August 20, 2026 Tax Updates

COURT OF TAX APPEALS (CTA) DECISIONS

TAXPAYER CANNOT CLAIM REFUND FOR VAT ERRONEOUSLY PASSED ON BY SUPPLIERS ON ZERO-RATED PURCHASES; THE PROPER REMEDY IS REIMBURSEMENT FROM THE SUPPLIERS. A taxpayer that is entitled to zero-rated purchases is not the proper party to claim a refund of VAT erroneously passed on by its suppliers; the buyer’s remedy is to seek reimbursement from the supplier. Applying these principles, even assuming that taxpayer’s purchases from renewable energy suppliers were zero-rated, the VAT allegedly shifted to the taxpayer should not have been charged in the first place; the taxpayer therefore cannot recover the erroneously passed-on VAT through a Section 112 refund claim merely because it bore the economic burden. The Supreme Court held that the proper recourse of a buyer mistakenly charged VAT on zero-rated purchases is against its supplier and the same principle extends to  renewable energy developers. Thus, the Court held that the taxpayer was not the proper party to claim a refund of the input VAT erroneously passed on by its suppliers, without prejudice to its right to seek reimbursement from them. [Pure Essence International, Inc. v. Commissioner of Internal Revenue, CTA EB No. 3023 (CTA Case No. 10411), February 27, 2026]

THE INCENTIVES GRANTED TO RE DEVELOPERS EXPRESSLY COVER BOTH POWER AND NON-POWER APPLICATIONS; INPUT VAT RELATED TO NON-POWER APPLICATION CANNOT BE VALIDLY SUBJECT OF INPUT VAT REFUND. The law (third paragraph) provides zero-rated VAT on local purchases of goods, properties, and services needed for the whole process of exploring and developing renewable energy sources up to their conversion into power. The Court held that the third paragraph does not distinguish between power and non-power applications: the phrase “whole process of exploring and developing renewable energy sources” sufficiently covers non-power applications, while the succeeding phrase “up to its conversion into power” merely extends the coverage to power applications and does not exclude non-power RE developers. Since petitioner was accredited by the DOE as a biomass RE developer for non-power application, specifically a biofuel manufacturer producing biodiesel/Coconut Methyl Ester, its purchases falling within the statutory coverage were entitled to VAT zero-rating. Accordingly, the input VAT pertaining to purchases entitled to zero-rating should be disallowed from the taxpayer’s VAT refund claim. [Pure Essence International, Inc. v. Commissioner of Internal Revenue, CTA EB No. 3023 (CTA Case No. 10411), February 27, 2026]

INPUT VAT ON CAPITAL GOODS EXCEEDING PHP MILLION MUST BE PROPERLY SUBSTANTIATED BY INVOICE AND AMORTIZATION SCHEDULE; PRIOR YEAR INPUT VAT RETURN IS NOT SUFFICIENT. Input VAT on capital goods with an aggregate acquisition cost exceeding Php1 million may be spread over 60 months or the capital goods’ estimated useful life, whichever is shorter, but the taxpayer must properly substantiate the capital-goods purchases and the corresponding amortization; supporting documents are necessary to establish the nature of the purchases as capital goods and to verify the proper amortization of the input VAT. Applying this rule, although the taxpayer claimed that the deferred input VAT carried over from CY 2017 was supported by its Q4 CY 2017 VAT return and that it represented the remaining amortized input tax, the taxpayer failed to present the underlying documents establishing the capital-goods purchases and the correctness of the amortization computation; even its independent CPA reported that the supporting documents for the capital-goods input taxes deferred and amortized in CY 2018 had not been provided. Thus, the mere appearance of the amount in the prior-period VAT return was insufficient substantiation, and the Court properly disallowed the deferred input VAT from the refund claim. [Pure Essence International, Inc. v. Commissioner of Internal Revenue, CTA EB No. 3023 (CTA Case No. 10411), February 27, 2026]

INPUT VAT MAY BE SUPPORTED BY PHOTOCOPIES. A duplicate, including a photocopy, is admissible to the same extent as an original unless a genuine question is raised regarding the authenticity of the original or admission of the duplicate would be unjust or inequitable. The Supreme Court recognized that a photocopy falls within the definition of a duplicate and is therefore admissible as an original. Applying this rule, the Court held that the input VAT supported by photocopies of sales invoices and official receipts should not have been disallowed, since the BIR did not question the authenticity of the originals nor establish that admitting the photocopies would be unjust or inequitable. Accordingly, the disallowance was reversed and the amount was added back to the taxpayer’s valid input VAT for CY 2018. [Pure Essence International, Inc. v. Commissioner of Internal Revenue, CTA EB No. 3023 (CTA Case No. 10411), February 27, 2026]

A VAT-REGISTERED TAXPAYER CLAIMING INPUT VAT ATTRIBUTABLE TO ZERO-RATED SALES HAS TWO ALTERNATIVE OPTIONS: (1) CHARGE THE INPUT VAT AGAINST OUTPUT VAT FROM REGULAR 12% VATABLE SALES AND CLAIM A REFUND ONLY OF ANY RESULTING EXCESS INPUT VAT, OR (2) CLAIM THE ENTIRE INPUT VAT ATTRIBUTABLE TO ZERO-RATED SALES FOR REFUND OR TAX CREDIT. The Court cannot impose the first method when the taxpayer chose the second. In this case, however, the Court found that the taxpayer original Petition for Review and its own computation showed that it chose the first option, as it first allocated input VAT to VATable sales and determined whether such input VAT exceeded its declared output VAT before arriving at the refundable amount. Thus, the Court in Division properly charged the substantiated input VAT against petitioner’s output VAT. The Court En Banc determined valid input VAT, of which an amount was allocated to VATable sales, leaving  output VAT still due; the remaining input VAT allocated to zero-rated sales was likewise insufficient to produce any excess input VAT refundable to petitioner. Accordingly, despite the adjustment recognizing the photocopied supporting documents, the taxpayer still had no excess input VAT for refund and failed to satisfy the requisites under Section 112. [Pure Essence International, Inc. v. Commissioner of Internal Revenue, CTA EB No. 3023 (CTA Case No. 10411), February 27, 2026]

INVOICE ISSUED PRIOR TO DATE OF ATP CANNOT VALIDLY SUBSTANTIATE INPUT VAT; ANTE-DATING IS NOT ALLOWED. Taxpayers are required to issue a duly registered invoice at the point of each sale, and the supporting invoice must be covered by a valid and subsisting Authority to Print (ATP) applicable to the date of the transaction. Applying this rule, the Court rejected the taxpayer’s argument that the subject document remained valid merely because they were eventually registered with the BIR under an ATP dated earlier than ATP date, and that the NIRC does not expressly prohibit antedating. The Court clarified that antedating itself was not the decisive issue; rather, the receipts (now invoice) were disallowed because they were not duly registered receipts at the point of each sale, constituting non-compliance with the invoicing and substantiation requirements. The official receipts (now invoice) covering transactions dated earlier should have been supported by an ATP valid and subsisting on those dates, but the receipts (now invoice) bore serial numbers outside the range authorized by  a later ATP. Consequently, the receipts could not substantiate the claimed input VAT. [Mastercard Transaction Services (Philippines) Inc. v. Commissioner of Internal Revenue, CTA EB Nos. 3062 & 3066 (CTA Case No. 10628), March 18, 2026]

AN EXPORT SALE IS SUBJECT TO ZERO PERCENT VAT ONLY WHEN THE SALE IS MADE BY A VAT-REGISTERED PERSON, THERE IS AN ACTUAL SALE AND SHIPMENT OF GOODS FROM THE PHILIPPINES TO A FOREIGN COUNTRY, AND THE SALE IS PAID FOR IN ACCEPTABLE FOREIGN CURRENCY AND ACCOUNTED FOR IN ACCORDANCE WITH BSP RULES. The taxpayer bears the burden of strictly proving both the factual basis of its zero-rated sales and compliance with the statutory and documentary requirements, since a VAT refund is in the nature of a tax exemption; moreover, a CTA case is litigated de novo, and the judicial claim must be established by the evidence formally presented before the CTA. Applying these rules, the taxpayer failed to prove that its reported sales actually qualified for VAT zero-rating. The Court found that some of reported sales had no valid VAT zero-rated sales invoices or lacked corresponding bills of lading and/or export declarations; or bills of lading that were inadmissible, missing from the records, did not correspond with the exhibits offered, or were illegible. The taxpayer likewise failed to establish the third requirement because its inward remittance certifications and bank transaction reports did not correspond with the amounts stated in the sales invoices; its explanations that the discrepancies resulted from advance payments, prior-period receivables, or the practice of splitting or consolidating invoice amounts were merely bare assertions unsupported by sales invoices, official receipts, bank credit advices, or reconciliation schedules. Because the taxpayer failed to first establish the existence of valid zero-rated sales to which the claimed unutilized input VAT could be attributed, the Court found it unnecessary to examine the remaining requisites for the refund. [Agri Exim Global Philippines, Inc. v. CIR, CTA EB No.3075, CTA Case No. 10621, March 24, 2026]

WHERE THE TAXPAYER IMPORTED JET A-1 FUEL AND SUBSEQUENTLY SOLD IT TO QUALIFIED INTERNATIONAL CARRIERS FOR USE OUTSIDE THE PHILIPPINES, THE FUEL BECAME EXEMPT. Under the applicable provisions on excise tax and tax exemption of petroleum products sold to international carriers, excise tax is an indirect tax imposed on the article itself, with the statutory liability attaching to the importer or manufacturer, while the economic burden may be passed on to the buyer; hence, the buyer is not the statutory taxpayer entitled to claim the exemption. Applying this rule, the Court held that the international carriers that purchased the Jet A-1 fuel merely bore the economic burden of the excise tax, while the taxpayer, as the importer and statutory taxpayer, was the proper party to claim the exemption and refund. Although the excise tax became due upon importation, the subsequent sale of the Jet A-1 fuel to qualified international carriers for use and consumption outside the Philippines rendered the petroleum products exempt, resulting in the excise taxes previously paid being erroneously or illegally collected and therefore refundable. The taxpayer sufficiently proved through competent evidence that it imported the Jet A-1 fuel and subsequently sold it to international carriers; thus, the CTA in Division correctly granted the refund. [(CIR v. Pilipinas Shell Petroleum Corporation, CTA EB No. 3027, CTA Case NO. 10352, March 11, 2026)]

UNDER THE 2-YEAR PRESCRIPTIVE PERIOD FOR TAX REFUNDS, THE PERIOD RUNS FROM PAYMENT OF THE ERRONEOUSLY OR ILLEGALLY COLLECTED TAX; THUS, BECAUSE THE TAXPAYER IMPROPERLY RECOGNIZED DEFERRED SUBSCRIPTION REVENUE IN 2017 AND PAID THE CORRESPONDING INCOME TAX IN APRIL 2018, ITS REFUND CLAIMS FILED ONLY IN APRIL AND MAY 2021 WERE PRESCRIBED; WITH DISSENTING OPINION. Both the administrative and judicial claims for refund of erroneously or illegally collected taxes must be filed within  2 years from the date of payment of the tax, with timely filing being mandatory and jurisdictional; applying these provisions, the Court En Banc held that the erroneous payment arose not in CY 2018 but in CY 2017, when the taxpayer improperly included Php200M of deferred subscription revenue, collected but not yet earned, in its 2017 taxable income and paid the corresponding income tax in April 2018. Since the taxpayer uses the accrual method, income should be recognized when earned, and the deferred subscription revenue was properly earned only in 2018; thus, the two-year period commenced in April 2018 and, considering the applicable COVID-19 extensions, taxpayer had only until June 2020 to file its claims. However, the taxpayer filed its administrative claim only in April 2021 and its judicial claim in May 2021, both beyond the prescriptive period, depriving the CTA of jurisdiction and requiring dismissal of the refund case. Dissenting Opinion: The two-year prescriptive period should be reckoned from its 2018 income tax payment, not from 2017 when the taxpayer reported the cash deposits or advances as income when received in 2017 in compliance with RMC No. 16-2013; the Court should respect the accounting method adopted by the taxpayer [SAS Institute (Philippines) Inc. v. Commissioner of Internal Revenue & Commissioner of Internal Revenue v. SAS Institute (Philippines) Inc., CTA EB Nos. 2991 & 2994 (CTA Case No. 10537), March 4, 2026.]

REVENUE ISSUANCES

RMC No. 95-2026, August 14, 2026

The BIR provides extension of the deadlines for the filing of tax returns of corresponding taxes due thereon, including submission of required documents for taxpayers due to unavailability of eBIR forms offline package

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

BIR DEADLINES FROM AUGUST 10, 2026 TO AUGUST 16, 2026. A gentle reminder on the following deadlines, as may be applicable: