PEZA-registered enterprise tax exemptions

(CIR VS. SEAGATE TECHNOLOGY PHILIPPINES)

ISSUE: Whether or not respondent is entitled to the refund or issuance of Tax Credit Certificate in the amount of P12,122,922.66 representing alleged unutilized input VAT paid on capital goods purchased for the period April 1, 1998 to June 30, 1999.

Doctrine: Yes. As a PEZA-registered enterprise within a special economic zone, it is entitled to the fiscal incentives and benefits provided for in PD 66. It shall also avail of  all privileges, benefits, advantages or exemptions under both RA 7227 and 7844 .

Business companies registered in and operating from the Special Economic Zone in Naga,— are entities exempt, albeit zero-rated,  from all internal revenue taxes and the implementing rules relevant thereto, including the value-added taxes or VAT. Although export sales are not deemed exempt transactions, they are nonetheless zero-rated.

Hence, in the present case, the distinction between exempt entities and exempt transactions has little significance, because the net result is that the taxpayer is not liable for the VAT. Respondent, a VAT-registered enterprise, has complied with all requisites for claiming a tax refund of or credit for the input VAT it paid on capital goods it purchased. Thus, the Court of Tax Appeals and the Court of Appeals did not err in ruling that it is entitled to such refund or credit.|||

NOTES: (You can use this as an alternative doctrine template)

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.

Its sales transactions intended for export may not be exempt, but like its purchase transactions, these are zero-rated. As such, respondent is exempt from all internal revenue taxes , including the VAT and regulations pertaining thereto.No prior application for effective zero ration 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 VAT refund or credit.


Section 108(B)3 of the 1997 Tax Code, as amended, provides for the value-added tax (VAT) zero rating on supply of services performed in the Philippines by VAT-registered persons to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory.

Following this provision, the supply of services to entities registered under the Philippine Economic Zone Authority (Peza) law, or Republic Act (RA) 7916, shall be subject to VAT zerorating.

Requisites:

1) Sale of service is performed in the Philippines;

2) Service is performed by a VAT-registered person; and

3) Service is rendered to persons or entities exempted under special laws or international agreement to which the Philippines is a signatory.

Classification of PEZA Registered enterprises in the Philippines

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