CIR Vs Seagate
CIR Vs Seagate
CIR Vs Seagate
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* THIRD DIVISION.
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PANGANIBAN, J.:
The Case
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The Facts
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Sole Issue
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5 The Petition was deemed submitted for decision on April 3, 2003, upon
receipt by the Court of petitioner’s Memorandum, signed by Assistant
Solicitors General Cecilio O. Estoesta and Fernanda Lampas Peralta and
Associate Solicitor Romeo D. Galzote. Respondent’s Memorandum, signed by
Attys. Dennis G. Dimagiba and Franklin A. Prestousa, was filed on March 7,
2003.
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Sole Issue:
Entitlement of a VAT-Registered PEZA Enterprise to
a Refund of or Credit for Input VAT
No doubt, as a PEZA-registered
7 enterprise within a
special economic zone, respondent
8 is entitled to the
fiscal
9 incentives
10 and benefits provided for in either PD
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13 §17(1) of PD 66.
14 §18 of PD 66.
15 Article 77(1), Book VI of EO 226.
16 Article 39 of EO 226, certain paragraphs of which are expressly
repealed by the 2nd paragraph of §20 of RA 7716, otherwise known
as the “Expanded Value Added Tax Law,” deemed effective May 27,
1994. See Commissioner of Internal Revenue v. Michel J. Lhuillier
Pawnshop, Inc., 406 SCRA 178, 187, July 15, 2003.
17 Article 78 of EO 226.
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34 EO 273.
35 Vitug, J. and Acosta, Tax Law and Jurisprudence (2nd ed.,
2000), p. 227.
VAT-registered persons shall pay the VAT on a monthly basis. §114(A) of the
Tax Code.
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Effectively zero-rated
50 transactions, however,
51 refer to
the sale of goods or supply of services to persons or
entities whose exemption under special laws or
international agreements to which the Philippines is a
signatory 52effectively subjects such transactions to a
zero rate. Again, as applied to the tax base, such rate
does not yield any tax chargeable against the
purchaser. The seller who charges zero output tax on
such transactions can also claim a refund of or a tax
credit certificate for the VAT previously charged by
suppliers.
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Exempt Transaction
and Exempt Party
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57 Id., p. 121.
58 De Leon, pp. 133 & 135.
59 Deoferio, Jr. and Mamalateo, supra, p. 118.
60 Id., p. 132.
61 Id., pp. 132-133.
62 De Leon, p. 132.
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a zero rate.
Tax Exemptions
Broad and Express
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charter of PEZA
84 (then EPZA) that was later amended
by RA 7916. No provisions in the latter law modify
such exemption.
Although this exemption puts the government at an
initial disadvantage, the reduced tax collection
ultimately redounds to the benefit of the national
economy by enticing more business investments
85 and
creating more employment opportunities.
Fourth, even the rules implementing the PEZA law
clearly reiterate that merchandise—except those
prohibited by law—“shall not be subject to x 86x x
internal revenue laws and regulations x x 87x” if
brought to the ecozone’s restricted area 88 for
manufacturing by registered export enterprises, of
which respondent is one. These rules also apply to all
enterprises registered 89with the EPZA prior to the
effectivity of such rules.
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Tax Refund as
Tax Exemption
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Finally, under RA 7844, the State declares the need 123 “to
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Tax Refund or
Credit in Order
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refund or credit.
First, respondent is a VAT-registered entity. This
fact alone distinguishes the present case from Contex,
in which this Court held that the petitioner151 therein
was registered as a non-VAT taxpayer. Hence, for
being merely VAT-exempt, the petitioner in that case
cannot claim any VAT refund or credit.
Second, the input taxes paid on the capital goods of
respondent are duly supported by VAT invoices and
have not
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Summary
To summarize, 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 percent 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.
WHEREFORE, the Petition is DENIED and the
Decision AFFIRMED. No pronouncement as to costs.
SO ORDERED.
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