COURT OF TAX APPEALS (CTA) DECISIONS
Different due dates renders the assessment void for lack of a clear, unequivocal payment deadline. A valid Final Assessment Notice/Formal Letter of Demand (FAN/FLD) must contain two essential elements: a definite demand for a specific amount of tax liability and a clear, unequivocal due date for payment. In the present case, the FAN/FLD is flawed because it contains two inconsistent due dates—one indicating payment is due within 15 days from receipt of the Preliminary Assessment Notice (PAN) or February 12, 2020, and another stating a later due date (the due date for the payment on the assessment notices was February 29, 2020) thereby creating confusion and failing to provide a single, clear deadline for payment. Thus, the assessment is void (Kingston Aluminum and Stainless Sales Corp., v. CIR, CTA Case No. 10326, February 24, 2025)
Failure of the Bureau of Internal Revenue (BIR) to prove willful falsity prevents application of the 10-year prescriptive period, rendering the assessment barred by prescription. Internal revenue taxes must be assessed within three years from the filing or due date of the tax return or the ten-years in case of false or fraudulent returns filed with intent to evade tax or failure to file a return. The Supreme Court, in McDonald’s Philippines Realty Corp. v. CIR, clarified that to apply the extended ten-year period, the BIR must prove with clear and convincing evidence that the taxpayer deliberately or willfully filed a false return containing material misstatements or omissions. Additionally, the taxpayer must be properly notified that the extended period is invoked, with the factual and legal basis clearly stated. In this case, although the BIR alleged false returns based on discrepancies in foreign exchange valuation and imposed a surcharge, the BIR failed to present clear and convincing evidence that the taxpayer acted with deliberate or willful intent to evade tax. Consequently, the period to assess has prescribed, rendering the deficiency Capital Gains Tax assessment invalid. (Holcim Philippines Manufacturing Corporation v. CIR, CTA Case No. 10414, February 14, 2025)
Value-Added Tax (VAT) cannot be imposed on presumed unaccounted expenses; it must be based on actual sales or service income. VAT is imposed on gross selling price or gross receipts from sales or services—not from disbursements or expenses. In this case, the BIR treated the discrepancy between the taxpayer’s AFS/ITR and 1604CF/1601-E as undeclared income and subjected it to VAT based solely on presumed unaccounted expenses. However, the Court found this assessment legally baseless, as VAT liability must be based on actual sales or service income, not inferred from expenditures. (Ebar Abstracting Company, Inc. v. CIR, CTA Case No. 10681, January 15, 2025)
In VAT zero-rating, Certificate or Articles of Foreign Incorporation and a SEC Certificate of Non-Registration of the NRFC must be provided; separate personality of the taxpayer and NRFC parties must be respected even if they are related parties; proof that services were performed in the Philippines is required. VAT zero-rating on the sale or supply of services applies only if certain requirements are met: (1) the recipient is a non-resident foreign corporation (NRFC) not engaged in business in the Philippines; (2) the services are not related to processing, manufacturing, or repacking; (3) the services are performed in the Philippines by a VAT-registered person; and (4) payment is made in acceptable foreign currency. To establish NRFC status, the taxpayer must present a Certificate or Articles of Foreign Incorporation and a SEC Certificate of Non-Registration. In this case, petitioner adequately proved that Innodata, Inc. is a foreign entity not doing business in the Philippines by submitting the required documents, and the Court emphasized that the separate corporate personality of Innodata, Inc. must be respected despite its relationship with petitioner. However, petitioner failed to meet the third requirement, as there was no clear indication in the service agreement or supporting evidence that the services were actually performed in the Philippines. Without proof of the place of service, one of the essential elements for VAT zero-rating remains unproven, rendering the claim for zero-rated VAT treatment incomplete. (Ebar Abstracting Company, Inc. v. CIR, CTA Case No. 10681, January 15, 2025)
Disallowing excess input ax carried forward to succeeding period without written legal and factual basis violates Section 228’s due process, rendering the assessment void. A tax assessment must inform the taxpayer in writing of the legal and factual bases on which it is made; failure to do so renders the assessment void. In this case, respondent disallowed input tax carried forward to succeeding period without providing any explanation or legal justification for the disallowance. This lack of disclosure violates the due process requirement under Section 228, and as such, the disallowed input tax must be cancelled for being invalid. (Ebar Abstracting Company, Inc. v. CIR, CTA Case No. 10681, January 15, 2025)
A BIR letter not clearly stating it as a final decision on disputed assessment is not an appealable Final Decision on Disputed Assessment appealable to the CTA. The CTA has exclusive appellate jurisdiction over decisions of the Commissioner of Internal Revenue (CIR) involving disputed assessments, which must be based on an FDDA. An FDDA must clearly state the facts, applicable laws or jurisprudence, and must explicitly indicate that it constitutes the final decision of the Commissioner or his duly authorized representative. In this case, the taxpayer erroneously treated the letter issued by the Regional Director as an FDDA, due to the letter’s failure to clearly and categorically state that it was the final decision on the disputed assessment. As such, the letter cannot be considered an appealable FDDA, and the CTA correctly dismissed the petition for lack of jurisdiction. (Bukidon II Electric Cooperative, Inc. v. CIR, CTA Case No. 10822, March 25, 2025)
Issuance of the FLD/FAN before the expiration of the 15-day period to respond to the PAN violates due process, rendering the tax assessment void. Taxpayers who received a PAN are given fifteen (15) days from receipt thereof to respond before FLD/FAN may be issued. This procedural safeguard ensures compliance with the taxpayer’s right to due process. In this case, the taxpayer received the PAN on January 4, 2016 and had until January 19, 2016 to respond. However, the BIR issued the FLD/FAN prematurely on January 12, 2016—before the expiration of the 15-day period—thereby depriving the petitioner of the opportunity to be heard. The BIR’s failure to observe this mandatory period constitutes a violation of due process, rendering the subject tax assessments null and void and without legal effect. (Vibal Group, Inc. v. CIR, CTA Case No. 10291, January 20, 2025)
Delayed service of the assessment after its payment deadline violates due process, rendering the assessment invalid. Tax authorities must inform the taxpayer of the legal and factual bases of the assessment, including a clear amount due and a date to comply. In this case, although the FLD/FAN was dated October 29, 2018 and required payment by October 31, 2018, it was only served on DMCI Masbate Power on November 5, 2018—after the deadline had lapsed. This deprived the taxpayer of a fair opportunity to pay within the prescribed period, thereby violating its right to due process. (DMCI Masbate Power Corporation v. CIR, CTA Case No. 10424, March 13, 2025)
REVENUE REGULATIONS
Revenue Regulations No. 012-2025, November 29, 2024
| Provision | Details |
| Warrant of Distraint/Levy (WDL) | Must be served personally to the taxpayer or their authorized representative |
| If Taxpayer is Absent/Refuses | WDL may be constructively served in presence of 2 credible witnesses (preferably barangay officials); Leave copy at premises |
| Additional Communication | Send a copy of the WDL via registered mail and/or email |
| Resurfaced Taxpayers | Applies to those previously tagged as “Cannot Be Located” (CBL) but have appeared at any BIR office had whereabouts legally determined |
| Must be simultaneously served with other related documents directly to the taxpayer or authorized representative |
Revenue Regulations No. 014- 2025, April 2, 2025
| Category | Details |
| Issued | April 2, 2025 |
| Who’s Affected | Non-Resident Digital Service Providers |
| Registration Deadline | June 1, 2025 via ORUS or VDS Portal |
| VAT Liability Starts | June 2, 2025, regardless of registration status |
| BIR Authority | Commissioner may extend the registration deadline as needed |
Revenue Regulations No. 015-2025, April 29, 2025
| Category | Details |
| Issuance Date | April 29, 2025 |
| Purpose | Updates rules for tax-qualified private retirement plans (RA 4917, Tax Code) |
| Covered Plans | Pension, Gratuity, Provident, Profit-sharing, Stock Bonus |
| Tax Benefits | Retirement benefits & trust income: Tax-exempt
Employer contributions: Tax-deductible |
| Employee Eligibility | Minimum 50 years old
At least 10 years of service Must not have availed similar tax benefits before |
| Application | Submit documents (trust agreements, actuarial report, etc.) within 30 days of effectivity |
BIR RULINGS
Unutilized input VAT from zero-rated sales cannot be deducted as an expense. Under Revenue Memorandum Circular No. 57-2013, unutilized input VAT attributable to zero-rated sales may only be recovered through a refund or tax credit claim. The Tax Code provides no legal basis for treating such amounts as deductible expenses. Furthermore, per the Supreme Court ruling in United Coconut Planters Bank v. Spouses Uy, only decisions of the Supreme Court establish binding precedent, rendering rulings of lower courts like the Court of Tax Appeals merely persuasive. Applying these principles, the BIR denied Norteam Shipping Service, Inc.’s request to record its denied VAT refund claim as a miscellaneous expense for income tax purposes. Despite NSSI citing the CTA decision in Maersk Global Service Center, the absence of a supporting Supreme Court ruling and the clear guidance of RMC No. 57-2013 preclude the deductibility of unutilized input VAT as an income tax expense. (BIR Ruling No. OT-016-2024, February 28, 2024)
Sales of herb-roasted chicken for take-out are VAT-exempt as simple-processed agricultural products. The sale of agricultural and poultry products that have undergone simple processes such as roasting remains VAT-exempt, including those prepared for market using methods like roasting or broiling. Applying this to Agros Trofi Corporation, which sells herb-roasted chicken solely on a take-out basis without dine-in facilities, the BIR confirmed that such sales fall within the scope of VAT-exempt transactions, consistent with the legislative intent to exclude common food items like roasted chicken from VAT, as reflected in the Bicameral Conference Committee records. (BIR Ruling No. VAT-017-2024, February 28, 2024)
Proceeds from electronic gift certificates are not taxable income or VATable sales, but related service fees and unspent balances are subject to VAT and taxes under the NIRC and RA 10962. Amounts received as proceeds from electronic gift certificates (eGCs) represent value held in trust by the issuer on behalf of the beneficiary and thus do not constitute taxable income or VATable sales. Thus, the face value proceeds from eGCs issued to clients are not subject to income tax, expanded withholding tax, or VAT, making the issuance of acknowledgment receipts proper. However, service fees for facilitation, administration, or marketing are subject to 12% VAT and EWT, requiring issuance of official receipts, while revenue from unspent eGCs and commissions paid to merchants are taxable accordingly. (BIR Ruling No. OT-018-2024, March 8, 2024)
Importation of a MARINA-approved passenger vessel for domestic transport qualifies for VAT exemption, subject to regulatory compliance. The Tax Code exempts from VAT the sale, importation, or lease of passenger vessels for domestic transport operations, subject to compliance with MARINA’s importation restrictions and vessel retirement program. Applying this, Montenegro Shipping Lines, Inc.’s importation of the 2023-built RORO passenger vessel MV “Binibining Coron,” duly authorized by MARINA and necessary for its operations, qualifies for VAT exemption, provided it adheres to MARINA’s conditions. (BIR Ruling No. VAT-019-2024, March 14, 2024)
Income payments to persons enjoying income tax exemptions under the Omnibus Investment Code of 1987 is exempted from withholding tax. Thus, a domestic corporation registered with the Board of Investment as a Domestic Market Enterprise is exempt from CWT on revenues generated exclusively from its registered production of bean sprouts and alfalfa sprouts This exemption is granted under the terms of Executive Order No. 226 and subject to compliance with the specific terms and conditions set forth in the taxpayer BOI Registration Agreement. (BIR Ruling No. 020-2024, March 14, 2024)
Property dividends are subject to VAT despite non-VAT registration status; exemption claim is denied due to lack of proof and documentary compliance. Property dividends constituting stocks in trade or properties primarily held for sale or lease, when distributed by a corporation, are subject to VAT based on their fair market value or zonal valuation, whichever is higher. In the case of M.C. Holdings Corporation, despite its claim of being a non-VAT registered entity, the denial of its request for exemption is based on the principle that VAT liability is determined by the Tax Code regardless of registration status. The corporation’s failure to meet the burden of proof to establish exemption, along with noncompliance with documentary requirements under Revenue Memorandum Order No. 9-2014, justified the denial. Thus, M.C. Holdings Corporation remains subject to VAT on the distribution of property dividends as ruled, and the claim for exemption was properly denied. (BIR Ruling No. 023-2024, April 11, 2024)
Termination fee as compensation for breach of contract and services rendered related to its business operations is subject to both VAT and income tax. A VAT is imposed on any person engaged in the course of trade or business on the sale, barter, exchange, lease of goods or properties, and the rendering of services in the Philippines. In this case, the termination fee received by Air Liquide Philippines, Inc. from Pilipinas Shell Petroleum Corporation under the Termination Agreement is subject to VAT because it constitutes compensation not only for breach of contract but also for services rendered and related costs incurred in the construction and installation of specialized plants, which are directly connected to Air Liquide’s business operations. Additionally, the termination fee is subject to income tax under Section 27(A) of the Tax Code as it represents income “from whatever source derived,” including compensation for loss of anticipated profits. Thus, both VAT and income tax apply to the termination fee received by Air Liquide. (BIR Ruling No. OT-022-2024, April 11, 2024)
Amounts received by Easytrip for loads/reloads are not income and exempt from EWT, but its service fees and income from holding these funds are taxable and subject to EWT and VAT. Withholding tax is imposed on income payments where there is a flow of wealth to the recipient, and taxes withheld serve as advance payments of the recipient’s income tax. In the case of Easytrip Services Corporation, amounts received from banks, credit card companies, authorized merchants, and corporate clients for loads and reloads are considered cash advances or liabilities held in trust for remittance to toll operators and therefore do not constitute income, making them exempt from EWT. However, the service fees charged by Easytrip for its electronic toll collection services, as well as any income earned from holding the cash advances or refunds on unused loads, do constitute income and are subject to income tax, creditable withholding tax, and VAT. (BIR Ruling No. OT-024-2024, April 25, 2024)
Maxicare’s sale of prepaid HMO services is subject to 12% VAT, as no law exempts such transactions from VAT. The Tax Code imposes VAT on gross receipts from the sale of services rendered “in the course of trade or business,” including health maintenance organization (HMO) services, unless specifically exempted by law. Revenue Memorandum Circular No. 56-2002 clarifies that HMO providers like Maxicare are subject to VAT because they provide prepaid membership services rather than direct medical services. (BIR Ruling No. VAT-025-2024, April 29, 2024)