Respondent is a resident foreign corporation registered in and operating from the Philippine Export Zone Authority (PEZA) to engage in the manufacture of recording components primarily used in computers for export. On 04 October 1999, it filed an administrative claim for refund of VAT input taxes covered by its VAT returns for the period 01 April 1998 to 30 June 1999. The CIR did not act upon said administrative claim, prompting respondent to elevate the case to the CTA.
Whether or not respondent is not subject to VAT and therefore entitled to refund or credit for VAT taxes paid.
YES. Special laws expressly grant preferential tax treatment to business establishments registered and operating within an ecozone, which by law is considered as a separate customs territory. As such, respondent is exempt from all internal revenue taxes, including the VAT, and regulations pertaining thereto. It has opted for the income tax holiday regime, instead of the 5% preferential tax regime. As a matter of law and procedure, its registration status entitling it to such tax holiday can no longer be questioned. Its sales transactions intended for export may not be exempt, but like its purchase transactions, they are zero-rated. No prior application for the effective zero rating of its transactions is necessary. Being VAT-registered and having satisfactorily complied with all the requisites for claiming a tax refund of or credit for the input VAT paid on capital goods purchased, respondent is entitled to such VAT refund or credit.