[LEONARDO-DE CASTRO, J.]
Toshiba is a domestic corporation registered with the Philippine Economic Zone Authority (PEZA) as an Economic Zone (ECOZONE) export enterprise.It filed two separate applications for tax credit/refund of its unutilized input VAT payments. The CIR denied the application. On appeal, the CTA ruled that Toshiba is entitled to the credit/refund of the input VAT paid on its purchases of goods and services relative to such zero-rated export sales. The Court of Appeals reversed the decision of the CTA in the petition for review stating that Toshiba is a tax exempt entity under R.A. No. 7916 thus not entitled to refund the VAT payments made in the domestic purchase of goods and services.
Is Toshiba entitled to VAT refund?
YES.Such export sales took place before October 15, 1999, when the old rule on the VAT treatment of PEZA-registered enterprises still applied. Under this old rule, it was not only possible, but even acceptable, for Toshiba, availing itself of the income tax holiday option under Section 23 of Republic Act No. 7916, in relation to Section 39 of the Omnibus Investments Code of 1987, to be subject to VAT, both indirectly (as purchaser to whom the seller shifts the VAT burden) and directly (as seller whose sales were subject to VAT, either at ten percent [10%] or zero percent [0%])