Stefanini Philippines Inc. vs. Commissioner of Internal Revenue

DECISION

REYES-FAJARDO, L;_ Before the Court is a Petition for Review¹ filed by Stefanini Philippines, Inc. (petitioner or Stefanini Philippines) on December 16, 2019 against respondent Commissioner of Internal Revenue (CIR), seeking the refund of or issuance of a tax credit certificate (TCC) amounting to P9,632,173.66 representing alleged excess and/ or unutilized input value-added tax (VAT) on purchases of goods and services attributable to zero-rated sales relative to the third and fourth quarters of calendar year (CY) 2017.

FACTS

Stefanini Philippines is a corporation organized under Philippine law, with registered office address at 3, 5 & 6/ F iMET BPO Metrobank Ave., Metropolitan Park, Roxas Blvd., Pasay City 1300. It is engaged in the business of providing business process outsource solutions and allied contact or call center services2 to clients that

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include non-resident foreign entities such as Stefanini, Inc., Stefanini UK Ltd., Stefanini Sart and Stefanini NV / SA. Respondent is the head of the Bureau of Internal Revenue (BIR) empowered to perform the duties of the office, including acting upon and approving claims for refund or tax credit. Its office address is at the 5th Floor, BIR National Office Building, BIR Road, Diliman, Quezon City. 3

Tax Returns

1) Output VAT

For the third and fourth quarters of CY 2017, Stefanini Philippines filed4 Quarterly Value-Added Tax Returns (BIR Form No. 2550-Q) and reported total sales of !>359)76,890.35, which included zero-rated sales of !>358,807,912.34 as follows:

Period

VA Table Sales

Zero-rated Sales

Total Sales

Third Quarter - 20175

f> 221,514.41 f> 122,765,262.34 f> 122,986,776.75 - - ----- - ·- ·---·---------- - - ------

Fourth Quarter- 20176

147,463.60 236,042,650.00 236,190,113.60

Total

P 368,978.01 P358,807,912.34 P359,176,890.35 Correspondingly, Stefanini Philippines reported output VAT from its sales subject to VAT in the third and fourth quarters amounting to P26,581.737 and Pl7,695.63,8 respectively.

2) Input VAT

On the other hand, it also declared a total input VAT of P9,676A50.52 from its current domestic purchases of goods and services and input VAT on purchases of capital goods from previous quarters, detailed as follows:

3 Par. 2, Stipulation of Facts, Compliance dated October 1, 2020, Docket- Vol. I, pp. 298 to 299. Petitioner amended its VAT return for the fourth quarter on April14, 2018. s Exhibit "P-80", Lines 115 to 19, Docket- Vol. II, p. 1128. (Note: Zero-rated sales were reported as Exempt sales.)

6 Exhibit "P-100", Lines 15 to 19, Docket- Vol. I, p. 471. 7 Exhibit "P-80", Line 15B, Docket- Vol. II, p. 1128. s Exhibit "P-81", Line 15B, Docket- Vol. II, p. 1130.

t

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Input Tax Due on Capital

Goods exceeding P1M

Deferred

from previous quarter

Purchase of Capital Goods

Exceeding P1M

Total

Less:

Deferred

for the succeeding period Amortized input tax on capital goods exceeding ?1M

Input Tax Due on Current

Purchases of Goods other than

Capital Goods

Input tax on purchase of capital goods not exceeding

P1M

Input

tax on domestic purchases of goods other than capital goods

Sub-total

Input Tax Paid on:

Input

tax on domestic purchases of services

Sub-total

Total input tax during the 4th Qtr 2017 3rd Qtr 2017

(Amended)

"P-80"

"P-100"

Total

P1,582,446.18 P1,498,163.00 P3,080,609.18 1,195,413.26 1,195,413.26 P1,582,446.18 P2,693,576.26 P4,276,022.44 1,498,163.36 2,602,771.62 4,100,934.98 ?84,282.82 ?90,804.64 ?175,087.46 P141,177.60 P100,028.89 P241,206.49 101,759.75 312,164.12 413,923.87 ?242,937.35 ?412,193.01 ?655,130.36 P3,027,767.46 P5,818,465.24 P8,846,232.70 ?3,027,767.46 ?5,818,465.24 ?8,846,232.70 period P3,354,987.63 P6,321,462.89 P9,676,450.52

3) VAT Payable

On account of the excess of input over output VAT, Stefanini Philippines reported net VAT overpayment for the third and fourth quarters amounting to P54,951,712.8Q9 and P61,255A80.42,10 respectively.

Proceedings before the BIR On September 26, 2019, Stefanini Philippines filed before the BIR an Application for Tax Credits/Refunds (BIR Form No. 1914),11

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accon1panied by a letter12 of even date (administrative claim). In the main, it averred as follows: First, it incurred excess and/ or unutilized input VAT attributable to its zero-rated sales. Second, it is entitled to the refund or credit of excess input VAT arising from the third and fourth quarters of CY 2017 in the aggregate amount of P9,632,173.66.13 The CIR14 denied Stefanini Philippines's administrative claim. The latter received a copy of this denial on November 18,2019. Hence, it filed the present Petition for Review on December 16, 2019 (judicial claim).15 Proceedings before the Court The CIR filed an Answer16 and submitted17 the BIR Records of the case on March 2, 2020 and July 28, 2020, respectively. After the parties' submission of their respective pre-trial briefs18 and the conduct of a pre-trial conference,19 the Court resolved20 to approve the parties' Joint Stipulation of Facts and Issues21 and issued a Pre-Trial Order dated February 3, 2021.22 During trial, the following persons testified for Stefanini Philippines: (1) Ms. Jeanina B. Pepito/3 petitioner's Finance Manager, 12 Exhibit "P-88", Docket - Vol. II, pp. 1153 to 1155. 13 With P0.50 discrepancy against the total per VAT Returns. 14 Through a letter dated October 29, 2019 issued by the BIR, through Ms. Maria Luisa I. Belen, OIC-Assistant Commissioner (ACIR) - Assessment Service. Exhibit "P-118" to "P-118-A-1", Docket - Vol. II, pp. 658 to 668. ts Docket- Vol. I, pp. 6 to 16.

16 Docket- Vol. I, pp. 62 to 71.

17 Compliance dated July 27, 2020, Docket - Vo l. I, pp. 79 to 80. 18 For the CIR, see Docket- Vol. I, pp. 88 to 92; For Stefanini Philippines, see Docket - Vol. I, pp. 103 to 117.

19 Notice of Resetting dated June 30, 2020, Docket - Vol. I, p. 77; Minutes of the hearing held on, and Order dated, September 24, 2020, Docket - Vol. I, pp. 287 to 290, and 292 to 293, respectively.

2o In a Resolution dated October 19,2020. Docket- Vol. I, p. 332.

and (2) Mr. Joseph Cedric V. Calica,24 the Court-commissioned Independent Certified Public Accountant (ICPA).25 The Report of the ICPA was submitted on December 4, 2020.26 Stefanini Philippines filed its Formal Offer of Evidence27 on February 10, 2021. While the CIR filed a Comment2B thereto, the Court expunged29 the same for being filed out of time. Consequently, the Court resolved30 to admit all exhibits offered by Stefanini Philippines. For its part, the CIR presented the testimony of Revenue Officer Dexter C. Bustillos.31 Subsequently, the Court also admitted32 all exhibits offered33 by the CIR.

After the parties filed their respective Memoranda,34 the case was submitted for decision on August 23, 2022.35

ISSUE

The Court is tasked to ascertain Stefanini Philippines's entitlement to a refund or credit of alleged unutilized input VAT attributable to zero-rated sales relative to the third and fourth quarters of CY 2017.

24 Exhibit "P-120", Docket- Vol. II, pp. 671 to 704; Minutes of the hearing held on January 21, 2021, Docket- Vol. II [last four (4) pages thereof); Order dated January 21, 2021, Docket- Vol. II, pp. 944 to 945.

25 Oath of Commission dated October 22, 2020, Docket- Vol. I, p. 337; Minutes of the hearing held on, and Order dated, October 22, 2020, Docket - Vol. I, pp. 334 to 336 and 338 to 339, respectively.

26 Exhibits "P-114" and "P-114-A", Docket- Vol. I, pp. 377 to 395. 27 Docket- Vol. II, pp. 978-1011. 2s Docket- Vol. III, pp. 1480-1483. 29 In a Resolution dated May 23, 2021, Docket- Vol. III, p. 1485. 30 In a Resolution dated June 21,2021, Docket- Vol. III, pp. 1488 to 1491. 31 Exhibit "R-4", Docket- Vol. I, pp. 97 to 102; Minutes of the hearing held on, and Order dated, November 4, 2021, Docket- Vol. III, pp. 1505 to 1508-a. 32 In a Resolution dated March 21, 2022, Docket- Vol. III, pp. 1539 to 1540. 33 Docket- Vol. III, pp. 1515 to 1518. 3-1 For the CIR, see Docket- Vol. III, pp. 1566 to 1578. For Stefanini Philippines, see Docket- Vol. III, pp. 1580 to 1622.

35 In a Minute Resolution dated August 23, 2022, Docket - Vol. III, p. 1623.

•

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Petitioner's Arguments

Stefanini Philippines anchors its claim for refund or credit on Sections 108(B)(2) and 112(A), in relation to Section 110(B), of the National Internal Revenue Code (Tax Code).36 It avers as follows: First, it is a VAT -registered taxpayer.37 Second, the input VAT subject of the present claim was derived from purchases of goods and services attributable to zero-rated sales of services.38 Third, said input VAT has remained unutilized and/ or unapplied against its output VAT liability.39 Fourth, it filed administrative and judicial claims within reglementary period prescribed by the Tax Code.4o Respondent's Argum.ents On the other hand, the CIR insists that Stefanini Philippines failed to substantiate its claim for refund at the administrative level.41 In particular, the CIR denied Stefanini Philippines's administrative claim because it did not comply with the mandatory invoicing requirements pursuant to Section 113 in relation to Section 110 of the Tax Code.42

OUR RULING

Stefanini Philippines's Petition for Review is partly meritorious. The Court n1ay consider evidence not presented at the administrative level.

The basic rule in tax refund cases requires the claimant to establish its entitlement to the refund or credit sought by showing that it has strictly complied with the conditions for its grant.43 The 36 Docket - Vol. I, p. 9.

37 Docket- Vol. I, p. 10.

38 Docket - Vol. I, p. 10.

39 Docket- Vol. I, p. 10.

40 Docket - Vol. I, p. 11.

41 Docket - Vol. I, p. 63.

42 Docket - Vol. I, p. 65.

43 Silico11 Phils. Inc. v. Conn11issioHer of llltemnl Revenue, G.R. Nos. 184360, 184361 & 184384, February 19, 2014, 727 Phil. 487-506; Silicon Pliils., l11c. v. Commissioner of lntemnl Revenue, G.R. No. 173241, March 25, 2015.

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claimant's burden consists of proving not only that it is entitled to a refund, but also that it observed the reglementary periods within which the administrative and judicial claims for refund must be filed.44 Verily, the law authorizes the CIR to issue a TCC relative to or refund creditable input VAT due or paid attributable to zero-rated sales.45 Thus, the CIR is given sufficient discretion to grant or deny the claim for refund or credit, after evaluating the claimant's submissions in support of its request.

The CIR' s denial is appealable to this Court.46 On appeal, the claimant must convince the Court that the CIR' s denial was not justified. It may re-submit the documents already presented to the CIR, as well as additional documents which may further bolster its entitlement to a refund or credit. Put in another way, "part of the evidence to be submitted to the CTA must necessarily include whatever is required for the successful prosecution of an administrative claim."47 Significantly, cases filed before this Court are litigated de novo. Thus, Our review shall not be "limited to whether or not the Commissioner committed gross abuse of discretion, fraud, or error of law, as contended by the Commissioner" and shall cover even the CIR' s factual findings.48 Accordingly, We are not foreclosed from considering the totality of the evidence offered by the claimant, whether or not submitted previously at the adn1inistrative level. 44 Co111missio11er of Internnl Reve/lue v. United Cndiz Sugnr Fnr111ers Associntiou Multi-Purpose Cooperative, G.R. No. 209776, December 7, 2016, 802 Phil. 636-659. 45 Section 112(C), Tax Code.

46 Section 112(C), Tax Code.

~7 See Atlns C01zsolidnterl Milling nnrl Develop111e11t Corp. v. C0111111issioner of Jnterunl Revenue, G.R. No. 145526, March 16, 2007, 547 Phil. 332-340.

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Stefanini Philippines is entitled to a partial refund or credit.

After a careful evaluation of the evidence offered in support of the instant judicial claim, We find in favor of granting Stefanini Philippines a refund or credit to the extent of P5,588,956.13. The recent case of Chevron Holdings, Inc. v. Commissioner of Internal Revenue49 set out the requisites for a grant of refund or credit of unutilized input VAT attributable to zero-rated sales, viz.: Under Section 112 (A) of the Tax Code, the taxpayer may claim for refund or issuance of tax credit certificate of unutilized input VAT attributable to zero-rated sales subject to the following conditions: (1) the taxpayer is VAT-registered; (2) the taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) the claim must be filed within two (2) years after the close of the taxable quarter when such sales were made; and (4) the creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against the output tax.

The concurrence of the above-enumerated conditions In the present case is discussed below.

1) VAT Registration

Stefanini Philippines's VAT registration is established by its Certificate of Registrationso with TIN 006-960-314-00000.

2) VAT Zero-rating

Stefanini Philippines avers that the input VAT it seeks to refund is attributable to sales of services to its non-resident foreign clients, which they regard as subject to zero percent (0%) VAT, pursuant to Section 108(B)(2) of the Tax Code, viz.: 49 G.R. No. 215159, July 5, 2022.

so Exhibits "P-4" and "P-4-A, Docket- Vol. II, p. 1023.

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Sec. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties. -

XXX

XXX

XXX

(B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT -registered persons shall be subject to zero percent (0%) rate:

(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);

(2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);" (Emphases supplied) The preliminary consideration for VAT zero-rating of a sale or supply of service is that it must have been performed in the Philippines.

In this regard, it is already stipulated that Stefanini Philippines is engaged in the enterprise of providing business process outsource solutions and allied contact or call center services.51 That these services were performed in the Philippines is supported by its Amended Articles of Incorporation,52 BIR Certificates of Registration dated December 17, 201353 and January 18, 2018,54 and Agreements for Services55 with its respective clients, among others. In particular, these documents show that its registered address and principal place of business is in the Philippines. In Our view, that a corporation was incorporated in the Philippines and is registered herein are prima facie proofs that, necessarily, it conducts its business in the Philippines, 51 Par. 1.1, Stipulation of Facts, Compliance dated October 1, 2020, Docket- Vol. I, p. 298. 52 Exhibit "P-3", Docket- Vol. I, pp. 142-146. 53 Exhibit "P-4", Docket- Vol. I, p. 150.

S-1

Exhibit "P-4", Docket- Vol. I, p. 151.

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where it resides and is registered.56 Significantly, Stefanini Philippines's domestic registered address is no longer disputed, as this fact has been settled and accepted between the parties. 57 Sales or supplies of services performed in the Philippines may fall into two categories for purposes of zero-rating: export services under sub-paragraph (B)(1) (e.g., processing, manufacturing or repacking of goods intended for consumption outside the Philippines) and other services under sub-paragraph (B)(2) (e.g., sale or supply of services other than those referred to in sub-paragraph (B)(1)). In line with this, Stefanini Philippines submitted the following agreements indicating therein that the services to be provided, i.e., "outsourced processing services to support [its clients'] internal operations and external customer contracts," viz.:

1. Agreement for Services between Stefanini, Inc. and petitioner made on January 1, 2015 and shall remain in force until April30, 2018;58

2. Agreement for Services between Stefanini UK Ltd. and petitioner made on September 1, 2017 and shall remain in force until August 31, 2019;59

3. Agreement for Services between Stefanini Sarl and petitioner made on January 1, 2016 and shall remain in force until April30, 2018;60 and

4. Agreement for Services between Stefanini NV /SA and petitioner made on January 1, 2016 and shall remain in force until April30, 2018.61 These establish that Stefanini Philippines's services (i.e., outsourced business process services) are zero-rated sales or supplies of other services. Consequently, its services must meet the criteria set out in Section 108 sub-paragraph (B)(2). 56 Stefnllini Pl7ilippines, l11.c. v. Com111issioner of lnternnl Revwue, C.T.A. Case No. 10188, November 23, 2022.

57 Par. 1, Stipulation of Facts, Compliance dated October 1, 2020, Docket- Vol. I, p. 298. ss Exhibit "P-6", Docket- Vol. II, pp. 1025 to 1030.

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In Comm.issioner of Internal Revenue v. Deutsche Knmuledge Services Pte. Ltd.,62 the Supreme Court enumerated the conditions under Section 108(B)(l), viz.:

Sales of "other services," such as those qualifying services rendered by DKS to its foreign affiliates-clients, shall be zero-rated pursuant to Section 108 (B) (2) of the Tax Code if the following conditions are met: First, the seller is VAT -registered. Second, the services are rendered "to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed." Third, the services are "paid for in acceptable foreign currency and accounted for in accordance with [BSP] rules and regulations."

Proof of NRFC Status

For purposes of zero-rating under Section 108 (B) (2) of the Tax Code, the claimant must establish the two components of a client's NRFC status, viz.: (1) that their client was established under the laws of a country not the Philippines or, simply, is not a domestic corporation; and (2) that it is not engaged in trade or business in the Philippines. To be sure, there must be sufficient proof of both of these components: showing not only that the clients are foreign corporations, but also are not doing business in the Philippines. We find that Stefanini Philippines established its compliance with the aforementioned requisites. First, as discussed above, its VAT-regish·ation is shown by its BIR Certificate of Registration. Second, to prove that the remittances it received as payments for the services rendered were in acceptable foreign currency and accounted for as required by applicable BSP rules, petitioner presented Certificates of Inward Remittance issued by the Bank of America, N.A.63 and Metropolitan Bank & Trust Company.64 62 G.R. No. 234445, July 15, 2020.

63 Exhibits "P-75" and "P-76", Docket - Vol. II, pp. 1121 to 1124.

IH

Exhibit "P-77", Docket - Vol. II, p. 1125.

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In the issuance of invoices and receipts evidencing the subject sales and collections of remittances, Stefanini Philippines must also comply with the mandatory invoicing requirements laid out in Section 113(A) and (B) of the Tax Code,65 as further implemented by Section 4.113-1(A) and (B) of Revenue Regulations (RR) No. 16-05. In this regard, Stefanini Philippines submitted the following official receipts to support its reported zero-rated sales for the third and fourth quarters of CY 2017, to wit: 65 SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons. - (A) Invoicing Requirements. - A VAT -registered person shall issue:

(1) A VAT invoice for every sale, barter or exchange of goods or properties; and

(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services.

(B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt:

(1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN);

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That:

(a) The amount of the tax shall be shown as a separate item in the invoice or receipt;

(b) If the sale is exempt from value-added tax, the term 'VAT-exempt sale' shall be written or printed prominently on the invoice or receipt;

(c) If the sale is subject to zero percent (0%) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;

(d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be shown on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale;

(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and

(4) In the case of sales in the amount of One thousand pesos (1'>1,000) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and Taxpayer Identification Number (TIN) of the purchaser, customer or client.

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Amount

OR

Foreign

Exh.66 No.

Date

Client

Currency

PhP

3rd Quarter

"P-10"

117 07/ 12/2017 Stefanini, Inc.

$200,000.00 P10,092,000.00

"P-11"

118 07/18/2017 Stefanini, Inc.

$125,000.00 6,341,250.00

"P-12"

119 07/24/2017 Stefanini, Inc.

$200,000.00 10,127,000.00

"P-13"

121 07/31/2017 Stefanini, Inc.

$281,107.85 14,17 4,863.34

"P-14"

122 08/08/2017 Stefanini, Inc.

$500,000.00 25,282,500.00

"P-15"

123 08/25/2017 Stefanini, Inc.

$300,000.00 15,340,500.00

"P-16"

124 09/ 05/ 2017 Stefanini, Inc.

$200,000.00 10,212,000.00 "P-17'' 125 09/ 21/ 2017 Stefanini, Inc.

$260,000.00 13,234,000.00

"P-18"

126 09/ 15/ 2017 Stefanini, Inc.

$30,000.00 1,530,000.00

"P-19"

127 09/ 19/ 2017 Stefanini, Inc.

$300,000.00 15,239,539.50

"P-20"

128 09/20/ 2017 Stefanini, Inc.

$10,000.00 505,134.50

"P-21"

129 09/28/2017 Stefanini, Inc.

$13,500.00 686,475.00

Subtotal

P122, 765,262.34 4th Quarter

"P-22"

130 10/03/2017 Stefanini, Inc.

$500,000.00 P25,450,000.00

"P-23"

131 10/ 10/ 2017 Stefanini, Inc.

$30,000.00 1,539,000.00

"P-24"

132 10/ 19/ 2017 Stefanini, Inc.

$320,000.00 16,483,200.00

"P-25"

133 11/ 08/ 2017 Stefanini, Inc.

$400,000.00 20,542,000.00

"P-26"

134 11/ 17/2017 Stefanini, Inc.

$365,000.00 18,512,800.00

"P-27"

135 11/ 17/2017 Stefanini UK Ltd.

£50,987.39 3,414,115.63

"P-28"

136 11/20/2017

Stefanini NV / SA

€260,000.00 15,475,200.00

"P-29"

138 12/ 04/ 2017 Stefanini, Inc.

$160,000.00 8,064,800.00

"P-30"

139 12/ 06/ 2017 Stefanini, Inc.

$500,000.00 25,315,000.00

"P-31"

140 12/07/2017 Stefanini Sarl

Fr61,000.00 3,113,440.00

"P-32"

141 12/28/2017 Stefanini, Inc.

$250,000.00 12,457,500.00

"P-33"

142 12/ 20/ 2017 Stefa nini, Inc.

$200,000.00 10,046,000.00

Subtotal

P160,413,055.63

TOTAL

P283,178,317.97 Upon examination, We observe that each inward remittance is duly supported by VAT official receipts, all of which bear the information in accordance with the applicable invoicing requirements. To be sure, the amount collected was written and declared as "zero rated sales" in the breakdown portion (left side) on the face of each official receipt. All collections are reflected clearly as zero-rated sales on the official receipts, in compliance with the applicable invoicing requirements and pursuant to applicable jurisprudence directing that the term "zero-rated sale" be written or printed prominently on the face thereof.

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We do note two (2) third quarter transactions where the amount of remittance received differed from the amount billed. Significantly, Stefanini Philippines submitted a reconciliation67 where it was able to explain the nature of these discrepancies.6s Third, that Stefanini Philippines's clients for whom it rendered the subject services are (a) non-resident foreign corporations (NRFC)

(b) not engaged in trade or business in the Philippines are established by the SEC Certifications of Non-Registration and Proofs of Foreign Incorporation/Registration relative to each of its foreign clients, viz:

Company

Name

Stefanini, Inc.

Stefanini

Ltd.

UK

Stefanini Sarl

Stefanini

NV/SA

SEC Certification of

Non-Registration of

Company

(Exhibit Rej)

"P-57"69

"P-58"74

"P-59"79

"P-60"86

Proof of foreign incorporation/ registration

(Exhibit Rej)

"P-61" to "P-61-A";7o "P- 62" to "P-62-B";71 "P-66";72

"P-67"73

"P-63" to "P-63-A" ,75 "P- 116";76 "P-68"77; "P-69"7s "P-65" to "P-65-A" ,so "P- 65-l";s1 "P-65-A-1";82 "P- 72" ;83 "P-73" ;84 "P-74"85 •• - • ~w - ·--ri --·-• "P-64" to "P-64-A" ;87 "P- 117"88 67 Exhibits "P-78" and "P-79", Docket- Vol. II, pp. 1126 to 1127. 68 Exhibit "P-78", Docket- Vol. II, p. 1126. 69 Doc ke t- Vo l. II, p. 1096.

70 Docket - Vol. II, pp. 1100 to 1101. 71 Docket - Vol. II, pp. 1102 to 1105. n Docket - Vol. II, p. 1114.

73 Docket- Vol. II, p. 1115.

74 Docket - Vol. II, p. 1097.

75 BIR Records, p. 78.

76 Docket- Vol. II, pp. 652 to 653. 77 Docket- Vol. II, p. 1116.

78 Docket- Vol. II, p. 1117.

79 Docket- Vol. II, p. 1098.

80 BIR Records, pp. 82 to 83.

81 Docket- Vol. II, p. 1111.

82 Docket- Vol. II, pp. 1112 to 1113. 83 Docket-Vol. - II, p. 1118.

84 Docket-Vol. - II, p. 1119.

85 Docket-Vol. - II, p. 1120.

86 Docket- Vol. II, p. 1099.

87 BIR Records, pp. 80 to 81.

ss BIR Records, pp. 80 to 81.

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3) Timeliness of Administrative and

Judicial Claims

The present claim covers the third and fourth quarters of CY 2017. Counting two (2) years from the close of each of these quarters, respectively, the following table indicates the last day for filing of the administrative claim, viz.:

VAT

Return

-~rd q~~rt~~- 4th quarter

Close of the Quarter

__ .?.~E!~r.n ~er }_~ _?017 December 13, 2017

Last Day to File

Administrative Claim

~~r_teil_l~-~! 30_L 2019 ___ _ December 31,2019 It is clear from the foregoing that Stefanini Philippines's September 26, 2019 filing of its administrative claim was within the two (2)-year prescriptive period set out in Section 112(A) of the Tax Code. Subsequently, however, the CIR denied the administrative claim.

It is stipulated that Stefanini Philippines received a copy of the CIR's denial on Noven1ber 18, 2019.89 It then proceeded to this Court and filed the present judicial claim on December 16, 2019.90 Likewise, the judicial claim was timely as it was filed within the thirty (30)-day reglementary period counted from receipt of the CIR' s decision.

4) Validityofunutilizedinput VAT

Certainly, the input VAT subject of the claim must also be validi that is, eligible for refund or credit in accordance with relevant Tax Code provisions and regulations. To be valid, the input VAT: (a) must not be transitional input taxes,91 (b) must be due or paid92 and substantiated by supporting documents that, in turn, meet the applicable VAT invoicing requirements,93 (c) must be attributable to

Pnge 16 of 29

zero-rated or effectively zero-rated sales or supplies of service,94 and

(d) must not have been applied against output taxes during and in the succeeding quarters.95 In the subject VAT returns, Stefanini Philippines declared input taxes in the aggregate amount of P9,676A50.52. Subject of the present claim is a total of !>9,632)73.6696 of the aforementioned amount. Stefanini Philippines's compliance with the above-enumerated requisites is discussed in detail below. • Not transitional input VAT There is no showing that input VAT credits subject of the instant claim are transitional input VAT within the meaning of Section 111(A) of the Tax Code. To be sure, the input VAT's non-transitional nature has not been put in issue nor questioned by the CIR. • Actually due and paid; supported by VAT invoices and official receipts Only 57.84%97 of the total input VAT reported in the returns was established to h ave been actually due or paid. Whether input VAT was due or paid is conditioned upon the presentation of documents that (a) substantiate the amount of input tax credits, as prescribed under Section 4.110-8 of RR No. 16-2005, and

(b) comply with the invoicing requirements under Sections 113(A) and (B), 237 and 238 of the Tax Code, and implemented by Section 4.113- 1(A) and (B) of RR No. 16-2005.

Here, Stefanini Philippines submitted VAT invoices and official receipts to support its input taxes from domestic purchases of goods and services for the third and fourth quarters of CY 2017. A careful 9~ Intel Teclmology Philippilles, lr1c. v. Co111missioner of Internal Revwue, supra; and Snn Roque Power Corporntio11 vs. Co111111 issioner of Internal Revenue, supra. 95 Intel Teclnwlogy PhilippiHes, Inc. v. Co111111issioner of Intemnl Reve11ue, supra; Snn Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T C01111111111icntions Services Philippines, THe., supra.

96 With f>0.50 discrepancy against the total per VAT Returns. 97 Valid input VAT+ Total claim= 1'>5,596,590.06 + P9,676,450.52 = 0.5783722 "' 57.84% examination of these documents reveals that input taxes amounting to P4,079,860.46 are not supported properly and, thus, should be disallowed, viz.:

Third Quarter

Invoice/OR

Supplier’ Exh. No. Date Amount Input Tax Purchase of goods other than capital goods Address, business style and/or TIN of petitioner not indicated in invoice Brother’s Venture P-91-A-23. 07/26/2017, P = 56,760.00 P 6,081.43 Brother’s Venture P-91-A-25 07/28/2017 22,500.00 2,410.71 Brother’s Venture P-91-A-27 = 08/23/2017 75,000.00 8,035.71 Pacsports* P-91-A-247 08/18/2017 11,970.00 1,282.50 Subtotal P 166,230.00 P 17,810.35 Invoice dated outside period of claim Synergenius Inc. P-91-A-341 06/08/2017 P41,810.72 P4,479.72 Unison? P-91-A-347 = 05/17/2017 3,311.41 354.79 Unison P-91-A-349 = 05/19/2017 29,926.40 3,206.40 Unison P-91-A-351 = 05/19/2017 7,481.60 801.6 Unison P-91-A-353 06/19/2017 5,465.60 585.6 Unison P-91-A-355 = 05/19/2017 2,744.00 294 Unison P-91-A-357 = 06/01/2017 29,926.40 4,382.40 Unison P-91-A-362 06/01/2017 7A81.60 801.6 Unison P-91-A-364 06/01/2017 10,931.20 1,171.20 Unison P-91-A-366 06/06/2017 2,240.00 240 Unison P-91-A-368 06/13/2017 5,376.00 576 Unison P-91-A-370 06/13/2017 4,760.00 510 Unison P-91-A-372 06/23/2017 5,465.60 585.6 Unison P-91-A-374 06/29/2017 5,488.00 588 Unison P-91-A-376 06/29/2017 2,744.00 294 Subtotal P 165,152.53 P 18,870.91 Disallowed input taxes from purchase of goods other than capital goods P 36,681.26 Purchase of capital goods not exceeding P1Million Undated invoice Hi-End Office Design¢ P-91-B-2 P 574,560.00 P 61,560.00 Disallowed input taxes from purchase of capital goods not exceeding P 61,560.00

P1Million

Purchase of services OR dated outside period of claim Pacita R. Salceda P-91-A-21 03/09/2017

Subtotal

VAT not separately indicated in the supporting OR

Corpnet Global4 P-91-A-106 08/30/2017

Corpnet Global P-91-A-108 09/18/2017

Extra Ordinaire® P-91-A-131 07/24/2017

Extra Ordinaire P-91-A-133 07/24/2017

Extra Ordinaire P-91-A-135 = 09/11/2017

Extra Ordinaire P-91-A-137 09/11/2017

P 6,000.00 _P 642.86 r 642.86 P 31,350.00 P 3,420.00 49,500.00 5,400.00 112,450.46 11,482.17 85,517.99 8,544.08 84,417.72 8,424.05 105,835.84 10,760.57 ye

Pnge 18 of29

Kalibn Technologyf

P-91-A-236

07/ 12/2017 28,325.00 3,090.00

Kalibn Technology

P-91-A-240

09/22/2017 28,325.00 3,090.00 Phil. Vending Corp.g

P-91-A-298

08/04/2017 18,177.50 1,983.00 Phil. Vending Corp.

P-91-A-300

08/04/2017 61,769.91 6,738.54 Phil. Vending Corp.

P-91-A-302

09/08/2017 8,672.32 946.07 Ricoh (Phil.) Inc.

P-91-A-314

08/17/2017 11,894.20 1,333.93 Ricoh (Phil.) Inc.

P-91-A-316

08/17/2017 11,894.20 1,333.93 Ricoh (Phil.) Inc.

P-91-A-318

08/ 17/2017 11,894.20 1,333.93 Ricoh (Phil.) Inc.

P-91-A-320

08/17/2017 11,894.20 1,333.93 Ricoh (Phil.) Inc.

P-91-A-322

08/17/2017 11,894.20 1,333.93 Ricoh (Phil.) Inc.

P-91-A-324

08/ 17/ 2017 8,894.33 970.29 Ricoh (Phil.) Inc.

P-91-A-326

08/ 17/2017 11,989.72 1,344.64 Ricoh (Phil.) Inc.

P-91-A-328

08/17/2017 47,926.82 5,228.38 Ricoh (Phil.) Inc.

P-91-A-330

08/ 17/2017 40,014.63 4,365.23 Ricoh (Phil.) Inc.

P-91-A-332

08/17/2017 35,143.17 3,833.80 Ricoh (Phil.} Inc.

P-91-A-334

08/17/2017 44,021.80 4,802.38

Subtotal

p 861,803.21 p 91,092.85 Input VAT on purchases of services not supported by 0 R

B&T Law Offices

P-91-A-76

09/05/2017 p 19,734.50 p 1,800.00

Hi-End Office Design

P-91-A-205

07/24/2017 933,336.25 101,818.50

Hi-End Office Design

P-91-A-207

08/11/ 2017 933,336.25 101,818.50

PLDTh

P-91-A-249

08/ 16/2017 175,558.20 19,151.80

PLDT

P-91-A-252

08/ 16/2017 216,805.89 23,651.55

PLDT

P-91-A-254

08/16/2017 99,933.04 10,901.79

PLDT

P-91-A-257

09/04/2017 143,000.00 15,600.00

PLDT

P-91-A-259

09/ 04/ 2017 99,933.04 10,901.79

PLDT

P-91-A-261

09/04/2017 4,483.77 489.03

PLDT

P-91-A-263

09/04/2017 4,483.77 489.03

PLDT

P-91-A-265

10/ 12/2017 165,548.06 18,059.79 Wellthy Solutions Inc.

P-91-A-405

07/21/2017 9,630.00 1,080.00 Well thy Solutions Inc.

P-91-A-407

09/25/2017 9,630.00 1,080.00 Well thy Solutions Inc.

P-91-A-409

08/22/2017 9,630.00 1,080.00

Subtotal

p 2,825,042. 77 p 307,921.78 No supporting documents

Intellicare

P48,563.50 :P5,827.62 Ricoh (Phil.) Inc.

11,205.33 1,344.64 Ricoh (Phil.) Inc.

7,664.33 919.72 Ricoh (Phil.) Inc.

45,477.00 5,457.24

Subtotal

p 112,910.16 p 13,549.22 With discrepancy in amount of input tax claim against OR amount

Claim

Should be

Difference

Federal Landi

P-91-A-143

P 83,783.70

P

82,287.56 f> 1,496.14

Federal Land

P-91-A-145

361,067.71 344,948.62 16,119.09

Subtotal

P444,851.41 P 427,236.18 p 17,615.23 Disallowed input taxes from purchase of services p 430~21.94

Purchase of capital goods with amortized input tax Invoice has no BIR Authority to Print

Westcon Solutionsi

P-91-C-10

Recognized

Input Tax

Life (in

months) p 12,953.16 60 Disallowed input taxes from purchase of capital goods with amortized input tax Total disallowed input taxes for the Third Quarter

Fourth Quarter

Invoice/OR

SU££lier Exh.No.

Date

Amount

Purchase of goods other than capital goods Address, business style and/or TIN of petitioner not indicated in invoice Beyond The Grow1dk

P-91-A-443

11/23/2017 p 330,568.00 Brother Venture!

P-91-A445

11/06/2017 29,248.00

Brother Venture

P-91-A-447

11/ 10/2017 35,700.00

Brother Venture

P-91-A-449

11/23/ 2017 50,220.00

Brother Ventme

P-91-A-451

11/23/2017 58,720.00

Brother Ventme

P-91-A-453

09/18/2017 92,000.00

Brother Ventme

P-91-A-455

10/04/2017 37,800.00

Brother Venture

P-91-A-457

10/25/2017 43,660.03 GNS inc.111

P-91-A-547

10/12/2017 1,680.00

Gem Stationary Inc

P-91-A-557

09/07/2017 27,089.06

Gem Stationary Inc

P-91-A-559

09/08/2017 34,655.00

Gem Stationary Inc

P-91-A-561

09/18/2017 8,000.00

Gem Stationary Inc

P-91-A-563

09/25/2017 36,230.00

Gem Stationary Inc

P-91-A-565

09/30/2017 4,981.00

Gem Stationary Inc

P-91-A-569

10/04/2017 40,550.00

Gem Stationary Inc

P-91-A-571

10/ 05/2017 2,500.00

Gem Stationary Inc

P-91-A-573

11/04/2017 25,455.00

Gem Stationary Inc

P-91-A-575

11/27/2017 39,629.99

Gem Stationary Inc

P-91-A-577

12/27/2017 30,647.00

Gem Stationary Inc

P-91-A-579

11/27/2017 29,237.00 Promocentra.I, Inc.

P-91-A-697

12/15/2017 509,091.52

Subtotal

p 1,467,661.60 No supporting documents Star AJ2£lia.nce Cn·.

Subtotal

With discrepancy in amount of input

Claim

Should be tax claim and invoice amount Mercmy Drug Corr.

P-91-A-669

p 7,897.18 p 5,691.64

Subtotal

Disallowed input taxes from purchase of goods other than capital goods Purchase of services OR dated outside period of claim AGL Phils., Inc.n

P-91-A-411

03/09/2018 p 79,284.16 AGL Phi.ls., Inc.

P-91-A-412

03/09/2018 11,000.00 AGL Phi.ls., Inc.

P-91-A-413

01/23/2018 220,442.44 AGL Phi.ls., Inc.

P-91-A-414

01/23/2018 30,543.23

Amortized

Input Tax

fortheQtr.

p 647.66 p 647.66 In£utTax p 35,418.00 3,133.71 3,825.00 5,380.71 6,291.43 9,857.14 4,050.00 4,677.86 180 2,902.40 3,713.04 857.14 3,881.79 533.68 4,344.64 267.86 2,727.32 4,246.07 3,283.61 3,186.11 54,545.52 p 157,303.03 p 10,114.29 p 10,114.29

Ditfpence

p 2,205.54 p 2,205.54 p 169,622.86 p 300.00 1,200.00 1,200.00 300 ~

..

ANSI Services, lnc.0

P-91-A-429

01/09/2018 480,716.24 9,456.73 ANSI Services, In.c

P-91-A-431

01/09/2018 483,438.52 9,510.27 ADI, Inc.P

P-91-A-433

01/08/2018 127,742.41 13,935.54 B& T Law Offices<l

P-91-A-458

01/ 16/2018 1,344.00 144

B& T Law Offices

P-91-A-459

01/ 10/ 2018 1,344.00 144

B& T Law Offices

P-91-A-460

01/16/2018 1,680.00 180

B& T Law Offices

P-91-A-461

01/10/2018 1,344.00 144

B& T Law Offices

P-91-A-462

01/10/2018 4,256.00 456

B& T Law Offices

P-91-A-484

01/10/2018 11,200.00 1,200.00

B& T Law Offices

P-91-A-486

01/30/2018 231,168.00 24,768.00

Corpnet GlobaJr

P-91-A-493

01/09/2018 30,250.00 3,300.00 Corp net Global

P-91-A-495

02/07/2018 44,000.00 4,800.00

Extra Ordinaire

P-91-A-505

01/ 10/ 2018 107,449.72 10,936.63

Extra Ordinaire

P-91-A-506

01/10/2018 273,647.76 27,176.97 Fedex Pacific, LLCS

P-91-A-508

01/08/2018 2,732.42 298.1 Fedex Pacific, LLC

P-91-A-510

01/08/2018 3,264.79 356.15

Federal Land

P-91-A-534

01/09/2018 810,759.85 88,446.53

Federal Land

P-91-A-536

01/09/2018 10,747,022.22 1,205,273.52 FP Philippines, Inc.

P-91-A-538

01/12/2018 74,637.56 8,142.28

Globe Telecom

P-91-A-580

02/14/2018 19,699.04 2,198.05

Glocal Manpowert

P-91-A-609

01/ 17/2018 52,635.76 5,808.47

Glocal Manpower

P-91-A-611

01/09/2018 55,325.63 5,837.99

Glocal Manpower

P-91-A-613

02/01/2018 105,971.92 11,573.85 HTECHCorp.

P-91-A-623

01/ 10/2018 165,000.00 18,000.00

Intellicare

P-91-A-629

02/01/2018 17,936.60 1,956.72

Intellicare

P-91-A-630

02/01/2018 19,566.40 2,134.52

Intellicare

P-91-A-633

01/16/2018 15,597.06 1,701.50

Intellicare

P-91-A-634

01/ 16/2018 18,667.72 2,036.47

Intellicare

P-91-A-635

01/ 16/2018 82,685.33 9,020.22

JaiN Jio Canteen

P-91-A-642

01/ 19/2018 93,303.57 10,178.57

Jones Lang LaSalleu

P-91-A-647

01/ 12/2018 10,890.00 1,188.00

Jones Lang LaSalle

P-91-A-649

01/ 12/2018 183,788.00 20,049.60

Jones Lang LaSalle

P-91-A-651

01/12/2018 127,530.98 13,912.47

Jones Lang LaSalle

P-91-A-653

01/ 12/ 2018 10,890.00 1,188.00 Lane Archive Tech.

P-91-A-664

01/23/2018 1,144.00 124.8

PLDT

P-91-A-670

01/30/2018 443,288.03 48,358.69

RCW Constructionv

P-91-A-700

05/02/2017 33,994.40 3,708.48

RCW Construction

P-91-A-712

02/ 14/2018 37,818.00 4,125.60

RCW Constmction

P-91-A-714

02/14/2018 84,921.10 9,264.12 Ricoh (Phils.) Inc.

P-91-A-724

01/15/2018 4,673.07 509.79 Ricoh (Ph.ils.) Inc.

P-91-A-726

01/15/2018 63,765.31 7,151.25

SGV&CO

P-91-A-729

01/30/2018 304,858.01 298.1 Well thy Solutions

P-91-A-857

01/19/2018 9,630.00 1,080.00

Wellthy Solutions

P-91-A-863

01/19/2018 9,630.00 1,080.00

Subtotal

P15,752,477.25 P1,594,153.98 VAT not separately indicated in the supporting OR BDD Inc."'

P-91-A-487

12/11/2017 f>275,000.00 f>21,428.57 BDD Inc.

P-91-A-488

10/20/2017 196,428.57 30,000.00 Corp net Global

P-91-A-491

11/22/ 2017 40,490.65 4,417.16

JaiN Jio Canteen

P-91-A-636

10/26/2017 11,000.00 1,200.00

Jai N Jio Canteen

P-91-A-638

10/26/2017 116,875.00 12,750.00 ~

Pnge 21 of29

JaiN Jio Canteen

P-91-A-640

11/ 23/ 2017 38,696.43

Kristina Po

P-91-A-657

11/23/2017 18,190.00

RCW Construction

P-91-A-716

12/ 28/2018 9,292,572.78

Subtotal

P 9,989,253.43 Input VAT on purchases of services not supported by OR

PLDT

P-91-A-690

11/29/2017

P

PLDT

P-91-A-693

11/ 29/ 2017

Wellthy Solutions

P-91-A-861

01/10/2017 454,291.65 537,880.00 9,630.00

Subtotal

p 1,001,801.65 4,221.43 2,040.00 1,013,735.21 P1,089,792.37 p 49,559.09 58,677.82 1,080.00 p 109,316.91 No supporting documents Adventure Int'l.x

B& T Law Offices

Diversfy

Federal Land

Federal Land

Globe Telecom

Ricoh (Phils.) Inc.

p 3,000.00 p 2,400.00 154,305.50 2,739,258.00 775,136.00 119,769.25 26,464.42 360.00 288.00 18,516.66 328,710.96 93,016.32 14,372.31 3,175.73 Ricoh (Phils.) Inc.

11,084.92

Subtotal

p 3,831,418.09 With discrepanet; in amount of input tax claim and OR amount

Claim

Extra Ordinaire

P-91-A-499

p 25,501.63

Extra Ordinaire

P-91-A-501

25,753.75

Extra Ordinaire

P-91-A-503

26,331.11

Federal Land

P-91-A-516

123,808.80

Federal Land

P-91-A-518

1,680.00

Federal Land

P-91-A-520

3,600.00

Federal Land

P-91-A-524

85,719.00

Seafood Ventures

P-91-A-728

20,271.43 W &I Ins. Brokers, Inc.Y

P-91-A-865

57,722.85

Subtotal

P370,388.57 Disallowed in_eut taxes from _eurchase of services Purchase of capital goods with amortized input tax Invoice has no BIR Authoritr.J to Print

Input Tax

Should be p 4,658.26 4,730.29 4,808.49 123,797.73 1,679.06 3,598.09 85,650.53 5,000.00 9,620.47 p 243,542.92

Recognized

Life

Westcon Solutionsz

P-91-C-10

P12,953.16 60 months Disallowed input taxes from purchase of capital goods with amortized input tax Total disallowed in_eut taxes for the Fourth Quarter

TOTAL DISALLOWED INPUT TAXES

1,330.19 p 459,770.17 Ditf_eren.ce p 20,843.37 21,023.46 21,522.62 11.07 0.94 1.91 68.47 15,271.43 48,102.38 p 126,845.65 P3,379,879.08

Amortized

Input Tax for

the Qtr.

P647.66 P647.66 P3,550,149.60 P4,079 ,860.46 "Supplier names that have been abbreviated in the table above are shown in full below. a P ACSPORTS PHILS., INC.

b Unison Computer Systems Inc.

c Hi-End Office Design Corporation d Corpnet Global Corporation e Extra Ordinaire & Manpower Services Inc.

I

Kalibrr Technology Ventures, Inc. g Philippine Vending Corporation h Philippine Long Distance Telephone Company i Federal Land Inc (formerly Philippine Securities Corporation)

Pnge 22 of29

Westcon Solutions Philippines, Inc. k Beyond The Ground Commodities Inc ' Brother Venture Trading Corp m Gateway Network Solutions (GNS) Inc. n Able Global Logistics Philippines, Inc. 0 All Nation Security & Investigation Services, Inc. P Analytics and Data Integrity, Inc. q Buan & Temprosa Law Offices r

Corpnet Global Corporation

s Federal Express Pacific, LLC t

Glocal Manpower Supply & Services

u Jones Lang LaSalle (Philippines), Inc. v RCW Consh·uction Development Corporation "" Buffet Dining Destination Inc. x Adventure International Tours, Inc. Y Winebrenner & Inigo Insurance Brokers, Inc. z Westcon Solutions Philippines, Inc. Resultantly, only input VAT amounting to P5,596,590.06 out of the P9,676,450.52 declared in the return shall be considered valid, viz.: Third Qtr.

Fourth Qtr.

Total

Input taxes

Per VAT Returns

f> 3,354,987.63 f> 6,321,462.89 f> 9,676,450.52

Less: Disallowed

529,710.86 3,550,149.60 4,079,860.46 Valid input taxes p 2,825,276.77 p 2,771,313.29 p 5,596,590.06 • Attributable to zero-rated sales Only 99.86%98 of the valid input VAT cmnputed above IS attributable to zero-rated sales and, thus, eligible for refund. When the clai1nant was engaged in both VAT-able or zero-rated sales and input taxes due or paid cannot be attributed directly and entirely to either type of activity, it shall be allocated proportionately based on sales volume.99 In the subject taxable quarters, Stefanini Philippines was engaged in both VAT-able and zero-rated sales. Furthermore, its input taxes were not shown to be attributable exclusively to either activity. Thus, the amount of P5,596,590.06 of valid input VAT computed above shall be apportioned between the two activities per quarter, viz.: 98 Input VAT attributable to zero rated sales+ Valid input taxes= r5,589,771.14 + F>5,596,590.06 "'99.86% 99 Section 112(A), Tax Code.

'

Pnge 23 of29

VAT-able Sales

add Zero-rated Sales

Total Sales

Zero-rated Sales

Divided by Total Sales

Percentage

Valid In12ut VAT

Attributable to:

Zero-rated sales* VAT-able sales * Eligible for refund

Third Quarter

Fourth Quarter

Total

P221,514.41 P147,463.62 122,765,262.34 236,042,650.00 122,986,776.75 236,190,113.62 P122,765,262.34 P236,042,650.00 P283,178,317.97 122,986,776.75 236,190,113.62 99.82% 99.94% P2,825,276.77 P2,771,313.29 P5,596,590.06 P2,820,188.10 P2,769,583.03 P5,589,771.14 p 6,818.92 Based on the foregoing, Stefanini Philippines' total valid input taxes attributable to zero-rated sales amounts to P5,589,771.14. Not applied against output tax during the third and fourth quarters of CY 2017 To recall, in the present case, Stefanini Philippines' claim for refund amounted to P9,632)73.16 resulted from offsetting the output tax on VAT-able sales against available input taxes for the third and fourth quarters of CY 2017, respectively, computed100 as follows:

Third

Fourth

Quarter

Quarter

Total

Input tax on:

Capital Goods exceeding f>lM (amortized portion)101 f>84,282.82 f>90,804.64

Current Purchases of Goods

other than Capital Goods102 242,937.35 412,193.01 Domestic purchases of services 103 3,027,767.46 5,818,465.24 Input tax attributable to zero- rated sales, per VAT returns P3,354,987.63 ?6,321,462.89 P9,676,450.52 Less Output tnx still due104 26,581.73 17,695.63 44,277.36 InEut tax sought to be refunded P3,328,405.90 P6,303,767.26 P9,632,173.16 1oo Based on Stefanini' s Quarterly VAT Returns. See Exhibits "P-80" and "P-81," Docket- Vol. II,

p. 1128-1131. 101 Excess of amount in Line 20B over amount in Line 23A in the Quarterly VAT Return. 102 Sum of Lines 21B and 21F in the Quarterly VAT Return. 103 Line 21J in the Quarterly VAT Return. 1().1 Line 15B in the Quarterly VAT Return.

'

Pnge 24 of29

Significantly, the amount claimed consists only of (a) the amortized portion of input tax on capital goods exceeding Pl million,

(b) input tax on current purchases of goods other than capital goods, and (c) input tax on domestic purchases of services. Stefanini Philippines does not seek to refund the amount of input taxes carried over from previous periods.1os It is clear from the foregoing that the amount herein claimed is already net of the output tax reported during the subject quarters. Not applied against output tnx in any subsequent period Further, based on the observations detailed below, We also find that the subject claim was not applied against any output taxes in succeeding periods.

First, the balance of input taxes carried over from previous periods as of January 1, 2018106 amounted to P61,255,480.06, computed as follows:

Input taxes carried over from previous periods, beginning Balance, June 30, 2017 P51,623,306.90

Third Quarter 2017

Fourth Quarter 2017

Balance, December 31, 2017 P3 ,328,405. 90 6,303,767.26 P61,255 ,480. 06 Second, from the first quarter of CY 2018 (i.e., beginning January 1, 2018) to the second quarter of CY 2019 (i. e., ending June 30, 2019), Stefanini Philippines accumulated input taxes from domestic purchases amounting to P21,311,658.19, computed as follows: 105 Line 20A in the Quarterly VAT Return. 106 Corresponds to the balance as of December 31, 2017.

Input taxes from domestic purchases

Goods Services Gross Unamortized Amortized Total

A B Cc D E=C-D A+BtE

2018 Q1197-P113,97700 P295494444 P260277156 242565957 P17711199 324603343 Q2108 56028343 = 199156964 242565993 224854829 17711164 272896471 Q3109 900,982.54 330532369 224854829 259065108 (6421027) 386415344 Q4110 888,026.67 9247343157 259065107 236478221 22586886 358732710 2019 Ql 1530,94032 400869957 236478221 324444372 (87966151) 465997838 Q2"2 = 35839705 §= 253291872 324444373 291055837 33388536 322520113 P21,311,658.19 Third, having regard to the first and second observations detailed above, the balance of input taxes carried over from previous periods as of June 30, 2019 amounted to P82,567,138.25, computed as follows:

Input taxes carried over from previous periods, ending Balance, January 1, 2018 P61,255,480.06 add Input taxes from current transactions 21,311,658.19 Balance, June 30, 2019 P82,567,138.25 Fourth, from the first quarter of CY 2018 (i.e., beginning January 1, 2018) to the second quarter of CY 2019 (i.e., ending June 30, 2019), Stefanini Philippines incurred output taxes amounting to P1,567,724.08, computed as follows: Output taxes!!3 2018 First quarter P88,627.92 Second quarter 22,646.06 Third quarter 79,547.60 Fourth quarter 107,124.89 2019 First quarter 340,528.32 Second quarter 929 249.29 Total P1,567,724.08 107 108 Exhibit “P-101”, Docket - Vol. I, pp 473-474. Exhibit “P-102”, Docket - Vol. I, pp. 475-477. Exhibit “P-103”, Docket - Vol. I, pp. 478-480. 110 Exhibit “P-105”, Docket - Vol. I, pp. 484-485. i Exhibit “P-106”, Docket - Vol. I, pp. 486-487. 12 Exhibit “P-113”, Docket - Vol. I, pp. 526-527. 43 Line 15B in the Quarterly VAT Return. See notes 107 to 112.

"-

Pnge 26 of29

Fifth, in the quarterly VAT returns from the first quarter of CY 2018 (i.e., beginning January 1,2018) to the second quarter of CY 2019 (i.e., ending June 30, 2019), Stefanini Philippines applied the aforementioned output taxes against the outstanding balance of input taxes carried over from previous periods. Thus, after application, the net balance of input taxes amounted to P80,999,414.17, computed as follows:

Input taxes carried over from previous periods, net a,[ output Balance, June 30, 2019 P82,567,138.25 less Output taxes incurred 1,567,724.08 Balance, net of output taxes P80,999,414.17 Sixth, in its fourth quarterly VAT return for CY 2018 and second quarterly VAT return for CY 2019, Stefanini Philippines carved out from the balance of its input taxes the amounts of P11,857,373.50114 and P15,210,089.68,ns respectively.

According to the testimony116 of Jeanina B. Pepita, Finance Manager, Stefanini Philippines, the amount of P15,210,089.68 pertained to the aggregate amount of input taxes relative to the second, third, and fourth quarters of CY 2017,117 for which Stefanini Philippines has sought a refund, viz: Claim for refund, input taxes pertaining to CY 2017 Second quarter- CTA Case No. 10188118 Third quarter- Present claim Fourth quarter - Present claim Per verification Per VAT return, Q2 CY 2019

Variance

P5,577,917. 98 3,328,405.90 6,303,767.26 P15,210,091.14 15,210,089.68 P1.46 Seventh, after removing the amounts that Stefanini Philippines claimed as refunds, the balance of allowable input taxes as of June 30, 2019 amounted to P53,931,950.99, computed as follows: 114 Exhibit "P-105," Line 23D, Docket- Vol. I, p. 484. 115 Exhibit "P-113," Line 23D, Docket - Vol. I, p. 526. 116 Exhibit "P-90," Docket - Vol. I, pp. 118-138. m Exhibit "P-90," Docket - Vol. I, pp. 133-134. 118 Stefmzini Philippines, Inc. v. Coml/lissioner of Internnl Revenue, C.T.A. Case No. 10188, November 23, 2022.

' •

Pnge 27 of29

Allowable input taxes, as of June 30, 2019 Balance, net of output taxes P80,999A14.17 less Amounts carved out Per Q4 CY 2018 VAT return Per Q2 CY 2019 VAT return Allowable input taxes P11,857,373.50 15,210,089.68 27,067A63.18 P53,931,950.99 Based on the foregoing, Stefanini Philippines's balance of input taxes available for utilization was more than sufficient to cover all of the output taxes it incurred from January 1, 2018 to June 30, 2019 (i.e., third and fifth observations). Further, as of June 30, 2019, it already carved out/removed frmn the balance of input taxes available for utilization the amount claimed as refund in the instant case (i.e., sixth and seventh observations). These observations are consistent with the !CPA's findings.119 Thus, We are convinced that the input taxes sought to be refunded in the present case were not utilized or applied against output taxes in any given taxable period.

Computation

of refundable unutilized or excess input taxes We proceed to the determination of the refundable amount of unutilized or excess input taxes attributable to petitioner's zero-rated sales.

To recall, petitioner declared total zero-rated sales in its Quarterly VAT Returns in the aggregate amount of P358,807,912.34. However, only the zero-rated sales in the amount of P283,178,317.97 is properly supported by official receipts and proof of inward remittances. In short, only a portion of petitioner's declared zero-rated sales qualifies as valid zero-rated sales: 3rd Quarter 4th Quarter

Total

Valid zero-rated sales P122,765,262.34 P160,413,055.63 P283,178,317. 97

Divided by

P122,765,262.34 P236,042,650.00 P358,807,912.34 Declared zero-rated sales

Percentage

100.0000% 67.9594% Consequently, out of the valid input taxes of P5,552,312.70, only the remaining valid input VAT of P4,670,035.76 is attributable to

Pnge 28 of29

I

petitioner's valid zero-rated sales for the 3rd and 4th quarters of CY 2017, as computed below, and thus, must be refunded in favor of petitioner:

3rct Quarter 4th Quarter

Total

Excess/ unutilized input tax ath·ibutable to declared p 2,798,695.04 p 2,753,617.66 p 5,552,312.70 zero-rated sales

Multiplied by Percentage

100.0000% 67.9594% of valid zero-rated sales Refundable input taxes attributable to valid zero- P2,798,695.04 P1,871,340. 72 P4,670,035. 76 rated sales In sum, while Stefanini Philippines ably den1onstrated that the amount claimed had not been utilized previously, We grant the claim only to the extent that it represents input taxes eligible for refund (i.e., deinonsh·ated to be actually due and paid, properly substantiated, and attributable to zero-rated sales). Thus, We determine that Stefanini Philippines shall be entitled to a refund of P4,670,035.76.

WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is DIRECTED TO REFUND OR ISSUE TAX CREDIT CERTIFICATE in favor of petitioner in the a1nount !>4,670,035.76. representing its unutilized input VAT attributable to its zero-rated sales for the third and fourth quarters of CY 2017.

WE CONCUR:

(with due re pect, ~bf."~-F~ MARIAN I-1Y F. RE~ES-FAJARDO

Associate Justice

please see Dissenting Opinion) ROMAN G. DEL ROSARIO

Presiding Justice

·~~

C~Et(MANAHAN

Associate Justice

'·

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

Presiding Justice

,

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

SPECIAL FIRST DIVISION

STEFANINI PHILIPPINES, INC., .

CTA CASE NO. 10226 Petitioner,

Members:

DEL ROSARIO, P.J. , Chairperson, -versus- MANAHAN, and REYES-FAJARDO, JJ.

COMMISSIONER OF INTERNAL

Promulgated:

REVENUE, Respondent.

X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DISSENTING OPINION

DEL ROSARIO, P.J.:

With utmost respect, I am constrained to withhold my assent on the ponencia which partially grants the Petition for Review and orders the refund or issuance of tax credit certificate in petitioner's favor in the amount of P4,670,035.76.

I submit that petitioner's refund claim should be denied for its failure to comply with the invoicing requirements under the law. Section 113(8)(2)(c) and (d) of the National Internal Revenue Code (NIRC) of 1997, as amended, reads: "SEC. 113. Invoicing and Accounting Requirements for VAT- Registered Persons. -

XXX

(B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt:

XXX

~

I

DISSENTING OPINION

Stefanini Philippines, Inc. vs. Commissioner of Internal Revenue CT A Case No. 1 0226

Page 2 of 6

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. Provided , That:

XXX

(c) If the sale is subject to zero percent (0%) value-added tax, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt.

(d) If the sale involved goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be known on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. x x x" (Boldfacing supplied) The above provision is implemented by Section 4.113-1 of Revenue Regulations (RR) No. 16-2005, as amended, which reads: "SEC. 4.113-1 . Invoicing Requirements. --

XXX

(B) Information contained in VAT invoice or VAT official receipt.- The following information shall be indicated in VAT invoice or VAT official receipt:

XXX

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That:

XXX

(c) If the sale is subject to zero percent (0%) VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt;

(d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT- exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale." (Boldfacing supplied) ~

DISSENTING OPINION

Stefanini Philippines, Inc. vs. Commissioner of Internal Revenue CT A Case No. 1 0226

Page 3 of 6

Verily, it is a requirement that for any VAT invoice or official receipt evidencing a zero-rated transaction, the term "zero-rated sale" should be written or printed prominently thereon. Failure to comply with the invoicing requirements is sufficient ground to deny the claim for refund or tax credit. 1 The Supreme Court has settled, in a number of cases,2 that the writing or imprinting of the term "zero-rated sale" on the VAT invoice or official receipt is indispensable for a valid claim of refund of unutilized input tax. Such requirement was traced by the Supreme Court from Section 4.108-1 of RR No. 7-95, which has been incorporated in Section 113(8)(2)(c) of the NIRC of 1997, as amended, by virtue of the amendments introduced by Republic Act No. 9337, which confirms the validity of the imprinting requirement on VAT invoices or official receipts.3 Revenue Memorandum Circular No. 42-2003 provides that if the refund claim is based on the existence of zero-rated sales but the taxpayer fails to comply with the invoicing requirements, such claim should be denied, viz. :

"Q-13: Should penalty be imposed on TCC application for failure of claimant to comply with certain invoicing requirements, (e.g., sales invoices must bear the TIN of the seller)? A-13: Failure by the supplier to comply with the invo1c1ng requirements on the documents supporting the sale of goods and services will result to the disallowance of the claim for input tax by the purchaser-claimant.

If the claim for refund/TCC is based on the existence of zero-rated sales by the taxpayer but it fails to comply with the invoicing requirements in the issuance of sales invoices (e.g. failure to indicate the TIN), its claim for tax credit/refund of VAT on its purchases shall be denied considering that the invoice it is issuing to its customers does not depict its being a VAT- registered taxpayer whose sales are classified as zero-rated sales. Nonetheless, this treatment is without prejudice to the right of 1 Commissioner of Internal Revenue vs. Phi/ex Mining Corporation, G.R. No. 230016, November 23, 2020.

2 Panasonic Communications Imaging Corporation of the Philippines vs. Commissioner of Internal Revenue, G.R. No. 178090, February 8, 2010; J.R.A. Philippines, Inc. vs. Commissioner oflnternal Revenue, G.R. No. 177127, October 11, 201 0; Hitachi Global Storage Technologies Philippines Corp. vs. Commissioner of Internal Revenue, G.R. No. 174212, October 20, 2010; Kepco Philippines Corporation vs. Commissioner of Internal Revenue, G.R. No. 181858, November 24, 2010; Silicon Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 172378, January 17, 2011 ; Western Mindanao Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 181136, June 13. 2012; Eastern Telecommunications Philippines. Inc. vs. Commissioner oflnternal Revenue, G.R. No. 183531 , March 25, 2015. 3 Mirant [Navotas II] Corporation [Formerly Southern Energy Navotas II Power, Inc.] vs. Commissioner of Internal Revenue, G.R. No. 180526, September 23, 2015. ~

DISSENTING OPINION

Stefanini Philippines, Inc. vs. Commissioner of Internal Revenue CT A Case No. 1 0226

Page 4 of 6

the taxpayer to charge the input taxes to the appropriate expense account or asset account subject to depreciation, whichever is applicable. Moreover, the case shall be referred by the processing office to the concerned BIR office for verification of other tax liabilities of the taxpayer." (Boldfacing and underscoring supplied) There is no reason to depart from the consistent ruling of the Supreme Court that a refund claimant's alleged zero-rated sales must also comply with the invoicing requirements under Section 113 of the NIRC of 1997, as amended.

In this case, all of petitioner's alleged zero-rated sales, evidenced by VAT official receipts,4 do not bear the term "zero-rated sale" written or printed prominently on such receipts. The ponencia reasons that the amount collected by petitioner from its alleged VAT zero-rated sales was written and declared as "zero-rated sales" in the breakdown portion on the left side of each face of the VAT official receipts, as shown in the following sample exhibits:

i

IN SETTLEMENT OF TliE FOUOWINO:

INVOICE

AMOUNT

( STEFe~~~t!:~!h~~_!.,~~~.' INC.

H. v. Oela Cooltl. Salc:i!iCo ~ M.>l<all er., VAT REG TIN 0()6..960-31.\-000

~~\:'RECEIPT

NO.:

, ..... _- ,_:-:-Solos...,._.,f'I,.,AT' :-:-In<:t.

-..- -:-:1----~-:f'::-;-:\,~ l 'l \"t

Dato: ----

n'" VAT •

I ~

,;' Rucolved ftom

with TIN·

- -

and Address at:

., • .. Due Bus. Style. - ., .

tho sum of:

pesos~~ ) 4 Exhibits "P-10" to "P-33", Docket, Vol. II, pp. 1049 -1072.~

DISSENTING OPINION

Stefanini Philippines, Inc. vs. Commissioner of Internal Revenue CT A Case No. 1 0226

Page 5 of 6

. - .

rt ~NENT OF TliE fOUOWING:

1' '.VOICE

AMOUNT

l'r 1r. srEF~~~~~!~!~!fr~~2, INc.

H. V. D.i;J eo.ta, Salcedo w.g.., Makr.l O!y VAT REG TlN 0011-!MI0-314-000 ll

v ~~~~H~IlU:CEIPT

NO.:

It:;:

~;::;-;, '""::-:, .. ~ .:::;

,AT::-:-:

InO.I:.o -::-- ...,-+---- , .. -,.--..lr-1.'\ · \ D:mr ___ _ t!'::i':"-~"7 •. ~==t---, --.mC 1'' ~~ Rucelved from.------------

:::S

_________ v.11h TIN. ___ _ andAddrcssot ------ ----- ··:sr ··~ r ..

Bus Style.------------- the sum or. ___________ _ 0

(CHEO<

0 -~· The ponencia's proposition is flawed. The information necessary to be indicated in the "breakdown" and the writing or imprinting of "zero rated sales" on the VAT official receipts are requirements governed by separate provisions of the NIRC of 1997, as amended-- that is, Section 113(B)(2)(c), which provides for the imprinting requirement, and Section 113(B)(2)(d), which requires the breakdown of sales as VATable, VAT-exempt or VAT zero-rated in case of mixed transactions. In other words, notwithstanding that petitioner indicated in the breakdown of the VAT official receipts the amount pertaining to "zero-rated sales", such however is not tantamount to compliance with the imprinting requirement. The samples above show that petitioner failed to comply with the mandatory requirement of imprinting the term "zero-rated sales".

Tax refunds are in the nature of a claim for exemption and the law is construed in strictissimi juris against the taxpayer. The pieces of evidence presented entitling a taxpayer to exemption are also strictissimi scrutinized and must be duly proven.5 Thus, for failure of 5 Kepco Philippines Corporation vs. Commissioner of Internal Revenue, G.R. No. 179961 , January 31,2011 . 011 ,.

DISSENTING OPINION

Stefanini Philippines, Inc. vs. Commissioner of Internal Revenue CT A Case No. 1 0226

Page 6 of 6

petitioner to comply with the invoicing requirements for its alleged zero- rated sale of services, the refund claim should be denied. ALL TOLD, I VOTE to DENY the Petition for Review for lack of merit.

Presiding Justice