August 12, 2026 Tax Updates

COURT OF TAX APPEALS DECISIONS

REASONS FOR DISALLOWANCE OF CWT. A taxpayer is entitled to a refund of excess Creditable Withholding Taxes (CWT) if, among others, the income payments subject of the CWTs are declared as part of the taxpayer’s gross income in its annual ITR and the fact of withholding is established through duly issued BIR Form No. 2307, without requiring proof of the withholding agent’s actual remittance or the submission of a SAWT. Here, while the taxpayer substantiated most of its claimed CWTs through valid BIR Forms 2307, the Court disallowed some CWT due to defective withholding certificates and further denied CWT corresponding to income payments that were not sufficiently proven to have been reported as part of gross income. Reasons for the disallowance: variance between sales invoice and schedule; unreadable invoice; cancelled sales invoice, untraced payment file; incorrect TIN of the taxpayer; the TIN of the Head Office was indicated but the address is the Branch Office; Incomplete address of the taxpayer; BIR Forms 2307 were dated outside of the claimed period; variance in the amount of CWT per BIR Form 2307 versus per books; CWT not within the period of claim; no signature of the payor-issuer/authorized representative; with alteration on taxpayer’s name without counter signature, alteration on the taxpayer’s TIN without counter signature; income payments not traced to the GL/supporting documents [Watsons Personal Care Stores (Philippines), Inc. v. CIR, CTA Case No. 10883, November 26, 2025; Watsons Personal Care Stores (Philippines), Inc., CTA Case No. 10504, February 16, 2026; see also Sonic Sales & Distribution, Inc. v. CIR, CTA Case No. 10888, February 18, 2026]

OSG’S RECEIPT OF THE RESOLUTION, NOT BIR’S, IS THE RECKONING PERIOD TO APPEAL TO THE CTA EN BANC. An aggrieved party may appeal a CTA Division decision or resolution on a motion for reconsideration or new trial to the Court En Banc within 15 days from receipt thereof, while the Administrative Code vests in the Office of the Solicitor General (OSG) the authority and duty to represent the government in appellate proceedings, with deputized government lawyers remaining under its supervision and control. Service upon the deputized counsel or BIR Legal Division is insufficient; the OSG, as principal counsel, must receive the decision and has the authority to determine whether an appeal should be taken. In this case, although the BIR received the assailed Resolution in December, the OSG received it only in January the following year, while the BIR filed the Petition for Review in December, before the OSG had even received the Resolution. There was also no evidence that the BIR had been duly authorized by the OSG to file the appeal. Thus, the petition lacked the requisite OSG authority, and the 15-day appeal period could not be reckoned from the BIR’s receipt of the Resolution. Consequently, the appeal was not properly perfected, causing the assailed Resolution to attain finality (CIR v. MSCI Hongkong Limited, CTA EB No. 3047, CTA Case No. 10474, February 19, 2026)

A DUPLICATE COPY, INCLUDING A PHOTOCOPY, OF A DOCUMENT IS ADMISSIBLE TO THE SAME EXTENT AS AN ORIGINAL UNLESS (1) A GENUINE QUESTION IS RAISED AS TO THE AUTHENTICITY OF THE ORIGINAL, OR (2) IT WOULD BE UNJUST OR INEQUITABLE TO ADMIT THE DUPLICATE IN LIEU OF THE ORIGINAL; DISSENTING OPINION Consistent with Lastimosa Case, a photocopy of a paper-based document qualifies as a duplicate, abandoning the former distinction between electronic and paper-based documents. Applying this rule, the Court En Banc held that certain exhibits, which the Court in Division had excluded solely because the taxpayer failed to present the originals for comparison, should be admitted because the BIR did not question their authenticity and there was no showing that admitting the photocopies would be unjust or inequitable. Although the taxpayer failed to timely seek reconsideration of the earlier exclusion, the Court relaxed the procedural rules in the interest of substantial justice, consistent with the principle that procedural rules are meant to facilitate, rather than defeat, the just resolution of cases. Accordingly, the Court admitted the photocopied exhibits as duplicates under the amended Rules on Evidence. Dissenting Opinion: original documents should have been presented under the CTA rules; party should sufficiently explain the unavailability of the originals; taxpayer did not seek reconsideration of the CTA in Division’s resolution excluding the documentary exhibits; there was no proper tender of excluded evidence; strict application of law under tax refund cases [Schaeffler Philippines Inc. v. Commissioner of Internal Revenue, CTA EB No. 2947 (CTA Case No. 10358), February 20, 2026]

THE ABSENCE OF A SEPARATELY PROMINENT IMPRINT OF “ZERO-RATED SALE” DID NOT AUTOMATICALLY NEGATE THE ZERO-RATED CHARACTER OF THE TRANSACTIONS. A VAT invoice must prominently indicate “zero-rated sale,” while invoices covering mixed transactions must clearly show the breakdown of taxable, exempt, and zero-rated components; however, substantial compliance with these invoicing requirements may suffice when the invoice itself clearly identifies the amount as pertaining to zero-rated sales. In this case, although the Court in Division denied the taxpayer’s refund claim because the phrase “zero-rated sale” was not separately and prominently imprinted on the invoice/OR, the Court En Banc held that the invoices contained a detailed breakdown expressly identifying the sales amount under “Zero Rated Sales,” which sufficiently disclosed both the nature and monetary value of the transactions. The Court found that this presentation substantially complied with the invoicing requirement because there could be no other reasonable conclusion than that the stated amount pertained to zero-rated sales, and the clients’ PEZA registrations further established that the sales were indeed subject to zero percent VAT [Schaeffler Philippines Inc. v. Commissioner of Internal Revenue, CTA EB No. 2947 (CTA Case No. 10358), February 20, 2026; Commissioner of Internal Revenue v. MSCI Hong Kong Limited, CTA EB No. 2939 (CTA Case No. 9884), November 9, 2025]

REVENUE ISSUANCES

RMC No. 89-2026, August 10, 2026

The BIR provides extension of the deadlines for the filing of tax returns and payment of corresponding taxes due thereon, including submission of required documents for taxpayers within the jurisdiction of Revenue District Offices of the BIR that were affected by the continued heavy rainfall brought about by southwest monsoon.

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