COURT OF TAX APPEALS DECISIONS
The tax assessment is void if the BIR failed to prove proper service of the Notice of Informal Conference and Preliminary Assessment Notice (PAN); procedural requirements in substituted serve must be complied with; unverified sources like newspaper clippings and third party sources cannot be a valid basis for assessment.
Due process in tax assessments requires that taxpayers be informed in writing of the law and facts on which the assessment is based, beginning from Notice of Informal Conference (NIC), followed by a Preliminary Assessment Notice (PAN), and ultimately a Formal Letter of Demand (FLD). Where there was no evidence that the NIC was received, and the PAN was served without complying with the requirements for valid substituted service, including the absence of corroborating documents such as a barangay official’s acknowledgment or a postmaster’s certification; where the revenue officer who allegedly served the PAN did not testify, and the BIR’s witness lacked personal knowledge, the FLD and all related assessment notices for deficiency taxes are void for violating the petitioner’s right to due process. (Rex Jayson Miraflor Tuozo v. CIR, CTA Case No. 10638, March 24, 2025; see also Apex 5678 Rockwell, Inc. v. CIR, CTA Case No. 10673, February 19, 2025 and Diamond Drilling Corporation of the Philippines v. CIR, CTA Case No. 10661, January 20, 2025); where the Acknowledgment Receipt for the PAN was incomplete, with the section indicating the reason for substituted service left blank, and the witnesses’ identities and roles not properly specified; where the Written Report also failed to prove that no person was found at the address or that the barangay official who allegedly received the notice was properly identified or authenticated, the assessment notices, and the consequent Warrant of Distraint and Levy (WDL) and Warrant of Garnishment (WOG), were declared void and without legal effect. (Regus Plt Centre, Inc. v. CIR, CTA Case No. 10778, March 11, 2025); where the Formal Letter of Demand (FLD) did not adequately explain how the alleged income was computed and failed to identify or attach the documents that formed the basis of the assessment—such as news clippings and third-party sources; where documents were also not presented during administrative proceedings, denying the respondents the opportunity to examine and refute them, the unverified sources like newspaper articles, without proper corroboration, constitute hearsay and lack probative value. Given the absence of verified factual support and the failure to inform the taxpayers of the detailed basis of the assessment, the Court ruled that the assessment violated the respondents’ right to due process and was therefore void. (CIR v. Sps. Emmanuel D. Pacquiao and Jinkee J. Pacquiao, CTA EB No. 2737, CTA Case No. 8639, January 23, 2025)
CMC No. 131-2019, being an interpretative rule that merely implements EO No. 23, s. 2017, is valid without prior publication; District Collectors are not indispensable parties since a final and complete resolution can be made without affecting their individual interests, given they acted under the authority of the BOC Commissioner.
Under established jurisprudence, interpretative administrative rules do not require publication to be effective, as they merely clarify or implement existing law without adding new obligations; applying this to the case, CMC No. 131-2019, addressed solely to Bureau of Customs personnel, merely reiterated the duty rates under EO No. 23, s. 2017 and did not create new rights or impose additional burdens on the public, making its implementation valid even without prior publication. Moreover, an indispensable party is one whose interest in the controversy is such that a final adjudication cannot be made without affecting that interest or rendering the decision ineffective. Applying this principle, the Court held that the District Collectors who issued the demand letters are not indispensable parties because the petition primarily seeks to nullify CMC No. 131-2019 for lack of prior publication, with the demand letters being merely consequential to that issuance. Even if the demand letters were the main subject, the District Collectors, being under the authority of the BOC Commissioner and lacking a distinct legal interest in the controversy, are not necessary for a complete and binding resolution of the case. (Fabrossi Food Group Inc. et. al, v. Bureau of Customs, CTA EB No. 2742, CTA Case No. 10111, February 28, 2025)
Taxpayer must file a protest within 30 days from receipt of the Final Assessment Notice (FAN); FAN received on December 17, 2018, but protested to only on April 12, 2019—well beyond the prescribed period – renders the assessment final, executory, and placing it beyond the Court’s jurisdiction.
Section 228 of the NIRC of 1997, as amended, and RR No. 12-99, as amended, require that a taxpayer must file an administrative protest—either a request for reconsideration or reinvestigation—within 30 days from receipt of the FLD/FAN lest the tax assessment becomes final, executory, and demandable. Where the petitioner received the FLD/FAN on December 17, 2018, through an employee authorized to receive official communications, as confirmed by petitioner’s own witness, but petitioner filed its protest only on April 12, 2019—well beyond the 30-day deadline which expired on January 16, 2019, the assessment becomes final and executory. Although petitioner claimed it became aware of the assessment only upon receipt of the Final Notice Before Seizure on April 1, 2019, this was contradicted by its own admission that it received the FLD/FAN on December 27, 2018. Due to the failure to timely protest the FLD/FAN, the assessment became final, and the Court in Division correctly ruled it had no jurisdiction to hear the case. (E-Power Security and Investigation Services Inc., v. CIR, CTA EB No. 2747, CTA Case No. 10143, February 21, 2025)
Assessment is void if the BIR failed to specify the factual and legal bases in the PAN, FAN, and FDDA, and did not address the taxpayer’s arguments on trade discounts versus senior citizen discounts. Under Section 228 of the NIRC of 1997, as amended, and implementing rules under RR No. 12-99, a tax assessment is void if the taxpayer is not properly informed in writing of the legal and factual bases for the assessment, as this violates due process. In this case, the BIR failed to address and consider the respondent’s detailed arguments in both its Reply to the PAN and Protest to the FLD/FAN, particularly concerning the nature of the disallowed sales discount and the inapplicability of RR No. 7-2010. Despite repeated contentions that the discounts were trade-related and not senior citizen discounts, the BIR’s findings in the FAN/FLD and FDDA lacked any reasoned explanation or citation of specific facts and law for rejecting the respondent’s position. This omission constitutes a clear denial of due process, thereby rendering the deficiency VAT assessment void and unenforceable. (CIR v. Ajanta Pharma Philippines, Inc., CTA EB o. 2761, CTA Case No. 10057, January 31, 2025)
Under Section 228 of the NIRC and relevant jurisprudence, the 30-day appeal period is reckoned from the receipt of the PCLs—not the earlier denial letter—as only the PCLs clearly constituted a final, appealable decision.
Under Section 228 of the NIRC and established jurisprudence, a final decision on a disputed assessment must be clearly and unequivocally communicated to the taxpayer to trigger the 30-day period to appeal to the Court of Tax Appeals (CTA). Applying this, the July 30, 2018 letter from the Regional Director merely cited the taxpayer’s failure to submit supporting documents and referenced procedural rules, but did not convey a clear final determination or demand for payment; hence, it could not be deemed a final decision appealable to the CTA. In contrast, the Preliminary Collection Letters (PCLs) received on April 4, 2019, contained a definitive demand for payment and warned of summary remedies in case of non-compliance, satisfying the legal requirement of finality. As such, the 30-day appeal period began from the receipt of the PCLs, and since the petition was filed on April 11, 2019, it was timely. Accordingly, the Court in Division properly exercised jurisdiction over the case. (CIR v. Joselito B. Yap, CTA EB No. 2792, CTA Case No. 10063, February 11, 2025)
The CTA may consider issues like improper service of LOAs even if raised for the first time on appeal, as it decides cases de novo and addresses matters affecting assessment validity.
The CTA is a court of record that decides cases de novo, allowing it to consider all evidence and issues necessary for a just resolution, even if not previously raised at the administrative level. Applying this, the Court in Division correctly ruled on the issue of improper service of Letters of Authority and assessment notices despite it being raised for the first time on appeal, since such issue pertains to the intrinsic validity of the assessments. Moreover, the CTA is not confined to the issues initially stipulated by the parties and may address related matters to ensure an orderly and complete disposition of the case. (CIR v. Joselito B. Yap, CTA EB No. 2792, CTA Case No. 10063, February 11, 2025)
Taxpayer is estopped from challenging the service of LOAs and assessment notices, having acknowledged receipt and failed to timely object at the administrative level.
Under the doctrine of estoppel, a party is precluded from taking a position inconsistent with one previously assumed, especially when the other party has relied on such representation in good faith. Applying this principle, the taxpayer is estopped from questioning the validity of the service of the LOAs and assessment notices for taxable years 2011 to 2013, as he repeatedly admitted in his Legal Protest Notices that he received the Preliminary Assessment Notices (PANs), Final Assessment Notices (FANs), and Formal Letters of Demand (FLDs). These notices were received by individuals who acted as his authorized representatives, and respondent never objected to their authority or the propriety of service during the administrative proceedings. Moreover, by submitting documents in compliance with the LOAs without objecting, respondent confirmed their receipt and validity. Failure to timely object to alleged defects in service at the administrative level bars a taxpayer from raising such issues for the first time on appeal, as doing so would undermine orderly tax administration and judicial review. (CIR v. Joselito B. Yap, CTA EB No. 2792, CTA Case No. 10063, February 11, 2025)
Electric cooperatives registered with the National Electrification Administration (NEA) remain exempt from income tax despite lack of Cooperative Development Authority (CDA) registration.
The legal basis for income tax exemption of electric cooperatives is Section 39(a) of P.D. No. 269, which grants permanent exemption to those registered with the NEA. While E.O. No. 93 later withdrew these exemptions, FIRB Resolution No. 24-87 partially restored them but maintained the taxability of income from electric operations. However, R.A. No. 6938, as amended, repealed laws inconsistent with its provisions but preserved P.D. No. 269. In Samar-I Electric Cooperative v. CIR, the Supreme Court ruled that CDA registration is optional for NEA-registered cooperatives and that E.O. No. 93 was effectively repealed by R.A. No. 6938. Applying this precedent, the taxpayer, though not registered with the CDA, retains its income tax exemption under P.D. No. 269, and thus cannot be held liable for income tax. (CIR v. MORESCO-II, CTA EB No. 2796, CTA Case No. 10145, February 28, 2025)
BIR RULINGS
Income from PAGCOR’s purchase of slot machines from a non-resident supplier used in gaming operations is subject only to 5% final withholding tax in lieu of all other taxes, including the 25% income tax and VAT.
Under Section 13 of Presidential Decree No. 1869, as amended, PAGCOR and its contractees—whether domestic or foreign, resident or non-resident—are subject only to a 5% franchise tax on gross revenue from gaming operations, in lieu of all other national and local taxes, including corporate income tax and VAT. This exemption is affirmed by jurisprudence, including the Supreme Court rulings which emphasized that tax incentives extend to PAGCOR’s suppliers and licensees without distinction. In application, the BIR ruled that PAGCOR’s purchase of slot machines from a non-resident supplier falls under this exemption, as the machines are used in PAGCOR’s gaming operations. Accordingly, the non-resident supplier is subject only to a 5% final withholding tax (as franchise tax), and not to the 25% income tax under RA No. 11534 or VAT. However, income from non-gaming operations remains taxable under regular rules. (BIR Ruling No. VAT-027-2024, May 13, 2024)
CWT and DST on the installment sale of real property must be computed based on the higher of the zonal value or market value at the time the Agreement to Purchase and Sale was executed.
Pursuant to Section 3(J) of Revenue Regulations No. 17-2003, for sales of real property classified as ordinary assets on an installment basis—wherein payments in the year of sale do not exceed 25% of the agreed consideration—the creditable withholding tax (CWT) is computed on each installment, based on the ratio of actual collection to the total consideration, applied to the gross selling price or fair market value at the time of the execution of the contract to sell, whichever is higher; while the documentary stamp tax (DST) accrues upon execution of the deed of absolute sale, it is also based on the gross selling price or fair market value at the time of the contract to sell. Applying this to the transaction between Fine Properties, Inc. (FPI) and Prime Asset Ventures, Inc. (PAVI), the BIR confirmed that since the agreement to purchase and sell was executed on June 24, 2021 and clearly structured as an installment sale (with less than 25% paid initially and the balance due in 2023), the CWT and DST should be computed based on the higher of the zonal or market value of the subject property at that date. The subsequent execution of the deed of absolute sale upon full payment merely consummates the sale, and the legal and tax consequences are deemed to have retroacted to the date of perfection of the contract. (BIR Ruling No. OT-028-2024, May 29, 2024)
The assignment of rights under a Contract to Sell, with no gain realized and no transfer of ownership, is not subject to CGT, EWT, VAT, or DST—except DST on notarial acknowledgment, with DST due upon execution of the Deed of Absolute Sale.
Pursuant to Section 24(D)(1) of the Tax Code and Revenue Regulations No. 02-98, as amended, capital gains tax (CGT) or expanded withholding tax (EWT) applies only when there is a realized gain from the sale, exchange, or assignment of real property interests. In this case, since the original buyer assigned its rights under a Contract to Sell before completing full payment and the amount paid by the assignee equaled the assignor’s payment to the original sellers, no gain was realized; hence, the assignment is not subject to CGT or EWT. Further, the assignment of rights is not considered a sale of real property and thus not subject to value-added tax (VAT). Likewise, under Section 196 of the Tax Code, documentary stamp tax (DST) does not apply to the assignment of rights as it is not a sale or conveyance of real property itself. However, the notarial acknowledgment of the Deed of Assignment is subject to a fixed DST of ₱30.00, and the eventual Deed of Absolute Sale executed by the assignee will trigger DST based on the original Contract to Sell’s terms. (BIR Ruling No. OT-029-2024, May 29, 2024)
Under RA No. 8047 and Section 109(1)(R) of the Tax Code, VAT exemption applies to sales and publication of qualified educational materials, but not to non-exempt services or purchases which remain subject to 12% VAT.
Under Section 12 of RA No. 8047 and Section 109(1)(R) of the Tax Code, sales, printing, or publication of books, newspapers, and other educational reading materials that are not principally devoted to paid advertisements and are compliant with National Book Development Board (NBDB) requirements are exempt from VAT. Applying these provisions, Inteligente Publishing, Inc., as a registered book publisher and seller under the NBDB, may claim VAT exemption for its core activities involving the sale and publication of qualified educational materials. However, activities not covered by the exemption—such as bookbinding, engraving, printing of brochures or trade books—are subject to 12% VAT, requiring the Company to register as a VAT-registered entity and issue separate VAT invoices for those transactions. Moreover, while its core sales may be VAT-exempt, its purchases of goods or services from VAT-registered suppliers remain subject to VAT since tax exemption does not prohibit the passing on of VAT to buyers under Section 107 of the Tax Code. (BIR Ruling No. VAT-030-2024, June 5, 2024)
Exemption from donor’s tax under RA 6657 is denied as the law covers only capital gains tax and the land remains agriculturally classified, lacking proof of reclassification.
Under Section 66 of Republic Act No. 6657, also known as the Comprehensive Agrarian Reform Law of 1988, land transfers made under the Act—such as those involving disturbance compensation arising from the lawful termination of tenancy due to land reclassification or conversion to non-agricultural use—are exempt from capital gains tax, registration fees, and related taxes and fees. However, the law does not expressly provide exemption from donor’s tax, and tax exemptions, being in derogation of sovereign power, must be strictly construed against the taxpayer. In the present case, while the transfer of a portion of land from BBB to the tenant was executed as disturbance compensation, there is no showing that the land has been officially reclassified or converted by competent authorities for residential, commercial, or industrial use as required under Section 36(1) of RA No. 3844, which remains applicable. All supporting documents submitted show that the land remains classified as agricultural in actual use. Therefore, in the absence of proof of reclassification or conversion and without a clear legal basis for donor’s tax exemption, the request cannot be granted, and the transaction remains subject to donor’s tax.(BIR Ruling No. OT-031-2024, June 5, 2024)
Insurance policies issued by GSIS to IPAs and their registered business enterprises are subject to DST (borne by the non-exempt party) and 12% VAT, unless the enterprise is under the 5% SCIT regime and the insurance—such as for assets or employees directly involved in the registered activity—is proven to be directly and exclusively used therein and certified by the concerned IPA for VAT zero-rating.
Insurance policies issued by the GSIS to Investment Promotion Agencies (IPAs) and their registered business enterprises (RBEs) are generally subject to both documentary stamp tax (DST) and value-added tax (VAT), unless otherwise expressly exempted by law. While the GSIS is exempt from DST under Section 39 of RA No. 8291, liability shifts to the other contracting party pursuant to Section 173 of the NIRC. IPAs are not exempt from DST or VAT, as the 5% special corporate income tax (SCIT) in lieu of all national and local taxes applies only to registered business enterprises, not to the IPAs themselves. For RBEs, those under the ITH regime are liable for DST, while those under the 5% SCIT regime are not, since the SCIT covers DST. As to VAT, registered export enterprises (REEs) may avail of the VAT zero-rating on local purchases (including insurance premiums) only if such purchases are directly and exclusively used in their registered project or activity, supported by a VAT zero-rating certificate issued by the concerned IPA, in accordance with RR No. 3-2023. Insurance related to assets or employees integral to the project may qualify for zero-rating, provided proper attribution is possible. Otherwise, or in the case of Domestic Market Enterprise, (DME) the purchase is subject to 12% VAT, which becomes part of the cost if the DME is under SCIT. Supporting documents such as the insurance policy, tax incentive registration status (ITH or SCIT), and the VAT zero-rating certificate must be submitted to avail of these tax benefits, subject to possible post-audit by the BIR. (BIR Ruling No. OT-032-2024, June 5, 2024)
The transfer of legal title to a new nominee-trustee of shares is not subject to CGT, donor’s tax, or DST, as there is no consideration or change in beneficial ownership.
Capital gains tax (CGT) and documentary stamp tax (DST) apply only where there is a sale, exchange, or transfer involving consideration or a change in beneficial ownership. DST applies only when there is an actual or constructive transfer of beneficial ownership. In this case, Nestlé Philippines, Inc. (NPI), the true and beneficial owner of a Manila Polo Club (MPC) membership share, merely transferred legal title from its former nominee BBB to new nominee CCC due to the end of BBB’s employment. The transfer was made under a Declaration of Trust confirming that CCC holds the share solely for NPI’s benefit, with no consideration and no transfer of beneficial ownership. As such, the transaction is not subject to CGT, donor’s tax (as there is no intent to donate), or DST. Only the notarization of the trust document is subject to DST under Section 185 of the Tax Code. (BIR Ruling No. OT-034-2024, September 4, 2024)
BIR DEADLINES FROM JUNE 9 TO MAY 18 2025.
A gentle reminder on the following deadlines, as may be applicable:
BIR DEADLINES FROM JUNE 16 TO JUNE 20, 2025.
A gentle reminder on the following deadlines, as may be applicable:
| DATE | FILING/SUBMISSION |
| June 16, 2025 | Estate Tax Amnesty |
| Consolidated Return of All Transactions based on the Reconciled Data of Stockbrokers – June 1-15, 2025 | |
| June 20, 2025 | e-FILING/FILING & e-PAYMENT/PAYMENT – BIR Form 1600 WP (Remittance Return of Percentage Tax on Winnings and Prizes Withheld by Race Track Operators) – eFPS & Non-eFPS Filers – Month of May 2025 |