G.R. No. 190506 - CORAL BAY NICKEL CORPORATION, VS. COMMISSIONER OF INTERNAL REVENUE.D E C I S I O N - Supreme Court E-Library

Ruling

Accordingly, the premature filing of the judicial claim was allowed, giving to the CTA jurisdiction over the appeal. As to the main issue, we sustain the assailed decision of the CTA En Banc . The petitioner's insistence, that Toshiba is not applicable because Toshiba Information Equipment (Phils) Inc., the taxpayer involved thereat, was a PEZA-registered entity during the time subject of the claim for tax refund or credit, is unwarranted. The most significant difference between Toshiba and this case is that Revenue Memorandum Circular No. 74-99 [16] was not yet in effect at the time Toshiba Information Equipment (Phils) Inc. brought its claim for refund. Regardless of the distinction, however, Toshiba actually discussed the VAT implication of PEZA-registered enterprises and ECOZONE-located enterprises in its entirety, which renders Toshiba applicable to the petitioner's case. Prior to the effectivity of RMC 74-99, the old VAT rule for PEZA-registered enterprises was based on their choice of fiscal incentives, namely: (1) if the PEZA-registered enterprise chose the 5% preferential tax on its gross income in lieu of all taxes, as provided by Republic Act No. 7916, as amended, then it was VAT-exempt; and (2) if the PEZA-registered enterprise availed itself of the income tax holiday under Executive Order No. 226, as amended, it was subject to VAT at 10% [17] (now, 12%). Based on this old rule, Toshiba allowed the claim for refund or credit on the part of Toshiba Information Equipment (Phils) Inc. This is not true with the petitioner. With the issuance of RMC 74-99, the distinction under the old rule was disregarded and the new circular took into consideration the two important principles of the Philippine VAT system: the Cross Border Doctrine and the Destination Principle. Thus, Toshiba opined: The rule that any sale by a VAT-registered supplier from the Customs Territory to a PEZA-registered enterprise shall be considered an export sale and subject to zero percent (0%) VAT was clearly established only on 15 October 1999, upon the issuance of RMC No. 74-99. Prior to the said date, however, whether or not a PEZA-registered enterprise was VAT-exempt depended on the type of fiscal incentives availed of by the said enterprise. This old rule on VAT-exemption or liability of PEZA-registered enterprises, followed by the BIR, also recognized and affirmed by the CTA, the Court of Appeals, and even this Court, cannot be lightly disregarded considering the great number of PEZA-registered enterprises which did rely on it to determine its tax liabilities, as well as, its privileges. According to the old rule, Section 23 of Rep. Act No. 7916, as amended, gives the PEZA-registered enterprise the option to choose between two sets of fiscal incentives: (a) The five percent (5%) preferential tax rate on its gross income under Rep. Act No. 7916, as amended; and (b) the income tax holiday provided under Executive Order No. 226, otherwise known as the Omnibus Investment