Weekly Tax Updates [April 29, 2025]

Metro Manila workers to get wage hike soon – DOLE

Other Relevant Tax Updates:

• TAX & BUSINESS-RELATED NEWS [APRIL 24-28]
• BIR CLARIFIES THE SUBMISSION OF PROOF OF SETTLEMENT OF ESTATE TO AVAIL OF ESTATE TAX AMNESTY
• BIR FURTHER CLARIFIES TAXES DUE ON THE SALE OF REAL PROPERTY CONSIDERED ORDINARY ASSETS
• CTA CASES

I.TAX & BUSINESS-RELATED NEWS [APRIL 24-28]

1. Metro Manila workers to get wage hike soon – DOLE
2. Spouses of OFWs now considered solo parents
3. San Jose del Monte Water Board moves to pre-terminate PrimeWater
4. SEC readies guidelines on crypto asset services
5. SEC eyes declassification of listed firms’ common shares
6. Mitsui eyes MPIC stake in toll unit
7. BPOs to set up council to establish quality norms
8. CIMB says reversal of funds underway after ‘unauthorized fund transfers’
9. ‘Rising scams from IMSI catchers may stall digital economy’
10. Foreign digital service providers reminded of VAT sign-up deadline
11. Cybercriminals turn to PDFs
12. New markets seen for value-added coconut products
13. OECD calls for review of Philippine GOCCs
14. Value of Northern Mindanao economy tops trillion-peso mark
15. Visa interviews require complete documents —US Embassy
16. Norwegian Cruise Line opens first PH medical clinic
17. SC requires electronic filing for annulment, nullity of marriage cases
18. BIR tax filings rise over 20% this year
19. Digital Banks Take the Lead in Forbes’ 2025 Best Banks in the PH
20. Cebu shipowner Paul Rodriguez barred from Camiguin run over residency, debts

 

II. BIR CLARIFIES THE SUBMISSION OF PROOF OF SETTLEMENT OF ESTATE TO AVAIL OF ESTATE TAX AMNESTY

Revenue Memorandum Circular (RMC) No. 40-2025, issued on April 24, 2025, clarifies the provisions of Section 2 of Revenue Regulations (RR) No. 10-2023 regarding the submission of proof of settlement of the estate, whether judicial or extra-judicial, as a requisite for the availment of Estate Tax Amnesty. As clarified, proof of settlement of the estate (e.g., Extra Judicial Settlement, Court Order) is not required to accompany the Estate Tax Amnesty Return upon filing and payment if it is not yet available, and its non-submission by June 14, 2025, will not invalidate the application for the availment of Estate Tax Amnesty. However, it will be required during the processing and issuance of the Electronic Certificate Authorizing Registration.

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III. BIR FURTHER CLARIFIES TAXES DUE ON THE SALE OF REAL PROPERTY CONSIDERED ORDINARY ASSETS

Revenue Memorandum Circular (RMC) No. 31-2025, issued on April 7, 2025, clarifies the provisions on applicable taxes due on the sale of real property considered as ordinary assets by taxpayers habitually engaged in real estate business.

Highlights include: 

1. Requisite tax returns to be filed.
2. Combining multiple real estate sales into one return is not allowed and cannot be used as proof of withholding tax payment when processing the electronic Certificate Authorizing Registration (eCAR).
3. Only BIR Form No. 1606 with proof of payment can be used to claim the income tax credit for the sale of real property classified as an Ordinary Asset. Issuance of BIR Form No. 2307 as proof of income tax credit in lieu of BIR Form 1606 with proof of payment shall be discontinued.
4. Manner of presentation of income tax credits arising from BIR Form No. 1606 in the Annual Income Tax Returns (ITR).
5. Documents to be issued for the sale of real property financed by financing institutions (i.e., banks, Pag-Ibig/HDMF).
6. Taxability of other fees collected

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IV. CTA CASES

THE ENTITLEMENT TO VAT ZERO-RATING ON SALES TO FREEPORT-REGISTERED ENTITIES IS DETERMINED BY WHETHER THE GOODS SOLD ARE INTENDED FOR USE IN CONNECTION WITH THE ENTITIES’ REGISTERED ACTIVITIES

Petitioner Ford Group Philippines, Inc. filed a Petition for Review seeking to nullify the deficiency Value-Added Tax (VAT) assessment issued by the Commissioner of Internal Revenue (CIR), asserting that they are not liable for the deficiency VAT. The Petitioner asserted that the executed waiver of prescription is not valid and should not extend the period for the respondent to assess. It also argued that the Final Decision on Disputed Assessment (FDDA) did not constitute a proper demand for payment. In addition, it argued that its sales to Ford Subic and Ford Clark qualify for VAT zero-rating. On the other hand, the Respondent counters that the waiver is valid pursuant to Revenue Memorandum Order (RMO) No. 14-2016, which extends his authority to assess, and that the FDDA and the assessment are valid. In ruling, the Court upheld the validity of the Waiver, stating that under RMO No. 14-2016, only two dates are material and should be present on the Waiver: the date of execution and the expiry date of the period which the taxpayer waives. The date of acceptance of the Waiver is not a material requirement that can affect its validity. Since the Waiver complied with the requirements, it effectively extends the Respondent’s authority to assess. The Court also held that the FDDA constitutes a valid demand for payment, stating that the term “request” does not loosen the effect of a demand for payment. It clarifies that the primary purpose of an FDDA is to demand payment and signifies the time when penalties and interest shall begin to accrue, and its issuance shows that the deficiency VAT indicated must be paid immediately upon receipt. Finally, the Court held that the Petitioner’s sales to Ford Subic and Ford Clark, as Freeport Zone-registered entities, qualify for VAT zero-rating. The operative characteristic that entitles sales to ecozone-registered entities with VAT zero percent is that the merchandise or goods sold thereto are “to be used in connection with the registered activity”. In this case, both Ford Subic and Ford Clark are engaged in automotive dealership, therefore, their purchases of automobiles and spare parts from the Petitioner qualify for VAT zero-rating as they are to be used in connection with their registered activities. Consequently, the Petition was GRANTED. [FORD GROUP PHILIPPINES, INC. VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10805, APRIL 4, 2025]

[TAXPAYER SHALL BE INFORMED IN WRITING OF THE LAW & THE FACTS ON WHICH THE ASSESSMENT IS BASED; OTHERWISE, ASSESSMENTS SHALL BE VOID] [NON-SERVICE OF THE NOTICE FOR INFORMAL CONFERENCE & IMPROPER SERVICE OF THE PRELIMINARY ASSESSMENT NOTICE VIOLATE RIGHT TO DUE PROCESS, RENDERING DEFICIENCY TAX ASSESSMENTS VOID] [SUBSTITUTED SERVICE CAN BE RESORTED TO WHEN THE PARTY IS NOT PRESENT AT THE REGISTERED OR KNOWN ADDRESS]

Petitioner Rex Jayson Miraflor Tuozo filed a Petition for Review seeking cancellation and withdrawal of the 2018 assessment issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner claimed the assessments violated his due process rights because he never received the Notice of Informal Conference (NIC) and the Preliminary Assessment Notice (PAN), which are mandatory requirements.  Further, assessments still lack a factual and legal basis, even if due process was observed. On the other hand, the Respondent contended that the Petition should be dismissed for being filed out of time. Also, there was no violation of due process, and the Petitioner failed to substantiate its claim that the assessment lacked factual and legal bases. In ruling, the Court held that the assessments are void due to violations of the taxpayer’s right to due process. Specifically, the Respondent failed to serve the NIC, as even their witness could not confirm its issuance, and did not properly serve the PAN as required under Section 228 of the Tax Code. Meanwhile, the PAN must be properly served through personal, substituted, or registered mail, with sufficient proof of mailing and receipt. While substituted service is allowed, it must involve a barangay official and disinterested witnesses, with the notice handed to them. In this case, the BIR did not present the revenue officer to confirm compliance, relying instead on a witness without personal knowledge. Additionally, the claim of service by registered mail was unsupported, as the registry receipt lacked key details and was not backed by a postmaster’s certification. Furthermore, the persuasiveness of the right to due process reaches both substantial and procedural rights.  It violates this right if the BIR fails to follow legal and procedural requirements strictly. As a result, any tax assessment made without due process is null and void. Consequently, the Petition is GRANTED, and the assessments are cancelled. [REX JAYSON MIRAFLOR TUOZO VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10638, MARCH 24, 2025]