TERRITORIAL

• General rule is that tax laws only operate within territorial limits of state
• Special economic zones part of phil territory? yesz
o Power of taxation extends to them
o Not part of customs territory
o If goods from customs territory is brought out, it is akin to importation
o If bringing goods from customs territory to eco-zone – akin to export – subject to vat at
0-rating
o Locator registered as a manufacturer, but it sold its equipment and derived income. Is
it subject to income tax and VAT?

BIR: income tax no, because to be entitled to the in lieu taxes exemption, income must be derived
from the registered activity