IN last week's article, we discussed that to qualify for value-added tax (VAT) zero-rating under Section 108(B)(2) of the National Internal Revenue Code, the following elements must be present: (1) the recipient of the services is a foreign corporation doing business outside the Philippines, or is a nonresident person not engaged in business who is outside the Philippines when the services were performed; (2) the payment for such services were made in acceptable foreign currency accounted for in accordance with the Bangko Sentral ng Pilipinas rules; (3) the services fall under any of the categories under Section 108 (B) (2), or simply, the services rendered should be other than 'processing, manufacturing or repacking goods;' and (4) the services must be performed in the Philippines by a VAT-registered person.

In recent court decisions, claims for refund for VAT zero-rating under said section have been denied for failure to prove the last element — that the services must be performed in the Philippines by a VAT-registered person. Since in most instances, the taxpayer claiming for refund is doing business in the Philippines, this element can sometimes be taken for granted.