FACTS:
Respondent is a domestic corporation whose principal office is located at the Special Export Processing Zone, Laguna Technopark, Biñan, Laguna. On 11 November 1998, it filed two separate applications for tax credit/refund of VAT input taxes paid for the period January to March 1997 and April to June 1997, respectively.
ISSUE(S):
Whether or not respondent is entitled to the refund or issuance of tax credit certificate for unutilized input taxes paid on domestic purchase of capital goods and services for the period covering January to June 1997.
HELD:
YES. While an ecozone is geographically within the Philippines, it is deemed a separate customs territory and is regarded in law as foreign soil. Sales of suppliers from outside the borders of the ecozone to this separate customs territory are deemed as exports and treated as export sales. These sales are zero-rated or subject to a tax rate of zero percent.
Since 100% of the products of respondent are exported, all its transactions are deemed export sales and are thus VAT zero-rated. It has been shown that respondent has no output tax with which it could offset its paid input tax. Since the subject input tax it paid for its domestic purchases of capital goods and services remained unutilized, it can claim a refund for the input VAT previously charged by its suppliers.
