Court of Tax Appeals · Third Division

Deutsche Knowledge Services Pte. Ltd. vs. Commissioner of Internal Revenue

CTA Case No. 8623 August 4, 2017 Fabon-Victorino

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

THIRD DIVISION

DEUTSCHE KNOWLEDGE

SERVICES PTE. LTD.,

Petitioner,

CTA CASE

NOS.

8623,

8656, 8661, and 8685

-versus-

Members:

BAUTISTA, Chairperson

FABON-VICTORINO, and

RINGPIS-LIBAN, JJ.

COMMISSIONER OF

Promulgated:

INTERNAL REVENUE,

Respondent.

AUG ') 2.~ 2{)17

c...

lt>;3s "'· ....

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

DECISION

Fabon-Victorino, J.:

These four ( 4) consolidated Petitions for Review filed by petitioner

Deutsche

Knowledge

Services

Pte.

Ltd.

on different dates seek for the refund or issuance of tax credit certificate (TCC) in the total amount of P153,201,143.71, allegedly representing unutilized input value-added tax (VAT) arising from petitioner's domestic purchases of goods other than capital goods and services, purchases of capital goods, and purchases of services rendered by non-residents for the four quarters of calendar year (CY) 2011 which are attributable to its zero-rated sales, broken down, as follows: CTA Case No.

CY 2011

Input VAT Claim

8623 pt Quarter p 8656 2nd Quarter 8661 3rd Quarter 1 Petition for Review, docket, vol. 1, p. 16, CTA Case No. 8623. 2 Petition for Review, docket, p. 18, CTA Case No. 8656. 30,987,110.541 43,483,971.552 39,444,853.683

J

CTA CASE NOS. 8623, 8656, 8661, and 8685

8685 I 4th Quarter

Total

39,285,207.944 P153,201, 143.71 Petitioner Deutsche Knowledge Services Pte. Ltd. is a foreign corporation organized and existing under the laws of Singapore, with license to transact business in the Philippines with office address at Net Quad Center, 31st Street corner 4th Avenue, E-Square Zone Crescent Park West, Taguig City. 5 It is a VAT-registered taxpayer as of June 16, 2005, with Taxpayer Identification No. (TIN) 238- 763-115-000.6 Petitioner is also registered with the Securities and Exchange Commission (SEC) and is licensed to do business as a regional operating headquarters (ROHQ) in the Philippines.

It is engaged 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 maintenance; data processing and communication and business development to its affiliates in the Philippines and abroadJ On the other hand, respondent is Commissioner of the Bureau of Internal Revenue (BIR), with power to decide, approve, and grant refunds of internal revenue taxes or issue a tax credit certificate. He holds office at the BIR National Office Building, BIR Road, Diliman, Quezon City.

Petitioner

filed with the

BIR

its

Monthly

VAT

Declarations

and

Quarterly VAT

Returns

through the Electronic Filing and Payments System (EFPS), for the period beginning January 1, 2011 to December 31, 2011 as follows: 8

3 Petition for Review, docket, p. 18, CTA Case No. 8661.

4 Petition for Review, docket, p. 18, CTA Case No. 8685.

5 Par. 1, Joint Stipulation of Facts and Issues (JSFI), docket, vol. 1, p. 489.

6 Par. 4, JSFI, docket, vol. 1, unpaginated.

7 Par. 3, JSFI, docket, vol. 1, p. 489.

8 Par. 5, JSFI, docket, vol. 1, unpaginated.

CTA CASE NOS. 8623, 8656, 8661, and 8685

PERIOD COVERED

January 2011

February 2011

First Quarter of 2011

April 2011

May 2011

Second Quarter of 2011

July 2011

August 2011

Third Quarter of 2011

October 2011

November 2011

Fourth Quarter of 2011

DATE FILED

February 18L 20119

March 9, 201!1° April 25, 2011 11 May 19, 2011 12 June 17, 2011 13 July 22, 2011 14 August 18, 201 !15 September 19, 2011 16 October 26, 2011 17 November 18, 2011 18 December 19, 2011 19 January 20, 2012 (original)20 March 14, 2013 (amended)21 On October 31, 201222, January 9, 201323, January 23, 201324 and March 19, 201325, petitioner separately filed with the BIR Large Taxpayers Regular Audit Division 3 (LTRAD), its administrative claims for refund or issuance of TCC for its alleged unutilized input VAT attributable to zero-rated sales for the 1st, 2nd, 3rd, and 4th quarters of 2011 in the respective amounts of P30,987,110.54, P43,483,971.55, P39,444,853.68, and P39,285,207.94 or in the aggregate amount of P153,201, 143.71. 26 When no action was taken by respondent on its administrative claims for refund, petitioner filed with the Court four ( 4) separate Petitions for Review on March 27, 2013, May 20, 2013, June 19, 2013, and August 5, 2013,

9 Exhibit "P-4".

10 Exhibit "P-4-a".

11 Exhibit "P-5".

12 Exhibit "P-4-b".

13 Exhibit "P-4-c".

14 Exhibit "P-6".

15 Exhibit "P-4-d".

16 Exhibit "P-4-e".

17 Exhibit "P-7".

18 Exhibit "P-4-f".

19 Exhibit "P-4-g".

20 Exhibit "P-31".

21 Exhibit "P-8".

22 Exhibits "P-24" and "P-24-a".

23 Exhibits "P-25" and "P-25-a".

24 Exhibits "P-26" and "P-26-a".

25 Exhibits "P-27" and "P-27-a".

26 Par. 6, Joint Stipulation of Facts and Issues, docket, vol. 1, unpaginated.

CTA CASE NOS. 8623, 8656, 8661, and 8685 docketed as CTA Case Nos. 8623, 8656, 8661, and 8685, respectively.

Respondent filed his Answer in CTA Case No. 8623 on June 14, 2013, 27 in CTA Case No. 8656 on July 19, 2013,28 in CTA Case No. 8661 on August 23, 2013,29 and in CTA Case No. 8685 on October 30, 2013. 30 To respondent's mind, the four cases for refund/tax credit should not be given due course for failure of petitioner to exhaust administrative remedies before elevating its cases to the Court.

Allegedly, petitioner failed to submit complete supporting documents at the administrative level as mandated in Section 112 of the National Internal

Revenue

Code

(NIRC), as amended, and

Revenue

Memorandum Order (RMO) No. 53-98. Further, to be entitled to refund, petitioner, who has the burden of proof, must prove compliance with all the requisites under existing law and jurisprudence including registration, invoicing and accounting requirements. After the parties submitted their Joint Stipulation of Facts and Issues31 , the Court issued the Pre-Trial Order32 on December 10, 2013.

To prove its case, petitioner presented as witnesses (1) Rachel M. Concepcion33 ; and (2) Katherine 0. Constantino, the

Court-commissioned

Independent

Certified

Public

Accountant (ICPA). 34

27 Docket, val. 1, pp. 67-82, CTA Case No. 8623.

28 Docket, pp. 53-64, CTA Case No. 8656.

29 Docket, pp. 55-67, CTA Case No. 8661.

30 Docket, pp. 76-89, CTA Case No. 8685.

31 Docket, val. 1, pp. 489-498.

32 Docket, val. 1, pp. 500-506.

33 Minutes of the hearing dated February 10, 2014, docket, val. 1, p. 519; Minutes of the hearing dated June 27, 2016, docket, val. 7, p. 3945.

34 Minutes of the hearing dated June 9, 2014, docket, val. 3, p. 1389; Minutes of the hearing dated June 15, 2015, docket, val. 6, p. 3672.

CTA CASE NOS. 8623, 8656, 8661, and 8685

Rachel M. Concepcion, the Finance Controller of petitioner testified 35 that she is familiar with the instant cases since she oversees, prepares and safekeeps petitioner's financial documents pertaining to its operations.

Petitioner

is registered with the

Securities

and Exchange Commission (SEC) and is licensed to operate as a Regional Operating Headquarters (ROHQ) in the country. Petitioner is likewise registered with the BIR with Certificate of Registration OCN No. 9RC0000270209 dated June 16, 2005.

As a ROHQ, petitioner provides accounting, valuation and information systems maintenance and development services, among others, to entities in the Deutsche Bank Group.

Thus, petitioner renders zero-rated services to its non-resident affiliates engaged in business outside the Philippines or nonresident persons not engaged in business who are outside the Philippines based on Section. 108(B)(2) of the NIRC. For services rendered, it is paid in acceptable foreign currency, i.e. Euros, inwardly remitted through Deutsche Bank Manila then credited to petitioner's account in said bank.

Thus, petitioner incurred input VAT for domestic purchases of goods (other than capital goods) and services, purchases of capital goods, and purchases of services rendered by nonresidents attributable to zero-rated sale of services in the year 2011, based on Section 110(8) and Section 112(A) of the NIRC. The input VAT incurred by petitioner remained unutilized since it was not applied against any output VAT liability. Due to the inaction of respondent on petitioner's administrative claims for refund, petitioner filed four ( 4) separate administrative claims for refund of its unutilized input VAT for the year 2011 on October 31, 2012, January 9, 2013, January 23, 2013, and March 19, 2013.

35 See Minutes of the hearing dated February 10, 2014, docket vol. 1 p. 519; Judicial Affidavit dated November 15, 2013, docket vol. 1 pp. 135-167; no cross examination conducted.

CTA CASE NOS. 8623, 8656, 8661, and 8685

The

Court-commissioned

ICPA

Katherine

Constantino testified 36 that she examined and verified the documentary evidence of petitioner in relation to the present cases. Thereafter, she prepared an ICPA Report which she submitted to the Court on May 29, 2014, indicating that of the pro-rated amount of input

VAT

attributable to petitioner's zero-rated sales of P158,201,143.71, only P62,454,876.86 was properly substantiated. She also examined the additional documents submitted by petitioner and submitted to the Court a supplemental report. 37 After petitioner rested, respondent manifested that he would not present any evidence in the absence of the investigation report from the BIR examiners. At the instance of petitioner, the cases were reopened for the recall of witness Rachel M.

Concepcion, who identified 38 additional documents to prove that petitioner rendered services to non-resident clients who are doing business outside the Philippines. In the Resolution 39 dated August 5, 2016, the cases were submitted for decision.

THE ISSUES

The parties submitted the following issues for this Court's resolution :40

1. Whether petitioner is entitled to a refund or issuance of tax credit certificate for its unutilized input VAT arising from purchases of goods (other than capital goods) and services, purchases of capital goods, and purchases of

36 See Minutes of the hearing dated June 9, 2014, docket vol. 3, p. 1389; Judicial Affidavit dated June 4, 2014, docket vol. 3, pp. 1383-1388; no cross examination was conducted.

37 See Minutes of the hearing dated June 15, 2015, docket val. 6, p. 3672; Judicial Affidavit dated March 27, 2015, docket vol. 6, pp. 3637-3645.

38 See Minutes of the hearing dated June 27, 2016, docket val. 7, p. 3945; Judicial Affidavit dated June 21, 2016, docket val. 7, pp. 3844-3848.

39 Docket, val. 7, pp. 4031-4032.

40 JSFI, docket, val. 1, p. 490.

CTA CASE NOS. 8623, 8656, 8661, and 8685 services rendered by non-residents attributable to zero-rated sales for the 1st, 2nd, 3rd, and 4th quarters of taxable year 2011 in the respective amounts of P30,987,110.54, P43,483,971.55, P39,444,853.68, and P39,285,207.94, or in the aggregate amount of P153,201, 143.71.

2. Whether the Court has jurisdiction over the Petitions for Review filed by petitioner.

DISCUSSION/RULING

First, the jurisdiction of the Court. Respondent claims that the Court lacks jurisdiction to determine the present petitions as petitioner failed to exhaust administrative remedies given that it failed to submit complete supporting documents at the administrative level, as mandated under Section 112 of the National Internal Revenue Code (NIRC), as amended, and Revenue Memorandum Order (RMO) No. 53-98, before resorting to judicial action. The issue has long been settled. There is nothing in the cited provisions that requires submission of complete documents enumerated in

RMO

No. 53-98 for a grant of a refund/tax credit of input VAT. In other words, the alleged flaw is not fatal to petitioner's cause. This much had been clarified by the Supreme Court in the following manner:

The CIR's reliance on RMO 53-98 is misplaced. There is nothing in Section 112 of the NIRC, RR 3-88 or RMO 53-98 itself that requires submission of complete documents enumerated in RMO 53-98 for a grant of a refund or credit of input VAT. x x x Even assuming that

RMO

53-98 applies, it specifically states that some documents are required to be submitted by the taxpayer "if applicable."

Moreover, if TSC indeed failed to submit the complete documents in support of its application, the CIR could have informed TSC of its failure, consistent with Revenue Memorandum Circular No. (RMC) 42-03. 41

41 Commissioner of Internal Revenue vs. Team Sual Corporation (formerly Mirant Sual Corporation), G.R. No. 205055, July 18, 2014.

CfA CASE NOS. 8623, 8656, 8661, and 8685

In another case, the High Court elucidated on the matter, as follows:

As explained earlier and underlined in Team Sua/ above, taxpayers cannot simply be faulted for failing to submit the complete documents enumerated in RMO No. 53-98, absent notice from a revenue officer or employee that other documents are required. Granting that the BIR found that the documents submitted by Total Gas were inadequate, it should have notified the latter of the inadequacy by sending it a request to produce the necessary documents in order to make a just and expeditious resolution of the claim. Indeed, a taxpayer's failure with the requirements listed under RMO No. 53-98 is not fatal to its claim for tax credit or refund of excess unutilized excess VAT.

This

holds especially true when the application for tax credit or refund of excess unutilized excess VAT has arrived at the judicial level.

After all, in the judicial level or when the case is elevated to the Court, the Rules of Court governs. Simply put, the question of whether the evidence submitted by a party is sufficient to warrant the granting of its prayer lies within the sound discretion and judgment of the Court. 42 Thus, the alleged submission of complete documents at the administrative level is irrelevant when the claim for refund has already reached the Court. In Court, the basis of whether or not to grant the claim for refund will be dependent on the evidence presented pursuant to the Rules of Court, showing compliance with all the requisites under the applicable law and jurisprudence. On the merits of the claim, Sections 110(8) and 112(A) and (C) of the NIRC, as amended, provide: SEC. 110. Tax Credits. -

XXX

42 Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue, G.R. No. 207112, December 8, 2015.

CTA CASE NOS. 8623, 8656, 8661, and 8685

(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: xxx 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 Section 112.43 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(B)(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 of 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.

XXX

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In 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.

43 As amended by Republic Act No. 9361, November 21, 2006.

CTA CASE NOS. 8623, 8656, 8661, and 8685

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of 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. Based on the foregoing prov1s1ons, to be entitled to a refund/tax credit of input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be satisfied:

that the taxpayer is VAT-registered; 2.

that the claim for refund was filed within the prescriptive periods;

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

that input taxes were incurred or paid; 5.

that such input taxes are attributable to zero- rated or effectively zero-rated sales; and 6.

that the input taxes were not applied against any output VAT liability. First Requisite: Taxpayer is a VAT-registered entity It is undisputed that petitioner is a VAT -registered taxpayer with TIN/VAT Registration No. 238-763-115-000 and BIR Certificate of Registration No. OCN 9RC0000270209 effective June 16, 2005 issued by the BIR Revenue District Office (RDO) No. 44. 44

Second

Timeliness

administrative claims

Requisite:

of the and judicial 44 Par. 4, JSFI, docket, vol. 1, unpaged (between pp. 489 and 490); Exhibit "P-2", docket, vol. 3, p. 1487.

CTA CASE NOS. 8623, 8656, 8661, and 8685

Applying Section 112(A) of the NIRC of 1997, as amended, the two (2)-year prescriptive period in filing an administrative claim is reckoned from the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made; thus, petitioner's administrative claims for the 1st, 2nd, 3rd, and 4th quarters of 2011 were timely filed, as shown below:

End of the 2-

year period

Close of the

to file

Filing of the

Taxable

taxable

Administrative

Quarter

Claim

1st Qtr of 2011 Mar. 31, 2011 Mar. 31, 2013 Oct. 31, 201245 2nd Qtr of 2011 Jun. 30, 2011 Jun. 30, 2013 Jan. 9 201346 3rd Qtr of 2011 Sept. 30, 2011 Sept. 30, 2013 Jan. 23, 201347 4th Qtr of 2011 Dec. 31, 2011 Dec. 31, 2013 Mar. 19, 201348 As to the judicial claim, Section 112(C) of the NIRC of 1997, as amended, provides a 30-day period, from either the receipt of the adverse decision of respondent or the lapse of the 120-day period for respondent to act on the claim, within which to file a Petition for Review with the CTA. Since respondent failed to act on petitioner's administrative claims for refund, petitioner sought judicial intervention and filed the claims for the 1st, 2nd, 3rd, and 4th quarters of 2011 within the "120+30" day period, as shown below:

Filing of

Taxable

Administrative

End of 120-

Quarter

claim day period 1st Qtr of 2011 Oct. 31, 2012 Feb. 28, 2013 2nd Qtr of 2011 Jan.9 2013 May 9, 2013 3rd Qtr of 2011 Jan. 23, 2013

May 23 2013

4th Qtr of 2011 Mar. 19, 2013 Jul. 17, 2013 45 Exhibits "P-24" to "P-24-a", docket, vol. 3, pp. 1752-1758. 46 Exhibits "P-25" to "P-25-a", docket, vol. 3, pp. 1759-1764. 47 Exhibits "P-26" to "P-26-a", docket, vol. 3, pp. 1765-1771. 48 Exhibits "P-27" to "P-27-a", docket, vol. 3, pp. 1772-1777. 49 March 30, 2013 fell on a Saturday. 50 June 8, 2013 fell on a Saturday. 51 June 22, 2013 fell on a Saturday.

Filing of

End of 30-day

Petition for

period

Review

Apr. 1, 201349 Mar. 27, 2013 Jun. 10, 201350 May 20, 2013 Jun. 24, 201351 Jun. 19 2013 Aug. 16,2013 Aug. 5,2013

CTA CASE NOS. 8623, 8656, 8661, and 8685

Third Requisite: Existence

of zero-rated or effectively zero-rated sales In its Quarterly VAT Returns for the four quarters of CY 2011, petitioner reported zero-rated sales in the amount of P6,757,540,662.07, as shown below:

Exhibit ·

Quarter

Zero-rated sales P-5-b (CTA Case No. 8623, Docket, Vo/.3, p. 1506) pt p 1 452 400,318.22 P-6-b (CTA Case No. 8623, Docket, Vo/.3, p. 1519) 2nd 1 324 728,851.41 P-7-b (CTA Case No. 8623, Docket, Vo/.3, p. 1528) 3rd 1 529 170,363.03 P-8-c (CTA Case No. 8623, Docket, Vo/.3, p. 1543) 4th 2 451 241,129.41

Total

P6,757,540,662.07 Petitioner posits that its sales of services to its various non-resident affiliates, the consideration for which was paid in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP), are subject to zero percent (0°/o) VAT pursuant to Section 108(8)(2) of the NIRC of 1997, as amended, which provides: SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

XXX

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

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

CTA CASE NOS. 8623, 8656, 8661, and 8685

(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); In the case of Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. 52, it was held that in order for the supply of services to be VAT zero-rated under Section 108(B)(2) of the NIRC of 1997, as amended, the following requisites must concur:

1. the services 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. Petitioner satisfied the first condition. Petitioner is duly registered with the SEC and is licensed as ROHQ in the Philippines to provide qualifying services of 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 to its affiliates in the Philippines and abroad. 53 Such services are not in the same category as "processing, manufacturing or repacking of goods".

52 G.R. No. 153205, January 22, 2007.

53 Par. 3, JSFI, docket, vol. 1, p. 489.

CTA CASE NOS. 8623, 8656, 8661, and 8685

To comply with the third requisite, petitioner presented the following documents showing that its foreign clients are non-resident foreign corporations doing business outside the

Philippines:

1. SEC Certifications of Non-Registration of Company54 ;

2. Various

Registration

Documents

{i.e.,

AMinet

Company

Profile

Fact

Sheet,

Certificate

Registration/Certificate

of Incorporation/ Association )55 ; and

3. Intragroup Service Agreements56 • However, each of the aforesaid documents, standing alone, is inadequate proof that petitioner's clients are non- resident foreign corporations doing business outside the Philippines.

While

the

Certificates

Registration/Foreign

Incorporation/ Association prove that the therein named entities were incorporated/organized abroad, these documents do not necessarily establish that such entities are not doing business in the Philippines. The same holds true for the SEC Certificates of Non- Registration which show that the named entities are not registered corporations/partnerships in the Philippines.

However, they do not prove that such entities are non- resident foreign corporations doing business outside the Philippines.

The service agreements only indicate the names and addresses of petitioner's customers to whom it rendered services but they do not establish that such customers are non-resident foreign corporations doing business outside the Philippines.

54 Exhibits "P-15" to "P-15-b" and "P-6113" to "P-6154".

55 Exhibits "P-13" to "P-13-b", "P-14" to "P-14-b", "P-6155" to "P-6156", "P-6167" to "P- 6168", "P-5992" to "P-6064", and "P-6200" to "P-6208".

56 Exhibits "P-11" to "P-11-b", "P-6065" to "P-6112", "P-6170" to "P-6171", and "P-6209" to "P-6212".

CTA CASE NOS. 8623, 8656, 8661, and 8685

In the case of Site/ Philippines Corporation (formerly Clientlogic Phils., Inc.)

vs.

Commissioner of Internal

Revenue57 , the Supreme Court held that while Sitel's documentary evidence, which includes Certifications issued by the

Securities

and

Exchange

Commission

and Agreements between Sitel and its foreign clients, may have established that

Sitel

rendered services to foreign corporations and received payment therefor through inward remittances, the said documents failed to specifically prove that such foreign clients were doing business outside the Philippines or have a continuity of commercial dealings outside the Philippines. Therefore, to be considered as non-resident foreign corporation doing business outside the Philippines, each entity must be supported at the very least by both SEC Certificate of Non-Registration of Corporation/Partnership and

Certificate/ Articles

Foreign

Incorporation/ Association/Registration and that there is no other indication that the recipient of the services is doing business in the Philippines. On this account, the Court cannot give credence to the purported foreign business registration print-outs retrieved from the Deutsche Bank Global (the Head Office located in Germany) AMinet database. The said documents are insufficient to establish that the service recipients are non- resident foreign corporations doing business outside the Philippines, for they are self-serving and can be easily manipulated to favor petitioner in view of its affinity with the entity that maintains or keeps the said database. The following table will indicate whether petitioner complied with the third requisite with the presentation of the said SEC Certificate and Certificates of Registration/Foreign Incorporation/ Association for each of the recipients of the services rendered:

57 G.R. No. 201326, February 8, 2017.

CfA CASE NOS. 8623, 8656, 8661, and 8685

AO DB Securities (Kazakhstan)

DB Consorzio S. Cons. A.R.L. in Liquidazione DB Finance Inc.

DB HedgeWorks, LLC

DB International (Asia) Limited

DB Securities Services NJ Inc. DB Services New Jersey, Inc. DB Services Tennessee Inc.

DB Trust Company Limited Japan

DBOI Global Services Private Limited

Deutsche Asia Pacific Holdinqs Pte Ltd.

Deutsche Asset Management Asia Limited

Deutsche Bank (Malaysia) Berhad

Deutsche Bank Aktiengesellschaft

Deutsche Bank Aktiengesellschaft Inlandsbank

Deutsche Bank Aktiengesellschaft Asia Pacific Head Office

Deutsche Bank Aktiengesellschaft Filiale Abu Dhabi

Deutsche Bank Aktiengesellschaft Filiale Amsterdam

Deutsche Bank Aktienqesellschaft Filiale Bangkok

Deutsche Bank Aktiengesellschaft Filiale Dubai (DIFC)

Deutsche Bank Aktienqesellschaft Filiale Frankfurt A.M. Zurich Deutsche Bank Aktiengesellschaft Filiale Ho-Chi-Minh City

Deutsche Bank Aktiengesellschaft Filiale Honqkong

Deutsche Bank Aktiengesellschaft Filiale Jakarta

Deutsche Bank Aktienqesellschaft Filiale Labuan

Deutsche Bank Aktiengesellschaft Filiale London

Deutsche Bank Aktienqesellschaft Filiale Mumbai

Deutsche Bank Aktiengesellschaft Filiale New York

Deutsche Bank Aktienqesellschaft Filiale Paris

Deutsche Bank Aktiengesellschaft Filiale Prague

Deutsche Bank Aktienqesellschaft Filiale Riad

Deutsche Bank Aktiengesellschaft Filiale Seoul

Deutsche Bank Aktiengesellschaft Filiale Singapore

Deutsche Bank Aktiengesellschaft Filiale Taipei

Deutsche Bank Aktiengesellschaft Filiale Tokyo

Deutsche Bank Aktiengesellschaft Filiale Wien

Deutsche Bank Aktiengesellschaft Filiale Zurich

Deutsche Bank China Co. Ltd. Beijing Branch Deutsche Bank China Co. Ltd. Guangzhou Branch Deutsche Bank China Co. Ltd. Shanqhai Branch

Deutsche Bank International Limited

Deutsche Bank Luxembourg S.A.

Deutsche Bank National Trust Company

Deutsche Bank PBC Spolka Akcyjna

Deutsche Bank Pgk Ag

Certificate of

SEC Certificate

Registration I of Non-

Incorporation/

Registration

Association

None

P-6154

None

P-6113

None

P-6114

None

P-6115

None

P-6116

None

P-6117

None

P-6118

P-6156

None

P-6149

None

P-13 I P-6169

P-6139

None

P-15-a

P-13-a

None

P-6123

None

P-6124

None

P-6125

None

P-6138

None

P-6126

None

P-6127

None

P-6128

P-6167

None

P-6129

None

P-6130

None

P-15

P-13-b

P-6131

None

P-6132

None

P-6133

None

P-6134

None

P-15-b

None

P-6135

None

P-6136

None

P-6137

None

P-6119

None

P-6120

None

P-6121

None

P-6140

None

P-6141

None

P-6142

None

CTA CASE NOS. 8623, 8656, 8661, and 8685

Deutsche Bank Real Estate Japan YK

Deutsche Bank Securities Inc.

Deutsche Bank Sociedad Anonima Espanola

Deutsche Bank Societa Per Azione

Deutsche Bank Suisse SA

Deutsche Bank Trust Company Americas

Deutsche Group Services Ptv Limited

P-6143

None

P-6144

None

P-6146

None

P-6122

None

P-6145

None

P-6147

None

Deutsche Securities Inc.

P-6148

P-6155

Deutsche Trustees Malaysia Berhad

None

DWS Holding & Service GMBH

P-6150

None

Global Markets Centre Private Limited

None

Licorne Gestion

P-6151

None

PT Deutsche Securities Indonesia

P-6152

None

RREEF Management GMBH

P-6153

None

RREEF Manaqement LLC

None

Rued Blass and CIE AG

None

Correspondingly, only the sales of services by petitioner to entities which have the said two required documents will be treated as subject to the 0°/o VAT rate, pursuant to Section 108(B)(2) of the NIRC of 1997, as amended. Corollary to the second requisite, Sections 113(A)(2), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1(A)(2), (B)(1) and (2)(c) of Revenue Regulations (RR) No. 16-05, provide that a VAT taxpayer, like herein 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:

XXX

A

VAT-

XXX

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

CTA CASE NOS. 8623, 8656, 8661, and 8685

(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:

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; and" (Emphasis supplied) "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.

CTA CASE NOS. 8623, 8656, 8661, and 8685

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 invoic~ 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 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°/o) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;" (Emphasis supplied) Pursuant to Section 108(8)(2) of the NIRC of 1997, as amended, only the sales of services by petitioner to entities which have the two required documents will be treated as subject to the 0°/o VAT rate.

CTA CASE NOS. 8623, 8656, 8661, and 8685

To prove that petitioner rendered services to its foreign affiliates and was paid in foreign currency duly accounted for in accordance with the rules and regulations of the BSP for the four quarters of CY 2011, petitioner submitted in evidence its VAT zero-rated official receipts (ORs) and invoices58 issued to its alleged non-resident foreign clients and bank certification of inward remittances59 issued by Deutsche Bank AG Manila. Upon verification of the foregoing pieces of evidence, the Court finds that out of the P6,757,540,662.07 zero-rated sales declared per VAT Return for the four quarters of CY 2011, only the amount of €28,324,387.08 with peso equivalent of P1,691,367,779.99, as presented below, qualifies for VAT zero-rating under Section 108(8)(2) of the NIRC of 1997, as amended: O.R.

OR

OR Amount

Customer's Name

O.R. Date No.

Exhibit

(in Euro)

Amount in Peso

No.

Deutsche Asia Pacific Holdings Pte Ltd

12-Jan-11

1176

P-51

8 742.50 498,916.99

Deutsche Asia Pacific Holdings Pte Ltd

24-Jan-11

1208

P-79

8 742.50 528 279.55

Deutsche Asia Pacific Holdings Pte Ltd

6-Apr-11

1387

P-250

38 467.07 2 369 559.97

Deutsche Asia Pacific Holdings Pte Ltd

7-Jul-11

1578

P-419

38 467.08 2 360,305.41

Deutsche Asia Pacific Holdings Pte Ltd

4-0ct-11 1708

P-540

64 216.80 3 759 125.80 Deutsche Bank Aktiengesellschaft, Asia Pacific

Head Office

5-Jan-11

1164

P-40

86 210.13 5 017 731.30 Deutsche Bank Aktiengesellschaft, Asia Pacific

Head Office

12-Jan-11

1178

P-53

70 855.00 4 075,367.04 Deutsche Bank Aktiengesellschaft, Asia Pacific

Head Office

12-Jan-11

1179

7-Feb-11

1248

P-116

18,157.50 1 077 440.63

Deutsche Bank Aktiengesellschaft Asia Pacific

7-Feb-11

1249

P-117

58 Exhibits "P-38" to "P-238", "P-244" to "P-403", "P-414" to "P-532", and "P-539" to "P-782".

1261

P-128

1293

P-157

1294

P-158

1295

P-159

1321

P-184

1322

P-185

1323

P-186

1324

P-187

1325

P-188

1326

P-189

1327

P-190

1328

P-191

1329

P-192

1330

P-193

1331

P-194

1332

P-195

1333

P-196

1334

P-197

1336

P-199

1337

P-200

1338

P-201

1382

P-245

1401

P-262

1459

P-310

1460

P-311

1461

P-312

1462

P-313

1463

P-314

1464

P-315

1465

P-316

1507

P-353

1508

P-354

106,039.80 6,292,253.28 347 187.05 20 608,606.66 731 092.86 44 139 512.09 344 808.75 20 817 724.84 29 988.26 1 810-'532.20 319.94 19 199.92 26 900.00

1614 295.90

103 349.80 6 202 124.85 16 140.00 968 577.54 26 900.00

1614 295.90

8 070.00 484,288.77 96 581.41 5 795 947.00 8 847.41 530 941.92 18 157.50 1 089 649.73 3 257.59 195 491.23 16 140.00 968,577.54 35 104.59 2 106 661.55 6 298.02 377 950.48 31 204.08 1 872 588.04 262 500.21 15 752 900.10 9 153.11 549 287.28 209 180.30 12 553 118.98 13 903.53 852 817.50 766 230.31 48 046 394.97 27 081.03 1 658 664.34 12 976.22 794 770.12 23 672.04 1,449 869.84 13 778.06 843 881.37 152 566.30 9,344 411.26 4 777.81 292 632.26 744 023.10 45,570 075.63 12 976.22 807 316.82 17 754.03

1104 568.75

P-572

23 672.04

1404 682.24

P-575

20 763.12 1 232 068.97

P-576

8 226.05 488 128.03

P-577

6 473.94 384 159.05

P-578

20 713.04 1 229 097.25

P-579

23 672.04

1404 682.24

P-580

23 672.04

1404 682.24

P-581

3 195.73 3 195.73

P-583

4 429.53 262 845.20

P-584

25 628.58 1 520 781.95

P-585

19 819.31

1176 063.94

P-586

12 908.50 765 981.33

P-587

141 673.23 8 406 790.01

P-589

152 566.30 9 053 177.14

P-590

21,502.09 1 275 918.93

P-591

4,777.81 283 511.89

CTA CASE NOS. 8623, 8656, 8661, and 8685

Deutsche Bank Aktiengesellschaft, Asia Pacific

Head Office

Head Office

8-Nov-11

Deutsche Bank Aktiengesellschaft Filiale Jakarta

7-Jan-11

Deutsche Bank Aktienqesellschaft Filiale Jakarta

9-Feb-11

Deutsche Bank Aktiengesellschaft, Filiale Jakarta

9-Feb-11

Deutsche Bank Aktiengesellschaft Filiale Jakarta

9-Feb-11

Deutsche Bank Aktienqesellschaft Filiale Jakarta

9-Feb-11

Deutsche Bank Aktiengesellschaft, Filiale Jakarta

12-Dec-11

Deutsche Bank Aktiengesellschaft Filiale Jakarta

12-Dec-11

1763 1765 1815 1816 1817 1818 1819 1820 1821 1822 1823 1824 1825 1826 1855 1857 1858 1893 1928 1929 1930 1931 1932 1933 1934 1935 1936 1814 1166 1255 1256 1258 1254 1897 1898

P-592

25 115.15 1,490 315.37

P-594

3 515.30 208 595.43

P-631

29 074.77 1 715 019.62

P-632

309 621.67 18 263 506.07

P-633

126.29 7 449.41

P-634

4,312.37 254 371.72

P-635

19,079.16

1125 413.33

P-636

25 628.58 1 511 740.85

P-637

8,226.05 485 226.10

P-638

25,115.15 1 481 455.40

P-639

12,610.97 743 877.28

P-640

2 162.05 127 531.81

P-641

141 673.23 8 356 811.38

P-642

12 908.50 761427.55

P-669

123 970.09 7 289 840.63

P-671

1 001,938.81 58 755 587.49

P-672

3 151.73 184 823.41

P-703

3 140.08 180 934.99

P-736

16 824.66 966 245.44

P-737

16 885.18 969 721.12

P-738

145 395.12 8 350 086.81

P-739

30 320.33 1 741 305.95

P-740

18 105.83 1 039 823.43

P-741

27 617.38 1 586 074.69

P-742

255 808.23 14 691145.95

P-743

8 325.06 478 110.78

P-744

8 489.36 487 546.58

P-781

7 503.79 442 622.49

P-231

16 650.05 953 237.01

P-122

15 942.04 946 300.36

P-123

4 842.00 287 415.31

P-125

2 690.00 159 675.17

P-232

16 650.05 988 326.99

P-705

8 164.33 476 198.03

P-706

8 115.61 473 356.35

CTA CASE NOS. 8623, 8656, 8661, and 8685

7,101.62 414,213.71 361.22 546,008.61 Deutsche Bank Aktiengesellschaft, Filiale Jakarta 12-Dec-11 1899 Deutsche Bank Aktiengesellschaft, Filiale Jakarta 12-Dec-11 1900 9 .

P-709 4,842.00 Deutsche Bank Aktiengesellschaft, Filiale Jakarta 1902 | P-710 7,101.61 Deutsche Bank Aktiengesellschaft, Filiale Jakarta Deutsche Bank Aktiengesellschaft, Filiale Jakarta P-712 13-Dec-11 P-713 7,101.61 414,213.13 Deutsche Bank Aktiengesellschaft, Filiale New York | 10-Jan-11 Deutsche Bank Aktiengesellschaft, Filiale New York | 20-Jan-11 8,785,632.45

18-Feb-11

Deutsche Bank Aktiengesellschaft, Filiale New York | 15-Jun-11 1531 P-371 _1,091,949.00 24-Jun-11 P-384 30,254.52 1,861,158.23 Deutsche Bank Aktiengesellschaft, Filiale New York P-468 2-Sep-11 P-479 1,920,418.99 115,602,885.81

23-Sep-11

P-521 62,916.13 3,709,566.48 Deutsche Bank Aktiengesellschaft, Filiale New York | 26-Sep-11 | 1696 -523 689,090.12 40,598,279.84 1 629,013.40 36,676,676.87 26,365.95 36,513,078.54 i i :

193,988.60 P.

Deutsche Bank Aktiengesellschaft, Filiale New York | 25-Oct-1 1783 P-608 1,071,419.83 64,377,412.23 1 P.

20-Dec-11 P-767

10-Feb-11 | 1265 | P-132 2, 367,688.53 141,384,626.42

18-Feb-11

Deutsche Securities Inc. 12-Sep-11 1671 P-500 Deutsche Securities Inc. 12-Dec-11 | 1906 | P-714 1,870,536.33 Deutsche Securities Inc. 11-Jul-11 1581 P-422 481,808.18 28,923,330.49 TOTAL VALID ZERO-RATED SALES | 28,324,387.08 | 1,691,367,779.99

Fourth and Fifth

Requisites: Petitioner had input taxes attributable to its zero-rated sales Having resolved that petitioner had VAT zero-rated sales for the four quarters of CY 2011 in the amount of P1,691,367,779.99, the Court shall proceed to determine the amount of input VAT attributable thereto.

CTA CASE NOS. 8623, 8656, 8661, and 8685

In its Quarterly VAT Returns for CY 2011, petitioner declared input VAT of P154,055,337.69 on its purchases of goods and services, of which the amount of P153,201,143.71 is the subject of the present claim, as shown below:

lstQtr 2011 2nd Qtr 2011 3rd Qtr 2011 4th Qtr 2011

Total

Purchase of Capital Goods

not exceeding P1M p 41 088.23 p 104 241.74 p 81 582.20 p 55 201.28 p 282 113.45

Input

VAT

Purchases

Capital

Goods

exceeding

P1

Million

276 516.85 263 775.87 239 882.15 263 364.63 1 043 539.50

Total Input VAT on

Current Purchases of

Goods and Services

P30,987,110.54 P43,851,119.92 P39,664,987.16 p 39,552,120.07 P154,055,337 .69 Divided by total declared sales 1 335 913 939.24 1 537,704 342.95 2 467 895 387.24 5 341,513 669.43

Multiply

by zero-rated sales 1 324 728 851.41 1 529 170 363.03 2,451 241129.41 5 305,140 343.85

Total

P30,987,110.54 P43,483,971.55 P39,444,853.68 p 39,285,207.94 P153,201,143.71 To substantiate its claim that its input VAT on purchases of goods and services other than capital goods amounts to P153,011,798.19, petitioner presented various invoices and official receipts issued by its suppliers, BIR Forms No. 1600 and other documents60 which were all examined by the ICPA. From the !CPA's findings, the Court subscribes to the following exceptions: 61

Reference

(Annex 9

Original

Supplemental

ofiCPA

Amount

Amount (Exhibit

Reports)

(Exhibit P-29)

P-6172)

TOTAL

OTHER FINDINGS - Purchases of Goods

1 Purchases of goods supported by TIN VAT REG invoices but not dated

4Q-e

p 124,347.80 p 124,347.80 within the quarter of claim and without BIR permit to print 60 Exhibits "P-21" to "P-22-a" and "P-793" to "P-5991". 61 Exhibit "P-6172", Supplemental ICPA Report, Annexes 11 and 12.

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

CTA CASE NOS. 8623, 8656, 8661, and 8685

Purchases of goods supported by REG VAT TIN invoices but not dated 1Q-f; 2Q-f within the year of claim and/or petitioner's TIN is not indicated Purchases of goods supported by VAT REG TIN invoices but date is not clearly visible, without petitioner's 1Q-g; 4Q-g TIN and VAT amount is not shown separately Purchases of goods supported by VAT REG TIN invoices but not dated 1Q-h; 2Q- within the year of claim, and/or without petitioner's

TIN

and/or h; 3Q-h;

incorrect petitioner's TIN and/or VAT

4Q-h

amount is not shown separately Purchases of goods supported by VAT REG TIN invoices but no date 1Q-I; 3Q-I;

indicated and without petitioner's

4Q-i

photocopied invoices

4Q-r

Sub-total

4,144.98 5,364.10 500,588.39 3,158.40 2,362.50 825.00 58,007.15 6,029.83 63,866.32 15,953.22 24,812.15 319,313.37 936 422.44 , 2,065.195.65 62 The annex referred to cannot actually be found. 4,144.98 5,364.10 p 189,417.16 690,005.55 192.86 3,351.26 2,362.50 825.00 58,007.15 6,029.83 63,866.32 15,953.22 24,812.15 48,882.06 368,195.43 3,294.76 3,294.76 169,007.81 169,007.81 (817 898.61) 118,523.83 , (407.103.96) , 1,658,091.69 /

CTA CASE NOS. 8623, 8656, 8661, and 8685

OTHER FINDINGS - Purchases of Services

1 Purchases of services supported by BIR TIN ORs with no BIR permit to

2Q-w

print 2 Purchases of services supported by VAT REG ORs but VAT amount is not 1Q-x; 3Q-x shown separately 3 Purchases of services supported by VAT REG ORs but not dated within the quarter of claim with incorrect

3Q-y

petitioner's TIN and VAT amount is not tied-up with the amount per schedule 4 Purchases of services supported by

VAT

REG

ORs

with incorrect petitioner's TIN and VAT amount is

1Q-z

not tied-up with the amount per schedule 5 Purchases of services supported by

VAT

REG

ORs

with incorrect 1Q-aa; 2Q- petitioner's TIN and VAT amount is not tied-up with the amount per aa; 3Q-aa schedule 6 Purchases of services supported by VAT REG TIN VAT ORs without

1Q-ab

petitioner's TIN and VAT amount is not shown separately 7 Purchases of services supported by VAT REG TIN ORs but not dated 1Q-ac; 2Q- within the quarter of claim and/or petitioner's TIN and/or VAT amount ac; 3Q-ac is not shown separately 8 Purchases of services supported by VAT REG TIN ORs but not dated within the quarter of claim and

3Q-ad

incorrect petitioner's TIN and VAT amount per OR is not tied-up with the amount per schedule 9 Purchases of services supported by VAT REG TIN ORs but not dated 1Q-ae; 2Q- within the quarter of claim and VAT ae; 3Q-ae;

amount per OR is not tied-up with

4Q-ae

the amount per schedule 10 Purchases of services supported by VAT REG TIN ORs but not dated

4Q-af

within the year of claim 11 Purchases of services supported by VAT REG TIN ORs but no date 1Q-ag; 4Q- indicated and/or without petitioner's ag

TIN

12 Purchases of services supported by VAT REG TIN ORs but no date indicated and with incorrect

1Q-ah

petitioner's TIN and VAT amount per OR is not tied-up with the amount per schedule 13 Purchases of services supported by VAT REG TIN ORs but no date

2Q-ai

indicated and VAT amount per OR is not tied-up with the amount per - p 26,756.57 p 26,756.57 27,487.02 p 1,019.60 28,506.62 33.60 33.60 1,982.20 1,982.20 40,793.14 40,793.14 273,908.52 273,908.52 488,515.17 488,515.17 3,756.70 3,756.70 261,114.17 261,114.17 2,565,815.39 167,658.21 2,733,473.60 58,134.59 58,134.59 9,076.28 9,076.28 2,090.98 2,090.98 14 15 16 17 18 19 20 21 22 23 24 25 26

CfA CASE NOS. 8623, 8656, 8661, and 8685 schedule Purchases of services supported by VAT REG TIN ORs but no year

2Q-aj

indicated in the date Purchases of services supported by

VAT REG TIN ORs

but without 1Q-ak; 2Q- petitioner's TIN and/or incorrect ak; 3Q-ak;

petitioner's TIN and/or VAT not

4Q-ak

shown separately Purchases of services supported by

VAT

REG

TIN

ORs

without 1Q-al; 2Q- petitioner's TIN and VAT amount is al; 3Q-al;

not tied-up with the amount per

4Q-al

schedule Purchases of services supported by VAT REG TIN ORs but incorrect 1Q-am;

petitioner's TIN and VAT amount per 2Q-am;

OR is not tied-up with the amount

3Q-am

per schedule Purchases of services supported by

VAT

REG TIN ORs but without

3Q-an

countersignature on the alteration in the petitioner's TIN Purchases of services supported by 1Q-ap; 2Q- VAT REG TIN ORs but VAT amount per OR is not tied-up with the ap; 3Q-ap;

amount per schedule

4Q-ap

Purchases of services supported by 1Q-aq; 3Q- TIN ORs without petitioner's TIN and aq; 4Q-aq VAT amount is not shown separately Purchases of services supported by

1Q-ar

TIN ORs

Purchases of services supported by TIN ORs but incorrect petitioner's TIN and VAT amount per OR is not

1Q-as

tied-up with the amount per schedule Purchases of services supported by TIN ORs but VAT amount per OR is 1Q-at; 2Q- not tied-up with the amount per at; 4Q-at schedule Purchases of services supported by

TIN NON VAT and/or NON VAT REG

1Q-au; 2Q-

TIN ORs and/or TIN VAT ZERO

au; 4Q-au

RATED

Purchases of services supported by TIN VAT ORs but not dated in the 1Q-av; 2Q- quarter of claim and/or without petitioner's TIN and/or VAT not av; 3Q-av shown separately Purchases of services supported by TIN VAT ORs but not dated in the 2Q-aw;

quarter of claim and VAT amount is not tied-up with the amount per

3Q-aw

schedule 182.04 182.04 11,523,808.61 4,403,506.66 15,927,315.27 280,752.84 280,752.84 3,768,597.09 3,768,597.09 78,019.20 78,019.20 2,225,215.82 2,225,215.82 117,843.23 44,536.85 162,380.08 32,350.37 32,350.37 28,382.14 28,382.14 85,146.42 85,146.42 147,102.74 147,102.74 361,750.33 361,750.33 19,529.67 19,529.67 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42

CTA CASE NOS. 8623, 8656, 8661, and 8685

Purchases of services supported by TIN VAT ORs but not dated in the 1Q-ax; 4Q- year of the claim and/or VAT amount ax is not shown separately Purchases of services supported by TIN VAT ORs but without petitioner's 1Q-ay; 2Q- TIN or incorrect petitioner's TIN ay; 3Q-ay;

and/or VAT amount is not shown

4Q-ay

separately Purchases of services supported by TIN VAT ORs but without petitioner's 1Q-az; 2Q- TIN and VAT amount is not tied-up az; 4Q-az with the amount per schedule Purchases of services supported by

TIN

VAT

ORs

but incorrect petitioner's TIN and VAT amount is

1Q-ba

not tied-up with the amount per schedule Purchases of services supported by

TIN

VAT

ORs

but without

3Q-bb

countersignature on the alteration in the petitioner's TIN Purchases of services supported by TIN VAT ORs but without BIR permit

2Q-bc

to print and VAT amount is not tied- up with the amount per schedule Purchases of services supported by 1Q-bd; 2Q- TIN VAT ORs but VAT amount is not bd; 3Q-bd;

tied-up with the amount per

4Q-bd

schedule Purchases of services supported by 1Q-be; 2Q- tape receipts be· 3Q-be Purchases of services supported by 1Q-bf; 2Q- other than OR bf; 3Q-bf;

4Q-bf

Purchases of services supported by 1Q-bg; 2Q- photocopied OR bg; 3Q-bg;

4Q-bg

Purchases of services supported by VAT REG TIN ORs but no date

4Q-bw

indicated and/or VAT amount is not shown separately Purchases of services supported by

NON VAT REG TIN ORs and VAT

4Q-bx

amount is not shown separately Purchases of services supported by 3Q-by; 4Q- TIN NON VAT ORs and VAT amount is not shown separately by Purchases of services supported by TIN VAT ORs but no date indicated 3Q-bz; 4Q- and VAT amount is not shown bz separately Purchases of services supported by

TIN VAT ZERO Rated ORs and VAT

3Q-ca

amount is not shown separately Purchases of services supported by 1Q-bt; 2Q-

VAT REG TIN ORs/TIN VAT ORs

bt; 3Q-bt;

representing overstated VAT amount

4Q-bt

Sub-total

41,344.20 1,712.68 43,056.88 2,563,712.39 4,650,934.98 7,214,647.37 483,858.45 483,858.45 132,252.83 132,252.83 18,543.75 18,543.75 32,749.82 32,749.82 1,011,678.34 1,011,678.34 238,504.92 97,598.70 336,103.62 2,722,422.65 701,738.73 3,424,161.38 47,754,185.11 (27,122,791.74) 20,631,393.37 27,540.00 27,540.00 7,170.00 7,170.00 2,829.75 2,829.75 224,318.09 224,318.09 24,130.00 24,130.00 348,115.17 348,115.17 1'77. 427,397.29 1'{16,419,982.32) 1'61,007. 414.97

CTA CASE NOS. 8623, 8656, 8661, and 8685

OTHER FINDINGS - Purchases of Capital Goods

- not exceeding Pl Million 1

Purchases

of capital goods not exceeding one million supported with

1Q-bj

p 72,581.79 p 72,581.79 TIN VAT invoices dated not within the year of claim 2

Purchases

of capital goods not exceeding one million supported with

2Q-bk

1,500.00 1,500.00 TIN VAT invoices not dated within the quarter of claim 3

Purchases

of capital goods not exceeding one million supported by

4Q-bl

9,000.00 9,000.00 VAT REG TIN invoices not dated within the quarter of claim 4

Purchases

of capital goods not 1Q-bm;

exceeding one million supported by 2Q-bm;

(91,686.42) (91,686.42) documents other than VAT invoices

4Q-bm

Purchases

of capital goods not 1Q-bn; 2Q- exceeding one million supported by 177,070.37 177,070.37 documents other than VAT invoices bn; 4Q-bn

Sub-total

, 168,465.74 - , 168,465.74

Purchases

of services without 10,960,023.58 10,960,023.58 supporting documents

GRAND TOTAL

P90,621,082.26 P(16,827,086.28) P73,793,995.98 1 2 Thus, the input VAT in the amount of P73,793,995.98 should be disallowed as they were not properly substantiated

by VAT

invoices or official receipts as prescribed under Sections 110(A) and 113(A) and (B) of the NIRC of 1997, as amended, in relation to Sections 4.110-2, 4.110-8, and 4.113-1 of Revenue Regulations (RR) No. 16- 05, as amended.

Upon further verification, the Court finds that the additional input VAT of P5,382,960.55, as presented below, shall likewise be disallowed for petitioner's failure to meet the substantiation requirements prescribed under the aforesaid VAT law and regulations:

Name of Supplier

Exhibit

Input VAT

Amount

Supported by documents/exhibits which were denied admission by the Court

Tierra International

P-2704

p 331,200.00 6-3 Property Holdings Inc.

P-4843

973,834.10

Trane Philippines

P-2705

2,400.00 DHL Express (Philippines) Corp.

P-3701

58.75

Subtotal

P1,307,492.85 Purchases of goods supported by documents other than VAT invoice

Reach Marketing

P-3926

p 4,446.00 3 4 5 6

CTA CASE NOS. 8623, 8656, 8661, and 8685

Reach Marketing

subtotal

P-3927

10,017.86 p 14,463.86 Purchases of goods supported by VAT invoices but without petitioner's TIN and/or dated outside the year of claim

JJED Philippines Inc

P-1738

p 10,348.29

Bettilane Marketing Corporation

P-2051

16,664.99 subtotal p 27,013.28 Purchases of goods supported by VAT invoice without SIR Permit to Print

Hewlett-Packard Philippines

P-5131

p 8,799.71

Hewlett-Packard Philippines

P-5132

13,688.44

Papertech Inc

P-5217

14,128.93 subtotal p 36,617.08 Purchases of services supported by VAT ORs but VAT amount was not separately shown or the VAT amount stated refers to withholding tax

MGE UPS Systems Philippines Inc

P-1170

p 18,480.00

MGE UPS Systems Philippines Inc

P-1171

18,480.00

PSEI Firesafety System

P-1334

17,280.00

PSEI Firesafety System

P-1335

33,960.00

Realform Furniture Shop

P-1344

15,000.00

Chloride Secure

P-2296

17,142.86

Proffesional Skills Enrichment

P-2524

3,000.00

Colliers International Philippines

P-3552

2,888.44 International Elevator & Equipment Inc.

p 712.00 DHL Express Phils Corp (P731.60-P33.60)

P-975

698.00 DHL Express Phils Corp (P1,039.60-P33.60)

P-979

1,006.00 DHL Express Phils Corp (P1,714.60-P33.60)

P-980

1,681.00 DHL Express Phils Corp (P1,873.60-P33.60)

P-981

1,840.00 DHL Express Phils Corp (P264.86-P33.60)

P-982

231.26 DHL Express Phils Corp (P815.60-P33.60)

P-983

782.00 Headstrong Philippines Inc (P12,960.00-P12,728.57)

P-1095

231.43 Headstrong Philippines Inc (P25,200-P24,750)

P-1096

450.00 Headstrong Philippines Inc (P41,040.00-P40,307.14)

P-1097

732.86 Headstrong Philippines Inc (P14,130.00-P13,877.68)

P-1098

252.32

CTA CASE NOS. 8623, 8656, 8661, and 8685

DHL Express Phils Corp (P728.60-P33.60 P-2099 695.00 DHL Express Phils Corp (P6,781.60-P33.60) P-2100 6,748.00 DHL Express Phils Corp (P787.00-P33.60) P-2171 753.40 Servcom Incorporated (P7,071.42-P6,945.00 P-2279 126.42 Headstrong Philippines Inc (P53,010-P52,063) P-2313 947.00 Frasers Hospitality Investment (P3,670.80-P1,682.45) P-2232 1,988.35 Taurus Electrical Service (P6,428.57-P6,313.78) P-2276 114.79 Professional Skills Enrichment (P13,080-P2, 180) Headstrong Philippines Inc (P12,071.25-P11,855.69) P-2307 215.56 Headstrong Philippines Inc (P61,320-P60,225) P-2312 1,095.00 International Elevator (P54,016.88-P51,605.41) P-2335 2,411.47 Servcom Incorporated (P7,873.92-P7,733.34) P-2275 140.58 IBM Philippines Inc (P26,006.40-P25,542.00) P-2329 464.40 DHL Express Phils Corp (P838.60-P33.60 P-2169 805.00 DHL Express Phils Corp (P633.60-P33.60) P-2301 600.00 DHL Express Philippines Corp (P1,229.60-P33.60) Benchmark Consulting Co (P13,200.00-P12,964.28) Asia Select Inc (P11,494.26-P11,289.00) Premium Security & Investigation (P22,938.51-P3,671.75) Taurus Electrical Service (P132,055.21-P129,697.19)

CTA CASE NOS. 8623, 8656, 8661, and 8685

Headstrong Philippines Inc (P45,360.00-P44,550.00) P-4046 810.00 Headstrong Philippines Inc (P8,100-P7,955) 6-24 Property Holdings Inc (P2,264,525.85-P2,201,607.81) 6-24 Property Holdings Inc (P973,834.10-P945,820.89) Asia Select Inc (P13,335.87-P13,097.73) P-4907 Asia Select Inc (P12,698.25-P12,471.49) P-4914 Asia Select Inc (P10,717.74-P10,526.35) P-4919 Headstrong Philippines Inc (P131,400-P129,054 Headstrong Philippines Inc (P93,240.00-P91,575.00) IBM Philippines Inc (P122,585.40-P12,585.40) MGE UPS Systems Philippines Inc (P31,920.01-P31,350.00) - . MGE UPS Systems Philippines Inc (P27,945.16-P27,446.14) - . MGE UPS Systems Philippines Inc (P59,865.16-P58, 796.14) Premium Security & Investigation (P12,565.86-P1, 104.53) P-5279 11,461.33 subtotal | sd 755,469.07 _| 7 Purchases of services supported by document with statement "NOT ELIGIBLE

FOR/NOT VALID AS SOURCE OF INPUT TAX”

Accent Micro Technologies Inc

SOP Printing House P- —oe 321.43 Accent Micro Technologies Inc | P-3432_| 1,227.27 Accent Micro Technologies Inc P-3436 3,000.00

Shellsoft Technology Corp P-3957

SOP Printing House 675.00 subtotal P 10,327.98 8 Purchases of services supported by documents other than VAT ORs FTL Hotels = 15,114.60

FTL Hotels

6-24 Property Holdings Inc P-2686

6-24 Property Holdings Inc P-2687

Manila Peninsula Hotel Inc

Headstrong Philippines Inc

Headstrong Philippines Inc P-4674 26,880.00 po Sutotal@ =| | 636,702.78 without countersignature

Sunvision Cable Inc

subtotal | LP 38,640.00 | 10 Purchase of services supported by VAT OR but without BIR Permit to print

Federal Phoenix Assurance P-2229

—

CTA CASE NOS. 8623, 8656, 8661, and 8685 subtotal

Grand Total

p 316,382.74 PS,382,960.55 Moreover, part of the total input

VAT

of P154,055,337.69 is the amount of P1,043,539.50 representing input VAT on purchases of capital goods exceeding P1 Million.

Pursuant to Section 110(A) of the

NIRC of 1997, as amended, as 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 aggregate acquisition cost does not exceed P1 Million, the total input taxes shall be allowed as credit/refund in the month of acquisition. Upon verification of the documents supporting the purchases on capital goods exceeding P1 Million, the Court finds that the amount of P243,537 .00 should be disallowed due to the following reasons:

Annex 12 of Exhibit

Original

P-6172

Amount

Supplemental

Total

Supported by VAT REG TIN invoices but VAT

Annex 10

amount per invoice is not tie-up with the p 73,928.57 p 73,928.57 amount per schedule

2Q-b

Supported with TIN VAT Invoices not dated

Annexes 10

4,595.14 p 19,557.43 24,152.57 within the year of claim

1Q-d· 2Q-d

Supported with invoices but unable to verify to

Annex 10

659,461.71 116,571.43 original copy (photocopied invoices) 2Q-f; 3Q-f (542,890.28) Supported by documents other than VAT

Annex 2Q-

8,485.72 8,485.72 invoices q·3Q-q Without supporting documents I unaccounted

Annexes 12-

20,398.71 20,398.71 A; 12-B;

TOTAL

P766,869.85 P(S23,332.85) p 243,537.00 Thus, while petitioner was able to substantiate the amount of P800,002.50 (P1,043,539.50 less P243,537.00), out of the total input VAT of P1,043,539.50 on purchases of capital goods exceeding P1 Million, only the amortization for CY 2011 in the amount of P132,943.20 may be claimed by

CTA CASE NOS. 8623, 8656, 8661, and 8685 petitioner as valid input tax credits for the same taxable year, as determined hereunder:

Monthly

No. of

Month

Substantiated

Exhibit

Name of Supplier

acquired

Input VAT

Months

Amortization

P-39

P-40

P-793

P-1960

P-3679

P-1963

P-2002

P-1977

P-1978

P-1979

P-1980

P-1982

P-1990

P-1991

P-3692

P-3696

P-1992

P-2663

P-3691

P-3697

P-1987

P-1988

P-3418

P-3693

P-3694

P-3695

P-3698

P-3419

P-3420

P-4849

P-4850

P-4851

Total

p 800 002.50 p 132,943.20 Consequently, the unamortized input

VAT

of P667,059.30 (P800,002.50 less P132,943.20) pertaining to capital goods purchases exceeding Pl Million shall also be disallowed.

63 Based on useful life of 48 months.

CTA CASE NOS. 8623, 8656, 8661, and 8685

In sum, only the remaining amount of P73,967,784.86 represents petitioner's valid input VAT for the four quarters of 2011, as computed below:

Total Input VAT per Returns

p 154 055,337.69

Less: Disallowed Input VAT

On purchases of goods and services other than capital goods

Per ICPA Report

P73 793,995.98 Per this Court's Further Verification 5 382,960.55 (79,176,956.53) On purchases of capital goods exceeding Pl Million Per this Court's Further Verification p 243,537.00 Unamortized input VAT on capital goods exceeding P1 Million 667,059.30 (910,596.30) Valid In_put VAT P73,967,784.86 However, a portion of the P73,967,784.86 shall be applied against the reported output VAT liability of P5,293,874.9564 • Consequently, only the remaining input VAT of P68,673,909.91 can be attributed to the entire zero- rated sales amounting to P6,757,540,662.07 and only the input VAT of P17,188,625.90 is attributable to the valid zero-rated sales of P1,691,367,779.99, computed as follows:

Valid Input VAT

Less: Output Tax Due

Total

Divide by Total Zero-Rated Sales declared per return

Multiply by Valid Zero-rated Sales

Excess Input VAT Attributable to Valid Zero-Rated Sales

Sixth

Requisite:

Excess

input taxes were not applied against any output VAT liability p 73,967,784.86 5,293,874.95 p 68,673,909.91 6,757,540,662.07 1,691,367,779.99 p 17,188,625.90 Although the claimed input VAT was carried over by petitioner in its succeeding Quarterly VAT Returns65, the

64 Sum of the amounts in Line15B of Exhibits "P-5-a", "P-6-a", "P-7-a", and "P-8-b", docket, vol. 3, pp. 1506, 1519, 1528, and 1543, respectively.

65 Exhibits "P-6" to "P-8" and "P-19" to "P-20".

CTA CASE NOS. 8623, 8656, 8661, and 8685 same remained unutilized until it was deducted as "VAT Refund/TCC Claimed" in its Quarterly VAT Returns for the fourth quarter of CY 201266 and first quarter of CY 2013 67 • Therefore, the excess input VAT of P249,651,814.1968 as of the end of the fourth quarter of 2012, which was carried over to the succeeding first quarter of 2013, no longer included the subject first quarter claim and the input VAT of P147,996,613.2769 as of the end of the first quarter of 2013, which was carried over to the succeeding second quarter of 2013, no longer included the subject second, third, and fourth quarters claims.

WHEREFORE, the present Petitions for Review are hereby PARTIALLY GRANTED. Accordingly, let a tax refund or a tax credit certificate be issued in favor of petitioner in the reduced amount of P17 ,188,625.90, representing its unutilized and excess input VAT attributable to zero-rated sales for the first, second, third, and fourth quarters of calendar year 2011.

SO ORDERED.

ESPE

. FASON-VICTORINO

We Concur:

LOVELL l}! BAUTISTA

Associate Justice

~. ~

J L-

MA. BELEN M. RINGPIS-LIBAN

Associate Justice

66 Exhibit "P-19-c", Line 230, docket, vol. 5, p. 2771.

67 Exhibit "P-20", Line 230, docket, vol. 5, p. 2776.

68 Exhibit "P-19-c", Line 29, docket, vol. 5, p. 2772.

69 Exhibit "P-20", Line 29, docket, vol. 5, p. 2777.

CTA CASE NOS. 8623, 8656, 8661, and 8685

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.

LOVELLt BAUTISTA

Associate Justice

Chairperson

CERTIFICATION

Pursuant

Section

of Article VIII

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's Division.