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ATLAS CONSOLIDATED MINING v.

CIR Tax treatment of goods brought into the export processing zones is only
consistent with the Destination Principle and Cross Border Doctrine to which the
FACTS: Petitioner corporation is engaged in the business of mining, production, and sale Philippine VAT system adheres. According to the Destination Principle, goods and
of various mineral products, such as gold, pyrite, and copper concentrates. It is a VAT- services are taxed only in the country where these are consumed. In connection with
registered taxpayer. the said principle, the Cross Border Doctrine mandates that no VAT shall be imposed to
Petitioner corporation filed with the BIR the application for the refund/credit of form part of the cost of the goods destined for consumption outside the territorial
its input VAT on its purchases of capital goods and on its zero-rated sales. When its border of the taxing authority. Hence, actual export of goods and services from the
application for refund/credit remained unresolved by the BIR, petitioner filed a Petition Philippines to a foreign country must be free of VAT, while those destined for use or
for Review with the CTA. The CTA denied the claims on the grounds that for zero-rating to consumption within the Philippines shall be imposed with 10% VAT. Export processing
apply, 70% of the company's sales must consists of exports, that the same were not filed zones are to be managed as a separate customs territory from the rest of the
within the 2-year prescriptive period (the claim for 1992 quarterly returns were judicially Philippines and, thus, for tax purposes, are effectively considered as foreign territory.
filed only on April 20, 1994), and that petitioner failed to submit substantial evidence to For this reason, sales by persons from the Philippine customs territory to those inside the
support its claim for refund/credit. export processing zones are already taxed as exports.

The petitioner, on the other hand, contends that CTA failed to consider the 3. NO. For a judicial claim for refund to prosper, however, respondent must not only
following: sales to PASAR and PHILPOS within the Export Processing Zone Authority prove that it is a VAT registered entity and that it filed its claims within the prescriptive
(EPZA) as zero-rated export sales; the 2-year prescriptive period should be counted from period. It must substantiate the input VAT paid by purchase invoices or official receipts.
the date of filing of the last adjustment return which was April 15, 1993, and not on every This respondent failed to do. Petitioner corporation failed to present together with its
end of the applicable quarters; and that the certification of the independent CPA attesting application the required supporting documents, whether before the BIR or the CTA.
to the correctness of the contents of the summary of suppliers’ invoices or receipts Tax refunds are in the nature of tax exemptions. It is regarded as in
examined, evaluated and audited by said CPA should substantiate its claims. derogation of the sovereign authority, and should be construed in strictissimi juris
ISSUES: against the person or entity claiming the exemption. The taxpayer who claims for
exemption must justify his claim by the clearest grant of organic or statute law and
1. Whether or not the claims were filed within the 2-year prescriptive period should not be permitted to stand on vague implications.
2. Whether or not the claims for refund/credit of input VAT of petitioner corporation
have sufficient legal bases
3. Whether or not petitioner sufficiently established the factual bases for its
applications for refund/credit of input VAT
HELD:
1. YES. The filing of a quarterly income tax returns required in Section 85 (now Section 68)
and implemented per BIR Form 1702-Q and payment of quarterly income tax should only
be considered mere installments of the annual tax due. These quarterly tax payments
which are computed based on the cumulative figures of gross receipts and deductions in
order to arrive at a net taxable income, should be treated as advances or portions of the
annual income tax due, to be adjusted at the end of the calendar or fiscal year. This is
reinforced by Section 87 (now Section 69) which provides for the filing of adjustment
returns and final payment of income tax. Consequently, the two-year prescriptive period
provided in Section 292 (now Section 230) of the Tax Code should be computed from the
time of filing the Adjustment Return or Annual Income Tax Return and final payment of
income tax.
2. YES. Section 106(b)(2), in relation to Section 100(a)(2) of the Tax Code of 1977, as
amended, allowed the refund/credit of input VAT on export sales to enterprises operating
within export processing zones and registered with the EPZA, since such export sales were
deemed to be effectively zero-rated sales.
ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION v. CIR
GR Nos. 141104 & 148763 June 8, 2007
Chico-Nazario, J.

DOCTRINE:
Export processing zones are to be managed as a separate customs territory from the rest
of the Philippines and, thus, for tax purposes, are effectively considered as foreign
territory.

FACTS:
Both cases involved applications for tax refund of the input VAT by petitioner
corporation on its zero-rated sales in the taxable quarters of the years 1990 and 1992.
The Court of Tax Appeals and Court of Appeals denied the claims for failure to meet the
requirements of Sec 2 of Revenue Regulation No. 2-88 which provides that, sale of raw
materials to export-oriented BOI-registered enterprises whose export sales, under rules
and regulations of the BOI, exceed 70% of the total annual production, shall be subject to
zero-rate.
Petitioner corporation assails the validity of said regulation contending that it imposes
additional requirements, not found in Sec 100(a) of the Tax Code of 1977. Also that,
PASAR and PHILPHOS to whom the sale were made are registered not only with BOI, but
also with the then Export Processing Zone Authority.
Under Sec. 100(a) of the Tax Code, Export Sales are subject to 0% VAT and “Export Sale”
means the sale and shipment of goods from the Philippines to a foreign country,
irrespective of any shipping arrangement that may be agreed upon which may influence
or determine the transfer of ownership of the goods so exported, or foreign currency
denominates sales.
ISSUE:
Whether or not petitioner corporation is entitled to the refund of input VAT.
HELD:
YES, petitioner corporation is entitled to tax refund of input VAT. The Supreme Court held
that Sec 2 of Revenue Regulation No. 2-88 should not have been applied. PASAR and
PHILPHOS, in addition to being registered with BOI, were also registered with EPZA and
located within an export-processing zone. The transactions were considered export sale.
According to the Destination Principle, goods and services are taxed only in the country
where these are consumed. In connection with the said principle, the Cross Border
Doctrine mandates that no VAT shall be imposed to form part of the cost of the goods
destined for consumption outside the territorial border of the taxing authority. Hence,
actual export of goods and services from the Philippines to a foreign country must be free
of VAT, while those destined for use or consumption within the Philippines shall be
imposed with 10% VAT(Now 12% under R.A. No 9337). Export processing zones are to be
managed as a separate customs territory from the rest of the Philippines and, thus, for
tax purposes, are effectively considered as foreign territory. For this reason, sales by
persons from the Philippine customs territory to those inside the export processing zones
are already taxed as exports.