[AN EXAMINER WHO PARTICIPATES IN THE REINVESTIGATION WITHOUT BEING NAMED IN THE LOA DOES NOT, BY ITSELF, INVALIDATE THE ASSESSMENT, SINCE A SEPARATE LOA IS NOT REQUIRED FOR THE REINVESTIGATION OF A TAXPAYER’S PROTEST] [A VALID WAIVER MAY EXTEND THE PRESCRIPTIVE PERIOD, BUT IT CANNOT REVIVE THE BIR’S RIGHT TO ASSESS OR COLLECT TAXES THAT HAD ALREADY PRESCRIBED BEFORE THE WAIVER WAS EXECUTED] [THE 10-YEAR PRESCRIPTIVE PERIOD FOR FALSE OR FRAUDULENT RETURNS CANNOT BE INVOKED UNLESS THE ASSESSMENT NOTICE EXPRESSLY STATES ITS APPLICATION & THE FACTUAL BASIS FOR FALSITY, FRAUD, OR THE 30% SUBSTANTIAL UNDERDECLARATION]

Petitioner Michael S. Veloso filed a Petition for Review seeking the cancellation and nullification of the deficiency tax assessments for taxable year (TY) 2014 issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner argued, among others, that the participation of a Revenue Officer (RO) who was not named in the Letter of Authority (LOA) during the reinvestigation invalidated the assessment, that the BIR’s right to assess had prescribed, and that the ten (10)-year prescriptive period could not be applied. On the other hand, the Respondent maintained that the assessments were valid and that the Waiver of the Defense of Prescription executed by Petitioner extended the period to assess and collect the taxes. In ruling, the Court held that the participation of an RO not named in the LOA during the reinvestigation did not, by itself, invalidate the assessment because the Preliminary Assessment Notice (PAN) and Formal Letter of Demand (FLD)/ Final Assessment Notice (FAN) were issued upon the recommendation of duly authorized RO. It likewise held that a valid Waiver may extend the prescriptive period but cannot revive a tax liability that had already prescribed. Further, the extraordinary 10-year prescriptive period could not be applied to the deficiency assessment because the assessment notices failed to clearly state that the 10-year period was being invoked and the factual basis for falsity or fraud. The Court also ruled that underdeclared purchases alone do not establish undeclared taxable income or vatable sales. Thus, the VAT and EWT assessments had prescribed, while only the remaining assessments that were timely issued remained enforceable. [MICHAEL S. VELOSO VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 11484, JULY 31, 2026]

PAGCOR’S TAX EXEMPTION DOES NOT EXTEND TO LICENSEES WITHOUT A CONTRACTUAL RELATIONSHIP IN CONNECTION WITH CASINO OPERATIONS

Petitioner I-Cyberworld Biz Inc. filed a Petition for Review praying for the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR) for its alleged deficiency Value-Added Tax (VAT) for taxable year (TY) 2019. The Petitioner argues that, as a PAGCOR licensee, it is exempt from VAT on revenues derived from its gaming operations pursuant to Section 13 of Presidential Decree (P.D.) No. 1869, or the PAGCOR Charter. It maintains that the deficiency VAT assessments for TY 2019 have no factual and legal basis and should therefore be withdrawn and cancelled. On the other hand, the Respondent argues that the Petitioner is liable for the deficiency VAT and compromise penalties, as it failed to submit documents to counter the assessment and is not covered by PAGCOR’s tax exemption. It further maintains that the Petitioner is liable for VAT on commissions received from marketing incentives. In ruling, the Court held that the tax exemption granted to PAGCOR does not extend to the Petitioner because its contractual relationship with PAGCOR was not shown to involve the operation of casinos authorized under P.D. No. 1869. Thus, the Petitioner’s gaming revenues, including those from electronic games and electronic bingo, as well as marketing incentives and other taxable income, are subject to VAT, resulting in a basic deficiency VAT liability of Php 19,917,366.70. However, the Court cancelled the Php 50,000.00 compromise penalty, ruling that such penalty requires the taxpayer’s conformity and cannot be imposed without mutual agreement. Consequently, the Petition is PARTIALLY GRANTED, and the assessment covering the compromise penalty is CANCELLED and SET ASIDE. [I-CYBERWORLD BIZ INC VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 11098, JULY 28, 2026]

RELIANCE IN GOOD FAITH ON LOCAL ORDINANCES CANNOT DEFEAT WITHHOLDING TAX OBLIGATIONS UNDER THE TAX CODE

The case involves consolidated Petitions for Review before the Court of Tax Appeals (CTA) Special Second Division filed by the Provincial Government of Nueva Vizcaya, represented by its Governor, Provincial Treasurer, and Provincial Accountant, seeking the cancellation of assessments for deficiency Withholding Tax on Compensation (WTC) arising from the grant of Economic Relief Assistance (ERA) to employees for taxable year (TY) 2014 and Calamity Relief Assistance (CRA) to employees for TY 2015. The Petitioners argued that they acted in good faith in relying on provincial ordinances declaring the benefits non-taxable and that the Provincial Treasurer and Provincial Accountant should not be held personally liable. They likewise contended that the 2014 assessment was void because the BIR issued the Formal Letter of Demand and Final Assessment Notice (FLD/FAN) before the expiration of the fifteen (15)-day period for responding to the Preliminary Assessment Notice (PAN). On the other hand, the respondent, Commissioner of Internal Revenue (CIR), argued that the ERA and CRA constituted taxable compensation income subject to withholding tax and that local ordinances cannot override the provisions of the Tax Code. The CIR further maintained that good faith does not excuse the failure to withhold taxes. In ruling, the Court held that the CRA constituted taxable compensation income subject to WTC and that the Provincial Government, as withholding agent, was liable for the deficiency WTC. Local ordinances cannot create tax exemptions or declare benefits non-taxable in contravention of the Tax Code. However, it found that the Provincial Treasurer and Provincial Accountant were not personally liable for the deficiency taxes and interest. As to taxable year 2014, the Court declared the assessment void for violation of due process because the BIR prematurely issued the FLD/FAN before the lapse of the taxpayer's fifteen (15)-day period to respond to the PAN. Thus, the Petition for TY 2014 was GRANTED, while the Petition for TY 2015 was PARTIALLY GRANTED. [PROVINCIAL GOVERNMENT OF NUEVA VIZCAYA VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10553 & 10554, JULY 20, 2026]

CHANGE IN INVOICE HEADER DOES NOT INVALIDATE CAS PERMIT; PROOF OF BSP-COMPLIANT FOREIGN CURRENCY REMITTANCES REMAINS ESSENTIAL FOR VAT REFUND ON ZERO-RATED EXPORT SALES

Petitioner MD Isalon Organic Banana Agri-ventures, Inc. filed a Petition for Review seeking reversal and setting aside of Respondent Commissioner of Internal Revenue (CIR)’s Value-Added Tax (VAT) Refund Notice, and to grant the same refund application in the amount of Php 5,082,473.73 representing Petitioner's alleged excess and unutilized input VAT for the period covering taxable year (TY) 2021. Petitioner argued that it had complied with all the statutory requirements for a VAT refund, timely filed its claims, and submitted sufficient documentary evidence to support its zero-rated export sales. It further maintained that the change in the invoice header from “Charge Invoice” to “Charge Sales Invoice/Commercial Invoice” did not constitute a major enhancement of its Computerized Accounting System and therefore did not invalidate its Permit To Use (PTU) Computerized Accounting System (CAS). On the other hand, Respondent contended that the claim was inadequately substantiated because the invoices used were not those authorized under the approved CAS permit and thus failed to comply with invoicing requirements under the Tax Code. He also argued that the Petitioner failed to prove its entitlement to a refund through proper documentation and that tax refunds must be strictly construed against taxpayers. In ruling, the Court held that both the administrative and judicial claims were timely filed and rejected the Respondent’s position that the modified invoice header invalidated the invoices. Alteration was merely nominal, involved no change in system functionality, modules, or software version, and therefore did not constitute a major system enhancement requiring a new permit. Nevertheless, the Court held that the Petitioner failed to prove a crucial requirement for zero-rated export sales: that the sales proceeds were paid in acceptable foreign currency and duly accounted for in accordance with BSP rules. The bank certifications and supporting schedules presented were insufficient to establish a clear link between the inward remittances and the specific export sales, and substantial discrepancies remained unreconciled. Consequently, despite recognizing the validity of the invoices, the Court DENIED the VAT refund claim for failure to satisfactorily substantiate compliance with the foreign-currency remittance requirement. [MD ISALON ORGANIC BANANA AGRI-VENTURES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO.11246, JULY 20, 2026]