October 28, 2026 Tax Update

COURT OF TAX APPEALS (CTA) DECISIONS

VAT ZERO-RATING ON FUEL SALES TO INTERNATIONAL VESSELS REQUIRES PROOF OF INTERNATIONAL SHIPPING OPERATIONS AND COMPLIANCE WITH ROUTE REQUIREMENTS, WHICH THE TAXPAYER FAILED TO ESTABLISH LACKING BOC CERTIFICATIONS. The sale of goods, supplies, equipment, and fuel to persons engaged in international shipping is subject to zero-percent VAT, provided that the buyers are engaged in international shipping and the fuel is used exclusively for such operations, including direct travel from a Philippine port to a foreign port without stopping at another Philippine port, except for specified purposes. In this case, the taxpayer claimed zero-rated sales from bunker fuel deliveries to international vessels. The Court accepted the Maritime Industry Authority (MIA) and Bureau of Customs (BOC) certifications, together with the sales invoices, Bunker Delivery Receipts, and Bunkering Permits, as sufficient evidence that the identified vessels were engaged in international shipping and proceeded to foreign ports or did not ply domestic waters. However, fuel sales without corresponding BOC certifications were disallowed from zero-rating because the taxpayer failed to establish that the corresponding vessels satisfied the required international shipping route conditions. Accordingly, only the adequately substantiated sales qualified for zero-percent VAT. (Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10884, April 23, 2026)

INPUT VAT REFUNDS REQUIRE PROPER DOCUMENTARY SUBSTANTIATION, AND INPUT VAT SUPPORTED BY DEFECTIVE INVOICES, INSUFFICIENT RECEIPTS, OR MISSING DOCUMENTS IS DISALLOWED. Input VAT claimed for credit or refund must be substantiated by the appropriate documents, including valid VAT invoices for domestic purchases of goods, official receipts for domestic purchases of services, and import documents showing actual payment of VAT. In this case, the taxpayer supported its claimed input VAT. However, the Court disallowed portions of the claimed input VAT because some lacked supporting documents, certain invoices did not contain the required information, some official receipts failed to indicate the nature of the services, and other amounts were overclaimed. Consequently, only the portion of input VAT adequately substantiated and shown to have been actually due or paid was considered valid, and the taxpayer only partially satisfied the requirements for an input VAT refund. (Petrotrade Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10884, April 23, 2026)

THE CTA LACKS JURISDICTION OVER A VAT REFUND APPEAL WHEN THE TAXPAYER FAILS TO PROVE THE DATE OF RECEIPT OF THE DENIAL NOTICE, PREVENTING THE COURT FROM DETERMINING WHETHER THE PETITION WAS FILED WITHIN THE PRESCRIBED 30-DAY PERIOD. The CTA has appellate jurisdiction over decisions or inactions of the CIR, provided that the judicial appeal is filed within the prescribed period of 30 days from receipt of the denial of the refund claim or expiration of the period for the Commissioner to act. In this case, the taxpayer filed an administrative claim for a VAT refund, which was denied through a VAT Refund Notice dated June 6, 2022. Although the taxpayer alleged that it received the notice only on October 4, 2022, it failed to present competent and credible evidence establishing the actual date of receipt. Moreover, its copy of the notice showed that the certification fee for obtaining a certified true copy had been paid on August 31, 2022, undermining its claim of later receipt. Without sufficient evidence of the date of receipt, the Court could not determine whether the Petition for Review was timely filed. Accordingly, the Court ruled that it lacked jurisdiction and dismissed the Petition for Review. (MD Panabo Agri-Ventures, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11020, April 21, 2026)

ZERO-RATED SALES TO PEZA-REGISTERED ENTITY REQUIRE PEZA VAT ZERO-RATING CERTIFICATION; SALES WITHOUT IT ARE DISALLOWED. VAT zero-rating on sales to PEZA-registered entities require proof that the customers remain qualified for the tax incentive. In this case, the taxpayer argued that its customers’ PEZA Certificates of Registration were sufficient to establish their entitlement to VAT zero-rating and that no separate PEZA certification was required. Since the taxpayer failed to present these certifications for certain customers, the corresponding sales were disallowed from VAT zero-rating, while the remaining sales supported by both the PEZA Certificates of Registration and PEZA VAT Zero-Rating Certifications were accepted. Accordingly, the Court En Banc affirmed the Court in the Division’s ruling. [Lantro Phils. Inc. v. Commissioner of Internal Revenue, CTA EB No. 3032 (CTA Case No. 10130), April 29, 2026]

VAT REFUND CLAIMS REQUIRE SPECIFIC PROOF THAT THE INPUT TAXES WERE NOT APPLIED AGAINST OUTPUT VAT. A taxpayer claiming a VAT refund bears the burden of proving, through sufficient and competent evidence, its entitlement to the refund and that the input taxes claimed have not been applied against output tax liabilities during the current and succeeding quarters. In this case, the taxpayer argued that the amount deducted from input tax in its amended first quarterly VAT return of 2017 covered the amount claimed for refund and that the remaining input tax carried over to succeeding quarters was already net of the claim. However, the Court found that the taxpayer failed to present evidence specifically identifying the amount claimed and establishing that it had not been applied against output VAT liabilities. Accordingly, the Court denied the claim for refund for failure to sufficiently substantiate its entitlement. [Lantro Phils. Inc. v. Commissioner of Internal Revenue, CTA EB No. 3032 (CTA Case No. 10130), April 29, 2026]

THE CTA MAY CONSIDER ADDITIONAL EVIDENCE NOT SUBMITTED ADMINISTRATIVELY, BUT THE TAXPAYER MUST STILL PROVE ALL REQUIREMENTS FOR A REFUND. Proceedings before the CTA are litigated de novo and are not strictly governed by technical rules of evidence, allowing taxpayers to present additional evidence to support their administrative tax refund claims. In this case, the BIR argued that the Court was limited to the documents submitted during the administrative proceedings and could not consider evidence presented for the first time before the CTA. However, the Court rejected this position, reiterating its authority to accept and evaluate additional evidence and determine issues even if they were not raised at the administrative level. The taxpayer must nevertheless prove every aspect of its claim and comply with all requirements for a tax refund, as failure to satisfy any requirement may justify denial of the claim. (MD Nabunturan Agri-Ventures, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11248, April 24, 2026)

A MERE CHANGE IN INVOICE HEADER DOES NOT CONSTITUTE A MAJOR SYSTEM ENHANCEMENT REQUIRING NEW BIR REGISTRATION. VAT invoices and official receipts must comply with prescribed invoicing requirements, while changes to a BIR-approved computerized accounting system require new registration only when they constitute major system enhancements. In this case, the taxpayer changed the header of its system-generated invoices from “Charge Invoice” to “Charge Sales Invoice/Commercial Invoice,” prompting the BIR to deny its VAT refund claim on the ground that the invoices were not covered by its approved computerized accounting system permit. However, the Court found that the change was merely formal and did not affect the system’s financial functions, modules, or software version; thus, it did not constitute a major system enhancement requiring new registration. (MD Nabunturan Agri-Ventures, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11248, April 24, 2026)

ZERO-RATED VAT COVERS ANCILLARY POWER RESERVES SOURCED ENTIRELY FROM HYDROPOWER, NOT MAINTENANCE OR OPERATION SERVICES. The sale of power generated through renewable energy sources, including hydropower, is subject to zero-percent VAT, which covers the sale of power capacity and related ancillary services generated from such sources. In this case, the taxpayer, a generation company operating the San Roque Hydroelectric Power Plant, sold electricity to the National Power Corporation and ancillary services in the form of power capacity or reserves to the National Grid Corporation of the Philippines. The Court ruled that the ancillary services qualified for zero-rating because the power capacity was sourced entirely from hydropower and did not involve the maintenance or operation of the power plant. Accordingly, the Court held that the BIR’s reclassification of the ancillary service sales as VATable was erroneous and recognized the taxpayer’s sales for the fiscal year ended March 31, 2020, as zero-rated. (San Roque Power Corporation v. Commissioner of Internal Revenue, CTA Case No. 10731, June 09, 2026)

A MOTION FOR NEW TRIAL CANNOT BE BASED ON FORGOTTEN EVIDENCE THAT COULD HAVE BEEN PRESENTED DURING TRIAL THROUGH REASONABLE DILIGENCE. A motion for a new trial may be granted only on grounds of excusable negligence or newly discovered evidence that could not have been obtained through reasonable diligence. In this case, the taxpayer’s Denial Letter was already in its possession before trial but was omitted from its evidence, and it failed to establish the actual date of receipt, a jurisdictional fact essential to its refund claim. The Court ruled that the letter constituted forgotten evidence, not newly discovered evidence, and that counsel’s negligence was not excusable; thus, the denial of the Motion for New Trial was proper. [HP PPS (Philippines), Inc. v. Commissioner of Internal Revenue, CTA EB No. 3044 (CTA Case No. 10090), April 22, 2026]

VAT REFUND CLAIM FILED BEYOND THE MANDATORY 90+30-DAY PERIOD IS TIME-BARRED, RENDERING THE DEEMED DENIAL FINAL AND UNAPPEALABLE. A taxpayer must file a judicial claim for a VAT refund within the mandatory and jurisdictional 90-day period for the CIR to act and the subsequent 30-day period to appeal the denial or deemed denial. In this case, the taxpayer filed its administrative claim on January 31, 2019, giving the CIR until May 1, 2019 to act and the taxpayer until May 31, 2019 to file its judicial claim. However, the taxpayer filed its petition only on June 4, 2019, beyond the prescribed period. Thus, the Court ruled that the judicial claim was time-barred and affirmed the denial of the refund claim. [HP PPS (Philippines), Inc. v. Commissioner of Internal Revenue, CTA EB No. 3044 (CTA Case No. 10090), April 22, 2026]

REASONS FOR DISALLOWANCE OF VAT REFUND CLAIM. Claims for VAT refunds and zero-rating require strict adherence to statutory eligibility rules and invoicing requirements under the Tax Code, as tax exemptions and refunds are strictly construed against the taxpayer. In evaluating declared zero-rated sales, the CTA disallows zero-rating when transactions fall outside the statutory scope of 0% VAT such as restricting renewable energy zero-rating strictly to power generation while subjecting ancillary reserve services to regular 12% VAT; or when supporting zero-rated Official Receipts (ORs) fail to explicitly state the specific nature of services rendered or lack supporting VAT ORs altogether. On the input VAT side, the Court systematically disallows creditable input tax claims based on Independent Certified Public Accountant (ICPA) audit findings and direct judicial verification due to statutory invoicing defects, including missing, unreadable, or out-of-period receipts, invalid BIR Authority to Print (ATP), omitted transaction dates or countersignatures, failure to separately reflect the VAT amount on invoices, ORs omitting service descriptions or referenced billing statements, overclaims exceeding face amounts on ORs, and capital goods purchases that were either unsupported or improperly claimed immediately instead of being deferred and amortized over future periods. (San Roque Power Corporation v. Commissioner of Internal Revenue, CTA Case No. 11012, April 07, 2026; TPSC Philippines Corporation v. Commissioner of Internal Revenue, CTA Case No. 10995, April 20, 2026)

BUREAU OF INTERNAL REVENUE ISSUANCES

BIR RMC No. 115-2026

Due to technical issues causing the unavailability of the Electronic Filing and Payment System (eFPS), the filing and payment deadlines for quarterly tax returns due on October 26, 2026, are extended to October 29, 2026, without penalty. 

Key Provision	Details
Issuance	Revenue Memorandum Circular No. 115-2026
Date of Issuance	October 26, 2026
Reason for Extension	Technical issues / unavailability of the Electronic Filing and Payment System (eFPS)
Affected BIR Forms	• BIR Form No. 2550Q (Quarterly Value-Added Tax Return)  • BIR Form No. 2551Q (Quarterly Percentage Tax Return)
Original Deadline	October 26, 2026
Extended Deadline	October 29, 2026
Penalties	No imposition of penalties
Effectivity	Immediately

RR No. 006-2026 and RMC No. 112-2026

The BIR issued RR No. 006-2026 and RMC No. 112-2026 to require sellers to show Creditable Withholding Tax (CWT) as a separate deduction on sales invoices, but only when the sale is actually subject to withholding tax. The taxpayer does not have to throw away old invoice booklets or immediately replace current machines. Existing manual invoices may continue to be used until fully consumed by simply writing or stamping the tax deduction, while computerized and register systems are granted compliance windows extending through late 2026 or early 2027 to update their software.

Invoicing Method / Topic	Summary of Requirements for the Taxpayer
General Rule: When to Show CWT	Only when required: The taxpayer adds the line only if the customer or buyer is legally required to withhold tax from the payment.  Not for regular shoppers: Everyday walk-in customers or ordinary retail shoppers (B2C) do not withhold tax, so the taxpayer is not required to enter a CWT amount.  Labels allowed: The taxpayer may label the entry as “Less: Withholding Tax”, “Less: Creditable Withholding Tax”, or simply “Less: CWT”.  Leaving the field blank: If an invoice contains a pre-printed CWT field but the transaction does not involve withholding, the taxpayer may write “N/A”, “0.00”, or leave the field completely blank without penalty.  Full sales reporting: The CWT line only reduces the final net cash amount collectible; it does not reduce the taxpayer’s reported gross sales or the VAT base calculation.
Manual Paper Invoices & Loose-Leaf	Consuming existing stocks: The taxpayer may continue using existing unused invoice booklets until fully consumed without surrendering booklets or securing a new Authority to Print (ATP).  Procedure for existing stocks: When a sale is subject to withholding tax, the taxpayer stamps, prints, or legibly handwrites the CWT phrase and amount on both the original and duplicate copies prior to issuance. The taxpayer is not required to stamp blank booklet pages in advance.  Newly printed invoices: Any new invoice booklets printed under subsequent ATP approvals must include the CWT line in the approved layout prior to use.   Single series requirement: The taxpayer is prohibited from maintaining separate booklets or series for withholding and non-withholding sales.
Cash Register Machines (CRMs)	Deadline: A taxpayer using cash registers is allowed until March 31, 2027 to reconfigure the machines.  Interim fix: Until the register is reprogrammed, the taxpayer stamps, prints, or writes the CWT line and amount directly on the printed tape or invoice for CWT transactions.  Full compliance: Starting April 1, 2027, every cash register must be capable of generating the CWT line and amount.
Point-of-Sale (POS) Systems (Non-Mandatory E-Invoicing)	Deadline: A taxpayer using POS systems not yet subject to mandatory e-invoicing has until March 31, 2027 to complete modifications.  Interim fix: The taxpayer writes or stamps the CWT details on the face of the printed receipt or invoice for covered transactions.  Full compliance: Starting April 1, 2027, the POS system must be capable of generating the CWT field whenever applicable.
Computerized Accounting Systems (CAS) & E-Invoicing Systems	Deadline: A taxpayer using CAS/CBA or invoicing systems covered by mandatory e-invoicing has until December 31, 2026 to complete software updates.  Interim fix: The taxpayer stamps or writes the CWT line and amount on printed copies while development is underway.  Full compliance: Beginning January 1, 2027, the electronic invoicing setup must generate, display, and preserve the CWT field on all invoices.
Software Updates & BIR Permits	Limited System Change (No new permit needed): When the software modification is limited solely to capturing, calculating, reconciling, or displaying CWT data, the taxpayer does not need to apply for a new system permit or re-registration.  Material System Change (New permit needed): If the update modifies core databases, invoice-numbering controls, cloud hosting, or security structures, it is classified as material and requires the taxpayer to obtain standard BIR approvals before use.
Online Platforms & Intermediaries	Customer invoices: An online merchant taxpayer issues the sales invoice to the customer for the full purchase price with the CWT line left blank or marked “0.00”, as regular buyers do not withhold taxes.  Platform deductions: The withholding tax deducted by an online platform is reflected in payout statements and withholding certificates (Form 2307), not deducted on the invoice issued to the retail customer.
Key Compliance Principles	Form 2307 required: Indicating the CWT amount on the invoice serves an informational purpose only; the taxpayer still requires BIR Form 2307 to claim creditable tax.  Invoice validity preserved: An omission of the CWT field does not invalidate an invoice or disqualify the tax claim or business expense claims if all other mandatory information is present.  Correcting differences: If a withholding error occurs or a customer determines withholding post-issuance, the taxpayer issues a BIR-registered Credit Memo referencing the original invoice rather than tearing up or canceling the original invoice.

Revenue Regulations (RR) No. 007-2026 amends RR No. 07-10 to institutionalize burden-sharing agreements and compulsory rebates for the mandated 20% senior citizen discount on medicines across pharmaceutical retailers, wholesalers, and manufacturers/distributors, strictly limiting each party’s deductible expense from gross income to its actual agreed share under Department of Health (DOH) guidelines.

Section / Topic	Detailed Summary
Issuance Details & Legal Basis	Revenue Regulations No. 007-2026, dated September 17, 2026.
Coverage	Expands the scope of covered entities supplying qualified goods and services to explicitly include pharmaceutical retailers, manufacturers, and distributors. Mandates that these entities are subject to DOH-prescribed burden-sharing arrangements for senior citizen discounts.
Burden-sharing agreement	Authorizes retailers, manufacturers/distributors, wholesaler-retailers, and wholesalers to enter into agreements to share the financial burden of senior citizen discounts on medicines, vaccines, and essential medical supplies. Requires burden-sharing agreements to be duly documented and formally furnished to the DOH in accordance with its prescribed guidelines and mechanisms.
Tax Treatment & Deduction Caps	Reaffirms that senior citizen discounts are treated as ordinary and necessary deductible expenses under itemized deductions (inapplicable if using the Optional Standard Deduction). Cap on Deduction: Where a burden-sharing agreement exists, the allowable deductible expense from gross income for each claimant cannot exceed the portion corresponding to its specific share under the agreement.
Effectivity	Takes effect fifteen (15) days following publication in the Official Gazette or on the official BIR website, whichever comes first.