February 23, 2026 Tax Updates

COURT OF TAX APPEALS DECISIONS

TRUST FUND CONTRIBUTIONS BY PRE-NEED COMPANY IS EXCLUDED FROM GROSS RECEIPT FOR VAT PURPOSES; 19.75% UNDER-DECLARATION OF SALE WARRANTS THE APPLICATION OF 3-YEAR PRESCRIPTIVE PERIOD. Under the law, contributions to the trust fund are not included in the gross receipts of a pre-need company. Accordingly, when the taxpayer, as a pre-need company, made both initial trust fund contributions and subsequent additional contributions as required by the SEC, both amounts should be excluded in determining VAT liability. The BIR cannot validly exclude the initial contributions while including the additional ones in its VAT assessment. As to prescription, the BIR generally has three (3) years within which to issue an assessment. The period extends to ten (10) years only in cases the return is intentionally false or fraudulent. A prima facie presumption of falsity or fraud arises when there is an under-declaration of taxable sales exceeding thirty percent (30%) of the amount declared in the return. However, this presumption may be rebutted by the taxpayer upon showing that the discrepancy was due to inadvertence or error. In this case, the taxpayer demonstrated that the alleged under-declaration resulted from the BIR’s failure to exclude the additional trust fund contributions. Since the under-declaration amounted to only 19.75%, which is below the 30% threshold, the presumption of falsity does not apply. Consequently, the ordinary three-year prescriptive period governs. (CIR v. Pet Plans, Inc., CTA EB No. 2857, CTA Case No. 10002, September 2, 2025)

AN ASSESSMENT IS VOID WHEN THE EXAMINERS’ AUTHORITY TO AUDIT IS BASED ON MEMORANDUM OF ASSIGNMENT; CHIEF IS NOT AUTHORIZED TO ISSUE LETTER OF AUTHORITY; COURT MAY RULE ON EXAMINER’S LACK OF AUTHORITY EVEN NOT RAISED AS AN ISSUE. The Commissioner of Internal Revenue (CIR) or his duly authorized representatives, such as Regional Directors and Deputy Commissioners, have the authority to examine a taxpayer’s books of accounts; however, any reassignment of the examination to different revenue officers requires the issuance of a new Letter of Authority (LOA). A reassignment effected only through a Memorandum of Assignment (MOA), referral memorandum, or similar internal document, without a corresponding new LOA, constitutes a usurpation of the CIR’s authority, as an MOA cannot supplant or substitute for an LOA. Furthermore, a taxpayer’s failure to question the lack of authority does not bar the court from considering the issue, since it affects the intrinsic validity of the assessment itself. Thus, where an LOA originally authorized Revenue Officers Fernandez, Dizon, and Costales to conduct the audit, but the case was later reassigned to Examiners Benedicto and Santos without the issuance of a new LOA, relying only on a MOA signed by the Chief of Regular LT Audit Division II, who is not authorized to issue an LOA, the reassigned examiners lack legal authority, rendering the resulting assessment void. (CIR v. Metro Rail Transit Corporation, CTA EB No. 2862, CTA Case No. 9651, September 2, 2025)

ASSESSMENT BASED ON TAX VERIFICATION NOTICE (TVN), WITHOUT LOA, IS VOID. Under the National Internal Revenue Code, only the Commissioner of Internal Revenue or his duly authorized representative, specifically the Revenue Regional Director, may authorize the examination of a taxpayer through the issuance of a LOA and such authority may be exercised only in the manner expressly provided by law; jurisprudence consistently holds that an LOA is the exclusive and indispensable authority for a revenue officer to validly examine a taxpayer, the absence of which renders the assessment void for violation of due process. Applying these principles, a TVN issued by a Revenue District Officer cannot substitute for an LOA, as the NIRC, being a special law prevailing over the general provisions on agency under the Civil Code, does not recognize any equivalent document nor empower the Revenue Regional Director to delegate the issuance of LOAs through a TVN; thus, without a valid LOA authorizing the revenue officer’s examination, the resulting deficiency assessment is null and void. (CIR v. St. Paul Hospital Cavite, Inc., CTA EB No 2880, CTA Case No. 10815, August 15, 2025)

180-DAY PERIOD BASED ON INACTION IS COUNTED FROM THE FILING OF THE PROTEST AND NOT FROM APPEAL TO THE CIR. There is only one 180-day period reckoned from the filing of the protest or the submission of complete supporting documents. Thus, if the CIR’s duly authorized representative denies the protest within that 180-day period and the taxpayer elevates the matter to the CIR, the CIR is left with the balance of the same 180-day period to resolve the case. Should no action be taken within the remaining period, the taxpayer may appeal to the CTA within 30 days from the lapse thereof. Conversely, if the taxpayer opts to await the decision of the CIR’s representative and such decision is issued beyond the 180-day period, the taxpayer may still appeal the same to the CTA; in this situation, the 180-day period is no longer relevant, and the taxpayer’s recourse is to await the CIR’s final decision before seeking relief from the CTA if the ruling is adverse. (Benguet Electric Cooperative, Inc. (BENECO) vs. The Commissioner on Internal Revenue, CTA EB No. 2882, CTA Case No. 9667, September 2, 2025)

ASSESSMENT IS VOID IF THE BIR FAILED TO ADDRESS TAXPAYER’S ARGUMETNS IN THE PAN; VOID IF EXAMINER’S AUTHORITY IS MEMORANDUM OF ASSIGNMENT. Tax assessments must state in writing the factual and legal bases therefor and must be issued by revenue officers duly authorized through a valid LOA; otherwise, the assessments are void for violation of administrative due process and lack of authority, as consistently held in jurisprudence such as Avon Case. In this case, the BIR failed to address and consider the taxpayer’s refutations to the PAN, as the FLD merely reproduced the earlier findings without explaining the rejection of the defenses, thereby denying the taxpayer a meaningful opportunity to be heard; moreover, the deficiency assessments were recommended by a revenue officer who lacked a valid LOA at the time of the audit, her authority resting only on a Memorandum of Assignment issued by one not authorized to issue an LOA, rendering the examination and resulting assessments a nullity. Accordingly, the assessments were correctly declared void in  (CIR v. Will Team PH, Inc., CTA EB No. 2884, CTA Case No. 10154)

ASSESSMENT IS VOID IF NOT ALL EXAMINERS ARE NAMED IN THE LOA. Only the CIR or his duly authorized representatives—such as Revenue Regional Directors, Deputy Commissioners, Assistant Commissioners, and Head Revenue Executive Assistants—may issue a valid Letter of Authority (LOA) empowering revenue officers (ROs) to examine and audit a taxpayer’s books, and the LOA must specifically name the ROs performing the audit to satisfy due process; in this case, while the LOA for TY 2014 named ROs Pelayo, Guimbao, and GS Aviles, additional ROs Sison, Gomez, and Manuel participated in the examination without being named, tainting the audit with illegality and violating the taxpayer’s right to due process, and as a result, the Court of Tax Appeals in Division correctly nullified the 2014 deficiency tax assessments and enjoined the BIR from collecting them, (CIR V. Concepcion Industries, Inc., CTA EB No. 2920, CTA Case No. 10584 October 20, 2025)

30-DAY PERIOD TO FILE PETITION FOR REVIEW WITH THE CTA DIVISION IS NON-EXTENDIBLE. Under the National Internal Revenue Code of 1997, the 30-day period to appeal the Commissioner’s denial of a protest on a disputed assessment to the Court of Tax Appeals is mandatory and jurisdictional; failure to comply renders the assessment final, executory, and demandable, and such period cannot be extended by invoking Section 11 of Republic Act No. 1125 or Rule 42 of the Rules of Court, as the latter applies generally and yields to the specific substantive provision of Section 228. Here, the petitioner received the Final Decision on Disputed Assessment (FDDA) on July 15, 2024 and, instead of filing a Petition for Review within the 30-day period or until August 14, 2024, filed a Motion for Extension on August 13, 2024 seeking an additional 15 days; however, the Court En Banc held that it could not grant the extension because the appeal period under Section 228 is non-extendible, and procedural rules cannot override this statutory mandate. (Yokohama Tire Sales Philippines, Inc. v. CIR, CTA EB No. 3078, CTA Case No. 11590, October 24, 2025)

INTERCOMPANY LOAN IS NOT SUBJECT TO DST IF THE LOANED AMOUNT IS UTILIZED OUTSIDE  OF THE PHILIPPINES. Under Philippine law, documentary stamp tax (DST) is an excise tax imposed on transactions represented by documents, not on the documents themselves, and must be interpreted strictly against the government and liberally in favor of the taxpayer. DST on debt instruments applies only when the obligation or right arises from Philippine sources or when the object of the contract is located or used in the Philippines, reflecting the principle that a state’s taxing power is limited to subjects within its territorial jurisdiction. In the present case, Bloomberry’s loan agreements with its non-resident foreign affiliates were perfected outside the Philippines, as the loans were real contracts that required delivery of the proceeds, which were used in the Republic of Korea. Because the necessary jurisdictional connection, or situs, for DST is absent, the transactions cannot be taxed. Furthermore, the proviso in Section 173, which allows shifting of DST liability when one party is exempt, presupposes that the transaction is already taxable and does not create liability where none exists. Therefore, consistent with the legislative intent and the strict construction principle, Bloomberry’s loan transactions are not subject to DST. (CIR v. Bloomberry Resorts Corporation, CTA EB No. 2933, CTA Case No. 10193; Bloomberry Resorts Corporation v. CIR, CTA EB No. 2935, CTA Case No. 10193, August 6, 2025)

REVENUE ISSUANCES

BIR DEADLINES FROM FEBRUARY 23, 2026 TO FEBRUARY 28, 2026. A gentle reminder on the following deadlines, as may be applicable: