THE Supreme Court (SC) rejected the applicability of the cross-border doctrine in the case of a nickel miner registered with the Philippine Economic Zone Authority (PEZA) that had been claiming exemption from value-added tax (VAT).

In a March 2025 decision written by Associate Justice Japar B. Dimaampao and only made public on Monday, the court partially granted a refund claim filed by Coral Bay Nickel Corp., a PEZA-registered exporter of nickel and cobalt sulfide, for unutilized input VAT on purchases consumed outside the ecozone but within Philippine territory.

“Having been consumed outside of the ecozone, the cross-border doctrine finds no application,” according to the 15-page ruling.

“The same could not have been deemed ‘exported’ to Coral Bay. Having been rendered within the Philippines’ customs territory, it is naturally subject to national internal revenue laws such as VAT,” it added.

The High Court upheld the ruling and computation of the Court of Tax Appeals (CTA) Third Division, awarding the company the reduced refund amount of over P11.88 million, representing its unutilized input VAT attributable to its zero-rated sales for taxable year 2012.

The SC ruled that while ecozones are treated as foreign territory for tax purposes under the cross-border doctrine, VAT exemptions apply only to goods or services consumed within these zones or exported overseas.

Purchases made and consumed outside PEZA zones — even if within the Philippines — remain subject to VAT.

The decision reversed an earlier ruling by the full tax court, which had found Coral Bay to be fully VAT-exempt by virtue of its PEZA registration.

The SC said this interpretation was inconsistent with Republic Act No. 7916, which granted PEZA firms a preferential 5% tax on gross income in lieu of all national and local taxes, with the explicit exception of VAT.

“When the nuances of the foregoing pronouncements and issuances are taken together, two key concepts are established: one, PEZA-registered enterprises are not absolute VAT-exempt entities; and two, the VAT treatment of its transactions depends on whether the cross-border doctrine applies,” it added. — Chloe Mari A. Hufana