“Destination Principle” and “Cross Border Doctrine’ in Taxation Law

Topic: TERRITORIALITY

Destination Principle

According to the Destination Principle, goods and services are taxed only in the country where these are consumed.

“Cross Border Doctrine”

In connection with the said principle, the Cross Border Doctrine mandates that no VAT shall be imposed to form part of the cost of the goods destined for consumption outside the territorial border of the taxing authority.

Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT while those destined for use or consumption within the Philippines shall be imposed with 10% VAT (Now 12% under R.A. No. 9337).

Source: ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION v. COMMISSIONER OF INTERNAL REVENUE 524 SCRA 73,103 (2007)

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