THE Court of Tax Appeals (CTA) has affirmed a division ruling on PTT Philippines Trading Corp.’s refund of P13.35 million representing its erroneously paid advance value-added tax (VAT) on its importation of diesel fuel for the period covering Sept. 20, 2013, to Jan. 20, 2014.

In a decision on June 14 and made public on June 16, the CTA full court denied the appeal of the commissioner of internal revenue (CIR) to reverse the ruling, as it agreed with the Third Division granting the company’s refund.

“The Court in Division is correct in granting the refund of the VAT collected by petitioner (CIR) from the respondent (PTT) on the imported fuel in the total amount of P13.3 million since it is an illegal or erroneous tax or one which was levied without statutory authority,” according to the ruling written by CTA Associate Justice Marian Ivy F. Reyes-Fajardo.

PTT is a domestic corporation that engages in the distribution, marketing, and selling of petroleum and petroleum-related products within the Subic Bay Freeport Zone and other special economic and export processing zones in the Philippines.

It had previously imported diesel fuel from the Cayman Islands, British West Indies from Sept. 20, 2013 to Jan. 20, 2014, and paid VAT worth P13.35 to the Bureau of Customs.

Republic Act No. 7227, or the Bases Conversion and Development Act of 1992, grants locators in the former Subic and Clark military bases incentives such as tax and duty-free importation. PTT operates a fuel receiving terminal in the Subic Special Economic Zone.

The tax court noted that the company was duly registered with the Subic Bay Freeport Enterprise, which grants tax and duty-free importation of raw materials and fuel.

Under Republic Act No. 7916, or the Special Economic Zone Act of 1995, no taxes shall be imposed on business establishments within economic zones.

The Bureau of Internal Revenue’s (BIR) Revenue Regulations No. 2-2012, which imposes taxes on Freeport and Economic Zone (FEZ) enterprises, had been declared by the Supreme Court as unconstitutional for illegally imposing taxes on these areas that should enjoy tax exemptions.

PTT had sold the imported diesel fuel to Clark Development Corp., which the CTA said is a tax-exempt entity.

“Adverting to our earlier discussion, the diesel fuel imported by the respondent (PTT) is exempt from VAT,” it said.

The CTA noted the laws previously cited consider FEZs as foreign territories and when resources are brought to these areas, the goods remain in foreign territory and are not subject to Philippine customs and tax laws. — John Victor D. Ordoñez

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