Competence. Integrity. Commitment.

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)

COURT OF TAX APPEALS DECISIONS

A PETITION FILED WITH THE CTA DUE TO THE COMMISSIONER'S INACTION WITHIN 180-DAYS IS DISMISSIBLE FOR LACK OF JURISDICTION. In Nueva Ecija II Electric Cooperative, Inc. Area II v. Commissioner of Internal Revenue, G.R. No. 258101 (Notice), Apri119, 2022, the Supreme Court categorically held that no new or separate 180-day period is granted to the Commissioner of Internal Revenue (CIR) to act on the Administrative Appeal. The 180-day period is counted from the filing of protest to the Regional Director, not in the CIR’s administrative appeal. (CTA Case No. 10818, February 4, 2025)

AN ASSESSMENT IS VOID IF THE GROUP SUPERVISOR WHO RECOMMENDED THE NOTICE OF DISCREPANCY AND PRELIMINARY ASSESSMENT NOTICE IS NOT NAMED IN THE LETTER OF AUTHORITY; MEMORANDUM OF ASSIGNMENT CANNOT REPLACE A LOA. The issuance of a Letter of Authority (LOA) is a necessary prerequisite for the lawful examination of a taxpayer’s books and other accounting records by any Revenue Officer (RO). Without it, any resulting assessment is invalid. Furthermore, any reassignment or transfer of a case to another RO, as well as any revalidation of an expired LOA, must be accompanied by the issuance of a new LOA. In this case, although Group Supervisor Dominic Morales recommended the issuance of the Notice of Discrepancy and the Preliminary Assessment Notice, his name does not appear in any of the applicable LOAs—which list only Group Supervisors Ronaldo Camba and Constate Jr. Reinante. Consequently, the assessment is rendered void. (Helix Aggregates, Inc. (formerly Lafargeholcim Aggregates, Inc., v. CIR, CTA Case No. 10852, March 3, 2025); A Memorandum of Assignment cannot substitute a LOA is not valid and sufficient authority, even if the LOA was belatedly issued (Productivity Technologies Services, Inc. v. CIR, CTA Case No. 10873, March 7, 2025; Barrio Fiesta Manufacturing Corporation v. CIR, CTA Case no. 10213, MARCH 17, 2025)

ASSOCIATION DUES, MEMBERSHIP FEES, AND OTHER CHARGES COLLECTED BY HOMEOWNERS' ASSOCIATIONS ARE NOT SUBJECT TO VALUE-ADDED TAX (VAT). This is because such collections do not constitute a sale of services as defined under Section 105 of the National Internal Revenue Code (NIRC), which outlines the transactions subject to VAT. There is no commercial activity involved that can be considered taxable under VAT laws. These fees are merely collected to cover expenses related to the maintenance, repair, improvement, reconstruction, and administrative operations necessary for the association to provide services to its members. Moreover, Revenue Memorandum Circular (RMC) No. 9-2013 is null and void to the extent that it seeks to impose VAT on these collections, as it contradicts the clear provisions of Section 105 of the NIRC. (Pasig Green Park Village Homeowners Association, Inc. v. CIR, CTA Case No. 10149, February 6, 2025)

FAILURE TO SPECIFY THE NEWLY DISCOVERED EVIDENCE OR ADDITIONAL EVIDENCE; FAILURE TO SUBMIT DOCUMENTS WITHIN 60 DAYS FROM FILING OF REQUEST FOR REINVESTIGATION; OR SUBMISSION BEYOND THE 60-DAY PERIOD -  RENDERS THE ASSESSMENT FINAL AND UNAPPEALABLE. Under Section 3 of Revenue Regulations No. 12-99, as amended by RR No. 18-2013, a taxpayer may administratively protest a tax assessment by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment, in the manner prescribed by the implementing rules. For a request for reinvestigation, all relevant supporting documents must be submitted within sixty (60) days from the date of filing the protest; otherwise, the assessment shall become final. Additionally, the request must specify any newly discovered or additional evidence the taxpayer intends to present. In the present case, although the petitioner timely filed a protest on November 15, 2018, requesting a reinvestigation of the assessment for taxable year 2015, it failed to submit the required supporting documents by January 14, 2019, and did not identify any new or additional evidence as mandated. Instead, the petitioner merely made a general reservation to submit further documents without actual compliance. As a result, the tax assessment became final and unappealable, and the petitioner’s subsequent appeal was deemed premature, depriving the Court of jurisdiction to hear the case. (Suburbia Automotive Ventures, Inc. v. CIR, CTA Case No. 10128, March 3, 2025) In another case, the petitioner filed its Request for Reinvestigation on May 16, 2019, giving it until July 15, 2019 to complete the submission of all relevant documents. However, it only submitted the necessary supporting documents on August 28, 2019—104 days after the request and 44 days beyond the deadline. This delay signified that the protest was not properly or timely substantiated, resulting in the tax assessment becoming final, executory, and unappealable. The petitioner’s reliance on previous court decisions was misplaced, as those cases involved taxpayers who had submitted what they considered to be complete documentation within the prescribed period. In contrast, the petitioner’s subsequent submission of documents after the deadline indicated that the initial filing was incomplete. Furthermore, the Court rejected the petitioner’s interpretation that the 60-day rule is without consequence, as this would effectively nullify the clear directive of Section 228 of the NIRC. Since vital supporting documents—such as VAT invoices and official receipts—were only submitted after the lapse of the period, the protest lacked factual and legal basis within the required timeframe, rendering the request for reinvestigation invalid and the assessment final.(My Solid Technologies & Devices Corporation v. CIR, CTA Case no. 10293, February 6, 2025)

REVENUE REGULATIONS

Revenue Regulations No. 9-2025

Implementing the provisions of Republic Act No. 12066 (CREATE MORE Act) concerning the tax treatment of local sales of goods and/or services by Registered Business Enterprises (RBEs). It clarifies the application of Value-Added Tax (VAT) to such transactions.

VAT Rate on Local Sales	All local sales of goods and/or services by RBEs are subject to 12% VAT, unless exempt or zero-rated. Local sales shall include sales of goods and services to domestic market enterprises and non-RBEs, regardless of location.
Income Tax Regime Impact	The applicable income tax regime (e.g., Income Tax Holiday, 5% Gross Income Earned, Special Corporate Income Tax, Enhanced Deduction Regime, or Regular Corporate Income Tax) does not affect the VAT treatment of local sales.
Location of Sales	The location of the RBE or the transaction (inside or outside ecozones, freeports, or customs territory) is not a determining factor for VAT applicability on local sales.
Liability to Pay and Remit VAT.	Rests with the buyer of the goods or services.
Buyer’s VAT Status	Business-to-Business (B2B): VAT-registered buyers can claim input VAT on purchases from RBEs. ·         RBE-seller to bill the transaction inclusive of the VAT, which is shown as a separate item in the invoice that will be tagged as "VAT on Local Sales." (not to be included in the total amount due from the buyer); buyer to pay the purchase price to the RBE- seller, exclusive of VAT on local sales. ·         Buyer of the goods or services to and remit the corresponding VAT from the transaction. Filing and payment of VAT ·         Re. Goods from ECOZONES and Freeport – on a per transaction basis; BIR Form No. 0605 (in the meantime) to be transmitted to RBE-Seller for the release of the goods. ·         Re. Services from ECOZONES and Freeport – on a monthly basis; BIR Form No. 1600-VT; to be filed on or before 10th day; buyer to issue withholding VAT Certificate (2307) to the RBE-Seller ·         Re. Goods and Services from BOI-Registered Enterprise – on a monthly basis; BIR Form No. 1600-VT; to be filed on or before 10th day; buyer to issue withholding VAT Certificate (2307) to the RBE-Seller
	Business-to-Consumer (B2C): Non-VAT registered buyers cannot claim input VAT. ·         Imposing payment and remittance is not administratively feasible; buyer/consumer will still pay the VAT due on the transaction, but the RBE-Seller will be responsible for remitting it to the government. ·         The seller shall be responsible in remitting the VAT on local sales it charged to its buyers that are not engaged in business.
	Government agencies purchasing goods and/or services from RBEs must withhold 12% VAT on payments. |
Requirements to Claim of Input Tax by VAT-Registered Buyers	Sales Invoice issued by the RBE showing the amount of VAT on local sales; and Copy of the corresponding duly-filed BIR Form No. 1600VT or BIR Form No. 0605, whichever is applicable.
Optional VAT registration on local sales	If the RBE is under the 5% GIE or SCIT and all registered activities fall under the same income tax regime This will not affect the RBE's existing fiscal and non-fiscal incentives, including VAT zero-rating on local purchases and VAT exemption on importation that are directly attributable to the RBE's registered activity.

Revenue Regulations No. 10-2025

Amends the Consolidated VAT Regulations (RR No. 16-2005) to implement provisions of the National Internal Revenue Code (Tax Code) as amended by Republic Act No. 12066. These amendments focus on Value-Added Tax (VAT) zero-rating and refund procedures, particularly concerning export-oriented enterprises.

Export Sales Threshold	At least 70% of the enterprise's total annual production in the preceding taxable year must be exported.
Certification Requirement	Must obtain a certification from the Export Management Bureau (EMB) of the Department of Trade and Industry (DTI) confirming compliance with the export sales threshold.
Post-Audit Compliance	EMB may conduct post-audits to verify continued compliance with the export sales threshold.
Streamlining VAT Refund Claims	Taxpayers may submit certified true copies of supporting documents (e.g., invoices, receipts) for VAT refund claims instead of original documents.
Request for Reconsideration and appeal to the CTA	In case of partial or full denial of a VAT refund claim, taxpayers must file a request for reconsideration within 15 days of receiving the decision.   In case of full or partial denial of the request for reconsideration, or failure on the part of the CIR to act on the application for refund or request for reconsideration within the periods prescribed above, the taxpayer affected may appeal with the CTA within thirty (30) days: i.      after the expiration of the ninety (90)-day period to decide on the application for refund, in cases where no action is made by the CIR on the application for refund; or ii.     from the receipt of the decision denying the request for reconsideration; or iii.    after the lapse of the fifteen (15)-day period to decide on the request for reconsideration in cases where no action is made by the CIR on the request for reconsideration. When no decision is rendered within the 90-day period or the 15- day period, as the case may be, and the taxpayer-claimant opted to  seek for a judicial remedy within thirty (30) days from such period, the administrative claim for refund or the request for reconsideration shall be considered moot and shall no longer be processed.
Refund in case of cancellation of VAT registration (retirement or change in status)	2 year from the date of cancellation (issuance of BIR Tax Clearance)

Revenue Regulations No. 11

Implements provisions of the National Internal Revenue Code (Tax Code) as amended by Republic Act No. 12066, also known as the CREATE MORE Act.These regulations focus on enhancing tax compliance through the mandatory use of electronic invoicing and electronic sales reporting systems.

Mandatory Electronic Invoicing Requirement	Taxpayers engaged in E-commerce, under the jurisdiction of LTS, large taxpayers, using CAS/CBA, exporters, RBEs availing tax incentives, and using POS systems
Exemption	Micro taxpayers under the Ease of Paying Taxes (EoPT) Act (can voluntarily issue electronic invoices)
Electronic Sales Reporting Requirement	Applicable once BIR establishes system to store and process data, including e-commerce, LTS taxpayers, large taxpayers, exporters, RBEs, POS system users, etc.
Deductions for Compliance	Micro and Small Taxpayers: 100% of setup cost; Medium and Large Taxpayers: 50% of setup cost
Claiming Deductions	Deductions can be claimed only once within the taxable year when system setup is completed or final payment is made
Effective Date	March 14, 2025
Deadline for Compliance	March 14, 2026

Revenue Regulations No. 12

Amends Section 5 of Revenue Regulations No. 3-69 to enhance due process in the service and execution of summary remedies, particularly concerning the Warrant of Distraint and/or Levy (WDL).

Individual Taxpayers	- Serve personally to delinquent taxpayer, authorized representative, or a household member (legal age, sufficient discretion).- If refusal or absence, constructive service allowed with two credible witnesses (preferably barangay officials) who are not BIR employees. - Duplicate copy left at taxpayer’s premises, and a copy sent via registered mail/e-mail.
Corporate Taxpayers	- Serve to the president, vice president, manager, treasurer, comptroller, or any responsible person who customarily receives correspondence for the corporation.
Taxpayers Reported as "Cannot Be Located" (CBL)	- If the taxpayer resurfaces or their whereabouts are known, WDL and related notices (e.g., Warrants of Garnishment, Notice of Levy, Notice of Tax Lien, Notice of Encumbrance) are served simultaneously.
Effectivity	- Amendments took effect immediately upon publication on the BIR Official Website on March 6, 2025.

Revenue Memorandum Circular No. 14-2025

Provides clarifications and updates to the mandatory requirements for claiming tax credit certificates or cash refunds of excess/unutilized Creditable Withholding Tax (CWT) on income.These updates amend certain provisions of RMC No. 75-2024 to align with Sections 76(C), 204(C), and 229 of the National Internal Revenue Code (NIRC) of 1997, as amended.

Document Submission	Taxpayers can submit scanned, facsimile, photocopy, notarized, or certified true copies of BIR Form No. 2307 (Certificate of Creditable Tax Withheld) and BIR Form No. 1606 (Withholding Tax Remittance Return).
	Authenticity verified by cross-referencing with SAWT and Alphalist of payees. Included in the verification procedures of the processing office is the validation of the authenticity and veracity of the claimed BIR Form No. 2307 by comparing the CWT claimed per Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax at Source (SAWT) submitted by the taxpayer claimant with the annual or quarterly Alphalist of payees as attached in the BIR Form No. 1604E or 1601E submitted by the withholding agents of the taxpayer-claimant. If the data matches, the BIR can already be assured that the BIR Form 2307 claimed by the taxpayer-claimant is valid and authentic which makes the question as to whether or not the submitted document is an original copy already moot and academic
Taxpayer Types Clarification	Section 76(C) of the Tax Code applies to corporate taxpayers.
	Individual taxpayers should base claims on Section 58(E) in relation to Section 204 of the Tax Code.
Filing Tax Returns After Claim	Taxpayers cannot amend tax returns after filing a claim for income tax credit or refund.
	Only tax returns filed before the application will be considered in the claim evaluation.
Changes in Documentary Requirements	Annex "A.1" of RMC No. 75-2024 renumbered as Annex "A.1.1."
	New Annex "A.1.2" added for mandatory individual taxpayer-claimant requirements.
	Amendments made to Annexes "A.1," "A.2," and "A.4" of RMC No. 75-2024.
Effectivity	Amendments took effect immediately on February 19, 2025, upon publication on the BIR website.

Memorandum Circular No. 20-2025

Provides clarifications on the policies, guidelines, and procedures for processing and issuing the Tax Clearance Certificate for Final Settlement of Government Contracts (TCFG)

Coverage of TCFG Requirement	Required for government contracts involving any procurement via public bidding process (RA No. 12009); and procurement of goods, consulting services, and infrastructure projects (RA No. 9184, amended by RA No. 12009). Exempt for small value purchase contracts.
Definition of TCFG	TCFG is a certificate contractors must obtain before the final settlement of government contracts, confirming tax compliance. - TCFG needed only before the final (e.g., 10th) settlement in contracts with multiple installments.
Exemption from TCGP	Contractors are not required to secure a Tax Clearance Certificate for General Purposes (TCGP) for collection purposes when applying for the TCFG (in line with RA No. 11032).
Effectivity	The circular took effect immediately upon publication on the BIR Official Website on March 20, 2025.

BIR RULINGS

CASH DISTRIBUTIONS FROM PHILIPPINE DEPOSITARY RECEIPTS (PDRS) TO A NONRESIDENT FOREIGN CORPORATION ARE TAXED AS INTEREST AND NOT AS DIVIDENDS SINCE PDRS DO NOT CONFER STOCK OWNERSHIP. Under Section 28(B)(5)(b) of the Tax Code, dividends paid by a domestic corporation to a nonresident foreign corporation (NRFC) are subject to a 15% income tax, provided the NRFC’s country of residence grants a tax credit for taxes deemed paid in the Philippines equivalent to that 15%. In the case of Mercury Media Holdings Finance I, Ltd. (Mercury Media), an NRFC, the cash distribution it received from Philippine Depositary Receipts (PDRs) issued by ABS-CBN Holdings Corporation over ABS-CBN Corporation shares is not considered a dividend. As a media entity, ABS-CBN cannot be owned by foreigners, and Mercury Media, being a foreign corporation, cannot be a stockholder. Moreover, PDRs do not represent ownership of shares. Accordingly, the cash distribution is not a dividend subject to the reduced 15% rate but is treated as interest income subject to the regular 30% tax rate. (BIR Ruling No. OT-006-2024, January 24, 2024; see also BIR Ruling No. OT-007 and 009)

THE TRANSFER OF MEMBERSHIP SHARES TO A NEW NOMINEE-TRUSTEE IS NOT SUBJECT TO CAPITAL GAINS TAX, DONOR’S TAX, OR DOCUMENTARY STAMP TAX AS IT INVOLVES NO MONETARY CONSIDERATION, NO CHANGE IN BENEFICIAL OWNERSHIP, AND NO INTENT TO DONATE. Landbank of the Philippines (LBP) transferred its Manila Polo Club, Inc. (MPC) membership shares from its former nominee-trustee to a new nominee-trustee pursuant to a Declaration of Trust. This transaction is exempt from capital gains tax because it involves no monetary consideration and no change in beneficial ownership. It is also not subject to donor’s tax, as a valid donation requires intent to freely give, which LBP lacks given the business nature of the transfer. Additionally, documentary stamp tax does not apply since there is no actual transfer or conveyance of beneficial ownership of the shares. (BIR Ruling No. OT-008-2024, February 21, 2024; see also BIR Ruling No. OT-010-2024, February 22, 2024)

A TAXPAYER MUST CONSISTENTLY USE THE SAME INVENTORY VALUATION METHOD UNLESS A CHANGE IS APPROVED BY THE COMMISSIONER, PROVIDED THE NEW METHOD FOLLOWS BEST ACCOUNTING PRACTICES AND CLEARLY REFLECTS INCOME. Under Section 41 of the 1997 NIRC, once a taxpayer adopts a specific inventory valuation method for a taxable year, that method must be used in all subsequent years unless the Commissioner authorizes a change. The chosen method must align with the best accounting practices in the industry and accurately reflect income. In this case, Netfarms, Inc. was permitted to switch from the FIFO method to the Moving Average Method due to its new computerized accounting system, as this change complies with sound accounting standards and clearly presents the company’s income. Inventory items include agricultural and construction supplies, spare parts, fuel, lubricants, office supplies, and others (BIR Ruling No. OT-011-2024, February 22, 2024).

REAL PROPERTIES ACQUIRED BY A REAL ESTATE DEALER ARE CLASSIFIED AS ORDINARY ASSETS AND SUBJECT TO APPLICABLE TAXES, EVEN IF THEY DO NOT MEET THE TYPICAL DEFINITIONS OF ORDINARY ASSETS. Ordinary assets include: (1) stock in trade or similar inventory at year-end; (2) real property held primarily for sale in the ordinary course of business; (3) real property used in business subject to depreciation under Section 34(F) of the Tax Code; and (4) other real property used in the taxpayer’s trade or business. According to Section 3(a)(1) of RR No. 07-03, all real properties acquired by a real estate dealer are considered ordinary assets. Although the properties are not inventory, not primarily held for sale, not depreciable, nor used in business, the taxpayer’s engagement in the real estate business—including activities such as purchasing, owning, leasing, and selling properties—classifies all its real properties as ordinary assets. Consequently, sales of these properties are subject to Creditable Withholding Tax (CWT), Documentary Stamp Tax (DST), and Value-Added Tax (VAT) (BIR Ruling No. OT-012-2024, February 22, 2024).

UNIVERSAL CHARGE FOR MISSIONARY ELECTRIFICATION (UCME) COLLECTED BY DISTRIBUTION UTILITIES IS NOT  AN INCOME AND NOT SUBJECT TO VAT, WHILE PAYMENTS FROM THE UCME FUND TO NEW POWER PROVIDERS ARE ZERO-RATED FOR VAT UNLESS THE PROVIDERS ARE VAT-EXEMPT ELECTRIC COOPERATIVES. The BIR, in BIR Ruling No. 020-02, March 13, 2022, held that Universal Charge for Missionary Electrification (UCME) to be collected by the distribution utilities do not belong to PSALM and since they would not redound to its benefit, the same would not be considered an income. The UCME subsidy fund collected by the distribution utilities and/or electric cooperatives from its consumers, are eventually remitted in trust to PSAM for transfer to NPC and cannot be considered as part of their gross receipts. Thus, the same is not subject to VAT. On the part of the New Power Providers (NPPs)/ Qualified Third Parties (QTPs) who take over the generation function of NPC in the remote and unviable areas in the off-grid under Alternative Electric Service for Isolated Villages scheme, such payment to NPPS/QTPs from UCME fund for merchant electrification is subject to zero-rated VAT pursuant to Section 6 of RA No. 9136, unless such NPPs/QTPs are registered with the Cooperative Development Authority and considered as electric cooperatives enjoying VAT-exempt privilege pursuant to RA No. 9520. (BIR Ruling No. OT-013-2024, February 22, 2024)

VAT ZERO-RATING ON LOCAL PURCHASES UNDER THE CREATE LAW APPLIES ONLY TO GOODS AND SERVICES EXCLUSIVELY USED IN REGISTERED EXPORT PROJECTS; NON-EXPORT ENTERPRISES ARE SUBJECT TO REGULAR VAT. Section 5, Rule 18 of the amended Implementing Rules and Regulations of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Law) states that VAT zero-rating on local purchases applies solely to goods and services directly attributable to and exclusively used in the registered project or activity of registered export enterprises during the transitory period. Although registered export enterprises (REEs) may still avail of VAT zero-rating, it is limited to qualifying goods and services. Since Baliwag State University, despite being registered with PEZA as developer/operator for an Information Technology Park, is a non-export enterprise, payments for its construction project are subject to the regular 12% VAT. (BIR Ruling No. OT-014-2024, February 22, 2024).

BIR DEADLINES FROM MAY 26 TO JUNE 1, 2025. A gentle reminder on the following deadlines, as may be applicable:

DATE	FILING/SUBMISSION
May 30, 2025	SUBMISSION - Proof of eFiled BIR Form 1702 – RT/EX/MX with Audited Financial Statements (AFS), 1709 (if applicable), and Other Attachments through Electronic Audited Financial Statements (eAFS) or Manually -  Fiscal Year ending January 31, 2025
	SUBMISSION - Soft copies of Inventory Lists and Schedules stored and saved in DVD-R/USB properly labeled together with Notarized Sworn Declaration - Fiscal Year ending April 30, 2025
	e-SUBMISSION - Quarterly Summary List of Sales/Purchases/Importations by a VAT Registered Taxpayers - eFPS Filers - Fiscal Quarter ending April 30, 2025
	e-FILING/FILING & e-PAYMENT/PAYMENT - BIR Form 1702Q (Quarterly Income Tax Return For Corporations, Partnerships and Other Non-Individual Taxpayers) and Summary Alphalist of Withholding Taxes (SAWT) - For the Quarter ending March 31, 2025
	ONLINE REGISTRATION (thru ORUS) - Computerized Books of Accounts and Other Accounting Records - Fiscal Year ending April 30, 2025
June 1, 2025	SUBMISSION - Consolidated Returns of All Transactions based on the Reconciled Data of the Stockbrokers.  May 16–31, 2025
	SUBMISSION - Engagement Letters and Renewals or Subsequent Agreements for Financial Audit by Independent CPAs.  Fiscal Year beginning August 1, 2025

 

 

COURT OF TAX APPEALS DECISIONS

Receipt of Preliminary Assessment Notice (PAN) by a person who is not an employee renders the assessment void. According to Revenue Regulations No. 12-99, Section 3.1.6, as amended,, tax notices such as the PAN and Formal Letter of Demand (FLD) must be served personally. If personal service is not possible, substituted service is allowed under certain conditions—such as delivering the notice to a clerk, a person in charge at the business, or to a barangay official with witnesses if no one is present at the registered address. Here, the PAN was received by Richard Alarcon, an employee of Prime Pacific Grill. However, he was not employed by the taxpayer (James Fausto Cor.) Since he was neither a person in charge nor a qualified recipient under the rules, the service of the PAN was invalid, rendering the assessment void. (James Fausto Corp., v. CIR, CTA Case No. 10775, January 16, 2025)

The BIR must consider the taxpayer's explanations before issuing a Final Assessment Notice (FAN); if the basic tax amount remains unchanged and the BIR fails to justify rejecting the taxpayer’s response, the assessment is invalid. The BIR is required to rule on the PAN and must take into account the taxpayer’s explanations or arguments before issuing a FAN. Failure to do so renders the assessment invalid. If a comparison of the PAN and FAN shows that the basic tax amount remains the same, and the BIR merely reiterates the findings in the PAN without providing any justification for rejecting the taxpayer’s response, the assessment is considered void. (James Fausto Corp., v. CIR, CTA Case No. 10775, January 16, 2025)

Unverified third-party information (TPI) cannot form the basis of a tax assessment, and if the BIR fails to provide TPI sworn statement or requests, the assessment is void. Unverified TPI cannot constitute a valid factual basis for a tax assessment. If the assessment originates solely from the BIR’s data-matching with such third-party information—without any supporting sworn statement or verification from the source—and the BIR fails to formally offers in evidence the letter requests, the assessment is rendered void. (James Fausto Corp., v. CIR, CTA Case No. 10775, January 16, 2025)

A new Letter of Authority (LOA) is required when an examination is reassigned to a different revenue officer, and if an unauthorized officer conducts the examination, the assessment is void. A new LOA is required in cases where the examination is reassigned or transferred to a different revenue officer (RO). If the original LOA designates RO Cajuday and GS Pre, but the taxpayer’s logbook records show that RO Mandigma and GS Carim conducted the examination, with a visitor’s pass issued to Mandigma or Carim, and GS Carim received the submitted documents and was named in the PAN and FLD/FAN, despite not being authorized under the LOA, then the assessment is void. (Fabtech Kitchens Unlimited, Inc. v. CIR, CTA Case No. 10798, February 12, 2025)

A Memorandum of Assignment (MOA) cannot replace a LOA, and if unauthorized officers conduct the audit, the assessment is invalid. A MOA cannot replace a LOA as it does not grant the authority to conduct an examination or assessment. While the LOA authorized RO Bacorro and GS Arce to inspect the taxpayer’s books of accounts, RO Bacorro was transferred to a different district. Consequently, RO Sengco and GS Qunto carried out the audit, but since they were not named in the LOA—only in the MOA prepared by the Revenue District Officer—their authority is deemed invalid. (Delsan Transport Lines, Inc. v. CIR, CTA Case No. 10798, March 12, 2025)

If the BIR issues a FLD/FAN before the 15-day response period from the receipt of the PAN expires, the assessment is void. The taxpayer has 15 days from the receipt of the PAN to respond before the BIR can issue the FLD/FAN. Failure to observe this 15-day period renders the assessment void. In this case, assuming the PAN was received on December 19, 2016, the taxpayer had until January 3, 2017, to reply. However, since the BIR issued the FLD/FAN on December 29, 2016, before the 15-day period had expired, the FLD/FAN is considered void. (Delsan Transport Lines, Inc. v. CIR, CTA Case No. 10798, March 12, 2025)

Assessment notices can be personally served or mailed, but if delivery is disputed, the BIR must prove receipt; failure to do so, along with returned mail, violates the taxpayer's right to due process. Assessment notices may be served personally to the party. If personal service is not feasible, the assessment notices can be delivered by mail. In cases where the taxpayer denies receiving the assessment, the BIR bears the burden of proving that the notice was actually received. In this instance, the BIR failed to explain the taxpayer's claim of not receiving the PAN and the FLD/FAN, which were sent via registered mail. Furthermore, the FAN/FLD was marked "Return to Sender," and the examiner testified that the PAN was returned because the taxpayer could not be located at the registered address. As a result, the taxpayer's right to due process was violated. (Delsan Transport Lines, Inc. v. CIR, CTA Case No. 10798, March 12, 2025)

REVENUE REGULATIONS

Revenue Regulations No. 004-2025 increases the tax-exempt limits for clothing allowance to ₱7,000 and achievement awards to ₱10,000 under the “De Minimis” benefits, exempting them from income and fringe benefit taxes.

1. Clothing Allowance Increase: The tax-exempt limit for uniform and clothing allowance is raised from a lower amount to ₱7,000 per annum.
2. Achievement Awards: Tax-exempt employee achievement awards (e.g., for length of service or safety) are allowed up to ₱10,000 per year, whether given in cash, gift certificates, or tangible property, provided under a nondiscriminatory written plan.
3. Tax Exemption: These benefits are exempt from both income tax on compensation and fringe benefit tax.

Revenue Regulations No. 005-2025 imposes a 0.5% withholding tax on payments by credit card companies and digital platforms to merchants, amending RR No. 2-98 in accordance with RA No. 12066.

1. Credit Card Transactions: A 1/2% withholding tax is imposed on gross payments made by credit card companies to businesses for goods/services sold to cardholders.
2. Digital Platforms: A 1/2% withholding tax is also applied to gross remittances by electronic marketplace operators and digital financial services providers to merchants.

Revenue Regulations No. 006-2025 implements Sections 135 and 135-A of the Tax Code, as amended by Republic Act No. 12066, focusing on excise tax exemptions and refunds for petroleum products.

1. Excise Tax Exemption: Petroleum products sold to:
   • International carriers (Philippine or foreign) for consumption outside the Philippines.
   • Exempt entities/agencies under international agreements, provided reciprocity exists.
   • Entities legally exempt from direct and indirect taxes.
2. Refund of Excise Tax:
   • Suppliers must file a written refund claim within 2 years of payment.
   • BIR must act on complete claims within 90 days.
   • Denials can be reconsidered within 15 days (limited to legal issues).
   • Taxpayers can appeal to the Court of Tax Appeals within 30 days of denial or inaction.

Revenue Regulations No. 007-2025 reduces corporate income tax to 20% for qualified small corporations and RBEs under EDR, allows VAT input deductibility, and permits carryforward of excess tax payments.

1. Reduced Corporate Income Tax Rates:
   • 20% for domestic corporations with net taxable income not exceeding ₱5M and total assets not exceeding ₱100M (excluding land).
   • 20% for Registered Business Enterprises (RBEs) under the Enhanced Deductions Regime (EDR), effective November 28, 2024.
   • 25% for all other domestic and resident foreign corporations (effective July 1, 2020).
2. Scope of Reduced Rates: The 20% rate for RBEs only applies to income from registered projects; non-registered income is taxed at standard rates.
3. Deductibility of Input VAT: Input VAT on local purchases related to VAT-exempt sales is deductible from gross income under Section 34(C)(8).
4. Transitory Provision: RBEs that overpaid tax prior to these regulations may carry forward excess payments to the next period.

 

 

Revenue Regulations No. 008-2025 implements Sections 112(C) and 135-A of the Tax Code (as amended by R.A. No. 12066), specifically addressing procedures for requests for reconsideration on denied VAT and excise tax refund claims.

1. Scope: Covers reconsideration of denied refund claims for:
   • Creditable input VAT (Sections 112 A & B)
   • Excise tax on petroleum products (Section 135-A)
   • Applies to claims filed from April 1, 2025 onward.
2. Reconsideration Limits:
   • Only questions of law may be raised—not factual issues.
   • No new evidence allowed; only previously submitted documents are accepted.
   • Filing must occur within 15 days of receipt of the denial.
3. Procedural Rules:
   • Filed with appropriate BIR offices depending on the signatory of the denial.
   • Strict formatting and documentation requirements must be met.
   • Decision must be issued within 15 days from receipt of request.
   • If granted, refund must be processed within 20 days.
4. Appeals:
   • If denied or not acted upon within the prescribed period, taxpayers may appeal to the Court of Tax Appeals (CTA) within 30 days.

BIR RULINGS

Retirement pay is subject to tax if company has retirement plan registered with the BIR but employee completed only 6 years of service. Under the Tax Code, a retirement benefit plan that is duly registered with the BIR and classified as a reasonable private benefit plan is exempt from withholding tax, provided the employee has rendered at least 10 years of service with the same private employer and is at least 50 years old at the time of retirement. In the absence of a registered retirement plan, collective bargaining agreement, or any applicable employment contract, the Labor Code allows retirement benefits to be exempt from income tax if the employee has served for at least 5 years and is between 60 and 65 years old at retirement. However, if a taxpayer has a BIR-registered retirement plan but the employee has completed only 6 years of service, the retirement benefit will be subject to withholding tax. In such cases, the Tax Code takes precedence, even though the Labor Code allows tax exemption after 5 years of service (BIR Ruling No. OT-001-2024, January 9, 2024).

The transfer of property to a condominium corporation without consideration for the common benefit of unit owners is not subject to income tax, capital gains tax, VAT, or DST—except for DST on the notarial acknowledgment. The transfer of property to a condominium corporation without consideration, and solely for the purpose of project management for the common benefit of unit owners, does not result in taxable income and is not subject to capital gains tax. Additionally, documentary stamp tax (DST) is not applicable to conveyances of real property without consideration and not made in connection with a sale. VAT is also not imposed on property transfers where no payment is made and the beneficial ownership remains with the original party. In the case of Manila Jockey Club Inc., the landowner, and Alveo Land, the developer of Celadon Park Manila under a Joint Development Agreement, a condominium corporation (Celadon Park Manila Condominium Corporation) was established to hold title to the land and common areas of the project. The transfer of the land, facilities, utilities, and common areas to the Condominium Corporation without consideration is not subject to income tax, creditable withholding tax, VAT, or DST—except for the DST due on the notarial acknowledgment of the conveyance (BIR Ruling No. OT-002-2024, January 18, 2024).

Earnings of an employee trust fund are exempt from income and withholding tax if contributions are made for the exclusive benefit of employees and used solely for distributing earnings and principal. Earnings of employee trust fund are exempt from withholding tax if the following conditions are met: (1) Contributions to the trust are made by the employer, the employee, or both; (2) the contributions are intended for the distribution of both earnings and principal to employees; and (3) No part of the fund’s principal or income is used for purposes other than the exclusive benefit of the employees. Accordingly, when the University of the Philippines established a non-profit corporation to serve as a retirement fund for the benefit of its employees—intended to support retirement, resignation, or separation from employment—and where employees contribute to the fund for the purpose of receiving distributions, the earnings from bank deposits, interest, or other income derived from deposit substitutes, trust funds, and similar arrangements are exempt from income tax and withholding tax (BIR Ruling No. OT-003-2024, January 18, 2024).

A transfer of non-traded shares for a consideration, between spouses by an agreement in annulment proceedings, is treated as a sale and is subject to both capital gains tax and DST. A 15% capital gains tax is imposed on the transfer of shares of stock not traded on the stock exchange, whether through sale, barter, exchange, or other forms of disposition involving domestic shares. Accordingly, in a case involving annulment proceedings, where the spouses voluntarily executed a Memorandum of Agreement in which the husband agreed to transfer his shares in the Manila Polo Club to the wife for a consideration, the transaction is treated as a sale. As such, it is subject to both capital gains tax and DST (BIR Ruling No. OT-004-2024, January 18, 2024).

Transfers of real property as disturbance compensation are exempt from CGT and DST only if proven to result from the termination of tenancy due to land reclassification or conversion. Transfers of real property made as disturbance compensation are exempt from capital gains tax (CGT) and documentary stamp tax (DST). Disturbance compensation refers to payments made due to the termination of a tenancy relationship resulting from the reclassification or conversion of agricultural land into non-agricultural uses, such as residential, commercial, industrial, or other urban purposes. However, if land is transferred to assignees purportedly as disturbance compensation but there is no proof that the compensation arose from the extinguishment of a tenancy relationship due to land reclassification or conversion, the transaction will be subject to both CGT and DST (BIR Ruling No. OT-005-2024, January 18, 2024).

 

LETTER OF AUTHORITY

 

A LETTER OF AUTHORITY (LOA) MAY COVER MORE THAN ONE TAXABLE YEAR.  RMO 43-1990 provides that if the audit of the taxpayer shall include more than one taxable period, the other periods or years shall be specifically included in the LOA. In Commissioner of Internal Revenue (CIR) v. Sony Philippines, Inc., G.R. No. 178697, November 17, 2010, the Supreme Court ruled that if the CIR intended to include another taxable year, this should have been done by “including it in the LOA or issuing another LOA”. Thus, where the BIR issued a LOA covering January 1, 2010 to December 31, 2013, the LOA is valid. (Commission on Elections v. CIR, CTA Case No. 10588, November 13, 2024)  

 

A REASSIGNMENT OF REVENUE OFFICER (RO) REQUIRES A NEW LOA. The reassignment, transfer, or substitution of  an RO requires the issuance of a new or amended LOA to authorize the new RO to continue the audit or investigation. A Memorandum of Assignment, Referral Memorandum, or any equivalent document cannot serve as a substitute for the required LOA. Where the LOA was issued authorizing a group of examiners; and the audit was later transferred to another group of examiners through a memorandum of assignment, the assessment is considered void. Moreover, the  taxpayer can question the authority despite failure to raise the issue at the administrative level (CIR v. Sun Life Grepa Financial, Inc. CTA EB No. 2826, CTA Case No. 10080, December 12, 2024)

 

AN UNREVALIDATED LOA REMAINS VALID EVEN THOUGH THE PERIOD TO CONDUCT AUDIT HAS LAPSED. Under RMO No. 44-2010, an LOA need not be revalidated beginning June 1, 2010. The effect of failure to revalidate is merely to subject the examiners to applicable administrative sanctions but not to render null the LOA. Thus, where the LOA was not revalidated despite the lapse of period to audit, the same remains valid. (Grand Union Supermarket, Inc. v. CIR, CTA Case No. 10390, December 17, 2024)

 

A FINAL ASSESSMENT NOTICE AND/OR FORMAL LETTER OF DEMAND (FAN/FLD) REMAINS VALID DESPITE THE LACK OF AUTHORITY OF ADDITIONAL EXAMINERS WHO RECOMMENDED THE ISSUANCE OF THE FAN/FLD. All audit/investigations should be accompanied by an LOA. Where additional examiners who prepared and signed the audit reports and memorandum recommending the issuance of the FLD/FAN were not authorized under a new or amended LOA, but the original examiner has valid authority to conduct the audit; and where the original examiner recommended the issuance of the Preliminary Assessment Notice (PAN) but the taxpayer did not reply to it, and the additional examiners who prepared the FAN/FLD merely adjusted the interest,  the FLD/FAN remains valid. (Grand Union Supermarket, Inc. v. CIR, CTA Case No. 10390, December 17, 2024)

 

PRESCRIPTION

 

THE 10-YEAR PRESCRIPTIVE PERIOD SHALL NOT APPLY DUE TO THE BIR’S INCONSISTENT APPLICATION OF 25% AND 50% SURCHARGE AND BIR’S FAILURE TO PROVE ALLEGED WILLFUL NEGLECT TO FILE RETURN. In Mcdonald’s Case, G.R. No. 247747, August 8, 2023, to apply the 10-year prescriptive period, the  assessment notice must state the basis of allegations of falsity or fraud and BIR must have not acted in a manner that is inconsistent with the invocation of the extraordinary prescriptive period or have otherwise misled the taxpayer that the basic period will be applied.  Thus,  where the PAN and FLD/FAN reflected 50% surcharge but the actual amounts were equivalent to 25% of the basic tax due; the BIR's uncertainty and indecision regarding whether a 25% or 50% surcharge should apply misled the taxpayer and prejudiced its defense, as noted in McDonald's, the 10-year prescriptive period does not apply (United Graphic Printing Corporation v. CIR, CTA Case No. 10610, October 31, 2024)

 

AN UNVERIFIED THIRD-PARTY INFORMATION (TPI) AND EXECUTION OF WAIVER CANNOT BE A VALID BASIS OF A 10-YEAR PRESCRIPTIVE PERIOD BASED ON ALLEGED FILING OF A FALSE RETURN. In allegation of false return, the McDonald’s case ruled that the BIR must prove by clear and convincing evidence that the error or misstatement is deliberate or willful, unless there is prima facie evidence of falsity or fraud (30% threshold), in which case, the taxpayer has burden to prove otherwise. If the taxpayer failed to overcome the presumption, the 10-year period applies. If the taxpayer overturned the presumption (by demonstrating that the misstatement inadvertent or attributable to mistake or not deliberate), the BIR cannot rely on the presumption. In this regard, the BIR must observe the following due process: first, the assessment notice must state that the 10-year period is being applied with the basis of allegation of falsity and fraud; and second, the BIR must not act in a manner inconsistent with the invocation of the extraordinary period or have otherwise misled the taxpayer that the basic period will apply. As regards first requisite, the FLD/FAN and Final Decision on Disputed Assessments (FDDA) provide that the BIR is applying the 10-year period and a 50% surcharge was imposed due the alleged failure to report sales in an amount exceeding 30% of that declared in the return. In CIR v. MCC Transport Singapore PTE. LTD, G.R. No. 255382, June 27, 2021,  the Supreme Court ruled that unverified TPI cannot serve as a proper factual basis of an assessment. An assessment must be based on actual facts and substantiated by evidence. Without the necessary confirmation or verification, the data obtained from third-party matching cannot serve as factual basis. As regards the second requisites, the prior execution of a waiver is meant to extend the basic three-year period, which is inconsistent with the invocation of the 10-year extraordinary prescriptive period. (Wellcargo Customs Brokerage, Inc. v. CIR, CTA Case No. 10817, October 2, 2024)

 

A WAIVER EXECUTED AFTER THE 3-YEAR PERIOD IS HAS NO EFFECT; ITEM OF ASSESSMENT BECOMES INVALID. The BIR has 3 years to assess the taxpayer counted from the period fixed by law for the filing of the tax return or the actual date of filing, whichever is later, except, among others, when BIR and taxpayer executed a waiver. Where the waiver was notarized and accepted on May 26, 2015 and May 29, 2015, but the assessment prescribed in April 2015, the assessment for withholding tax is void. (Grand Union Supermarket, Inc. v. CIR, CTA Case No. 10390, December 17, 2024)

 

HONEST MISTAKE AND RELIANCE IN GOOD FAITH FROM BANGKO SENTRAL NG PILIPINAS ADVICE NEGATES FRAUD. In invoking a 10-year prescriptive period, a substantial under declaration of taxable sales, receipts or income or a substantial overstatement of deductions is prima facie evidence of a false or fraudulent return and can still be contradicted by other evidence. Moreover, the error or misstatement in the false return should be deliberate or willful. Where the accused did not include in his tax return the income from sale of gold with the BSP due to reliance in good faith from BSP Davao City Buying Station advice, the honest mistake and reliance with BSP does not make the annual ITR false. (People v. Rizaldy Goloran Chua, CTA Crim Case Nos. O-792 & O-793, October 29, 2024)

 

LGU MUST PROVE FRAUD FOR THE 10-YEAR PRESCRIPTIVE PERIOD TO APPLY. Local taxes shall be assessed within five (5) years from the date they become due, and no action for collection, whether administrative or judicial, shall be instituted after such period, except when, among others, there is fraud or intent to evade taxes,  in which case the extraordinary period of 10 years shall apply. Fraud is not presumed. Thus, where the LGU did not offer any evidence to substantiate its claim of fraud the 5-year period applies. (City Government of Valenzuela et. al v. NLEX Corporation, CTA AC No. 296, November 15, 2024)

 

NOTICE OF DISCREPANCY (NOD)      

 

ABSENCE OF NOD RENDERS THE ASSESSMENT VOID. In the case of CIR v. Pilipinas Shell Petroleum Corp, G.R. Nos. 197945 & 204119-20, July 9, 2018, the Supreme Court ruled, among others, that the taxpayer was deprived of due process when the Commissioner failed to issue a NIC (now NOD). In Avon Case, G.R. Nos. 201398-9, October 3, 2019,  the Supreme Court ruled that Notice of Informal Conference is a part of due process. Thus, where BIR assessed taxpayer for deficiency income tax and VAT, and the PAN was issued on January 29, 2021, without the Notice of Information Conference/Notice of Discrepancy, the taxpayer’s right to due process was violated. (Wellcargo Customs Brokerage, Inc. v. CIR, CTA Case No. 10817, October 2, 2024)

 

PRELIMINARY ASSESSMENT NOTICE (PAN)

 

REGISTRY RECEIPT, AFFIDAVIT OF SERVICE AND REPORT ON SERVICE ARE NOT SUFFICIENT TO ESTABLISH RECEIPT OF PRELIMINARY ASSESSMENT NOTICE. Under the NIRC, the taxpayer must be notified via PAN of the BIR’s findings as part of due process. One of the recognized modes of service of PAN is via registered mail. If the taxpayer denies receipt of the PAN, the BIR must prove that the notice was received.  In the cases of CIR v. Villanueva (G.R. No. 249540, 28 February 2024) and CIR v. T Shuttle Services, Inc. (G.R. No. 249540, 28 February 2024), the Supreme Court ruled that BIR must prove that authorized representatives received the PAN. Mere presentation of the registry receipts, without authentication or identification that the signature appearing on the receipt is taxpayer’s or his or her authorized representative’s, is not sufficient to prove actual receipt by the taxpayer. Thus, where  the affidavit of service does not verify the taxpayer’s actual receipt, and the Report on Service by Mail/Courier for the PAN does not demonstrate actual receipt by the taxpayer; and the BIR failed to show that authorized representative received the PAN, the assessment is cancelled (Broadcast Enterprises & Affiliated Media (BEAM), Inc. v. CIR, CTA Case NO. 10712, November 19, 2024)

 

SERVICE OF PAN VIA PRIVATE COURIER REQUIRES PROOF OF RECEIPT;  SERVICE OF FLD/FAN WITHIN THE 15-DAY PERIOD TO REPLY TO PAN VIOLATES THE TAXPAYER’S DUE PROCESS. One of the recognized modes of service of a PAN is through a reputable professional courier service. In such a case, the server accomplishes the bottom portion of the same notice and makes a written report under oath before a Notary Public or any person authorized to administer an oath. Additionally, the official receipt issued by the professional courier company containing sufficiently identifiable details of the transaction, must be attached to the case docket. An official receipt for courier services alone is not sufficient proof that the subject parcel was received as it is a mere written acknowledgment of the fact of payment in money or other settlement. It does not prove delivery. Moreover, in the case of Prime Steel Mill, Incorporated v. Commissioner of Internal Revenue (G.R. No. 249153, September 12, 2022), citing Commissioner of Internal Revenue v. Yumex Philippines Corporation (G.R No. 222476, May 5, 2021, the Supreme Court has held that the 15-day period provided under RR No. 12-99 for a taxpayer to reply to a PAN forms part and parcel of the due process requirement in the issuance of a deficiency tax assessment and the same must be strictly complied with; otherwise, the assessment becomes null and void. Where the PAN was received on 07 January 2016; but the BIR issued the FAN on 14 January 2016 within the mandatory 15-day period, the BIR violated the taxpayer's right to due process by issuing a FAN without even awaiting its reply to the PAN, or at least, the lapse of the period provided for the filing thereof. (United Graphic Printing Corporation v. CIR, CTA Case Ni. 10610, October 31, 2024; CIR v. HI-Stakes Gaming Incorporated, CTA EB No. 2841m CTA Case No. 10172, October 3, 2024; Health Plan Philippines, Inc. v. CIR, CTA Case No. 10262, December 4, 2024; John V. Olegarion v. CIR, CTA Case  No. 10967, December 10, 2024)

 

FAILURE TO DENY AUTHORITY OF ACCOUNTING STAFF/PERSONNEL TO RECEIVE THE PAN AND FDDA RENDERS THE SUBSTITUTED SERVICE VALID. The service of the PAN and FDDA may be made through a substituted service, which can be resorted to among others when the party is not present at the registered or known address, in which case, the notice may be left at the party's registered or known address, with his/her/its clerk or with a person having charged thereof. Where the PAN and the FDDA were respectively received by a certain Ms. Celia M. Mxxx, an accounting staff and Ms. Cris Marie Cordero, an accounting personnel, without  the taxpayer denying that these persons are not its employees or that they are not clerks or persons having charge of petitioner's place of business; an where the taxpayer’s witness testified he received the PAN and FDDA as his services was engaged by the taxpayer, the taxpayer is considered to have validly received the PAN and FDDA (Goodyear Steel Pipe Corporation v. CIE, CTA Case No. 10555, December 10, 2024)

 

FINAL ASSESSMENT NOTICE AND/OR FORMAL LETTER OF DEMAND

WRONG VENUE OF FILING OF PROTEST RENDERS THE ASSESSMENT FINAL AND EXECUTORY; WARRANT OF DISTRAINT AND/OR LEVY (WDL) REMAINS VOID DUE TO PRESCRIPTION. RMC 39-13 provided the list of the offices in which taxpayers may file their protest. These are: (1)  The Office of the concerned Regional Director; (2)  The office of the ACIR-LTS;  (3)  The office of the Assistant Commissioner-Enforcement Service ("ACIR-ES"); and (4)  The office of whoever signed the PANs, FANs, and FLD. Even though the PAN was signed by the Deputy Commissioner, who is an officer of an Regular Large Taxpayer Audit Division, an office under ACIR-LTS, the taxpayer should have filed the protest to the office of the ACIR-LTS, not with the office of the Deputy Commissioner. Thus, the assessment becomes final and executory. Nevertheless, the WDL is void if the prescription sets in regardless whether the assessment is final and executory. (Alphaland Balesin Resort Corporation v. CIR, CTA Case NO. 10485, November 5, 2024)

 

TAXPAYER’S FAILURE TO DISPUTE ASSESSMENT RENDERS THE ASSESSMENT FINAL, EXECUTORY AND DEPENDABLE; ASSESSMENT CANNOT BE APPEALED TO THE CTA. An assessment is considered "disputed" after a protest is filed against it within 30 days from date of receipt thereof. If a taxpayer fails to file its protest,  the assessment becomes final, executory and demandable, and the CTA has no jurisdiction to entertain the case. One of the modes of service of the FLD is by service through registered mail. Where the taxpayer directly denies receipt of the FLD, the burden of proving the actual receipt of the same lies with the BIR. Where it was admitted by the taxpayer that her staff received the FLD, but the taxpayer failed to timely protest the FLD, the FLD cannot be considered as a disputed assessment. Since there is no disputed assessment, nothing can be acted or decided upon by the BIR and nothing can be brought before the CTA for review  (Jeanifer P. Ajoc v. CIR, CTA Case No. 10642, December 17, 2024; see also (Ortiz Memorial Chapel, Inc. v. CIR, CTA EB No. 2651, CTA Case No. 9805, December 6, 2024)

 

AN ASSESSMENT, WHICH WAS NOT EXPRESSLY DENOMINATED AS A "FORMAL LETTER OF DEMAND" DOES NOT AFFECT ITS VALIDITY. The Supreme Court has recognized that there is no specific definition or form of an assessment (CIR v. Fitness By Design, Inc., G.R No. 215957, November 9, 2016, 799 Phil391-420.) It has been referred to as a "formal assessment" and/or "final assessment." What is important is that Formal Letter of demand and FAN must state the facts, law, rules, and regulations upon which the computation of tax liabilities is founded. Furthermore, the formal assessment notice must be served upon the taxpayer; it shall include a demand for payment within a specified period, thereby signaling the time when penalties and interests begin to accrue against the taxpayer and enabling the latter to determine his remedies therefor." Thus, the assessment served upon taxpayer denominated as a "Formal Assessment Notice" rather than a "Formal Letter of Demand" is not a fatal mistake that invalidates the tax findings against it when the FAN contains all the information required under the law and rules. (Gcomm Business Supplies Corporation v. CIR, CTA Case No. 10696, November 19, 2024)

 

PROTEST FILED AFTER 30 DAYS RENDERS THE ASSESSMENT FINAL, EXECUTORY AND DEMANDABLE. The taxpayer has 30 days to file its protest on the FAN/FLD. Thus, where taxpayer received the FAN/FLD on January 4, 2017, but it filed the administrative protest on February 6, 2017 or three days after the deadline, the failure to file the administrative protest within 30 days from FAN/FLD's receipt is jurisdictional and renders the assessments issued by respondent final, executory and demandable. (SCG Marketing Philippines, Inc. v. CIR, CTA Case No. 10776, October 30, 2024)

 

A STATEMENT IN THE ASSESSMENT THAT “PLEASE NOTE THAT THE INTEREST AND THE TOTAL AMOUNT DUE WILL HAVE TO BE ADJUSTED IF PAID AFTER THE DATE SPECIFIED HEREIN" AND A DUE DATE IS SPECIFIED WILL NOT AFFECT THE VALIDITY OF THE ASSESSMENT. In Fitness by Design Case, the Supreme Court invalidated the assessment as the amount was subject to modification and entirely dependent on the taxpayer’s payment date when the assessment stated “interest and total amount due will have to be adjusted if paid prior or beyond April 15, 2004”. Moreover, in the same case, the FAN did not set a specific due date. Thus, where the due date of February 17, 2020 was stated explicitly in the FAN/FLD, there is a definite amount of tax liability in this case. Further, the statement in the FLD that "the interest and total amount due will have to be adjusted if paid after the date specified herein” does not make  deficiency withholding tax liability indefinite so as to render the subject FLD/FAN void. This statement merely informs that the interest would have to be adjusted if payment is made after February 17, 2020. Only the 12% deficiency delinquency interest per annum will need to be adjusted if payment is made beyond February 17, 2020. Undeniably, the interest must be recalculated because the BIR cannot predict when the taxpayer will settle the deficiency taxes. Therefore, the total amount due may be adjusted based on the actual payment date. (Commission on Elections v. Commissioner of Internal Revenue, CTA Case No. 10588, November 13, 2024; Hawaiian-Philippine Company v. CIR, CTA Case No. 10726, November 13, 2024; .(Grand Union Supermarket, Inc. v. CIR, CTA Case No. 10390, December 17, 2024)

 

A PHRASE “REQUEST TO PAY” IS CONSIDERED A DEMAND.  A demand may take the form of a request for payment. Using phrases such as “requested to pay” or “requested to settle” does not negate an equivocal demand for payment of deficiency taxes. In the Fitness by Design Case, the Supreme Court did not find issue with the use of the word “request” and the assessment was cancelled for the reason that the absence of the due dates in the FAN negated the demand for payment. Thus, where the FLD/FAN indicated the due date, which confirms the BIR’s intent to demand payment before the indicated date, a “requested to pay [the] aforesaid deficiency tax” does not render the assessment void. (Hawaiian-Philippine Company v. CIR, CTA Case No. 10726, November 13, 2024)

 

IN REQUEST FOR REINVESTIGATION,FAILURE TO SUBMIT ADDITIONAL DOCUMENTS WITHIN THE 60-DAY PERIOD WILL NOT RENDER THE ASSESSMENT FINAL AND EXECUTORY. Under RR 18-2013,  an assessment shall become “final” if the taxpayer failed to submit relevant information in support of the protest within 60 days in case of requests for reinvestigation. “Final” means that the taxpayer is barred from introducing newly discovered or additional evidence. It does not mean that the assessment is final, executory or demandable. It cannot be taken to mean as a bar to avail the remedy of appeal as the rules  allow taxpayers to appeal. (Health Plan Philippines, Inc. v. CIR, CTA Case No. 10262, December 4, 2024).

 

ASSESSMENT IS VOID IF SENT VIA PRIVATE COURIER BUT SERVER DID NOT ACCOMPLISH THE BOTTOM PORTION OF THE NOTICE, NO DATE OF RECEIPT AND NO REPORT ON THE SERVICE. Section 228 of the Tax Code provides that the taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment is void. Assessment notices, sent via reputable professional courier service, must comply with the following requirements: the server shall accomplish the bottom portion of the notice; he shall also make a written report under oath before a Notary Public or any person authorized to administer oath under Section 14 of the NIRC, as amended, setting forth the manner, place and date of service, the name of the person/barangay official/professional courier service company who received the same and such other relevant information; and the official receipt issued by the professional courier company containing sufficiently identifiable details of the transaction shall constitute sufficient proof of mailing and shall be attached to the case docket. Where the assessment is issued via LBC, but the server did not accomplish the bottom portion of the notice, leaving the printed name, signature and designation of the person who received the subject assessment notices, and the date of receipt blank; the OR issued by LBC contains no identifiable details of the transaction, merely noting "document" without further specifics, he or she did not present any written report, certification, or any other document from LBC regarding the service of the assessment notice, the assessment is void. (CIR v. Grand Geo Spheres Construction Corp. (CTA EB No. 2763, CTA Case No. 9891, October 8, 2024), October 8, 2024) 

 

A REVENUE DISTRICT OFFICER’S ADMINISTRATIVE DECISION ON THE PROTEST IS INVALID; 180+30 DAY PERIOD WILL APPLY. The Commissioner's powers can be delegated only to subordinates with a position of "division chief or higher," meaning, that the CIR's power to decide on disputed assessments cannot be validly delegated to a BIR official of a rank lower than that of a division chief. Where the Administrative Decision is issued by the Revenue District Officer, which is not equivalent to or higher than a division chief, it is as though no decision was made. If no valid decision is arrived at, what is applicable is the 180+30-day period, i.e., petitioner had 30 days from the lapse of the 180-day period within which to file the instant Petition. (John V. Olegarion v. CIR, CTA Case  No. 10967, December 10, 2024)

 

A REPRESENTATIVE MUST BE AUTHORIZED BY SPECIAL POWER OF ATTORNEY FOR SERVICE OF NOTICE TO BE VALID. Revenue Regulations No. (RR) 12-99 expressly provides that in serving the required notices, personal delivery must be acknowledged by the taxpayer or his duly authorized representative. In Mannasoft Technology Corp. v. Commissioner of Internal Revenue, G.R. No. 244202, July 10, 2023, personal delivery shall be made directly to the taxpayer or a person who has been designated or authorized particularly to act for and on behalf of the taxpayer. The recipient acting on the taxpayer's behalf must possess sufficient authority or discretion. The tax authorities must inquire into the extent of authority the representative actually possesses before serving a tax notice. Thus, where notices were addressed to a certain “Rommel Braga,” the tax agents could have very well requested a special power of attorney or valid identification from this "Rommel Braga," to verify his supposed authority; and where apart from the bare assertion that this person was respondent's employee, the BIR did not offer proof that it took the necessary steps to verify and confirm the authority supposedly vested upon the person who received the notices, the assessment is void. (CIR v. Fidela D. Fernandez, CTA EB No. 2791, CTA Case No. 9908, November 6, 2024)

 

LACK OF DUE DATE IN THE FAN/FLD RENDERS THE ASSESSMENT VOID; A STATEMENT THAT THE “INTEREST WILL BE ADJUSTED IF PAID BEYOND APRIL 30, 2014” IS NOT THE DUE DATE. As held in the Fitness by Design case, the reckoning date of the accrual of penalties and surcharges cannot be considered as the due date for payment of tax liabilities. This was further reiterated in the more recent case of Republic v. First Gas Power Corporation (G.R NO. 214933, February 15, 2022) , where the Supreme Court held that the FAN and FLD subject therein were not valid because they failed to indicate a definite due date for payment. Thus, where the FLD issued against the taxpayer stated that the interest and the total amount due will have to be adjusted if paid beyond April 30, 2014, but the due dates were left blank, the date April 30, 2014 indicated in the FLD, cannot be considered as the due date to pay the assessments as said date only serves as the reckoning date for accrual of penalties and surcharges. (CIR v. Berringer Marketing, Inc., CTA EB No. 2662, CTA Case No. 8978, November 4, 2024)

 

THE BIR’S FAILURE TO PROVIDE BREAKDOWN AND SCHEDULE SHOWING HOW THE ITEM OF ASSESSMENT IS ARRIVED AT RENDER THE ITEM OF ASSESSMENT VOID. Under Section 228 of the NIRC, the taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. The presumption of correctness of assessment does not apply when the assessment is without foundation or rational basis. Thus, where the FLD/FAN did not provide any breakdown or schedule showing how the amount was arrived at; that BIR merely provided a separate audit working paper, which simply summed up the amounts in the debit portion to the taxpayer’s receivable allegedly taken from the general ledger; and the BIR failed to consider the adjustments such as correction of errors and other adjustment resulting in reduction in sales; and the taxpayer also submitted ICPA report providing for reconciliation, the taxpayer’s right to due process was violated as it was not formally informed of the facts and laws on which the assessment is based. (Hawaiian-Philippine Company v. CIR, CTA Case No. 10726, November 13, 2024)

 

FAN/FLD IS VOID IF ISSUED RIGHT AFTER THE TAXPAYER RESPONDED TO PAN; IDENTICAL FINDINGS IN PAN AND FAN WITHOUT CONSIDERATION OF THE EXPLANATION OF THE TAXPAYER IN THE REPLY TO THE PAN RENDERS THE ASSESSMENT VOID. As part of the taxpayer's due process rights in the issuance of a deficiency tax assessment, the taxpayer is granted a period of fifteen (15) days from receipt of the PAN to file a response thereto with the BIR.  Moreover, in Avon Case (G.R. Nos. 201398-99 & 201418-19, October 3, 2018), the Supreme Court ruled that The BIR must render its decision in such a manner that the taxpayer can know the various issues involved, and the reasons for the decisions rendered. Thus, where the taxpayer responded to PAN on December 18, 2020 (Friday); and the BIR issued a letter on Monday, December 23, 2020, informing the taxpayer that the response will not be considered and on the same day the FLD was issued, and the PAN and FLD are identical and no substantial difference between them except for a minor adjustment in computation of the deficiency interest, the assessment is void. (Central Pangasinan Electric Cooperative Inc. v. CIR, CTA Case No. 10724, October 22, 2024 See also First Telecom Philippines, Inc. v. CIR, CTA Case No. 10688, December 18, 2024; Aeon Credit Service (Philippines), Inc. v. CIR, CTA Case No. 10373, December 13, 2024)

 

THERE IS NO VIOLATION OF DUE PROCESS IF THE BIR ACCEPTED THE TAXPAYER’S EXPLANATION AND REDUCED THE ASSESSMENT. In CIR v. Avon Products Manufacturing, Inc. (Avon Case), G.R. Nos. 201398-99 & 201418-19, October 3, 2018, the Supreme Court set aside the assessment for violation of due process. Among other infractions, the CIR issued identical PAN and FAN, without acknowledging and considering the taxpayer's reply to the PAN, administrative protest, submission of additional supporting documents. There was no reference to, comment on, or, much less, explanation on the merits of Avon's explanations. Where the taxpayer ably raised its defenses, which, eventually, were considered by the BIR and resulted in a reduction of the assessment,  and the taxpayer’s reply was acknowledged in the FAN and made part of BIR records, and the BIR cancelled some items of assessment, and the amount due was reduced in the Final Decision on Disputed Assessment, there is no violation of due process. (Gcomm Business Supplies Corporation v. CIR, CTA Case No. 10696, November 19, 2024; Marina Square Properties, Inc. v. CIR, CTA Case No. 10601, December 13, 2024)

 

IF A PURCHASE DISCOUNT IS GRANTED AFTER THE ISSUANCE OF THE INVOICE, THE DISCOUNT DOES NOT AFFECT THE VAT BASE. As  rule, the tax base of VAT on the sale of goods or property shall be the gross selling price or gross value in money as indicated on the invoice. The tax base may be reduced should there be returns or allowance and/or discount.  Sales discount granted and indicated in the invoice at the time of sale and the grant of which does not depend upon the happening of a future event may be excluded from the gross sales within the same quarter it was given. Where the discount was agreed upon at the outset, and it was not given automatically, such that it remained conditional upon the taxpayer’s payment within the discount period, the discount should not affect the tax base and the BIR cannot validly disallow or reduce input VAT on purchase discount.(Gcomm Business Supplies Corporation v. CIR, CTA Case No. 10696, November 19, 2024)

 

ASSESSMENTS FOR DEFICIENCY INCOME TAX ARISING FROM UNDECLARED SALES VS. THIRD PARTY INFORMATION (TPI) IS CANCELLED FOR FAILURE TO VERIFY THE TPI SOURCES. Revenue Memorandum Order (RMO) No. 46- 2004 requires the BIR to verify the amounts it obtained from its computerized/third-party matching by securing confirmation or certification from the TPI source. Where no such confirmation or certification from the TPI sources was made/obtained, the data gathered from the computerized/third party matching are left unverified, thus, are not credible, the resulting assessment is void for lack of factual and legal basis. (Goodyear Steel Pipe Corporation v. CIE, CTA Case No. 10555, December 10, 2024)

 

THE BIR CANNOT VALIDLY SUBJECT TO INCOME TAX AN UNDECLARED PURCHASE OR IMPORTATION. For income tax purposes, a taxpayer is free to deduct from its gross income a lesser amount, or not to claim any deduction at all. What is prohibited by the income tax law is to claim a deduction beyond the amount authorized therein. The Supreme Court (Commissioner of Internal Revenue vs. The Court of Appeals, et. at., G.R. No, I08576, January 20, 1999) sets forth the three elements in the imposition of income tax, to wit: (1) there must be gain or and profit; (2) that the gain or profit is realized or received, actually or constructively; and, (3) it is not exempted by law or treaty from income tax. Where the BIR failed to establish the taxpayer’s right to receive income or that the gain or profit is realized or received from the alleged undeclared purchases and importations; and where BIR only assumed that the alleged undeclared purchases and importations were sold and then applied petitioner's gross profit ratio for the TY 20 11 to determine the supposed taxable income therefrom, the assessment lacks factual basis (Goodyear Steel Pipe Corporation v. CIE, CTA Case No. 10555, December 10, 2024)

 

FINAL DECISION ON DISPUTED ASSESSMENT (FDDA)

 

A BIR LETTER, EVEN IN THE ABSENCE OF SIGNED FDDA, IS CONSIDERED A FINAL DECISION OF THE BIR. A BIR letter is considered final decision where (1) it expressly mentioned that the assessment had become final, executory and demandable, and considered the deficiency taxes as delinquent taxes; (2) it also mentioned that, since petitioner's protest was not valid, the BIR did not have to issue the FDDA as the assessment had already become final; (3) a witness unrebutted testimony confirmed that the BIR already informed the taxpayer that it will issue an FDDA and that petitioner eventually received the said Letter; and, (4) the BIR demonstrated no intention of issuing the FDDA, as it remained unsigned and unserved. (Health Plan Philippines, Inc. v. CIR, CTA Case No. 10262, December 4, 2024)

 

THE FDDA AND THE ATTACHED ASSESSMENT NOTICES ARE VOID FOR FAILURE TO STATE THE DEFINITE DATE FOR THE PAYMENT; BUT A VOID FDDA WILL NOT RESULT IN INVALIDITY OF THE FORMAL LETTER OF DEMAND. In Pascor Case, G.R. No. 128315, June29, 1999, and Fitness by Design Case, G.R No. 215957, November 9, 2016, the Supreme Court ruled that a demand for settlement of the tax liability must be definite and fixed within the specified period. Where the FDDA with Assessment Notices reflected a due date of "March 31, 2021" but was issued on May 19, 2021 and received by petitioner on May 20, 2021, showing that the due date has already lapsed when the FDDA and the corresponding Assessment Notices were issued, making it impossible for petitioner to comply therewith, the said due date and the FDDA is deemed invalid. Nevertheless, despite the infirmity of the FDDA and the attached Assessment Notices, the FLD dated August 5, 2016  remains valid in the absence of any other ground which may nullify it as held in Liquigaz Case, G.R. Nos. 215534 and 215557, April 18, 2016, where the Supreme Court ruled that a void FDDA does not ipso facto render an assessment void. (Goodyear Steel Pipe Corporation v. CIE, CTA Case No. 10555, December 10, 2024; (Grand Union Supermarket, Inc. v. CIR, CTA Case No. 10390, December 17, 2024)

 

DATE OF RECEIPT OF THE FDDA MUST BE INDICATED IN THE FDDA OR SUPPORTED BY TESTIMONIAL EVIDENCE. A taxpayer has 30 days from the receipt of the FDDA to file  a judicial appeal. Thus, where the taxpayer claimed that it received the FDDA on April 27, 2021, but the FDDA did not indicate the date of receipt and only the date of issuance, which is on April 14, 2021, is stamped and where the date was not even supported by testimonial evidence, the petition, filed on May 27, 2021, is considered belatedly filed. (Goodyear Steel Pipe Corporation v. CIR, CTA Case No. 10541, November 25, 2024)

 

APPEAL TO COMMISSIONER

 

FAILURE TO INDICATE THE DATE OF RECEIPT OF THE FINAL DECISION ON REQUEST FOR RECONSIDERATION RENDERS THE CASE DISMISSIBLE FOR LACK OF JURISDICTION. Under 228 of the NIRC, the taxpayer has 30 days to appeal to the CTA from the receipt of the CIR’s decision or ruling. The Rules of Court clearly requires that the specific material dates shall be indicated in the petition for the purpose of showing that the same was filed on time, and that the petition be accompanied, among others, by material portions of the record that would support petitioner's allegations. Where the taxpayer failed to provide proof of date of receipt, and the date or receipt was not also indicated in the Final Decision on Request for Reconsideration (FDRR); the taxpayer’s witness did not also testify nor declare the date of the receipt, but rather confirmed that they were unaware of the circumstances surrounding the FDRR’s receipt; the Court is unable to confirm the date of petitioner's actual receipt of respondent's FDRR. As a result, it could not thus make a proper determination if petitioner's instant Petition for Review has been timely filed. (SCG Marketing Philippines, Inc. v. CIR, CTA Case No. 10776, October 30, 2024)

 

CRIMINAL CASE

 

FAILURE TO ESTABLISH AUTHORITY OF THE RECIPIENT RESULTS IN INVALIDITY OF ASSESSMENT AND ACQUITTAL OF THE ACCUSED. In substituted service of assessment notices, the rules require that the notice be left with the clerk or a person having charge of the taxpayer’s place of business. Where the BIR examiner failed to verify the identity of the recipient of the documents, and merely assumed that the recipient was the authorized representative, and the records did not show that the recipient was a  “clerk of person having charge” and was not duly authorized by the accused to receive, the assessment is void. (People of the Philippines v. Serafin Panaligan Villalobos, CTA Crim Case No. O-917, November 26, 2024)

 

IMPORTATION OF CHAINSAWS REQUIRE PRIOR PERMIT BY DENR; IMPORTATION OF USED TIRES IS PROHIBITED; SHIPMENT NOT USED AS INSTRUMENT TO COMMIT ILLEGAL IMPORTATION SHOULD NOT BE FORFEITED. Under Section 117 of the Customs Modernization and Tariff Act (CMTA), regulated goods shall be imported only after securing the necessary requirements before the importation. The importation of chainsaws is regulated under Chain Saw Act of 2002 (RA 9175) to prevent illegal logging. The same law allows importation of chainsaws with prior authorization from the DENR. Otherwise, the importation is unlawful even though DENR authorization is subsequently obtained. Moreover,  under Section 113 (f) of the CMTA, used tires are prohibited import. Thus, they may be seized by the Bureau of Customs. Lastly, under Section 113 (f) of the CMTA, goods imported contrary to law and goods used as instruments in the importation of the former should be seized or forfeited. The word "instrument" is defined as "a means whereby something is achieved, performed, or furthered;" or "one used by another as a means or aid.   Thus, partial seizure is allowed if the remainder of the shipment is not used in the commission of the offense. (ERS Surplus Venture v. Republic of the Philippines, CTA Case No. 10953, October 15, 2024)

 

THE BIR CANNOT SEIZE GOODS WITHOUT A SEARCH WARRANT WITHOUT PRIOR JUSTIFICATION FOR THE INTRUSION. One of the exceptions to the rule that the BIR must obtain a search warrant is that there was a prior justification for an intrusion or probable cause to enter the premises. Where the BIR seized cigarette raw materials, padlock the taxpayer’s office and warehouse thereby shutting down the taxpayer’s business operation by virtue of a mission order, which was issued based on an unverified allegation or “tip”, and the letter neither identified the signatory nor bore the company’s official letterhead, the seizure is invalid. Moreover, the intrusion is invalid if the Mission order did not comply with the requirements for its issuance such as conduct of “prelude to surveillance”. (People of the Philippines v. GB BEM Cigarette Co.,  CTA Crim No. O-935, November 20, 2024)

 

LACK OF PARTICIPATION IN THE PREPARATION OF DOCUMENTS AND SHIPMENT NEGATES FRAUD; IMPORTER MAY REDEEM SEIZED GOODS. Section 6 of CAO No. 001-20 provides that a discrepancy amounting to more than 30% of the duty and tax to be paid between what is legally determined and what is declared shall constitute prima facie evidence of fraud in case of misdeclaration, misclassification or undervaluation. Fraud must be actual and intentional. Where the taxpayer was able to refute fraud, the Customs must prove the same. Where it was shown that the taxpayer did not participate in the preparation of shipping documents and actual shipment, fraud is not present. Moreover, without fraud, the  importer may redeem the shipment. (Commissioner of Customs v. Globe Telecom, Inc., CTA EB No. 2782, CTA Case No. 9883, November 14, 2024)

 

LOCAL BUSINESS TAX

 

A PROVINCE CANNOT IMPOSE FRANCHISE TAX IF PRINCIPAL PLACE OF BUSINESS IS NOT LOCATED WITHIN ITS JURISDICTION. The Supreme Court in the case of City of Iriga v. Camarines Sur III Electric Cooperative, Inc., G.R. No. 192945, ruled that the situs of taxation for franchise tax is the principal place of business, regardless where the services are delivered. Where the principal place of business is not located in the province, the province cannot impose a franchise tax even though a station of the taxpayer is situated in the province. (TRANSCO v. Province of Davao Del Sur, et. al. CTA Case No. 239, October 31, 2024)

 

A LENDING DESK/OFFICE ACCEPTING A LOAN APPLICATION IS CONSIDERED DOING BUSINESS, BUT NOT CONSIDERED A SALES OUTLET SUBJECT  TO LOCAL BUSINESS TAX. Local business taxes shall accrue and be paid in the city where there is a branch or sales outlet making sales or transaction; otherwise, the sale shall be recorded in the principal place of business and the taxes due shall accrue and be paid in the city where the principal place of business is located. An act of accepting a loan application, although considered doing business as it is conducted with a view to profit, is not considered a sale transaction. Thus, where a lending desk is in Davao, but the loan applications are processed and approved in Makati, Davao cannot impose local business tax. The taxes due accrue and should be paid in Makati City  (Toyota Financial Services Philippines Corporation v. City of Davao et. al., CTA AC No. 280, October 15, 2024)

 

PRIOR REGISTRATION WITH THE LGU AS CEMENT MANUFACTURER IS NOT REQUIRED TO AVAIL OF PREFERENTIAL RATE OF LOCAL BUSINESS TAX; LGU MAY ASSESS TAXPAYER USING PRESUMPTIVE INCOME LEVEL ASSESSMENT APPROACH (PILAA) IN THE ABSENCE OF PROOF OF GROSS SALES AND WHEN ORDINANCE PROVIDES THEREFOR; TAXPAYER IS NOT ENTITLED TO PREFERENTIAL RATE IF IT IS NOT EXCLUSIVELY ENGAGED IN MANUFACTURING OF CEMENT AND IT FAILED TO SHOW THAT THE SALES WERE DERIVED FROM SALE OF CEMENT. Manufacturers and/or wholesalers of essential commodities are entitled to a preferential rate for local business tax. Cement is considered an essential commodity. A prior  registration with the LGU Bureau of permits that an entity is a manufacturer is not required, as long as the articles of incorporation of the entity shows that it is engaged in the business of manufacturing of cement. Moreover, the LGU may use PILAA as a method to assess LBT when two conditions occur simultaneously: (1) the taxpayer is unable to provide proof of its gross sales or receipts and (2) such is permitted by the local tax ordinance. Where the taxpayer failed to submit Certification of its gross sales or receipts and Manila ordinance allows the use of PILAA, the LGU validly assessed  the Company using the PILAA. Where the taxpayer is not exclusively engaged in the sale and/or manufacture of cement such that the AOI shows that the taxpayer may engage in sale and/or manufacture of all kinds of minerals and building materials; the certification of total gross receipts/sales does not indicate that the sales were derived solely from the sale of cement; and where the taxpayer’s witness stated that the taxpayer is engaged in wholesale and warehousing, the taxpayer is not entitled to preferential rate. (Holcim Philippines, Inc. v. The City of Manila et. al., CTA EB No. 2758, CTA AC No. 251)

 

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. 285, October 22, 2024); Other charges consisting of (a) Mayor's Permit; (b) Ecological and Waste Management Charges; (c) Peace & Order Charge; (d) Barangay Clearance; (e) Dr. Pia Scholarship Fund; (f) Fire Inspection Fee- National; and, (g) Penalties for Operating without Permit are not local taxes (NLEX Corporation v. The City of Valenzuela et. al., CTA AC. No. 297, November 18, 2024; see also National Grid Corporation of the Philippines v. Municipality of Bayombong, Nueva Vizcaya et. al., CTA EB No. 2795, October 10, 2024; The City Treasurer of Taguig v. Bellagio Two Condominium Association, Inc., CTA EB No. 2843, RTC SCA Case No. 285, October 3, 2024)

 

GROSS RECEIPTS, FOR PURPOSES OF IMPOSING LBT, EXCLUDES VAT. The taxpayer is not required to submit copies of its VAT returns. (The City of Valenzuela et. al. v. NLEX Corporation, CTA AC No. 290, November 25, 2024)

 

LGU WHERE PRINCIPAL PLACE OF BUSINESS IS SITUATED CANNOT VALIDLY COLLECT TAX ON BRANCH SALES; SIGNAGES AND INSTALLATIONS OUTSIDE LGU IS NOT CONSIDERED A BRANCH OR SALES OFFICE. Branches or sales outlets which record their sales therein should pay the local tax due in the city or municipality where they operate. Where an entity has factories, assembly plants, plantations, farms and project offices, the 30-70% rule on payment of local business tax shall apply. Where the entity has shown that it has branches outside of the principal office located in QC, QC LGU cannot impose tax on sales in the branches outside the LGU. (Quezon City et. al. v. Sky Cable Corporation, CTA AC No. 295, October 8, 2024); signages and installations in the LGU (outside of principal office) is not considered a branch or sales office or a fixed place of business where business transactions were held as there is no physical space within the general vicinity of these assets that are used for the generation, booking, and/or recording of revenue for these transactions. (NLEX Corporation v. The City of Valenzuela et. al., CTA AC. No. 297, November 18, 2024)

 

A BUSINESS SHALL BE CONSIDERED TERMINATED WHEN ITS OPERATIONS ARE STOPPED COMPLETELY AND SHALL BE OFFICIALLY RETIRED WHEN THE CORRESPONDING TAX DUE IS PAID. A mere application for business retirement/termination of business or even actual transfer of principal office to another locality does not automatically relieve the taxpayer from paying any taxes which may have accrued prior to the official closure or termination of business. Thus, where the application for retirement in Makati was filed two years after it has transferred its principal office to Taguig; where the sworn statement of gross sales/receipts showed sales in Makati; and where the Company has not paid, but rather protested the tax due, the Company cannot be said to have retired its business and is still liable for local business tax in Makati even if it has transferred to Taguig. (Lazada E-Services Philippines, Inc. v. City of Makati, City Treasurer of Makati, CTA EB No. 2766, CTA AC No. 261; City of Makati, City Treasurer of Makati v. Lazada E-Services Philippines, Inc., CTA EB No. 2767, CTA AC No. 261, October 24, 2024)

 

A CONDOMINIUM CORPORATION IS EXEMPT FROM LOCAL BUSINESS TAX UNLESS IT IS ENGAGED IN ACTIVITIES FOR PROFIT. In the case of Yamane v. BA Lepanto Condominium Corporation, G.R. No. 154993, October 25, 2005, the Supreme Court ruled that condominium corporations are generally exempt from local business taxation under the Local Government Code, irrespective of any local ordinance that seeks to declare otherwise. A condominium corporation may be liable for local business tax if it is engaged in activities for profit under the shelter of the condominium corporation. Thus, where the LGU failed to prove that the condominium corporation  is engaged in any business with a view to generate profit, such LBT assessment has no basis. (Taguig City Government et. al. v. Kensington Place Condominium Corporation, CTA EB No. 2807, SCA Case No. 272, December 3, 2024)

 

NGCP IS EXEMPT FROM REAL PROPERTY TAX. NGCP is liable to pay franchise tax “in lieu of all taxes”, which includes real property tax. A prior factual determination of the actual use of the properties is a condition for their exemption from real property tax. If these properties are determined to be actually and directly used for NGCP's electric power transmission, they are exempt; otherwise, they are not. The requirement of "actual and direct use" does not imply total or exclusive usage; it acknowledges that properties may be principally used in a manner that supports NGCP's franchise. The definition of "actual use" uses the modifiers "principally or predominantly." The term "exclusive" was purposefully not used by Congress in defining NGCP's tax exemption. (Heide D. Pangilinan et. al. v. The Central Board of Assessment Appeals and National Grid Corporation of the Philippines (CTA EB No. 2827, CBAA Nos. L-120 & L-121)

 

REFUND / ISSUANCE OF TAX CREDIT

 

REFUND OF EXCESS INPUT VAT ON ZERO-RATED SALES

 

Certain requisites must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT related to zero-rated sales. Said requisites are classified into certain categories, to wit:

As to the timeliness of the filing of the administrative and judicial claims:

• The claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made;
  • An application should be filed with the VAT Credit Audit Division (VCAD). Filing with an RDO, which is a wrong office, renders the application not filed. Failure to file before the VCAD is fatal since it is the correct office that has jurisdiction over its claim. Consequently, a taxpayer is considered to have failed to prove timely filing of administrative claim within the two-year prescriptive period. (BW Shipping Philippines, Inc. v. CTA Case No. 10317, November 19, 2024)
  • Taxpayer must prove the date of receipt. A manifestation showing the PHLPOST registered mail barcode and Certification issued by the Central Post office are not sufficient. They must be identified by testimony, and it must be proved that the mail matter pertains to the alleged decision of the BIR. (Chemrez Tehcnologies, Inc. v. CIR, CTA Case No. 10454, December 4, 2024)
• That in case of full or partial denial of the refund claim rendered within a period of 90 days from the date of submission of the official receipts or invoices and other documents in support of the application, the judicial claim shall be filed with the Court of Tax Appeals (CTA) within thirty (30) days from receipt of the decision.

With reference to the taxpayer's registration with the BIR:

• The taxpayer is a VAT-registered person;
  • Every person subject to any internal revenue tax is mandated to register with the BIR within a certain period of time. If such person maintains a head office, a branch, or facility, such registration shall be made with the BIR office having jurisdiction over said branch or facility. Moreover, said person or entity is required to pay an annual registration fee in the amount of P500 for every separate or distinct establishment or place of business, which specifically includes "facility types where sales transactions occur". Thus, a facility must be registered with the BIR, and in case sales transactions occur therein, the annual registration fee of P500.00 must be paid. Where a “facility”  houses the contact center agents who would perform contact center services, even if no billing statements or official receipts would be issued therefrom, the facilities should be registered as branches before the commencement or start of the business and paid the annual registration fee. Since the facilities are not register as VAT taxpayer, the refund should be denied. (Foundever Philippines Corporation v. CIR, CTA Case No. 10629, December 13, 2024)

In relation to the taxpayer's output VAT:

• The taxpayer is engaged in zero-rated or effectively zero-rated sales;
  • The invalid zero-rated sales will effectively result in a disallowance of valid input VAT because the effect of invalid zero-rated sales is as if no zero-rated sales were generated from which the valid input taxes may be imputed (CIR v. Carmen Copper, CTA EB No. 2735, CTA Case No. 10201; Carmen Copper Corporation v. CIR, CTA EB No. 2743, CTA No. 10201, November 26, 2024)
•  For zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b), and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations
  • The amounts in the remittances must correspond to the zero-rated sales. Otherwise, the claim is denied.(MD Rio Vista Agri-Ventures, Inc. v. CIR, CTA Case No. 10624, December 10, 2024)

•  Re. sales of services, certain essential elements must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%) to wit:
  •  The services fall under any of the categories under Section 108(B)(2), or simply, the services rendered should be other than ''processing, manufacturing or repacking of goods” (Royal Caribbean Cruises Ltd., under the name of RCL Regional Operating Headquarters v. CIR, CTA Case No. 10508, October 15, 2024)
  • The taxpayer must comply with invoicing requirements:
    • The VAT invoice or VAT official receipt must indicate the TIN of the purchaser or client in case of sales in the amount of more than 1,000 or more where the transfer is made to a VAT registered person. (CBK Power Company Limited v. CIR, CTA Case No. 8784, October 31, 2024)

 

Zero-rated on sale to renewable energy developers:

 

All RE Developers are entitled to VAT zero-rating on their purchases of local supply of goods, properties, and services necessary for the development, construction, and installation of plant facilities. The law explicitly declares that VAT zero-rating applies to the whole process of exploring and developing renewable energy sources up to their conversion into power, including but not limited to the services performed by subcontractors and/or contractors. For a sale transaction to an RE Developer to qualify for VAT zero-rating under RA No. 9513 and its IRR, the following conditions must be met:

1. The RE Developer must be registered with the Department of Energy and Board of Investments;
2. The local sales of goods, properties and services to the RE Developer are needed for the development, construction, and installation of the RE Developer's plant facilities and the whole process of exploration and development of RE sources up to its conversion into power; and

iii.          With regard to the supply of locally-produced RE equipment to an RE Developer, the manufacturer, fabricator, and supplier thereof must also be registered with the DOE and BOI (Air Drilling Associates Pte Ltd. v. CIR, CTA Case No. 10944, December 18, 2024)

 

As regards the taxpayer's input VAT being refunded:

• The input taxes are not transitional input taxes.
  • Transitional input tax credit operates to benefit newly VAT-registered persons, regardless of whether they previously paid taxes on the acquisitions of their beginning inventory of goods, materials, and supplies. During the transition from non-VAT to VAT status, the transitional input tax credit serves to alleviate the impact of the VAT on the taxpayer (Air Drilling Associates Pte Ltd. v. CIR, CTA Case No. 10944, December 18, 2024)
• The input taxes are due or paid.
• The input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume. In this case, the exempt sales must be considered in the allocation as well.

• Input tax must comply with invoicing requirements.
  • Reasons for disallowance:
    •  Nature of services cannot be ascertained in the supporting OR; incorrect TIN; incomplete address (Air Drilling Associates Pte Ltd. v. CIR, CTA Case No. 10944, December 18, 2024))
    • Not properly supported by VAT Invoices or ORs; purchase dated outside of the claimed period; without TIN; countersign is different from the authorized signatory; authority of the countersign cannot be ascertained; invoice or OR without t signature (Royal Caribbean Cruises Ltd., under the name of RCL Regional Operating Headquarters v. CIR, CTA Case No. 10508, October 15, 2024)
• the input taxes have not been applied against output taxes during and in the succeeding quarters.

 

REFUND OF UNUTILIZED CREDITABLE WITHHOLDING TAX

• In filing a claim for refund or credit of creditable withholding tax, compliance with the following must be met:

 

1. The claim for refund must be filed within the two-year prescriptive period.

• • • The two-year prescriptive period should be counted from the filing of the Final Adjustment Return, because it is only during that date that the exact tax liability or refundability of the tax can be determined. (Global Business Power Corporation v. CIR, CTA Case No. 10869, November 20, 2024)

 

• • • The law prescribes two options to a taxable corporation whose total quarterly income tax payment in a given taxable year exceeds its total income tax due. The taxpayer may either file a tax refund (either in the form of cash or tax credit certificate) or carry over the excess credit. However, once the carry-over option is taken actually or constructively it becomes irrevocable for that taxable period. The phrase "for that taxable period" refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer.
      • In exercising its option, the corporation must signify in its final adjustment return (by marking the option box provided in the BIR form) its intention either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other. (Global Business Power Corporation v. CIR, CTA Case No. 10869, November 20, 2024)

 

2. The fact of withholding must be established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom.

• • The second requirement mandates petitioner to establish the fact of withholding of the claimed CWTs by presenting a copy of the statement duly issued by the payor (withholding agent) to the payee, showing the names of the payor and payee, the income payment and the amount of tax withheld. BIR Form No. 2307 (Certificate of Creditable Tax Withheld at Source) serves as the competent proof to establish the fact of withholding. It is a withholding statement duly issued by the payor to the payee that reflects the amount paid and tax withheld, as described in Section 2.58.3(B) of RR No. 2-98. (Global Business Power Corporation v. CIR, CTA Case No. 10869, November 20, 2024)

 

3. The income upon which the taxes were withheld must be included in the return of the recipient.

 

Excise Tax

Pursuant to Sections 131 and 135, in relation to Sections 204(C) and 229, of the NIRC of 1997, as amended, petitioner is required to prove the following in order for its claim for refund to prosper:

1. Petitioner filed the refund claim within the two (2)-year prescriptive period;
2. The entity to which the petitioner sold the petroleum products is an entity exempt by law from indirect and direct taxes;

• With respect to enterprises located in the Subic Special Economic Zone (SSEZ), their tax exemption only takes effect upon the SBMA's issuance of a Certificate of Registration (CRT) or Certificate of Registration and Tax Exemption (CRTE). It is only from the date of issuance of the CRTE will the concerned business enterprise be entitled to the tax exemption from national and local taxes granted under Section 12(c) of RA No. 7227, as amended (Petron Corporation v. CIR, CTA Case No. 10632, October 28, 2024)

3. The petitioner is the statutory taxpayer which actually paid the excise taxes sought to be refunded on the same imported petroleum products sold to the exempt entity.

 

It is incumbent upon the taxpayer to prove, with preponderant evidence, that: (i) it imported lubricating oils and its additives and paid the excise taxes on said importations; and, (ii) the imported lubricating oils and its additives actually became a component in the blending process that eventually produced the finished goods or lube products  that were sold to its tax-exempt customers.  (Petron Corporation v. CIR, CTA Case No. 10632, October 28, 2024)

 

ONLY DECISIONS OR RULINGS ISSUED BY THE COMMISSIONER OF CUSTOMS ARE SUBJECT TO APPEAL TO THE CTA. Inaction does not fall within this purview. Thus, a petition for refund of duty and tax filed with the CTA on the inaction of the COC is dismissed. (LTJS Store v. Hon District Collector of Customs, CTA Case No. 10581, November 13, 2024)

 

IMPORTATION OF PRESCRIPTION DRUGS AND MEDICINES FOR DIABETES, HIGH CHOLESTEROL, AND HYPERTENSION IS EXEMPT FROM VAT EFFECTIVE JANUARY 1, 2020 UNDER THE TRAIN LAW. RMC No. 62-2020 providing that exemption becomes effective on January 23, 2020 is void as administrative regulations cannot prevail what the law prescribes. (Boehringer Ingelheim (Philippines), Inc. v. CIR, CTA Case No. 10758, October 22, 2024; CTA CASE NO. 10854, December 17, 2024)

 

SALE OF SHARES TO NRFC IS NOT SUBJECT TO INCOME TAX APPLYING RP-THAILAND TAX TREATY. The net capital gains (being gains from dealings in property) from the sale of shares of stock in a domestic corporation made outside the stock exchange by an NRFC may be subject to CGT but may be exempted therefrom "to the extent required by any treaty obligation binding upon the Government of the Philippines. Where a certificate of residence was submitted to prove that the petitioner is an NRFC and the real property interest is less than 50% of the entire assets, the petitioner is entitled to a refund of the final withholding tax paid. (Cal-Comp Precision (Thailand) Limited, v. CIR, CTA Case No. 10899, November 20, 2024)

 

ORIGINAL COPIES OF PROOF OF PAYMENT OF EXCISE TAX IS REQUIRED IN REFUND, UNLESS PHOTOCOPIES ARE NOT OBJECTED TO. Excise tax is paid by the owner or importer upon importation and prior to removal from the customs house. For purposes of refund, the 2-year prescriptive period is reckoned from the date of actual payment of excise taxes. Thus, the taxpayer must first show the date of actual payments of the excise taxes. In the case of Kuwait Airways Corporation v. Tokyo Marine and Fire Insurance Co., Ltd., G.R. No. 213931, November 17, 2021, The Supreme Court ruled that a photocopy of an original, therefore, may consist of a "duplicate" if there is no question that it is an accurate reproduction of the original." Thus, where the BIR did not object to the admission on the manner identified in court but subject to the condition that the documents are compared with the original documents, but the taxpayer merely submitted photocopies, the proof of payment should not be admitted in evidence, and therefore refund should be denied (Pilipinas Shell Petroleum Corporation v. CIR, CTA Case No. 10241, October 29, 2024)

LETTER OF AUTHORITY (LOA)

 

A LOA IS VALIDLY SERVED TO A PERSON WHO CUSTOMARILY RECEIVES CORRESPONDENCES FROM THE BIR. A LOA is intended to inform the taxpayers of the revenue officers (RO) who are duly authorized to conduct the examination and assessment. Where it was admitted that the person who received the LOA is an employee, and he received the First Request, showing that he customarily receives correspondences for the taxpayer, the person who received the LOA is an authorized person.  On the other hand, where the individual taxpayer was not present at the time of service of LOA and the examiner merely relied on the representation of the taxpayer’s supposed relative as to the authority to receive the LOA and the person who received the LOA is not an employee of the taxpayer, the LOA is void. With respect to the representative, principal must delegate the necessary authority. Agency is not presumed. Thus, where the BIR served the LOA to someone without verifying the position of the recipient, and it was found out that the one who receipt the LOA is a driver of the taxpayer, the LOA is improperly served. The act of receiving the LOA is no proof of authority. The act originating from the taxpayer must be shown.

A MEMORANDUM OF ASSIGNMENT (MOA) WITHOUT A LOA RENDERS THE ASSESSMENT VOID. An RO may recommend the assessment of any deficiency tax due. It is also clear, however, that such recommendation may only be done pursuant to a LOA. Where  an RO, who was not named in the LOA, was assigned through a mere MOA signed by the RDO, who is neither the Commissioner of Internal Revenue (CIR) nor a Regional Revenue Director, the issuance of a mere MOA insufficient to validly grant a RO with the authority to examine a taxpayer's records. Thus, the RO who examined taxpayer's records and recommended the deficiency assessment was not authorized to do so, rendering said assessment void. Moreover, even if a second LOA was issued on the examiner, the second LOA did not cure the defect, since the original investigation had already ceased as when the second LOA was issued, the FLD/FAN as well as the have already been issued.

 

A TAX VERIFICATION NOTICE (TVN) WITHOUT A LOA RENDERS THE ASSESSMENT VOID. Unless authorized by Commissioner himself or by his duly authorized representative, through a LOA, an examination of the taxpayer cannot ordinarily be undertaken. Here, there is no LOA to prove the authority of the revenue officer to conduct an audit of the petitioner and only TVN was issued against petitioner

 

__________________________________________

Li-Son Transport Service v. CIR, CTA Case No. 10631, July 26, 2024. Redentor Agpuldo Tagala, as the proprietor of 7^th Concept Trading/7C Construction v. CIR, CTA Case No. 10720, August 14, 2024. Strawberry Foods Corporation v. CIR, CTA Case No. 10282, July 12, 2024. Travel Warehouse, Inc. v. CIR, CTA Case No. 10098, July 12, 2024; CIR v. Ma. Erlina T. Ong, CTA EB No. 2785, CTA Case No. 10100, August 5, 2024; CIR v. Zilog Electronics Philippines Inc., CTA Eb No. 2762, CTA Case Nos. 9403 & 9492, June 18, 2024; CIR v. Basic Housing Solution, Inc., CTA EB No. 2723, CTA Case No. 9905, June 11, 2024 ; CIR v. Sellery Phils. Enterprises, Inc. CTA EB No. 2756, CTA Case No. 10047, August 5, 2024; Alphaland Southgate Tower Inc., v. CIR, CTA Case No. 10669, August 13, 2024; Prudentialife Plans, Inc. v. CIR, CTA Case No. 10339, August 24, 2024. R.A. Tagala & Co. Ventures, Inc. v. CIR, CTA Case No. 10217, July 19, 2024

for taxable year 2007. TVN is not equivalent to a LOA. A TVN which is nowhere mentioned in the 1997 NIRC, as amended, is not a LOA that vests an authority to revenue officer to conduct tax examination of a taxpayer . Thus, In the absence of a LOA, the assessment is void.

 

A LETTER NOTICE, WITHOUT A LOA, RENDERS THE ASSESSMENT VOID. The Supreme Court, in Medicard Case, G.R. No. 222743, April 5, 2017, ruled that an LN must first be converted into a LOA before the RO may examine and assess the taxpayer. An LN is not the same as LOA and the absence of a LOA is tantamount to violation of taxpayer’s due process.

 

AN ASSESSMENT OUTSIDE THE COVERED PERIOD OF LOA IS VOID. An assessment must be conducted pursuant to a valid LOA. Where the LOA covers January 2020 to May 31, 2021, but the assessment relates to quarter ending June 30, 2021, the assessment has no legal effect. Moreover, a Letter issued by the BIR informing the taxpayer that it cannot utilize excess input VAT is in the nature of assessment notice requiring a valid LOA.

A LOA AT THE REINVESTIGATION STAGE IS NOT REQUIRED.  The Tax Code requires authority from the commissioner or authorized representative before an examination of a taxpayer in the form of LOA. While the law explicitly requires a LOA to be addressed to a revenue officer before an examination of a taxpayer and recommendation of an assessment may be had, the law does not specifically require the same for purposes of recommending a final decision on a disputed assessment. Moreover, even assuming that a LOA is required to conduct the reinvestigation, its absence would only invalidate the resulting decision, such as the FDDA, but not the assessment. A new LOA however is not needed because the audit investigation process was already done – in case of reinvestigation, issuance of an assessment (thru a FAN), the objective of a LOA becomes functus offtcio.

A LOA IS VALID EVEN THOUGH NOT REVALIDATED WHEN CONDUCT OF AUDIT EXTENDED BEYOND 120-DAY PERIOD. Beginning June 1, 2010, a LOA need not be revalidated if the examiner failed to complete the audit within 120-days from issuance of the LOA. Where, the covered LOA is 2014, the lack of revalidation will not invalidate the LOA.

 

LOA COVERING 2 YEARS FOR RETIRING BUSINESS IS VALID. The issuance of LOA covering 2 years (immediately preceding year and short period) is valid for retiring businesses. Thus, where the RO was assigned to audit taxable period for 2015 and 2016 for retiring business, the LOA remains valid.

 

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Dizon Country Fresh v. CIR, CTA Case No. 10643, June 7, 2024.

Republic of the Philippines v. Mr. Ranson Diodell N. Tenerife, CTA EB No. 2805, CTA OC No. 025, July 10, 2024,

PMFTC Inc. v. CIR, CTA Case No. 10714, June 19, 2024.

Fort Bonifacio Development Corporation v. CIR, CTA Case No. 10343, August 22, 2024.

Alberto Lim Tangso/A.L Electrical Shop and Parts Supply v. CIR, CTA Case No. 10367, June 18, 2024

Strawberry Foods Corporation v. CIR, CTA Case No. 10282, July 12, 2024.

Glend Agnes Llantada Serviplus Medical Equipment Services & Supply v. CIR, CTA Case No. 10468, July 26, 2024.

 

PRESCRIPTION

WILLFUL INTENT MUST BE ESTABLISHED FOR A 10-YEAR PRESCRIPTIVE PERIOD TO APPLY. When either the return is not filed at all or the taxpayer files a "false or fraudulent return with intent to evade taxes", the BIR may assess the taxpayer within an extended period of 10-years from the discovery of the falsity, fraud, or omission. The 10-year period can be invoked only when willful intent is established. Where the BIR did not attempt to even allege such willful intent, the three-year period under Section 203 of the NIRC must be followed. Where the PAN, FLD/FAN and FDDA does not state the foregoing, 10-year prescriptive period will not apply. Imposition of 50% surcharge is not sufficient to apply the 10-year prescriptive period.

 

BIR’S RIGHT TO COLLECT AFTER 10 YEARS FROM ASSESSMENT PRESCRIBES. The BIR has five (5) years to enforce collection of deficiency taxes thru summary administrative remedies, such as the distraint and/or levy of taxpayer's property and/or thru judicial remedies, such as the filing of a criminal or civil action against the erring taxpayer. Where the BIR assessment was received in 2010, but collection was initiated only in 2021 or more than 10 years from the issuance of the assessment, the collection effort has prescribed.

CRIMINAL CASE PRESCRIBES WHEN INFORMATION IS FILED AFTER 5 YEARS FROM FILING OF CASE WITH THE PROSECUTOR’S OFFICE. All violation of Tax Code prescribes in 5 years. If the day of commission of the offense is unknown, 5-year period shall run from the discovery and filing of case in the prosecutor’s office for preliminary investigation and it will be interrupted by filing of information with the CTA. Where the CIR referred the case to the DOJ on July 5, 2012, the information should be filed until July 5, 2017 to the CTA. But since the information was filed on October 26, 2022 or more than 5 years, the offense has prescribed.

 

PROTEST

PROTEST MUST STATE THE RELEVANT DATES, AND FACTUAL AND LEGAL BASES. To validly protest against a FLD/FAN, the following must be stated in the protest: (i) the nature of the protest whether reconsideration or reinvestigation, specifying newly discovered or additional evidence he intends to present if it is a request for reinvestigation, (ii) date of the assessment notice, and, (iii) the applicable law, rules and regulations, or jurisprudence on which his protest is based. Failure to comply with these mandatory prerequisites renders the protest void and devoid of legal force and effect. Where protest lacks reference to the date of receipt, itemized statement of findings,

 

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Travel Warehouse, Inc. v. CIR, CTA Case No. 10098, July 12, 2024.

Fort Bonifacio Development Corporation v. CIR, CTA Case No. 10343, August 22, 2024.

Dizon Country Fresh v. CIR, CTA Case No. 10643, June 7, 2024.

People of the Philippines v. Ziegfried Loo Tian, CTA CEB Crim No. 117, CTA Crim Case No. O-945, July 31, 2024.

 

schedule of adjustments, no factual narratives supported by laws, regulations and jurisprudence, the protest is invalid and no disputed assessment to speak of.

 

REFUSAL TO RECEIVE PRELIMINARY ASSESSMENT NOTICE (PAN) REQUIRES THE BIR TO BRING BARANGAY OFFICIAL AND TWO DISINTERESTED WITNESSES TO PERSONALLY OBSERVE THE SERVICE OF THE NOTICE AND TO ATTEST TO THE REFUSAL.

 

Mode of Service of PAN/FLD/FAN/FDDA
Personal	Delivery to the party at his registered or known address or wherever he may be found
Substituted	· Not present -  notice be left at the party’s registered or known address, with the clerk or with the person in charge of the office · No person is found – BIR to bring barangay official and 2 disinterested witnesses; notice to be given to the barangay official · Refused - BIR to bring barangay official and 2 disinterested witnesses; notice to be given to the barangay official
Mail	By sending the notice with instruction to the postmaster to return the mail to the sender after 10 days, if undelivered; registry receipt issued by the post office containing sufficiently identifiable details of the transactions shall constitute proof of mailing and be attached to the docket

 

Corporations are always present and found at its address. Corporations act thru their directors or another person (officers, committees, or agents). Thus, PAN binds the corporation when it is received by the board of directors or officers pursuant to law or corporate by-laws. Thus, when an employee refused to receive the notice, but it did not bring a barangay official and 2 disinterested witnesses, the service of PAN violates the taxpayer’s due process and renders the assessment void.

ASSESSMENT IS VOID IF NOTICE IS RECEIVED BY THE SECURITY GUARD. The assessment may be served by reputable courier service under the regulations. While the regulation removes the requirement to indicate the designation and authority to act for and in behalf of the taxpayer if the assessment notice is received by a person other than the taxpayer, the Supreme Court still upholds it in Mannasoft case. Thus, where the assessment notice was sent via LBC and it was received by the security guard of the company, who is not an authorized representative, the assessment is void. Failure of the taxpayer to notify the BIR of the transfer will not cure the defect.

 

ASSESSMENT IS VOID IF NO NOTICE OF INFORMAL CONFERENCE (NOW NOTICE OF DISCREPANCY OR NOD) AND PAN WAS SERVED. In the Pilipinas Shell

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Li-Son Transport Service v. CIR, CTA Case No. 10631, July 26, 2024; Pentagon Gas Corporation v. CIR, CTA Case No. 10868, July 19, 2024; Up North Holdings, Inc. v. CIR, CTA Case No. 10208, June 25, 2024.

Xytrix Systems Corporation v. CIR, CTA Case No. 10629, August 6, 2024.

Ship to Shore Medical Assist, Inc. v. CIR, CTA Case No. 10550, June 6, 2024.

 

case, G.R. No. 172598, December 21, 2007, the Supreme Court emphasized the importance of following the procedures prescribed under RR No. 12-99, as amended, which includes the issuance of notice of informal conference (now NOD) and PAN. Here, no NOD or PAN was served by the BIR prior to the assessment. Thus, the assessment is void.

 

FLD/FAN WITH DUE DATE, STATEMENT “REQUESTED TO PAY”; GAP IN THE INTEREST COMPUTATION, IS VALID. The Supreme Court, in the case of Fitness By Design, G,R, No. 215957, November 9, 2016, invalidated the assessment as the FAN remained indefinite for being subject to modification and the FAN did not contain due dates. The vital element is the definiteness of the amount and the deadline for the payment. Where the assessment indicates the due date of assessment, the assessment is valid. Moreover, the phrase “you are requested to pay” cannot invalidate the FLD/FAN. It is used in the pro-forma FLD in RR 12-99, as amended by RR 18-2013.  The FLD/FAN was valid. Moreover, what is prohibited is the indefinite amount of total tax due and not the interest. Thus, gap of 2 months between due date of FLD/FAN and computation of interest will not make the amount indefinite; the use of the phrases "requested to pay," "requested that you settle," or "requested that you pay" does not negate the unequivocal demand for payment of deficiency tax.

 

THERE IS VALID DEMAND TO PAY A DEFINITE LIABILITY DESPITE THE STATEMENT “INTEREST WILL HAVE TO BE ADJUSTED” OR “IT IS REQUESTED” THAT THE LIABILITY BE PAID. For a tax assessment to be valid, it must not only contain a computation of tax liabilities but must also include a demand upon the taxpayer for the settlement of a tax liability that is definitely set and fixed. "A demand, within the meaning of the requirement of a demand for the payment of taxes, means any intimation to the taxpayer that payment is desired. There is a valid demand to pay a definite liability despite the statement “interest will have to be adjusted if paid beyond the date specified therein” and “it is requested” that liability be immediately paid, as it is sufficient that the tax due and interest are definite and fixed. Although the language of the FLD and FDDA may have been respectful, this did not change their tenor establishing that petitioner had an obligation to pay and, thus, it was being required to satisfy the same.

WHERE NO PAN WAS ISSUED TO THE TAXPAYER, THE FLD IMMEDIATELY ISSUED IS VOID. Taxpayer shall be issued with a PAN upon determination of deficiency taxes. Thereafter, it has 15 days from the receipt of the PAN within which to submit its response. Only after receiving the taxpayer's reply or the lapse of the 15-day period to file the same shall the BIR issue a final assessment (i.e., FLD/Final Assessment Notice ("FAN")). Here, the BIR’s non-issuance of the PAN prior to the issuance of the subject

 

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PMFTC Inc. v. CIR, CTA Case No. 10714, June 19, 2024;  CIR v. Grand Geo Spheres Construction Corp., CTA EB No. 2778, CTA Case No. 10207, June 12, 2024.  Li-Son Transport Service v. CIR, CTA Case No. 10631, July 26, 2024; (Fort Bonifacio Development Corporation v. CIR, CTA Case No. 10343, August 22, 2024  Altimax Broadcasting Co., Inc., v. CIR, CTA Case No. 10687, August 21, 2024  Ford Group Philippines, Inc. v. CIR, CTA Case No. 10316, July 15, 2024; Bio-Resource Power Generation Corporation v. CIR, CTA Case No. 10372, July 30, 2024; Xytrix Systems Corporation v. CIR, CTA Case No. 10629, August 6, 2024)

FLD constitutes a violation of petitioner's right to due process, thus, invalidating the assessment against the petitioner.

 

IDENTICAL SIDE-BY-SIDE COMPARISON OF FIGURES BETWEEN PAN AND FLD/FAN WITHOUT INDICATION THAT THE BIR CONSIDERED ARGUMENTS IN THE PAN RENDERS THE ASSESSMENT VOID. The BIR must consider the matters raised by the taxpayer. It cannot simply reproduce the PAN’s contents in the subsequent FLD/FAN without mentioning of the taxpayer’s arguments or any discussion on the merits (Avon Case). Where the FLD/FAN made no reference to the taxpayers reply to the PAN and the CIR did not mention any of the taxpayer’s arguments, much less give an intelligent discourse in resolving each matter raised, the assessment is void. 

 

FLD/FAN ISSUED ON THE 15^TH DAY TO FILE PROTEST TO THE PAN IS VOID; RECEIPT DATE AND NOT DATE OF MAILING IS THE RECKONING POINT OF THE 15-DAY PERIOD. A taxpayer that disagrees with a PAN issued against it may protest the same within 15 days from receipt of said notice. The FAN can only be issued either (a) within 15 days from the filing of the protest; or (b) after the expiration of the 15-day period for filing a protest if none is filed.  The 15-day period to reply to the PAN is counted from receipt of the PAN and not of the mailing. October 9, 2018 as the start of the 15-day period, taxpayer had until October 24,2018 within which to protest the PAN. BIR, however, issued the Formal Letter of Demand with the assailed FAN on that date (October 24), without waiting for the expiration of the 15-day period. This premature issuance was, again, a violation of petitioner's right to due process and yet another reason to declare the assailed assessment void.

 

FLD WITHOUT DEFINITE FINAL DATE OF PAYMENT IS VOID. An assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period. Here, the FLD did not provide for a definite final date for payment of the taxes assessed therein. More importantly, the said FLD did not have assessment notices attached thereto which could have likewise indicated a definite due date. Since the FLD failed to indicate the due date for payment, the assessment is void.

 

ELECTRIC COOPERATIVES ARE EXEMPT FROM INCOME TAX DESPITE NON-REGISTRATION WITH COOPERATIVE DEVELOPMENT AUTHORITY (CDA) Under Section 39 of P.D. No. 269, cooperatives registered with the National Electrification Administration ("NEA") are permanently exempted from paying income taxes. In the

 

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Arnel Cortez Manaloto v. CIR, CTA Case No. 10551, June 25, 2024.

Wipro Philippines, Inc. v. CIR, CTA Case No. 10814, June 24, 2024; Berong Nickel Corporation v. CIR, CTA Case No. 10319, June 11, 2024; Serbiz Multi-Purpose Cooperative v. CIR, CTA Case No. 10369, July 15, 2024; Bio-Resource Power Generation Corporation v. CIR, CTA Case No. 10372, July 30, 2024; Glend Agnes Llantada Serviplus Medical Equipment Services & Supply v. CIR, CTA Case No. 10468, July 26, 2024; CIR v. The Residences at Greenbelt Condominium Corporation, CTA EB No. 2910, CTA Case No. 9942, August 5, 2024; Altimax Broadcasting Co., Inc., v. CIR, CTA Case No. 10687, August 21, 2024; Motalban Methane Power Corporation v. CIR, CTA Case No. 10334, August 13, 2024.

Travel Warehouse, Inc. v. CIR, CTA Case No. 10098, July 12, 2024.

Arnel Cortez Manaloto v. CIR, CTA Case No. 10551, June 25, 2024.

 

case of Samar-1 Electric Cooperative, inc. v CIR (CTA EB No. 460 and 462, March 11, 2020), the CTA ruled that electric cooperative exempt from Minimum Corporate Income Tax under P.D. No. 269, even in the face of E.O. No. 93 and FIRB Resolution No. 24-87 and despite said cooperative not being registered with the CDA under the Cooperative Code. The ruling was reached via two conclusions: (1) registration with the CDA was optional for cooperatives already registered with the NEA; and (2) E O No. 93 is inconsistent with the Cooperative Code, which thus repealed the former. Thus, where the taxpayer is registered with NEA, it is exempt from income tax even if it is not registered with CDA.

SUBSEQUENT SALE OF VEHICLES BY THE CUSTOMERS OF BUYER-ENTITY REGISTERED IN SUBIC SPECIAL ECONOMIC ZONE WILL NOT AFFECT THE ZERO-RATED VAT TRANSACTION. Sales of goods by a V A T-registered taxpayer, such as petitioner, to entities located in the Subic Special Economic Zone, which by legal fiction is regarded as foreign territory, are considered "export sales" subject to VAT zero-rating, The subsequent resale by the buyer-entity of these vehicles and spare parts to its customers who may or may not bring them outside the SFZ is beyond taxpayer's control and should not affect the tax treatment of its sale of vehicles and spare parts.

 

DEDUCTION OF EXCESS INPUT TAX CARRIED FORWARD TO SUCCEEDING QUARTER DEDUCTED FROM INPUT TAX CREDITS WITHOUT EXPLANATION IS A VIOLATION OF DUE PROCESS. Taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Where the BIR deducted amount of excess input tax carried forward to succeeding quarter from the available input tax credits of petitioner which effectively disallows the same, and BIR did not provide for any legal and/or factual basis for disallowing the said amount, as such, the same must be cancelled.

 

A PRIOR TAX CLEARANCE IN FAVOR OF AN ABSORBED CORPORATION IS UNNECESSARY FOR THE SURVIVING CORPORATION TO ABSORB THE FORMER'S UNUTILIZED INPUT VAT  A merger shall be effective at the time the certificate approving the articles and plan of merger is issued, and this results in the transfer of all rights, privileges, immunities, franchises, and other assets of the absorbed corporation without need of any act or deed. Thus, the pending tax investigation of the absorbed corporation does not bar the transfer of its unutilized input VAT to the surviving corporation.

FINAL DECISION ON DISPUTED ASSESSMENT (FDDA) SIGNED BY THE CIR HIMSELF IS APPEALABLE TO THE CTA. Pursuant to the PAGCOR Case, G.R. No. 208731, January 27, 2016, a whole or partial denial by the CIR is appealable to the CTA. Thus, where the taxpayer received the FDDA, signed by the Commissioner himself, denying the protest and declaring the assessment final and demandable, the taxpayer’s remedy is to file an appeal to the CTA, not a letter-reply to the FDDA addressed to the

 

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Misamis Oriental Rural Electric Service Cooperative, I, Inc. v. CIR, CTA Case No. 10206, July 16, 2024.

Ford Group Philippines, Inc. v. CIR, CTA Case No. 10316, July 15, 2024.

Ford Group Philippines, Inc. v. CIR, CTA Case No. 10316, July 15, 2024.

PMFTC Inc. v. CIR, CTA Case No. 10714, June 19, 2024.

Commissioner. The letter-reply is an MR to the CIR that does not toll the running of the 30-day period to appeal to the CTA.

 

REQUEST FOR REINVESTIGATION TO THE COMMISSIONER ON THE FDDA ISSUED BY THE REGIONAL OFFICE IS NOT ALLOWED. Under RR No. 12-99, as amended by RR No. 18-2013, if the protest is denied by the CIR's duly authorized representative, the elevation to the CIR through a request for reinvestigation shall not be allowed. Instead, only a request for reconsideration shall be permitted. Taxpayer’s request for reinvestigation is not sanctioned by the regulations.

THE ISSUANCE OF WDL OR ANY FORM OF DEMAND TO COLLECT ASSESSMENT WITHOUT THE ISSUANCE OF FDDA IS TANTAMOUNT TO DENIAL OF PROTEST. Thus, WDL is not premature after the taxpayer’s grant of request for reinvestigation.  

 

AN ASSESSMENT ITEM INCLUDED IN THE FDDA AND NOT FOUND IN THE FLD/FAN, IS NOT VALID. To allow respondent to incorporate new assessments in the FDDA would deprive the taxpayer of its right to due process and would put the latter at the mercy of the former. Hence, the particular assessment should be cancelled for being issued contrary to the guidelines of RR No. 12-99, as amended by RR No. 18-2013.

 

JURISDICTION

 

WARRANT OF GARNISHMENT (WG) IS APPEALABLE TO THE CTA WITHIN 30 DAYS FROM ITS RECEIPT. In the Supreme Court case of CIR v. Algue, Inc., G.R. No. 225809, March 17, 2021, the warrant of distraint and/or levy is the CIR’s final decision. With the issuance of WG, the protest is considered denied. The taxpayer has 30 days from receipt of WG to file the petition with the CTA. Thus, where the WG was received in 2021, but instead of the taxpayer wrote a letter to the BIR, and appealed the letter received in 2022, the CTA has no jurisdiction over the case.

ENVIRONMENTAL FEE IS NOT A TAX AND NOT WITHIN THE JURISDICTION OF THE CTA. The CTA’s appellate jurisdiction over regional trial court’s decision become operative only when the case involve tax. Tax and fee are different from each other. The imposition is tax if the generation of revenue is the primary purpose; regulatory fee, if regulation is the primary purpose. 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.

APPEAL TO THE COURT OF INACTION OF THE LOCAL TREASURER ON THE PROTEST SHOULD BE FILED WITHIN 30 DAYS AFTER THE LAPSE OF 60-DAYS

 

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Pentagon Gas Corporation v. CIR, CTA Case No. 10868, July 19, 2024.

Up North Holdings, Inc. v. CIR, CTA Case No. 10208, June 25, 2024.

Xytrix Systems Corporation v. CIR, CTA Case No. 10629, August 6, 2024.

Golden Donuts, Inc. v. CIR, CTA Case No. 10336, July 30, 2024.

Country Bank, Rural Bank of Bongabong, Inc. v. BIR, CTA EB No. 2760, CTA Case No. 10864, August 5, 2024.

DOLE Philippines Inc. – Stanfilco Division v. The Sangguniang Panlungsod of the City of Davao et. al., CTA AC no. 286, Civil Case No. R-DVO-20-0252-CV, June 7, 2024.

 

FROM FILING OF PROTEST. Whenever a taxpayer receives a notice of assessment from a local treasurer, he or she can file a protest thereto with the local treasurer within 60 days from receipt of such notice of assessment. Thereafter, the local treasurer has 60 days to decide a protest filed by a taxpayer. Should the local treasurer wholly or partly deny the protest, the taxpayer then has 30 days to file an appeal with the regular courts from (1) the receipt of the denial of the protest; or (2) from the lapse of the 60-day period for the local treasurer to decide on the protest. Significantly, the failure of the local treasurer to decide a protest on time is deemed a "denial due to inaction" and as such can be acted upon by the regular courts. The taxpayer does not have the option to wait for an actual denial by the local treasurer before filing an appeal. Here, the protest was filed on March 13, 2019, the treasurer has until May 12, 2019 to decide. Without the decision, the taxpayer has until June 11, 2019. But where the taxpayer filed the appeal on June 13, 2019, the court has no jurisdiction to rule on the appeal.

 

AVON CASE DOES NOT APPLY TO FDDA. Avon case applies to a situation where the BIR issued identical amounts of assessments in the PAN and FAN, without considering the arguments and documents submitted by a taxpayer in its protest. It does not apply to a situation where FLD and FDDA contains the same amounts of assessments and explanation. An assessment itself differs from a decision on a disputed assessment.

 

CASH BASIS OF ACCOUNTING REQUIRES PROOF THAT TAXPAYER MAINTAINS CASH SALES BOOKS. The taxable income of a taxpayer shall be computed in accordance with the method of accounting regularly employed in keeping its books, but if it does not regularly employ a method of accounting which reasonably shows the correct income, the computation of income shall be made in such manner as in the opinion of the Commissioner clearly reflects such income. Where the taxpayer adopts cash basis of accounting, but it failed to show proof that it regularly employs cash basis method of accounting, such that the sales book has no indication of cash sales or sales on account, the BIR can compute income tax based on accrual/invoice.

BIR’S FAILURE TO PRESENT REGISTRY RECEIPT AND CERTIFICATION OF POSTMASTER WHEN RECEIPT OF PAN IS DENIED, RENDERS THE PAN INVALID; BIR MUST EXPLAIN WHY IT IS RESORTING TO SERVICE BY MAIL. The Supreme Court in the case of CIR v. Metro Star Suprema, Inc. (G.R. No. 185371, December 8, 2010) ruled that issuance and service of PAN is part of due process requirement. PAN is served through personal service, and if not practicable, by substituted service or by mail. The server shall make a written report under oath setting forth the manner, place and date of service, the name of the person who received the same and such other relevant information. The registry receipt shall constitute sufficient proof of mailing and shall be attached to the docket. Where the taxpayer denied receipt by mail, The BIR has the burden to prove that the mailed matter was received. Where the BIR failed to present the registry receipt and the certification of the postmaster to prove od mailing an and receipt, nor present the testimony of the BIR server or personnel who delivered the mail to the post office, the PAN is void.

 

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Public Safety Mutual Benefit Fund, Inc v. Rosette A. Lauian, CTA AC Case No. 245, June 11, 2024

Alberto Lim Tangso/A.L Electrical Shop and Parts Supply v. CIR, CTA Case No. 10367, June 18, 2024

Alberto Lim Tangso/A.L Electrical Shop and Parts Supply v. CIR, CTA Case No. 10367, June 18, 2024.

Ma. Erlinda Ong v. CIR, CTA Case No. 10444, June 13, 2024.

 

REFUND OF EXCESS INPUT VAT ON ZERO-RATED SALES

Certain requisites must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT related to zero-rated sales. Said requisites are classified into certain categories, to wit:

 

As to the timeliness of the filing of the administrative and judicial claims:

 

1. The claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made. In accordance with Section 112(A) and (C) of the NIRC of1997, as amended by TRAIN Law, the administrative claim for refund of unutilized input VAT must be filed with the BIR within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made.
2. That in case of full or partial denial of the refund claim rendered within a period of 90 days from the date of submission of the official receipts or invoices and other documents in support of the application, the judicial claim shall be filed with the Court of Tax Appeals (CTA) within thirty (30) days from receipt of the decision made.

• Where the taxpayer failed to offer the Denial Letter with proof of receipt, the CTA has no means to determine whether the judicial claim was timely filed.
• In case of inaction within the said 90-day period, petitioner had thirty (30) days from such expiration to file its judicial claim. Any belated decision is not binding upon the taxpayer. The non-receipt of the decision within 90 days is considered inaction and the reckoning point to file the judicial claim within 30 days.
• For regional cases, the power to decide applications or claims for refund of creditable input taxes was delegated to the Regional Director, within the 90-day time frame. The participation of a Revenue District Officer (RDO) after the filing of the claim is limited only to verification/processing. Thus, for applications or claims for refund of creditable input taxes filed with the concerned RDO, the appealable decision to this Court is not one issued by the corresponding RDO, but by the Regional Director.

 

With reference to the taxpayer's registration with the BIR:

 

3. The taxpayer is a VAT-registered person.

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HP PPS (Philippines), Inc. v. CIR, CTA Case No. 10090, July 2, 2024; Offsourcing Philippines, Inc. v. CIR, CTA Case No. 10257, July 5, 2024.

HP PPS (Philippines), Inc. v. CIR, CTA Case No. 10090, July 2, 2024.

Manulife Data Services, Inc. v. CIR, CTA Case No. 10666, August 2, 2024; Offsourcing Philippines, Inc. v. CIR, CTA Case No. 10257, July 5, 2024; “K” Line Maitime Academy Philippines, Inc. v. CIR, CTA Case No. 10270, June 27, 2024.

Sankyu-Ats Consortium-B v. CIR, CTA Case No. 10495, August 6, 2024.

 

In relation to the taxpayer's output VAT:

 

4. The taxpayer is engaged in zero-rated or effectively zero-rated sales.

 

Reason for disallowance: sale outside the period of claim; unreported inward remittance; no VAT OR; failed to indicate the nature of the service; or indicated only the billing statement numbers but failed to offer the billing statement.

 

5. For zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b), and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with Bangko Sentral ng Pilipinas (BSP) rules and regulations

 

• sales of goods abroad, in order for an export sale to qualify as zero-rated

 

• The following conditions must be complied with: first, the sale was made by a VAT-registered person; second, there was sale and actual shipment of goods from the Philippines to a foreign country; and third, said sale was paid for in acceptable foreign currency accounted for in accordance with the rules and regulations of the BSP.
• In relation to the second condition, any VAT-registered person claiming VAT zero-rated direct export sales must present, among others: one, sales invoice as proof of sale of goods; and two, bill of lading or airway bill as proof of actual shipment of goods from the Philippines to a foreign country.
• Reason for the denial: Sales without remittance; sales with bill of lading not in customer’s name; customer is not the remitter; VAT ORs dated in the subsequent quarter or dated outside the validity period of the ATP; missing date and corrections without countersignature; unreadable OR; cancelled OR.

 

• Sale of services to ECOZONE-registered enterprises.Since the Ecozone, by legal fiction, is viewed as a foreign territory, a VAT-registered person's sales of goods and services to an entity registered and operating within the ecozone in the Philippine customs territory are considered exports to a foreign country subject to zero percent (0%) VAT.

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PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024

Halliburton Worldwide Limited Philippine Branch v. CIR, CTA Case No. 10467, July 26, 2024; Philippine Mining Service Corporation v. CIR, CTA Case No. 10494, July 8, 2024.

Halliburton Worldwide Limited Philippine Branch v. CIR, CTA Case No. 10467, July 26, 2024; Philippine Mining Service Corporation v. CIR, CTA Case No. 10494, July 8, 2024.

Philippine Mining Service Corporation v. CIR, CTA Case No. 10494, July 8, 2024; Nippon Express Philippines Corporation v. CIR, July 5, 2024.

Philippine Mining Service Corporation v. CIR, CTA Case No. 10494, July 8, 2024.

 

• Sale of services to RE Developers

 

To confer 0% VAT on sales of goods, properties and services to an RE Developer, the following conditions must be present: first, the RE Developer must be registered with the DOE and BOI; and second, the local sales of goods, properties and services to the RE Developer are needed for the development, construction, and installation of the RE Developer's plant facilities and the whole process of exploration and development of RE sources up to its conversion into power.

 

• sales of services, certain essential elements must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%), towit:

 

• The services fall under any of the categories under Section 108(B)(2), or simply, the services rendered should be other than ''processing, manufacturing or repacking of goods”
• The service must be performed in the Philippines by a VAT-registered person.The ICPA testimony that the services are performed in the Philippines is not sufficient as the ICPA lacks personal knowledge of such fact and merely examined the taxpayer’s documents. Petitioner must prove that the services were rendered in the Philippines.
• The payment for such services should be in acceptable foreign currency accounted for in accordance with BSP rules.
• The recipient of the services must be engaged in business conducted outside the Philippines or not engaged in business and is outside the Philippines when the services are performed.

In order to be considered as a non-resident foreign corporation doing business outside the Philippines, each entity must be supported, at the very least, by both a Certification of Non-Registration of Corporation/Partnership issued by the Philippine SEC, and proof of incorporation/registration in a foreign country (e.g., Articles/Certificate of Incorporation/Registration and/or Tax

 

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Halliburton Worldwide Limited Philippine Branch v. CIR, CTA Case No. 10467, July 26, 2024.

PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024; MSCI Hongkong Limited v. CIR, CTA Case No. 10474, July 17, 2024;

PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024;MSCI Hongkong Limited v. CIR, CTA Case No. 10474, July 17, 2024)

Avaloq Philippines Operating Headquarters v. CIR, CTA Case No. 2746, CTA Case No. 1019, July 31, 2024.

PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024; MSCI Hongkong Limited v. CIR, CTA Case No. 10474, July 17, 2024; Stefanini Philippines, Inc. v. CIR, CTA Case No. 10595, June 24, 2024.

PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024; MSCI Hongkong Limited v. CIR, CTA Case No. 10474, July 17, 2024; Stefanini Philippines, Inc. v. CIR, CTA Case No. 10595, June 24, 2024.

PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024; Stefanini Philippines, Inc. v. CIR, CTA Case No. 10595, June 24, 2024.

• Residence Certificate).

 

As regards the taxpayer's input VAT being refunded:

 

6. The input taxes claimed are attributable to zero-rated or effectively zero-rated sales.However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume.

 

7. The input taxes are not transitional input taxes.

 

8. The input taxes have not been applied against output taxes during and in the succeeding quarters.

 

9. Input tax must comply with invoicing The following information shall be indicated in the VAT invoice or official receipt:

 

• Reasons for the disallowance: unreadable date, description or VAT amount; nature of the service is not indicated or the reference indicated is not attached to the OR; alteration in the address and the countersignature differs from that of the authorized representative; no TIN of the taxpayer; different date in the COR; collection receipt only; VAT was not separately shown.

 

REFUND OF UNUTILIZED CREDITABLE WITHHOLDING TAX (CWT)

 

In filing a claim for refund or credit of creditable withholding tax, compliance with the following must be met:

1. The claim for refund must be filed within the two-year prescriptive period.

• The administrative and judicial remedy of filing a claim for refund of erroneously or excessively paid tax must be done within two (2) years from the date of payment of the tax both in the administrative and judicial levels.
• For actions for refund of excess corporate income tax, the Supreme Court ruled that the two-year prescriptive period should be counted from the filing of the Final Adjustment Return, because it is only during that date that the exact tax liability or refundability of the tax can be determined.

 

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PPD Pharmaceutical Development Philippines Corp., v. CIR, CTA Case No. 10348, August 6, 2024; (MSCI Hongkong Limited v. CIR, CTA Case No. 10474, July 17, 2024; Stefanini Philippines, Inc. v. CIR, CTA Case No. 10595, June 24, 2024.

Nippon Express Philippines Corporation vs. Commissioner of Internal Revenue (CTA Case No. 10489; July 5, 2024.

Stefanini Philippines, Inc. v. CIR, CTA Case No. 10595, June 24, 2024; Halliburton Worldwide Limited Philippine Branch v. CIR, CTA Case No. 10467, July 26, 2024.

Tullett Prebon [Philippines], Inc. v. CIR, CTA Case No. 10273,CTA Case no. 10273, June 28, 2024; Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024.

Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024; Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024; Ayala Corporation v. CIR, CTA Case No. 10496, June 19, 2024.

 

• The law prescribes two options to a taxable corporation whose total quarterly income tax payment in a given taxable year exceeds its total income tax due. The taxpayer may either file a tax refund (either in the form of cash or tax credit certificate) or carry over the excess credit. However, once the carry-over option is taken actually or constructively it becomes irrevocable for that taxable period. The phrase "for that taxable period" refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer.
• In exercising its option, the corporation must signify in its final adjustment return (by marking the option box provided in the BIR form) its intention either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other.

1. The fact of withholding must be established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom.

• Proof of actual remittance of taxes withheld to the BIR is not required in a claim for refund of excess CWT. The claimant-taxpayer is only required to prove that the income payment formed part of the gross income and the fact of withholding. The proof of remittance of the withheld taxes remains the responsibility of the withholding agent.
• Reasons for disallowance: TIN of taxpayer was not complete; no signature of the payor; out of period; typographical error per CWT certificates; incorrect TIN of the taxpayer and name; overclaimed amount.

1. The income upon which the taxes were withheld must be included in the return of the recipient.

• Taxpayer must prove that the income payments from which the substantiated CWTs were withheld were declared as part of taxpayer's gross income in its Annual ITR. It requires that the SAWT tie up with the General Ledger.

 

VIOLATION OF TAX CODE

 

ACCUSED IS ACQUITTED FOR ALLEGED WILLFUL REFUSAL TO PAY TAX IF ASSESSMENT IS VOID; CTA MAY RULE ON THE CIVIL LIABILITY DESPITE

 

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Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024; Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024; Sonoma Services, Inc. v. CIR, CTA Case No. 10515, July 2, 2024; Ayala Corporation v. CIR, CTA Case No. 10496, June 19, 2024.

Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024; Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024

Tullett Prebon [Philippines], Inc. v. CIR, CTA Case No. 10273,CTA Case no. 10273, June 28, 2024; Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024; Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024.

Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024

Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024; ; Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024; Ayala Corporation v. CIR, CTA Case No. 10496, June 19, 2024; Philippine Mining Service Corporation v. CIR, CTA Case No. 10494, July 8, 2024.

Tullett Prebon [Philippines], Inc. v. CIR, CTA Case No. 10273,CTA Case no. 10273, June 28, 2024; Service Resources, Inc. v. CIR, CTA Case No. 10503, July 5, 2024.

Ford Group Philippines, Inc. v. CIR, CTA Case No. 10507, July 10, 2024.

 

ACQUITTAL. One of the elements of the crime of willful refusal to pay tax under Section 255 of the NIRC is that the taxpayer is required to pay tax. Where the PAN and FLD was not served properly (no proof that accused received it and prosecution’s witness admitted that there was no authorization was issued by the accused to the representative), thereby rendering the assessment void, the said element is not met. Moreover, the Court, in the criminal case, may rule on the civil liability despite assessment is void applying the Mendez Case (G.R. Nos. 208310-11 & 208662, March 28, 2023). Where the prosecution failed to present evidence to prove the civil liability, no civil should be imposed.

 

A VEHICLE USED IN TRANSPORTING SMUGGLED GOODS MAY BE SUBJECT OF FORFEITURE IF (A) IT IS A PRIVATE CARRIER OR A LEASED OR CHARTERED COMMON CARRIER; AND (B) OWNER HAS KNOWLEDGE OF THE SMUGGLING. Thus, the vehicle is considered a private carrier if the service is limited only to friend referrals and owner failed to prove that he had ongoing application to engage in trucking business. But since owner has no knowledge of the smuggling, the vehicle cannot be forfeited.

 

ACQUITTAL OF THE ACCUSED IS FINAL AND UNAPPEALABLE EXCEPT WHEN THE PROSECUTION WAS DENIED OPPORTUNITY TO PRESENT CASE OR WHERE THE TRIAL IS A SHAM, IN WHICH CASE, THE COURT ACTED WITH GRAVE ABUSE OF DISCRETION. Thus, where the petition failed to allege any violation of due process or mistrial and merely seeks to correct mistake in the findings of the trial court, the CTA cannot rule on the trial court’s appreciation of the parties’ evidence. Thus, the petition should be denied.

 

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People v. Angelito O. Dela Peña, CTA Crim Case No. O-844, June 20, 2024

Marvin Raluna Reyes v. Commissioner of Customs, CTA Case No. 10340, August 7, 2024.

People of the Philippines v. Hon. Ana Teresa T. Cornejo-Tomacruz et. al., CTA SCA Case No. 0014, July 16, 2024.

 

ASSESSMENT

THE REVENUE OFFICER (RO) TASKED TO AUDIT OR EXAMINE THE BOOKS OF ACCOUNTS OF TAXPAYER MUST BE CLOTHED WITH A PROPER LETTER OF AUTHORITY (LOA). An RO must be armed with authority, through an LOA, to conduct the audit or investigation of the taxpayer. Absent such grant of authority through an LOA, the RO cannot conduct the audit of taxpayer's books of accounts and other accounting records because such right is statutorily conferred only upon the Commissioner of Internal Revenue (CIR). Here, the authority of RO Arriola and GS Balbi merely sprung from a Memorandum of Assignment (MOA) that Chief Escalada issued.  Thus, the deficiency tax assessments issued against the taxpayer are inescapably void (Central Luzon Drug Corporation v. CIR, CTA Case No. 10045, May 2, 2024; CIR v. Scicindustrial Corp., CTA EB No.  2503, CTA Case No. 9616, May 27, 2024).

 

A CHIEF OF THE REGULAR LARGE TAXPAYERS AUDIT DIVISION CANNOT ISSUE AN LOA. An LOA can only be issued either by the CIR or his duly authorized representative identified in Section 10 (C) of the NIRC of 1997, as amended, which is a Revenue Regional Director. The position equivalent to a Revenue Regional Director for the Large Taxpayers Service is the Assistant Commissioner/Head Revenue Executive Assistants under RMO No. 29-0757. Here, the MOA was signed and issued by Ms. Shirley A. Calapatia, Chief of the Regular L T Audit Division 1. She is neither the CIR, Revenue Regional Director, nor an Assistant Commissioner/Head Revenue Executive Assistant of the LTS. She had no authority to issue the MOA which could have authorized RO Cayabyab to continue the audit/investigation of petitioner.  The MOA cannot be regarded as a valid LOA within the context of the law as the MOA was not signed by the CIR or his duly authorized representative. Since the conduct of the audit of petitioner was legally flawed, the assessments issued against it are inescapably void (NCR Corporation Philippines vs. CIR, CTA Case No. 10498, May 10, 2024).

FAN/FLD ISSUED IN 2014 FROM VALUE-ADDED TAX (VAT) FILING DEADLINE IN 2010 RENDERS THE VAT ASSESSMENT PARTIALLY PRESCRIBED. The three-year prescriptive period for issuing a VAT assessment shall be counted from the last day of the 25-day period from the close of the taxable quarter within which to file the quarterly VAT return, or the date of actual filing of the quarterly VAT return, whichever comes later. Thus, if the deadlines for the three (3) quarters are April, July and October 2010, respectively, but the BIR issued the FLD/FAN in January 2014, the assessment is partially prescribed.  (Applied Food vs. CIR, CTA No. 9952, May 23, 2024).

10-YEAR PRESCPRITIVE PERIOD WILL NOT APPLY WHEN BIR DID NOT ALLEGE FAILURE TO FILE RETURN, BIR IMPOSED 25% SURCHARGE, AND TAXPAYER ATTACHED THE RETURN IN THE PETITION; BIR HAS 3 YEARS TO COLLECT FROM FORMAL LETTER OF DEMAND/FINAL ASSESSMENT NOTICE (FLD/FAN). The BIR has 3 years to assess, except when there is a failure to file a return among other grounds, in which case, 10-year prescriptive period shall apply. Where the BIR did not allege that taxpayer failed to file the return, the FLD/FAN imposed 25% surcharge instead of 50%, and the taxpayer attached the return in the petition, and the BIR failed to prove that taxpayer failed to file the return, the 3-year prescription applies. Moreover, the BIR has another 3 years to collect. Where the FLD/FAN was issued on March 2, 2015 but the preliminary collection letter was issued on April 17, 2018, the collection effort is prescribed. (Ma. Erlinda Ong v. CIR, CTA Case No. 10265, May 3, 2024)

 

10-YEAR PRESCRIPTION APPLIES ONLY TO SPECIFIC TAXES MENTIONED. In the case of McDonald’s Philippines realty Corp v. CIR,  G.R. No. 247737, August 8, 2023, the Supreme Court ruled that for a 10-year period prescription to apply, the BIR must state in the assessment notice that the extraordinary period is applied and the basis of allegation of omission, falsity, or fraud as the case may be. Thus, where the BIR failed to expressly referred the 10-year period to VAT only, excluding EWT, the 10-year prescriptive period does not apply to EWT. (Japan Airport Consultants, Inc. et. al. v. CIR, CTA Case No. 10592, May 23, 2024)

WAIVER MUST STATE THE KIND AND AMOUNT OF TAX DUE. Assessment of internal revenue taxes must be made within three (3) years, counted from the actual date of filing of a tax return, or the last day prescribed by law for filing of a tax return, whichever is later, except when waiver is validly executed. The Supreme Court ruled that waiver must state the kind and amount of tax due (CIR v. First Philippine Industrial Corporation, G.R. No. 266404, August 23, 2023). Thus, where the waiver states “all internal revenue taxes” without express mention of particular taxes and the respective amounts, the waiver is invalid.(Applied Food vs. CIR, CTA No. 9952, May 23, 2024; Plastic Container Packaging Corporation, CTA Case No. 10095, May 23, 2024). Note: waiver was executed on June 21, 2013.

FLD/FAN WITHOUT RULING ON THE TAXPAYER’S ARGUMENTS IN THE REPLY TO THE PAN RENDERS THE ASSESSMENT VOID.  The BIR must consider the matters raised by the taxpayer. It cannot simply reproduce the PAN’s contents in the subsequent FLD/FAN without mentioning of the taxpayer’s arguments or any discussion on the merits (Ang Tibay Case and Avon Case). Where the FLD/FAN made no reference to the taxpayers reply to the PAN and the CIR did not mention any of the taxpayer’s arguments, much less give an intelligent discourse in resolving each matter raised, the assessment is void.  (Applied Food vs. CIR, CTA No. 9952, May 23, 2024; Plastic Container Packaging Corporation, CTA Case No. 10095, May 23, 2024; Neuftech Philippines v. CIR, CTA Case No. 10442, May 29, 2024)

 

 

BIR’S FAILURE TO PRESENT REGISTRY RECEIPT AND CERTIFICATION OF POSTMASTER WHEN RECEIPT OF PAN IS DENIED, RENDERS THE PAN INVALID; BIR MUST EXPLAIN WHY IT IS RESORTING TO SERVICE BY MAIL; FILING OF PROTEST WILL NOT CURE AN INVALID ASSESSMENT. The Supreme Court in the case of CIR v. Metro Star Suprema, Inc. (G.R. No. 185371, December 8, 2010) ruled that issuance and service of PAN is part of due process requirement. PAN is served through personal service, and if not practicable, by substituted service or by mail. The server shall make a written report under oath setting forth the manner, place and date of service, the name of the person who received the same and such other relevant information. The registry receipt shall constitute sufficient proof of mailing and shall be attached to the docket. Where the taxpayer denied receipt by mail, The BIR has burden to prove that the mailed matter was received. Where the BIR failed to present the registry receipt and the certification of the postmaster to prove od mailing an and receipt, nor present the testimony of the BIR server or personnel who delivered the mail to the post office, the PAN is void. Likewise, Service by FLD/FAN  shall be by personal delivery or when not practicable, by substituted service or by mail. Where the BIR did not present competent evidence proving that the personal service was not practicable, nor explained or discussed in the answer ot memorandum why the BIR resorted to service by mail, the FLD/FAN is void. Lastly, as held in the Supreme Court case of Mannasoft v. CIR,  (G.R. No. 244202, July 10, 2023), the defect due process will not be cured by the taxpayer’s protest to the FAN. (Ma. Erlinda Ong v. CIR, CTA Case No. 10265, May 3, 2024)

 

 

THE NON-SERVICE OF THE PAN AND THE IMPROPER SERVICE OF THE FLD/FAN VIOLATE PETITIONER'S RIGHT TO DUE PROCESS AND RENDER THE ASSESSMENT VOID. The taxpayer must first be informed that he is liable for deficiency taxes through the sending of a PAN and that its issuance and service to the taxpayer is part of the due process requirement. As to the service of the FLD /FAN, Section 3.1.6 of RR No. 18-2013 expressly provides that the service shall be made by personal delivery, and it is only when personal service is not practicable that the notice shall be served by substituted service or by mail. Here, no PAN was received by the taxpayer and the FAN was improperly served because there was no competent evidence proving that personal service was not practicable. Thus, the deficiency tax assessments are void (Erlina T. Ong vs. CIR, CTA Case No. 10265, May 3, 2024).

 

180-DAY PERIOD OF INACTION RUNS FROM FILING OF THE PROTEST; CIR IS NOT GIVEN A FRESH OR SEPARATE 180-DAY PERIOD WITHIN WHICH TO DECIDE THE ADMINISTRATIVE APPEAL. The Supreme Court ruled that there is no new or separate 180-day period granted to the CIR to act on the administrative appeal. There is a singular 180-day period counted from the protest or the submission of the required documents. Thus, where the taxpayer’s 180-day period from receipt of the protest ended on May 20, 2018; taxpayer appealed the FDDA received on November 29, 2018 to the CIR on December 21, 2018 and filed the petition with the CTA on July 19, 2018, the CTA has no jurisdiction considering that 180-day period of inaction runs from May 20, 2018. (Friendlycare Foundation, Inc. v. CIR, CTA Case No. 10123, May 30, 2024)

 

CONSULTANCY SERVICES IS EXEMPT FROM VAT PURSURANT TO A TAX ASSUMPTION AGREEMENT BETWEEN THE PHILIPPINES AND JAPAN. In the case of Mitsubishi Corp. – Manila Branch v. CIR (G.R. No. 175772, June 5, 2017), the Supreme Court ruled that  the Philippines may assume all fiscal levies and taxes. This assumption is a form of concession [given to Japanese suppliers, contractors or consultants in consideration of a loan to be used for an implementation of a project], and collection of taxes from entities enjoying benefits of a tax assumption arrangement is erroneous. Thus, where in an Exchange of Notes between Philippines and Japan, the Philippines assumes taxes, the consultancy services supplied to Government is exempt from VAT (Japan Airport Consultants, Inc. et. al. v. CIR, CTA Case No. 10592, May 23, 2024).

 

NO SURCHARGE AND INTEREST SHOULD BE IMPOSED IF ASSESSMENT IS INCORRECT.

Surcharge and interest are computed on the basis of tax. Where the assessment is incorrect, surcharge and interest should be cancelled. (Japan Airport Consultants, Inc. et. al. v. CIR, CTA Case No. 10592, May 23, 2024)

 

COURT MAY RULE ON ASSESSMENT IF APPLICATION FOR COMPROMISE IS BASED ON DOUBTFUL VALIDITY. The CIR’s decision on a taxpayer’s applications for compromise may be reviewed by the court touching on validity of the assessment, if the ground cited to support the application for compromise is doubtful validity of the assessment. Where the basis for compromise is financial incapacity, the court cannot rule on the validity of the assessment. (Dante R. Gutierrez v. CIR, CTA Case No. 10477, May 10, 2024; CIR v. Oro Dare Logistics; CTA EB No. 2699, CTA Case No. 9846, May 10, 2024) Dissenting Opinion: Court may review validity of the assessment.

 

THIRD PARTY INFORMATION (TPI) INFORMATION REQUIRES CERTIFICATIONS. Sources of TPI and confirmation requests and/or certifications/sworn statements from third parties must be presented in evidence, otherwise, the discrepancies based on third-party information is void. (Japan Airport Consultants, Inc. et. al. v. CIR, CTA Case No. 10592, May 23, 2024)

 

IMPORTATION OF RICE REQUIRES IMPORT PERMIT. NFA MC No. AO-2015-06-12, which has the force and effect of law requires importers of rice to secure an Import Permit per Bill of Lading. Without the import permit, the shipment is illegal. (Calumpit Multi-Purpose Cooperative v. Bureau of Customs et. al. CTA Case No. 10023, UDK SP 028, May 30, 2024)

 

SURVEILLANCE REQIURES THE BIR EXAMINER TO BE IN THE OFFICE OF THE TAXPAYER. In issuing  48-Hour Notice, 5-Day VCN and Closure Order, RMO No. 3-2009 requires that a taxpayer must be noncompliant. The taxpayer, to be considered non-compliant, must have resulted from surveillance/stocktaking activities of the BIR. The BIR must have initially conducted a surveillance or stocktaking against the taxpayer. Otherwise, the taxpayer may not be categorized as a non-compliant taxpayer. Where the BIR did not conduct a surveillance for 10 days and the BIR examiner only visited only once for four hours and rather proceeded to the post-evaluation, the taxpayer cannot be considered non-compliant (Rebecca Duka v. CIR, CTA Case No. 10393, May 29, 2024)

 

WARRANT OF GARNISHMENT (WG) SHOULD BE QUESTIONED IN THE CTA WITHIN 30 DAYS FROM RECEIPT. The CTA has jurisdiction to review the warrant of garnishment under “other matters” within 30 days. Where the WG was received in 2016, but the petition was filed only in 2021, the period to question WG has lapsed. (Dante R. Gutierrez v. CIR, CTA Case No. 10477, May 10, 2024)

 

CTA HAS JURISDICTION TO REVIEW THE CIR'S DISAPPROVAL OF AN OFFER TO COMPROMISE. The CTA has authority to take cognizance of "other matters," arising from the National Internal Revenue Code of 1997, as amended (Tax Code), and other laws administered by the BIR, which necessarily includes rules, regulations, and measures on the collection of tax. Here, the filing of the present petition was prompted by the CIR' s Notice of Denial and the simultaneous attempt to collect alleged deficiency taxes from Oro Dare; matters that fall within the Court's jurisdiction over "other matters,".  The scope of CTA’s review includes the correctness of the CIR' s ruling relative to the compromise, in which an attempt to collect had been incorporated, and the attendance of any grave abuse of discretion (CIR vs. Oro Dare Logistics Corporation, CTA EB No. 2699, May 10, 2024).

 

REFUND / ISSUANCE OF TAX CREDIT

REFUND OF EXCESS INPUT VAT ON ZERO-RATED SALES

Certain requisites must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT related to zero-rated sales. Said requisites are classified into certain categories, to wit:

As to the timeliness of the filing of the administrative and judicial claims:

• The claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made;
• That in case of full or partial denial of the refund claim rendered within a period of 90 days from the date of submission of the official receipts or invoices and other documents in support of the application, the judicial claim shall be filed with the Court of Tax Appeals (CTA) within thirty (30) days from receipt of the decision.
  • The 90 + 30-day periods to appeal are both mandatory and jurisdictional. After the lapse of the 90-day period, petitioner had 30 days to elevate its claim to the CTA. The claimant need not wait for the decision of the BIR after the 90-day waiting period. It should file a judicial claim for refund with the CTA. (Orica Philippines, Inc. v. CIR, CTA Case No. 10152, May 8, 2024)

With reference to the taxpayer's registration with the BIR:

• The taxpayer is a VAT-registered person;

In relation to the taxpayer's output VAT:

• The taxpayer is engaged in zero-rated or effectively zero-rated sales;
• For zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b), and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations
• sales of services, certain essential elements must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%), to wit:
  • The services fall under any of the categories under Section 108(B)(2), or simply, the services rendered should be other than ''processing, manufacturing or repacking of goods” (Maxima Machineries, Inc. CTA Case No. 9453, June 30, 2021)

As regards the taxpayer's input VAT being refunded:

• The input taxes are not transitional input taxes.
• The input taxes are due or paid.
• The input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume. In this case, the exempt sales must be considered in the allocation as well.
  • The law does not require that the input tax be directly attributable to zero-rated sales. CIR v. Oceanagold (Philippines), Inc. v. CTA EB No. 2721, CTA Case No. 9957, May 10, 2024)
• Input tax must comply with invoicing requirements.
• the input taxes have not been applied against output taxes during and in the succeeding quarters.

REFUND OF UNUTILIZED CREDITABLE WITHHOLDING TAX

• In filing a claim for refund or credit of creditable withholding tax, compliance with the following must be met:

 

1. The claim for refund must be filed within the two-year prescriptive period. (Ford Group Philippines., v. CIR, CTA Case No. 10067, May 8, 2024; Global Energy Supply Corporation v. CIR, CTA Case No. 10501, May 3, 2024)

 

• the two-year prescriptive period should be counted from the filing of the Final Adjustment Return, because it is only during that date that the exact tax liability or refundability of the tax can be determined. (Ford Group Philippines., v. CIR, CTA Case No. 10067, May 8, 2024; Global Energy Supply Corporation v. CIR, CTA Case No. 10501, May 3, 2024)

 

• The law prescribes two options to a taxable corporation whose total quarterly income tax payment in a given taxable year exceeds its total income tax due. The taxpayer may either file a tax refund (either in the form of cash or tax credit certificate) or carry over the excess credit. However, once the carry-over option is taken actually or constructively it becomes irrevocable for that taxable period. The phrase "for that taxable period" refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer.
  • In exercising its option, the corporation must signify in its final adjustment return (by marking the option box provided in the BIR form) its intention either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other. (Ford Group Philippines., v. CIR, CTA Case No. 10067, May 8, 2024)

 

2. The fact of withholding must be established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom. (Ford Group Philippines., v. CIR, CTA Case No. 10067, May 8, 2024; Global Energy Supply Corporation v. CIR, CTA Case No. 10501, May 3, 2024)

 

• Proof of actual remittance is not a condition to claim for a refund of unutilized tax credits.(Ford Group Philippines., v. CIR, CTA Case No. 10067, May 8, 2024)
• The lack of taxpayer’s address is not fatal to the petitioner’s claim as the taxpayer’s name and TIN were clearly stated in the forms, showing that the forms were indeed issued to the taxpayers (Ford Group Philippines., v. CIR, CTA Case No. 10067, May 8, 2024)

 

3. The income upon which the taxes were withheld must be included in the return of the recipient.  (Ford Group Philippines., v. CIR, CTA Case No. 10067, May 8, 2024; Global Energy Supply Corporation v. CIR, CTA Case No. 10501, May 3, 2024)

 

• A general ledger without the detailed transactions comprising the revenue/sales wherein the court cannot trace or verify whether the income payments formed part of the sales in the ITR is not sufficient to prove the claim. (Ford Group Philippines., v. CIR, CTA Case No. 10067, May 8, 2024)

 

REFUND OF ERRONEOUSLY OR ILLEGALLY COLLECTED TAXES

CLAIM FOR REFUND OF ERRONEOUSLY PAID TAX FILED AFTER TWO YEARS PRESCRIBES; 6-YEAR PRESCRIPTIVE PERIOD UNDER CIVIL CODE IS NOT APPLICABLE.

The taxpayer has 2 years from date of payment of tax to file an administrative claim before filing a judicial claim with the court. Both claims must be filed within 2 years, regardless of any supervening cause that may arise after the payment. Thus, where the DST and withholding tax were paid on July 3, 2014 and July 9, 2014, respectively, the taxpayer until July 3, 2016 and July 9, 2016 to file its administrative and judicial claim. Considering that the admin and judicial claim were filed only on December 12, 2016 and February 7, 2022, respectively, the CTA has no jurisdiction. Moreover, the 6-year prescriptive period for actions under the Civil Code will not apply considering that the Tax Code is a special law that explicitly provides for mandatory period for claiming a refund for taxes erroneously paid. (Lyk Property Holdings, Inc. v. CIR, CTA Case No. 10754, May 8, 2024).