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 |