Case Study:

Incentives to PEZA
Registered Entities
 Keith Co. was organized and established
as a domestic corporation and registered
Facts of the Case: with PEZA as a Non-Pioneering Ecozone
Export Enterprise in the year 1995. It
availed a 4-year Income Tax Holiday upon
commencement of the business operations

On December 29, 1995, it registered with

the BIR as a VAT Taxpayer and
punctually filed its VAT Returns for the 1st
and 2nd quarters of 1996

2
 The Vat Returns showed Input VAT
for the purchases of Capital Goods
Facts of the Case:
and Services in the amount of
P1,000,000 which remained
unutilized since it had not engaged
in any business for it to be liable to
Output VAT.

Subsequently, Keith Co. applied for

Tax Credit/Refund of its unutilized
3 Input VAT
 RMC 74-99
Issued by the BIR on October 15, 1999

4
 Summary of RMC 74-99

Sale of Sale of
BUYER SELLER
Goods Services
VAT Registered
PEZA Registered
Supplier in
Enterprise Subject Zero-Rated Zero-Rated
Customs
to 5% Special Tax
Territory
PEZA Registered VAT Registered
Enterprise not Supplier in
Zero-Rated Zero-Rated
Subject to 5% Customs
Special Tax Territory
5
 Summary of RMC 74-99

Sale of Sale of
BUYER SELLER
Goods Services
Non-VAT
PEZA Registered
Supplier in
Enterprise Subject Exempt Exempt
Customs
to 5% Special Tax
Territory
PEZA Registered Non-VAT
Enterprise not Supplier in
Exempt Exempt
Subject to 5% Customs
Special Tax Territory
6
 Summary of RMC 74-99

Sale of
BUYER SELLER Sale of Goods
Services

Buyer in Technical Not embraced

PEZA
Customs Importation by 5% Special
Registered
Territory subject to VAT Tax Regime for
Enterprise
only to buyer buyer
PEZA PEZA
Refer to Next
Registered Registered Exempt
Slide
Enterprise Enterprise
7
 Summary of RMC 74-99

Sale of
BUYER SELLER
Services

PEZA Registered
PEZA-Registered
Enterprise Subject Exempt
Enterprise
to 5% Special Tax

PEZA Registered
Enterprise not PEZA-Registered
Zero-Rated VAT
Subject to 5% Enterprise
Special Tax

8
 The BIR contends:
Facts of the Case: Keith Co. could not claim any Input
VAT since sales made to it by a
VAT-registered entity in the
customs territory are zero-rated,
Therefore, no input tax was shifted
or passed to Keith Co.

9
 Keith Co. responds:
As of the date of the VAT Returns,
Facts of the Case:
Section 23 of RA 7916 gives me
the incentive of the 5% preferential
tax rate and the income tax holiday
as provided for in EO 226
(Omnibus Investments Code of
1987) where those availing of the
tax holiday incentive are deemed
exempt only from income tax.
10
Given the facts, is Keith Co. entitled to
Tax Credit Certificate or Refund on
unutilized Input VAT?
 a. No, because Keith Co. is a PEZA-registered entity
b. No, because Keith Co. is exempt from VAT
c. Yes, because Keith Co. filed for Tax Credit/Refund
in 1996
d. Yes, because according to Sec. 4.100-2 of RR No. 7-
95 provides that a zero-rated sale by a VAT-
registered person, which is taxable for VAT
purposes, shall not result in any output tax but the
input tax on his purchases of goods related to such
zero-rated sale shall be available as tax
12
credit/refund
 a. No, because Keith Co. is a PEZA-registered entity
b. No, because Keith Co. is exempt from VAT
c. Yes, because Keith Co. filed for Tax Credit/Refund
in 1996
d. Yes, because according to Sec. 4.100-2 of RR No. 7-
95 provides that a zero-rated sale by a VAT-
registered person, which is taxable for VAT
purposes, shall not result in any output tax but the
input tax on his purchases of goods related to such
zero-rated sale shall be available as tax
13
credit/refund
14
 G.R. No. 150154
CIR vs. Toshiba
15