The The Supreme Court has ruled that businesses registered with the Philippine Economic Zone Authority (PEZA) are not entirely exempt from paying Value-Added Tax (VAT). In Coral Bay Nickel Corporation v. Commissioner of Internal Revenue (G.R. Nos. 251333-34, March 5, 2025), the Court clarified that while PEZA-registered enterprises enjoy exemptions from most national and local taxes under the Special Economic Zone Act, this does not cover VAT. Applying the cross-border doctrine, sales to ecozones are zero-rated only if the goods or services are for use within the ecozone or abroad. However, when goods or services are consumed outside the ecozone but still within the Philippines, the destination principle applies, and VAT is imposed. Since Coral Bay’s purchases were used outside the ecozone, they were subject to VAT, making the company entitled to a refund of unutilized input VAT. This ruling affirms that PEZA firms must still comply with VAT rules for domestic transactions outside their zones. Supreme Court has ruled that businesses registered with the Philippine Economic Zone Authority (PEZA) are not entirely exempt from paying Value-Added Tax (VAT). In Coral Bay Nickel Corporation v. Commissioner of Internal Revenue (G.R. Nos. 251333-34, March 5, 2025), the Court clarified that while PEZA-registered enterprises enjoy exemptions from most national and local taxes under the Special Economic Zone Act, this does not cover VAT. Applying the cross-border doctrine, sales to ecozones are zero-rated only if the goods or services are for use within the ecozone or abroad. However, when goods or services are consumed outside the ecozone but still within the Philippines, the destination principle applies, and VAT is imposed. Since Coral Bay’s purchases were used outside the ecozone, they were subject to VAT, making the company entitled to a refund of unutilized input VAT. This ruling affirms that PEZA firms must still comply with VAT rules for domestic transactions outside their zones.
SC: PEZA Firms Not Fully Exempt from VAT
- Post author:Wilfredo Baltazar
- Post published:August 14, 2025
- Post category:Accounting / BIR / News / VAT
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