Court of Tax Appeals · Third Division

Deutsche Knowledge Services, et al. vs. Commissioner of Internal Revenue

CTA Case No. 8300 July 10, 2015 Pabon-Victorino

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

THIRD DIVISION

DEUTSCHE KNOWLEDGE

CTA CASE NO. 8300

SERVICES, PTE LTD.,

Petitioner,

Members:

BAUTISTA, Chairperson

-versus-

FABON-VICTORINO, and

RINGPIS-LIBAN, JJ.

COMMISSIONER OF

Promulgated:

INTERNAL REVENUE,

Respondent.

J U l 1 0 2015

/01 s-!" c.·~+>.·

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

Pabon-Victorino, J.:

In this

Petition

for Review, petitioner

Deutsche

Knowledge Services, Pte Ltd. prays for the refund or issuance of tax credit certificate in the amount of P53,739,763.31 allegedly representing excess and unutilized input Value-Added Tax (VAT) on its purchases of goods and services attributable to zero-rated sales for the second quarter of year 2009.

Petitioner is the Philippine branch of a multinational company organized and existing under the laws of Singapore, with registered office address at One Raffles Quay, #17-10 South Tower, Singapore 048583. 1 It is licensed by the Securities and Exchange Commission (SEC) on April 25, 2005 as a Regional Operating Headquarters

(ROHQ)

in the

Philippines

to engage in general administration and planning;

business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion;

training and personnel management; logistic services, research and development services and product development; technical support and 1 Par. 2, Joint Stipulation of Facts and Issue (JSFI), Docket, Vol. I, p. 74. j maintenance; data processing and communication and business development. 2 Petitioner acts as a shared services center, which handles regional, as well as global accounting and related controlling processes, such as accounting production work in the global general ledger in SAP, developing and operating inter-company clearing house, accounting, and head office reporting for non-regulated entities and product control. 3 It is a VAT registered taxpayer as of June 16, 2005 with Taxpayer Identification No. (TIN) 238-763-115-000. 4 Respondent, on the other hand is the Commissioner of Internal Revenue with authority to grant and approve claims for refund or tax credit as provided by law. 5 On July 17, 2009, petitioner filed with the BIR its original Quarterly VAT Return for the second quarter of taxable year 2009. 6 On January 28, 2011, petitioner filed with the SIR- Revenue District Office No. 44 an Application for Tax Credit/Refund (BIR Form No. 1914) of its alleged excess and unutilized input VAT for the second quarter of taxable year 2009 in the total amount of P53,739,763.31. 7 Respondent failed to act on petitioner's administrative claim8 , hence, the instant Petition for Review filed on June 27, 2011. 9 In her Answer, 10 respondent essentially states that it is incumbent upon petitioner to substantiate its claim for refund and to prove compliance with the pertinent laws, rules, and regulations.

In support of its allegations, petitioner presented first its Legal Entity Controller since August 2010, Rachel 2 Par. 3, JSFI, Docket, Vol. I, p. 74; Exhibit "A", Docket, Vol. 1, p. 205. 3 Par. 4, JSFI, Docket, Vol. I, p. 74. 4 Par. 5, JSFI, Docket, Vol. I, p. 74; Exhibit "B", Docket, Vol. 1, p. 225. 5 Par. 1, JSFI, Docket, Vol. I, p. 73. 6 Par. 6, JSFI, Docket, Vol. I, p. 75. 7 Par. 7, JSFI, Docket, Vol. I, p. 75. 8 Par. 8, JSFI, Docket, Vol. I, p. 75. 9 Docket, Vol. I, pp. 1-7. 10 Docket, Vol. I, pp. 31-33. /

Concepcion. 11 Her duties include the handling and preparation of all the company's financial and statutory reporting.

She testified that on January 28, 2011, petitioner filed a claim for refund of excess and unutilized input VAT attributable to zero-rated sales for the 2nd quarter of the year 2009.

The VAT credits were incurred as petitioner purchased goods and services in the course of rendering services in the Philippines as a shared services center to clients engaged in business conducted outside the country. These foreign clients paid petitioner for such services. To prove that petitioner rendered services to entities engaged in business outside the Philippines, she presented the Service Agreements with the foreign clients, their respective SEC Certifications of Non-Registration in the country, and relevant consularized certifications and documents relating to these clients.

She added that petitioner and its non-resident clients are all affiliates of the Deutsche Bank Aktiengesellschaft Group as evidenced by a document denominated as

Deutsche

Bank

List of Shareholdings

2008 prepared pursuant to the laws of Germany, which further shows that petitioner's clients are engaged in business conducted outside the Philippines.

Moreover, the subject input taxes for the 2nd quarter of 2009 remain unutilized as indicated in petitioner's Quarterly VAT Returns from the 3rd quarter of 2009 up to the 2nd quarter of 2011, all indicating that the input VAT subject of the claim for refund has been carried over. These Quarterly VAT Returns were filed through the BIR's e-Filing facility and given their respective Filing Reference Numbers. Having been employed by the petitioner only in August of 2010, she has no personal knowledge about the returns filed pertaining to the subject claim for the 2nd quarter of 2009.

In any event, as Legal Entity Controller, she validated the returns filed for this period as part of her duties and in the process acquired personal knowledge on / the matter.

J

11 Sworn Statement of Ms. Rachel Concepcion to Questions Propounded by Atty. Marvin B. Ibarra dated January 13, 2012, docket pp. 101-123.

This witness also identified the business registration documents of each of petitioner's clients as electronically stored in and retrievable from petitioner's global database known as AMINET.

AMINET is the Data Maintenance Platform for legal entities and other reportable vehicles within the Deutsche Bank Group of which petitioner is a part.

She opined that these documents further show that petitioner's clients are doing business outside the Philippines. 12

The Court-commissioned Independent Certified Public

Accountant (ICPA) Romeo A. De Jesus, lr. 13 submitted to the Court his ICPA Report on April 11, 2012 stating that the input VAT of P53,739,762.99 was properly recorded in the books and declared in the input VAT Returns of petitioner. Out of the P53,739,762.99, P549,159.52 was applied to petitioner's output VAT as of June 30, 2009. With few exceptions, the total input VAT paid per schedule of local purchases attributable to zero-rated sales are supported by original suppliers' invoices and/or official receipts that are within the period covered, with all required particulars indicated therein.

His audit revealed as well that petitioner's service invoices, official receipts, and fund transfer credit advices on file support the zero-rated sales for the 2nd quarter of year 2009.

Finally, petitioner's zero-rated sales to non-resident entities were paid for in EURO, an acceptable foreign currency, inwardly remitted and duly accounted for in accordance with the regulations of the Bangko Sentral ng Pilipinas (BSP).

He added that petitioner's domestic purchases of goods and of services are supported by both invoices and official receipts. The same is true with petitioner's sales of goods and of services.

The ICPA also presented petitioner's official receipts and proofs of inward remittances for the 2nd quarter of year 2009 pertinent to its claim 14 • The official receipts prove petitioner's collection for its zero-rated sales for the 2nd / 12 See Supplemental Sworn Statement of Ms. Rachel Concepcion to Questions Propounded by Atty. Marvin B. Ibarra dated March 11, 2013. 13 Sworn Statement of Mr. Romeo A. De Jesus, Jr. to Questions Propounded by Atty. Marvin B. Ibarra dated June 7, 2012, docket pp. 171-180.

14 See Minutes of hearing dated June 2, 2014, docket p. 1096.

quarter of year 2009, he opined. The proofs of inward remittances, on the other hand, pertain to petitioner's fund transfer credit advice and bank statements for collection/receipts made for invoices issued during the 2nd quarter of year 2009, which tend to prove the amounts in EURO inwardly remitted to petitioner and duly accounted for in accordance with the regulations of the Bangko Sentral ng Pilipinas, for its zero-rated sales to non-resident entities. In fine, the sales amounts as reflected in petitioner's service invoices were properly collected and reported in its books. 15 After petitioner had rested, respondent waived her right to present any evidence. 16

ISSUE

Whether petitioner is entitled to the claim for refund of alleged excess or unutilized input VAT for the second quarter of year 2009 in the amount of P53,739,763.31.

RULING OF THE COURT

Sections 110 (B) and 112 of the National Internal Revenue Code (NIRC) of 1997, as amended, relevantly provide, viz.:

SEC. 110. Tax Credits. -

XXX

(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, That the input tax inclusive of input VAT carried over from the previous quarter that may be credited in every quarter shall not exceed seventy percent (70°/o) of the output VAT: Provided, however, That any input tax attributable to zero-rated sales by a VAT- registered person may at his option be refunded or j 15 See Supplemental Sworn Statement of Mr. Romeo A. De Jesus, Jr. to Questions Propounded by Atty. Marvin B. Ibarra dated May 6, 2014, docket pp. 1082-1085.

16 Minutes of the Hearing held on October 11, 2012, Docket, Vol. II, p. 685.

credited against other internal revenue taxes, subject to the provisions of Section 112. 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 106(A)(2)(a)(1), (2) and (b) and Section 108(8)(1) 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 108 (B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales.

(B) X X X

XXX

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made.-ln proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of j the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals."

Thus, to be entitled to a refund or tax credit of input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be satisfied:

1. that the taxpayer must be VAT-registered;

2. that there must be zero-rated or effectively zero-rated sales;

3. that input taxes were incurred or paid;

4. that such input VAT payments are directly attributable to zero-rated sales or effectively zero-rated sales;

5. that the input VAT payments were not applied against any output VAT liability; and

6. that the claim for refund was filed within the two-year prescriptive period. Compliance with all the foregoing requisites starts on the timeliness of the claim. Section 112(A) provides that a VAT-registered taxpayer whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the relevant sales were made, apply with respondent an administrative claim for refund or tax credit of its creditable input tax due or paid attributable to such sales. 17 In this case, petitioner seeks refund of its excess and unutilized input VAT attributable to zero-rated sales for the second quarter of CY 2009. Counting from the close of the second quarter of CY 2009 or from June 30, 2009, petitioner had two (2) years or until June 30, 2011 to file its administrative claim with respondent. Clearly, petitioner seasonably filed its administrative claim for the second / quarter of CY 2009 on January 28, 2011. 18 w/ 17 Commissioner of Internal Revenue vs. Mindanao II Geothermal Partnership, G.R. No. 191498, January, 15, 2014.

18 Exhibit "L", Docket, Vol. I, p. 244; Exhibit "L-1", Docket, Vol. I, p. 245.

Similarly, petitioner's judicial claim was also timely filed on June 27, 2011. 19 Under Section 112(C) of the NIRC, a taxpayer-claimant may file a petition for review with the CTA within 30 days from either: (1) the receipt of the adverse decision of the CIR; or (2) the lapse of the 120-day period for respondent to act on the claim for refund /tax credit. 20 The record shows that from the filing of the administrative claim on January 28, 2011, respondent had 120 days or until May 28, 2011 within which to act upon the administrative claim.

However, respondent failed, hence, petitioner had 30 days from May 28, 2011 or until June 27, 2011 within which to seek judicial intervention before this Court. Evidently, the instant Petition for Review was filed on time.

As to the other requisites, the Court made the following findings.

Petitioner, as an ROHQ, allegedly generated sales by rendering services in the Philippines to persons engaged in business conducted outside the Philippines, for which payments were made in Euro and other acceptable foreign currency and duly accounted for in accordance with the rules and regulations of the BSP. Petitioner claims that said services qualify for VAT zero-rating. Section 108(6)(2) of the NIRC of 1997, as amended, pertinently provides, as follows: "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

XXX

"(B) Transactions Subject to Zero Percent (Oo/o) Rate. -The following services performed in the

Philippines by VAT-

registered persons shall be/ subject to zero percent (0°/o) rate:

XXX

19 Petition for Review, Docket, Vol. 1, pp. 1-7. 2° Commissioner of Internal Revenue vs. Team Sual Corporation (formerly Mirant Sual Corporation), G.R. No. 194105, February 5, 2014.

"(2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); II Therefore, for the supply of services to be deemed VAT zero- rated, the following requisites must be met: 21

1. The services by a VAT-registered person must be other than processing, manufacturing or repacking of goods;

2. The payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations; and

3. The recipient of such services is doing business outside the Philippines.

Record shows that petitioner is a duly registered VAT taxpayer. 22 The services it performs in the Philippines as

ROHQ

includes general administration and planning;

business planning and coordination; sourcing/procurement of raw materials and components;

corporate finance advisory services; marketing control and sales promotion; training and personnel management;

logistic services, research and development services and product development; technical support and maintenance; data processing and communication and business development. 23 Such services are not in the same category as "processing, manufacturing or repacking of goods". Corollary to the second requisite, Sections 113(A)(2), (B)(l), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1(A)(2), (B)(l) and (2)(c) / 21 Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, G.R. No. 172129, September 12, 2008. 22 Par. 3, Joint Stipulation of Facts and Issue, Docket, p. 426; Exhibit "B", Docket, Vol. 1, p. 225.

23 Exhibit "A", Docket, Vol. 1, p. 205.

of Revenue Regulations (RR) No. 16-05 requires that a VAT taxpayer, like petitioner, shall for every lease of goods or properties and for every sale, barter or exchange of services, issue a VAT official receipt which must contain the following information:

SEC

113.

Invoicing

and

Accounting

Requirements for VAT-Registered Persons. -

(A) Invoicing

Requirements.

registered person shall issue:

A

VAT-

XXX

(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 obliged to pay to the seller with the indication that such amount includes the value- added tax: Provided, That:

XXX

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

XXX

(3) The date of transaction, quantity, unit cost and description of the goods or / properties or nature of the service; kl SECTION 4.113-1. Invoicing Requirements. -

(A) A VAT-registered person shall issue: -

XXX

(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;

(2) The total amount which the purchaser pays or is obliged 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°/o) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; (emphasis supplied) Pursuant to the foregoing provisions, the foreign currency remittances referred to under Section 108(8)(2) of / the NIRC of 1997, as amended, must likewise be supported ~ by VAT zero-rated official receipts.

For services rendered for the second quarter of 2009, petitioner received foreign currency payments which were accounted for in accordance with the BSP rules and regulations, as evidenced by sales invoices and official receipts issued by petitioner to its alleged non-resident foreign clients, various inward remittance advices and bank statements. 24 For the said taxable quarter, petitioner allegedly rendered services to the following entities25 : 1 Deutsche Bank Aktiengesellschaft, Inlandsbank 2 Deutsche Bank Aktiengesellschaft, Filiale Riad Deutsche Bank Aktiengesellschaft, Filiale Dubai 3

(DIFC)

4 Deutsche Bank Aktiengesellschaft, Filiale Zurich 5 Deutsche Bank Aktiengesellschaft, Filiale Wien Deutsche Bank Aktiengesellschaft, Asia Pacific Head 6

Office

7 Deutsche Bank Aktiengesellschaft, Filiale Singapur 8 Deutsche Bank Aktiengesellschaft, Filiale Bangkok 9 Deutsche Bank Aktiengesellschaft, Filiale Mumbai 10 Deutsche Bank Aktiengesellschaft, Filiale Hongkong 11 Deutsche Bank Aktiengesellschaft, Filiale Jakarta

12 Deutsche Asset Management (Asia) Limited

13 Deutsche Bank Aktiengesellschaft, Filiale London 14 Deutsche Bank Aktiengesellschaft, Filiale Paris 15 Deutsche Bank Aktiengesellschaft, Filiale Prag 16 Deutsche Bank Luxembourg S.A. 17 Deutsche Securities Inc.

18 Deutsche Bank (Suisse) SA

19 Deutsche Bank (China) Co. Ltd., Beijing Branch 20 Deutsche Bank (China) Co. Ltd., Guangzhou Branch 21 Deutsche Bank (China) Co. Ltd., Shanghai Branch 22

DWS Holding & Service GmbH

23 Deutsche Bank Real Estate (Japan) Y.K. 24

Deutsche Asia Pacific Holdings Pte Ltd

Deutsche Group Services Pty Limited

Deutsche Bank PBC Spolka Akcyjna

/ 27 DB Finance Inc.

28 DB Consortium S. Cons. a.r.l. in liquidazione 29

Global Markets Centre Private Limited

24 Exhibits "N-1" to "N-311 ".

25 Exhibit "R", Docket Vol 1, p. 635.

To prove that its clients are non-resident foreign entities doing business outside the Philippines, petitioner presented the following documents:

1. SEC

Certifications

Non-Registration

of Company; 26

2. Authenticated Certificate of Incorporation in Change of Names of Company; Authenticated

Certificate

of Registration;

Authenticated

Certificate of Association; Company Profile Fact Sheet; 27

3. Intragroup Service Agreements; 28

4. Deutsche Bank List of Shareholdings 200829 However, the foregoing documents, standing alone, are inadequate proof that petitioner's clients are non-resident foreign entities doing business outside the Philippines. While it is true that the SEC Certificates of Non- Registration indicate that the named entities are not registered corporations/partnerships in the Philippines, they do not prove that such entities are non-resident foreign corporations doing business outside the Philippines. The same with the IntraGroup Service Agreements which only show the names of petitioner's customers to whom it rendered services but do not establish that such customers are non-resident foreign corporations doing business outside the Philippines.

The

Certificate of Association

and

Certificates

Registration/

Incorporation

Foreign

Company only establish that the named entities were incorporated/organized abroad but do not indicate that such entities are not doing business in the Philippines. To be considered as a non-resident foreign corporation doing business outside the Philippines, each entity must be supported by both SEC Certificate of Non-registration of corporation/partnership and certificate/articles of foreign incorporation/association/registration. Thus, only the following clients of petitioner shall be considered as non- /

26 Exhibits "0-12", "0-14" to "0-23", "0-25" to "0-26, "0-30", "0-32" to "0-34", "0-36", "0-39" to "0- 47".

27 Exhibits "0" to "0-10", "0-48" to "0-65".

28 Exhibits "P" to "P-12", "P-14" to "P-15", "P-18" to "P-22", "P-23.1" to "P-23.6", "P24", "P-27", "P-29" to "P-34".

29 Exhibit "Q".

resident foreign corporations doing business outside the

Philippines:

Company Name

Location

Frankfurt, Deutsche Bank AG, Inlandsbank

Germany

Deutsche Bank Aktiengesellschaft, Filiale Riad Riyadh, Saudi

Arabia

Deutsche Bank Aktiengesellschaft, Filiale Wien Vienna, Austria Deutsche Bank Aktiengesellschaft, Filiale Singapur

Singapore

Deutsche Bank Aktiengesellschaft, Filiale Bangkok Bangkok, Thailand Deutsche Bank Aktiengesellschaft, Filiale Mumbai Mumbai, India

Deutsche Bank Aktiengesellschaft Filiale Hongkong

Hong kong

Deutsche Bank Aktiengesellschaft Filiale Jakarta

Indonesia

Deutsche Asset Management (Asia) Limited

Singapore

Deutsche Bank Aktiengesellschaft, Filiale London

London

Deutsche Bank Luxembourg S.A.

Luxembourg

Deutsche Securities, Inc. Tokyo, Japan

Deutsche Bank (Suisse) SA

Switzerland

Deutsche Bank (China) Co. Ltd., Beijing Branch Beijing, China Deutsche Bank (China) Co. Ltd., Guangzhou Branch Guangzhou, China Frankfurt,

DWS Holding & Service GmbH

Germany

Deutsche Bank Real Estate (Japan) Y.K.

Tokyo Japan

Deutsche Asia Pacific Holdings Pte Ltd

Singapore

Deutsche Bank PBC Spolka Akcyjna

Warsaw, Poland DB Finance Inc.

Tokyo Japan

DB Consorzio S. Cons. a r. I. Milan, Italy ,Global Markets Centre Private Limited Mumbai, India Accordingly, petitioner's sales of services to the aforementioned entities for the second quarter of 2009 in the amount of €13,167,067.56 with peso equivalent of P842,455,992.11, as presented below, qualify for VAT zero- rating under Section 108(8)(2) of the NIRC of 1997, as amended:

OR

Inward

Amount

OR

Exh.

Remittance

Collected in

Company Name

No.

Exhibit No.

Euro

Peso Equivalent

DB AG, Inlandsbank 383

N-137

N-138

€ p 60,920,985.79 956,893.16 DB AG, Filiale Riad 439

N-277

N-278

6,375.00 429,690.94 DB AG, Filiale Riad 390

N-57

N-58

43,562.52 2,706,674.41 DB AG, Filiale Wien 431

N-288

N-289

925.00 61,741.35 DB AG, Filiale Singapur 435

N-159

N-160

25,000.02 1,676,101.34 DB AG, Filiale Singapur 401

N-96

N-97

12,500.00 802,576.25 DB AG, Filiale Singapur 402

N-163

N-164

136,137.13 8,740,859.22 DB AG, Filiale Singapur 387

N-251

N-252

72,792.83 4,522,844.08 DB AG, Filiale Bangkok 434

N-292

N-293

18,500.00 1,240,314.00 w/'

DB AG, Filiale Mumbai DB AG, Filiale Hongkong DB AG, Filiale Hongkong DB AG, Filiale Jakarta DB AG, Filiale London DB AG, Filiale London DB AG, Filiale London DB AG, Filiale London DB AG, Filiale London DB AG, Filiale London DB AG, Filiale London DB AG, Filiale London DB AG, Filiale London DB AG, Filiale London DB Luxembourg S.A.

DB Luxembourg S.A.

Deutsche Asset Management

(Asia) Limited

Deutsche Securities, Inc. Deutsche Securities, Inc. Deutsche Securities, Inc. Deutsche Securities, Inc.

DB (Suisse) SA

DB (China) Co. Ltd., Beijing DB (China) Co. Ltd., Guangzhou

DWS Holding & Service GmbH

DB Real Estate (Japan) Y.K.

Deutsche Asia Pacific Holdings

Pte Ltd

Deutsche Bank PBC Spolka

Akcyjna

DB Finance Inc.

DB Consorzio S. Cons. a r. I.

Global Markets Centre Private

Limited

TOTAL

403

N-100

394

N-255

377

N-168

377

N-168

426

N-236

427

N-239

424

N-242

418

N-176

417

N-271

416

N-274

409

N-106

408

N-258

407

N-264

379

N-281

437

N-300

375

N-189

436

N-296

432

N-285

391

N-193

393

N-267

376

N-261

441

N-113

398

N-198

419

N-203

433

N-304

392

N-127

438

N-308

400

N-215

378

N-219

405

N-223

430

N-227

N-101

23,124.53 1,484,735.89

N-256

1,076.00 68,239.06

N-169

705,238.23 45,663,822.77

N-169

16,650.04 1,057,054.43

N-237

67,726.08 4,531,504.60

N-240

45,238.47 3,026,874.36

N-243

120,005.87 7,899,098.38

N-177

4,701,873.80 301,542,921.48

N-272

72,502.05 4,707,855.36

N-275

70,088.22 4,551,115.49

N-107

4,154,005.85 263,941,377.70

N-259

79,624.00 5,059,229.34

N-265

71,800.11 4,562,107.19

N-282

559,285.00 35,980,873.40

N-301

10,175.00 686,200.98

N-190

10,175.02 650,542.96

N-297

110,139.00 7,427,763.15

N-286

17,216.00 1,149,123.24

N-194

931,396.22 59,068,403.16

N-268

12,051.20 764,277.46

N-262

6,025.60 390,154.59

N-114

278.00 18,811.90

N-199

18,500.04 1,188,178.02

N-204

13,875.03 904,028.97

N-305

18,500.00 1,240,314.00

N-128

12,950.01 821,279.~7

N-309

27,750.00 1,870,419.38

N-216

462.50 29,561.24

N-220

1,387.50 89,839.93

N-224

13,875.03 886,846.13

N-228

1,387.50 91,650.90 c P842,455,992.11 13,167,067.56 The rest of petitioner's declared zero-rated sales in the amount of P237,405,916.01 (P1,079,861,908.12 less P842,455,992.11) shall be denied VAT zero-rating for its failure to prove that the entities to whom it rendered services are non-resident foreign corporations doing business outside the Philippines.

Petitioner

claims that the entire amount of P53,739,763.31, reflected in its Quarterly VAT Returns for./ the second quarter of 2009 as input VAT from current purchase transactions, is attributable to its zero-rated sales of services for the said quarter. Below is the breakdown of the input tax of P53,739,763.31: Input VAT from Current Transactions Purchase of Capital Goods exceeding !Million p 3,744,402.33 Domestic Purchases of Goods Other than 2,484,800.62

CaQital Goods

Domestic Purchases of Services

39,357,223.69

Services Rendered by Non-Residents

8,153,336.67

Total Input VAT

p 53,739,763.31 Note that part of the total input VAT claim of P53,739,763.31, is the amount of P3,744,402.33, representing input VAT on purchases of capital goods exceeding P1 Million.

Pursuant to Section 110 (A) of the

NIRC of 1997, as amended, which is being implemented by Section 4.110-3 of RR No. 16-2005, input VAT claim on capital goods purchases attributable to zero-rated sales may be claimed either in full during the month of acquisition, or spread over a period of time, depending on the aggregate acquisition cost of the capital goods in the calendar month. If the aggregate acquisition cost exceeds P1 Million, the claim for input tax should be spread over 60 months or the estimated useful life of the capital goods, whichever is shorter. On the other hand, if the aggregate acquisition cost does not exceed P1 Million, the total input taxes shall be allowed as credit/refund in the month of acquisition. Thus, while petitioner was able to substantiate the amount of P3,616,902.33 out of the total claimed input VAT of P3, 744,402.33 on capital goods purchases exceeding P1 Million, only the amortization for the second quarter of 2009 in the amount of P172,160.09 may be claimed by petitioner as valid input tax credits for the same taxable quarter, as determined below:

Invoice

Input Vat

Registered Name of

Numbe

Invoice

Ex h.

Applied for

Supplier

Date

No.

OR Date

Refund

Amortization

Accent Micro Technologies

Inc.

098822 2/10/09

M-18

4/1/2009 p 4 853.57 p 303.35

Accent Micro Technologies

Inc.

098941 2/12/09

M-19

4/1/2009 2 357.14 147.32

Accent Micro Technologies

Inc.

099820 3/13/09

M-20

4/1/2009 1 285.50 80.34

Accent Micro Technologies

099817 3/13/09

098989 100142 100141 100165 098829 099960 100288 100325 100008 100411 100434 100372 100454 100794 101206 101232 100371 101332 101309 100660 100795 101436 101437 101628 101627 101740 101626 101837 101885 101878 101938 101975 101625 101890 2/13/09

M-22

3/25/09

M-23

3/25/09

M-24

3/26/09

M-25

2/10/09

M-26

3/19/09

M-28

3/30/09

M-29

3/31/09

M-27

3/23/09

M-30

4/3/09

M-31

4/13/09

M-32

4/2/09

M-34

4/14/09

M-33

4/27/09

M-35

5/5/09

M-36

5/6/09

M-37

4/2/09

M-39

5/11/09

M-38

5/8/09

M-40

4/22/09

M-43

4/27/09

M-41

5/18/09

M-42

5/18/09

M-44

5/25/09

M-45

5/25/09

M-46

5/29/09

M-47

5/25/09

M-48

6/3/09

M-49

6/4/09

M-51

6/4/09

M-53

6/8/09

M-50

6/10/09

M-52

5/25/09

M-57

6/4/09

M-54

4/3/2009 2 147.36 134.21 4/7/2009 698.36 43.65 4/7/2009 1 396.71 87.29 4/8/2009 288 769.93 18,048.12 4/13/2009 4 039.29 252.46 4/15/2009 8 517.86 532.37 4/15/2009 589.29 36.83 4/15/2009 200 357.14 12 522.32 ' 4/17/2009 2 303.57 143.97 4/23/2009 1 079 748.43 67 484.28 4/23/2009 219 716.25 13,732.27 5/1/2009 52 395.43 2,183.14 5/1/2009 13 563.32 565.14 5/5/2009 4 510.07 187.92 5/19/2009 891 420.21 37,142.51 i

I

5/19/2009 17 465.14 727.71 5/20/2009 17 792.14 741.34 5/20/2009 1 074.86 44.79

I

5/22/2009 6 428.57 267.86 6/1/2009 19 039.29 396.65 6/1/2009 3 759.43 78.32 6/1/2009 109,285.71 2 276.79 6/1/2009 3 642.86 75.89 6/5/2009 1 821.43 37.95 6/8/2009 483.00 10.06 6/9/2009 128 993.04 2l687.36 6/10/2009 428.36 8.92 6/16/2009 182,142.86 3 794.64 6/23/2009 6,589.29 137.28 6/23/2009 1 607.14 33.48 6/23/2009 1 664.36 34.67 6/23/2009 4,017.86 83.71 6/24/2009 943.71 19.66 6/24/2009 319,774.71 6,661.97 './ 1 2 3 4 5 6 7

Accent Micro Technologies

Inc.

Accent Micro Technologies

Inc.

Accent Micro Technologies

Inc.

101939 6/8/09 101936 6/8/09 101940 6/8/09

M-55

6/24/2009 1 664.36 34.67

M-56

6/24/2009 3 880.07 80.83

M-58

6/24/2009 1 449.00 30.19

TOTAL

- - --~~ p 3,6161902.3~ L_~172,160.09 Consequently, the unamortized input

VAT

of P3,444,742.24 (P3,616,902.33 less P172,160.09) and the input VAT of P127,500.00 pertaining to purchase of capital goods exceeding P1 Million the supporting VAT invoice of which was not presented before the Court shall be deducted from petitioner's input VAT claim. In addition, the input VAT of P24,414,629.8930, as summarized below, shall be disallowed for petitioner's failure to meet the substantiation requirements under Sections 110(A) and 113(A) and (B) of the NIRC of 1997, as amended by RA 9337, and as implemented by Sections 4.110-2, 4.110-8 and 4.113-1 of Revenue Regulations No. 16-05:

Disallowed Input

Findings

VAT

Domestic purchases of services supported by VAT ORs wherein the input VAT were not separately indicated p 9,300,096.83 Domestic purchases of goods other than capital goods supported by VAT invoices wherein the input VAT were not separately indicated 96,883.29 Domestic purchases of services without supporting valid

VAT ORs

2,437,168.27 Domestic purchases of goods other than capital goods without supporting valid VAT invoices 136 459.07 Input VAT on services supported by documents imprinted with the statement "This document is not a valid source of in12_ut tax" 1 042.90 Domestic purchases of services supported by VAT ORs dated outside the period of claim 6,009,296.27 Domestic purchases of capital goods not exceeding P1M supported by VAT invoices dated outside the period of claim 1,363,030.99 8 Over-claimed input VAT on domestic purchases of services supported by VAT ORs 188,316.98 9 Without supportin_g documents 4,882,335.29

TOTAL

p 24,414,629.89 ~ 30 See Annex A of this Court's Findings for details.

Thus, only the remaining amount of P25, 752,891.18, as computed below, represents petitioner's valid input VAT for the second quarter of 2009: Input VAT claimed for refund p 53,739,763.31

Less:

Disallowances

Unamortized Input VAT on Capital

Goods exceeding P1M p 3_L444, 742.24

Input VAT on Capital Goods

exceeding P1M without supporting documents 127,500.00 Input VAT on purchases of services and goods other than capital goods 24 414,629.89 27,986,872.13

Valid Input VAT

p 25,752,891.18

After

applying petitioner's valid input

VAT

of P25,752,891.18 against its output VAT of P549,159.52 for the subject period of claim, there remains an excess input VAT of P25,203, 731.66, which can be attributed to the entire zero-rated sales/receipts declared by petitioner in the amount of P1,079,861,908.12. Accordingly, only the input VAT of P19,662,731.51 is attributable to the valid zero-rated sales of P842,455,992.22, as computed below:

Valid Input VAT

p 25,752,891.18

Less: Output VAT

549,159.52

Valid Excess Input VAT

p 25,203,731.66

Valid Zero-Rated Sales/Receipts

842,455,992.22

Divided by Total Reported Zero-Rated Sales/Receipts

1,079,861,908.12

Multiply by Valid Excess Input VAT

25,203,731.66 Excess Input VAT attributable to the Valid Zero-

Rated Sales/Receipts

p 19,~~~,:731.51 Although the claimed input VAT was carried over by petitioner in the succeeding Quarterly VAT Returns in 200931 and 2010/2 the same remained unutilized until it was deducted33 from petitioner's total available input tax in the 1st quarter of 2011.

Consequently, the subject claim no longer formed part of the excess input

VAT

31 Exhibits "D", and "E".

32 Exhibits "F", "G", "H", and "I".

33 Line 230, Exhibit "J".

P242,243,640.5434 as of the 1st quarter of 2011 which was carried over/applied to the succeeding 2nd quarter of 2011. 35 In fine, petitioner is entitled to a refund or issuance of tax credit certificate in the amount of P19,662,731.51, representing its unutilized excess input VAT for the 2nd quarter of 2009 attributable to its zero-rated receipts for the same period.

WHEREFORE, the Petition for Review dated June 27, 2011 filed by petitioner Deutsche Knowledge Services, Pte Ltd. is 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 NINETEEN MILLION SIX HUNDRED SIXTY TWO

THOUSAND SEVEN HUNDRED THIRTY ONE PESOS AND

51/100 (P19,662,731.51), representing petitioner's unutilized excess input VAT for the 2nd quarter of 2009 attributable to its zero-rated sales.

SO ORDERED.

We concur:

Associ a

34 Line 27, Exhibit "J".

35 Line 20E, Exhibit "K".

ESPE

~. ~ ..4-L...· MA. BELEN M. RINGPIS-LIBAN

Associate Justice

ATTESTATION

I attest 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.

LOVELL~· BAUTISTA

Chai(rperson

CERTIFICATION

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

Presiding Justice

CTA CASE NO. 8300 - ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE LTD.

CTA CASE NO. 8300 -ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE LTD.

CTA CASE NO. 8300- ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE LTD.

E.E. BLACK, LTD.

ePLDT INC.

GREAT YEAR INDUSTRIES CORP MAN

LEAVES & BRANCHES ENT

MAXICARE HEALTHCARE CORP

PREMIUM SECURITY & INVESTIGATI

REGUS CENTRES INC

SKYCABLE CORPORATION

TECOMA CORPORATION

TEMPO SERVICES, INC.

16-3 PROPERTY HOLDINGS INC.

IANN ARBOR DEVELOPMENT CORPORAT

IBAYANTEL- various

BEN SIMEON GOMEZ

I BUSINESS- PROFILES INC

n1 I T'=RS INTERNATIONAL PHIUPP IDATACRAFT PHILIPPINES INC. I ~r1 IIC:IVE CARS, INC I EXCLUSIVE CARS, INC I ~rl USIVE CARS, INC I FXrl ll<;IVE CARS, INC I Fl(-rl USIVE CARS, INC I FXrl IJ<;IVE CARS, INC I FXrl USIVE CARS, INC I EXCLUSIVE CARS, INC I ~rl IISIVE CARS, INC I FYrl IISIVE CARS, INC I FXrl IISIVE CARS, INC I FYrl I ISIVE CARS, INC I ~rl IISIVE CARS, INC I FYrl I tc:IVE CARS, INC I FXrl IISIVE CARS, INC l~riiiC:TVE CARS, INC I FXrl II<;TVE CARS, INC I ~rl IIC:TVE CARS, INC IFxriiJ<;IVE CARS, INC I FYrl IIC:TVE CARS, INC I FXC'I lTS!VE CARS, INC I FYrl USIVE CARS, INC IFXC"IIJ<;IVE CARS, INC I ~r1 IIC:IVE CARS, INC I ~rl I Jc:IVE CARS, INC I FYrl I tc:IVE CARS, INC I ~r1 I Jc:IVE CARS, INC I FXC'I ll<;IVE CARS, INC I FYrl USIVE CARS, INC IFXC'I USIVE CARS, INC

M-376

1360

M-377

1361

M-391

5951

M-393

5954

M-396

5966

M-522

4267

M-597

3972

M-603

061702

M-1001

52937

M-1014

11606

M-1079

480520

M-1098

00738

M-1101

42735

M-1104

43461

M-1105

43462 11171 2613

Page 5 of 15

CfA CASE NO. 8300 -ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE LTD. 33.60 1,335,983.37 1,312,126.52 4,155,101.20 4,080,903.00 37." 41n <;?

370]04--:-6-f 13,712.55 13,515.09 5,642.75 5,561.50 12,857.14 12,627.55 4,714.29 4,500.00 26,475.00 5,791.41 18,885.66 18,053.79 9,336.60 9,316.72 53,385.00 52,431.70 241,771.94 216.538.15 2,641.56 2,570.85 2,742.44 2,700.12 2,643.26 2,607.36 506.00 23,856.85 74,198.20 5,405.91 197.46 81.25 229.59 214.29 ?n kR~ <;C 831.87 19.88 953.30 25,233.79 70.71 42.32 35.90 188,316.98 t;~)~~~,~~~~r1(,f:: ' (62,121.12) 7,776.00 130,749.12 28,989.59 42,428.57 (42,428.57) 21,637.20 (754.82) 190,678.62 3,461.65 1,544.17 386.68 1,280.27 164.46 428.57 463.30 56.79 3,240.69 17.14 460.74 416.27 488.47 531.33 3,240.69 3,019.74 3,167.04 2,576.25 78.21 237.87 2,576.25 58.93 5.36 21.43 105.00 716.79 26.79 21.43 416.68 35.36

CTA CASE NO. 8300 -ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE LTD.

ITA CASE NO. 8300 -ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE LTD.

CTA CASE NO. 8300 -ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE LTD.

CTA CASE NO. 8300- ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE LTD.

[GLOBE TELECOM P\1.. I'IU. 't:J/ LOUOO !GLOBE TELECOM AC No. 45726088 GLCfBETELECOM AC No. 4fii?Rifi1 GLOBE TELECOM AC No.

GLOBE TELECOM AC No. 4hh4n"'~' GLOBE TELECOM AC No.

[GLOBE TELECOM AC No. 46878752 !GLOBE TELECOM AC No. 46878752 [GLOBE TELECOM AC No. 50574118 !GLOBE TELECOM AC No. 50574118 r.:ru1nn: .6c::c::nrTATES MANILA LTD. HEADSTRONG PHIUPPINES INC. HEADSTRONG PHILIPPINES INC. I HEADSTRONG PHILIPPINES INC. II SYSTEMS INTEGRATORS, INC. II SYSTEMS INTEGRATORS, INC.

IINNOVE A/C 106921130

IINNOVE A/C 830006736

IINNOVE NC 830006736

IINNOVE NC 831577230

IINNOVE NC 831580222

IINNOVE NC 831589775

IINNOVE NC 831685726

IINNOVE NC 831759062

INNOVE NC 831797054

INNOVENC

INNOVE AC 106797149

INNOVE AC 106797900

INNOVE AC 10!;A~AAn~ I IN NdVE-AC 10688406:1.

IINNOVE AC 106886134

IINNOVE AC 106922948

INNOVE AC 830105671

INNOVE AC

INNOVE AC 830635381

INNOVE AC s:nn"'~~4~h

IINNOVE AC 830744573

IINNOVE AC A~1nm~m liN NOVE AC A~1 nm!;'\?

IINNOVE AC 831003770

IINNOVE AC 831003897

liN NOVE AC A~1 nn4nA~

IINNOVE AC 831004175

IINNOVE AC 831498908

IINNOVE AC 831502594

IINNOVE AC 831577371

IINNOVE AC 831577518

liN NOVE AC 831577518 IINNOVEAC 83:1.578785-

IINNOVE AC 831579260

liN NOVE AC 83157926Cf

IINNOVE AC 831579340

IINNOVE AC 831579420

IINNOVE AC 831580511

[INN6VEAC 831580511

liN NOVE AC 83~ '\An!;'\?

IINNOVE AC 831589996

IINNOVE AC 831613073

IINNOVE AC 831hA~AC

IINNOVE AC 831758723

IINNOVE AC 8:31759013

[fNNOVE AC 831759283

IINNOVE AC 831819390

[INNOVE AC 831819745

IINNOVE AC 831819794

1154 0727 0727

Page 12 of 15

CTA CASE NO. 8300 -ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE LTD. 128.57 128.57 204.00 204.00 204.00 204.00 204.00 204.00 204.00 204.00 32,871.43 55,519.49 16,800.00 169,336.25 233,384.27 17,850.00 149.65 160.18 160.18 19,387.20 19,387.20 19,387.20 139.34 134.19 138.75 138.75 138.75 138.75 138.75 138.75 138.75 160.18 160.18 160.18 160.18 123.32 160.18 18,000.00 165.71 160.18 160.18 106.61 160.18 144.38 128.58 160.18 160.18 160.18 138.75 138.75 138.75 138.75 138.75 138.75 138:75 138.75 138.75 138.75 138.75 138.75 138.75 138.75 138.75 138.75 138.75 129.63 138.75 140.09 138.75 138.75 138.75 157.95

CTA CASE NO. 8300 - ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE LTD.

CTA CASE NO. 8300 -ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE L TO.

CTA CASE NO. 8300- ANNEX A DEUTSCHE KNOWLEDGE SERVICES, PTE LTD.