Halliburton Worldwide Limited - Philippine Branch vs. Commissioner of Internal Revenue

DECISION

BACORRO-VILLENA, L.:

In the instant Petition for Review 1 filed on 17 December 2 0 21 pursuant to Section 3(a) 2 , Rule 8 in relation to Section 3(a)(2)3, Rule 4 o~. 1 Division Docket, Volume I, pp. 6-26.

SEC. 3. Who may appeal; period to file petition.-

(a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review within the two-year period prescribed by law from payment or collection of the taxes.

SEC. 3. Cases within the jurisdiction of the Court in Division. - The Court in Division shall exercise:

(a) Exclusive original over or appellate jurisdiction to review by appeal the following:

(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue the Revised Rules of the Court of Tax Appeals (RRCTA), petitioner Halliburton Worldwide Limited- Philippine Branch (petitioner) seeks the refund of I'I0,523,339·72, which represents its excess and/or unutilized input value-added tax (VAT) on purchases of goods and services attributable to its alleged zero-rated sales for the first (15') to fourth (4'h) quarters of calendar year (CY) 2019.

PARTIES OF THE CASE

Petitioner is duly registered with the Securities and Exchange Commission (SEC) as the Philippine branch office of Halliburton Worldwide Limited, a foreign corporation organized and existing under the laws of the Cayman Islands. 4 It is likewise registered with the Bureau of Internal Revenue (BIR) under Taxpayer Identification No. (TIN) 266-369-s6s-ooo, with business address at Unit I502-o3, 15th Floor, Richville Corporate Tower, 1107 Alabang-Zapote Road, Madrigal Business Park (MBP), Ayala, Muntinlupa City.s Respondent, on the other hand, is the duly appointed head of the BIR, clothed by law with the authority to administer and enforce the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended, including the power to decide, approve, and grant claims for refund or issuance of tax credits for excess and/or unutilized input VAT pursuant to applicable statutes, rules, and regulations.6

FACTS OF THE CASE

For the 1'' to 4'h quarters of CY 2019, petitioner filed its Quarterly VAT Returns (BIR Form No. 2550-Q) through the BIR's Electronic Filing and Payment System (eFPS) facility on the following dates:7 J Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action [.]

Exhibit ''P-1", Division Docket, Volume I, pp. 38-49. Exhibit "P-2", id., p. 50.

Par. 2, Joint Stipulation of Facts and Issues (JSFI), id., pp. 419-420. Exhibits "P-3" to "P-6", id., Volume 11, pp. 704-715.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

Quarter

Period Covered

Date Filed

1st

January to March 2019

25 April 2019

2nd

Aoril to June 2019

25 July 2019

3'd

July to September 2019

24 October 2019

4th

October to December 2019

27 January 2020

There it declared a total zero-rated sales of P242,946,27o.s8, broken down as follows:

Quarter

Zero-Rated Sales

1st 1"75,512,692.01 2nd 20,459,149-02 3 rd 71,968,215.04 4th 75,oo6,214.51

Total

1"242,946,270·58 For CY 2019, petitioner claimed to have accumulated excess input VAT in the total amount of P10,523.339·72 from its current domestic purchases of goods and services and amortized input VAT on purchases of capital goods from previous quarters, which is the subject of the present petition, as shown in the following tabulation: Source oflnoutVAT 1st Quarter8 I 2nd Quarter9 Current input VAT

Domestic Purchases of Goods

Other than Capital Goods l'll,79J.35

Importation of Goods Other

than Capital Goods -

Domestic Purchases of

Services

141,171.88

Services Rendered by Non-

residents 1,685,763.52

Subtotal

P2,239,112.7<;

D~ferred input VAT amortized (or the period

Input Tax Deferred on Capital

Goods Exceeding P1Million

from Previous Quarter 1'1},008.92

Less: Input Tax on Purchases

of Capital Goods exceeding PtMillion deferred for the succeedine oeriod 1,201.';6

Subtotal

f7,8o5.~6

TOTAL INPUT VAT

P2,246,938.n 10

II

Exhibit "P-3", id., pp. 704-706.

Exhibit "P-4", id., pp. 707-709.

Exhibit "P-5", id., pp. 710-712.

Exhibit "P-6", id., pp. 713-715.

1'27,388.8!

- 756-470.12 1,810,029·95 P2, <;g~, 888.88 1'5,201.56 - P<;,2o3.56 ~'2 ·599· 0 92-44 1rd Quarter'o 4rh Quarter''

CY 2019

I' 46,899·18 1'16,J50.ll 1'!2243).65 - 902,994-00 C)02,99+00 910,699·24 1,094,091·71 1,122,83+95 1,646,J68.1C) 1,019,90+54 6,16z,o66.zo P2, 623, g66.81 P3, 0<;3, 342· 36 P10,51D,JJ0.8o - - 1'18,21248 - - 5,203·56

P-

P-

I'Ij,008.92 1'2,623,966.81 1'3,053>342·36 !'10,523,339·72

I

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

On 31 March 2021, petitioner filed with BIR Revenue District Office (RDO) No. 53B an Application for Tax Credits/Refunds (BIR Form No. 1914), accompanied by a letter dated 30 March 2021.'2 In its application, petitioner sought the refund or, in the alternative, the issuance of a tax credit certificate (TCC) covering its excess and/or unutilized creditable input VAT for the 1st to 4th quarters of CY 2019, allegedly attributable to zero-rated sales, in the aggregate amount ofP10,523,339·72. Due to the BIR's alleged inaction, petitioner filed the present petition on 17 December 2o21.'3 The case was initially raffled to this Court's Second Division.'4

PROCEEDINGS BEFORE THE COURT

In its petition before Us, petitioner asserted its entitlement to a refund ofPw,523,339·72, representing its excess and/or unutilized input VAT attributable to its alleged zero-rated sales for the 1st to 4th quarters of CY 2019, i.e., sales to duly-registered renewable energy (RE) developers and export sales to nonresident affiliates, claiming that all the requisites for a successful claim for VAT refund have been duly satisfied, it alleged that:

(1) it is a VAT-registered taxpayer;

(2) its sales of '1'242,946,270.58 are valid zero-rated sales; (3) the excess and/or unutilized input VAT are attributable to its valid zero-rated sales;

(4) it has excess input VAT that were not applied against any output VAT liability; (s) it timely filed its administrative and judicial claims for VAT refund; (6) the excess and/or unutilized input VAT were properly supported by suppliers' invoices, official receipts (ORs) and other related supporting documents; and (7) its pieces of documentary evidence are authentic and duly executed.

On 03 January 2022, the Court issued Summons'S on respondent. However, on n March 2022, respondent filed a "Motion for Extension of Time to File Answer"'6 through registered mail. In its Order dated 22 March 2022'7. the Court granted the said motion and there~· 12 13 15 16 17 Exhibit "P-28", id., pp. 982-997.

Supra at note I.

Composed of Associate Justice Erlinda P. Uy (Ret.), as Chairperson, Associate Justice Jean Marie A. Bacorro-Villena and Associate Justice Lanee S. Cui-David as Members. Division Docket, Volume I, p. 268.

!d., pp. 270-271.

!d., p. 275.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

DECtStON

extended respondent's deadline to file an Answer untiln April 2022. In compliance therewith, respondent filed his or her Answer18 through registered mail on o8 April 2022.

In his or her Answer, respondent raised the following special and affirmative defenses against petitioner's claim for refund of excess and/or unutilized input VAT for the 1st to 4th quarters of CY 2019:

(1) petitioner's entitlement to refund is conditioned upon strict compliance with statutory requisites under the NIRC of 1997, as amended, such as VAT registration, existence of zero-rated sales, substantiation and proper attribution of input taxes, compliance with invoicing and accounting rules and timely filing of claims; (2) petitioner issued zero-rated ORs worth P9o,042,o8o.92 with expired Authority to Print (ATP), in violation of Sections 23819 and 26420 of the NIRC of1997, as amended; (3) petitioner failed to substantiate importations other than capital goods amounting to P2,294,016.6o; (4) local purchases totaling Pn,250.450.I2 did not meet invoicing requirements under Revenue Regulations (RR) No. 16-2005 21 , as amended; (5) discrepancies of I'2.313,074·53 were found between petitioner's reported sales per income tax return (ITR) and VAT return; (6) sales to the Energy Development Corporation (EDC) worth P2s,o24,68s.82 did not comply with invoicing rules applicable to zero-rated transactions; (7) petitioner issued supplementary receipts, such as billing statements, instead of ORs or sales invoices (Sis), with an aggregate value of PI8,I68,s2o.s1, likewise under an expired ATP; and (8) claims for VAT refund partake of the nature of tax exemptions, which must be construed strictly against the claimant and in favor of the taxing authority, and that the burden of proof rests upon petitioner to demonstrate entitlement through clear legal basis and competent evidence. Meanwhile, prior to the Pre-Trial Conference on 03 November 20222 \ respondent filed his or her Pre-Trial Brief on 22 June 2o22. 23 Og 18 19 21 22 23 / !d., pp. 276-282.

SEC. 238. Printing ojReceipts or Sales or Commercia/Invoices. SEC. 264. Failure or Refits alto Issue Receipts or Sales or Commercial Invoices, Violations Related to the Printing of such Receipts or Invoices and Other Violations. Consolidated Value-Added Tax Regulations of2005. See Resolution dated 28 September 2022, Division Docket, Volume I, pp. 354-356; Minutes of the hearing held on, and Order both dated 03 November 2022, id., pp. 418, and 414-415, respectively; the Pre-Trial Conference was initially set for 27 June 2022 but was successively reset to 26 September 2022, then to 29 September 2022. !d., pp 328-330.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue the hand, petitioner submitted its Amended Pre-Trial Brief on 28 October 2022. 24 On 29 November 2022, the parties filed their Joint Stipulation of Facts and Issues (JSFI) 25, which the Court admitted and approved in its Resolution dated 20 December 202226, thereby terminating the pre-trial proceedings. A Pre-Trial Order was issued on u January 2023. 2 7 In the Resolution dated 14 July 202328, the Court directed respondent's counsel, Atty. Joana Q. Bilongilot (Atty. Bilongilot), to show cause why she should not be cited for indirect contempt pursuant to Section s(b ) 29, Rule 6 of the RRCTA, as amended, and to comply with the Court's Order dated 22 March 2022 requiring the elevation of the entire BIR Records of this case within ten (w) days from notice. Respondent's counsel thereafter filed her "Compliance" and transmitted the records, consisting of 2.397 pages bound in 10 folders, on 04 August 2023.30 Trial on the merits ensued. Petitioner presented its witnesses, namely: (I) Moon Lin Loh (Loh), Tax Manager of Halliburton Business Services Sdn Bhd, which renders services for petitioner; (2) Aubrey Madridano (Madridano), petitioner's Office Administrator; and

(3) Richard Querido (Querido), the Court-commissioned Independent Certified Public Accountant (ICPA)3', who all testified via their respective judicial affidavits.

On the witness stand, Loh declared essentially that: (I) she oversees petitioner's tax matters and is familiar with its operations as a Philippine branch of a foreign corporation duly licensed by the SEC and registered with the BIR as a VAT taxpayer; (2) she is the Tax Manager of 24 ld .• pp. 398-413.

I

25 I d., pp. 419-434.

26 Id., p. 450.

27 ld., pp. 452-459.

28 Id.,p.551.

29

RULE 6

30 31

PLEADINGS FILED WITH THE COURT

SEC. 5. Answer.-

(b) Transmittal of records. Compliance dated 04 August 2023, Division Docket, Volume I, pp. 578-579. Oath of Commission dated 15 March 2023, id., p. 476; Minutes of the hearing held on, and Order both dated 15 March 2023, id., pp. 475 and 479-480, respectively.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

Halliburton Business Services Sdn Bhd, which provides support services to petitioner; (3) petitioner is engaged in rendering oilfield services and products and, for the I'' to 4'h quarters of CY 2019, incurred input VAT from various purchases duly supported by invoices and receipts; (4) said input VAT, amounting to 'P10,523,339·72, was attributable to zero-rated sales to RE developers in the Philippines, paid in pesos, and to nonresident affiliates, paid in foreign currency and settled under an offsetting arrangement duly accounted for in accordance with Bangko Sentral ng Pilipinas (BSP) rules; (s) the claimed input VAT was carried over until deducted as "VAT Refund/TCC Claimed" in the Amended Quarterly VAT Return for the 4'h quarter of CY 202o3 2 ; (6) the filings were duly supported by eFPS confirmations, authenticated corporate documents of nonresident affiliates and SEC certifications of their non- registration; (7) the governing "Intercompany Services Agreement"33 substantiated the offsetting of intercompany obligations; and (8) petitioner filed its administrative claim for refund with SIR RDO No. 538 on 3I March 2o2I, which, to date, remains unacted upon by the BIR.34 Loh, in the course of her cross-examination, clarified that: (1) she has been discharging the same functions for petitioner since 2015;

(2) notwithstanding her foreign citizenship, she is acquainted with prevailing Philippine tax laws; (3) she resides in Malaysia; (4) to remain updated on tax developments, she regularly receives email advisories and occasionally participates in teleconferences conducted by SyCip, Gorres, Velayo (SGV) & Co.; (5) petitioner has not received any formal notice from respondent regarding the denial of its administrative claim; and

(6) under the "Intercompany Services Agreement"35, petitioner served as the service provider, while its nonresident foreign affiliates were the recipients of such services.36 No redirect examination was conducted.37 ICPA Querida submitted his "Results of the Procedures Performed Relative to the Company's Claim for Refund of Its Unutilized Input Tax Covering the I'' to 4'h Quarters of [CY] 2019" (I CPA Report) on 02 May f 32 33 34 35 36 37 Line 23D, Exhibit "P-10-1", id., Volume II, p. 731. Exhibit "P-27", id., pp. 955-981.

Exhibit "P-35", Judicial Affidavit of Moon Lin Loh, id., pp. 370-388; Minutes of the hearing held on, and the Order both dated 09 March 2023, id., pp. 473 and 474, respectively. Exhibit "P-27", supra at note 33.

TSN dated 09 March 2023, pp. 9-18.

!d., p. 18.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

2023 and "Results of the Supplemental Procedures Performed Relative to the Company's Claim for Refund oflts Unutilized Input Tax Covering the 1st to 4th Quarters of [CY] 2019" (Supplemental ICPA Report) on 22 September 2023.38 During Madridano's testimony, she declared that: (1) her duties include the custody of petitioner's contracts, handling of sales, coordination with clients and procurement of government certifications necessary to comply with zero-rating requirements; (2) petitioner is engaged in providing oilfield services and products in the Philippines, including drilling, cementing, logging and consulting; (3) during CY 2019, petitioner rendered services to EDC and Philippine Geothermal Production Company, Inc. (PGPC), both REdevelopers duly recognized under Republic Act (RA) No. 951339; (4) petitioner rendered directional drilling services to EDC under a service agreement and amendments thereto; (s) petitioner rendered software subscription, maintenance, and support services to PGPC involving the "Compass Advanced" software, substantiated by maintenance quotations and PGPC purchase orders; and (6) as custodian of petitioner's sales contracts, she had electronic access to and printed copies of said documents, which were submitted in evidence.4° During the hearing held on o8 August 2023, Madridano, on cross- examination, explained that petitioner provided services to EDC and PGPC, all of which were duly supported by ORs that were submitted to ICPA Querido for his evaluationY No redirect examination was conductedY Lastly, ICPA Querido took the witness stand. He testified that:

(1) his audit procedures covered the verification of input VAT on domestic purchases, importations, services rendered by nonresidents, and amortization of deferred input VAT, as well as the validation of ) petitioner's declared zero-rated sales; (2) he cross-checked schedules of/ 38 39 41 42 Exhibits "P-36'' and "P-36-3", Division Docket, Volume I, pp. 484-545 and 589-645, respectively. AN ACT PROMOTING THE DEVELOPMENT, UTILIZATION AND OMMERCIALIZA TION OF RENEWABLE ENERGY RESOURCES AND FOR OTHER PURPOSES. Exhibit "P-555", Judicial Affidavit of Aubrey Madridano, Division Docket, Volume I, pp. 389-397; Order dated 08 August 2023, Division Docket, Volume I, pp. 581-582. TSN dated 08 August 2023, pp. 19-2 I.

!d., p. 21.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue input VAT against quarterly VAT returns, inspected receipts and invoices for compliance with invoicing requirements, validated importation records and BIR filings, and ensured that claimed input VAT had not been applied against output VAT in subsequent periods; (3) petitioner's total claim of :Pw,523,339·72 was reviewed, but only :P8,770,518.24 was properly substantiated; (4) petitioner's zero-rated sales for the same period, amounting to P242,946,270.58, were supported by ORs, billing statements, inward remittances and intercompany invoices; (5) certain claimed amounts were excluded for failure to comply with invoicing requirements, being out-of-period, or not being properly substantiated, thereby reducing the valid input VAT attributable to zero-rated sales; and

(6) upon the subsequent submission of original BIR Records on 04 August 2023, he conducted further procedures on 18 August and 13 September 2023, which was reflected in his Supplemental !CPA Report confirming the validity of the remaining claim.43 On cross-examination, !CPA Querida clarified that: (1) in the !CPA Report, the substantiated amount of petitioner's claim was :P8, 770,518.24;

(2) in the Supplemental !CPA Report, the substantiated amount was slightly adjusted to :P8,763,996.81; (3) the decrease stemmed from the availability of additional documents that were not accessible when the !CPA Report was prepared; (4) certain receipts and invoices were excluded because they were issued beyond the validity period of the ATP; and (s) he acknowledged that his findings on expired ATP covered only amounts reflected in the records he examined. No further questions were propounded and the cross-examination was concluded without redirect examination. 44 In the interim, pursuant to Administrative Circular No. 01-2023 dated 23 May 2023, which reorganized the Divisions of the Court, the present case was transferred to the Court's First Division by virtue of the Resolution dated 29 May 2023.45 43 44 " Exhibits "P-558" and "P-559"", Judicial Affidavit and Supplemental Affidavit of Independent Certified Public Accountant (!CPA) RichardS. Querido, Division Docket, Volume I, pp. 555-574 and 652-667, respectively; Minutes of the hearing held on, and the Order dated 18 January 2024, Division Docket, Volume II, pp. 673-675. TSN dated 18 January 2024, pp. 15-2 I. Division Docket, Volume I, p. 546.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

On 07 February 2024, petitiOner filed its Formal Offer of Evidence46 (FOE). Respondent did not file his or her comment thereto.47 In the Resolution dated 15 April 202448, the Court admitted all of petitioner's offered exhibits, except Exhibits "P-24-5" and "P-556", for failure to submit the duly marked exhibits. Subsequently, on 02 May 2024, petitioner filed its "Motion for Partial Reconsideration (Re: Resolution dated 15 April 2024)"49 (MPR) assailing the Resolution on petitioner's FOE. Respondent again failed to file any comment.50 In its Resolution dated 23 July 20245', the Court granted petitioner's MPR, admitted Exhibit "P-556", and set a Commissioner's Hearing solely for the marking of Exhibit "P-24-5", with the directive that the same shall be deemed admitted thereafter as part of petitioner's exhibits.

For his or her part, respondent presented the testimony of his or her lone witness, Revenue Officer (RO) Dominic Jay S. Canabe (Canabe).

On the witness stand, RO Canabe of BIR ROO No. 53B testified that he was authorized under Tax Verification Notice (TVN) No. 2018-ooo98030 dated 12 April 20215z to process petitioner's claim for refund of unutilized input VAT for the period 01 January to 31 December 2019. He personally served the notice on petitioner's authorized representative and thereafter evaluated the documents submitted, including the application letter and revised checklist of requirements filed on 31 March 2021. He prepared the undated Memorandum Report53 embodying the following findings: (1) petitioner issued zero-rated ORs for services amounting to I'90,042,o8o.92 using an expired ATP, in violation of Sections 23854 and 26455 of the NIRC of 1997, as amended;

(2) petitioner failed to substantiate importations other than capital/ 46 47 48 49 50

5I

53 54 55 ld., Volume II, pp. 676-703.

Records Verification dated 28 February 2024, id., p. I 004. I d., pp. I 009-10 I 0.

ld., pp. 1026-1029.

See Records Verification dated 24 May 2024, id., p. 1033. !d., pp. !038-1040.

BIR Records, Folder I, p. 2187.

Exhibit "R-5", id., pp. 2363-2369.

Supra at note 19.

Supra at note 20.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue goods worth P2,294,016.6o, contrary to Sections no(A)S6 and 113(A)s7 of the NIRC of 1997, as amended, and Section 4.no-8S8 of RR No. 16-o5s9, as amended; (3) petitioner's local purchases worth Pn,250A50.12 did not comply with invoicing requirements under Section 4·113-160 of RR No. 16-os, as amended; (4) a discrepancy ofP2,]13,074·53 was found between reported sales per ITR and VAT returns, representing sales of property, plant and equipment subject to VAT under Sections 1056' and 10662 of the of the NIRC of1997, as amended; (s) petitioner failed to comply with invoicing rules for zero-rated sales to EDC amounting to P25,024,68s.82; and ( 6) petitioner issued supplementary receipts such as billing statements, instead of VAT invoices or ORs, worth PI8,I68,520.51, likewise under an expired ATP. RO Canabe stated that while a notice of denial had been prepared, it remained unsigned because the docket was forwarded to respondent's Assessment Division and later to his or her Legal Division when petitioner elevated its claim to this Court.63 No cross-examination followed.64 On 22 April 2024, respondent filed his or her FOE65, to which petitioner filed its "Comment (Re: Respondent's [FOE])"66 on 29 April 2024. In the Resolution dated 23 July 202467, the Court admitted all of respondent's offered exhibits.

Thereafter, petitioner filed its Memorandum on 16 September 2024.68 Respondent did not file his or her Memorandum.69 On 30 September 2024, the case was deemed submitted for decision.7° I 56 57 58 59 60 61 63 64 65 66 67 68 69 70 SEC. II 0. Tax Credits. - A. Creditable Input Tax.

SEC. I 13./nvoicing and Accounting Requirements fOr VAT-Registered Persons.- (A) invoicing Requirements.

SEC. 4.110-8. Substantiation ojlnput Tax Credits. Supra at note 21.

SEC. 4.113-1. Invoicing Requirements.

SEC. 105. Persons Liable.

SEC. I 06. Value-Added Tax on Sale of Goods or Properties. Exhibit "R-6", Judicial Affidavit of Revenue Officer (RO) Dominic JayS. Can abe, Division Docket, Volume I, pp. 286-293; Order dated 16 April 2024, Division Docket, Volume II, pp. I 012-1013. TSN dated 16 April2024, p. 9.

Division Docket, Volume 11, pp. I 015-1021. !d., pp. I 022-1024.

!d., pp. 1038-1040.

!d., pp. I 049-1081.

See Records Verification dated 10 September 2024, id., p. 1048. See Notice of Resolution dated 30 September 2024, id., p. !084.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

ISSUE

As can be gleaned from the parties' JSFF', the sole issue for this Court's resolution is-

WHETHER PETITIONER HALLIBURTON WORLDWIDE LIMITED-

PHILIPPINE BRANCH IS ENTITLED TO A REFUND OR THE ISSUANCE OF A TAX CREDIT CERTIFICATE (TCC) OF ITS ALLEGED

UNUTILIZED INPUT VALUE-ADDED TAX (VAT) ALLEGEDLY

ATTRIBUTABLE TO ZERO-RATED SALE OF SERVICES FOR THE

FIRST (rST) TO FOURTH (4TH) QUARTERS OF CALENDAR YEAR (CY) 2019 IN THE AMOUNT OF .Pw,523>339·72.

ARGUMENTS

In support of its petition, petitioner insists that it fully complied with all statutory requisites for a VAT refund, namely: (1) it is a VAT- registered taxpayer engaged in zero-rated or effectively zero-rated sales;

(2) its input VAT claimed is due or paid, and does not include transitional input taxes; (3) the input VAT being claimed has not been applied against output VAT during the same or succeeding quarters;

(4) the input VAT claimed represents the proportionate share allocated to zero-rated or effectively zero-rated sales, in accordance with the law;

(s) the claim for refund or TCC was filed within the mandatory periods prescribed by law; and (6) petitioner maintains that all documentary requirements for substantiating the claim have been met, including proper invoicing and substantiation of importations and local purchases.

Respondent, on the other hand, opposes the claim on the following grounds: (1) petitioner issued zero-rated ORs for sales amounting to P90,042,o8o.92 using receipts with expired ATP, violating Section 23872 and punishable under Section 26473 of the NlRC of 1997, as amended; (2) petitioner failed to fully substantiate importations (other than capital goods) worth P2,294,016.6o, as required by Sections no(A)74

I

and 113(A)7S of the NIRC of 1997, as amended; (3) local purchases worth J 71 72 73 74 75 Issue, JSFI, id., Volume I, p. 420.

Supra at note 19.

Supra at note 20, Supra at note 56.

Supra at note 57.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

Pn,zsoAso.12 did not comply with the invoicing requirements under Section 4.113-176 of RR No. 16-os, as amended; (4) there is a discrepancy of P2,313,074·53 between total sales per ITR and VAT return, representing sale of property, plant, and equipment, which should be subject to 12% VAT under Sections 10577 and 10678 of the NIRC of 1997, as amended; (s) petitioner failed to comply with the invoicing requirements for sales to EDC subject to o% VAT, amounting to Pzs,o24,68s.8z; (6) petitioner issued supplementary receipts (billing statements) instead of ORs/Sis, and these were also issued with expired ATP, covering sales of P18,168,szo.s1; and (7) claims for VAT refund partaking the nature of tax exemptions, must be construed strictly against the claimant and in favor of the taxing authority, and that the burden of proof rests upon petitioner to demonstrate entitlement through clear legal basis and competent evidence.

RULING OF THE COURT

After a careful and thorough evaluation of the parties' respective evidence and the applicable laws, rules and regulations, the Court finds the instant petition partly meritorious. Petitioner anchors its claim on Sections no(B)79, nz(A) and (C) of the NIRC of 1997, as amended by RA 10963 or Tax Reform for Acceleration and Inclusion (TRAIN), which are quoted hereunder:

7G

77 79 SEC. no. Tax Credits. - (B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters: Provided, however, That any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of I Section 112.

Supra at note 58.

Supra at note 61.

Supra at note 62.

As amended by Republic Act No. 9361, "AN ACT AMENDING SECTION I IO(B) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES''.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

SEC. 112. Refunds or Tax Credits of Input Tax.- (A) Zero-Rated or Effectively Zero-Rated Sales. -Any VAT- registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section w6(A)(2)(a)(r), (2) and (b) and Section w8(B)(r) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero- rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section w8(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. (C) Period within which Refund of Input Taxes shall be Made.- In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety ( 90) days from the date of submission of the official receipts or invoices and other documents in support of the application filed in accordance with Subsections (A) and (B) hereof: Provided, That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial.

In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (3o) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals: Provided, however, That failure on the part of any official, agent, or employee of the BIR to act on the application within the ninety (9o)-day period shall be punishable under Section 269 of this Code.80 In Commissioner of Internal Revenue v. Deutsche Knowledge Services Pte. Ltd. 8' (Deutsche Knowledge Services), the Supreme Court laid down the requisites for the entitlement to tax refund or credit~· of excess input VAT attributable to zero-rated sales, to wit: 80 81 Emphasis supplied and italics in the original text. G.R. No. 234445, 15 July 2020; Citations omitted.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

Under Section 4.112-1(a) of Revenue Regulations No. (RR) 16-os, otherwise known as the Consolidated VAT Regulations of 2005, in relation to Section 112 of the Tax Code, a claimant's entitlement to a tax refund or credit of excess input VAT attributable to zero-rated sales hinges upon the following requisites: "(1) the taxpayer must be VAT-registered; (2) the taxpayer must be engaged in sales which are zero-rated or effectively zero-rated; (3) the claim must be filed within two 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." Applying the foregoing principle, the Court will proceed to determine whether petitioner complied with the aforementioned requisites. For an orderly discussion, We shall start with the third (3'd) requisite, followed by the first (1't) and second (2nd) requisites, then the fourth (4th) requisite.

THIRD (JR0) REQUISITE:

THE CLAIM MUST BE FILED WITHIN

TWO (2) YEARS AFTER THE CLOSE OF

THE TAXABLE QUARTER WHEN SUCH

SALES ARE MADE.

In accordance with Section n2(A) and (C)82 of the NIRC of 1997, as amended by TRAIN, the administrative claim for refund ofunutilized input VAT must be filed with the BIR within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales are made.

Petitioner's present claim covers the 1't to 4th quarters of CY 2019. Counting two (2) years from the close of the subject taxable quarters, petitioner had until the following dates to file its administrative claim, to wit:

Close of the Taxable

Last Day to File

Period Covered

Quarter

Administrative Claim

I 5t quarter

31 March 2019

31 March 2021

(01 january to 31 March 2019)

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

2"d quarter

30 June 2019

30 June 2021

(o1 April to 30 June 2019) 3'd quarter

30 September 2019

30 September 2021

(o1 July to 30 September 2019) 4'' quarter

31 December 2019

31 December 2021

(01 October to 31 December 2019)

Hence, petitioner timely filed its administrative claim for VAT refund concerning the foregoing period with respondent on 31 March 2021.83 As to the timeliness of petitioner's judicial claim, respondent had ninety (9o) days or until 29 June 2021, to decide on petitioner's administrative claim. However, considering that during the said period, enhanced community quarantine (ECQ) and modified enhanced community quarantine (MECQ) were imposed due to corona virus disease 2019 (COVID-19) pandemic84, thereby further extending the 90-day period to act, and taking into account the additional thirty (30) days after the lifting thereof per RR No. 27-2o8s, the 90-day to act now began to run on 14 June 2021. Be that as it may, additional ECQ and MECQ were imposed during the concerned period86 further extending the 9o-day period to act to 21 November 2021.

I

83 " Exhibits "P-28"" and "P-29", Division Docket, Volume II, pp. 982-998.

Dates

Imposed

Number

COVID-1 9-related Issuances

Quarantine

of days

Restriction

0 I April 2021 to

ECQ/MECQ

30 Memorandum from the Executive Secreta!)' 85 86

30 April 2021

from 27 March 2021; IATF-EID Resolution No.

108-A, 04 April 2021; IATF-EID Resolution No. 109-A, 10 April2021

OJ May 2021 to

MECQ

14 JATF-EID Resolution No. 113-A, 29 April

14 Mav 2021

2021

Total

44 Regulations Suspending the Filing and Ninety (90)-Day Processing of Value-Added Tax (VAT) Refund Claims Anchored Under Section 112 of the Tax Code of 1997, as Amended, in Relation to Section 4(tt) of Republic Act (R.A.) No. 11494, Otherwise Known as the "Bayanihan to Recover as One Act".

Dates

Imposed

Number

COVID-19-related Issuances

Quarantine

of days

Restriction

06 August 2021 to

ECQ

15 lA TF-EID Resolution No. 130-A. 29 July

20 Aueust 2021

0021

21 August 2021 to

MECQ

II

lA TF-EID Resolution No. I 34, I 9 August

3 I Auaust 202 I

2021

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

Considering respondent was unable to act on petitioner's administrative claim within the said 9o-day period, petitioner had 30 days from the expiration of the same, or until 21 December 2021, to file a judicial claim. Given that petitioner filed the instant Petition for Review on 17 December 202187, the same was timely filed within the reglementary period. Such being the case, the Court finds that petitioner satisfied the above-stated 3'd requisite.

FIRST (IST) REQUISITE:

PETITIONER MUST BE VALUE-ADDED

TAX (VAT)-REGISTERED.

Undeniably, petitiOner is a VAT-registered taxpayer with TIN 266-369-s6s-ooo, as shown in its SIR Certificate of Registration (COR) Number OCN 9RCoooos3osso.88 Thus, petitioner complied with the 1st requisite.

SECOND (2ND) REQUISITE:

PETITIONER MUST BE ENGAGED IN

SALES WHICH ARE ZERO-RATED OR

EFFECTIVELY ZERO-RATED.

The z"d reqwszte requires that the taxpayer be engaged in zero-rated or effectively zero-rated sales. Petitioner claims that its reported zero-rated sales/receipts for CY 2019 consisted of- (1) export sales of goods to nonresident foreign affiliates doing business outside the Philippines; and (2) sales to duly registered RE developers, detailed as follows:89 1st Quarter 2nd Quarter 3'd Quarter 4th Quarter

CY 2019

Halliburton

Energy

Services

(Malaysia)

Sdn

Bhd

l's3,242.03 1'<;3,242,03 87 88 89

0 I September 2021 to

07 September 2021

08 September 2021 to

15 Seotember 2021

Total

Supra at note 1.

Supra at note 5.

MECQ

7

MECQ

8 41 Par. 7, Petition for Review, supra at note l, p. 8. IATF-EID Resolution No. 135-A, 26 August 2021

I

lA TF-EID Resolution No. 137, 07 September 2021

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

Halliburton

Drilling

Technologies, Inc.

288,647·04 288,647·04

Halliburton

Energy

Services, Inc.

1'262,119·58 262,119·58

Halliburton AS

1'2,016,631.42 2,016,631.42

Export Sales of

Goods to Non-

Resident Foreign

Affiliates

/341,889,07 1'262,119·58 f'2, 016,631,42 P2,620,640.07

Energy

Development

Corporation

(EDC)

1'74.455.984-27 20,117,259·95 71,706,095-46 72,674.593·88 238.953·933·56

Philippine

Geothermal

Production

Company (PGPC)

1,0<;6,707·74 314,989.21 1,371,696·95

Sales

to

RE

developers

Total Sales

1"75· 512, 692.01 1'20,117,259·95 f'71, 706, 095·46 1'75·512,692,01 1'20,459>149·02 1'71,968,215.04 1.

EXPORT SALES OF GOODS TO

NONRESIDENT

FOREIGN

AFFILIATES DOING BUSINESS

OUTSIDE THE PHILIPPINES

f'72, 989,583.09 f'240,J25,630,51 P75,oo6,21.4.51 1'242,946,270·58 Petitioner maintains that during the 1st to 4th quarters of CY 2019, it generated zero-rated sales from its export sales to nonresident foreign affiliates doing business outside the Philippines under Section w6(A)(2)(a)(1)9o of the NIRC ofr997, as amended. To qualify as zero-rated under Section w6(A)(2)(a)(1) of the NIRC " of 1997, as amended, the following essential elements must be present/ 90 SEC. 106. Value-Added Tax on Sale of Goods or Properties.- (A) Rate and Base of Tax. -There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to twelve percent (12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor.

(2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

(a) Export Sales. -The tenn 'export sales' means: (I) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP)[.]

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

1.

The sale was made by a VAT -registered person; 2.

There was a sale and actual shipment of goods from the Philippines to a foreign country; and, 3· The sale was paid for in acceptable foreign currency accounted for in accordance with the rules and regulations of the BSP.

The first essential element is undisputed. As for the second essential element, Sections 113(A)(1), (8)(1) and (2)(c) of the NIRC ofi997, as amended, and Sections 4-113-1(A)(1), (8)(1) and (2)(c) ofRR No.16-os9\ respectively provide: 91 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 1 the invoice or receipt;

Supra at note 21.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

92

(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 (o%) 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 breakdown 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.9" SEC. 4·113-1. Invoicing Requirements. - (A) 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. Only VAT -registered persons are required to print their TIN followed by the word "VAT'' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax.

VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt:

1. A statement that the seller IS a VAT-registered person, followed by his TIN;

l Emphasis and italics in the original text.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

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:

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

b. If the sale is exempt from VAT, 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 (o%) 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.93 From the above provisions, any VAT -registered person claiming VAT zero-rating in relation to export sales of goods must present the following documents: (1) SI as proof of sale of goods showing prominently the term "zero-rated sale"; and (2) Bill of lading or airway bill as proof of actual shipment of goods from the Philippines to a foreign country.

In addition to the above requirements94, the Sis supporting the export sales must be duly registered with the BIR and must contain all the required information, pursuant to Sections 237 and 238 of the NIRC of 1997, as amended, viz:

93 94 SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. -All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.oo) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date Emphasis supplied and italics in the original text. See Eastern Telecommunications ?hils. Inc. v. Commissioner of Internal Revenue, G.R. No. 183531,25 March2015.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue of transaction, quantity, unit cost and description of merchandise or nature of service ....

SEC. 238. Printing of Receipts or Sales or Commercial Invoices. - All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.9s To summarize the foregoing requirements, the following information should be reflected in the VAT invoice or OR: 95

1. A statement that the seller is a VAT -registered person, followed by its 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 VAT, provided that: (a) the amount of tax shall be shown as a separate item in the invoice or receipt; (b) if the sale is exempt from VAT, the term "VAT exempt sale" shall be written or printed prominently on the invoice or receipt; (c) if the sale is subject too% VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt; or (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 breakdown 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; Emphasis supplied and italics in the original text.

I

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

3· In the case of sales in the amount of P1,ooo.oo or more, where the sale or transfer is made to a VAT -registered person, the name, business style, if any, address and TIN of the purchaser, customer or client;

4· Date of transaction; and 5· Quantity, unit cost and description of merchandise or nature of service.96 Tellingly, Revenue Memorandum Circular (RMC) No. 42-0397 expressly provides that a taxpayer's failure to comply with the invoicing requirements will result in the disallowance of the claim for input tax, as follows:

98 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 invoicing requirements on the documents supporting the sale of goods and services will result [in] the disallowance of the claim for input tax by the purchaser-claimant.

If the claim for refund/TCC is based on the existence ofzero- 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 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. gB See Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 166732 27 April 2007.

Clarifying Certain Issues Raised Relative to the Processing of Claims for Value-Added Tax (VAT) Credit/Refund, Including Those Filed with the Tax and Revenue Group, One-Stop Shop Inter- Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS) by Direct Exporters. Italics in the original text, emphasis and emphasis supplied. ' I

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

Thus, only export sales supported by documents compliant with the above-stated requirements shall qualify for VAT zero-rating under Section w6(A)(2)(a)(1) of the NIRC of 1997, as amended. To prove its export sales off>2,62o,64o.o7, petitioner presented Sis and shipment waybills, except for the amount off>288,647·04, as shown below:

Summary

Billing

Shipment

Amount of

Reference

Statement

SI

Waybill

Export Sales

(Annexed to

Customer Name

Date

Exhibit "P-

Exhibit No.

36-J")

Supported only by a billing statement

Halliburton

Drilling

Annex B-s

Technologies Inc

May 1, 2019

"P-533"

- - 1'288,647·04

Sub-total

1'288,647·04 Supported by Sis and shipment wa bills

Halliburton Energy

Services

Malaysia

Annex B-s

SDN BHD

16 April 2019

- "P-<;14"

"P-535"

'53,242.01

Halliburton Energy

Annex B-s

Services Inc.

2'5 july 2019 -

"P-'536"

"P-s37"

262,119.58

Halliburton AS

17 December

Annex B-s

2019 -

"P-s38"

"P-539"

2,016,631.42

Sub-total

1'2,JJI,99J•03 Total export sales of goods to non-resident foreign affiliates f'z,62o,64o.o7 However, We note that the Sis supporting petitioner's export sales ofP2,331,993.03 were not duly registered with the BIR as required under Sections 237 and 238 of the NIRC of1997, as amended. Also, petitioner's TIN and the term "zero-rated sale" were not indicated on the said Sis, which are clear violations of the invoicing requirements. Consequently, petitioner failed to satisfy the second essential element. In sum, petitioner's claimed export sale of goods to its nonresident foreign affiliates amounting to P2,62o,64o.o7, failed to qualify for VAT zero-rating under Section w6(A)(2)(a)(1) of the NIRC of 1997, as f-7 amended.

y

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

11.

SALES

TO

RENEWABLE

ENERGY(RE)DEVELOPERS

Petitioner alleges that its sales to EDC and PGPC, RE developers, are zero-rated pursuant to Section 15(g)99 of RA 9513 in relation to Section w8(B)(3) 100 of the NIRC of 1997, as amended. Based on its "Schedule ofZero-Rated Sale of Services and Schedule of Zero-Rated Sale of Goods"10', petitioner's reported sales to EDC and PGPC can be further broken down as follows:

EDC

PGPC

'

Total

i

Sales/Receipts

' Sales of goods f'25,o24,685.82 - P25,o24,6s5.s2 Sales of services 213,929,247·71 f'1,371,696.95 215,300,944·66

Total

Sales/Receipts

1'238·953>933·53 PI,J7I,696·95 P240>325,63o.48 Before We delve on whether the aforesaid sales qualify for VAT zero-rating, We shall first determine whether petitioner complied with the pertinent invoicing requirements.'02 99 100 101 102 Sec. IS. Incentives for Renewable Energy Projects and Activities. - RE developers of renewable energy facilities, including hybrid systems, in proportion to and to the extent of theRE component, for both power and non-power applications, as duly certified by the DOE, in consultation with the BOI, shall be entitled to the following incentives:

(g) Zero Percent Value-Added Tax Rate. - The sale of fuel or power generated from renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy and other emerging energy sources using technologies such as fuel cells and hydrogen fuels, shall be subject to zero percent (0%) value-added tax (VAT), pursuant to the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 9337. All REDevelopers shall be entitled to zero-rated value added tax on [their] purchases of local supply of goods, properties and services needed for the development, construction and installation of its plant facilities.

This provision shall also apply to the whole process of exploring and developing renewable energy sources up to its conversion into power, including but not limited to the services performed by subcontractors and/or contractors.

SEC. !08. Value-Added Tax on Sale of Services and Use or Lease of Properties.- (B) Transactions Subject to Zero Percent (0%) Rate. - .

"

(3) Services rendered to persons or entities whose exemption under special laws or international }J agreements to which the Philippines is a signatory effectively subjects the supply of such services j/ to zero percent (0%) rate[.]

Exhibits "P-551" and "P-552", USB (Exhibit ''P-36-5"). Supra at pp. 22-23.

Halliburton Worldwide Limited — Philippine Branch v. Commissioner of Internal Revenue

As previously discussed, the invoicing requirements require that BIR-registered VAT Sls must support the sale of goods, whereas BIR- registered VAT ORs must substantiate the sale of services. The SIs and ORs must contain all the information required under the said law and regulations.

With regard to petitioner’s sales of goods to EDC in the amount of P25,024,685.82, petitioner presented the billing statements’ it issued, instead of BIR-registered SIs, hence, the same shall be disallowed.

As to petitioner’s sales of services to EDC and PGPC in the total amount of P215,300,944.66, petitioner presented BIR-registered VAT ORs, summarized as follows:

Summary'®?/ Amount of Sales Folder’ Exh. Customer | OR Per ;

. Reference No. Name No. OR Date Per OR Schedule’”’ Difference | ‘p-436” | EDC | 6510 | 21June 2019 | _P4,823,428.35 | _ Pa4,921,865.65 | _(P98,43730) “P-439" EDC 6515 05 July 2019 9,194,627.61 9,382,273.07 (187,645.46) EDC 6516 | 26 July 2019 8,772:798.33 8,951,835.03 (179,036.70) EDC | 6517 | 2July 2019 13,081,736.65 | 13,348,710.87 | __ (266,974.22) Annex B-1 “P-451” EDC 6518 19 July 2019 4,765,597-37 (95,311.35) Annex B-1 “P-454” 1 July 2019 337,751.86 41,163.49 (3,411.63) Annex B-1 “P-459"” 23 August 2019 4,058,891.79 4,141,726.00 (82,834.21) Annex B-1 “P-462” EDC 27 August 2019 1,382,528.4 1,410,743.60 (28,215.17)

18 September

Annex B-1 “P-467” EDC 6522 2019 16,700,240.31 17,041,061.54 (340,821.23)

25 September

Annex B-1 “P-470” EDC 652 2019 12,076,554.19 12,,323,014.48 (246,460.29)

04 October

. Annex B-1 2019 668,621.70 682,267.04 (13,645.34) Annex B-1 u October 2019 1,313,440.98 1,340,245.90 (26,804.92)

08 November

Annex B-1 2019 6,261,154.93 6,388,933.60 (127,778.67)

29 November

Annex B-1 EDC 6528 2019 14,652,752.74 14,951,788.52 (299,035.78)

06 December

‘ Annex B-1 6529 2019 1,274,393-77 1,300,912,01 (26,518.24) x

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

26 December

Annex B-1

"P-494"

EDC

6530 2019 22,727,')02.99 22,985,761.0o ( 258,258.01)

Annex B-2

"P-499"

EDC

6505 04 january 2019 12,<;82,067.12 12,838,843·99 (256.776.87)

Annex B-2

"P-5o5"

EDC

6o;o6

27 March 2019

12,601,671.98 12,86o,889.88 (257,217.90)

Annex B-2

"P-510"

EDC

6507

13 March 2019

13.447,219.26 11,721,6')2.31 (274·431.05)

Annex B-2

"P-514"

EDC

65o8

20 March 2019

1,308,723.26 1.335.431.90 (26,708.64)

Annex B-2

"P-s1s"

EDC

6509

20 March 2019

16,9o8, 786.02 17,2')3,861.1';

(345,077·")

Annex B-2

"P-522"

EDC

65u

29 March 2019

15.357,221.60 15,670,634·28 ( )1),412.68)

Annex B-2

EDC

- 774,668.)4 (774,668.')4)

Annex B-2

"P-525"

EDC

6513

02 May 2019

12,245.332.66 12.495,217-40 (249.904-74)

Annex B-2

"P-'i29"

EDC

6')14

22 May 2019

2,646,1';1.74 2,700,1<;6.8q (54,oo3.1o;)

Subtotal

P2o9, 095, 8;6.29 P2IJ,929,247·7' (P4,833.391.42)

Annex B-1

"P-497''

PGPC

n61

19 March 2019

I' 1,098,68o.96 I' 1,oo;6,7o7.74

I'

41,973·22

Annex B-2

PGPC

- 114,989.21 b4,Q8Q.21)

Subtotal

PI,o98,68o.96 PI,J7I,696·9> (P271,0I<;.99)

Total

l'210,194o537·2'i 1'215,100,944·66 (l';,w6,407.41) However, as shown above, the sales/receipts reflected in the supporting ORs amounted only to 1'210,194,537·25, which is lower by P5,106Ao7-41 when compared against the declared sales/receipts in the amount of 1'215,J00,944·66. The said discrepancy of P5,106Ao7-41 consisted of the following:

Amount of Sales

EDC

PGPC

Total

Without supporting ORs (1"774,668.54) (1"314,989.21) (f'1,o89.657. 75) With supporting ORs but the amounts indicated therein differ with the amounts shown per petitioner's schedule/claim (4,058.722.88) 41,973.22 (4,016,749·66) Total discrepancy in sales/receipts (P 4,833>391.42) (1"273,015·99) (f's,w6,4o7 .41) Petitioner's claimed sales/receipts in the amount ofP1,o89,657·75 must be disallowed for being unsupported by B!R-registered VAT ORs, which is in violation of the substantiation requirements under Section , 113(A)(2)108 of the NIRC ofl997, as amended, and Section 4·113-1(A)(2)109 / of RR No. 16-os.

"" 109 Supra at p. 19.

Supra at pp. 20-21.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

The same holds true as the claimed sales/receipts of P4,016,749·66. lCPA Querido noted that the amounts indicated in the ORs were net of withholding tax. However, there was no indication of the amount of gross receipts and the deduction of withholding tax. Neither did petitioner submit the corresponding withholding tax certificates. Such being the case, the amount ofP4,016,749·66 is deemed not supported by BIR-registered VAT ORs and, thus, must be disallowed.

Moreover, petitioner's claimed sales/receipts in the amount of P88,197,856.6o must also be disallowed for being supported by ORs which were dated outside the validity period of the ATP (i.e., 07 June 2019 to o6 June 2024) appearing on the ORs, to wit:

Summary"0 /Folder'"

Exhibit

OR

Reference

Number

No.

OR Date

EDC

PGPC

Total

Annex B-2

"P-497"

n61

19 March 2019

- 1"1,o98,68o.96 1"1,o98,68o.96

Annex B-2

"P-499"

6505

04 January 2019

1"12,582,067.12 12,582,067.12

Annex B-2

"P-sos"

65o6

27 March 2019

12,603,67!.98 12,603,67!.98

Annex B-2

"P-sro"

6507

13 March 2019

13.44 7,219.26 13.447,219.26

Annex B-2

"P-SI4"

6so8

20 March 2019

1,308,723.26 1,308,723.26

Annex B-2

"P-srs"

6509

20 March 2019

16,9o8,786.o2 16,9o8,786.o2

Annex B-2

"P-522"

65u

29 March 2019

15,357,221.60 15,357,221.60

Annex B-2

"P-525"

6513 o2 May 2019 12,245·332.66 12,245.332.66

Annex B-2

"P-szg"

6514

22 May 2019

2,646,153-74 2,646,153-74

Total

'1"87,099·175·64 l"r,o98,68o.96 l"88,I97,856.6o Although the ATP need not be reflected or indicated in the invoices or ORs because there is no law or regulation requiring it"\ this does not dispense with the statutory requirement of securing an ATP and registering its invoices or ORs before they can be used. Here, petitioner issued unregistered ORs. Consequently, such receipts carry no probative value for purposes of establishing entitlement to a VAT refund."3 Thus, out of petitioner's reported sales of services to EDC and PGPC in the amount ofP215,300,944·66, only that pertaining to EDC in ) 110

Ill

112 113 I CPA Supplemental Report (Exhibit "'P-36-3), Division Docket, Volume I, p. 642. USB (Exhibit "'P-36-5").

See Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue, supra at note 96. See Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) v. Commissioner of Internal Revenue, G.R. No. 172378, 17 January 2011.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue the amount of P121,996,68o.65 is properly supported by B!R-registered VAT ORs, computed as follows:

EDC

PGPC

Total

Amount of reported sales of services 1'211,929,247·71 l'1,171,6g6.go;

1'21';, 100,94+66

Less: Disallowances

Without supporting ORs 774.668.';4 314,989.21 1,o89,6'i7·7'i Discrepancy in sales as reflected in the ORs and as declared per VAT returns 4,os8,722.88 (41,971-22) 4,016,749·66 Sales supported by VAT ORs dated outside the validity period of the ATP appearing on the ORs 87,099,175·64 1,o98,68o.96 88,197,856.6o

Total Disallowances

1'91·932,<;67.06 1'1,371,696·95 ~'93·304,264.01 Sales of services properly supported by BIR- registered VAT ORs 1'121,996,68o.6s - 1'121,996,68o.6s Relative thereto, petitioner claims that its sales to EDC, being an RE developer, are subject to o% VAT, pursuant to Section 15(g) of RA 9513.114 We agree.

Section 15(g) ofRA 9513, which grants certain tax incentives toRE developers like EDC, provides:

'"

CHAPTER VII

GENERAL INCENTIVES

Section 15. Incentives for Renewable Energy Projects and Activities. - RE developers of renewable energy facilities, including hybrid systems, in proportion to and to the extent of the RE component, for both power and non-power applications, as duly certified by the DOE, in consultation with the BOI, shall be entitled to the following incentives:

(g) Zero Percent Value-Added Tax Rate. - The sale of fuel or power generated from renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy and other emerging energy sources using technologies such as fuel cells and hydrogen fuels, shall be subject to zero percent (o%) value-added tax (VAT), pursuant to the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 9337· Pars. 16-22, Petition for Review, supra at note I, pp. 12-13. ' p

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

All RE Developers shall be entitled to zero-rated value added tax on [their] purchases of local supply of goods, properties and services needed for the development, construction and installation of its plant facilities.

This provision shall also apply to the whole process of exploring and developing renewable energy sources up to its conversion into power, including but not limited to the services performed by subcontractors and/or contractors."5 Moreover, Section 13(G)(b)(c), Rule 5 of Department Circular No. DC2oo9-o5-ooo8 dated 25 May 2009, or the Implementing Rules and Regulations (IRR) of RA 9513, reads:

SEC. 13. Fiscal Incentives for Renewable Energy Projects and

Activities

DOE-certified existing and new RE Developers of RE facilities, including Hybrid Systems, in proportion to and to the extent of the RE component, for both Power and Non-Power Applications, shall be entitled to the following incentives:

G. Zero Percent Value-Added Tax Rate The following transactions/activities shall be subject to zero percent (o%) value-added tax (VAT), pursuant to the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 933T

(b) Purchase of local goods, properties and services needed for the development, construction, and installation of the plant facilities ofRE Developers; and

(c) Whole process of exploration and development of RE sources up to its conversion into power, including, but not limited to, the services performed by subcontractors and/or contractors."6 .

Based on the foregoing provisions, all RE developers are entitled h '· to zero-rated VAT on its purchases of local supply of goods, properties f 115 116 Emphasis supplied and italics in the original text. Emphasis supplied and italics in the original text.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue and services needed for the development, construction and installation of plant facilities. Furthermore, the law declares that the VAT zero-rating applies to the whole process of exploring and developing RE sources up to its conversion into power, including but not limited to the services performed by subcontractors and/or contractors. Relative thereto, the same IRR of RA 9513 further tells the conditions in availing the incentives and other privileges under the said law. Section 18(A) and (B) thereof reads: SEC. 18. Conditions for Availment of Incentives and Other

Privileges-

A. Registration/ Accreditation with the DOE For purposes of entitlement to the incentives and privileges under the Act, existing and new RE Developers, and manufacturers, fabricators, and suppliers of locally-produced RE equipment shall register with the DOE, through the Renewable Energy Management Bureau (REMB). The following certifications shall be issued:

(1) DOE Certificate of Registration- issued to an RE Developer holding a valid RE Service/Operating Contract. For existing RE projects, the new RE Service/Operating Contract shall pre-terminate and replace the existing Service Contract that theRE Developer has executed with the DOE subject to the Transitory Provision in Rule 13, Section 39· The DOE Certificate of Registration shall be issued immediately upon award of an RE Service/Operating Contract covering an existing or new RE project or upon approval of additional investment.

Any investment added to ex1stmg RE projects shall be subject to prior approval by the DOE.

B. Registration with the Board of Investments (BOI) The RE sector is hereby declared a priority investment sector that will regularly form part of the country's Investment Priority h Plan (IPP), unless declared otherwise by law. f'

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

To qualify for the availment of the incentives under Sections 13 and 15 of this IRR,

RE Developers and

manufacturers, fabricators, and suppliers of locally-produced RE equipment, shall register with the BOI. The registration with the BOI shall be carried out through an agreement and an administrative arrangement between the BOI and the DOE, with the end-view of facilitating the registration of qualified RE facilities. The applications for registration shall be favorably acted upon immediately by the BOI, on the basis of the certification issued by the DOE. "7 As a corollary, Department Circular No. DC2021-12-0042"8, amending Section 18(C) of the IRR of RA 9513, confirms that RE developers are automatically qualified to avail of the incentives provided for in RA 9513 after securing a DOE COR, viz: SEC. 18. Conditions for Availment of Incentives and Other Privileges. - C. DOE ENDORSEMENT FOR AVAILMENT OF INCENTIVES AND DUTY-FREE IMPORTATIONS OF MACHINERY, EQUIPMENT,

AND MATERIALS

RE Developers and manufacturers, fabricators, and suppliers of locally-produced RE equipment shall be AUTOMATICALLY qualified to avail of the incentives provided for in the Act, OTHER THAN THE

INCENTIVE OF DUTY-FREE IMPORTATION OF QUALIFIED

MACHINERY, EQUIPMENT, MATERIALS,

PARTS

AND

COMPONENTS, after securing a Certificate of Registration from the DOE."9 Thus, in order for the sales of services to an REdeveloper to qualify for VAT zero-rating as contemplated under RA 9513 and its IRR, the following conditions must be present:

117 "' 119 Italics in the original text, emphasis and underscoring supplied.

I

PRESCRIBING AMENDMENTS TO SECTIONS 13(E) AND IS( C) OF DEPARTMENT CIRCULAR NO. DC2009·05-0008. ENTITLED RULES AND REGULATIONS IMPLEMENTING REPUBLIC ACT NO. 9513, OTHERWISE KNOWN AS 'THE RENEWABLE ENERGY ACT or 2008". Emphasis in the original text and underscoring supplied.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

1) TheRE developer must be registered with the DOE and the BOI; and 2) The local sales of goods, properties and services to the RE developer are needed for the development, construction, and installation of the RE developer's plant facilities and the whole process of exploration and development of RE sources up to its conversion into power.

As for the first condition, petitioner complied when it submitted the following documents:

Particulars

Exhibit No.

Certificate of Registration with the DOE

"P , t "P ni2o -12-1 0 -12-5 Certification from the BOI "P , t "P n121 -13 0 -14-1 Endorsement from the DOE to the BIR

"P-16"122

BIR VAT Ruling No. 0218-2020 confirming that the sales to EDC are entitled to VAT Zero-rating "P ,123 -15 The foregoing documents prove that its client, EDC, Is an RE developer duly registered with the DOE and BOI. On the second condition, petitioner likewise complied with the same. It presented the contracts124 it entered into with EDC which show that for the subject period of claim, EDC engaged petitioner's services for directional drilling services for exploration and development of RE sources, i.e., geothermal wells.

In fine, petitioner's sales of services to EDC for CY 2019, duly covered by BIR-registered VAT ORs, in the amount of i'121,996,68o.6s, qualify for VAT zero-rating under Section 15(g) of RA 9513, in relation to Section w8(B)(3) of the NIRC of 1997, as amended. 120 121 122 123 12~ Division Docket, Volume I, pp. 84-88.

ld., pp. 89-97.

I d., pp. I 05- I 06.

fl ld., pp. 98-104.

Exhibits "P-24" to ''P-24-1 ", id., Volume II, pp. 823-954; Exhibits "P-24-2" to "P-24-3", id., pp.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

In sum, for purposes of the 2nd requisite, the Court finds that out of the total reported zero-rated sales/receipts of I'242,946,270.58, only the zero-rated receipts derived by petitioner from services rendered to EDC for CY 2019 in the amount ofP121,996,68o.6s qualify for VAT zero- rating.

The dissent is of the view that different types of sales transactions impose distinct imprinting requirements.

Specifically,

Section

113(B)(2)(c)'25 of the NIRC ofi997, as amended, governs purely VAT zero- rated sales transactions, wherein it is required that the term "zero-rated sale" is written or imprinted prominently. On the other hand, Section 113(B)(2)(d)126 of the NIRC of 1997, as amended, governs mixed-sale transactions wherein only a breakdown of the sale between its taxable, exempt and zero-rated components is enough. In the instant case, since the subject sale transactions to EDC were purely VAT zero-rated receipts, a 'breakdown' is not enough, the term "zero-rated sale" must also be prominently imprinted or written. We beg to differ.

Subsections (a), (b), and (c) of Section 113(B)(2)127 of the NIRC of 1997, as amended, apply to pure transactions, whereas subsection (d) of the same Section'28 applies to mixed-sale transactions. Should a seller be engaged in mixed-sale transactions, he or she or it is required to comply with subsection (d) only, and thus show the breakdown of sales to distinguish the taxable, exempt and the zero-rated components thereof. Nothing in subsection (d) requires the seller to again indicate the amount of tax or again print the term "exempt" or "zero-rated" on the same invoice (as this would be a redundant exercise). It is sufficient that a breakdown is presented to clearly segregate the sales. Conversely, should a seller be engaged in pure transactions, then he or she is required to comply with either subsections (a), (b), or (c) only, thus, show the amount of tax as a separate item, or imprint the term "exempt" or "zero-rated" whichever is applicable to the pure 125 126 127 128 Supra at pp. 20-21.

!d.

!d.

!d.

I

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue transaction. Such seller is not necessarily required to comply with subsection (d). It suffices that the applicable term or amount of tax is prominently imprinted or indicated to clearly distinguish the sale reflected on the invoice or OR. Simply stated, as long as the sale transaction type- whether subject to 12% oro% VAT or exempt- can be readily identified, the imprinting requirement is deemed satisfied. This interpretation aligns with the purpose of the requirement, i.e., to prevent buyers from falsely claiming input VAT from their purchases when no VAT was actually paid to the prejudice of the State' 2 9, without imposing undue burden on taxpayers.

In addition, one of the canons of a sound tax system is administrative feasibility, which means that the tax system should be capable of being effectively administered and enforced with the least inconvenience to the taxpayer.'3° Certainly, to require the seller to print the terms "exempt" or "zero-rated" again on all copies of the same invoice or receipt, when the nature of the transaction and its classification as either exempt, zero-rated or subject to 12% VAT can already be ascertained through the breakdown provided therein would run counter to the principle of administrative feasibility . Verily, a 'breakdown' conspicuously showing that the said sale transaction is zero-rated substantially complies with the imprinting requirement under subsection (c).

Accordingly, the amounts prominently written on the line directly parallel to the term "VAT ZERO RATED" clearly represent zero-rated sales.

FOURTH (4TH) REQUISITE:

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.

129 130 See Panasonic Communications Imaging Corporation of the Philippines (formerly Matsushita Business A4achine Corporation of the Philippines) v. Commissioner of Internal Revenue, G.R. No. 178090. 08 February 2010.

See Renata V. Diaz and Aurora Ma. F. Timbo/ v. The Secrela!JI of Finance and the Commissioner of!nternal Revenue, G.R. No. 193007, 19 July 201 I. ' f

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

To satisfy the fourth requisite, the following conditions must concur:

a. 1st condition: the input taxes are due or paid;

b. 2nd condition: the input taxes claimed are attributable to zero- rated or effectively zero-rated sales and where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales;

c. 3rd condition: the input taxes are not transitional input taxes; and,

d. 4th condition: the input taxes have not been applied against output taxes during and in the succeeding quarters. Petitioner complied with the fa condition as its input taxes do not appear to be transitional input taxes since they operate to benefit only newly VAT-registered persons. Also, petitioner is deemed to have complied with the 4th condition after it was established that it deducted the input VAT claim off'w,523.339·72 as a "VAT Refund/TCC Claimed" (line 23D) in its Amended Quarterly VAT Return for the 4'h quarter of CY 2o2o'3' preventing thus the carry-over of the said amount unto the succeeding taxable quarters. Accordingly, the subject claim no longer formed part of the excess input VAT of 'l"n,2m,26L38'3 2 as of the end of the 4'h quarter of CY 2020, to be carried over to the succeeding quarters. As to the 1st condition, petitioner claims that for the 1'' to 4th quarters of CY 2019, it had a total amount of input VAT of'l"w,523,339·72 arising from the amortized portion of its input VAT on capital goods purchases exceeding '1"1 million, domestic purchases and importation of goods other than capital goods, domestic purchases of services and services rendered by nonresidents, which is the subject of the present claim for refund, as shown below:'33 131 132 133 Supra at note 32.

Line 29, id.

Supra at p. 3.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

Source oflnputVAT I 1st Quarter 2nd Quarter 3'd Quarter 4'h Quarter

CYzo19

Current input VAT

Domestic Purchases of Goods

other than Capital Goods l'll,7<J7-3'i 1'27,J88.81 I' 46,899-38 1'36a5o.n 1'122>4"·65 Importation of Goods other than Capital Goods - - - 902,994-00 902,994-00

Domestic Purchases of

Services

541,571.88 7<;6,470.12 930,699·24 1,094,09'l.71 3,122,814-95

Services Rendered by Non-

residents 1,68s,763.52 1,810,029-95 1,646,368.19 1,019,9°4-54 6,162,066.20

Subtotal

1'2,239,132·75 P2,593,888.88 P2,623,966.81 /3,053>342·36 P10,510, no.Bo Deferred input VAT amortized for the period

Input Tax Deferred on Capital

Goods Exceeding P1Million

from Previous Quarter 1'1),008.92 1'5,203·56 - - 1'18,212-48

Less: Input Tax on Purchases

of Capital Goods exceeding P1Million deferred for the succeeding period 5,201-56 - - - ';,201.';6

Subtotal

f7,Bo5.36 Ps,2o3.56

P-

P-

P13,oo8.92

TOTAL INPUT VAT

1'2,246·938.11 1'2>599,092-44 1'2,621,966.81 1'3,053>342·36 1'10,523>339·72 For purposes of satisfying the 1st condition, it is of crucial importance that petitioner provides documents to support its declaration that the input VAT claimed during the subject period was actually due or paid in accordance with Section no(A) of the NIRC of 1997, as amended134, which provides:

134 SEC. no. Tax Credits. -

(A)

Creditable Input Tax. -

(1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section u3 hereof on the following transactions shall be creditable against the output tax:

a. Purchase or importation of goods: 1.

For sale; or n.

For conversion into or intended to form part of a finished product for sale including packaging materials; or n1.

For use as supplies in the course of business; or 1v.

For use as materials supplied in the sale of service; or v.

For use in trade or business for which deduction for depreciation or amortization is allowed under this Code.

b. Purchase of services on which a value-added tax has actually been paid.

Prior to the changes brought about by Republic Act No. 11976 or "Ease of Paying Taxes Act". I

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

(2) The input tax on domestic purchase or importation of goods or properties by a VAT-registered person shall be creditable:

a. To the purchaser upon consummation of sale and on importation of goods or properties; and

b. To the importer upon payment of the value-added tax prior to the release of the goods from the custody of the Bureau of Customs.

Provided, That the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (P1,ooo,ooo): Provided, however, That if the estimated useful life of the capital good is less than five (s) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter period: Provided, fUrther, That the amortization of the input VAT shall only be allowed until December 31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or imported shall be allowed to apply the same as scheduled until fully utilized. Provided, finally, That in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or free.'35 The above provrswns are implemented by Sections 4.110-1 to 4.110-3 ofRR No.16-o5, as amended by RR No. 13-18136, which provide as follows:

135 136 SEC. 4.no-I. Credits For Input Tax. -'Input tax' means the VAT due on or paid by a VAT -registered person on importation of goods or local purchases of goods, properties, or services, including lease or use of properties, in the course of his trade or business. It shall also include the transitional input tax and the presumptive input tax determined in accordance with Sec. m of the Tax Code. It includes input taxes which can be directly attributed to transactions subject to the VAT plus a ratable portion of any input tax which cannot be directly attributed to either the taxable or exempt activity. Any input tax on the following transactions evidenced by a VAT invoice or official receipt issued by a VAT-registered person in Emphasis supplied and italics in the original text. Regulations Implementing the Value-Added Tax Provisions under the Republic Act (RA) No. !0963, or the "Tax Reform for Acceleration and Inclusion (TRAIN)," Further Amending Revenue Regulations (RR) No. 16-2005 (Consolidated Value-Added Tax Regulations of2005), as Amended.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue accordance with Sees. 113 and 237 of the Tax Code shall be creditable against the output tax:

a. Purchase or importation of goods 1.

For sale; or

z. For conversion into or intended to form part of a finished product for sale, including packaging materials; or 3· For use as supplies in the course of business; or 4· For use as raw materials supplied in the sale of services; or 5· For use in trade or business for which deduction for depreciation or amortization is allowed under the Tax Code.

b. Purchase of real properties for which a VAT has actually been paid;

c. Purchase of services in which a VAT has actually been paid;

d. Transactions "deemed sale" under Sec. w6 (B) of the Tax Code;

e. Transitional input tax allowed under Sec. 4.m (a) of these Regulations;

f.

Presumptive input tax allowed under Sec. 4.m (b) of these Regulations;

g. Transitional input tax credits allowed under the transitory and other provisions of these Regulations. SEC. 4.110-2. Persons Who Can Avail of the Input Tax Credit.- The input tax credit on importation of goods or local purchases of goods, properties or services by a VAT-registered person shall be creditable:

a. To the importer upon payment ofVAT prior to the release of goods from customs custody;

b. To the purchaser of the domestic goods or properties upon consummation of the sale; or

c. To the purchaser of services or the lessee or licensee upon payment of the compensation, rental, royalty or fee. SEC. 4.110-3. Claims for Input Tax on Depreciable Goods. - Where a VAT-registered person purchases or imports capital goods, which are depreciable assets for income tax purposes, the aggregate acquisition cost of which (exclusive of VAT) in a calendar month exceeds One Million pesos (Pr,ooo,ooo.oo), regardless of the acquisition cost of each capital good, shall be claimed as credit against output tax in the following manner:

(a) If the estimated useful life of a capital good is five (s) years or more- The input tax shall be spread evenly over a period of sixty (6o) months and the claim for input tax credit will commence in the calendar month when the capital good is acquired. The total input taxes on purchases or importations of this type of capital

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue goods shall be divided by 6o and the quotient will be the amount to be claimed monthly.

(b) If the estimated useful life of a capital good is less than five (s) years -The input tax shall be spread evenly on a monthly basis by dividing the input tax by the actual number of months comprising the estimated useful life of the capital good. The claim for input tax credit shall commence in the calendar month that the capital goods were acquired.

Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable capital goods purchased or imported during any calendar month does not exceed One million pesos (P1,ooo,ooo.oo), the total input taxes will be allowable as credit against output tax in the month of acquisition. (c) The amortization of the input VAT shall only be allowed until December 31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or imported shall be allowed to apply the same as scheduled until fully utilized: Provided, That in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee. m Meanwhile, Sections 4.11o-8(a) and (d) and 4.114-2(b) of RR No. 16-os, as amended by RR No. 04-07'38, provide for the substantiation requirements of input tax credits, as follows: 137 138 SEC. 4.11o-8. Substantiation of Input Tax Credits.-

a. Input taxes for the importation of goods or the domestic purchase of goods, properties or services is made in the course of trade or business, whether such input taxes shall be credited against zero- rated sale, non-zero-rated sales, or subjected to the s% Final Withholding VAT, must be substantiated and supported by the following documents, and must be reported in the information returns required to be submitted to the Bureau:

(1) For the importation of goods - import entry or other equivalent document showing actual payment of VAT on the imported goods.

Emphasis supplied and italics in the original text. Amending Certain Provisions of Revenue Regulations No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of2005. '

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

(2) For the domestic purchase of goods and properties invoice showing the information required under Sees. 113 and 237 of the Tax Code.

(3) For the purchase of real property- public instrument i.e., deed of absolute sale, deed of conditional sale, contract/agreement to sell, etc., together with VAT invoice issued by the seller.

(4) For the purchase of services - official receipt showing the information required under Sees. 113 and 237 of the Tax Code.

A cash register machine tape issued to a registered buyer shall constitute valid proof of substantiation of tax credit only if it shows the information required under Sees. 113 and 237 of the Tax Code.

d. Input tax from payments made to non-residents (such as for services, rentals and royalties) shall be supported by a copy of the

Monthly Remittance Return of Value[-]Added Tax Withheld

(BIR Form 16oo) filed by the resident payor in behalf of the non-resident evidencing remittance of VAT due which was withheld by the payor.

SEC. 4·114-2. Withholding of VAT on Government Money Payments and Payments to Non-Residents. -

(b) The government or any of its political subdivisions, instrumentalities or agencies, including GOCCs, as well as private corporations, individuals, estates and trusts, whether large or non- large taxpayers, shall withhold twelve percent (12%) VAT, starting February 1, 2006, with respect to the following payments:

(1) Lease or use of properties or property rights owned by non-residents; and

(2) Other services rendered in the Philippines by non-residents.

In remitting VAT withheld, the withholding agent shall use BIR Form No. 16oo Remittance Return ofVAT and Other Percentage Taxes Withheld.

VAT withheld and paid for the non-resident recipient I (remitted using BIR Form No.16oo), which VAT is passed on to the

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue resident withholding agent by the non-resident recipient of the income, may be claimed as input tax by said VAT-registered withholding agent upon filing his own VAT Return, subject to the rule on allocation of input tax among taxable sales, zero-rated sales and exempt sales. The duly filed BIR Form No. 16oo is the proof or documentary substantiation for the claimed input tax or input VAT.'39 The documents also need to comply with the invoicing requirements'40 provided under Sections 113(A)(1), (B)(1) and (2)(c) of the NIRC of 1997, as amended, and Sections 4·113-1(A)(1), (B)(1) and (2)(c) ofRR No. 16-05, as amended.

To support the above input VAT, petitioner presented, among others, its suppliers' ORs and invoices'4', importation documents'4\ and "Monthly Remittance Return ofValue-Added Tax and Other Percentage Taxes Withheld" (BIR Forms No. 16oo)'43, which were all examined by ICPA Querido.

Upon review of the ICPA Report and Supplemental ICPA Report, and petitioner's supporting documents, We find that input VAT in the amount of P3,971,685.54 must be disallowed for failure to meet the substantiation and invoicing requirements, detailed in the following tabulation:

Summary'44 /

Exhibit

Input VAT

Supplier's Name

Folder'45

OR/SI Number

OR/SI Date

No.

Reference

Domestic purchases of services supported by VA TORs but the nature of services was not indicated therein; billing statements/invoices referred to in the ORs were not presented in evidence

HP PPS

PHILIPPINES INC.

A-1

"P-37'' OR oo3249 !CO ASIAPACIFIC PHILIPPINES INC.

A-2

"P-4o"

OR 0137

OILSERVE

TRADING-

LORE MAR A SAN

PEDRO

139 140 141 !42

A-2

"P-41 "

0Rooo8

Italics in the original text, emphasis and underscoring supplied. Supra at pp. 22-23.

Exhibits "P-37" to "P-245", Annexes A-1 to A-21, USB. Exhibits "P-246" to "P-407'', Annex A-22 and Exhibit "P-557'', id. Exhibits "P-408" to "P-429", Annex A-23, id. june 26, 2019 Feb. 20, 2019 Aug. 7, 2019 143 144 145 !CPA Supplemental Report (Exhibit "P-36-3"), Division Docket, Volume I, pp. 604-638. USB (Exhibit "P-36-5").

Claim

l'856.o, 9.427·58 68.437·54

I

Halliburton Worldwide Limited — Philippine Branch v. Commissioner of Internal Revenue

OILSERVE aa 7 ia

TRADING -

LOREMAR A. SAN | PEDRO A-2 “P-42” OR 0009 Aug. 14, 2019 17,861.54 |

OILSERVE T

TRADING -

LOREMAR A. SAN PEDRO | A-2 | “P-43” { OR oo11 Sep. 4, 201 63,210,98

OILSERVE |

TRADING -

LOREMAR A. SAN LE PEDRO A-2 “P-44” OR 0013 Sep. 11, 2019 203,487.84 OILSERVE | aa a

TRADING -

LOREMAR A. SAN PEDRO A-2 “P-45” OR 0014 Sep. 18, 201 62,246.88 | HLSERVE im Ty —

TRADING -

LOREMAR A. SAN PEDRO a A-2 __| _*P-46" | OR 0015 Sep. 25, 2019 __ 25,589.35

| OILSERVE

TRADING ~

LOREMAR A. SAN »_| PEDRO A-2 “P-47" OR 0018 Oct. 19, 2019 3,431.55 [OILSERVE.—*| +7 ee |

TRADING -

LOREMAR A. SAN PEDRO A-2 “P-48” | —_ ORooo20 Oct. 23, 2019 11,370.00

OILSERVE |

TRADING -

LOREMAR A. SAN PEDRO —| A-2 “P-49" ORoor _,__— Oct. 30, 2019 22,680.84

OJLSERVE

TRADING -

LOREMAR A. SAN | PEDRO [ A-2 "P-50”__| OR 0022 ao

OILSERVE ~T

TRADING -

LOREMAR A. SAN PEDRO | A-2 “P-5U" OR 0026 Dec. u1, 2019 333,128.82

| OILSERVE

TRADING -

LOREMAR A. SAN PEDRO A-2 “P-52” OR 0027 [__Dec. 18, 2019 22,950.52

OILSERVE

TRADING -

LOREMAR A. SAN PEDRO A-2 “P-53" OR 0028 Dec, 25, 2019 | 13,361.11

OILSERVE

TRADING -

LOREMAR A. SAN PEDRO A-2 “P-54” OR 0029 Dec. 31, 2019 85,148.28 | scvaco A-2 “P-55" ai: MK M 13,396.92 | St P-55" 00115021 May 15, 2019 3,396.9 SGV&CO A-2 “P-56” _| OR MKoo119983 June 27, 2019 31,808.28 | scvaco A-2 “P-57" OR MKoongg984_| June 27, 2019 31,808.28 SGV&CO A-2 “P-58" OR MKoo125256 Nov. 6, 2019 31,928.04 SGV&CO A-2 “P-59” OR MKoo126489_ | Dec. 4, 2019 | 28,233.60 Nov. 6, 2019 40,687.74

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

OILSERVE

TRADING-

LOREMARA SAN

PEDRO

A-1

"P-6{ OR oo10 Aug, 28,2019

OILSERVE

TRADING-

LOREMAR A SAN

PEDRO

A-3

"P-62"

ORomy

Oct. 2, 2019

OILSERVE

TRADING-

LOREMAR A SAN

PEDRO

A-3

"P-63"

ORom9

Oct. 16, 2019

OILSERVE

TRADING-

LOREMAR A SAN

PEDRO

A-3

"P-64"

OR 0021

Nov. q, 2019

OILSERVE

TRADING-

LOREMAR A SAN

PEDRO

A-3

"P-65"

OR oo25 Dec. 4, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-4

"P-66"

OR 4002137

Oct. 7, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-4

"P-67"

OR 4034397

Dec. 5. 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-4

"P-68"

OR 4035727

Nov. 21, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-4

"P-69"

OR 4"}8979

Dec. 2, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-4

"P-7o "

OR 4065488

Dec. 27, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-4

"P-y6"

OR 0476

Aug. 1, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-4

"P-77"

ORo486

Oct. 15, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-4

"P-y8"

ORo488

Oct. 30, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-4

"P-79"

OR 0497

Dec. 25, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-4

"P-So"

OR 0494

Dec. 5· 2019

BUSINESS

PROCESS

OUTSOURCING

INTERNATIONAL, INC.

A-:2_

"P-Si' OR o10'i768 july 10, 2019

25HP PPS

PHILIPPINES INC.

A-s

"P-8z" OR oo1021 Feb. 28, 2019 _27,194. 7l_ 101,844-91 1,792.U 32,169.52 2?,825-73 212.26 30 .. 00 79-20 79-20 30.00 39.903.85 2,813-52 36,5_93-29 4,689·96 8,702.76 1,144-00 822.62 ' I

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

HP PPS

PHILIPPINES INC.

A-s

"P-8,"

OR 003188

Apr. 17, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-o;

"P-84"

OR o4s3 Feb. 28, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-'i

"P-8')"

OR 0459

Mar. 27, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-o;

"P-86"

ORo46s

Mav '· 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-s

"P-87"

OR o468 Mav 29,2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-s

"P-88"

ORo473

June 26, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-s

"P-89"

ORo492

Nov. 28, 2019

QUISUMBING

TORRES LAW

OFFICES

A-7

"P-98"

OR o36772 Jan. 31, 2019

SISON CORILLO

PARONE &CO.

A-7

"P-toz"

OR 010939

Feb. 8, 2019

OILSERVE

TRADING -LARA

MAY G. AGUILAR

A-9

"P-104 "

OR os4S Feb. n, 2019

OILSERVE

TRADING- LARA

MAY G. AGUILAR

A-9

"P-10s " OR os46 Feb. 20, 2019

OILSERVE

TRADING - LARA

MAY G. AGUILAR

A-9

"P-106"

OR os47 Feb. 27, 2019

OILSERVE

TRADING- LARA

MAY G. AGUILAR

A-9

"P-toi' OR os48 Mar. 6, 2019

OILSERVE

TRADING - LARA

MAY G. AGUILAR

A-9

''P-1o8"

OR 0550

Mar. zo, 2019

OILSERVE

TRADING -LARA

MAY G. AGUILAR

A-9

"P-tog"

OR 0551

Mar. 27, 2019

OILSERVE

TRADING- LARA

MAY G. AGUILAR

A-9

"P-uo "

OR oss2 Apr. 3, 2019

OILSERVE

TRADING - LARA

MAY G. AGUILAR

A-9

"P-111 "

OR 0555

May 1, 2019

OILSERVE

TRADING- LARA

MAY G. AGUILAR

A-9

"P-nz"

OR o5s6 Mar. 8, 2019

OILSERVE

TRADING - LARA

MAY G. AGUILAR

A-o

"P-rn"

0Ro'5'57

Mav "· 2010

O!LSERVE

TRADING- LARA

MAY G. AGUILAR

A-9

"P-114 "

OR O'iS9

Mav 22,2019 761.4s 34.78TS3 34.787-S3 14.787-'ii

34·787-S3

34.787-S3

34·787-S3

1,529.03 14,S20.00 151.02 24,616.85 S,097-41 486.oo 52,603-7S 7,88r.6o 100,]13.24 7o.ssi.81 4,080.00 ')1,01l.'j6 25,802.17

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

OILSERVE

TRADING- LARA

MAY G. AGUILAR

A-9

"P-nl)"

0Ro')6o May 29,2019

OILSERVE

TRADING - LARA

MAY G. AGUILAR

A-9

"P-n6"

OR o562 june 12, 2019

OILSERVE

TRADING- LARA

MAYG.AGUILAR

A-9

"P-ni'

ORo56"J

june 19, 2019

OILSERVE

TRADING- LARA

MAY G. AGUILAR

A-9

"P-n8"

OR o'i64 june 26, 2019

OILSERVE

TRADING - LARA

MAY G. AGUILAR

A-9

"P-n9 "

OR o'i65 july'\, 2019

OILSERVE

TRADING- LARA

MAY G. AGUILAR

A-9

"P-120 "

0Ros66

july 17, 2019

OILSERVE

TRADING- LARA

MAY G. AGUILAR

A-9

"P-121 "

OR 0567

july 31, 2019

OILSERVE

TRADING- LARA

MAY G. AGUILAR

A-9

"P-122"

OR os68 Aug. 7, 2019

OILSERVE

TRADING- LARA

MAY G. AGUILAR

A-10

"P-123 "

OR 0542

jan. 30, 2019

OILSERVE

TRADING· LARA

MAY G. AGUILAR

A-w

"P-124"

OR 0549

Mar. 13, 2019

OILSERVE

TRADING • LARA

MAY G. AGUILAR

A-10

"P-125"

OR o<;6q Sep. 4, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-151 "

OR 1716'i3 May 16, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-154 "

OR 175624

june 26, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-15<;"

OR 176s64 july 03, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-1s6"

OR 18>534

Sep. 4, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-1<;7" OR 185'i'll Sep. 18, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-158"

OR 188974

Oct. '4· 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-1c;.o"

OR 191496

Nov. 6, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-160"

OR 194'i94 Nov. 27, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-161"

OR 19678o Dec. 12, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-12

"P 16~"

ORo45'i Mar. 6, 20IQ

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-12

"P-164"

OR o46'l Apr. 10, 2019 26,714.63 6,750.00 89,077.'JO 63,464-41 36,031.08 41,089.92 16,188.71 698.52 34,56o.6o 16,7o6.so 39.502.19 492.00 720,00 708.oo 624-00 792.00 ')64.00 912.00 36o.'oo 216.oo 420.00 5,216.64

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

Input VAT claim on domestic purchases of services supported by VAT ORs dated outside the period of claim

DHL EXPRESS

(PHILIPPINES)

CORP.

A-4

"P-71 "

OR 4069793

Jan. 2, 2020

DHL EXPRESS

(PHILIPPINES)

CORP.

A-4

"P-72 "

OR 4070118

jan. 6, 2020

DHL EXPRESS

(PHILIPPINES)

CORP.

A-4

"P-73 "

OR 4070314

jan. 8, 2020 Domestic purchase of goods supported by VAT invoice dated outside the period of claim

OILSERVE

TRADING - LARA

MAY G. AGUILAR

A-19

"P-233"

SI 578

Oct. 17, 2018 Domestic purchases of services supported by VAT ORs but petitioner's address indicated therein is different from that shown in its BIR Certificate of Registration (COR); nature of services was not indicated and the billing statements/invoices referred to in the ORs were not presented in evidence R.G. MANABAT & CO.

A-1

"P-38"

OR 002'J924

Aug. 8, 2019

FERVID

INTERNATIONAL

PRODUCTS, INC

A-2

"P-39 "

OR 14807

May 1, 2019

FERVID

INTERNATIONAL

PRODUCTS, INC

A-3

"P-6o"

OR 14811

jan. 30, 2019 !CO ASIAPACIFIC

PHILIPPINES INC

A-4

"P-74 "

OR 0138

Jan. 24, 2019 !CO ASIAPACIFIC

PHILIPPINES INC

A-4

"P-75"

OR 0139

Feb. 21, 2019

FERVID

INTERNATIONAL

PRODUCTS, INC

A-7

"P-92 "

OR 148o8 Dec. 4. 2019

FERVID

INTERNATIONAL

PRODUCTS, INC

A-7

"P-93"

OR 14809

Nov. 6, 2019

FERVID

INTERNATIONAL

PRODUCTS, INC

A-7

"P-94 "

OR 14810

Oct. 9, 2019

FERVID

INTERNATIONAL

PRODUCTS, INC

A-7

"P-95 "

OR 14813

Dec. 11, 2019

FERVID

INTERNATIONAL

PRODUCTS, INC

A-7

"P-96"

OR 14814

Nov. 27, 2019

FERVID

INTERNATIONAL

PRODUCTS, INC

A-7

"P-97 "

OR 14815

july 31, 2019

BUSINESS

PROCESS

OUTSOURCING

INTERNATIONAL,

INC

A-12

"P-139 "

OR 0104818

May 28,2019

BUSINESS

PROCESS

OUTSOURCING

A-12

"P-140 "

OR 0105531

june 28, 2019 30.00 30.00 30.00 3·913·91 78,660.00 22,go8.5o 14,601.60 20,770·93 4·737·18 9.989.6'} 30,518.60 23.3n74 z6,886.o8 8,956Ao 32,528.77 3,288.oo 1,344.00 ' f

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

INTERNATIONAL, INC.

BUSINESS

PROCESS

OUTSOURCING

INTERNATIONAL, INC.

A-12

"P-141"

OR 0107on Sept. n, 2019

BUSINESS

PROCESS

OUTSOURCING

INTERNATIONAL, INC.

A-12

"P-142 "

OR 0107435

Sep. 30, 2019

BUSINESS

PROCESS

OUTSOURCING

INTERNATIONAL, INC.

A-12

"P-143"

OR 0108616

Dec. 3, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-144 "

OR 159976

Feb.9, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P :t5" -14

OR 155389

jan. 4, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-146"

OR 158546

jan. 30, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-147 "

OR 161678

Feb. 21, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-148"

OR 16004o Mar. 20, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-149"

OR 166290

Mar. 27, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-15o"

OR 162566

Apr. 3, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P ISo'' -1 2

OR 171656

May 2, 2019

RAJAH TRAVEL

CORPORATION

A-12

"P-153''

OR 171'513

May 8, 2019 Domestic purchases of services supported by VA TORs but without the phrase "THIS INVOICE/RECEIPT SHALL BE VALID FOR FIVE (5) YEARS FROM THE DATE OF THE PERMIT TO USE" as required under RR 10- 2015, as amended by RR 16-2018; nature of services was not indicated and the billiny statements/invoices referred to in the ORs were not J!!Csented in evidence

SGV&CO

A-6

"P-9o"

OR MKoou8151

jan. 16, 2020

SGV&CO

A-6

"P-gl"

OR MKoou8152

jan. 16, 2020

SGV&CO

A-7

"P-99"

0 R MKoo112986

Apr. 12, 2019

SGV&CO

A-7

"P-1oo"

OR MKoo112987

AjJr. 12, 2019

SGV&CO

A-7

"P-1o1 "

OR MKoon8658

june 14, 2019

SGV&CO

A-8

"P-Ioj"

OR MKoon3004

Apr. 12, 2019

SGV&CO

A-12

"P-162"

OR MKoono'i92

Mar. 7, 2019 Domestic purchases of services supported by documents other than VAT ORs

BUSINESS

PROCESS

OUTSOURCING

INTERNATIONAL,

Billing Statement

INC.

A-n

"P-126"

(BS) oo23129 Dec. 1, 2018

BUSINESS

PROCESS

OUTSOURCING

INTERNATIONAL, INC.

A-n

"P-127"

BS 0024414

Jan. 1, 2019 2,688.oo 1.344·00 1,344-00 360.00 144·00 912.00 72.00 2,280.00 144:oo 288.oo 726.oo 1,o8o.oo 1'),832·38 15,832-38 16,040·35 1'),872.72 48.940.80 6),000.00 16,031.93 1,344-00 1,)44·00

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

BUSINESS

PROCESS

OUTSOURCING

INTERNATIONAL, INC.

A-n

"P-128"

BS 0025277

Feb. 1, 2019

Statement of

Account (SOA)

PLOTINC.

A-n

"P-129"

ooooo01o9639858 Apr. 17, 2019

SOA

PLOT INC.

A-n

"P 13!"

-1 0 oooooom823688 Sep. 17, 2019

SOA

PLOTINC.

A-n

"P-131"

oooooon216o788 Oct. 17, 2019

SOA

PLOT INC.

A-u

"P-132"

000000112786332 Nov. 17, 2019

QUISUMBING

TORRES

A-n

"P-111"

51 9515057965 Mar. 27, 2019

ROXASCRUZ

TAGLE AND CO.

A-n

"P-n4"

SOA 12782

Mav 27,2019

TECHNOLOGY

EXPORTS

Billing Invoice (BI)

SERVICES CORP.

A-n

"P ·11'"

-1 5 o6n jan. 23, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-n

"P-136"

BI o615 jan. 31, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-n

"P-137''

BI 0771

Aug. 30, 2019

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-n

"P-118"

Bl o8o2 Oct. 2, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-n

"P-16<(

BI Do5201418

jan. 26, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-13

"P-166"

BI D05240950

Feb. 22, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-13

"P-167''

Bl Do5W9530

Apr. 5, 2019

DHL EXPRESS

(PHILIPPINES)

Bl

CORP.

A-13

"P-168"

MNLooo1744399

Apr. 10, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-n

"P-169"

BI Do517107o May 0, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-13

"P-17o" BI MNLoo017')ll16 May 13, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-13

"P-171"

BI Do'i410755

May 17,2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-13

"P-172"

BI Do5481043

June 9, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-n

"P-171''

BI Do'i'i24936

June zs, 2019 1,344-00 420.00 420.00 420,00 420.00 7.199-70 6,900.00 34·787-53 34.787-53 34.787-53 34·787-53 44-22 39-60 218-96 994·95 43·56 1,629.01 39·.60 39.60 161.37 f

Halliburton Worldwide Limited — Philippine Branch v. Commissioner of Internal Revenue

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

CORP.

DHL EXPRESS

(PHILIPPINES)

DHL EXPRESS

(PHILIPPINES)

CORP.

GOLD VENTURE

LEASE &

MANAGEMENT

SERVICES, INC.

GOLD VENTURE

LEASE &

A-13

A-l

A-1

A-l

“P-178" “179”

“P-180”

“P-181”

“P.18>” “P-183" “P-184"

“P85”

*P.y, 0”

BI Do5108377A

BI Do555137

BI 05574483

BI Do5584782

BI Do5585069

BI MNL0001792338

BI

MNL0001792339

Bl

MNLoo001796348

BI Do5669037

BI Do5687978

BI Do5694142

BI Do5797855

BI MNLoo001805517

July 3, 2019 July 3, 2019 July 14, 2019 July 14, 2019 July 22, 2019 July 22, 2019 July 29, 2019 Aug. 10, 2019 Aug, 12, 2019 Aug. 18, 2019 Aug. 21, 2019 B] MNLoo01813419 Aug. 26, 2019 370.39 “P-188" BI Do5734010 Sep. 6, 2019 39.60 CORP. A-13 “P-189" BI Do5776094 Sep. 22, 2019 39.60 “P-1g2”

SOA AVS1481

SOA AVS1492

Oct.1,2019 | 39.60 | Oct. 1, 2019 9,00 9.60 9.60 39.60 9.60 10.78 210.6 39.60 2,846.34 9,60 9.60

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

MANAGEMENT

SERVICES, INC.

HP PPS

PHILIPPINES INC.

A-13

"P-193 "

BS oo12688 Nov. 20, 2018

HP PPS

PHILIPPINES INC.

A-13

"P-194 "

BS 0013773

Feb. 27, 2019

HP PPS

PHILIPPINES INC.

A-13

"P-195 "

BS 0014m Mar. 25, 2019

HP PPS

PHILIPPINES INC.

A-13

"P-1o6" BS oo15272 june 18, 2019

HP PPS

PHILIPPINES INC.

A-13

"P-197"

BS oo107oo july 9, 2019

HP PPS

PHILIPPINES INC.

A-13

"P-198"

BS o016o62 Aug. 19, 2019

HP PPS

PHILIPPINES INC.

A-13

"P-190"

BS 0016643

Oct. 16, 2019

PICASSO RENTAL

MANAGEMENT

CORP

A-13

"P-2oo "

SOA 1420

Aug. 27, 2010

BILL

SGV&CO

A-13

"P-201 "

PHLowo313797

Oct. 28, 2019

Y2 RENTAL

MANAGEMENT

CORPORATION

A-13

"P-202 "

BS 0481

june 4, 2019

Y2 RENTAL

MANAGEMENT

CORPORATION

A-13

"P-203 "

BS 0485

june 18, 2019

Y2 RENTAL

MANAGEMENT

CORPORATION

A-13

"P-204 "

BS oo;01 Sep. 9, 2019

Y2 RENTAL

MANAGEMENT

CORPORATION

A-n

"P-2o'i" BS ooo5 Sep. 6, 2019 Domestic purchases of services without supporting VA TORs

DHL EXPRESS

(PHILIPPINES)

CORP.

A-14

MNLoo01632672

DHL EXPRESS

(PHILIPPINES)

CORP.

A-14

Doo;224337 Feb. 10, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-14

Do48106ooC

DHL EXPRESS

(PHILIPPINES)

CORP.

A-14

MNL1ooo8792')0

DHL EXPRESS

(PHILIPPINES)

CORP.

A-14

MNLoo01801979

Aug. 5, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-14

MNLoo01796149

july 29, 2019

DHL EXPRESS

(PHILIPPINES)

CORP.

A-14

MNLooo1796347

july 29, 2019

OILSERVE

TRADING

A-14

1900013200000090 790-43 718.59 773.20 715.88 726.82 716.75 698·77 1,445·28 15,604.97 293·28 jl2.8j 293.28 293·28 207.63 39.60 71.18 287.77 4·155·93 1,726 .. 10 1,851.61 9,69o.oo

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

OILSERVE

TRADING

A-14

583

OILSERVE

TRADING

A-14

1900003400000190

OILSERVE

TRADING

A-14

1900022500000090

OILSERVE

TRADING

A-14

4~

OILSERVE

TRADING

A-14

190003'J300000070

OILSERVE

TRADING

A-14

1900043900000070

OILSERVE

TRADING

A-14

1900054700000080

OILSERVE

TRADING

A-14

19ooo6450ooooo8o

OILSERVE

TRADING

A-14

1900087000000090

OILSERVE

TRADING

A-14

19000766oooooo8o PLOT INC.

A-14

11007~592 PLOT INC.

A-14

1105009'iO PLOT INC.

A-14

110916891 PLOT INC.

A-14

111506484

PICASSO RENTAL

MANAGEMENT

CORP.

A-14

1085

PICASSO RENTAL

MANAGEMENT

CORP.

A-14

1099

RAJAH TRAVEL

CORPORATION

A-14

421816 Mar. 8, 2019

RICOH

PHILIPPINES INC

A-14

219239

SALVADOR

LLANILLO &

BERNARDO

A-14

10045 Oct. 10, 2019

SALVADOR

LLANJLLO &

BERNARDO

A-14

0010173B

Oct. 31, 2019

SALVADOR

LLANILLO &

BERNARDO

A-14

10408 Nov. 29, 2019

SUPPLY OILFIELD

SERVICES INC

A-14

7020

SUPPLY OILFIELD

SERVICES INC

A-14

6121

SUPPLY OILFIELD

SERVICES INC

A-14

8762

SUPPLY OILFIELD

SERVICES INC

A-14

8610

SUPPLY OILFIELD

SERVICES INC

A-14

SI O')'J')lA

SUPPLY OILFIELD

SERVICES INC

A-14

8131

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-14

403 Oct. 18, 2017 540.00 9,69o.oo 9,6()0.00 1,020.00 9,69o.oo 9,69o.oo 9,69o.oo 9.69o.oo g,69o.oo 9,69o.oo 420.00 420.00 420.00 420.00 1,100.20 146.64 q88.gg 482.14 29,107·97 14,280.00 n,148.oo 4,068.94 10,208.07 92.80 110-48 Bw:oo 16.71 1,938.oo ' /l

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-14

')89 Nov. 22, 2018

TECHNOLOGY

EXPORTS

SERVICES CORP.

A-14

588 Nov. 22, 2016

VALERO GRAND

SUITES

MANAGEMENT

CORP

A-14

16584

Y2 RENTAL

MANAGEMENT

CORPORATION

A-14

403

Y2 RENTAL

MANAGEMENT

CORPORATION

A-14

400

Y2 RENTAL

MANAGEMENT

CORPORATION

A-14

412

Yz RENTAL

MANAGEMENT

CORPORATION

A-14

417

Y2 RENTAL

MANAGEMENT

CORPORATION

A-14

4'>7

Y2 RENTAL

MANAGEMENT

CORPORATION

A-14

443

Y2 RENTAL

MANAGEMENT

CORPORATION

A-14

441

Y2 RENTAL

MANAGEMENT

CORPORATION

A-14

446

Y2 RENTAL

MANAGEMENT

CORPORATION

A-14

479

Y2 RENTAL

MANAGEMENT

CORPORATION

A-14

477

Y2 RENTAL

MANAGEMENT

CORPORATION

A-14

476 Domestic purchases of goods supported by VAT invoices dated outside the validity period

of_ATP

LAURENCE KIER

GENERAL

MERCHANDISE

A-15

"P-2o6"

SI 0102

Dec. 27, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-213"

SI oo55 july 3, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-214 "

Sloo67

july 6, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-215"

Sloo68

july 6, 2019 24~02.85 4,S83.71 313.21 488.8o 488.8o 322.61 273·73 293·28 1,309·98 586.56 291.28 _312.83 586.56 322.61 2.978·53 712.')0 2,828'57 2,351.79 ' f

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-216"

SI oo71 Aug. 4, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-217 "

SI oo73 Sep. 2, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-n

"P-218"

SI oo76 Sep. 4, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-219 "

Sloo78

Aug. 9, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-zzo"

Sl oo79 Sep. 5, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-n

"P-221 "

Sloo8o Sep. 21, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-222 "

SI oo81 Sep. 21, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-n

"P-223"

Sloo82

Sep. 21, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-224"

Sloo84

Sep. 21, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-n

"P-225 "

Sloo89

Nov. 10, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-226"

SI oog1 Nov. 10, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-zz7'' SI oo92 Nov. 10, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-17

"P-zz8"

swoq6 Nov. 24, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-n

"P-zzg "

Sloo97

Nov. 24, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-n

"P-2w"

SI 0098

Nov. 24, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-21

"P-244 "

SI oo6s july 3, 2019

LAURENCE KIER

GENERAL

MERCHANDISE

A-21

"P-245"

SI 0072

Aug. 9, 2019 Domestic purchase o{qoods supported by collection receipt instead of VAT invoice

HP PPS

Collection Receipt

PHILIPPINES INC.

A-20

"P-243"

20756 june 19, 2019 Importation of goods other than capital goods supported by invoice, Bureau of Customs (BOC) OR, and ROC Certification but without Import Entry and Internal Revenue Declaration (IEIRD) or Single Administrative Document (SAD) 3·996-43 1,jj'J.93 3,616.o8 5,208.75 5.071.61 '1.799·29 '),j16.97 2,7oB.ss 90').j6 803.')7 6,471A1 2,')22.57 1,435·72 1,j68.J3 1,009.29 2,475coo 9,214-29 12,094·14

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

BOC Form No. 38-

HALLIBURTON

A

GROUP CANADA

A-22

"P-247 "

01896972215 jan. 22, 2019 BOC Form No. 38-

HALLIBURTON

A

FAR EAST LTD

A-22

"P-404 "

01905584822 Nov. 19, 2019 Services rendered by non-residents supported by BIR Form No. 16oo, EFPS Payment Details but date ofVAT payment is outside the period of claim

HALLIBURTON

ENERGY

SERVICES,

HALLIBURTON

DRILLING

SERVICES,

HALLIBURTON

TECHNOLOGY

"P-428", n,n6.oo 2,956.oo

SERVICES

A-23"

"P-429"

Jan. 10, 2020 '140,68')-48 Amortization of Input VAT on capital goods purchases exceeding PIM without supporting VAT invoice

ISUZU

PHILIPPINES

A-24

SI 844

IJ,008.92

TOTAL DISALLOWED INPUT VAT

1'3,97'·685·54 Based on the foregoing, relative to petitioner's compliance with the 1st condition, out of the P10,523,339·72 total input VAT claim, only the amount of P6,5SI,654·18 represents petitioner's valid and substantiated input VAT, as computed below:

Input VAT Claim

!'!0,523,339·72

Less: Disallowanced Input VAT

3.971,68s.s4

Valid and Substantiated Input VAT

P6.ss•,6s4-•S As for the 2nd condition, since petitiOner only had zero-rated sales/receipts in the period of claim, the corresponding valid and substantiated input VAT ofP6,55I,654-18 is attributable to its zero-rated sales/receipts. However, as previously intimated, petitioner was able to properly substantiate only the amount ofP12I,gg6,68o.6s out of its total declared zero-rated sales/receipts ofP242,946,z7o.s8. Thus, with regard to petitioner's compliance with the 2nd condition, only the amount of P3,289,945.8o represents its valid and substantiated input VAT attributable to its valid zero-rated sales/receipts of Prz1,gg6,68o.6s, as computed below:

Valid input VAT attributable to reported zero-rated sales/receipts !'6,ssr,6s4.r8 Multiplied by: Valid zero-rated receipts 121,996,68o.6s Divided by: Total reported zero-rated sales/receipts 242,946,270·58

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

Valid input VAT attributable to valid zero-rated sales/receipts In fine, petitioner has sufficiently proven its entitlement to the refund or issuance ofTCC in the amount ofP3,289,945·8o, representing excess and unutilized input VAT attributable to its zero-rated sales for the four (4) quarters of CY 2019.

Claims for the tax refund, like tax exemptions, are construed strictissimi juris against the taxpayer. However, when the claim for refund has a clear legal basis and is sufficiently supported by evidence, as in the present case, then the Court shall not hesitate to grant the refund.'46

WHEREFORE, premises considered, the instant Petition for Review filed on 17 December 2021 by petitioner Halliburton Worldwide

Limited -

Philippine Branch is hereby PARTIALLY GRANTED. Accordingly, respondent Commissioner of Internal Revenue is ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner, in the reduced amount of P3,289,945·8o, representing its unutilized input Value-Added Tax attributable to its zero-rated sales/receipts for the 1", 2nd, 3rd and 4'h quarters of CY 2019.

WE CONCUR:

Presiding Justice

146 Chevron Holdings, Inc. (Formerly Caltex Asia Lhnited) v. Commissioner of Internal Revenue, G.R. No. 215159, 05 July 2022.

Halliburton Worldwide Limited- Philippine Branch v. Commissioner of Internal Revenue

LA~1vm

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's Division.

Presiding Justice

REPUBLIC OF THE PHILIPPINES

Court of Tax Appeals

QUEZON CITY

First Division

HALLIBURTON

WORLDWIDE

CTA Case No. 10708 LIMITED - PHILIPPINE BRANCH, -versus- Petitioner,

Members:

DEL ROSARIO, PJ., Chairperson, BACORRO-VILLENA, and CUI-DAVID, :hL.

COMMISSIONER OF INTERNAL

Promulgated:

REVENUE, Respondent.

!EP 3 0 2025 .) I r .3'0 frN X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - - - - - - - - X

DISSENTING OPINION

DEL ROSARIO, P.J.:

With due respect, I am constrained to withhold my assent on the ponencia. While I concur in the disallowance of petitioner's claimed export sales to its nonresident foreign affiliates, I submit that its reported sales of services to Energy Development Corporation (EDC), a renewable energy developer, must likewise be disallowed for failure to comply with the invoicing requirements under Section 113(B)(2)(c) of the National Internal Revenue Code (NIRC) of 1997, as amended. Consequently, petitioner's claim for refund of input value-added tax (VAT) attributable to zero-rated sales for the first to fourth quarters of calendar year 2019 must be denied in its entirety. Section 113(B)(2)(c) and (d) of the NIRC of 1997, as amended, reads:

"SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.-(fl

DISSENTING OPINION

XXX XXX 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 XXX 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 value-added tax. Provided, That:

XXX XXX 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 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. x x x" (Boldfacing and underscoring 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 betwee(IJ

DISSENTING OPINION

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 and underscoring supplied) Thus, it is mandated that VAT invoices or official receipts (OR) evidencing zero-rated transactions must prominently bear the notation "zero-rated sale." Non-compliance with this invo1c1ng requirement constitutes valid ground for the denial of a claim for refund or tax credit. 1 The Supreme Court has, in several cases, 2 consistently held that the writing or imprinting of the term "zero-rated sale" on the VAT invoice or OR is an indispensable requirement for a valid claim for refund of unutilized input tax. This requirement was traced by the Supreme Court from Section 4.108-1 of RR No. 7-95 and was later incorporated into Section 113(B)(2)(c) of the NIRC of 1997, as amended by Republic Act No. 9337, thereby affirming the validity of the imprinting requirement on VAT invoices or ORs, viz.: 3 "RR 7-95, which took effect on 1 January 1996, proceeds from the rule-making authority granted to the Secretary of Finance by the NIRC for the efficient enforcement of the same Tax Code and its amendments. In Panasonic Communications Imaging

Corporation of the Philippines

v.

Commissioner of Internal

Revenue, we ruled that this provision is reasonable and is in accord with the efficient collection of VAT from the covered sales of goods and services.' Moreover, we have held in Kepco Philippines

Corporation

v.

Commissioner of Internal Revenue that the subsequent incorporation of Section 4.108-1 of RR 7-95 in Section 113(B)(2)(c) of R.A. 9337 actually confirmed the validity of the imprinting reguirement on VAT invoices or official receipts - a case falling under the principle of legislative approval of administrative interpretation by reenactment." (Boldfacing and underscoring supplied) 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, 201 0; J.R.A. Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 177127, October 11, 2010; 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. Commissioneroflnternal Revenue, G.R. No. 183531, March 25,2015. 3 Western Mindanao Power Corporation vs. Commissioner of Internal Revenue, i~

DISSENTING OPINION

CTA Case No. 1 0708

Page 4 of 7

Revenue

Memorandum

Circular

No.

42-2003 expressly provides that where a claim for refund is anchored on zero-rated sales but the taxpayer fails to comply with the invoicing requirements, the claim must 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 invoicing 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." (Boldfacing supplied} An examination of the 0Rs4 submitted by petitioner covering its sales of services to EDC reveals that the words "zero-rated sale" were neither separately written nor prominently imprinted thereon.

Although petitioner indicated in the breakdown portion of its VAT ORs the amounts pertaining to "zero-rated sales," which constituted the entire amount of the sale, such entry did not cure its failure to prominently imprint the phrase "zero-rated sale" on the face of the receipts. It bears emphasis that the requirement to provide a breakdown of sales and the mandate to imprint "zero-rated sale" are governed by distinct provisions of the NIRC of 1997, as amended; specifically, Section 113(B)(2)(d), which pertains to mixed transactions involving VATable, VAT-exempt, or VAT zero-rated sales, and Section 113(B)(2)(c), which prescribes the imprinting requirement in cases of purely VAT zero-rated sales. Stated differently, where the transaction consists solely of a VAT zero-rated sale, the VAT OR must prominently bear the phrase "zero-rated sale," separate and distinct from any breakdown format, pursuant to Section 113(B)(2)(c) of the NIRC of 1997, as amended. In contrast, for mixed transactions involving VATable, VAT-exempt, or VAT zero-rated sales, the breakdown format contemplated under Section 113(B)(2)(d) applies. In this case, petitioner's VAT ORs to EDC cover purely zero-rated sales; nonetheless, petitioner failed to comply with the imprinting requirement under Section 113(8)(2)(c). 4 Exhibits "P-436", "P-439", "P-443", "P-448", "P-451", "P-454", "P-459", "P-462", "P-467", "P-470", "P-475", "P-556", "P-480", "P-489", "P-494", and "P-497", Annex "B-1 ", USB. C1J

DISSENTING OPINION

If the breakdown format were intended by law to suffice in all types of transactions-whether mixed transactions or purely zero-rated sales-there would have been no need for the legislature to craft separate provisions. One provision expressly requires the use of the breakdown format, while another distinctly mandates the prominent imprinting of the phrase "zero-rated sale" in cases involving purely VAT zero-rated transactions. Section 113 of the NIRC of 1997, as amended, both in its earlier form under Republic Act No. 9337, which governs this case, and in its present form as amended by Republic Act No. 11976 or the "Ease of Paying Taxes Act," prescribes two distinct formats: either invoices bearing the prominent imprint of the phrase "zero-rated sale," or invoices employing the breakdown format, depending on the nature of the transaction. Section 113, as amended by RA No. 9337 and RA No. 11976, provides:

RA No. 9337 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:

XXX

XXX

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 involves goods, properties or services RA No. 11976 Section 113. Invoicing and Accounting

Requirements

for

VAT-Registered

Persons.-

(A)

Invoicing

Requirement.

-

A

VAT-registered person shall issue a VAT invoice for every sale, barter, exchange, or lease of goods or properties, and for every sale, barter or exchange of services.

(B) Information Contained in the VAT

Invoice. - The following information shall be indicated in the VAT invoice:

XXX

XXX

XXX

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

(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 shall clearly indicate the breakdown of the sale _m-ice between

DISSENTING OPINION

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.

XXX

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: Provided, That the seller may issue separate invoices for the taxable, exempt, and zero-rated components of the sale.

XXX

Notably, the Ease of Paying Taxes Act5 retained separate provisions for transactions requiring the imprinting of "zero-rated sale" and those subject to the "breakdown format," although with a minor modification in the imprinting requirement, namely, the removal of the word "prominently." The retention of these distinct requirements affirms that the format mandating the imprinting of "zero-rated sale" is separate and distinct from the "breakdown format" applicable to mixed transactions.

In several VAT refund cases, this Court has permitted erasures and corrections in invoices or ORs provided these were made by an authorized signatory. This treatment, however, presents the risk of manipulation, particularly when it involves portions reflecting the types and amounts of sales. Unscrupulous taxpayers could alter zero-rated transactions supported only by a breakdown format, without the separate and prominent indication of "zero-rated sale," to make them appear VATable, in order to entitle them to input tax credits. To prevent this abuse, the requirement of prominently imprinting the term "zero-rated sale" in receipts covering purely zero-rated transactions must be enforced. This safeguard ensures that alterations cannot easily convert zero-rated sales into VATable sales, thereby avoiding the unwarranted use of credits against output tax liability or, worse, the refund of taxes not actually incurred or paid.

5 RA No. 11976. 01

DISSENTING OPINION

ALL TOLD, I VOTE to DENY the Petition for Review for lack of merit, petitioner having failed to establish its zero-rated sales due to non-compliance with substantiation requirements under relevant laws and regulations.

Presiding Justice