claim for refund of taxes that were erroneously or illegally collected, without the need for a prior assessment or protest. This provision applies when there is no finding of deficiency and, consequently, no Notice of Assessment (NOA) issued by the local treasurer. In this case, the Court held that the billing statements issued to respondent after the renewal of its business permit were not formal NOAs as contemplated under Section 195 of the LGC. Since there was no NOA finding a deficiency, the respondent was not required to file a protest within 60 days under Section 195. As such, the respondent properly availed of the remedy under Section 196 by filing a claim for refund within the two-year prescriptive period. Therefore, Section 7B.14(b) and (c) of the Revised Makati Revenue Code, which mirror Section 195, do not apply. (City of Makati and the Office of the City Treasurer of Makati through Jesusa E. Cuneta v. Casas+Architects, CTA EB No. 2771 [CTA AC No. 259], April 29, 2025).

LOCAL GOVERNMENTS ARE PROHIBITED FROM IMPOSING BUSINESS TAXES ON PROFESSIONALS SOLELY ENGAGED IN THE PRACTICE OF THEIR PROFESSION; SINCE CASAS+ARCHITECTS OPERATES EXCLUSIVELY AS A PROFESSIONAL PARTNERSHIP OF ARCHITECTS, IT IS EXEMPT FROM LOCAL BUSINESS TAX (LBT) AND ENTITLED TO A REFUND OF THE AMOUNTS PAID. Section 133(j) of the LGC prohibits local government units from levying taxes on professionals who are exclusively engaged in the practice of their profession. In this case, the Court affirmed that Casas+Architects is a professional partnership engaged solely in the practice of architecture, including interior design and landscaping, which fall within the lawful scope of the architectural profession. The Court in Division found no evidence that the Casas+Architects was involved in interior decorating or any other commercial activity that would remove it from the ambit of tax exemption. Given this, the imposition of LBT by the City of Makati was unlawful. (City of Makati and the Office of the City Treasurer of Makati through Jesusa E. Cuneta v. Casas+Architects, CTA EB No. 2771 [CTA AC No. 259], July 2025).

FOREIGN CURRENCY EXCEEDING USD10,000 BROUGHT INTO THE PHILIPPINES WITHOUT FULL DECLARATION IS SUBJECT TO LAWFUL SEIZURE BY CUSTOMS AUTHORITIES, AS CORRECTLY APPLIED WHEN MOHAMMAD FAILED TO DECLARE USD501,600 OUT OF THE USD649,600 HE CARRIED UPON ARRIVAL FROM HONG KONG. Custom Modernization and Tariff Act (CMTA) authorizes customs officers to seize goods subject to forfeiture, including undeclared items under Section 1113(l)(2), while Section 1404 specifically mandates seizure for failure to declare dutiable goods—including foreign currency—upon arrival. Section 4.1 of Customs Administrative Order (CAO) No. 1-2017 requires arriving passengers carrying foreign currency in excess of USD 10,000 to declare the entire amount using a Foreign Currency Declaration Form (FCDF), consistent with Bangko Sentral ng Pilipinas (BSP) rules. In this case, Mohammad arrived at NAIA from Hong Kong carrying USD 649,600 in his baggage, but declared only USD 148,000 in the FCDF. As this left USD 501,600 undeclared, the District Collector of NAIA rightfully exercised the authority to seize the amount through a Warrant of Seizure and Detention (WSD). (Chang L. Mohammad, et al. v. Commissioner of Customs, CTA EB No. 2784, July 2025).

SETTLEMENT OF SEIZURE CASES WHEN FRAUD IS PRESENT IS PROHIBITED; THE DELIBERATE NON-DECLARATION OF USD 491,600 CONSTITUTED FRAUD THAT DISQUALIFIED THE CASE FROM COMPROMISE. Section 1124 of the CMTA authorizes the District Collector, with the approval of the Commissioner, to settle seizure cases through payment of a fine or redemption of forfeited goods. However, such settlement is expressly disallowed when fraud is involved, the importation is prohibited, or the release of goods would be contrary to law. In this case, the Commissioner of Customs acted within the legal bounds of his discretion when he upheld the denial of petitioners’ Motion to Enter Into Compromise Settlement. Although petitioners contended that none of the statutory exceptions applied, the record shows that petitioner Mohammad declared only USD 148,000 out of the USD 649,600 he carried upon arrival in the Philippines. This substantial discrepancy, involving over USD 491,000 in undeclared funds, was found to be a deliberate act of concealment—an indicium of fraud. Accordingly, in view of the fraud attending the undeclared importation, settlement of the seizure case was legally barred under Section 1124.
(Chang L. Mohammad, et al. v. Commissioner of Customs, CTA EB No. 2784, July 2025).

FORFEITURE OF THE UNDECLARED USD 491,600 WAS PROPER AND NOT EXCESSIVE, AS IT IS A PENALTY EXPRESSLY ALLOWED UNDER SECTION 1124 OF THE CMTA, AND NEITHER PROVISIONAL DECLARATION UNDER SECTION 403 NOR AMENDMENT UNDER SECTION 408 APPLIED, GIVEN THE COURT’S FINDING OF FRAUD AND THE ABSENCE OF VALID JUSTIFICATION. The penalty of forfeiture is authorized under CMTA  when fraud attends the importation of goods, and may not be settled by payment of a fine. Petitioners’ reliance on CAO 10-2020, Section 14-4, and CMTA Sections 403 and 408—on provisional and amended declarations—is misplaced, as these provisions do not apply when the declarant is aware of material facts but deliberately fails to disclose them. In this case, the Court found that petitioner Mohammad knew he was carrying USD 491,600, despite his claim that some of the money belonged to another person and was verbally declared. His failure to lodge a proper written declaration or request an amendment before examination, without any valid justification, disqualified him from the remedial provisions of the CMTA. The presence of prima facie evidence of fraud warranted the denial of the motion for settlement and justified the forfeiture. (Chang L. Mohammad, et al. v. Commissioner of Customs, CTA EB No. 2784, July 2025).

CAPITAL GAINS TAX (CGT) MUST BE BASED ON THE CORRECT ZONAL VALUE, AND SINCE THE BIR USED AN INCORRECT AND UNSUBSTANTIATED VALUATION, RESULTING IN OVERPAID TAX, THE TAXPAYER IS ENTITLED TO A REFUND. A CGT on the sale of land by a domestic corporation is imposed at 6% based on the higher of the gross selling price or the fair market value (FMV), which may either be the zonal value prescribed by the BIR or the value stated in the city assessor’s schedule. In this case, the BIR computed CGT based on a zonal value of ₱10,650/sqm, amounting to ₱5.75 million in CGT liability, which the petitioner contested as erroneous. The Court found merit in the petitioner’s claim that the property should be assessed using a zonal value of ₱4,725/sqm, citing a certified BIR document (Exhibit “P-4”) that accurately reflected the applicable rates for the property’s classification. Although the petitioner also proposed a lower ₱7,500/sqm valuation based on “Interior Lot” classification, this claim lacked evidentiary support. Nonetheless, the Court determined that the BIR misapplied the higher rate applicable only to “Along-the-road” properties, and thus used the ₱4,725/sqm rate as the correct basis. With this adjustment, the correct CGT was computed at ₱2.55 million, and taking into account initial and subsequent payments, the Court found an overpayment of ₱3.2 million in CGT alone. Furthermore, the Court ruled that the surcharge of ₱1.44 million and excessive interest of over ₱1 million were unjustified under Sections 248 and 249 of the NIRC, because no grounds for civil penalties were established. In total, the petitioner was held to have overpaid by ₱5,677,373.22 and was awarded a refund of this amount.
(Bangko Sentral ng Pilipinas v. CIR, CTA Case No. 10083, Amended Decision dated February 19, 2025).

BOTH ADMINISTRATIVE AND JUDICIAL CLAIMS FOR REFUND MUST BE FILED WITHIN TWO YEARS FROM TAX PAYMENT, AND THE COURT DISMISSED THE PETITION FOR LACK OF JURISDICTION BECAUSE THE PETITIONER FAILED TO PROVE ACTUAL FILING AND RECEIPT OF ITS ADMINISTRATIVE REFUND CLAIM WITH THE BIR. Sections 204(C) and 229 of the 1997 National Internal Revenue Code (NIRC), as amended, provide that a taxpayer seeking refund of taxes erroneously or illegally collected must file a written administrative claim with the BIR within two years from the date of payment, and only thereafter may it file a judicial claim before the Court. In this case, the Bangko Sentral ng Pilipinas (BSP) sought the refund of documentary stamp tax (DST) paid on a property acquired through extrajudicial foreclosure, asserting exemption under the NIRC. However, while BSP claimed it filed an administrative claim dated June 18, 2018 and a follow-up letter dated April 10, 2019, the Court found these insufficiently substantiated. The LBC receipt submitted as proof for the June 18 letter merely showed delivery to a certain “Mary Ann G. Salazar” but bore no stamp or acknowledgment from BIR RDO No. 23-B confirming actual receipt. During cross-examination, BSP’s witness admitted there was no BIR stamp on the document. Similarly, the April 10 follow-up letter, filed via registered mail, was returned undelivered with a “Moved Out” notation, and BSP’s representative testified that no one signed the return card. As no other evidence or testimony established proper filing or receipt of the administrative claim, the Court ruled that BSP failed to meet the jurisdictional requirement of prior administrative filing, which rendered the judicial claim premature and void of jurisdiction. (Bangko Sentral ng Pilipnas v. CIR, CTA Case No. 10106, Amended Decision dated March 13, 2024).

BIR ISSUANCES

Revenue Memorandum Circular No. 75-2025, July 23, 2025

Category	Details
Covered Period (Original Deadlines)	Tax returns, payments, and required document submissions originally due from July 21 to July 25, 2025
New Deadline	Extended to July 31, 2025; if this date falls on a holiday or non-working day, the deadline moves to the next working day
Covered Transactions	·         Filing of BIR forms ·         Payment of internal revenue taxes ·         Submission of reports, attachments, and other required documents
Affected Taxpayers	Those residing or operating in the areas affected by the weather disturbances and covered by the corresponding work suspension declarations
Covered Areas (Provinces & Metro Manila)	Metro Manila, and provinces in Ilocos Region, Cordillera, Cagayan Valley, Central Luzon, CALABARZON, MIMAROPA, Bicol Region, and Western Visayas, including: – Ilocos Norte, Ilocos Sur, La Union, Pangasinan – Abra, Apayao, Benguet, Ifugao, Kalinga, Mountain Province – Cagayan, Nueva Vizcaya – Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac, Zambales – Cavite, Laguna, Batangas, Rizal, Quezon – Marinduque, Oriental Mindoro, Occidental Mindoro, Palawan, Romblon – Albay, Camarines Sur, Catanduanes, Masbate, Sorsogon – Aklan, Antique, Capiz, Guimaras, Iloilo, Negros Occidental

BIR RULINGS

FRANCHISE FEES ARE SUBJECT TO REGULAR CORPORATE INCOME TAX AS ORDINARY BUSINESS INCOME AND A 2% EXPANDED WITHHOLDING TAX IF THE PAYOR IS A TOP WITHHOLDING AGENT. Pursuant to Sections 27 (A) and (D) and 42 (A) (4) of the Tax Code, as amended, and Revenue Regulations No. 2-1998, as amended, along with the Supreme Court’s interpretation of passive income, franchise fees are generally subject to regular corporate income tax rather than the final withholding tax (FWT) on royalties. This is because such fees are considered ordinary business income derived from the active pursuit of a corporation’s primary purpose, which includes activities such as developing and licensing intellectual property rights, as well as providing training and systems for franchisees. Consequently, these fees are subject to the regular corporate income tax rate of 25% for income earned after July 1, 2020 (or 30% for income earned before that date). Furthermore, suppose the payor of these franchise fees is designated as one of the top withholding agents by the Bureau of Internal Revenue (BIR). In that case, the fees will also be subject to an expanded withholding tax (EWT) of 2%. Otherwise, if the payor is not a top withholding agent, the EWT will not apply. (BIR Ruling No. OT-015-2025, January 7, 2025)

 

RECONVEYANCE OF LAND WITHOUT CONSIDERATION BY A REAL ESTATE BUSINESS IS A TAXABLE TRANSFER OF AN ORDINARY ASSET, INCURRING CORPORATE INCOME TAX, VAT FOR THE TRANSFEROR, AND CWT (BASED ON HIGHER OF SELLING PRICE OR FAIR MARKET VALUE) AND DST FOR THE TRANSACTION. Under Section 27(A) and 196 of the Tax Code, as amended, and Revenue Regulations No. 2-98 and No. 7-2003, the reconveyance of a parcel of land, even without consideration, is considered a taxable transfer if the transferor is engaged in the real estate business. As such, the reconveyed land by Cityland Development Corporation to original owners due to overlapping of structures, which treated as an ordinary asset, is considered subject to corporate income tax and value-added tax for the transferor. Consequently, the transaction is also subject to creditable withholding tax (CWT) by the transferee, based on the gross selling price or fair market value (whichever is higher) and depending on the property’s value, and a documentary stamp tax (DST). (BIR Ruling No. OT-016-2025, January 7, 2025)

THE BIR DOES NOT ISSUE RULINGS SUCH AS REQUESTS TO CANCEL A LETTER OF AUTHORITY IF THE MATTER IS ALREADY UNDER AUDIT OR INVESTIGATION. Pursuant to Section 2 (r) of Revenue Bulletin No. 01-03, the Bureau of Internal Revenue (BIR) considers requests for rulings on matters that are already the subject of an ongoing audit or investigation as “No-Ruling Areas.” Therefore, a request to cancel a Letter of Authority due to an existing audit/investigation falls under this “No-Ruling Area” policy. (BIR Ruling No. OT-017-2025, January 7, 2025)

ONLY IMPORTED SWEETENED BEVERAGES EXCLUSIVELY USING COCONUT SAP SUGAR OR STEVIOL GLYCOSIDES ARE EXCISE TAX-EXEMPT; NO ADDED CALORIC/NON-CALORIC SWEETENERS REMAIN TAXABLE. Under Section 47 of Republic Act No. 10963 (TRAIN Law) and Section 3 of Revenue Regulations No. 20-2018, only sweetened beverages using purely coconut sap sugar and purely steviol glycosides are exempt from excise tax; therefore, imported sweetened beverages, even if certified by the FDA as having no added caloric and non-caloric sweeteners, remain subject to excise tax if they do not exclusively use the exempted sweeteners, especially if the presence of high fructose corn syrup is not explicitly ruled out. (BIR Ruling No. OT-018-2025, January 7, 2025).

A RETIREMENT FUND, WHILE TAX-EXEMPT, IS STRICTLY PROHIBITED FROM INVESTING IN THE EMPLOYER’S BUSINESS VENTURES TO PREVENT DIVERSION OF FUNDS, SAFEGUARD EMPLOYEE BENEFITS, AND MAINTAIN FINANCIAL SEPARATION. Under Section 60(B) of the Tax Code, as amended, and Section 5 of Revenue Regulations No. 1-68, as amended, a retirement fund, while a separate taxable entity with income generally exempt from tax, must operate exclusively for the benefit of its employees. Consequently, investing the retirement fund in the employer’s business ventures is prohibited as it could lead to a substantial diversion of income or corpus, jeopardize the fund’s sufficiency to pay benefits due to the variability of business operations, and compromise the crucial separation of funds, potentially facilitating tax evasion. (BIR Ruling No. OT-019-2025, January 7, 2025)

INCOME FROM PHILIPPINE INVESTMENTS BY FOREIGN GOVERNMENT-OWNED ENTITIES IS ONLY TAX-EXEMPT IF THEY ARE RECOGNIZED “FINANCING INSTITUTIONS,” NOT “INVESTMENT COMPANIES”, THUS MAKING THE SUBJECT COMPANIES’ INCOME FROM PHILIPPINE STOCKS, BONDS, OR OTHER DOMESTIC SECURITIES FULLY TAXABLE. Pursuant to Section 32 (B) (7) (a) of the Tax Code, as amended, and considering the distinctions between “financing companies” (as defined by R.A. No. 5980, as amended by R.A. No. 8556) and “investment companies” (as per Section 4 of R.A. No. 2629), income derived from Philippine investments by entities owned by foreign governments is exempt from income tax only if they are recognized as financing institutions or international/regional financial institutions established by foreign governments. In this case, the Companies, despite being wholly owned subsidiaries of a foreign sovereign wealth fund, are primarily engaged in investing and trading securities, which classifies them as investment companies rather than financing institutions. Therefore, their income from investments in Philippine stocks, bonds, or other domestic securities is subject to Philippine income tax and withholding taxes. (BIR Ruling No. OT-020-2025, January 7, 2025).

BIR DEADLINES FROM JULY 28 – AUGUST 03, 2025. A gentle reminder on the following deadlines, as may be applicable:

DATE	FILING/SUBMISSION
July 30, 2025	ONLINE REGISTRATION (thru ORUS) – Computerized Books of Accounts and Other Accounting Records – Fiscal Year ending June 30, 2025
	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) or Manually– Fiscal Year ending March 31, 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 June 30, 2025
	e-SUBMISSION – Quarterly Summary List of Sales/Purchases/Importations by a VAT Registered Taxpayers.  eFPS Filers – For the Quarter ending June 30, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – 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 May 31, 2025
July 31, 2025	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 1601-EQ (Quarterly Remittance Return of Creditable Income Taxes Withheld-Expanded) and Quarterly Alphalist of Payees (QAP) – eFPS & Non-eFPS Filers – For the Quarter ending June 30, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 1601-FQ (Quarterly Remittance Return of Final Income Taxes Withheld) and Quarterly Alphalist of Payees (QAP) – eFPS & Non-eFPS Filers – For the Quarter ending June 30, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 1602Q (Quarterly Remittance Return of Final Taxes Withheld on Interest Paid on Deposits and Yield on Deposit Substitutes/Trusts/Etc.) – eFPS & Non-eFPS Filers – For the Quarter ending June 30, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 1603Q (Quarterly Remittance Return of Final Income Taxes Withheld on Fringe Benefits Paid to Employees Other Than Rank and File) – eFPS & Non-eFPS Filers – For the Quarter ending June 30, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 1621 (Quarterly Remittance Return of Tax Withheld on the Amount Withdrawn from Decedent’s Deposit Account) – eFPS & Non-eFPS Filers -For the Quarter ending June 30, 2025
	SUBMISSION – Contract of Lease and Lessee Information Statement and Other Attachments by Lessors/Sub-Lessors of Commercial Establishments, Buildings or Spaces for Tenants – 1st Semester of 2025
	SUBMISSION – Sworn Statement by every Lessee/Concessionaire/Owner or Operator of Mines & Quarry/Processor of Minerals/Producer or Manufacturer of Mineral Products – 1st Semester of 2025
	SUBMISSION – Quarterly Summary List of Sales/Purchases/Importations by a VAT Registered Taxpayers.  Non-eFPS Filers – For the Quarter ending June 30, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 2550Q (Quarterly Value-Added Tax Return).  eFPS & Non-eFPS Filers – For the Quarter ending June 30, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 2551Q (Quarterly Percentage Tax Return).  For the Quarter ending June 30, 2025
August 01, 2025	SUBMISSION – Consolidated Return of All Transactions based on Reconciled Data of Stockbrokers.  July 16-31, 2025
	SUBMISSION – Engagement Letters and Renewals or Subsequent Agreements for Financial Audit by Independent CPAs – Fiscal Year beginning October 1, 2025

COURT OF TAX APPEALS DECISIONS

A criminal case for willful failure to pay tax prescribes after 5-years from finality of the tax assessment; thus, should be dismissed if assessment becomes final on February 10, 2013, but the Information was filed only on January 28, 2020. Violations of tax laws prescribe in five (5) years from the date of commission or, if unknown, from discovery and institution of judicial proceedings. Jurisprudence such as Lim v. Court of Appeals (G.R. No. L-48134-37, October 18, 1990) and Tupaz v. Ulep (G.R. No. 127777, October 1, 1999) clarifies that for failure to pay taxes despite demand, prescription begins upon finality of the assessment coupled with willful refusal to pay. In this case, the assessment became final on February 10, 2013 or thirty days after the Final Letter of Demand was mailed on January 10, 2013, and thus, the prescriptive period ended on February 10, 2018. Since the Information was filed only on January 28, 2020, it was filed nearly two years beyond the allowable period. Consequently, the government’s right to prosecute had already prescribed, warranting the dismissal of the case. (People of the Philippines v. Cosco Petroleum Cmpan, Inc. Michael T. Co Say, CTA Crim. No. O-805, January 20, 2025; see also People of the Philippines v. Buensol Construction Co.,et. al., CTA Crim. No. O-969, January 21, 2025)

Prosecution must prove beyond reasonable doubt the willful failure to pay tax; thus, accused should be acquitted due to invalid assessment for lack of valid Letter of Authority (LOA) and absence of proof of receipt of the Preliminary Assessment Notice (PAN) and Formal Letter of Demand (FLD). Under Section 255 of the NIRC of 1997, as amended, conviction for willful failure to pay taxes requires proof that (1) the accused is required to pay tax, (2) failed to do so, and (3) such failure was willful. However, the BIR’s assessment was rendered void due to a lack of a valid LOA authorizing Revenue Officer Galagac to conduct the examination. As a result, there was no valid deficiency tax liability to trigger the legal duty to pay. Even assuming that an obligation existed, the prosecution failed to establish willfulness, as it could not prove that the accused received the PAN and FLD due to the absence of return cards and failure to authenticate registry receipts. Thus, the Court held that all three elements of the crime were not established, warranting acquittal. (People of the Philippines v. Cosco Petroleum Cmpan, Inc. Michael T. Co Say, CTA Crim. No. O-805, January 20, 2025 )

Accused incurs no civil liability if the government fails to present competent evidence, apart from the void assessment. In Mendez and reaffirmed in People v. Tiotangco, the Supreme Court ruled that in criminal tax cases, civil liability for unpaid taxes must be established by competent evidence independent of the tax assessment. A void assessment, without more, is insufficient to support a civil judgment. In the present case, the prosecution relied solely on documents and testimony derived from an invalid assessment conducted without lawful authority. No independent or competent evidence was presented to substantiate the tax deficiency. Consequently, the Court found no factual or legal basis to impose civil liability on the accused. (People of the Philippines v. Cosco Petroleum Cmpan, Inc. Michael T. Co Say, CTA Crim. No. O-805, January 20, 2025 )

Accused should be acquitted for prosecution’s failure to establish a valid assessment or prove the willful non-payment of taxes beyond reasonable doubt, due to the prescription of the assessment, lack of due process, and insufficient evidence of intent. Under Section 255 of the National Internal Revenue Code (NIRC), as interpreted in People v. Mendez, criminal liability for willful failure to pay taxes requires proof beyond reasonable doubt of three elements: (1) the legal obligation to pay tax, (2) failure to pay at the time required by law, and (3) that such failure was willful (i.e., done knowingly, voluntarily, and intentionally in disregard of a known legal duty). In the present case, although the prosecution established that Buensol was a registered taxpayer in 2012 and that accused Solis was a responsible officer, it failed to prove that a valid and enforceable assessment existed. The FLD/FAN issued by the BIR was declared void for being time-barred under Section 203 of the NIRC, as it was issued more than three years after the due date for filing the 2012 tax return. Additionally, the assessment was based on unverified third-party information without the required confirmations under RMO No. 28-2007, and failed to indicate a clear and definite due date for payment, violating due process (the FLD stated the accused is only “requested” to pay tax;  “Due date: February 22” may refer to due date when the FLD/FAN should be delivered; deadline of February 22, 2017 is confusing as interest is computed until February 24, 2017). These defects rendered the assessment invalid and incapable of supporting a criminal charge. Further, the prosecution failed to establish that Solis was aware of a final tax liability and deliberately refused to pay it. Mere receipt of notices by family members through substituted service was insufficient to prove the accused’s willful intent to evade taxes. Given these substantial procedural and evidentiary lapses, the Court held that the essential elements of the offense were not proven, and thus acquitted the accused. (People of the Philippines v. Buensol Construction Co.,et. al., CTA Crim. No. O-969, January 21, 2025 )

The petition was dismissed for lack of jurisdiction as petitioner failed to timely appeal within the 30-day period from the deemed affirmed decision of the Commissioner of Customs (COC), pursuant to Section 1126 of the Custom Modernization and Tariff Act (CMTA) and Section 11 of RA No. 1125. a person aggrieved by the decision of the District Collector may elevate an appeal to the COC within 15 days from the receipt of the decision. The COC shall have 30 days from the receipt of the records to decide on the case. If no such decision is rendered within the said 30-day period, the decision of the District Collector shall be deemed affirmed, and an aggrieved party must then file a petition for review with the CTA within 30 days from such deemed affirmed decision. In this case, the records of petitioner Sigrid Carandang’s appeal were received by the Commissioner on January 14, 2021, and no action was taken within the 30-day period, resulting in a deemed affirmed decision on February 13, 2021. Instead of appealing to the CTA within the required period, petitioner filed a motion for reconsideration before the Commissioner, an unauthorized remedy not provided under the CMTA, which further delayed her filing of the petition for review until May 20, 2021, well beyond the March 15, 2021 deadline. The CTA emphasized that jurisdiction over the subject matter is conferred strictly by law, and that failure to comply with the statutory appeal period is fatal, thereby leaving the Court without authority to take cognizance of the case or rule on its merits. (Sigrid Carandang v. Hon. Rey Lenardo B. Guerrero, Commissioner of Customs et. al., CTA Case No. 10523)

 

An environmental fee is not a tax and  thus not within the jurisdiction of the CTA. The CTA’s appellate jurisdiction over regional trial court’s decisions become operative only when the case involves a tax. Tax and fees are different from each other. An imposition is considered a tax if the generation of revenue is the primary purpose; otherwise, it is a regulatory fee. An environmental tax is not a tax but a regulatory fee, as it is imposed for purposes of watershed protection, conservation and management program under  the Watershed Code. Thus, the CTA has no jurisdiction in assailing the environmental fee. (DOLE Philippines Inc. – Stanfilco Division v. The Sangguniang Panlungsod of the City of Davao et. al., CTA AC no. 306, February 17, 2025);

The BIR must collect assessed taxes within three years from the date of assessment, and since the valid FLD was issued on December 1, 2014 and no valid suspension occurred, the BIR’s collection efforts initiated only in 2017 and 2021 were made beyond the prescriptive period and thus barred. Under Section 203 of the NIRC, the BIR is given three years from the date of assessment to collect internal revenue taxes, either by distraint, levy, or court action, unless the period is suspended under Section 224 (e.g., when a reinvestigation is granted) or extended under Section 223 (e.g., via a written agreement). In this case, the Court found that a valid FLD was received by the accused on December 1, 2014, which served as the valid assessment notice. From this date, the BIR had until December 1, 2017 to collect. The taxpayer filed a protest with a request for reinvestigation, but failed to submit supporting documents within 60 days as required under RR No. 18-13 and Section 228 of the NIRC, rendering the protest void. Moreover, the BIR did not prove that it granted the reinvestigation or that the Final Decision on Disputed Assessment (FDDA) issued in 2017 was validly received. Consequently, there was no valid suspension of the prescriptive period. Since the BIR only issued the Warrant of Distraint and/or Levy on December 13, 2017, and filed criminal Informations in March 2021, both actions occurred after the three-year period had lapsed, making the BIR’s collection efforts prescribed. Thus, the Court ruled that the taxpayer can no longer be compelled to pay the assessed deficiency taxes, and revoked the BIR’s authority to enforce collection.

The five-year prescriptive period for criminal tax violations, if unknown, begins from discovery and referral for preliminary investigation, and since more than five years lapsed before the Information was filed in court, the criminal case is barred by prescription. Section 281 of the National Internal Revenue Code (NIRC) states that violations of tax laws prescribe after five (5) years, which is reckoned either from the date of the violation or, if unknown, from the date of discovery and the institution of judicial proceedings for its investigation and punishment. Further, Section 2, Rule 9 of the RRCTA provides that only the filing of the Information in the CTA interrupts the prescriptive period and not the filing of a complaint with the DOJ. The Court rejected petitioner’s argument that the complaint’s filing with the DOJ already interrupted prescription. The CT ruled that for unknown violations, the prescriptive period starts only upon discovery and referral for preliminary investigation, and that the period from that point up to the filing of the Information in court must not exceed five years. In this case, while the violation was discovered and referred for preliminary investigation, the Information was filed beyond the five-year limit, and the Court ruled that the case had already prescribed, leading to the dismissal of the criminal action. (People of the Philippines v. Ma. Luisa Reyes Angulo, CTA Crim Case Nos. O-867 and O-868, February 13, 2025)

Rappler Holdings Corporation (RHC) is not a dealer in securities as it was not regularly engaged in buying and selling securities for profit, and its issuance of Philippine Depositary Receipts (PDRs) was a legitimate capital-raising activity of a financial holding company, which is not a taxable event. Under Securities Regulation Code (SRC), and Revenue Regulations No. 06-08, a “dealer in securities” must be regularly engaged in the purchase and resale of securities to customers for profit, or in the ordinary course of business. The CTA En Banc upheld the Division’s ruling that RHC did not fall under this definition. The evidence showed that RHC issued PDRs to NBM and Omidyar Network for the sole purpose of raising capital for its subsidiary, Rappler Inc., in line with its purpose as a financial holding company, not as a merchant of securities. The Court noted that RHC neither bought securities from its subsidiary nor resold them to third parties, and that its Articles of Incorporation expressly prohibited it from acting as a dealer or stockbroker. Furthermore, the PDRs did not convey ownership or economic rights over the underlying shares unless exercised and subject to legal limitations on foreign ownership. Therefore, the PDR issuance was an investment arrangement, not a taxable sale or trading transaction, and there was no grave abuse of discretion in the Division’s factual findings to that effect. (People of the Philippines and Bureau of Internal Revenue v. Rappler Holdings Corporation and Maria Ressa, CTA EB Crim No. 126, CTA Crim Case Nos. O-679, O-680, O-681 and O-682, February 21, 2025)

 

BIR ISSUANCES

Revenue Memorandum Circular No. 061-2025, June 19, 2025

Repealed/Modified Tax Exemptions under Capital Markets Efficiency Promotions Act (CMEPA)

• All the above exemptions are revoked starting July 1, 2025.
• Affected transactions are now subject to income tax, capital gains tax, dividends tax, and/or documentary stamp tax, depending on the transaction type.

Affected Law / Provision	Entity / Description	Repealed Tax Exemptions
PD No. 1648 (Sec. 9)	National Development Company (NDC)	Exemption on issuance of bonds and securities (now subject to DST)
EO No. 603 (Secs. 6–8)	Light Rail Transit Authority (LRTA)	Exemptions on interest income, capital gains, DST, and bond issuance
RA No. 7354 (Sec. 14)	Philippine Postal Corporation	Exemptions on interest income, capital gains, DST
RA No. 4850 (Sec. 12)	Laguna Lake Development Authority (LLDA)	Exemptions on interest income, capital gains, DST, and bond issuance
PD No. 37 (No. 8)	Nayong Pilipino Foundation	Exemptions on interest income, capital gains, DST
PD No. 205 (Sec. 12)	Development Academy of the Philippines (DAP)	Exemptions on interest income, capital gains, DST
PD No. 442 (Art. 204)	State Insurance Fund (SSS/GSIS)	Exemption on capital gains tax
PD No. 696 (Secs. 10–11)	Philippine Aerospace Development Corp.	Exemptions on interest income, capital gains, DST, and bond issuance
RA No. 85 / RA No. 2081 (Sec. 2(g))	Development Bank / RFC	Exemptions on interest income and bond issuance
RA No. 3844 / RA No. 6389 (Secs. 76–77, 98)	Agricultural Land Reform Code	Exemptions on interest income, dividends, capital gains, DST on bonds
RA No. 3591 (Sec. 24)	Philippine Deposit Insurance Corporation (PDIC)	Exemptions on interest income and bond issuance
EO No. 1037 (Sec. 12)	Philippine Retirement Park System	Exemptions on interest income, capital gains, DST, and bond issuance
RA No. 6395 (Sec. 8(a))	National Power Corporation (NPC)	Exemptions on interest income, capital gains, DST on bonds
PD No. 334 (Secs. 9, 15)	Philippine National Oil Company (PNOC)	Exemptions on interest income, capital gains, DST, bond issuance
PD No. 1467 (Sec. 16)	Philippine Crop Insurance Corporation	Exemption on capital gains
RA No. 10801 (Sec. 56)	OWWA	Exemption on capital gains
RA No. 9267 (Sec. 28)	Securitization Act of 2004	Exemption on DST
RA No. 6426 (Sec. 6)	Foreign Currency Deposit Act	Exemption on interest income of residents (now taxable)
RA No. 9497 (Sec. 16(b))	Civil Aviation Authority of the Philippines (CAAP)	Exemptions on interest income, dividends, capital gains
RA No. 7356 (Sec. 21)	National Commission for Culture and the Arts (NCCA)	Exemptions on interest income, dividends, capital gains
RA No. 10086 (Sec. 23(a))	National Historical Commission of the Philippines (NHCP)	Exemptions on interest income, dividends, capital gains
PD No. 1201 (Sec. 11)	Philippine Institute for Development Studies (PIDS)	Exemptions on interest income, dividends, capital gains
RA No. 2640 / BP 35 (Sec. 11)	Veterans Federation of the Philippines	Exemptions on interest income, dividends, capital gains
RA No. 4156 / RA No. 6366 (Sec. 12)	Philippine National Railways (PNR)	Exemptions on interest income, dividends, capital gains
RA No. 9182 / RA No. 9343 (Sec. 15)	SPV Law (Special Purpose Vehicles)	Exemptions on capital gains and DST

 

Revenue Memorandum Circular  No. 066-2025, July 2, 2025

Context / Background	Previously, under RMC No. 80-2023, RBEs availing of VAT zero-rating on local purchases had to submit a sworn declaration to their suppliers affirming that the goods/services purchased were directly and exclusively used in their export activities.
Clarified Rule	With the issuance of RR No. 10-2025, the sworn declaration is no longer required. The VAT Zero-Rating Certificate issued by the concerned Investment Promotion Agency (IPA) (e.g., PEZA, BOI) is now sufficient documentary basis for claiming the 0% VAT rate.
BIR’s Post-Audit	The BIR retains authority to perform post-audit verification to confirm that the purchased goods/services are indeed directly attributable to the RBE’s registered project or activity.
Key Compliance Implication	RBEs and suppliers no longer need to collect sworn declarations. They must secure and retain the IPA-issued VAT Zero-Rating Certificate and ensure that transactions are indeed tied to registered export activity to withstand post-audit scrutiny.

Revenue Memorandum Circular No. 065-2025, July 2, 2025

Who is Covered	New business taxpayers ➤ With no existing TIN ➤ Or with an existing TIN but registering a new line of business
Types of Books Allowed	1. Manual Books of Accounts 2.Loose-Leaf Books of Accounts (LLBA) 3. Computerized Books of Accounts (CBA) or Computerized Accounting System (CAS)
Manual Books	·         No approval needed ·         Can be registered at the same time as TIN application ·         No additional permit required
Loose-Leaf Books (LLBA)	·         Requires a Permit to Use (PTU) ·         PTU can be issued only after TIN issuance ·         Cannot be registered during initial TIN application ⚠️ ·         Use without PTU is a violation
Computerized Books / CAS	·         Requires an Acknowledgement Certificate (AC) ·         AC can be issued only after TIN issuance ·         Cannot be registered during initial TIN application ·         Use without AC is a violation
Timing of Book Registration	Not mandatory during business registration
Compliance Warning	If LLBA or CBA are used without PTU or AC, the taxpayer is liable for failure to make valid entries under BIR rules
System Update	Once PTU or AC is issued, BIR Registration Officer must update the taxpayer’s records to reflect the registration of LLBA or CBA

BIR RULINGS

Income earned by CDPQ, a government-owned entity of Quebec, from investments in the Philippines is exempt from income tax and withholding tax as it qualifies as a foreign government agency. Under Section 32(B)(7)(a)(i) of the Philippine Tax Code, income derived by foreign governments or their controlled financing institutions from investments in Philippine securities is exempt from income tax and withholding tax. CDPQ, created by a legislative act of the National Assembly of Quebec and mandated to manage public pension and insurance funds, is a government instrumentality of the State of Quebec. Its structure, control, and ownership—along with its public mandate and accountability to Quebec’s Ministry of Finance—qualify it as a “foreign government” for tax purposes. As such, income from its Philippine investments, including dividends and interest, falls within the scope of this tax exemption. Accordingly, the BIR confirmed that CDPQ’s current and future Philippine-sourced investment income is not subject to Philippine income or withholding taxes (BIR Ruling No. OT-001-2025, January. 3, 2025).

If a homeowners association remains a validly registered homeowners’ association with an existing BIR registration and Authority to Print (ATP), no subsequent ATP may be issued to another group without first properly canceling the original. Under Section 4 of the Tax Code, the CIR has exclusive authority to interpret tax laws and rule on matters under the BIR’s jurisdiction, including the issuance of Authorities to Print (ATP). Section 238 of the Tax Code further requires taxpayers to secure an ATP prior to printing official receipts, which must contain required tax details. Consistent with RMO No. 83-99, a validly issued ATP remains in force unless revoked due to the taxpayer’s dissolution or loss of registration with a competent agency. In BIR Ruling No. OT-002-2025, the BIR confirmed that Sun Valley Residential Estates Homeowners Association, Inc. (SVREHAI), Phases 1-2, remains duly registered with the BIR and the Department of Human Settlements and Urban Development (DHSUD), and was validly issued an ATP. Given that its ATP has not been canceled or invalidated following the required procedures, the issuance of a separate ATP to a different faction is improper. The intra-association dispute is not within the BIR’s jurisdiction and does not independently affect the validity of the existing ATP. (BIR Ruling No. OT-002-2025, January 6, 2025)

SKK, a Top 10,000 Corporation, failed to withhold 2% EWT from payments to PSALM as required under RR No. 2-1998; while PSALM is not liable to refund since it reported and paid taxes on the income, SKK remains liable for penalties. Under Sections 2.57.2 to 2.57.5 of Revenue Regulations No. 2-1998, as amended, Top 10,000 Corporations like SKK Steel Corporation are mandated to withhold 1% or 2% expanded withholding tax (EWT) from payments to regular suppliers—including government-owned and controlled corporations (GOCCs) such as PSALM—at the time of payment or when the expense is recorded, whichever is earlier. Section 2.57.3 clearly places the withholding obligation on the buyer-payor, while failure to comply is subject to penalties under Sections 251 and 255 of the Tax Code. In this case, SKK failed to withhold the required EWT on its earlier payments to PSALM. After a BIR audit in 2014 revealed this lapse, SKK unilaterally deducted the back taxes from PSALM’s billing and claimed to have remitted the amount to the BIR. However, PSALM objected and billed SKK for the deducted amount plus interest, citing lack of BIR Form 2307 as proof of remittance. The BIR ruled that although SKK failed in its withholding obligation, PSALM had already reported the income in its tax returns without claiming deductions, and paid the corresponding taxes—thereby satisfying the substance of the withholding system. As a result, PSALM has no obligation to refund the deducted amount or the interest. Nonetheless, SKK may still be penalized for its failure to withhold and may claim a tax refund from the BIR upon submission of proper documentation (e.g., Form 2307) proving actual remittance (BIR Ruling No. OT-003-2025, January 6, 2025).

Technical fees paid by AAPPI to AMPL for remote services performed abroad are deemed Philippine-sourced royalties, and are thus subject to income tax, withholding tax, and VAT. Under Sections 23(F), 28(B)(1), and 42(C)(3) of the Tax Code, a non-resident foreign corporation (NRFC) is generally taxed only on income derived from sources within the Philippines, and compensation for services performed abroad is considered foreign-sourced and not subject to Philippine tax. However, Section 42(A)(4)(c) creates an exception: income derived from the supply of scientific, technical, industrial, or commercial knowledge or information is treated as royalties from Philippine sources if such knowledge is used in the Philippines. In this case, although the services rendered by Allegiance Marketing Pty. Ltd. (AMPL), an Australian NRFC, under a Technical Services Agreement were performed remotely from Australia and supported by a certification of non-rendition in Philippine territory, the BIR determined that the services involved the supply of technical knowledge used by Accor Advantage Plus Philippines, Inc. (AAPPI) in its operations in the Philippines. Therefore, the technical fees constitute Philippine-sourced royalties subject to income tax and final withholding tax under Section 28(B)(1), and to 12% VAT pursuant to Section 108(A)(3) of the Tax Code. (BIR Ruling No. OT-004-2025, January 6, 2025).

Tanay Water District is exempt from income tax, but remains liable for the 2% franchise tax under Section 119 and for 2% creditable withholding by government entities. Section 27(C) of the Tax Code, as amended by Republic Act No. 10026, exempts local water districts (LWDs) from the corporate income tax otherwise imposed on government-owned and controlled corporations (GOCCs). This means that Tanay Water District is not liable to pay the regular 25% income tax imposed on domestic corporations, nor is it subject to creditable withholding tax (CWT) on its income. However, the same law does not provide an exemption from the 2% franchise tax under Section 119 of the Tax Code, which applies to all franchise holders, including water utilities, regardless of whether they are GOCCs or not. Section 119 specifically imposes a 2% tax on gross receipts derived from the business covered by the franchise, which in this case includes water distribution services. In addition, Section 5.116(A)(4)(b) of Revenue Regulations No. 2-98, as amended, requires all government agencies, instrumentalities, GOCCs, LGUs, and their subsidiaries to withhold 2% franchise tax from gross payments made to franchise holders operating water utilities. Applying these provisions, while Tanay Water District enjoys income tax exemption, it is still liable for the 2% franchise tax on its gross receipts and must account for the corresponding withholding made by government payors, which can be credited against its franchise tax liability. The BIR thus affirmed that Tanay Water District remains subject to the franchise tax and related withholding requirements despite its income tax exemption (BIR Ruling No. OT-005-2025).

BIR DEADLINES FROM JULY 21 – 27 2025. A gentle reminder on the following deadlines, as may be applicable:

DATE	FILING/SUBMISSION
July 25, 2025	SUBMISSION – Quarterly Summary List Sales/Purchases / Importations by a VAT Registered Taxpayers.  Non-eFPS Filers – For the Quarter ending June 30, 2025
	SUBMISSION – Sworn Statement of Manufacturer’s or Importer’s Volume of Sales of each particular Brand of Alcohol Products, Tobacco Products and Sweetened Beverage Products – For the Quarter ending June 30, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 2550Q (Quarterly Value-Added Tax Return).  eFPS & Non-eFPS Filers -For the Quarter ending June 30, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 2551Q (Quarterly Percentage Tax Return).  For the Quarter ending June 30, 2025

COURT OF TAX APPEALS DECISIONS

A non-stock, non-profit mutual benefit association is not subject to Local Business Tax (LBT) as it is neither engaged in business nor classified as a financial institution or insurance company. Under Sections 131(d) and 143(f) of the Local Government Code (LGC), LBT may only be imposed on entities engaged in business or profit-driven financial activities, while Sections 190 and 403 of the Insurance Code expressly exclude mutual benefit associations (MBAs) from the definitions of “insurance companies” and “financial institutions”; applying these provisions, the Supreme Court held that a non-stock, non-profit MBA operating solely for the benefit of its members by providing financial assistance such as sickness, death, and unemployment benefits is not engaged in business or profit-seeking activity and therefore cannot be subjected to LBT, rendering the assessment and issuance of a tax order of payment void for lack of legal basis. (Public Safety Mutual Benefits Fund., Inc. v. Laquian, CTA Case No. 289, February 12, 2025)

A Tax Order Payment (TOP) is considered an assessment if it states the nature and amount of the tax and penalties even without citing the exact ordinance provision as long as it sufficiently informs the taxpayer (tax type, base, implied rate, and surcharges). Section 195 of the Local Government Code requires that a local tax assessment must include the nature of the tax, the amount of deficiency, and the applicable surcharges, interest, and penalties for it to be valid; applying this, the TOP issued was deemed sufficient as it clearly indicated the tax type (“FINANCIAL INSTITUTION – INSURANCE COMPANIES”), the tax base, rate (implied at 60% of 1%), and total amount due including penalties, which aligns with the rate prescribed under Section 21.02(1) of the City of San Juan Revenue Code of 2013, thereby upholding its validity and showing no due process violation despite the taxpayer’s failure to recognize the ordinance provision cited. (Public Safety Mutual Benefits Fund., Inc. v. Laquian, CTA Case No. 289, February 12, 2025)

Accused is acquitted for alleged willful failure to pay tax, ruling that the assessment was void due to improper service of the LOA and FAN/FLD, which violated her right to due process. Under Section 255 of the National Internal Revenue Code (NIRC) of 1997, as amended, a taxpayer who willfully fails to pay any tax, file a return, or supply accurate information may be held criminally liable. Here, the CTA acquitted the accused, Lanila Madayag Diaz-Salayog, for failure of the prosecution to prove her guilt beyond reasonable doubt. The Court held that the Bureau of Internal Revenue (BIR) failed to properly serve the Letter of Authority (LOA) and Final Assessment Notice/Formal Letter of Demand (FAN/FLD), both of which are essential to establish a valid tax assessment and a willful failure to pay taxes. The LOA was improperly delivered to an unauthorized person at an address different from the taxpayer’s registered address, and there was no competent justification or proof for the substituted service. Similarly, the FAN/FLD lacked proper evidence of mailing and receipt, such as registry receipts or an affidavit of service. Due to these procedural lapses, the assessment was rendered void, and without a valid assessment, neither criminal liability nor civil liability for the alleged ₱10.67 million deficiency income tax for 2014 could arise (People of the Philippines v. Lanila Madayag Diaz, CTA Crim Case No. O-999, January 15, 2025)

Accused was acquitted as the cigarettes found in his van were inadmissible evidence, seized through an invalid warrantless search lacking probable cause despite his admitted possession.  A mere unexplained possession of imported articles subject to excise tax, for which no tax has been paid, is punishable regardless of ownership. In this case, Victor Gaw Sy was apprehended driving a van containing 5,000 reams of imported “Two Moon” and “Blue Moon” cigarettes with unpaid excise taxes amounting to ₱1.75 million. Although Sy claimed he was unaware of the contents and was merely hired to transport the van, the Court found he had animus possidendi (intent to possess) due to his conscious physical control of the goods. However, the Court ruled that the warrantless search and seizure of the vehicle and cigarettes was unconstitutional due to the absence of probable cause and irregularities in the checkpoint procedure, rendering the seized evidence inadmissible and ultimately acquitting the accused. (People of the Philippines v. Victor Gaw Sy, CTA Case No. O-1050, January 15, 2025)

The tax assessment against Smart Communications was cancelled because it was partly prescribed, issued without jurisdiction over receipts recorded in Tuguegarao City, and based on arbitrary estimates unsupported by an audit of its records. Provinces may impose a franchise tax on businesses operating within their territorial jurisdiction based on gross receipts. Moreover, the law limits the assessment of local taxes to within five years from the date they become due. In this case, Smart Communications Inc. was assessed by the Province of Cagayan for local franchise taxes amounting to ₱48.59 million covering the years 2011 to 2015. Smart argued that it was exempt under its legislative franchise (R.A. No. 7294) which included a “tax in lieu of all taxes” clause, and also invoked the Public Telecommunications Policy Act’s equality clause. The Court rejected these defenses, affirming prior Supreme Court rulings that the “in lieu of all taxes” clause covers only national taxes, not local ones, and that Section 23 of the PTPA does not grant a tax exemption. However, the Court held that the 2011 assessment had prescribed, the Province had no authority to tax gross receipts recorded in Tuguegarao City, and that the assessments were invalid for being based on arbitrary, uniform estimates without examining Smart’s books. Thus, the Court cancelled the entire tax assessment and enjoined its collection (Smart Communications Inc. v. Province of Cagayan, CTA AC No. 291, Civil Case No. 8456, February 17, 2025)

The Regional Trial Court (RTC) correctly dismissed the petition, ruling that appeals from a local treasurer’s denial of tax protest under Section 195 of the LGC are original actions, as it involves judicial review of a non-judicial entity’s ruling. Under Section 195 of the Local Government Code (LGC) of 1991, a taxpayer may file an appeal with a court of competent jurisdiction within 30 days from receipt of the denial of a protest issued by the local treasurer against a local tax assessment. The Supreme Court clarified that such appeal is an exercise of original jurisdiction by the RTC because the local treasurer, as a non-judicial entity, does not render judicial decisions subject to appellate review. Applying this to the case, the RTC of Taguig City correctly dismissed the petition on the ground that appeals under Section 195 of the LGC are original actions, not appellate in nature, thus affirming its authority to exercise original jurisdiction over the taxpayer’s challenge to the local treasurer’s denial of protest (Lucio Tan Group, Inc. v J. Voltaire R. Enriquez, in his capacity as City Treasurer of Taguig City, CTA AC No. 300, February 12, 2025)

Under Section 196 of the Local Government Code (LGC), a refund claim applies in the absence of a valid assessment, which must state the nature, amount, and legal basis of the tax; otherwise, any court action without prior refund claim is premature. Under Section 196 of the LGC of 1991, a taxpayer may claim a refund of erroneously or illegally collected taxes by first filing a written claim with the local treasurer, and only after doing so may initiate a judicial action, provided both actions are filed within two years from the date of payment. In this case, petitioner paid local taxes on March 27, 2023 to the City Treasurer of Taguig as alleged deficiency business tax on dividend income, and subsequently filed a Petition for Review before the RTC without first submitting a written claim for refund. The document titled “Tax Deficiency Assessment for the Year 2022” lacked the necessary elements of a valid assessment under Section 195, such as the nature of the tax, factual and legal bases, and clear reference to applicable laws or ordinances. As such, Section 195 was inapplicable, and the proper remedy was under Section 196. However, petitioner’s letters to the City Treasurer only protested the assessment but did not specifically request a refund, thus failing to comply with the administrative prerequisite. Because no valid administrative claim for refund was filed prior to seeking judicial relief, the Petition for Review was dismissed for prematurity and failure to exhaust administrative remedies, despite the payment having been made within the allowable two-year period (Lucio Tan Group, Inc. v J. Voltaire R. Enriquez, in his capacity as City Treasurer of Taguig City, CTA AC No. 300, February 12, 2025)

BIR RULINGS

Prior service in a merged entity may be counted toward the ten-year requirement for tax-exempt retirement benefits, provided the merger was beyond the employee’s control and no separation pay was received. Pursuant to Section 32(B)(6)(a) of the National Internal Revenue Code (Tax Code), retirement benefits received by employees are exempt from income tax if the employee has rendered at least ten (10) years of service in the same employer and is at least fifty (50) years old at retirement. Under the Certificate of Qualification granted by the Bureau of Internal Revenue (BIR) to the BPI Group of Companies, and guided by relevant rules and jurisprudence, the ten-year service requirement may include aggregate years of service rendered by BFSBI employees prior to their absorption into BPI, provided the transfer was due to a valid merger beyond the employees’ control and no separation benefits were received. Accordingly, in the context of the approved merger between BPI and BFSBI effective January 1, 2022, the BIR confirms that: (1) the BFSBI employees’ prior service may be credited toward the tenure requirement under the Retirement Plan; and (2) the tax-exempt status of retirement benefits, the tax exemption of Retirement Fund investment income, and the deductibility of employer contributions to the Retirement Fund remain unaffected, so long as the conditions under the law and Certificate of Qualification continue to be met. (BIR Ruling No. OT-068-2024, December 26, 2024)

Sale and printing of educational books not principally for advertisements and compliant with NBDB rules are VAT-exempt, and thus not subject to 5% creditable withholding VAT by government purchasers. Pursuant to Section 109(1)(R) of the National Internal Revenue Code of 1997, as amended, in relation to Republic Act No. 8047 and Revenue Regulations No. 16-2005, the sale, importation, printing, or publication of books and educational materials—including digital formats—is exempt from Value-Added Tax (VAT), provided such materials are not principally for paid advertisements and comply with National Book Development Board (NBDB) requirements. Applying this provision, the Bureau of Internal Revenue confirmed that Mexico Printing Company, Inc. (MPCI), as an NBDB-registered book publisher and printer engaged in contracts with the government, is exempt from the 12% VAT on qualified transactions. Consequently, government entities purchasing such VAT-exempt materials from MPCI are not required to withhold the 5% creditable VAT under RMO No. 23-2014. However, MPCI’s non-exempt printing activities remain subject to VAT, and its purchases from suppliers are still subject to 12% VAT, as VAT exemptions apply only to its sales of qualified educational materials and not to its inputs. (BIR Ruling No. VAT-067-2024, December 18, 2024)

Coconut sap sugar processed through simple boiling with polarization below 99.5° and color above 800 ICU is considered in its original state and thus exempt from VAT. Pursuant to Section 109(1)(A) of the National Internal Revenue Code of 1997, as amended, and in relation to Revenue Regulations No. 8-2015, agricultural food products in their original state, including those that undergo simple processes such as boiling, may be exempt from VAT. Applying this provision, coconut sap sugar, produced through basic farm-level processes like boiling and drying, and meeting the specified thresholds of polarization (below 99.5°) and color (above 800 ICU), is deemed to be in its original state and thus qualifies as a VAT-exempt agricultural product. (BIR Ruling No. VAT-066-2024, November 15, 2024)

Leases and local purchases directly used in the development and installation of a certified renewable energy project are subject to 0% VAT. Pursuant to Section 15(g) of Republic Act No. 9513 (Renewable Energy Act) and Section 108(B)(3) of the Tax Code, as amended, purchases and leases of goods, properties, and services by a Department of Energy-certified renewable energy developer are subject to zero percent (0%) VAT, provided they are directly used in the development, construction, and installation of renewable energy facilities. Applying this, transactions such as the lease of land and procurement of local supplies and services for a certified solar power project are VAT zero-rated, subject to post-audit by the BIR to ensure the inputs were indeed utilized for the qualified activities. (BIR Ruling No. OT-065-2024, November 13, 2024)

Property transfers pursuant to a court-approved Declaration of Nullity of Marriage and adjudication to common children as presumptive legitimes are not subject to CGT, donor’s tax, or DST. Under Sections 24(D)(1), 98(A), and 188 of the Tax Code, as amended, and relevant BIR rulings, transfers of real properties arising from a court-approved Declaration of Nullity of Marriage are not subject to capital gains tax, donor’s tax, or documentary stamp tax (DST), as these are not considered sales, donations, or dispositions with monetary consideration but rather judicial partitions or distributions in compliance with property settlement. Additionally, the adjudication of property to common children as presumptive legitimes is also exempt from CGT and DST but must be annotated on the titles and will form part of the gross estate for estate tax purposes upon the death of either parent. (BIR Ruling No. OT-062-2024, October 18, 2024)

Tax exemption was denied due to private inurement arising from excessive fringe benefits comprising 40% of operating expenses, violating the non-profit requirement. Under Par. 3, Sec. 4, Art. XIV of the 1987 Constitution and Section 30(H) of the NIRC of 1997, non-stock, non-profit educational institutions are exempt from income tax only if their revenues are actually, directly, and exclusively used for educational purposes; however, due to substantial fringe benefits and incentives comprising 40% of operating expenses, which constitute private inurement, the institution failed to meet the non-profit requirement and was thus denied income tax exemption and reclassified as a proprietary educational institution subject to the 10% preferential tax under Section 27(B). (BIR Ruling No. SH30-063-2024, October 18, 2024)

The transfer of real properties via deeds of assignment by a liquidating government entity to the National Government, though akin to dacion en pago, is exempt from CGT, donor’s tax, and DST as it is a non-profit governmental function pursuant to its statutory mandate. Pursuant to Sections 24(D)(1), 98, 99, 101, 173, 188, 196, and 199 of the NIRC of 1997, as amended, Section 132(e) of R.A. No. 7653 (New Central Bank Act), and Section 66 of R.A. No. 6657 (CARL), the deeds of assignment executed by the CB-Board of Liquidators (CB-BOL) in favor of the Republic of the Philippines (ROP), although containing provisions similar to a dacion en pago and ordinarily taxable as a sale or disposition, are not subject to capital gains tax (CGT), donor’s tax, or documentary stamp tax (DST), as the transfers were made in performance of CB-BOL’s statutory duty to liquidate residual assets not transferred to the BSP, and such disposition by a government entity to the National Government is considered a governmental act not undertaken for profit, and therefore entitled to tax exemptions. (BIR Ruling No. OT-061-2024, October 8, 2024)

BIR DEADLINES FROM JULY 8, TO MAY 13 2025. A gentle reminder on the following deadlines, as may be applicable:

DATE	FILING/SUBMISSION
July 08, 2025	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 June 2025
	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 June 2025
July 10, 2025	SUBMISSION – List of Buyers of Sugar Together with a Copy of Certificate of Advance Payment of VAT made by each buyer appearing in the List by a Sugar Cooperative.  Month of June 2025
	SUBMISSION – Information Return on Releases of Refined Sugar by the Proprietor or Operator of a Sugar Refinery or Mill.  Month of June 2025
	SUBMISSION – Monthly Report on DST Collected and Remitted by the Government Agency.  Month of June 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 2200-C (Excise Tax Return for Cosmetic Procedures) with Monthly Summary of Cosmetic Procedures Performed.  Month of June 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 1600-VT (Monthly Remittance Return of Value-Added Tax) and/or 1600-PT (Other Percentage Taxes Withheld) and Monthly Alphalist of Payees (MAP) – eFPS & Non-eFPS Filers – Month of June 2025.
	BIR Form 1606 (Withholding Tax Remittance Return for Onerous Transfer of Real Property Other Than Capital Asset Including Taxable and Exempt).  Month of June 2025.
	e-FILING & e-PAYMENT/REMITTANCE – BIR Form 1600-VT (Monthly Remittance Return of Value-Added Tax) and/or 1600-PT (Other Percentage Taxes Withheld) and BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation).  National Government Agencies (NGAs).  Month of June 2025
	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 Odd Number.  Month of June 2025
	FILING & PAYMENT – BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation).  Non-eFPS Filers.  Month of June 2025
	FILING & PAYMENT/REMITTANCE FILING & PAYMENT/REMITTANCE – BIR Form 2200-M Excise Tax Return for the Amount of Excise Taxes Collected from Payment Made to Sellers of Metallic Minerals.  Month of June 2025
July 11, 2025	e-FILING – BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) – eFPS Filers under Group E.  Month of June 2025
July 12, 2025	e-FILING – BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) – eFPS Filers under Group D.  Month of June 2025
July 13, 2025	e-FILING – BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) – eFPS Filers under Group C.  Month of June 2025

COURT OF TAX APPEALS DECISIONS

An assessment is void for violating due process when the BIR issues a Formal Letter of Demand/Final Assessment Notice (FLD/FAN) before the lapse of the 15-day period to respond to a Preliminary Assessment Notice (PAN). The BIR must observe due process by granting the taxpayer 15 days from receipt of the PAN to file a response before issuing a FLD/FAN. The Court emphasized that the taxpayer must be afforded the full 15-day period to respond to the PAN, and failure to do so renders the subsequent assessment void. (CIR v. D.M. Wenceslao & Associates, Inc., CTA EB No. 2802, CTA Case No. 9764, February 6, 2025)

A petition filed by the BIR without written authorization from the Office of the Solicitor General is invalid and only the Solicitor General, as a general rule, may represent the government in appellate proceedings.  Under established jurisprudence and the general rule that only the Office of the Solicitor General (OSG) is authorized to represent the government in appellate proceedings—including those involving the Bureau of Internal Revenue (BIR)—a petition filed without the OSG’s authorization is not validly instituted. While Section 220 of the Tax Code allows BIR legal officers to initiate civil and criminal actions, the Supreme Court in CIR v. La Suerte, G.R. No. 144942, July 4, 2002, clarified that this does not extend to appellate proceedings. In this case, the Commissioner of Internal Revenue (CIR) filed a Petition for Review without any written authorization or deputization from the OSG. As none of the recognized exceptions apply, and no proof of OSG authority was presented, the Petition was deemed invalidly filed, resulting in the finality of the assailed Decision and Resolution. (CIR v. One Cypress Agri-Solution, Inc. CTA EB No. 2813, CTA Case No. 9937, March 5, 2025)

Failure to submit proof of actual receipt or required documents —such as return cards, postmaster certifications, or a sworn service report—rendered the FLD/FANs void for violating due process requirements. The issuance of a valid assessment requires that the taxpayer be duly notified through proper service of the FLD/FAN, thereby ensuring the taxpayer’s right to due process is upheld. In this case, while the BIR claimed service of the FLD/FANs by registered mail after a failed personal delivery, it merely submitted registry receipts without accompanying return cards, postmaster certifications, or a sworn report detailing the manner, date, and recipient of service as required by regulations. These deficiencies, combined with the express denial of receipt by the taxpayer, failed to overcome the disputable presumption of receipt by mail. Without competent proof of actual receipt or compliance with procedural requirements, the Court found that the BIR did not validly serve the assessment notices, and thus, any resulting assessment is void and unenforceable for lack of due process. (CIR v. One Cypress Agri-Solution, Inc. CTA EB No. 2813, CTA Case No. 9937, March 5, 2025)

Failure to appeal the warrants of distraint and garnishment within the 30-day reglementary period bars the CTA from acquiring jurisdiction over the case. The Court of Tax Appeals has jurisdiction over “other matters arising under the NIRC,” including the issuance of collection remedies such as warrants of distraint and levy (WDL) and garnishment (WOG); however, jurisdiction is also subject to compliance with procedural rules which require the filing of an appeal within 30 days from receipt of the questioned measure — and since petitioner received the WDL and WOG as early as March or April 2022 but only filed the Petition for Review on October 26, 2022, after making belated letter-requests to the Regional Director that did not toll the period, the Court in Division correctly dismissed the case for being filed out of time and for lack of jurisdiction. (Danile N. Matias v. CIR, CTA EB No. 2824, CTA Case No. 11025, March 4, 2025)

An assessment is void for violating due process when conducted by revenue officers not named in a valid LOA and issued by an unauthorized BIR official. Pursuant to Sections 6(A) and 13 of the NIRC of 1997, as amended, and RMO No. 43-90, only revenue officers specifically named in a duly issued Letter of Authority (LOA) by the CIR, Deputy Commissioner, or Regional Director may validly examine a taxpayer’s books; in this case, although the instant LOA authorized Revenue Officers (RO) San Pedro-Anaban, Budano, and Maniego, the audit and issuance of the PAN and FLD/FAN were instead performed by ROs Ancheta and Monforte, who were not named in any valid LOA but merely referenced in a letter signed by Chief of the LT Regular Audit, who lacked authority to issue LOAs, thus rendering the assessment void for violating the taxpayer’s right to due process. (CIR v. Concepcion Industries, Inc., CTA EB No. 2863, CTA Case No. 10305, January 22, 2025)

Lack of due date in the FLD/FAN renders the assessment void. A valid FLD/FAN must include a definite due date to constitute a proper demand for payment and to trigger the accrual of delinquency interest. In this case, the FLD/FAN lacked any indication of a due date, thereby depriving the taxpayer of essential information needed to determine remedies and properly respond to the assessment. This omission constitutes a violation of due process, rendering the assessment null and void and justifying the Court in Division’s ruling enjoining the collection of the assessed amounts. (CIR v. Concepcion Industries, Inc., CTA EB No. 2863, CTA Case No. 10305, January 22, 2025)

The right to collect prescribes when no WDL was served within the 3-year period from the issuance of the assessment. Under Section 203 of the NIRC, as interpreted in CIR v. QL Development, Inc., the BIR must initiate collection of assessed taxes within three years from the date of assessment, unless interrupted by actions specifically enumerated in Section 223(d), such as the valid service of a WDL. In this case, the FLD/FAN was issued on October 15, 2002, but the first valid act of collection—a Warrant of Garnishment dated March 18, 2008—was served 1,981 days later. The November 6, 2003 letter merely reiterated the demand for payment and did not constitute valid collection under the law. As the WDL was served well beyond the 3-year prescriptive period, and no other interrupting act occurred, petitioner’s right to collect had clearly prescribed. (CIR v. Canlubang Waterworks Corporation, CTA EB No. 2917, CTA Case No. 10682, February 27, 2025)

REVENUE ISSUANCES

Revenue Memorandum Circular No. 45, 2025, April 30, 2025

The Bureau of Internal Revenue informs all concerned of the issuance of CDA-DOF-BIR Joint Administrative Order No. 001-2025, which sets the rules for implementing the penalty provision under Section 308 of the Tax Code, as amended by the CREATE Act and implemented by DOF-DTI JAO No. 001-2023; the Order takes effect on March 28, 2025, as confirmed by FIRB Advisory 002-2025, following its publication on March 13, 2025.

Summary of CDA-DOF-BIR Joint Administrative Order No. 001-2025:

Section	Subject	Details
Scope	Covered Parties	·         CDA-registered cooperatives with valid CTEs availing tax incentives ·         CDA officials/employees responsible for reporting
Reportorial Requirements	Reports to be Submitted	By Cooperatives: ·         ATIR (Annex A) — within 30 days from tax return filing deadline ·         ABR (Annex B) — on or before May 15 annually By CDA: ·         Consolidated ATIR (Annex C) ·         Consolidated ABR (Annex D) ·         Master list (Annex E) — by Jan 30 yearly
Penalties (for Cooperatives)	Based on Offense	·         1st Offense: ₱100,000 fine ·         2nd Offense: ₱500,000 fine ·         3rd Offense: Revocation of CTE by BIR
Penalties (for CDA Officials)	Sanctions	·         Fine: 1 to 6 months’ salary ·         Suspension: Up to 1 year ·         Other administrative/criminal penalties as applicable
Effect of CTE Revocation	Tax Liability	·         Liable for all taxes, surcharges, interest, and penalties ·         May re-apply for CTE after prohibition period and upon compliance
Installment Payments	For Monetary Penalties	·         Allowed for up to 2 years ·         Up to 3 years for micro-cooperatives with proven financial incapacity
Waiver of Penalties	Exemptions	Granted if due to force majeure/Acts of God, upon submission of: ·         Application letter ·         LGU/Barangay Certificate ·         Supporting documents
Request for Reconsideration	One-time Option	Allowed once during cooperative’s existence for valid grounds ·         Final approval by CDA Board
Grace Period	Request by CDA	·         Up to 30 days for submission of Annexes C, D, and E ·         Must request at least 5 days before deadline
Transitory Provisions	Implementation Phases	For Taxable Year 2023: ·         ATIR/ABR due 60 days from effectivity ·         CDA reports due 90 days from effectivity Penalty Application: ·         2024 – Large & Medium cooperatives ·         2025 – Small cooperatives ·         2026 – Micro-cooperatives
Effectivity	Effective Date	March 28, 2025 (15 days after publication in The Philippine Star on March 13, 2025)

Revenue Memorandum Circular No. 47, 2025, May 7, 2025

The BIR clarifies the VAT obligations of Nonresident Digital Service Providers (NRDSPs). It confirms registration, filing, payment, invoicing, and enforcement rules related to VAT on cross-border digital services consumed in the Philippines.

Topic	Clarification / Requirement
Registration Requirement	All NRDSPs must register with the BIR, whether B2B, B2C, or both
Filing Obligation	All NRDSPs must file VAT returns to report digital transactions
Registration Method	Initially via ORUS; later through the VAT on Digital Services (VDS) Portal
Registration Deadline	On or before June 1, 2025 (120 days from RR 3-2025 effectivity)
Required Documents	Government-issued registration documents from country of origin
Local Representative	Not mandatory; may appoint a resident third-party service provider
Manual Registration	Allowed via BIR RDO No. 39–South Quezon City
Tax Type and Liability	Registered for 12% VAT on gross sales
Noncompliance Penalty	Subject to fines and possible suspension of operations
Proof of Registration	BIR Form No. 2303 (Certificate of Registration) with TIN
B2B Treatment	VAT is withheld and remitted by the PH buyer under reverse charge
B2C Treatment	NRDSP must directly file and pay VAT via simplified regime
Marketplace Transactions	If platform controls key aspects, it is deemed the DSP and liable
Invoicing Requirement	No format required; invoice must contain transaction details and VAT info
VAT Applicability Date	Effective June 2, 2025 (120 days from RR effectivity)
VAT Return Form	Use BIR Form No. 2550-DS for filing/payment; B2B buyers use 1600-VT
Input Tax Credit	Not allowed for NRDSPs
Refund for Erroneous VAT	Not allowed; may carry over excess to next return
Marketplace Liability	Not liable if payment goes directly to NRDSP
Service Fees via Marketplace	Still subject to VAT even if tied to physical goods
Scope of Taxable Digital Services	Includes online platforms, marketplaces, search engines, cloud services, media, etc.
Example – Teleconsultation	Online medical platforms are subject to VAT as digital service
Educational Institutions	No tax exemption certificate needed—DepEd/CHED/TESDA recognition suffices
RBEs and EOEs	Exempt if digital services are directly attributable to registered activities
Business Verification	Buyer may be verified via TIN, questionnaires, or registration documents
Substantiating Input VAT	Buyer may use filed BIR Form 1600-VT
Advance Payments for 2025	VAT still applies to services rendered from June 2, 2025, onward
Cost Sharing Arrangements	Shared costs for digital services consumed in PH are subject to VAT

Revenue Memorandum Circular No. 48, 2025, May 8, 2025

This BIR provides clear guidance on the correct foreign exchange (forex) rates to use in computing excise tax on mineral products, covering both export and domestic sales.

Particulars	Provision	Forex Reference	Basis Date	Other Notes
Export Sales – Provisional Excise Tax	For export permit application	BAP Spot Rate	Date of export permit application	Used for temporary computation
Export Sales – Final Excise Tax	After final assay and invoice	BAP Weighted Average Rate	Date of shipment	Shipment is deemed on bill of lading date
Export Sales – Final Invoice Deadline	Invoice issuance	N/A	Within 90 days from shipment date	Based on actual market value
Domestic Sales – Provisional Excise Tax	For transport permit (when denominated in foreign currency)	BAP Spot Rate	Date of transport permit application	Applies to local sales to processors
Domestic Sales – Final Excise Tax	After final assay and invoice	BAP Weighted Average Rate	Date of final sales invoice	Adjusts based on actual values
When is Product Considered Shipped	Determination of shipment date	N/A	Date of bill of lading	Used for final tax basis
Refund Due to Overpayment	Allowed if final tax is lower than provisional	N/A	Refund claim allowed under Section 229, NIRC	Must be supported by documents
Refund Filing Deadline	For excess excise tax payments	N/A	Within 2 years from date of payment	Subject to BIR refund rules

Revenue Memorandum Circular No. 49, 2025, May 7, 2025

• This BIR announces the release of the Offline eBIRForms Package Version 7.9.5, which may now be downloaded from the BIR website.
• The new version includes updated tax forms and multiple enhancements such as additional Alphanumeric Tax Codes (ATCs), a new treaty code for Brunei, and bug fixes. Certain forms are available for filing only through the Electronic Filing and Payment System (eFPS).

Revenue Memorandum Circular No. 52, 2025, May 30, 2025

This BIR announces the release of BIR Form No. 2550-DS (January 2025 version), designed specifically for nonresident digital service providers (NDSPs) to file their Value-Added Tax (VAT) returns, in line with Republic Act No. 12023 and Revenue Regulations No. 3-2025. The BIR will issue a separate revenue issuance containing detailed guidelines on the filing and payment procedures.

Provision	Details
Form Introduced	BIR Form No. 2550-DS (Jan 2025)
Purpose	For use by Nonresident Digital Service Providers in filing VAT returns
Legal Basis	Republic Act No. 12023 and Revenue Regulations No. 3-2025
Coverage	VAT due from digital services provided by nonresident entities to persons in the Philippines
Implementation Notes	Filing and payment procedures to be covered in a separate revenue issuance

BIR RULINGS

The transfer of the club share from one trustee to another is not subject to CGT, DST, or donor’s tax as there is no consideration or change in beneficial ownership, which remains with the appointing entity. Under the Tax Code of 1997 and relevant jurisprudence, the transfer of the Manila Polo Club, Inc. (MPCI) proprietary share from one trustee to another is not subject to capital gains tax (CGT), documentary stamp tax (DST), or donor’s tax, as there is no change in beneficial ownership. Applying the Supreme Court’s ruling in Sime Darby Pilipinas, Inc. v. Mendoza, HSBC remains the beneficial owner of the MPCI share while the legal title is merely held by the trustee to comply with MPCI’s requirement that only natural persons may be registered members. The assignment is solely to allow the trustee to enjoy club privileges during his employment with HSBC, with no consideration given and no intent to donate. As clarified under Revenue Regulations No. 13-2004, DST is not due since there is no transfer of beneficial ownership, and similarly, donor’s tax does not apply as there is no intent of liberality or patrimonial increase on the part of the trustee. (BIR Ruling No. OT-35-2024, September 4, 2024; BIR Ruling No. OT-38-2024, September 4, 2024; BIR Ruling No. OT-39-2024, September 11 2024; BIR Ruling No. OT-40-2024, September 11, 2024; BIR Ruling No. OT-41-2024, September 11, 2024)

Payments to a non-resident consultant for services performed entirely abroad—including reports, online workshops, and virtual meetings—are not subject to Philippine income tax, withholding tax, or VAT, as the income is considered foreign-sourced under the Tax Code. Under Sections 23(D), 25(B), and 42(C)(3) of the Tax Code, non-resident alien individuals not engaged in trade or business in the Philippines are taxable only on income derived from sources within the Philippines, with compensation for services being considered foreign-sourced if the services are performed outside the country. Section 108(A) similarly limits VAT to services performed within the Philippines. Applying these provisions, the compensation paid to the non-resident Canadian consultant under the Renewal Contract and Consultancy Services Agreement—covering advisory services, reports, virtual workshops, and communications conducted entirely outside the Philippines—is not subject to Philippine income tax, withholding tax, or VAT, as the income is foreign-sourced and the services were performed abroad. However, any portion of the services rendered physically within the Philippines, such as in-country missions or trainings, would be subject to Philippine income tax, withholding tax, and VAT. (BIR Ruling No. OT-049-2024, October 7, 2024)

 

 

BIR DEADLINES FROM JUNE 23 TO JUNE 30, 2025. A gentle reminder on the following deadlines, as may be applicable:

 

DATE	FILING/SUBMISSION
June 25, 2025	SUBMISSION – Quarterly Summary List of Sales/Purchases/Importations by a VAT Registered Taxpayer – Non-eFPS Filers – Fiscal Quarter ending May 31, 2025   Sworn Statement of Manufacturer’s or Importer’s Volume of Sales of each particular Brand of Alcohol Products, Tobacco Products and Sweetened Beverage Products – Fiscal Quarter ending May 31, 2025   e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 2550Q (Quarterly Value-Added Tax Return) – eFPS & Non-eFPS Filers – Fiscal Quarter ending May 31, 2025   BIR Form 2551Q (Quarterly Percentage Tax Return) – Fiscal Quarter ending May 31, 2025
June 29, 2025	e-FILING/FILING & e-PAYMENT/PAYMENT – 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 April 30, 2025
June 30, 2025	ONLINE REGISTRATION (thru ORUS) – Computerized Books of Accounts and Other Accounting Records – Fiscal Year ending May 31, 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 May 31, 2025
	Manufacturers’/Assemblers’/Importers’ Sworn Statement of each Particular Brand/Model of Automobile, Alcohol Products, Tobacco Products and Sweetened Beverage Products -1st Semester of 2025
	Soft copies of Inventory List and Schedules stored and saved in DVD-R/USB properly labeled together with Notarized Sworn Declaration – Fiscal Year ending May 31, 2025
	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) or Manually – Fiscal Year ending February 28, 2025
	e-SUBMISSION – Quarterly Summary List of Sales/Purchases/Importations by a VAT Registered Taxpayers – eFPS Filers – Fiscal Quarter ending May 31, 2025

 

COURT OF TAX APPEALS DECISIONS

The tax assessment is void if the BIR failed to prove proper service of the Notice of Informal Conference and Preliminary Assessment Notice (PAN); procedural requirements in substituted serve must be complied with; unverified sources like newspaper clippings and third party sources cannot be a valid basis for assessment.

Due process in tax assessments requires that taxpayers be informed in writing of the law and facts on which the assessment is based, beginning from Notice of Informal Conference (NIC), followed by a Preliminary Assessment Notice (PAN), and ultimately a Formal Letter of Demand (FLD). Where  there was no evidence that the NIC was received, and the PAN was served without complying with the requirements for valid substituted service, including the absence of corroborating documents such as a barangay official’s acknowledgment or a postmaster’s certification;  where the revenue officer who allegedly served the PAN did not testify, and the BIR’s witness lacked personal knowledge, the FLD and all related assessment notices for deficiency taxes are void for violating the petitioner’s right to due process. (Rex Jayson Miraflor Tuozo v. CIR, CTA Case No. 10638, March 24, 2025; see also Apex 5678 Rockwell, Inc. v. CIR, CTA Case No. 10673, February 19, 2025 and Diamond Drilling Corporation of the Philippines v. CIR, CTA Case No. 10661, January 20, 2025); where the Acknowledgment Receipt for the PAN was incomplete, with the section indicating the reason for substituted service left blank, and the witnesses’ identities and roles not properly specified; where the Written Report also failed to prove that no person was found at the address or that the barangay official who allegedly received the notice was properly identified or authenticated, the assessment notices, and the consequent Warrant of Distraint and Levy (WDL) and Warrant of Garnishment (WOG), were declared void and without legal effect. (Regus Plt Centre, Inc. v. CIR, CTA Case No. 10778, March 11, 2025); where the Formal Letter of Demand (FLD) did not adequately explain how the alleged income was computed and failed to identify or attach the documents that formed the basis of the assessment—such as news clippings and third-party sources; where documents were also not presented during administrative proceedings, denying the respondents the opportunity to examine and refute them, the unverified sources like newspaper articles, without proper corroboration, constitute hearsay and lack probative value. Given the absence of verified factual support and the failure to inform the taxpayers of the detailed basis of the assessment, the Court ruled that the assessment violated the respondents’ right to due process and was therefore void. (CIR v. Sps. Emmanuel D. Pacquiao and Jinkee J. Pacquiao, CTA EB No. 2737, CTA Case No. 8639, January 23, 2025)

CMC No. 131-2019, being an interpretative rule that merely implements EO No. 23, s. 2017, is valid without prior publication; District Collectors are not indispensable parties since a final and complete resolution can be made without affecting their individual interests, given they acted under the authority of the BOC Commissioner. 

Under established jurisprudence, interpretative administrative rules do not require publication to be effective, as they merely clarify or implement existing law without adding new obligations; applying this to the case, CMC No. 131-2019, addressed solely to Bureau of Customs personnel, merely reiterated the duty rates under EO No. 23, s. 2017 and did not create new rights or impose additional burdens on the public, making its implementation valid even without prior publication. Moreover, an indispensable party is one whose interest in the controversy is such that a final adjudication cannot be made without affecting that interest or rendering the decision ineffective. Applying this principle, the Court held that the District Collectors who issued the demand letters are not indispensable parties because the petition primarily seeks to nullify CMC No. 131-2019 for lack of prior publication, with the demand letters being merely consequential to that issuance. Even if the demand letters were the main subject, the District Collectors, being under the authority of the BOC Commissioner and lacking a distinct legal interest in the controversy, are not necessary for a complete and binding resolution of the case. (Fabrossi Food Group Inc. et. al, v. Bureau of Customs, CTA EB No. 2742, CTA Case No. 10111, February 28, 2025)

Taxpayer must file a protest within 30 days from receipt of the Final Assessment Notice (FAN); FAN received on December 17, 2018, but protested to only on April 12, 2019—well beyond the prescribed period –  renders the assessment final, executory, and placing it beyond the Court’s jurisdiction.

Section 228 of the NIRC of 1997, as amended, and RR No. 12-99, as amended, require that a taxpayer must file an administrative protest—either a request for reconsideration or reinvestigation—within 30 days from receipt of the FLD/FAN lest the tax assessment becomes final, executory, and demandable. Where the petitioner received the FLD/FAN on December 17, 2018, through an employee authorized to receive official communications, as confirmed by petitioner’s own witness, but petitioner filed its protest only on April 12, 2019—well beyond the 30-day deadline which expired on January 16, 2019, the assessment becomes final and executory. Although petitioner claimed it became aware of the assessment only upon receipt of the Final Notice Before Seizure on April 1, 2019, this was contradicted by its own admission that it received the FLD/FAN on December 27, 2018. Due to the failure to timely protest the FLD/FAN, the assessment became final, and the Court in Division correctly ruled it had no jurisdiction to hear the case. (E-Power Security and Investigation Services Inc., v. CIR, CTA EB No. 2747, CTA Case No. 10143, February 21, 2025)

Assessment is void if the BIR failed to specify the factual and legal bases in the PAN, FAN, and FDDA, and did not address the taxpayer’s arguments on trade discounts versus senior citizen discounts. Under Section 228 of the NIRC of 1997, as amended, and implementing rules under RR No. 12-99, a tax assessment is void if the taxpayer is not properly informed in writing of the legal and factual bases for the assessment, as this violates due process. In this case, the BIR failed to address and consider the respondent’s detailed arguments in both its Reply to the PAN and Protest to the FLD/FAN, particularly concerning the nature of the disallowed sales discount and the inapplicability of RR No. 7-2010. Despite repeated contentions that the discounts were trade-related and not senior citizen discounts, the BIR’s findings in the FAN/FLD and FDDA lacked any reasoned explanation or citation of specific facts and law for rejecting the respondent’s position. This omission constitutes a clear denial of due process, thereby rendering the deficiency VAT assessment void and unenforceable. (CIR v. Ajanta Pharma Philippines, Inc., CTA EB o. 2761, CTA Case No. 10057, January 31, 2025)

Under Section 228 of the NIRC and relevant jurisprudence, the 30-day appeal period is reckoned from the receipt of the PCLs—not the earlier denial letter—as only the PCLs clearly constituted a final, appealable decision.

Under Section 228 of the NIRC and established jurisprudence, a final decision on a disputed assessment must be clearly and unequivocally communicated to the taxpayer to trigger the 30-day period to appeal to the Court of Tax Appeals (CTA). Applying this, the July 30, 2018 letter from the Regional Director merely cited the taxpayer’s failure to submit supporting documents and referenced procedural rules, but did not convey a clear final determination or demand for payment; hence, it could not be deemed a final decision appealable to the CTA. In contrast, the Preliminary Collection Letters (PCLs) received on April 4, 2019, contained a definitive demand for payment and warned of summary remedies in case of non-compliance, satisfying the legal requirement of finality. As such, the 30-day appeal period began from the receipt of the PCLs, and since the petition was filed on April 11, 2019, it was timely. Accordingly, the Court in Division properly exercised jurisdiction over the case. (CIR v. Joselito B. Yap, CTA EB No. 2792, CTA Case No. 10063, February 11, 2025)

The CTA may consider issues like improper service of LOAs even if raised for the first time on appeal, as it decides cases de novo and addresses matters affecting assessment validity.

The CTA is a court of record that decides cases de novo, allowing it to consider all evidence and issues necessary for a just resolution, even if not previously raised at the administrative level. Applying this, the Court in Division correctly ruled on the issue of improper service of Letters of Authority and assessment notices despite it being raised for the first time on appeal, since such issue pertains to the intrinsic validity of the assessments. Moreover, the CTA is not confined to the issues initially stipulated by the parties and may address related matters to ensure an orderly and complete disposition of the case. (CIR v. Joselito B. Yap, CTA EB No. 2792, CTA Case No. 10063, February 11, 2025)

Taxpayer is estopped from challenging the service of LOAs and assessment notices, having acknowledged receipt and failed to timely object at the administrative level.

Under the doctrine of estoppel, a party is precluded from taking a position inconsistent with one previously assumed, especially when the other party has relied on such representation in good faith. Applying this principle, the taxpayer is estopped from questioning the validity of the service of the LOAs and assessment notices for taxable years 2011 to 2013, as he repeatedly admitted in his Legal Protest Notices that he received the Preliminary Assessment Notices (PANs), Final Assessment Notices (FANs), and Formal Letters of Demand (FLDs). These notices were received by individuals who acted as his authorized representatives, and respondent never objected to their authority or the propriety of service during the administrative proceedings. Moreover, by submitting documents in compliance with the LOAs without objecting, respondent confirmed their receipt and validity. Failure to timely object to alleged defects in service at the administrative level bars a taxpayer from raising such issues for the first time on appeal, as doing so would undermine orderly tax administration and judicial review. (CIR v. Joselito B. Yap, CTA EB No. 2792, CTA Case No. 10063, February 11, 2025)

Electric cooperatives registered with the National Electrification Administration (NEA) remain exempt from income tax despite lack of Cooperative Development Authority (CDA) registration.

The legal basis for income tax exemption of electric cooperatives is Section 39(a) of P.D. No. 269, which grants permanent exemption to those registered with the NEA. While E.O. No. 93 later withdrew these exemptions, FIRB Resolution No. 24-87 partially restored them but maintained the taxability of income from electric operations. However, R.A. No. 6938, as amended, repealed laws inconsistent with its provisions but preserved P.D. No. 269. In Samar-I Electric Cooperative v. CIR, the Supreme Court ruled that CDA registration is optional for NEA-registered cooperatives and that E.O. No. 93 was effectively repealed by R.A. No. 6938. Applying this precedent, the taxpayer, though not registered with the CDA, retains its income tax exemption under P.D. No. 269, and thus cannot be held liable for income tax. (CIR v. MORESCO-II, CTA EB No. 2796, CTA Case No. 10145, February 28, 2025)       

 

BIR RULINGS

Income from PAGCOR’s purchase of slot machines from a non-resident supplier used in gaming operations is subject only to 5% final withholding tax in lieu of all other taxes, including the 25% income tax and VAT.

Under Section 13 of Presidential Decree No. 1869, as amended, PAGCOR and its contractees—whether domestic or foreign, resident or non-resident—are subject only to a 5% franchise tax on gross revenue from gaming operations, in lieu of all other national and local taxes, including corporate income tax and VAT. This exemption is affirmed by jurisprudence, including the Supreme Court rulings which emphasized that tax incentives extend to PAGCOR’s suppliers and licensees without distinction. In application, the BIR ruled that PAGCOR’s purchase of slot machines from a non-resident supplier falls under this exemption, as the machines are used in PAGCOR’s gaming operations. Accordingly, the non-resident supplier is subject only to a 5% final withholding tax (as franchise tax), and not to the 25% income tax under RA No. 11534 or VAT. However, income from non-gaming operations remains taxable under regular rules. (BIR Ruling No. VAT-027-2024, May 13, 2024)

CWT and DST on the installment sale of real property must be computed based on the higher of the zonal value or market value at the time the Agreement to Purchase and Sale was executed.

Pursuant to Section 3(J) of Revenue Regulations No. 17-2003, for sales of real property classified as ordinary assets on an installment basis—wherein payments in the year of sale do not exceed 25% of the agreed consideration—the creditable withholding tax (CWT) is computed on each installment, based on the ratio of actual collection to the total consideration, applied to the gross selling price or fair market value at the time of the execution of the contract to sell, whichever is higher; while the documentary stamp tax (DST) accrues upon execution of the deed of absolute sale, it is also based on the gross selling price or fair market value at the time of the contract to sell. Applying this to the transaction between Fine Properties, Inc. (FPI) and Prime Asset Ventures, Inc. (PAVI), the BIR confirmed that since the agreement to purchase and sell was executed on June 24, 2021 and clearly structured as an installment sale (with less than 25% paid initially and the balance due in 2023), the CWT and DST should be computed based on the higher of the zonal or market value of the subject property at that date. The subsequent execution of the deed of absolute sale upon full payment merely consummates the sale, and the legal and tax consequences are deemed to have retroacted to the date of perfection of the contract. (BIR Ruling No. OT-028-2024, May 29, 2024)

The assignment of rights under a Contract to Sell, with no gain realized and no transfer of ownership, is not subject to CGT, EWT, VAT, or DST—except DST on notarial acknowledgment, with DST due upon execution of the Deed of Absolute Sale.

Pursuant to Section 24(D)(1) of the Tax Code and Revenue Regulations No. 02-98, as amended, capital gains tax (CGT) or expanded withholding tax (EWT) applies only when there is a realized gain from the sale, exchange, or assignment of real property interests. In this case, since the original buyer assigned its rights under a Contract to Sell before completing full payment and the amount paid by the assignee equaled the assignor’s payment to the original sellers, no gain was realized; hence, the assignment is not subject to CGT or EWT. Further, the assignment of rights is not considered a sale of real property and thus not subject to value-added tax (VAT). Likewise, under Section 196 of the Tax Code, documentary stamp tax (DST) does not apply to the assignment of rights as it is not a sale or conveyance of real property itself. However, the notarial acknowledgment of the Deed of Assignment is subject to a fixed DST of ₱30.00, and the eventual Deed of Absolute Sale executed by the assignee will trigger DST based on the original Contract to Sell’s terms. (BIR Ruling No. OT-029-2024, May 29, 2024)

Under RA No. 8047 and Section 109(1)(R) of the Tax Code, VAT exemption applies to sales and publication of qualified educational materials, but not to non-exempt services or purchases which remain subject to 12% VAT.

Under Section 12 of RA No. 8047 and Section 109(1)(R) of the Tax Code, sales, printing, or publication of books, newspapers, and other educational reading materials that are not principally devoted to paid advertisements and are compliant with National Book Development Board (NBDB) requirements are exempt from VAT. Applying these provisions, Inteligente Publishing, Inc., as a registered book publisher and seller under the NBDB, may claim VAT exemption for its core activities involving the sale and publication of qualified educational materials. However, activities not covered by the exemption—such as bookbinding, engraving, printing of brochures or trade books—are subject to 12% VAT, requiring the Company to register as a VAT-registered entity and issue separate VAT invoices for those transactions. Moreover, while its core sales may be VAT-exempt, its purchases of goods or services from VAT-registered suppliers remain subject to VAT since tax exemption does not prohibit the passing on of VAT to buyers under Section 107 of the Tax Code. (BIR Ruling No. VAT-030-2024, June 5, 2024)

Exemption from donor’s tax under RA 6657 is denied as the law covers only capital gains tax and the land remains agriculturally classified, lacking proof of reclassification.

Under Section 66 of Republic Act No. 6657, also known as the Comprehensive Agrarian Reform Law of 1988, land transfers made under the Act—such as those involving disturbance compensation arising from the lawful termination of tenancy due to land reclassification or conversion to non-agricultural use—are exempt from capital gains tax, registration fees, and related taxes and fees. However, the law does not expressly provide exemption from donor’s tax, and tax exemptions, being in derogation of sovereign power, must be strictly construed against the taxpayer. In the present case, while the transfer of a portion of land from BBB to the tenant was executed as disturbance compensation, there is no showing that the land has been officially reclassified or converted by competent authorities for residential, commercial, or industrial use as required under Section 36(1) of RA No. 3844, which remains applicable. All supporting documents submitted show that the land remains classified as agricultural in actual use. Therefore, in the absence of proof of reclassification or conversion and without a clear legal basis for donor’s tax exemption, the request cannot be granted, and the transaction remains subject to donor’s tax.(BIR Ruling No. OT-031-2024, June 5, 2024)

Insurance policies issued by GSIS to IPAs and their registered business enterprises are subject to DST (borne by the non-exempt party) and 12% VAT, unless the enterprise is under the 5% SCIT regime and the insurance—such as for assets or employees directly involved in the registered activity—is proven to be directly and exclusively used therein and certified by the concerned IPA for VAT zero-rating.

Insurance policies issued by the GSIS to Investment Promotion Agencies (IPAs) and their registered business enterprises (RBEs) are generally subject to both documentary stamp tax (DST) and value-added tax (VAT), unless otherwise expressly exempted by law. While the GSIS is exempt from DST under Section 39 of RA No. 8291, liability shifts to the other contracting party pursuant to Section 173 of the NIRC. IPAs are not exempt from DST or VAT, as the 5% special corporate income tax (SCIT) in lieu of all national and local taxes applies only to registered business enterprises, not to the IPAs themselves. For RBEs, those under the ITH regime are liable for DST, while those under the 5% SCIT regime are not, since the SCIT covers DST. As to VAT, registered export enterprises (REEs) may avail of the VAT zero-rating on local purchases (including insurance premiums) only if such purchases are directly and exclusively used in their registered project or activity, supported by a VAT zero-rating certificate issued by the concerned IPA, in accordance with RR No. 3-2023. Insurance related to assets or employees integral to the project may qualify for zero-rating, provided proper attribution is possible. Otherwise, or in the case of Domestic Market Enterprise, (DME) the purchase is subject to 12% VAT, which becomes part of the cost if the DME is under SCIT. Supporting documents such as the insurance policy, tax incentive registration status (ITH or SCIT), and the VAT zero-rating certificate must be submitted to avail of these tax benefits, subject to possible post-audit by the BIR. (BIR Ruling No. OT-032-2024, June 5, 2024)

The transfer of legal title to a new nominee-trustee of shares is not subject to CGT, donor’s tax, or DST, as there is no consideration or change in beneficial ownership.

Capital gains tax (CGT) and documentary stamp tax (DST) apply only where there is a sale, exchange, or transfer involving consideration or a change in beneficial ownership. DST applies only when there is an actual or constructive transfer of beneficial ownership. In this case, Nestlé Philippines, Inc. (NPI), the true and beneficial owner of a Manila Polo Club (MPC) membership share, merely transferred legal title from its former nominee BBB to new nominee CCC due to the end of BBB’s employment. The transfer was made under a Declaration of Trust confirming that CCC holds the share solely for NPI’s benefit, with no consideration and no transfer of beneficial ownership. As such, the transaction is not subject to CGT, donor’s tax (as there is no intent to donate), or DST. Only the notarization of the trust document is subject to DST under Section 185 of the Tax Code. (BIR Ruling No. OT-034-2024, September 4, 2024)

BIR DEADLINES FROM JUNE 9 TO MAY 18 2025. 

A gentle reminder on the following deadlines, as may be applicable:

 

BIR DEADLINES FROM JUNE 16 TO JUNE 20, 2025. 

A gentle reminder on the following deadlines, as may be applicable:

 

DATE	FILING/SUBMISSION
June 16, 2025	Estate Tax Amnesty
	Consolidated Return of All Transactions based on the Reconciled Data of Stockbrokers – June 1-15, 2025
June 20, 2025	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 1600 WP (Remittance Return of Percentage Tax on Winnings and Prizes Withheld by Race Track Operators) – eFPS & Non-eFPS Filers – Month of May 2025

 

 

COURT OF TAX APPEALS DECISIONS

A PETITION FILED WITH THE CTA DUE TO THE COMMISSIONER’S INACTION WITHIN 180-DAYS IS DISMISSIBLE FOR LACK OF JURISDICTION. In Nueva Ecija II Electric Cooperative, Inc. Area II v. Commissioner of Internal Revenue, G.R. No. 258101 (Notice), Apri119, 2022, the Supreme Court categorically held that no new or separate 180-day period is granted to the Commissioner of Internal Revenue (CIR) to act on the Administrative Appeal. The 180-day period is counted from the filing of protest to the Regional Director, not in the CIR’s administrative appeal. (CTA Case No. 10818, February 4, 2025)

AN ASSESSMENT IS VOID IF THE GROUP SUPERVISOR WHO RECOMMENDED THE NOTICE OF DISCREPANCY AND PRELIMINARY ASSESSMENT NOTICE IS NOT NAMED IN THE LETTER OF AUTHORITY; MEMORANDUM OF ASSIGNMENT CANNOT REPLACE A LOA. The issuance of a Letter of Authority (LOA) is a necessary prerequisite for the lawful examination of a taxpayer’s books and other accounting records by any Revenue Officer (RO). Without it, any resulting assessment is invalid. Furthermore, any reassignment or transfer of a case to another RO, as well as any revalidation of an expired LOA, must be accompanied by the issuance of a new LOA. In this case, although Group Supervisor Dominic Morales recommended the issuance of the Notice of Discrepancy and the Preliminary Assessment Notice, his name does not appear in any of the applicable LOAs—which list only Group Supervisors Ronaldo Camba and Constate Jr. Reinante. Consequently, the assessment is rendered void. (Helix Aggregates, Inc. (formerly Lafargeholcim Aggregates, Inc., v. CIR, CTA Case No. 10852, March 3, 2025); A Memorandum of Assignment cannot substitute a LOA is not valid and sufficient authority, even if the LOA was belatedly issued (Productivity Technologies Services, Inc. v. CIR, CTA Case No. 10873, March 7, 2025; Barrio Fiesta Manufacturing Corporation v. CIR, CTA Case no. 10213, MARCH 17, 2025)

ASSOCIATION DUES, MEMBERSHIP FEES, AND OTHER CHARGES COLLECTED BY HOMEOWNERS’ ASSOCIATIONS ARE NOT SUBJECT TO VALUE-ADDED TAX (VAT). This is because such collections do not constitute a sale of services as defined under Section 105 of the National Internal Revenue Code (NIRC), which outlines the transactions subject to VAT. There is no commercial activity involved that can be considered taxable under VAT laws. These fees are merely collected to cover expenses related to the maintenance, repair, improvement, reconstruction, and administrative operations necessary for the association to provide services to its members. Moreover, Revenue Memorandum Circular (RMC) No. 9-2013 is null and void to the extent that it seeks to impose VAT on these collections, as it contradicts the clear provisions of Section 105 of the NIRC. (Pasig Green Park Village Homeowners Association, Inc. v. CIR, CTA Case No. 10149, February 6, 2025)

FAILURE TO SPECIFY THE NEWLY DISCOVERED EVIDENCE OR ADDITIONAL EVIDENCE; FAILURE TO SUBMIT DOCUMENTS WITHIN 60 DAYS FROM FILING OF REQUEST FOR REINVESTIGATION; OR SUBMISSION BEYOND THE 60-DAY PERIOD –  RENDERS THE ASSESSMENT FINAL AND UNAPPEALABLE. Under Section 3 of Revenue Regulations No. 12-99, as amended by RR No. 18-2013, a taxpayer may administratively protest a tax assessment by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment, in the manner prescribed by the implementing rules. For a request for reinvestigation, all relevant supporting documents must be submitted within sixty (60) days from the date of filing the protest; otherwise, the assessment shall become final. Additionally, the request must specify any newly discovered or additional evidence the taxpayer intends to present. In the present case, although the petitioner timely filed a protest on November 15, 2018, requesting a reinvestigation of the assessment for taxable year 2015, it failed to submit the required supporting documents by January 14, 2019, and did not identify any new or additional evidence as mandated. Instead, the petitioner merely made a general reservation to submit further documents without actual compliance. As a result, the tax assessment became final and unappealable, and the petitioner’s subsequent appeal was deemed premature, depriving the Court of jurisdiction to hear the case. (Suburbia Automotive Ventures, Inc. v. CIR, CTA Case No. 10128, March 3, 2025) In another case, the petitioner filed its Request for Reinvestigation on May 16, 2019, giving it until July 15, 2019 to complete the submission of all relevant documents. However, it only submitted the necessary supporting documents on August 28, 2019—104 days after the request and 44 days beyond the deadline. This delay signified that the protest was not properly or timely substantiated, resulting in the tax assessment becoming final, executory, and unappealable. The petitioner’s reliance on previous court decisions was misplaced, as those cases involved taxpayers who had submitted what they considered to be complete documentation within the prescribed period. In contrast, the petitioner’s subsequent submission of documents after the deadline indicated that the initial filing was incomplete. Furthermore, the Court rejected the petitioner’s interpretation that the 60-day rule is without consequence, as this would effectively nullify the clear directive of Section 228 of the NIRC. Since vital supporting documents—such as VAT invoices and official receipts—were only submitted after the lapse of the period, the protest lacked factual and legal basis within the required timeframe, rendering the request for reinvestigation invalid and the assessment final.(My Solid Technologies & Devices Corporation v. CIR, CTA Case no. 10293, February 6, 2025)

REVENUE REGULATIONS

Revenue Regulations No. 9-2025

Implementing the provisions of Republic Act No. 12066 (CREATE MORE Act) concerning the tax treatment of local sales of goods and/or services by Registered Business Enterprises (RBEs). It clarifies the application of Value-Added Tax (VAT) to such transactions.

VAT Rate on Local Sales	All local sales of goods and/or services by RBEs are subject to 12% VAT, unless exempt or zero-rated. Local sales shall include sales of goods and services to domestic market enterprises and non-RBEs, regardless of location.
Income Tax Regime Impact	The applicable income tax regime (e.g., Income Tax Holiday, 5% Gross Income Earned, Special Corporate Income Tax, Enhanced Deduction Regime, or Regular Corporate Income Tax) does not affect the VAT treatment of local sales.
Location of Sales	The location of the RBE or the transaction (inside or outside ecozones, freeports, or customs territory) is not a determining factor for VAT applicability on local sales.
Liability to Pay and Remit VAT.	Rests with the buyer of the goods or services.
Buyer’s VAT Status	Business-to-Business (B2B): VAT-registered buyers can claim input VAT on purchases from RBEs. ·         RBE-seller to bill the transaction inclusive of the VAT, which is shown as a separate item in the invoice that will be tagged as “VAT on Local Sales.” (not to be included in the total amount due from the buyer); buyer to pay the purchase price to the RBE- seller, exclusive of VAT on local sales. ·         Buyer of the goods or services to and remit the corresponding VAT from the transaction. Filing and payment of VAT ·         Re. Goods from ECOZONES and Freeport – on a per transaction basis; BIR Form No. 0605 (in the meantime) to be transmitted to RBE-Seller for the release of the goods. ·         Re. Services from ECOZONES and Freeport – on a monthly basis; BIR Form No. 1600-VT; to be filed on or before 10th day; buyer to issue withholding VAT Certificate (2307) to the RBE-Seller ·         Re. Goods and Services from BOI-Registered Enterprise – on a monthly basis; BIR Form No. 1600-VT; to be filed on or before 10th day; buyer to issue withholding VAT Certificate (2307) to the RBE-Seller
	Business-to-Consumer (B2C): Non-VAT registered buyers cannot claim input VAT. ·         Imposing payment and remittance is not administratively feasible; buyer/consumer will still pay the VAT due on the transaction, but the RBE-Seller will be responsible for remitting it to the government. ·         The seller shall be responsible in remitting the VAT on local sales it charged to its buyers that are not engaged in business.
	Government agencies purchasing goods and/or services from RBEs must withhold 12% VAT on payments. |
Requirements to Claim of Input Tax by VAT-Registered Buyers	Sales Invoice issued by the RBE showing the amount of VAT on local sales; and Copy of the corresponding duly-filed BIR Form No. 1600VT or BIR Form No. 0605, whichever is applicable.
Optional VAT registration on local sales	If the RBE is under the 5% GIE or SCIT and all registered activities fall under the same income tax regime This will not affect the RBE’s existing fiscal and non-fiscal incentives, including VAT zero-rating on local purchases and VAT exemption on importation that are directly attributable to the RBE’s registered activity.

Revenue Regulations No. 10-2025

Amends the Consolidated VAT Regulations (RR No. 16-2005) to implement provisions of the National Internal Revenue Code (Tax Code) as amended by Republic Act No. 12066. These amendments focus on Value-Added Tax (VAT) zero-rating and refund procedures, particularly concerning export-oriented enterprises.

Export Sales Threshold	At least 70% of the enterprise’s total annual production in the preceding taxable year must be exported.
Certification Requirement	Must obtain a certification from the Export Management Bureau (EMB) of the Department of Trade and Industry (DTI) confirming compliance with the export sales threshold.
Post-Audit Compliance	EMB may conduct post-audits to verify continued compliance with the export sales threshold.
Streamlining VAT Refund Claims	Taxpayers may submit certified true copies of supporting documents (e.g., invoices, receipts) for VAT refund claims instead of original documents.
Request for Reconsideration and appeal to the CTA	In case of partial or full denial of a VAT refund claim, taxpayers must file a request for reconsideration within 15 days of receiving the decision.   In case of full or partial denial of the request for reconsideration, or failure on the part of the CIR to act on the application for refund or request for reconsideration within the periods prescribed above, the taxpayer affected may appeal with the CTA within thirty (30) days: i.      after the expiration of the ninety (90)-day period to decide on the application for refund, in cases where no action is made by the CIR on the application for refund; or ii.     from the receipt of the decision denying the request for reconsideration; or iii.    after the lapse of the fifteen (15)-day period to decide on the request for reconsideration in cases where no action is made by the CIR on the request for reconsideration. When no decision is rendered within the 90-day period or the 15- day period, as the case may be, and the taxpayer-claimant opted to  seek for a judicial remedy within thirty (30) days from such period, the administrative claim for refund or the request for reconsideration shall be considered moot and shall no longer be processed.
Refund in case of cancellation of VAT registration (retirement or change in status)	2 year from the date of cancellation (issuance of BIR Tax Clearance)

Revenue Regulations No. 11

Implements provisions of the National Internal Revenue Code (Tax Code) as amended by Republic Act No. 12066, also known as the CREATE MORE Act.These regulations focus on enhancing tax compliance through the mandatory use of electronic invoicing and electronic sales reporting systems.

Mandatory Electronic Invoicing Requirement	Taxpayers engaged in E-commerce, under the jurisdiction of LTS, large taxpayers, using CAS/CBA, exporters, RBEs availing tax incentives, and using POS systems
Exemption	Micro taxpayers under the Ease of Paying Taxes (EoPT) Act (can voluntarily issue electronic invoices)
Electronic Sales Reporting Requirement	Applicable once BIR establishes system to store and process data, including e-commerce, LTS taxpayers, large taxpayers, exporters, RBEs, POS system users, etc.
Deductions for Compliance	Micro and Small Taxpayers: 100% of setup cost; Medium and Large Taxpayers: 50% of setup cost
Claiming Deductions	Deductions can be claimed only once within the taxable year when system setup is completed or final payment is made
Effective Date	March 14, 2025
Deadline for Compliance	March 14, 2026

Revenue Regulations No. 12

Amends Section 5 of Revenue Regulations No. 3-69 to enhance due process in the service and execution of summary remedies, particularly concerning the Warrant of Distraint and/or Levy (WDL).

Individual Taxpayers	– Serve personally to delinquent taxpayer, authorized representative, or a household member (legal age, sufficient discretion).- If refusal or absence, constructive service allowed with two credible witnesses (preferably barangay officials) who are not BIR employees. – Duplicate copy left at taxpayer’s premises, and a copy sent via registered mail/e-mail.
Corporate Taxpayers	– Serve to the president, vice president, manager, treasurer, comptroller, or any responsible person who customarily receives correspondence for the corporation.
Taxpayers Reported as “Cannot Be Located” (CBL)	– If the taxpayer resurfaces or their whereabouts are known, WDL and related notices (e.g., Warrants of Garnishment, Notice of Levy, Notice of Tax Lien, Notice of Encumbrance) are served simultaneously.
Effectivity	– Amendments took effect immediately upon publication on the BIR Official Website on March 6, 2025.

Revenue Memorandum Circular No. 14-2025

Provides clarifications and updates to the mandatory requirements for claiming tax credit certificates or cash refunds of excess/unutilized Creditable Withholding Tax (CWT) on income.These updates amend certain provisions of RMC No. 75-2024 to align with Sections 76(C), 204(C), and 229 of the National Internal Revenue Code (NIRC) of 1997, as amended.

Document Submission	Taxpayers can submit scanned, facsimile, photocopy, notarized, or certified true copies of BIR Form No. 2307 (Certificate of Creditable Tax Withheld) and BIR Form No. 1606 (Withholding Tax Remittance Return).
	Authenticity verified by cross-referencing with SAWT and Alphalist of payees. Included in the verification procedures of the processing office is the validation of the authenticity and veracity of the claimed BIR Form No. 2307 by comparing the CWT claimed per Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax at Source (SAWT) submitted by the taxpayer claimant with the annual or quarterly Alphalist of payees as attached in the BIR Form No. 1604E or 1601E submitted by the withholding agents of the taxpayer-claimant. If the data matches, the BIR can already be assured that the BIR Form 2307 claimed by the taxpayer-claimant is valid and authentic which makes the question as to whether or not the submitted document is an original copy already moot and academic
Taxpayer Types Clarification	Section 76(C) of the Tax Code applies to corporate taxpayers.
	Individual taxpayers should base claims on Section 58(E) in relation to Section 204 of the Tax Code.
Filing Tax Returns After Claim	Taxpayers cannot amend tax returns after filing a claim for income tax credit or refund.
	Only tax returns filed before the application will be considered in the claim evaluation.
Changes in Documentary Requirements	Annex “A.1” of RMC No. 75-2024 renumbered as Annex “A.1.1.”
	New Annex “A.1.2” added for mandatory individual taxpayer-claimant requirements.
	Amendments made to Annexes “A.1,” “A.2,” and “A.4” of RMC No. 75-2024.
Effectivity	Amendments took effect immediately on February 19, 2025, upon publication on the BIR website.

Memorandum Circular No. 20-2025

Provides clarifications on the policies, guidelines, and procedures for processing and issuing the Tax Clearance Certificate for Final Settlement of Government Contracts (TCFG)

Coverage of TCFG Requirement	Required for government contracts involving any procurement via public bidding process (RA No. 12009); and procurement of goods, consulting services, and infrastructure projects (RA No. 9184, amended by RA No. 12009). Exempt for small value purchase contracts.
Definition of TCFG	TCFG is a certificate contractors must obtain before the final settlement of government contracts, confirming tax compliance. – TCFG needed only before the final (e.g., 10th) settlement in contracts with multiple installments.
Exemption from TCGP	Contractors are not required to secure a Tax Clearance Certificate for General Purposes (TCGP) for collection purposes when applying for the TCFG (in line with RA No. 11032).
Effectivity	The circular took effect immediately upon publication on the BIR Official Website on March 20, 2025.

BIR RULINGS

CASH DISTRIBUTIONS FROM PHILIPPINE DEPOSITARY RECEIPTS (PDRS) TO A NONRESIDENT FOREIGN CORPORATION ARE TAXED AS INTEREST AND NOT AS DIVIDENDS SINCE PDRS DO NOT CONFER STOCK OWNERSHIP. Under Section 28(B)(5)(b) of the Tax Code, dividends paid by a domestic corporation to a nonresident foreign corporation (NRFC) are subject to a 15% income tax, provided the NRFC’s country of residence grants a tax credit for taxes deemed paid in the Philippines equivalent to that 15%. In the case of Mercury Media Holdings Finance I, Ltd. (Mercury Media), an NRFC, the cash distribution it received from Philippine Depositary Receipts (PDRs) issued by ABS-CBN Holdings Corporation over ABS-CBN Corporation shares is not considered a dividend. As a media entity, ABS-CBN cannot be owned by foreigners, and Mercury Media, being a foreign corporation, cannot be a stockholder. Moreover, PDRs do not represent ownership of shares. Accordingly, the cash distribution is not a dividend subject to the reduced 15% rate but is treated as interest income subject to the regular 30% tax rate. (BIR Ruling No. OT-006-2024, January 24, 2024; see also BIR Ruling No. OT-007 and 009)

THE TRANSFER OF MEMBERSHIP SHARES TO A NEW NOMINEE-TRUSTEE IS NOT SUBJECT TO CAPITAL GAINS TAX, DONOR’S TAX, OR DOCUMENTARY STAMP TAX AS IT INVOLVES NO MONETARY CONSIDERATION, NO CHANGE IN BENEFICIAL OWNERSHIP, AND NO INTENT TO DONATE. Landbank of the Philippines (LBP) transferred its Manila Polo Club, Inc. (MPC) membership shares from its former nominee-trustee to a new nominee-trustee pursuant to a Declaration of Trust. This transaction is exempt from capital gains tax because it involves no monetary consideration and no change in beneficial ownership. It is also not subject to donor’s tax, as a valid donation requires intent to freely give, which LBP lacks given the business nature of the transfer. Additionally, documentary stamp tax does not apply since there is no actual transfer or conveyance of beneficial ownership of the shares. (BIR Ruling No. OT-008-2024, February 21, 2024; see also BIR Ruling No. OT-010-2024, February 22, 2024)

A TAXPAYER MUST CONSISTENTLY USE THE SAME INVENTORY VALUATION METHOD UNLESS A CHANGE IS APPROVED BY THE COMMISSIONER, PROVIDED THE NEW METHOD FOLLOWS BEST ACCOUNTING PRACTICES AND CLEARLY REFLECTS INCOME. Under Section 41 of the 1997 NIRC, once a taxpayer adopts a specific inventory valuation method for a taxable year, that method must be used in all subsequent years unless the Commissioner authorizes a change. The chosen method must align with the best accounting practices in the industry and accurately reflect income. In this case, Netfarms, Inc. was permitted to switch from the FIFO method to the Moving Average Method due to its new computerized accounting system, as this change complies with sound accounting standards and clearly presents the company’s income. Inventory items include agricultural and construction supplies, spare parts, fuel, lubricants, office supplies, and others (BIR Ruling No. OT-011-2024, February 22, 2024).

REAL PROPERTIES ACQUIRED BY A REAL ESTATE DEALER ARE CLASSIFIED AS ORDINARY ASSETS AND SUBJECT TO APPLICABLE TAXES, EVEN IF THEY DO NOT MEET THE TYPICAL DEFINITIONS OF ORDINARY ASSETS. Ordinary assets include: (1) stock in trade or similar inventory at year-end; (2) real property held primarily for sale in the ordinary course of business; (3) real property used in business subject to depreciation under Section 34(F) of the Tax Code; and (4) other real property used in the taxpayer’s trade or business. According to Section 3(a)(1) of RR No. 07-03, all real properties acquired by a real estate dealer are considered ordinary assets. Although the properties are not inventory, not primarily held for sale, not depreciable, nor used in business, the taxpayer’s engagement in the real estate business—including activities such as purchasing, owning, leasing, and selling properties—classifies all its real properties as ordinary assets. Consequently, sales of these properties are subject to Creditable Withholding Tax (CWT), Documentary Stamp Tax (DST), and Value-Added Tax (VAT) (BIR Ruling No. OT-012-2024, February 22, 2024).

UNIVERSAL CHARGE FOR MISSIONARY ELECTRIFICATION (UCME) COLLECTED BY DISTRIBUTION UTILITIES IS NOT  AN INCOME AND NOT SUBJECT TO VAT, WHILE PAYMENTS FROM THE UCME FUND TO NEW POWER PROVIDERS ARE ZERO-RATED FOR VAT UNLESS THE PROVIDERS ARE VAT-EXEMPT ELECTRIC COOPERATIVES. The BIR, in BIR Ruling No. 020-02, March 13, 2022, held that Universal Charge for Missionary Electrification (UCME) to be collected by the distribution utilities do not belong to PSALM and since they would not redound to its benefit, the same would not be considered an income. The UCME subsidy fund collected by the distribution utilities and/or electric cooperatives from its consumers, are eventually remitted in trust to PSAM for transfer to NPC and cannot be considered as part of their gross receipts. Thus, the same is not subject to VAT. On the part of the New Power Providers (NPPs)/ Qualified Third Parties (QTPs) who take over the generation function of NPC in the remote and unviable areas in the off-grid under Alternative Electric Service for Isolated Villages scheme, such payment to NPPS/QTPs from UCME fund for merchant electrification is subject to zero-rated VAT pursuant to Section 6 of RA No. 9136, unless such NPPs/QTPs are registered with the Cooperative Development Authority and considered as electric cooperatives enjoying VAT-exempt privilege pursuant to RA No. 9520. (BIR Ruling No. OT-013-2024, February 22, 2024)

VAT ZERO-RATING ON LOCAL PURCHASES UNDER THE CREATE LAW APPLIES ONLY TO GOODS AND SERVICES EXCLUSIVELY USED IN REGISTERED EXPORT PROJECTS; NON-EXPORT ENTERPRISES ARE SUBJECT TO REGULAR VAT. Section 5, Rule 18 of the amended Implementing Rules and Regulations of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Law) states that VAT zero-rating on local purchases applies solely to goods and services directly attributable to and exclusively used in the registered project or activity of registered export enterprises during the transitory period. Although registered export enterprises (REEs) may still avail of VAT zero-rating, it is limited to qualifying goods and services. Since Baliwag State University, despite being registered with PEZA as developer/operator for an Information Technology Park, is a non-export enterprise, payments for its construction project are subject to the regular 12% VAT. (BIR Ruling No. OT-014-2024, February 22, 2024).

BIR DEADLINES FROM MAY 26 TO JUNE 1, 2025. A gentle reminder on the following deadlines, as may be applicable:

DATE	FILING/SUBMISSION
May 30, 2025	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) or Manually –  Fiscal Year ending January 31, 2025
	SUBMISSION – Soft copies of Inventory Lists and Schedules stored and saved in DVD-R/USB properly labeled together with Notarized Sworn Declaration – Fiscal Year ending April 30, 2025
	e-SUBMISSION – Quarterly Summary List of Sales/Purchases/Importations by a VAT Registered Taxpayers – eFPS Filers – Fiscal Quarter ending April 30, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 1702Q (Quarterly Income Tax Return For Corporations, Partnerships and Other Non-Individual Taxpayers) and Summary Alphalist of Withholding Taxes (SAWT) – For the Quarter ending March 31, 2025
	ONLINE REGISTRATION (thru ORUS) – Computerized Books of Accounts and Other Accounting Records – Fiscal Year ending April 30, 2025
June 1, 2025	SUBMISSION – Consolidated Returns of All Transactions based on the Reconciled Data of the Stockbrokers.  May 16–31, 2025
	SUBMISSION – Engagement Letters and Renewals or Subsequent Agreements for Financial Audit by Independent CPAs.  Fiscal Year beginning August 1, 2025